SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                             ----------------------


                                    FORM 10-Q

(Mark One)

  X               Quarterly report pursuant to section 13 or 15(d) of the
------            Securities Exchange Act of 1934

                  For the quarterly period ended September 30, 2000

                                       OR

                  Transition report pursuant to section 13 or 15(d) of the
------            Securities Exchange Act of 1934


                         Commission file number 0-17353

                            FMS FINANCIAL CORPORATION
                            -------------------------
             (Exact name of registrant as specified in its charter)

New Jersey                                                   22-2916440
----------                                                   ----------
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                               Identification No.)

3 Sunset Road, Burlington, New Jersey                        08016
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code: (609) 386-2400

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  12 months (or for such  reports),  and (2) has been
subject to such filing requirements for the past 90 days. YES  X   NO    .
                                                              ---     ---

         As of November 3, 2000 there were 6,752,268  shares  outstanding of the
registrant's Common Stock, par value $.10 per share.


<PAGE>

                    FMS FINANCIAL CORPORATION AND SUBSIDIARY
                    ----------------------------------------

                          QUARTERLY REPORT ON FORM 10-Q
                          -----------------------------

                               SEPTEMBER 30, 2000
                               ------------------

                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                   <C>
PART I - Financial Information
------------------------------

         Item 1 - Financial Statements

               Consolidated Statements of Financial Condition (unaudited) as of
                       September 30, 2000 and December 31, 1999............................................1

               Consolidated Statements of Income (unaudited)
                       for the three and nine month periods ended
                       September 30, 2000 and September 30, 1999...........................................2

               Consolidated  Statements of Cash Flows  (unaudited)  for the nine
                       month periods ended September 30, 2000
                       and September 30, 1999..............................................................3

               Consolidated  Statements of Changes in  Stockholders'  Equity for
                       the nine months ended September 30, 2000 (unaudited)................................4


         Item 2 - Management's Discussion and Analysis of
                     Financial Condition and Results of Operations....................................5 - 15


PART II - Other Information
---------------------------

         Item 1 - Legal Proceedings.......................................................................16

         Item 2 - Changes in Securities...................................................................16

         Item 3 - Defaults Upon Senior Securities.........................................................16

         Item 4 - Submission of Matters to a Vote of Security Holders.....................................16

         Item 5 - Other Information.......................................................................16

         Item 6 - Exhibits and Reports on Form 8-K........................................................16
</TABLE>

<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                   September 30,      December 31,
                                                                                        2000             1999
-------------------------------------------------------------------------------------------------------------------
                                                                                            (Unaudited)
ASSETS
-------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>              <C>
     Cash and amounts due from depository institutions                             $  25,142,151    $  20,489,516
     Interest-bearing deposits                                                            96,914           82,493
     Short term funds                                                                 16,983,701       25,703,862
                                                                                   -------------    -------------
         Total cash and cash equivalents                                              42,222,766       46,275,871
     Investment securities held to maturity                                          243,127,942      220,307,242
     Investment securities and mortgage-backed securities available for sale          41,930,310       49,307,116
     Loans receivable  - net                                                         295,822,866      299,694,517
     Mortgage-backed securities held to maturity                                     115,393,826      121,424,419
     Accrued interest receivable:
         Loans                                                                         1,615,641        1,398,470
         Mortgage-backed securities                                                      815,832          836,699
         Investments                                                                   3,102,225        3,628,622
     Federal Home Loan Bank stock                                                      4,861,410        4,861,410
     Real estate held for development - net                                               87,926           87,926
     Real estate owned - net                                                             306,926          448,541
     Office properties and equipment - net                                            24,983,383       20,686,272
     Deferred income taxes                                                             2,460,585        2,264,587
     Excess cost over fair value of net assets acquired                                   34,580           55,328
     Prepaid expenses and other assets                                                 1,105,656          959,819
     Subordinated debentures issue cost - net                                            220,754          263,765
                                                                                   -------------    -------------
TOTAL ASSETS                                                                       $ 778,092,628    $ 772,500,604
                                                                                   =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------

Liabilities:
     Deposits                                                                      $ 629,464,920    $ 603,892,117
     Securities sold under agreements to repurchase                                   80,000,000       90,000,000
     Advances from the Federal Home Loan Bank                                          6,305,644       16,337,031
     10% Subordinated debentures, due 2004                                            10,000,000       10,000,000
     Advances by borrowers for taxes and insurance                                     2,112,309        2,204,704
     Accrued interest payable                                                          1,152,316        1,437,348
     Dividends payable                                                                   202,868          215,519
     Other liabilities                                                                 2,773,097        2,316,882
                                                                                   -------------    -------------
     Total liabilities                                                               732,011,154      726,403,601
                                                                                   -------------    -------------

Commitments and contingencies
Stockholders' Equity:
     Preferred stock - $.10 par value 5,000,000 shares  authorized;  none issued
     Common stock - $.10 par value 10,000,000 shares authorized; shares
         issued 7,897,891 and 7,897,791 and shares outstanding 6,752,268 and
         7,183,978 as of September 30, 2000 and December 31, 1999, respectively          789,789          789,779
     Paid-in capital in excess of par                                                  8,217,654        8,217,535
     Accumulated comprehensive loss - net of deferred income taxes                      (918,539)      (1,167,810)
     Retained earnings                                                                45,412,736       42,108,955
     Less:  Treasury stock (1,145,623 and 713,813 shares, at cost,  as of
         September 30, 2000 and December 31, 1999, respectively)                      (7,420,166)      (3,851,456)
                                                                                   -------------    -------------
Total stockholders' equity                                                            46,081,474       46,097,003
                                                                                   -------------    -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $ 778,092,628    $ 772,500,604
                                                                                   =============    =============

</TABLE>
See notes to consolidated financial statements.

                                       1
<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                              Three Months ended               Nine Months ended
                                                                September 30,                    September 30,
                                                     -------------------------------    -------------------------------
                                                           2000              1999             2000             1999
------------------------------------------------------------------------------------    -------------------------------
INTEREST  INCOME:                                              (Unaudited)                        (Unaudited)
Interest income on:
<S>                                                  <C>               <C>             <C>                <C>
    Loans                                             $  5,954,472      $  6,072,203    $   17,599,187     $ 17,646,423
    Mortgage-backed securities                           1,907,189         1,628,239         5,925,500        4,687,392
    Investments                                          5,266,485         4,684,824        15,371,925       12,904,158
                                                      ------------      ------------    --------------     ------------
Total interest income                                   13,128,146        12,385,266        38,896,612       35,237,973
                                                      ------------      ------------    --------------     ------------

INTEREST EXPENSE:
Interest expense on:
    Deposits                                             5,278,804         4,581,534        15,279,151       13,326,141
    Subordinated debentures                                264,337           264,337           793,011          793,011
    Borrowings                                           1,303,072         1,388,165         4,040,069        4,118,938
                                                      ------------      ------------    --------------     ------------
Total interest expense                                   6,846,213         6,234,036        20,112,231       18,238,090
                                                      ------------      ------------    --------------     ------------

NET INTEREST INCOME                                      6,281,933         6,151,230        18,784,381       16,999,883
PROVISION FOR LOAN LOSSES                                   60,000           474,000           180,000          594,000
                                                      ------------      ------------    --------------     ------------

NET INTEREST INCOME AFTER PROVISION
    FOR LOAN LOSSES                                      6,221,933         5,677,230        18,604,381       16,405,883
                                                      ------------      ------------    --------------     ------------

OTHER INCOME (EXPENSE):
    Loan service charges and other fees                     27,298            65,023            88,961          126,298
    Gain on sale of loans                                    1,437             2,235             2,242            3,568
    Gain on disposal of fixed assets                         8,708                 0             8,586          244,731
    Real estate owned operations, net                      (14,784)           (3,823)          (15,951)         (16,662)
    Service charges on accounts                            682,270           647,401         1,949,485        1,864,005
    Other income                                            49,491            42,891           143,208          136,408
                                                      ------------      ------------    --------------     ------------
Total other income                                         754,420           753,727         2,176,531        2,358,348
                                                      ------------      ------------    --------------     ------------

OPERATING EXPENSES:
    Salaries and employee benefits                       2,936,824         2,581,629         8,675,115        7,496,118
    Occupancy and equipment                              1,086,736           872,138         3,039,769        2,615,541
    Purchased services                                     477,505           387,286         1,353,767        1,120,055
    Federal deposit insurance premiums                      31,650            77,108            92,367          229,240
    Professional fees                                      117,956            81,413           352,218          360,163
    Advertising                                             53,494            57,885           164,729          161,341
    Other                                                  317,822           329,467         1,015,048        1,009,247
                                                      ------------      ------------    --------------     ------------

Total operating expenses                                 5,021,987         4,386,926        14,693,013       12,991,705
                                                      ------------      ------------    --------------     ------------

INCOME BEFORE INCOME TAXES                               1,954,366         2,044,031         6,087,899        5,772,526

INCOME TAXES:
Current                                                    972,233           896,267         2,463,790        1,897,126
Deferred                                                  (290,229)         (160,543)         (297,297)         188,170
                                                      ------------      ------------    --------------     ------------
Total income taxes                                         682,004           735,724         2,166,493        2,085,296

NET INCOME                                            $  1,272,362      $  1,308,307    $    3,921,406     $  3,687,230
                                                      ============      ============    ==============     ============

BASIC EARNINGS PER COMMON SHARE                       $       0.19      $       0.18    $         0.57     $       0.51
                                                      ============      ============    ==============     ============

DILUTED EARNINGS PER COMMON SHARE                     $       0.19      $       0.18    $         0.56     $       0.51
                                                      ============      ============    ==============     ============

Dividends declared per common share                   $       0.03      $       0.03    $         0.09     $       0.09
                                                      ============      ============    ==============     ============

Weighted average common shares outstanding               6,761,942         7,206,340         6,935,764        7,215,877

Potential dilutive effect of the exercise of
  stock options                                             69,075            83,100            69,951           82,393
                                                      ------------      ------------    --------------     ------------

Adjusted weighted average common shares outsanding       6,831,017         7,289,440         7,005,715        7,298,270
                                                      ============      ============    ==============     ============
</TABLE>

See notes to consolidated financial statements.

                                       2
<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Nine Months ended
                                                                                                       September 30,
                                                                                              --------------------------------
                                                                                                    2000               1999
                                                                                              --------------------------------
                                                                                                       (Unaudited)
<S>                                                                                          <C>               <C>
OPERATING ACTIVITIES:
Net income                                                                                    $   3,921,406     $    3,687,230
Adjustments to reconcile net income to net cash provided
   by operating activities:
Provision for loan losses                                                                           180,000            594,000
Depreciation and amortization                                                                     1,511,021          1,547,985
Realized (gains) and losses on:
Sale of loans and loans held for sale                                                                (2,242)            (3,568)
Disposal and sale of fixed assets                                                                    (8,586)          (244,731)
Sale of real estate owned                                                                           (31,416)                 0
Decrease (Increase) in accrued interest receivable                                                  330,093           (430,170)
(Increase) Decrease in prepaid expenses and other assets                                           (145,837)           232,945
Decrease in accrued interest payable                                                               (285,032)          (171,578)
Increase in other liabilities                                                                       456,215            815,471
(Increase) Decrease in deferred income taxes                                                       (336,091)            28,416
Other                                                                                                48,679                  0
                                                                                              --------------    ---------------
     Net cash provided by operating activities                                                    5,638,210          6,056,000
                                                                                              --------------    ---------------
INVESTING ACTIVITIES:
Proceeds from sale of:
     Education loans                                                                                438,075            707,172
     Real estate owned                                                                              570,073                  0
     Office property and equipment                                                                   12,436            348,731
Proceeds from maturities of investment securities held to maturity                              119,660,360         78,984,657
Proceeds from maturities of investment securities available for sale                              7,755,993         58,642,554
Principal collected on mortgage-backed securities                                                17,484,504         20,911,988
Principal collected on loans, net                                                                40,097,204         41,408,212
Longer-term loans originated or aquired, net                                                    (37,245,081)       (40,431,102)
Purchase of investment securities and mortgage-backed securities held to maturity               154,126,954)      (202,705,135)
Purchase of investment securities and mortgage-backed securities available for sale                       0         (4,056,040)
Purchase of office property and equipment                                                        (5,588,090)        (1,593,223)
                                                                                              --------------    ---------------
     Net cash used by investing activities                                                      (10,941,480)       (47,782,186)
                                                                                              --------------    ---------------
FINANCING ACTIVITIES:
Net increase in demand deposits and savings accounts                                             24,289,506         34,025,274
Net increase in time deposits                                                                     1,283,297         12,112,925
Net decrease in FHLB advances                                                                   (10,031,387)           (31,290)
Repayment of securities sold under agreements to repurchase                                     (10,000,000)                 0
Decrease in advances from borrowers for taxes and insurance                                         (92,395)          (133,880)
Purchase of treasury stock                                                                       (3,568,710)          (284,337)
Dividends paid on common stock                                                                     (630,275)          (650,175)
Net proceeds from issuance of common stock                                                              129                645
                                                                                              --------------    ---------------
     Net cash provided by financing activities                                                    1,250,165         45,039,162
                                                                                              --------------    ---------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                 (4,053,105)         3,312,976
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                   46,275,871         29,896,391
                                                                                              --------------    ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                                      $  42,222,766     $   33,209,367
                                                                                              ==============    ===============
Supplemental Disclosures:
     Cash paid for:
        Interest on deposits, advances, and other borrowings                                  $  20,397,263     $   18,409,668
        Income taxes                                                                              1,969,143          1,985,238
     Non-cash investing and financing activities:
        Dividends declared and not paid at quarter end                                              202,868            216,104
        Non-monetary transfers from loans to real estate acquired
        through foreclosure                                                                         445,722            146,000
</TABLE>

See notes to consolidated financial statements.

                                       3
<PAGE>

FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                    Accumulated
                                                                      other                                          Total
                               Common shares   Common    Paid-in    comprehensive    Retained      Treasury       Stockholders'
                               outstanding     stock     capital       loss          earnings       stock            Equity
------------------------------------------------------------------------------------------------------------------------------------

<S>                            <C>          <C>        <C>         <C>            <C>           <C>             <C>
Balances at December 31, 1999   7,183,978    $ 789,779  $8,217,535  $(1,167,810)   $ 42,108,955  $(3,851,456)    $   46,097,003
Net Income                                                                            3,921,406                       3,921,406
Other comprehensive income
  Unrealized loss
    on securities available
    for sale                                                            249,271                                         249,271
                                                                                                                 --------------
Total comprehensive income                                                                                            4,170,677
                                                                                                                 --------------

Dividends declared                                                                     (617,625)                       (617,625)
Exercise of stock options             100           10         119                                                          129
Purchase of common stock         (431,810)                                                        (3,568,710)        (3,568,710)
------------------------------------------------------------------------------------------------------------------------------------

Balances at September 30, 2000  6,752,268    $ 789,789  $8,217,654  $  (918,539)   $ 45,412,736  $(7,420,166)    $   46,081,474
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

                                       4
<PAGE>

ITEM 2: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
        SEPTEMBER 30, 2000 AND 1999.

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

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

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


General
-------

In the opinion of management,  the accompanying unaudited consolidated financial
statements of FMS Financial  Corporation contain all adjustments,  consisting of
normal recurring accruals,  necessary for a fair presentation of FMS's financial
condition,  results of  operations  and cash flows and changes in  stockholders'
equity for the periods and dates  indicated.  The results of operations  for the
three and nine months ended September 30, 2000 are not necessarily indicative of
the  operating  results for the full fiscal  year or any other  interim  period.
Certain items in the consolidated  financial  statements have been  reclassified
for comparative purposes.


The accompanying  unaudited consolidated financial statements have been prepared
in accordance with the instructions for FORM 10-Q, and therefore, do not include
all  information  and  notes  necessary  for a fair  presentation  of  financial
condition, results of operations and statements of cash flows in conformity with
generally  accepted  accounting  principles.  These statements should be read in
conjunction  with the  consolidated  statements  and  related  notes  which  are
incorporated by reference to the Corporation's annual report on Form 10K for the
year ended December 31, 1999. The consolidated  financial statements include the
Corporation's sole subsidiary, Farmers & Mechanics Bank ("the Bank").

                                       5
<PAGE>


FINANCIAL CONDITION -

Total Assets - at September 30, 2000 were $778.1  million as compared with total
assets at December 31, 1999 of $772.5 million.

Investment  Securities  Held to  Maturity -  increased  $22.8  million to $243.1
million at  September  30, 2000 from $220.3  million at December 31, 1999 due to
purchases of $28.1  million in reverse  repurchase  agreements,  $2.0 million in
U.S.  Agency notes and $1.8  million in  Municipal  Bonds during the nine months
ended September 30, 2000.  These increases were partially  offset by the call of
$4.7 million of U.S.  Agency notes,  $1.1 million of Municipal Bonds matured and
$3.3  million of  principal  paydowns on CMO's.  Investment  securities  held to
maturity at September 30, 2000 consisted  entirely of fixed rate  securities.  A
comparison of cost and approximate  market values of investment  securities held
to maturity as of September 30, 2000 and December 31, 1999 follows:

<TABLE>
<CAPTION>
                                                   September 30, 2000                                     December 31, 1999
                           --------------------------------------------------------------------  ----------------------------------
                                                    Gross           Gross         Estimated                           Estimated
                                Amortized        Unrealized      Unrealized         Market           Amortized          Market
                                   Cost             Gains          Losses           Value               Cost            Value
                           --------------------------------------------------------------------  ----------------------------------
<S>                       <C>                 <C>           <C>              <C>                <C>              <C>
U. S. Gov't Agencies       $      167,924,728  $       2,102 $    (5,798,426) $    162,128,404   $    170,610,811 $    161,851,452
CMO's                              44,800,766              0      (1,533,247)       43,267,519         48,187,121       46,481,467
Reverse Repurchase                 28,102,753              0                0       28,102,753                  0                0
Municipal bonds                     2,299,695          6,286                0        2,305,981          1,509,310        1,509,954
                           --------------------------------------------------------------------  -----------------------------------
Total                      $      243,127,942  $       8,388 $    (7,331,673) $    235,804,657   $    220,307,242 $    209,842,873
                           ====================================================================  ==================================
</TABLE>

Investment  Securities  and  Mortgage-Backed  Securities  Available  for  Sale -
decreased $7.4 million to $41.9 million at September 30, 2000 from $49.3 million
at December 31, 1999 as a result of $7.8 million of principal  paydowns on CMO's
and MBS's during the nine months ended September 30, 2000. Investments available
for sale consisted of $38.5 million in fixed rate securities and $3.4 million in
adjustable  rate  securities  at September  30,  2000. A comparison  of cost and
approximate  market  values of  investment  securities  available for sale as of
September 30, 2000 and December 31, 1999 follows:

<TABLE>
<CAPTION>
                                           September 30, 2000                                  December 31, 1999
                      --------------------------------------------------------------  -------------------------------
                                         Gross           Gross          Estimated                        Estimated
                         Amortized     Unrealized      Unrealized        Market          Amortized        Market
                            Cost         Gains           Losses           Value             Cost           Value
                      --------------------------------------------------------------  -------------------------------
<S>                  <C>            <C>          <C>               <C>               <C>            <C>
U. S. Gov't Agencies  $   10,292,280 $          0 $       (342,700) $     9,949,580   $   10,291,646 $     9,725,031
CMO's                     30,485,373        3,467       (1,086,609)      29,402,231       38,024,766      36,816,550
MBS's                      2,589,719            0          (11,220)       2,578,499        2,817,131       2,765,535

                      --------------------------------------------------------------  -------------------------------
Total                 $   43,367,372 $      3,467 $     (1,440,529) $    41,930,310   $   51,133,543 $    49,307,116
                      ==============================================================  ===============================
</TABLE>

                                       6
<PAGE>

Loans, net - decreased $3.9 million to $295.8 million at September 30, 2000 from
$299.7  million  at  December  31,  1999.   This  decrease  was  the  result  of
approximately $40.1 million of principal collected on loans, partially offset by
$37.2  million of loans  originated  during the nine months ended  September 30,
2000.  The following table  sets forth certain  information  concerning the loan
portfolio at the dates indicated.


                                          September 30,          December 31,
                                              2000                  1999
                                   --------------------------------------------

Mortgage loans (1-4  dwelling)      $           231,235,023  $     236,912,182
Construction loans                                   37,440            972,533
Commercial construction                             653,110          3,934,937
Consumer loans                                    3,583,286          3,273,792
Commercial real estate                           55,864,244         52,543,711
Commercial business                               9,097,598          6,790,348
                                   --------------------------------------------
Subtotal                                        300,470,701        304,427,503
                                   --------------------------------------------
Less:
    Deferred loan fees                              719,987            892,019
    Allowance for possible
     loan losses                                  3,927,848          3,840,967
                                   --------------------------------------------
Net Loans Receivable                $           295,822,866  $     299,694,517
                                   ============================================




At September 30, 2000, the recorded investment in loans for which impairment has
been recognized in accordance with SFAS Nos. 114 and 118 totaled $2.5 million of
which  $1.1  million  related  to loans  that  were  individually  measured  for
impairment with a valuation allowance of $425 thousand and $1.4 million of loans
that were collectively measured for impairment with a valuation allowance of $70
thousand.  For the nine months ended  September 30, 2000,  the average  recorded
investment in impaired loans was approximately $2.8 million. The Bank recognized
$136 thousand of interest income on impaired loans,  all of which was recognized
on the cash basis. The Bank had $3.9 million in total reserves for possible loan
losses at September 30, 2000,  representing  approximately  160% of  non-accrual
loans and 1.31% of total loans.

As of  September  30, 2000 the Bank had  outstanding  loan  commitments  of $7.8
million, of which $3.9 million represented  variable rate loans and $3.9 million
represented fixed rate loans. The Bank intends to fund these commitments through
scheduled  amortization  of loans  and  mortgage-backed  securities,  additional
borrowings and, if necessary,  the sale of investment  securities  available for
sale.

                                       7
<PAGE>

Non-Performing  Assets.  The following  table sets forth  information  regarding
non-accrual  loans,  troubled debt  restructured and real estate owned assets by
the Bank.


Non-Performing Assets:

                                                 September 30,   December 31,
                                                     2000            1999
                                                 -------------   ------------
Loans accounted for on a non-accrual basis:
Mortgage loans:
     One-to-four family                           $ 1,000,249     $ 1,386,096
     Commercial real estate                         1,460,732       1,510,167
     Consumer and other                                     0       $ 236,781
                                                  -----------     -----------
         Total mortgage non-accrual loans         $ 2,460,981     $ 3,133,044
                                                  -----------     -----------

     Troubled debt restructuring                  $   855,266     $   462,250
     Real estate owned, net                           306,926         448,541
     Other non-performing assets                       87,926          87,926
                                                  -----------     -----------
     Total non-performing assets, net             $ 3,711,099     $ 4,131,761
                                                  -----------     -----------


     Total non-accrual loans to net loans                0.83%           1.05%
                                                         ====            ====
     Total non-accrual loans to total assets             0.32%           0.41%
                                                         ====            ====
     Total non-performing assets to total assets         0.48%           0.53%
                                                         ====            ====



                                       8
<PAGE>

Mortgage-Backed  Securities  Held to Maturity - decreased $6.0 million to $115.4
million at September  30, 2000 from $121.4  million at December  31,  1999.  The
decrease  is the result of $17.5  million  in  principal  repayments,  partially
offset by the purchase of $11.6 million in FHLMC,  GNMA and FNMA adjustable rate
securities.  Mortgage-backed securities at September 30, 2000 consisted of $67.0
million  in  fixed  rate   securities  and  $48.4  million  in  adjustable  rate
securities.  Mortgage-backed  securities  held to maturity at September 30, 2000
and December 31, 1999 are summarized below:

<TABLE>
<CAPTION>
                                    September 30, 2000                                  December 31, 1999
            -----------------------------------------------------------------  ----------------------------------
                                   Gross         Gross
                 Amortized      Unrealized     Unrealized        Estimated         Amortized        Estimated
                   Cost            Gains         Losses        Market Value           Cost         Market Value
            -----------------------------------------------------------------  ----------------------------------

<S>         <C>              <C>           <C>              <C>               <C>              <C>
GNMA         $    34,635,833  $     267,471 $    (554,605)   $    34,348,699   $     37,742,389 $     36,940,635

FNMA              52,184,458        274,253      (526,969)        51,931,742         50,801,575       49,845,090

FHLMC             28,573,535        483,374       (35,355)        29,021,554         32,880,455       33,029,307

            -----------------------------------------------------------------  ----------------------------------
Total        $   115,393,826  $   1,025,098 $  (1,116,929)   $   115,301,995   $    121,424,419 $    119,815,032
            =================================================================  ==================================
</TABLE>




Deposits - increased  $25.6 million to $629.5 million at September 30, 2000 from
$603.9  million at December 31, 1999 as a result of an increase in  non-interest
checking accounts of $14.2 million, saving accounts of $5.6 million, certificate
of deposits of $1.3 million,  interest bearing checking accounts of $1.9 million
and money  market  accounts  of $2.6  million.  Non-interest  checking  accounts
increased due to the promotion of "Free Personal" and "Free  Business"  checking
accounts.  Interest  credited to depositor's  accounts for the nine months ended
September  30, 2000 amounted to $5.3  million.  The  following  table sets forth
certain information concerning deposits at the dates indicated:

<TABLE>
<CAPTION>
                                        September 30, 2000                         December 31, 1999
                             -------------------------------------------------------------------------------------
                                               Percent     Weighted                      Percent      Weighted
                                               of Total    Average                       of Total      Average
                                  Amount       Deposits      Rate              Amount    Deposits       Rate
                             -------------------------------------------------------------------------------------
<S>                             <C>           <C>         <C>             <C>           <C>           <C>
Non-interest checking             $96,735,258   15.37%      0.00%           $82,504,184   13.66%        0.00%
Checking accounts                 108,407,035   17.22%      3.04%           106,541,028   17.64%        2.26%
Savings accounts                  112,805,108   17.92%      2.70%           107,207,225   17.76%        2.67%
Money market accounts              68,178,245   10.83%      2.74%            65,583,704   10.86%        2.76%
Certificates                      243,339,274   38.66%      5.05%           242,055,976   40.08%        4.92%
                             -------------------------------------------------------------------------------------
   Total Deposits                $629,464,920  100.00%      3.31%          $603,892,117  100.00%        3.20%
                             =====================================================================================

</TABLE>


                                       9
<PAGE>


Borrowings  - at  September  30,  2000  amounted  to $96.3  million.  Borrowings
included  $10.0  million  of  10%  Subordinated  Debentures,  $80.0  million  in
securities sold under  agreements to repurchase with a weighted average interest
rate of 5.60%  and $6.3  million  in  Federal  Home Loan  Bank  Advances  with a
weighted  average  interest  rate of 5.49%.  At  December  31,  1999  borrowings
consisted of $10.0  million of 10%  Subordinated  Debentures,  $90.0  million in
securities sold under  agreements to repurchase with a weighted  average rate of
5.62% and $16.3  million  in  Federal  Home Loan Bank  Advances  with a weighted
average interest rate of 6.0%.

RESULTS OF OPERATIONS -

General

The earnings of the Corporation  depend primarily upon the level of net interest
income,  which is the difference between interest earned on its interest-earning
assets such as loans and investments,  and the interest paid on interest-bearing
liabilities,  such as deposits  including  non-interest  checking  accounts  and
borrowings. Net interest income is a function of the interest rate spread, which
is the difference between the weighted average yield earned on  interest-earning
assets and the weighted average rate paid on  interest-bearing  liabilities,  as
well  as  the  average  balance  of  interest-earning   assets  as  compared  to
interest-bearing  liabilities.  Net  income  is also  affected  by  non-interest
income,  such as gains (losses) on the sale of loans and investments,  provision
for loan  losses  and real  estate  owned,  service  charges  and other fees and
operating  expenses:  such as salaries and employee benefits,  deposit insurance
premiums,  depreciation,  occupancy and equipment expense and purchased services
expense.

The  Corporation  recorded net income for the three months ended  September  30,
2000 of $1.3  million,  or $.19  diluted  earnings per share as compared to $1.3
million,  or $.18 diluted earnings per share for the comparable  period in 1999.
Earnings for the nine months ended September 30, 2000 were $3.9 million, or $.56
diluted earnings per share as compared to $3.7 million, or $.51 diluted earnings
per share for the comparable period in 1999.

Interest Rate Spread

The Bank's  interest  income is affected by the  difference  or  "interest  rate
spread" between yields received by the Bank on its  interest-earning  assets and
the  interest  rates  paid  by  the  Bank  on its  interest-bearing  liabilities
including non-interest checking accounts. Net interest income is affected by (i)
the spread between the yield earned on interest-earning  assets and the interest
rates paid on interest-bearing deposits including non-interest checking accounts
and borrowings  (liabilities) and (ii) the relative amounts of  interest-earning
assets  versus  interest-bearing  liabilities.  The Bank's  interest rate spread
varies over time because income from investment  securities and  mortgage-backed
securities  depends  upon the amount  invested  during the period and the yields
earned on such securities.  The yield on loans receivable changes principally as
a result of existing mortgage loan repayments, adjustable rate loan adjustments,
sales and the interest rates and volume of new mortgage loans.  Interest expense
on  certificates  of deposit  changes  due to their  periodic  maturity  and the
prevailing current market interest rates.


                                       10

<PAGE>
Average Balance of Interest-Earning Assets and Interest-Bearing Liabilities

The following table sets forth certain information relating to the Corporation's
average balance sheet and reflects the average yield on assets and average rates
paid on liabilities for the periods indicated. Such yields and rates are derived
by dividing income or expense by the average balance of interest-earning  assets
or interest-bearing liabilities, respectively, for the periods presented:
<TABLE>
<CAPTION>
                                                                  Three Months Ended September 30,
                                ----------------------------------------------------------------------------------------------------
                                                     2000                                                  1999
                                ------------------------------------------------   -------------------------------------------------
                                   Average                            Average           Average                            Average
                                   Balance          Interest        Yield/Rate          Balance           Interest       Yield/Rate
                                ---------------  ----------------   ------------   ------------------  ---------------   -----------
                                                                       (Dollars in Thousands)
<S>                         <C>                 <C>                   <C>         <C>                 <C>                  <C>
Interest-earning assets:
  Loans receivable           $         301,532   $         5,954          7.90%    $         301,303   $        6,072          8.06%
  Mortgage-backed securities           111,323             1,907          6.85%               96,719            1,628          6.73%
  Investment securities                313,670             5,267          6.72%              294,038            4,685          6.37%
                             ------------------  ----------------   ------------   ------------------  ---------------   -----------
Total interest-earning
     assets                            726,525            13,128          7.23%              692,060           12,385          7.16%
                             ------------------  ----------------   ------------   ------------------  ---------------   -----------

Interest-bearing liabilities:
  Deposits                             622,169             5,279          3.39%              581,169            4,582          3.15%
  Borrowings                            90,521             1,303          5.76%               96,434            1,388          5.76%
  Subordinated debentures               10,000               264         10.56%               10,000              264         10.56%
                             ------------------  ----------------   ------------   ------------------  ---------------   -----------
Total interest-bearning
     liabilities             $         722,690             6,846          3.79%    $         687,603            6,234          3.63%
                             ==================  ----------------   ------------   ==================  ---------------   -----------
Net interest income                              $         6,282                                       $        6,151
                                                 ================                                      ===============
Interest rate spread                                                      3.44%                                                3.53%
                                                                    ============                                         ===========
Net yield on average interest-earning assets                              3.46%                                                3.56%
                                                                    ============                                         ===========
Ratio of average interest-
earning assets to average interest-bearing liabilities                  100.53%                                              100.65%
                                                                    ============                                         ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                      Nine Months Ended September 30,
                                   -------------------------------------------------------------------------------------------------
                                                        2000                                                  1999
                                   ------------------------------------------------    ---------------------------------------------
                                      Average                            Average           Average                        Average
                                      Balance          Interest         Yield/Rate         Balance        Interest       Yield/Rate
                                   ---------------  ----------------    -----------    -----------------  ----------     -----------
                                                                          (Dollars in Thousands)
<S>                            <C>                 <C>                   <C>          <C>                <C>             <C>
Interest-earning assets:
     Loans receivable           $         302,333   $        17,599          7.76%     $        301,127   $  17,646          7.81%
     Mortgage-backed securities           117,176             5,926          6.74%               91,468       4,687          6.83%
     Investment securities                309,750            15,372          6.62%              289,058      12,904          5.95%
                                ------------------  ----------------    -----------    -----------------  ----------  -------------
Total interest-earning
        assets                            729,259            38,897          7.11%              681,653      35,237          6.89%
                                ------------------  ----------------    -----------    -----------------  ----------  -------------

Interest-bearing liabilities:
     Deposits                             615,557            15,279          3.31%              556,860      13,326          3.19%
     Borrowings                            94,583             4,040          5.69%               96,448       4,119          5.69%
     Subordinated debentures               10,000               793         10.57%               10,000         793         10.57%
                                ------------------  ----------------    -----------    -----------------  ----------  -------------
Total interest-bearing
        liabilities             $         720,140            20,112          3.72%     $        663,308      18,238          3.67%
                                ==================  ----------------    -----------    =================  ----------  -------------
Net interest income                                 $        18,785                                       $  16,999
                                                    ================                                      ==========
Interest rate spread                                                         3.39%                                           3.23%
                                                                        ===========                                   =============
Net yield on average interest-earning assets                                 3.43%                                           3.32%
                                                                        ===========                                   =============
Ratio of average interest-
     earning assets to average interest-bearing liabilities                101.27%                                         102.77%
                                                                        ===========                                   =============
</TABLE>

                                       11
<PAGE>

Rate/Volume Analysis
The following  table describes the extent to which changes in interest rates and
changes in volume of interest-earning  assets and  interest-bearing  liabilities
have affected the Bank's interest income and interest expense during the periods
indicated.  For each category of  interest-earning  assets and  interest-bearing
liabilities,  information is provided on changes  attributable to (i) changes in
rate,  (ii)  changes in volume and (iii)  total  changes in rate and volume (the
combined  effect of changes in both volume and rate, not separately  identified,
has been  allocated  to rate).  Due to the fact that  average  balances on loans
include  non-performing loans which reduce the computed yield, a higher level of
non-performing loans affects both the changes due to volume and rate.

<TABLE>
<CAPTION>
                                          Three Months Ended                Nine Months Ended
                                             September 30,                    September 30,
                                        2000 compared to 1999             2000 compared to 1999
                                     ------------------------------   -------------------------------
                                      Increase (Decrease) due to:      Increase (Decrease) due to:
                                        Rate     Volume      Total      Rate      Volume      Total
                                     ------------------------------   -------------------------------
                                                             (In Thousands)
<S>                                 <C>        <C>        <C>        <C>        <C>        <C>
Interest income:
  Loans receivable                   $  (123)   $     5    $  (118)   $  (118)   $    71    $   (47)
  Mortgage-backed securities              33        246        279        (78)     1,317      1,239
  Investment securities                  269        313        582      1,544        924      2,468
                                     -----------------------------    -----------------------------
   Total change - interest income        179        564        743      1,348      2,312      3,660
                                     -----------------------------    -----------------------------
Interest expense:
  Deposits                               402        295        697        548      1,405      1,953
  Borrowings                             (44)       (41)       (85)         1        (80)       (79)
  Subordinated debentures                  0          0          0          0          0          0
                                     -----------------------------    -----------------------------
   Total change - interest expense       358        254        612        549      1,325      1,874
                                     -----------------------------    -----------------------------
Net change in net interest income    $  (179)   $   310    $   131    $   799    $   987    $ 1,786
                                     =============================    =============================
</TABLE>

                                       12




<PAGE>

Net  Interest  Income - for the three and nine months ended  September  30, 2000
totaled $6.3 million and $18.8 million,  respectively.  Net interest  income for
the three months ended September 30, 2000 increased $131 thousand as compared to
the same period in 1999 due  primarily  to an  increase  in  interest  income on
investment   securities  of  $582  thousand,  an  increase  in  mortgage  backed
securities of $279 thousand, and a decrease on interest expense on borrowings of
$85 thousand, partially offset by an increase in interest expense on deposits of
$697 thousand and a decrease in interest income on loans of $118 thousand.

Investment securities increased $582 thousand to $5.3 million due to an increase
in the average  balance of the portfolio of $19.6 million to $313.6  million for
the three  months  ended  September  30, 2000 from  $294.0  million for the same
period in 1999.  This  increase  was  primarily  due to the net  increase  since
September  1999 in repurchase  agreement  investments  of $28.0  million,  which
resulted in a volume increase in interest  income of $313 thousand.  The average
yield on the  investment  portfolio  increased  35 basis points to 6.72% for the
three  months  ended  September  30, 2000 from 6.37% for the three  months ended
September  30,  1999,  which  resulted in a increase in interest  income of $269
thousand.

Interest  income on mortgage backed  securities  increased $279 thousand to $1.9
million for the three months ended  September 30, 2000 from $1.6 million for the
same period in 1999,  which was primarily due to a $14.6 million increase in the
average  balance of the  portfolio to $111.3  million for the three months ended
September 30, 2000 from $96.7 million for the same period in 1999.  The increase
since  September 1999 in the mortgage backed  securities  portfolio was from the
purchases of $33.8 million of adjustable rate mortgage  backed securities offset
by principal  paydowns of $23.1 million.  This resulted in a volume  increase in
interest income of $246 thousand.  The average yield of the portfolio  increased
12 basis  points to 6.85% for the three  months  ended  September  30, 2000 from
6.73% for the same  period in 1999,  which  resulted  in an increase in interest
income of $33 thousand.

Interest  income on loans  decreased $118 thousand to $6.0 million for the three
months  ended  September  30, 2000 from $6.1 million for the same period in 1999
principally due to a decrease in the loan portfolio's  average rate to 7.90% for
the three months ended  September 30, 2000 from 8.06% for the three months ended
September  30,  1999.  The decrease in the average  yield for the current  three
month  period is primarily  due to interest  income on impaired  loans.  Average
interest rate on loans during the 1999 period includes $527 thousand of interest
income reorganized on impaired loans as compared to $136 thousand  recognized in
2000.  The average  balance of the loan  portfolio  increased  $229  thousand to
$301.5 million for the three months ended September 30, 2000 from $301.3 million
for the same period in 1999, which resulted in an increase in interest income of
$5 thousand.

Interest expense on deposits  increased $697 thousand for the three months ended
September 30, 2000 compared to the same period in 1999.  The average  balance of
deposits  increased  $41.0 million to $622.2  million for the three months ended
September  30,  2000 from  $581.2  million  for the same  period in 1999,  which
resulted in a volume increase in interest expense of $295 thousand. The weighted
average rates paid on deposits  increased 24 basis points to 3.39% for the three
months ended  September  30, 2000 from 3.15% for the same period in 1999,  which
resulted  in an  increase  in  interest  expense  of $402  thousand  due to rate
changes.  Average  balances  and  interest  rates on checking  accounts  tied to
treasury rates  increased  sharply during the third quarter due to a significant
rise in  short-term  interest  rates  and  short-term  certificates  of  deposit
repriced at higher costs.

Net interest  income for the nine months ended September 30, 2000 increased $1.8
million to $18.8  million  from $17.0  million for the same period in 1999,  due
primarily to an increase in interest  income on  investment  securities  of $2.5
million and an increase in mortgage backed securities of $1.2 million, partially
offset by an increase in interest expense on deposits of $2.0 million.

                                       13
<PAGE>

The increase in interest  income on  investment  securities  for the nine months
ended  September  30,  2000 as compared to the same period in 1999 was due to an
increase in the average balance of the investment  portfolio of $20.7 million to
$309.8 million for the nine months ended  September 30, 2000 from $289.1 million
for the same period in 1999,  which  resulted  in a volume  increase in interest
income of $924 thousand. The average yield on the investment portfolio increased
67 basis points to 6.62% for the nine months ended September 30, 2000 from 5.95%
for the same period in 1999, which resulted in an increase in interest income of
$1.5 million.

Interest  income on mortgage  backed  securities  increased $1.2 million to $5.9
million for the nine months ended  September  30, 2000 from $4.7 million for the
same time period in 1999, which was primarily due to a $25.7 million increase in
the average balance of the portfolio to $117.2 million for the nine months ended
September 30, 2000 from $91.5 million for the same period in 1999.  The increase
in the  mortgage  backed  securities  portfolio  was due to  purchases  of $33.8
million,  partially offset by $23.1 million of principal paydowns from September
1999 through  September  2000.  This  resulted in a volume  increase in interest
income of $1.3 million.  The average  yield of the  portfolio  decreased 9 basis
points to 6.74% for the nine months ended  September 30, 2000 from 6.83% for the
same time period in 1999, which resulted in a decrease in interest income of $78
thousand.

Interest  expense on deposits  increased  $2.0 million to $15.3  million for the
nine months  ended  September  30, 2000  compared to $13.3  million for the same
period in 1999.  The average  balance on  deposits  increased  $58.7  million to
$615.6 million for the nine months ended  September 30, 2000 from $556.9 million
for the nine months ended  September  30, 1999 which  resulted in an increase in
interest expense of $1.4 million.  Average interest rates on deposits  increased
12 basis points to 3.31% for the nine months ended September 30, 2000 from 3.19%
for the same period in 1999 which resulted in an increase in interest expense of
$548 thousand.

Provision  for Loan  Losses - for the three  months  ended  September  30,  2000
decreased  $414  thousand to $60 thousand from $474 thousand for the same period
in 1999.  For the nine months ended  September  30, 2000 there was a decrease in
the provision for loan losses of $414 thousand to $180 thousand compared to $594
thousand for the same period in 1999. At September 30, 2000 non-performing loans
decreased $672 thousand from December 31, 1999. Such decreases  precipitated the
decrease in the provision for loan losses.  The  determination  of the allowance
level  for  loan  losses  is  based  on   management's   analysis  of  the  risk
characteristics  of  various   classifications  of  loans,  previous  loan  loss
experience,  estimated  fair  value of the  underlying  collateral  and  current
economic conditions.  The Corporation will continue to monitor its allowance for
loan losses and make future  adjustments to the allowance  through the provision
for loan losses as economic conditions dictate.  Management continues to offer a
wider variety of loan products  coupled with the continued  change in the mix of
the products  offered in the loan portfolio from lower yielding loans (i.e., one
to four family loans) to higher  yielding  loans (i.e.,  commercial  real estate
mortgage, commercial construction, consumer, and commercial business) which have
a higher degree of risk than one to four family loans.  Although the Corporation
maintains  its  allowance  for loan  losses at a level that it  considers  to be
adequate to provide for the inherent risk of loss in its loan  portfolio,  there
can be no assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods due
to the higher  degree of credit risk which  might  result from the change in the
mix of the loan portfolio. Most of the Bank's lending activity is with customers
located  within  southern New Jersey.  Generally,  the loans are secured by real
estate.  While this represents a concentration of credit risk, the credit losses
arising from this type of lending compare  favorably with the Bank's credit loss
experience on its portfolio as a whole. The ultimate repayment of these loans is
dependent to a certain degree on the local economy and real estate market.

                                       14
<PAGE>

Other  Income - for the three and nine months ended  September  30, 2000 totaled
$754 thousand and $2.2 million,  respectively,  remaining constant for the three
month period and  decreasing  $182 thousand  during the nine month period ending
September  30, 2000  compared  to the same  period in 1999.  Gain on disposal of
fixed assets  decreased  $245  thousand for the nine months ended  September 30,
2000 due to the sale in May 1999 of a two acre  parcel of land.  Loan  servicing
fees  during the third  quarter of 1999  include $25  thousand  in late  charges
received from one commercial  loan. Real estate owned expenses  increased during
the third quarter of 2000 primarily due to expenditures of $9 thousand  incurred
to prepare one property for sale.

Operating  Expenses - for the three month and nine months  ended  September  30,
2000  amounted to $5.0 million and $14.7  million,  respectively  as compared to
$4.4 million and $13.0 million for the same periods in 1999.

Salaries  and  Employee  Benefits - for the three and nine month  periods  ended
September 30, 2000 were $2.9 million and $8.7 million, respectively, as compared
to $2.6 million and $7.5 million for the same periods in 1999.  The increase was
due to  annual  cost of  living  raises  and  additional  staff  in the four new
branches opened since September 30, 1999. Average full time equivalent employees
at September 30, 2000 were 423 as compared to 374 at September 30, 1999.

Occupancy and  Equipment - for the three and nine month periods ended  September
30, 2000 amounted to $1.1 million and $3.0 million, respectively, as compared to
$872 thousand and $2.6 million for the same periods in 1999. The increase is the
result of additional  depreciation  and  occupancy  expenses on the new branches
opened,  as well as other facility  improvements  and equipment  additions since
September 30, 1999.

Purchased  Services - for the three and nine month periods  ended  September 30,
2000 amounted to $478 thousand and $1.4  million,  respectively,  as compared to
$387  thousand  and $1.1  million  for the same  periods  in 1999.  ATM  charges
increased $129 thousand and check  processing  costs have increased $73 thousand
for the nine months ended  September 30, 2000 due to higher  transaction  volume
from an increase in the number of checking accounts.

Professional Fees - for the three and nine month period ended September 30, 2000
were $118 thousand and $352 thousand,  respectively, as compared to $81 thousand
and $360  thousand  for the same  periods  in 1999.  Accounting  and  regulatory
supervision fees increased during the current quarter.

ITEM 3:  DISCLOSURE ABOUT MARKET RISK

There were no significant  changes for the nine months ended  September 30, 2000
from the  information  presented in the annual  report on Form 10-K for the year
ended December 31, 1999.

                                       15
<PAGE>

PART II.       OTHER INFORMATION
               -----------------


         Item 1:       Legal Proceedings
         -------       -----------------

                       None


         Item 2:       Changes in Securities
         -------       ---------------------

                       None


         Item 3:       Defaults Upon Senior Securities
         -------       -------------------------------

                       None


         Item 4:       Submission of Matters to Vote of Security of Holders
         -------       ----------------------------------------------------

                       None

         Item 5:       Other Information
         -------       -----------------

                       None


         Item 6:       Exhibits and Reports on Form 8-K
         -------       --------------------------------

                       None


                                       16
<PAGE>

                                S I G N A T U R E





     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





FMS FINANCIAL CORPORATION





Date: November 14, 2000                      /s/ Craig W. Yates
                                          --------------------------------------
                                          Craig W. Yates
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)


Date: November 14, 2000                      /s/ Channing L. Smith
                                          --------------------------------------
                                          Channing L. Smith
                                          Vice President and
                                          Chief Financial Officer
                                          (Principal Financial Officer)