SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended        September 30, 1996
                          ----------------------------------


                                     - or -

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|_|   EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from __________________    to __________________

SEC File Number:  0-18764
                  -------

                               PULSE BANCORP, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

                  New Jersey                                   22-3016360
      ---------------------------------                    -------------------
       (State or other jurisdiction of                       (I.R.S. Employer
      of incorporation or organization)                    Identification No.)

  6 Jackson Street, South River, New Jersey                        08882
  -----------------------------------------                     ----------
   (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code:              (908) 257-2400
                                                                 --------------
Securities registered pursuant to Section 12(b) of the Act:         None
                                                                 --------------
Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $1.00 per share
                    ---------------------------------------
                               (Title of Class)

     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  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.        Yes X     No

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

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  Registrant,  based on the closing  sales price of the  Registrant's  Common
Stock as quoted on the Nasdaq  National  Market  System on  December 5, 1996 was
$48,038,256.

     As of December 5, 1996, the Registrant had outstanding  3,050,048 shares of
Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

1.   Parts II and IV --  Portions  of the  Registrant's  1996  Annual  Report to
     Stockholders.

2.   Part III -- Portions of the Registrant's 1997 Proxy Statement.


<PAGE>



                                    PART I

Item  1.  Business
------------------

     Pulse Bancorp,  Inc. (the  "Registrant" or the  "Corporation") is a savings
and loan holding company  incorporated under the laws of the State of New Jersey
in  November  1989,  for the sole  purpose  of  acquiring  all of the issued and
outstanding   common  stock  of  Pulawski  Savings  and  Loan  Association  (the
"Association") in connection with the reorganization of the Association into the
holding company form of  organization  and exchange of shares of common stock of
the Association for those of the Corporation (the "Reorganization").

     The  Association  was  chartered  by the  State of New  Jersey  in 1916 and
following  several  name  changes,  the last of  which  occurred  in  1993,  the
Association  became Pulse Savings Bank (the "Bank").  In 1996,  the  Corporation
formed three wholly owned subsidiaries named Pulse Investment,  Inc., Pulse Real
Estate, Inc. and Pulse Insurance  Services,  Inc. The subsidiaries are currently
inactive.

     At September 30, 1996,  the assets of the  Corporation  consisted of all of
the issued and  outstanding  shares of the Bank's Common Stock,  $1.0 million in
loans  receivable  from the Bank and $1.6  million  representing  the  potential
recovery from litigation in connection with certain fraudulent bridge loans. See
"Item  3.  Legal  Proceedings."   References   throughout  this  Report  to  the
Corporation  or the Bank  include,  unless  otherwise  specified  or the context
otherwise requires, the Corporation's and the Bank's predecessors in interest.

     At  September  30,  1996,   the  Bank  had  total   assets,   deposits  and
stockholders' equity of approximately $501.0 million,  $394.7 million, and $35.9
million,  respectively.  The  Bank  is a New  Jersey-chartered  savings  bank in
capital  stock form.  The Bank's  deposits  are  insured by the Federal  Deposit
Insurance  Corporation  ("FDIC")  under the Savings  Association  Insurance Fund
("SAIF").

     The Bank conducts its business through four offices located in South River,
South  Amboy,  Monroe  Township,  and  Lawrenceville,  New  Jersey.  The  Bank's
executive offices are located at 6 Jackson Street,  South River, New Jersey, and
its telephone number is (908) 257-2400.

     The principal  business of the Bank is the  acceptance of savings  deposits
from the general  public and the  origination of mortgage loans obtained for the
purpose of constructing,  financing or refinancing one-to four-family  dwellings
and other improved residential and commercial real estate. In addition, the Bank
purchases  investment  and  mortgage-backed  securities.  Its  income is derived
largely  from  interest  income  on  interest-earning   assets  such  as  loans,
mortgage-backed securities and investments.  Its principal expenses are interest
paid on deposits, borrowings and operating expenses.

     The  level  of  earnings  (net  interest  income)  of the Bank  will  vary,
depending upon the difference between the amount of income that it receives from
its loans,  mortgage-backed securities and investment portfolios and its cost of
funds.  This is because  the Bank's  cost of funds are  sensitive  to changes in
short-term interest rates due to shorter-term  savings accounts bearing interest
rates determined by current market conditions while a significant portion of the
Bank's loan portfolio, consisting of long-term, fixed-rate real estate loans, do
not  reprice  as  rapidly  or  to  the  same  extent  as  the  Bank's  deposits.
Consequently,  the Bank is  vulnerable  to future  increases  in interest  rates
which,  if  significant,  may have a material  adverse  affect on its  financial
condition and results of operations.

                                      2


<PAGE>




     The Bank originates fixed-rate and adjustable-rate mortgages and has in the
past purchased primarily one to five year  adjustable-rate  loans on residential
and  multi-family  dwellings  for retention in its  portfolio.  It has adopted a
strategy  designed to improve and stabilize its  operational  results to counter
the  volatile  cost  of its  funds  and  the  mismatch  between  its  relatively
long-term,  fixed-rate assets and short-term,  rate sensitive  liabilities.  The
principal  objective  of this  strategy is to  restructure  assets to lessen the
potential  adverse  effects of  interest  rate  volatility  on  earnings,  while
maintaining high quality (low credit risk) assets and improving profits.

     The Bank  operates  in an area  that is  highly  industrialized,  extremely
diverse  and  densely  populated.   No  one  industry  or  group  of  industries
predominates in the Bank's operating area. However,  the Bank is affected by the
economy and real estate market in the State of New Jersey, particularly northern
New Jersey, and the New York City metropolitan area.

Lending Activities
------------------

     General.  As of  September  30,  1996,  83.0% of the Bank's  gross loan and
mortgage-backed  securities  portfolio consisted of loans and securities secured
by mortgages  on one- to  four-family  residential  properties,  which  included
conventional  mortgage loans, insured loans,  guaranteed loans,  mortgage-backed
securities,  collateralized mortgage obligations,  and consumer loans secured by
real estate (home equity loans). Additionally, the Bank originates and purchases
multi-family and commercial real estate loans,  which loans represented 17.0% of
the Bank's gross loan portfolio at September 30, 1996. To a lesser  extent,  the
Bank also originates consumer loans not secured by real estate.

                                      3


<PAGE>



     Loan Portfolio  Analysis.  Set forth below is selected data relating to the
composition of the Bank's loan portfolio,  including mortgage-backed securities,
by type of loan and type of security on the dates indicated.

<TABLE>
<CAPTION>

                                                                     At September 30,
                                     ----------------------------------------------------------------------------------------------
                                           1992               1993                 1994                 1995              1996
                                     ------------------  -----------------   -----------------    ----------------  ---------------
                                     Amount     Percent  Amount    Percent   Amount    Percent    Amount   Percent  Amount  Percent
                                     ------     -------  ------    -------   ------    -------    ------   -------  ------  -------
                                                          (Dollars in Thousands)     

Type of Loan:
Conventional Real Estate Loans:

<S>                                 <C>          <C>    <C>          <C>    <C>        <C>      <C>        <C>     <C>       <C>
Construction Loans ..............   $    197       0.1% $     --        --% $     --      --%   $    280      0.1% $   363     0.1%
Loans on existing property.......    184,281      52.9   160,136      44.2   124,510    38.7     119,512     3.86  117,744    34.7
Insured or guaranteed real estate
   loans ........................     12,313       3.5    10,393       2.9     7,975     2.5       7,080     2.3     5,838     1.7

Mortgage-backed securites........     95,088      27.4   146,336      40.4   142,385    44.2     138,986    44.9   169,077    49.9
Collateralized mortgage..........     50,912      14.6    39,969      11.1    39,581    12.3      35,941    11.6    34,934    10.3
obligations
Consumer Loans:

Home equity .....................      8,307       2.4    10,076       2.8    10,870     3.4      10,397     3.4    13,544     4.0
Student loans ...................         86      --.-        57      --.-       101    --.-           7    --.-        --    --.-
Savings account loans ...........        735       0.2       514       0.1       319     0.1         288     0.1       184     0.1
Commercial loans ................        946       0.3      --.-        --        --    --.-          --    --.-        --      --
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 
                                     352,865     101.4   367,481     101.5   325,741   101.2     312,491   101.0   341,684   100.8
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 

Add:

 Premiums on mortgage-backed
   securities ...................        611       0.2       525       0.1       450     0.1         402     0.1       689     0.2
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 

Less:

Loans in process ................         69      --.-        --      --.-        --    --.-         187    --.-       238     0.1
Unearned discounts on loans and
  mortgage-backed securities and

  deferred loan fees ............      1,469       0.4     1,375       0.4       847     0.3         856     0.3       781     0.2


Allowance for loan losses........      4,200       1.2     4,487       1.2     3,369     1.0       2,604     0.8     2,459     0.7
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 
                                       5,738       1.6     5,862       1.6     4,216     1.3       3,647     1.1     3,478     1.0
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 
      Total .....................   $347,738     100.0% $362,144  $321,975     100.0%  100.0%   $309,246   100.0% $338,895   100.0%
                                    ========     =====  ========     =====  ========   =====    ========   =====  ========   ===== 

Type of Security:
                                                                                                    
Residential:

1 to 4 family ...................   $ 92,504      26.6% $ 82,162      22.7% $ 60,662    18.9%   $ 61,800    20.0% $ 73,578    21.7%
Other dwelling units ............     46,205      13.3    42,341      11.7    37,286    11.6      32,923    10.6    28,190     8.3
Commercial or industrial.........     54,076      15.5    45,709      12.6    37,432    11.6      35,466    11.5    29,883     8.8
  properties

Savings accounts ................        735       0.2       514       0.1       319     0.1         288     0.1       184     0.1
Commercial non-mortgage loans....        946       0.3        --      --.-        --    --.-         --     --.-        --    --.-
ollateralized mortgage..........      50,912      14.6    39,969      11.1    39,581    12.3      35,941    11.6    34,934    10.3
obligations
Insured by State or Federal

  Agencies:

FHA/VA ..........................     12,313       3.5    10,393       2.9     7,975     2.5       7,080     2.3     5,838     1.7
Mortgage-backed securities.......     95,088      27.4   146,336      40.4   142,385    44.2     138,986    44.9   169,077    49.9
Student loans ...................         86      --.-        57      --.-       101    --.-           7    --.-        --    --.-
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 
                                     352,865     101.4   367,481     101.5   325,741   101.2     312,491   101.0   341,684   100.8
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 

Add:

  Premiums ......................        611       0.2       525       0.1       450     0.1         402     0.1       689     0.2
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 

Less:

Loans in process ................         69      --.-        --      --.-        --    --.-         187    --.-       238     0.1
Unearned discounts on loans and
  mortgage-backed securities and

  deferred loan fees ............      1,469       0.4     1,375       0.4       847     0.3         856     0.3       781     0.2

Allowance for loan losses........      4,200       1.2     4,487       1.2     3,369     1.0       2,604     0.8     2,459     0.7
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 
                                       5,738       1.6     5,862       1.6     4,216     1.3       3,647     1.1     3,478     1.0
                                    --------     -----  --------     -----  --------   -----    --------   -----  --------   ----- 
      Total .....................   $347,738     100.0% $362,144     100.0% $321,975   100.0%   $309,246   100.0% $338,895   100.0%
                                    ========     =====  ========     =====  ========   =====    ========   =====  ========   ===== 
</TABLE>


                                               4


<PAGE>



     Mortgage-backed  Securities. The Bank periodically purchases collateralized
mortgage obligations ("CMOs") and mortgage-backed  securities  guaranteed by the
Government  National  Mortgage  Association  ("GNMA")  and the Federal  National
Mortgage  Association  ("FNMA")  and  participation  certificates  issued by the
Federal Home Loan Mortgage Corporation  ("FHLMC").  CMOs are aggregates of pools
of pass-through  securities consisting of mortgage loans that serve as security.
Mortgage-backed  securities  represent  a  participation  interest  in a pool of
single-family mortgages, the principal and interest payments on which are passed
from  the  mortgage  originators,   through  intermediaries   (generally  quasi-
governmental  agencies) that pool and repackage the  participation  interests in
the form of  securities,  to investors  such as the Bank.  GNMA  mortgage-backed
securities  are  certificates  issued and backed by the GNMA and are  secured by
interests in pools of mortgages  which are fully insured by the Federal  Housing
Administration  ("FHA") or partially guaranteed by the Veterans'  Administration
("VA"). FNMA  mortgage-backed  securities are certificates issued and guaranteed
by  the  FNMA  that  are  secured  by   conventional   mortgage   loans.   FHLMC
mortgage-backed  securities are participation certificates issued and guaranteed
by the FHLMC and secured by interests  in pools of  conventional  mortgages.  At
September 30, 1996, mortgage-backed securities,  consisting of GNMA, FHLMC, FNMA
and CMOs amounted to  approximately  $204.3 million or 60.3% of the net loan and
mortgage-backed securities portfolio.

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

     The CMOs (in the form of real estate mortgage investment  conduits) held by
the Bank at September  30, 1996  totaled  $36.4  million and  consisted of FNMA,
FHLMC,  and  privately  issued  pools.  The portfolio of CMOs held in the Bank's
mortgage-backed  securities  portfolio at September 30, 1996 did not include any
residual interests in CMOs. Further, at September 30, 1996, the Bank's mortgage-
backed securities portfolio did not include any "stripped" CMOs (i.e., CMOs that
pay interest only and do not repay  principal or CMOs that repay  principal only
and do not pay interest).

     Residential Real Estate Loans. One of the primary lending activities of the
Bank is to originate loans to enable borrowers to purchase  existing homes or to
construct new homes.  The Bank's real estate loan  portfolio also includes loans
on one- to four-family  dwellings,  multi-family  housing (over four units), and
loans  made  for the  development  of  unimproved  real  estate  to be used  for
residential  housing.  At September 30, 1996,  approximately 83.0% of the Bank's
gross  loan  and  mortgage-backed   securities   portfolio  consisted  of  loans
(including   conventional  mortgage  loans,  insured  loans,  guaranteed  loans,
collateralized mortgage obligations and guaranteed  mortgage-backed  securities)
secured by one- to four- family dwellings.

     The loan-to-value ratio, maturity and other provisions of the loans made by
the Bank  generally  have  reflected  the policy of making less than the maximum
loan  permissible   under  applicable   regulations,   consistent  with  lending
practices,  market  conditions,  and underwriting  standards  established by the
Bank. The Bank's general policy currently limits the maximum loan-to-value ratio
on single-family conventional

                                      5


<PAGE>



     loans to 95% and 80% on  multi-family  and  commercial  real estate  loans.
Mortgage  loans  originated by the Bank are intended to conform to the FHLMC and
the FNMA  underwriting  standards  so that they may be eligible  for sale in the
secondary market.  Mortgage loans, both fixed- and adjustable-rate,  made by the
Bank generally are long-term loans, amortized on a monthly basis, with principal
and interest due each month.  The initial  contractual  loan payment  period for
residential  loans typically ranges from 15 to 30 years.  The Bank's  experience
indicates that real estate loans remain  outstanding for  significantly  shorter
periods than their contractual terms. Borrowers may refinance or prepay loans at
their option, subject to any prepayment penalty provisions included in the note,
and any applicable state laws relating to such penalty.

     Due to  consumer  demand in the  Bank's  primary  market  area in which its
offices are located, to date, the Bank has originated primarily fixed-rate loans
and  one and  three  year  adjustable-rate  loans.  These  one  and  three  year
adjustable-rate   residential   mortgage  loans  which  adjust  based  upon  the
respective one and three year U.S. Treasury securities, are offered in an effort
to shorten the maturity and increase the interest rate sensitivity of the Bank's
total loan portfolio.

     Commercial  Real  Estate  Loans.  The Bank has in the past  purchased  both
construction   loans  and  permanent  loans  on   multi-family   and  commercial
properties. Loans secured by multi-family, commercial and other income-producing
real estate  generally are limited to 80% of appraised  value and generally have
an initial  contractual  loan  payment  periods from 15 to 30 years with varying
call  provisions.  Commercial  real  estate  loans  generally  are  made  on  an
adjustable-rate  basis  indexed to the one-year,  three-year  or five-year  U.S.
Treasury  index.  Commercial real estate loans,  consisting  primarily of office
buildings,   strip  shopping  centers,  health  care  facilities,   mini-storage
facilities,  and industrial  buildings  amounted to $30.0 million or 8.8% of the
Bank's gross loan and  mortgage-backed  securities  portfolio  at September  30,
1996.

     Construction  Loans.  The Bank will  occasionally  originate a  residential
construction  loan with an  initial  term of one to two years.  Generally,  such
loans are repaid or converted to permanent  loans when the property is completed
or sold.

     Commercial real estate and construction  lending is generally considered to
involve  a higher  level of  credit  risk than  one-to  four-family  residential
lending due to the  concentration  of principal in a limited number of loans and
borrowers  and the  effects  of  general  economic  conditions  on  real  estate
developers  and  managers.  The Bank's  risk of loss on a  construction  loan is
dependent  largely upon the accuracy of the initial  estimate of the  property's
value upon  completion of the project and the estimated cost of the project.  If
the estimated cost of construction or development  proves to be inaccurate,  the
Bank may be required to advance funds beyond the amount originally  committed to
permit  completion  of the  project.  If the  estimate  of  value  proves  to be
inaccurate, the Bank may be confronted, at or prior to the maturity of the loan,
with a project with value which is insufficient  to assure full repayment.  When
loan payments  become due,  borrowers may experience  cash flow from the project
which is not adequate to service total debt.  This cash flow shortage may result
in the failure to make loan payments.  In such cases,  the Bank may be compelled
to modify the terms of the loan. In addition,  the nature of these loans is such
that they are  generally  less  predictable  and more  difficult to evaluate and
monitor.  The Bank  seeks  to  minimize  these  risks by  lending  primarily  to
established customers and generally restricting such loans to its primary market
area.

                                      6


<PAGE>



     Consumer  Loans.  The Bank  presently  originates  loans secured by savings
accounts and home equity loans.  Consumer  loans,  including  home equity loans,
amounted to 4.1% of the Bank's total gross loan and  mortgage-backed  securities
portfolio at September 30, 1996.

     Commercial  Business  Loans.  The Bank generally does not offer  commercial
business  loans. At September 30, 1996, none of the Bank's loans were classified
as commercial business loans.

     Loan Maturity Schedule.  The following table sets forth certain information
at September 30, 1996,  regarding the dollar amount of loans and mortgage-backed
securities  maturing in the Bank's portfolio based on their contractual terms to
maturity.  Demand loans,  loans having no stated  schedule of repayments  and no
stated maturity, and overdrafts are reported as due in one year or less.

<TABLE>
<CAPTION>


                                         One year    One to       Three to       Five to    Over Ten
                                         or less   Three Years   Five Years     Ten Years     Years       Total
                                         --------  -----------   ----------     ---------   --------      -----
                                                                  (Dollars in Thousands)

<S>                                     <C>        <C>           <C>             <C>        <C>        <C>     
Real estate mortgage(1)..........       $ 25,578   $ 19,865      $  6,378        $ 11,396   $ 60,490   $123,707
Consumer.........................            198        269           951           2,383      9,927     13,728
Mortgage-backed securities(1)(2..          1,957     11,047         3,902          12,315    174,790    204,011
                                        --------   --------      --------        --------   --------   --------
      Total......................       $ 27,733   $ 31,181      $ 11,231        $ 26,094   $245,207   $341,446
                                        ========   ========      ========        ========   ========   ========
</TABLE>


---------------------
Footnotes included in next table.

     The following table sets forth the dollar amount of all loans due after one
year from September 30, 1996, which have  predetermined  interest rates and have
floating or adjustable interest rates, based on contractual terms.

                                                               Floating or
                                         Predetermined Rates  Adjustable Rates
                                         -------------------  ----------------
                                                   (Dollars in Thousands)

Real estate mortgage(1)...........             $75,870             $22,259
Consumer(1).......................               5,965               7,565
Mortgage-backed securities(1)(2)..              71,283             130,771
                                                ------             -------
      Total.......................            $153,118            $160,595
                                               =======             =======


     (1) Does not include scheduled principal amortization. Experience indicates
that prepayments significantly reduce the average term of maturity.

(2)   Includes collateralized mortgage obligations.

     Loan Solicitation and Processing.  The Bank actively solicits mortgage loan
applications from real estate brokers, contractors, existing customers, customer
referrals,  and call-ins  and walk-ins to its offices.  An appraisal of the real
estate  intended to secure the proposed loan is undertaken by an independent fee
appraiser.

     In  connection  with the loan  approval  process,  the Bank's loan officers
analyze  the  loan  applications  and the  property  involved.  All  residential
mortgage loans are processed by a loan officer

                                      7


<PAGE>



and then submitted to the Bank's President for his approval. All loans purchased
by the  Bank  are  reviewed  by a  committee  of three  executive  officers.  In
addition,  all multi-family and commercial loans are inspected by two directors.
In  connection  with loans  purchased  by the Bank,  the Bank also  requires  an
independent  appraisal,  in addition to the  information  required for all loans
originated by the Bank.  All loans  approved by the executive  officers are then
submitted to the Bank's Board of Directors  for its  approval.  Prior to closing
any  long-term  loan,  the  borrower  must  provide  proof of fire and  casualty
insurance  on the  property  serving  as  collateral,  which  insurance  must be
maintained during the full term of the loan.

     Loan  Purchases and Sales.  Because the Bank's savings  deposits  generally
exceed the demand for loans from its  customers  in its local  market  area,  in
addition  to  originating  loans  for its  portfolio,  the  Bank has in the past
purchased a portion of its real estate loan  portfolio in the secondary  market.
The Bank's  purchases in the secondary  market are dependent upon the demand for
mortgage  credit  in the  local  market  area  and  the  inflow  of  funds  from
traditional  sources.  Purchases of loans  enable the Bank to utilize  available
funds more quickly and to obtain a yield higher than could generally be obtained
in the  Bank's  primary  market  area.  Since  1990,  the Bank has not  actively
purchased loans in the secondary market,  rather if deposits exceed loan demand,
the Bank has invested primarily in mortgage-backed securities.

     The Bank has not sold loans, other than student loans, during the past five
years.

     Loan  Commitments.  It is  the  policy  of  the  Bank  to  generally  grant
commitments  to fund loans for periods not to exceed 60 days at a specified term
and interest rate. The total amount of the Bank's commitments to originate loans
at  September  30,  1996 was $3.1  million of which $2.5  million  were at fixed
rates.

     The  origination of fixed-rate  loans creates a potential for interest rate
risk. In a rising interest rate environment,  the  interest-bearing  liabilities
used to fund loan originations will experience increasing costs while fixed-rate
assets  cannot  reprice.  Accordingly,  net  interest  income may be  negatively
impacted. The reverse would occur in a declining interest rate environment.  The
Bank monitors  this  situation by regularly  evaluating  its interest rate risk.
Although  fixed-rate  loans often are repaid well before the date of contractual
maturity,  the Bank has attempted to offset the increased  interest rate risk of
these assets by increasing the interest rate sensitivity of its other assets. In
recent  years,  the Bank has  substantially  increased its  mortgage-backed  and
investment  securities  portfolios,  partly to address the greater interest rate
risk of its fixed-rate assets.

     In addition,  the Bank has a  Homeowners'  Equity  Credit Line Program that
represents  undisbursed  funds from  approved  lines of credit.  These  lines of
credit are secured by the respective one to four family  residential  properties
owned by the  borrowers.  At  September  30,  1996,  the  Bank  had  outstanding
commitments on approved lines of credit of $11.0 million.

     Loan  Origination  and Other Fees. In addition to interest earned on loans,
the Bank  receives loan  origination  fees or "points" and  commitment  fees for
originating or purchasing loans.

     Statement of Financial  Accounting  Standards No. 91 ("SFAS No. 91"), dated
December 1986, which prescribes the GAAP for recording  non-refundable  fees and
costs  associated with the  origination  and  acquisition of loans.  SFAS No. 91
requires the deferral and subsequent  amortization of all loan  origination fees
net of certain loan origination costs over the related life of the loan.

                                      8


<PAGE>




     The Bank's loan  origination  fees generally are 0% - 1.0% on  conventional
residential  mortgage loans and 1%-3% for commercial real estate loans. The Bank
does not charge  origination fees on fixed- rate conventional  mortgage loans or
on home equity  loans.  The total amount of deferred  loan fees and discounts on
loans at September 30, 1996, was $429,000.

     The Bank also receives other fees and charges  relating to existing  loans,
which  include  prepayment  penalties,  late  charges,  and  fees  collected  in
connection with a change in borrower or other loan modifications. These fees and
charges have not constituted a material source of income.

     Non-Performing  and  Restructured  Loans  and  Asset   Classification.   At
September  30, 1996,  the Bank had  classified  approximately  $12.1  million in
assets, of which $9.9 million were loans ($369,000 classified as special mention
and $9.5 million  classified  as  substandard)  and $2.2 million was real estate
acquired as a result of foreclosure.  Of the $9.9 million in loans classified by
the Bank,  approximately  $8.9 million included loans internally  classified but
which  were  not  delinquent   greater  than  90  days  at  September  30,  1996
("performing/non-performing  loans"). Such performing/non-performing  loans were
classified  by the Bank due to other factors (such as negative cash flow or past
delinquencies) and are not included in the following table.

     The  table  below  sets  forth  information  with  respect  to  the  Bank's
non-performing loans for the periods indicated.  It does not include real estate
acquired as a result of foreclosure.  Accruing  mortgage loans more than 90 days
delinquent  are  loans  that  management  considers  adequately  secured,  where
management  believes,  based  upon its  evaluation  of each  loan and its  prior
experience with similar loans,  that such interest  receivable is collectible in
due  course.  A loan is placed  on  non-accrual  status  when,  in  management's
judgment,  further  accruals  of  interest  will be  uncollectible.  Loans which
continue to accrue interest while  contractually  past due more than ninety days
consist  almost  entirely of smaller  balance  mortgage  loans secured by single
family  residential  properties  having  fair  values in  excess  of the  Bank's
recorded investment therein.

                                      9


<PAGE>

<TABLE>
<CAPTION>

                                                  At September 30,
                              --------------------------------------------------------
                                   1992        1993       1994       1995       1996
                                  ------      ------     ------     ------     -----

Loans Accounted For
On a Non-Accrual Basis:
<S>                               <C>       <C>         <C>          <C>        <C>  
  One- to four-family real estate $  749    $    443    $   212      $ 211      $ 345
  Multi-family real estate...         --          --        779      1,253        654
  Commercial real estate.....      5,125       2,566        464        464         --
                                   -----       -----     ------    -------    -------
    Total....................      5,874       3,009      1,455      1,928        999
                                   -----       -----     ------    -------    -------
Restructured Loans...........      1,121       3,121      4,200      4,167      2,135
                                   -----       -----     ------    -------    -------

Accruing Loans That Are
Contractually More than 90 Days
Delinquent:

  One- to four-family real estate  1,950       1,479      1,091      1,355        835
  Other......................          5          --         --         --         --
                                   -----       -----      -----     ------      -----
     Total...................      1,955       1,479      1,091      1,355        835
                                   -----       -----      -----     ------      -----
     Total of non-accrual,
      restructured, and more
      than 90 days delinquent and
      accruing loans.........     $8,950      $7,609     $6,746    $ 7,450     $3,969
                                   =====       =====      =====     ======      =====
Percentage of total loan and
  mortgage-backed securities
  portfolio..................      2.54%       2.07%      2.07%      2.38%      1.16%
                                   ====        ====      =====      =====     ======
</TABLE>



     For the year ended  September 30, 1996,  gross interest  income which would
have been recorded had the  non-accrual and  restructured  loans been current in
accordance  with their  original  terms  would have  amounted  to  approximately
$325,000. The amount that the Bank included in interest income on such loans for
the year ended September 30, 1996, was $154,000.

     At  September  30,  1996,  the Bank had loans with an  aggregate  principal
balance of $9.5 million  classified as substandard  ($3.95 million of such loans
were  non-performing  or restructured at September 30, 1996). The following is a
description of the larger  non-performing or restructured  loans as of September
30, 1996.  Additional  allowances  for losses may be required for one or more of
these loans.

     Hollowbrook  Associates  is a  loan  originated  in  1990  to  finance  the
acquisitions  of a 2-story,  45,000 square foot office building on 2.75 acres in
Wappinger Falls, New York. The loan was subject to a troubled debt restructuring
in May 1994 which  resulted in a reduction of the  interest  rate of the loan to
6.75% and an extension of its maturity to May 1, 1999. The loan has performed in
accordance  with its  restructured  terms and had a  remaining  balance  of $2.1
million at September 30, 1996.

     Brentwood Associates is a loan purchased in 1988 to finance the purchase of
a 32 unit, 8 building apartment complex located in Barrington,  New Jersey. This
non-accrual  loan, which has a $653,992 balance,  is in foreclosure  proceedings
and is being operated by a court appointed rent receiver.

                                      10


<PAGE>




     The remainder of the non-performing loans consists of smaller balance loans
aggregating  $1.2  million  which  are  secured  by  1-to  4-family  residential
property.

     The Bank's other  substandard  assets at September  30, 1996,  consisted of
$2.2 million of real estate owned.

      The major properties included in real estate owned are as follow:

     Bellows was a loan made in 1988 secured by a 3 story commercial/residential
mixed use property  located in Princeton,  New Jersey which was acquired as real
estate  owned in 1994.  The  property  had a carrying  value of $1.1  million at
September  30, 1996 and was  appraised as of May 17, 1994,  with a value of $1.4
million.  This property was sold after the end of the 1996 fiscal year. The Bank
recorded a gain on sale of $73,000.

     Rivco  Equities  was a loan  purchased  in 1986,  secured by a three  story
office  building  located in  Hackensack,  New Jersey which was acquired as real
estate  owned in 1994.  The  property  had a carrying  value of  $514,000  as of
September  30,  1996  and was  appraised  as of  August  1994,  with a value  of
$812,000.  This property is currently under contract of sale. However, there can
be no assurance the sale will take place.

     640 Lincoln Associates was a loan purchased in 1986 to finance the purchase
of a 29 unit, 3 story apartment  building  located in Morrisville,  Pennsylvania
which was  acquired as real estate  owned in 1995.  The  property had a carrying
value of $392,000 as of September  30, 1996.  This  property is currently  under
contract of sale. However, there can be no assurances the sale will take place.

     Four other  properties  with an  aggregate  carrying  value of $312,000 are
included in real estate owned.

     Provision for Loan Losses and Losses on Real Estate Owned.  A provision for
loan losses is charged to  operations  based on  management's  evaluation of the
risk  inherent in its loan  portfolio in relation to the level of the  allowance
for loan  losses and  changes  in the  nature  and volume of its loan  activity.
Management believes that it is reasonable to provide for unanticipated losses.

     The Bank provides  valuation  reserves for anticipated  losses on loans and
real estate owned when management  determines that a significant  decline in the
value of the  collateral  has  occurred,  as a result  of which the value of the
collateral  is less than the amount of the unpaid  principal of the related loan
plus  estimated  costs of  acquisition  and  sale.  In  addition,  the Bank also
provides reserves based on the dollar amount and type of collateral securing its
loans, in order to protect against  unanticipated  losses.  Although  management
believes   that  it  uses  the  best   information   available   to  make   such
determinations,  future adjustments to reserves may be necessary, and net income
could be significantly  affected, if circumstances differ substantially from the
assumptions used in making the initial determinations.

     At September 30, 1996,  non-performing and restructured loans totaled $3.95
million.  Management  believes the allowance for loan losses is established at a
level adequate to provide for potential credit losses in accordance with GAAP at
September  30, 1996.  However,  there can be no assurance  that,  in the future,
pursuant to a request from its  regulators or as a result of the Bank's  ongoing
review,  the Bank will not significantly  increase or decrease its allowance for
loan losses, thereby impacting the Bank's financial condition and earnings.

                                      11


<PAGE>




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


<TABLE>
<CAPTION>

                                                Year Ended September 30,
                                --------------------------------------------------------
                                     1992       1993        1994        1995      1996
                                     ----       ----        ----        ----      ----
                                                    (Dollars in Thousands)

<S>                                 <C>        <C>         <C>        <C>        <C>   
Balance at beginning of period.     $2,822     $4,200      $ 4,487    $3,369     $2,604
                                     -----      -----       ------     -----      -----


Provision charged to operations      2,500      2,101        2,650       --         --
                                     -----      -----       ------   -------     ------

Charge-Offs:
Residential real estate........    (1,122)    (1,814)     (3,673)(A)   (765)      (145)
Commercial real estate.........        --         --         (95)        --         --
                                  --------   --------    --------     ------     ------
                                   (1,122)    (1,817)      (3,768)     (765)      (145)
                                   ------     ------       ------    ------       -----
Balance at end of period.......   $ 4,200    $ 4,487      $ 3,369   $ 2,604     $2,459
                                    ======     ======       ======    ======      =====


Percentage of net charge-offs during
 the period to average loans
 outstanding during the period.       .52%       .92%        2.26%      .05%       .10%
                                      ===        ===         ====       ===        ===

Percentage of allowance for loan
 losses to gross loans outstanding at
 period end....................      2.03%      2.48%        2.34%     1.90%      1.78%
                                     ====       ====         ====      ====       ====

Percentage of allowance for loan
 losses to non-performing and
 restructured loans............      46.9%      59.0%        49.9%     35.0%      62.3%
                                     ====       ====         ====      ====       ====

</TABLE>

------------------------
(A)  Includes  $3,657,000  related  to  fraudulent  bridge  loans.  See  further
     discussions   related  to  bridge  loan   charge-offs  in  "Item  3.  Legal
     Proceedings."

                                      12


<PAGE>



     A breakdown  of the  allowance  for loan losses by category of loan and the
     relationship of each category of loan to total loans is presented below for
     the periods shown.

<TABLE>
<CAPTION>


                                                                      At September 30,
                      -------------------------------------------------------------------------------------------------------------
                               1992                1993                  1994                   1995                 1996
                      --------------------- --------------------- --------------------- ---------------------- --------------------

                                Percent of            Percent of            Percent of             Percent of            Percent of
                      Allowance  loans to   Allowance  loans to   Allowance  loans to   Allowance   loans to   Allowance  loans to
                       Balance  total loans  Balance  total loans  Balance  total loans  Balance   total loans  Balance  total loans
                      --------- ----------- --------- ----------- --------- ----------- ---------  ----------- --------- -----------
Real estate mortgage:
<S>                    <C>       <C>        <C>         <C>        <C>       <C>        <C>        <C>         <C>         <C>  
  1 to 4 family(1).    $  694     50.7%     $  822       51.1%     $  684     47.7%     $  225      48.9%       $ 394       57.6%
  Multifamily......     1,333      22.3      1,380       23.4       1,119     26.0         786      24.5          698       20.5
  Commercial.......     2,163      26.1      2,285       25.2       1,566     26.0       1,593      26.4        1,367       21.7
Commercial.........        10       0.5         --         --          --       --          --       --            --         --
Consumer...........        --       0.4         --        0.3          --      0.3          --       0.2           --        0.2
                       ------     -----     ------      -----      ------    -----       -----    ------       ------     ------
                       $4,200    100.0%     $4,487      100.0%     $3,369    100.0%     $2,604     100.0%      $2,459      100.0%
                        =====    =====       =====      =====       =====    =====      ======      =====        =====      =====

</TABLE>

-----------------------
(1)   Includes home equity lines of credit.

                                          13


<PAGE>



Investment Activities
---------------------

     Income from investment  securities  provides a significant source of income
for the Bank. Investment decisions are made within policy guidelines established
by the Board of Directors. The Bank invests in instruments such as U.S. Treasury
securities,  municipal  securities,  corporate  debt  securities  and  overnight
federal funds. The use of short-term security investments reflects  management's
response to the  significantly  increasing  percentage of savings  deposits with
short  maturities.  It is  the  intention  of  management  to  maintain  shorter
maturities  in the  Bank's  investment  portfolio  in order to better  match the
interest  rate  sensitivities  of its assets and  liabilities.  However,  during
periods of rapidly declining  interest rates, such investments also decline at a
faster rate than does the yield on long-term investments.

     A breakdown of investment securities by type is presented below.

<TABLE>
<CAPTION>

                                                  At September 30,
                          -----------------------------------------------------------------
                                  1994                  1995                  1996
                          ------------------    ------------------    ---------------------

                           Carrying    Fair     Carrying     Fair     Carrying     Fair
                            Value      Value      Value      Value      Value      Value
                          ---------   ------    ---------  -------    ---------  ----------
                                                   (In Thousands)

U.S. Government, including
<S>                         <C>        <C>       <C>        <C>        <C>        <C>     
  agencies...............   $87,317    $81,160   $113,781   $112,271   $144,004   $141,625
States and political
  subdivisions thereof...       600        596        600        614        600        622
                             ------     ------    -------    -------    -------    -------
                            $87,917    $81,756   $114,381   $112,885   $144,604   $142,247
                             ======     ======    =======    =======    =======    =======
</TABLE>



     The following  table is a summary of scheduled  investment  maturities  and
weighted average yields at September 30, 1996.

<TABLE>
<CAPTION>

                                              After One Year   After Five Years
                                             But Within Five   But Within Ten
                             Within One Year       Years            Years       After Ten Years        Total
                             --------------- ---------------   ---------------- ---------------    ----------------
                             Amount   Yield   Amount   Yield   Amount   Yield   Amount    Yield    Amount    Yield
                             ------   ------ -------   -----   ------   ------- ------    -----    ------    ------
                                                           (Dollars in thousands)

U.S. Government,
<S>                          <C>      <C>    <C>        <C>    <C>       <C>     <C>       <C>    <C>         <C>  
  including agencies....     $   --     --%  $45,593    6.15%  $92,411   6.93%   $6,000    7.62%  $144,004    6.71%

States and political

  subdivisions thereof..          3   5.50       --       --        --     --       597     6.42       600     6.42
                              -----   -----  -------   ------   ------  ------   ------     ----  --------     ----

                            $     3   5.50%  $45,593    6.15%  $92,411   6.93%   $6,597     7.51% $144,604     6.71%
                             ======           ======            ======            =====            =======     ====

</TABLE>


     Exclusive of securities issued by the U.S.  government and U.S.  government
agencies and corporations,  no aggregate  investment with any issuer exceeds 10%
of stockholders' equity.

                                      14


<PAGE>



Sources of Funds
----------------

     General.  Deposits are the major source of the Bank's funds for lending and
other investment purposes. In addition to deposits,  the Bank derives funds from
loan and mortgage-backed securities principal repayments. Historically, the Bank
has not relied  significantly upon the sale of loans (or loan participations) or
funds  borrowed  from the  Federal  Home Loan Bank  ("FHLB") of New York or from
other outside sources.  Loan repayments are a relatively stable source of funds,
while deposit inflows are significantly influenced by general interest rates and
money  market  conditions.  Borrowings  may be used  on a  short-term  basis  to
compensate for reductions in the availability of funds from other sources.  They
also may be used on a long-term basis for general business purposes.

     Deposits.  The Bank offers a wide variety of deposit  accounts,  although a
substantial majority of such deposits are in fixed-term, market-rate certificate
accounts.  Deposit  account  terms vary,  primarily as to the  required  minimum
balance  amount,  the  amount  of time  that the funds  must  remain on  deposit
(typically  between  three  months and five years) and the  applicable  interest
rate.

     Fixed-term,  market-rate  certificates have been the primary sources of new
deposits for the Bank and, at September 30, 1996, such certificates  represented
approximately  62.4% of the  Bank's  accounts.  The Bank also  offers IRA plans,
money market deposit  accounts,  passbook  accounts and NOW (negotiable order of
withdrawal) accounts.

Jumbo Certificate Accounts

     The following table indicates the amount of the Bank's certificate accounts
of $100,000 or more by time remaining until maturity as of September 30, 1996.

                                                  Certificate
Maturity Period                                     Accounts
                                                 --------------
                                                 (In Thousands)

Three months...................................        $4,607
Over three through six months..................         4,418
Over six through twelve months.................         3,591
Over twelve months.............................         2,706
                                                      -------
                                                      $15,322
                                                      =======

     Borrowings.  Savings deposits are the primary source of funds of the Bank's
lending and investment  activities and for its general  business  purposes.  The
Bank  generally  has not  relied  upon  advances  from  the  FHLB of New York to
supplement  its  supply  of  lendable  funds  or  to  meet  deposit   withdrawal
requirements.  The Bank  generally has been able to finance  operations  through
internally-generated  funds. However, in 1996, the Board of Directors decided to
engage in an asset growth strategy funded by borrowings.  As a result,  the Bank
made medium and short term  borrowings  which were used to fund  increased  loan
demand,   purchases  of  investment  and  mortgage-backed   securities  and  the
repurchase of 837,080  shares of common stock of the  Corporation.  The Bank had
advances or borrowings of $64.3 million outstanding at September 30, 1996.

                                      15


<PAGE>



Yields Earned and Rates Paid
----------------------------

     The Bank's  earnings  depend  primarily  on its net  interest  income.  Net
interest  income is  affected by (i) the volume of  interest-earning  assets and
interest-bearing  liabilities, (ii) rates of interest earned on interest-earning
assets and rates paid on interest-bearing  liabilities, and (iii) the difference
("interest rate spread")  between rates of interest  earned on  interest-earning
assets and rates paid on  interest-bearing  liabilities.  When  interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest
rate spread will generate net interest income.

     A portion of the Bank's real estate loans are long-term,  fixed-rate loans.
Accordingly,  the average yield on the Bank's loan portfolio  changes slowly and
generally does not keep pace with changes in interest rates on deposit  accounts
and borrowings.  Accordingly,  when interest rates rise, the Bank's yield on its
loan  portfolio  increases  more slowly than the rate by which its cost of funds
increases which may adversely impact the Bank's interest rate spread.

                                      16


<PAGE>

     The  following  table sets  forth for the  periods  indicated,  information
regarding the total dollar  amounts of interest  income from  interest-  earning
assets and the resulting  average  yields,  the total dollar amounts of interest
expense on  interest-bearing  liabilities and the resulting  average costs,  net
interest income,  interest rate spread,  net  interest-earning  assets,  the net
yield earned on interest-earning assets, and the ratio of total interest-earning
assets  to  total  interest-bearing  liabilities.  Average  balances  have  been
calculated primarily on a daily basis.

<TABLE>
<CAPTION>

                                              1994                         1995                       1996
                                  ----------------------------   -------------------------- ---------------------------
                                                        Yield/                       Yield/                      Yield/
                                  Balance   Interest     Rate    Balance   Interest   Rate  Balance  Interest     Rate
                                  -------   --------    ------   -------   --------  ------ -------  --------    ------
                                                                 (Dollars In Thousands)

<S>                               <C>         <C>       <C>      <C>       <C>       <C>    <C>      <C>         <C>  
  Loans(1)......................  $166,934    $14,691   8.80%    $138,049  $12,404   8.98%  $135,905 $11,861     8.73%

  Mortgage-backed securities....   183,468     10,530   5.74      181,058   11,113    6.13  190,069   12,269      6.46
  Investments and other interest-
   earning assets(2)............    84,108      5,127   6.10      113,801    7,222    6.34  133,309    8,603      6.45
                                   -------     ------             -------   ------          -------  -------

   Total interest-earning assets   434,510     30,348   6.98      432,908   30,739    7.10  459,283   32,733      7.13
                                               ------                       ------                   -------
Non-interest-earning assets.....    11,093                         15,064                    11,699
                                   -------                        -------                    ------
 Total assets...................  $445,603                       $447,972                    $470,982
                                   =======                        =======                     =======


Interest-Bearing Liabilities:

  Savings and interest-bearing 
   demand.......................   175,334      5,082   2.90      160,146    5,349    3.34  $146,865   4,477      3.04
  Time..........................   216,988      8,698   4.01      231,324   11,881    5.13  245,488    13,330     5.43
                                   -------     ------             -------   ------          -------  --------
    Total interest-bearing 
     deposits...................   392,322     13,780   3.51      391,470   17,230    4.40  392,353   17,807      4.53
  Securities sold under repurchase
    agreements..................        --         --   --.-           --       --    --.-   22,951    1,326      5.77
                                   --------    ------             -------   ------          -------- -------

    Total interest-bearing 
     liabilities................    392,322    13,780   3.51      391,470   17,230   4.40   415,304   19,133      4.60
                                               ------                       ------                    ------
Non-interest-bearing liabilities:
  Demand deposits...............     3,020                          3,629                      3,719
  Other.........................     1,610                          1,699                      2,231
                                   -------                        -------                   --------
    Total liabilities...........   396,952                        396,798                    421,254
Stockholders' equity............    48,651                         51,174                     49,728
                                   -------                        -------                   --------
    Total liabilities and 
     stockhoders' equity........  $445,603                       $447,972                   $470,982
                                   =======                        =======                    =======

Net interest income/interest
   rate spread..................               $16,568   3.47%              $13,509   2.70%           $13,600      2.53%
                                                ======   ====                ======  =====             ======      ====


Net interest-earning assets/net
  yield on interest-earning 
  assets........................  $ 42,188              3.81%     $41,438             3.12% $ 43,979             2.96%
                                   =======              ====       ======            =====    ======             ====
Ratio of average interest-earning
  assets to average interest-
  bearing liabilities...........     1.11X                          1.11X                       1.11X
                                   ======                          =====                        ====
</TABLE>

----------------------
(1)  Includes non-accrual loans.
(2)  Includes tax-exempt securities. Income from such securities, which amounted
     to  approximately  $44,000,  $39,000  and  $39,000  during the years  ended
     September  30,  1994,  1995 and 1996,  respectively,  is  included  without
     adjustment to a tax-equivalent basis. Such adjustments were not made due to
     their immateriality.
                                     17


<PAGE>



Gap Analysis
------------

     As rates on  sources  of funds  have  become  deregulated  and  subject  to
competitive pressures, financial institutions have become increasingly concerned
with the extent to which they are able to match  maturities of  interest-earning
assets  and  interest-bearing  liabilities.  Such  matching  is  facilitated  by
examining the extent to which such assets and  liabilities  are  "interest  rate
sensitive" and by monitoring an institution's  interest rate sensitivity  "gap."
An asset or liability is  considered  to be interest  rate  sensitive if it will
mature or reprice within a specific time period.  The interest rate  sensitivity
gap is defined as the excess of  interest-earning  assets  maturing or repricing
within a specific  time period  over  interest-bearing  liabilities  maturing or
repricing within that time period.

     The following  table  reflects the interest rate  sensitivity of the Bank's
interest-earning  assets and  interest-bearing  liabilities  as of September 30,
1996, the Bank's interest rate  sensitivity gap at various periods and the ratio
of the Bank's interest-earning assets to interest-bearing liabilities at various
periods.  As the table  indicates,  the Bank has a  negative  gap for assets and
liabilities  maturing or  repricing  within one year,  thereby  leaving the Bank
vulnerable to future  increases in interest rates. The Bank has assumed that its
savings and  interest-bearing  demand  deposits will be withdrawn  annually at a
rate  of 18%  on  the  cumulative  declining  balance  of  such  accounts.  This
assumption is based upon prior experience and management's  assessment of future
trends.

<TABLE>
<CAPTION>

                                                             Matures or Reprices
                                    -------------------------------------------------------------------
                                    
                                                    Over One      Over Five
                                     One Year       Through        Through       Over Ten
                                      or Less      Five Years     Ten Years        Years       Total
                                    -----------   -------------   ---------      ---------     -----
                                                                  (Dollars in Thousands)
                                    
Interest-Earning Assets:            
                                    
<S>                                 <C>             <C>             <C>          <C>          <C>    
Loans(2).......................     $ 48,717        $30,684         $10,491      $ 47,115     $ 137,00
Mortgage-backed securities (2).      130,799         13,840          12,337        47,371      204,347
Investments....................            3         45,593          92,411         6,597      144,604
Other interest-earning assets(1)       3,043             --              --            --        3,043
                                     -------         ------        --------       -------      -------
  Total........................      182,562         90,117         115,239       101,083      489,001
                                     -------         ------        --------       -------      -------
                                    
Interest-bearing liabilities:       
  Savings and interest-bearing      
                                    
    demand deposits............       26,723         66,698          34,635        20,406      148,462
  Time deposits................      206,483         39,636              --            --      246,119
  Securities sold under repurchase  
     agreements................       50,475         13,800              --            --       64,275
                                      ------         ------         -------       -------      -------
      Total....................      283,681        120,134          34,635        20,406      458,856
                                     -------        -------          ------        ------      -------
  Interest sensitivity gap.....     (101,119)       (30,017)          80,604        80,677
  Cumulative interest sensitivity   (101,119)      (131,136)        (50,532)        30,145
  Ratio of gap to total assets.       (20.12)%        (5.97)%         16.04%         16.05%
  Ratio of cumulative gap to total    (20.12)%       (26.09)%        (10.05)%         6.00%

</TABLE>


-------------------------------
(1)  Includes  FHLB of New York Stock  classified  as  repricing  in one year or
     less.
(2)  Does not include  prepayment  assumptions or scheduled  amortization  which
     could significantly reduce the terms to maturity of these assets.


                                            18


<PAGE>



     The table above indicates the time periods in which interest-earning assets
and  interest-bearing  liabilities will mature or may reprice in accordance with
their contractual terms.  However,  the table does not necessarily  indicate the
impact of general  interest  rate  movements  on the Bank's net  interest  yield
because  the  repricing  of  various  categories  of assets and  liabilities  is
discretionary  and is subject to competitive and other  pressures.  As a result,
various assets and liabilities indicated as repricing within the same period may
in fact reprice at different  times and at different  rate levels.  Furthermore,
the table does not reflect either scheduled principle amortization or the Bank's
prepayment  experience,  both of which reduce the actual term to maturity of the
Bank's loan portfolio.

Rate/Volume Analysis
--------------------

     Changes in net interest income are attributable to three factors:  a change
in volume of an interest- earning asset or interest-bearing  liability, a change
in rates or a change caused by a combination  of changes in volume and rate. The
table below sets forth certain information  regarding changes in interest income
and interest expense of the Bank for the periods indicated. For each category of
interest-earning asset and interest-bearing  liability,  information is provided
on changes  attributable to (1) changes in volume (changes in volume  multiplied
by old rate);  (2) changes in rates (changes in rate  multiplied by old volume);
and (3)  changes  in  rate-volume  (changes  in rate  multiplied  by  changes in
volume).

<TABLE>
<CAPTION>

                                                        1994 vs. 1995                                    1995 vs. 1996
                                                             Due to                                          Due to
                                               --------------------------------------       ----------------------------------------

                                                                    Rate/                                          Rate/
                                               Volume      Rate    Volume       Total       Volume      Rate      Volume      Total
                                               ------      ----    ------       -----       ------      ----      ------      -----
                                                                                  (In Thousands)

Interest Income:
<S>                                            <C>        <C>       <C>         <C>         <C>        <C>        <C>       <C>     
Loans ......................................   $(2,536)   $   300   $   (52)    $(2,288)    $  (196)   $  (352)   $     5   $  (543)

Mortgage-backed securities .................      (142)       734        (9)        583         550        577         29     1,156
Investments and other interest-bearing
   assets ..................................     1,821        203        71       2,095       1,235        125         21     1,381
                                               -------    -------   -------     -------     -------    -------    -------   -------

   Total interest-earning assets ...........      (857)     1,237        10         391       1,589        350         55     1,994
                                               -------    -------   -------     -------     -------    -------    -------   -------

Interest Expense:
  Savings and interest-bearing demand
    deposits ...............................      (444)       778       (67)        267        (438)      (474)        40      (872)

  Time deposits ............................       578      2,444       161       3,183         719        687         42     1,449
  Securities sold under repurchase
   agreements* .............................        --         --        --          --         1,326       --         --     1,326
                                               -------    -------   -------     -------     -------    -------    -------   -------
   Total interest-bearings liabilities......       134     3,222         94       3,450       1,607        213         82     1,903
                                               -------    -------   -------     -------     -------    -------    -------    -------
Net change in net interest-income...........  $   (991)  $(1,985)   $   (84)    $(3,059)   $    (18)   $   137    $   (27)  $    91
                                               =======    =======   =======     =======     =======    =======    =======   =======
</TABLE>


--------------------------
* Change in volume and change in rate  cannot be  determined  as the  balance of
securities sold under  repurchase  agreements at September 30, 1995 was zero and
the balance at  September  30,  1996 was  $64,275,000.  The average  balance and
average rate of  borrowings  at September 30, 1995 was zero and at September 30,
1996 was $22,951,000 and 5.77%, respectively.

                                       19


<PAGE>




Personnel
---------

     As of  September  30,  1996,  the Bank  had 49  full-time  employees  and 9
part-time  employees.   The  employees  are  not  represented  by  a  collective
bargaining  unit.  The Bank believes its  relationship  with its employees to be
satisfactory.

Competition
-----------

     The Bank faces strong  competition  in its  attraction of savings  deposits
(its primary  source of funds  available for lending) and in the  origination of
real estate loans.  Its most direct  competition for savings  deposits and loans
historically  has come from  other  thrift  institutions  and  commercial  banks
located in Middlesex County, New Jersey.  The Bank faces additional  significant
competition for investor funds from short-term money market securities and other
corporate and government securities.

     The Bank's  competition for real estate loans comes  principally from other
thrift institutions, commercial banks, and mortgage banking companies.

     The Bank competes for loans by charging competitive interest rates and loan
fees,  remaining  efficient and providing a wide range of services to borrowers,
real estate  brokers,  and home  builders.  It competes  for savings by offering
depositors a wide variety of savings  accounts,  checking  accounts,  convenient
office  locations,  drive-up  facilities,  extended banking hours,  tax-deferred
retirement programs, and other miscellaneous services.

     The Bank considers  Middlesex  County,  New Jersey and, to a lesser extent,
Mercer,  Monmouth and Ocean Counties, its primary market area for savings. While
the majority of the Bank's  mortgage  loans are  originated in this market area,
the Bank also makes loans, to a much lesser degree, throughout New Jersey.

     Based upon total assets,  the Bank was the 23rd largest thrift  institution
in the State of New Jersey as of September  30,  1996.  The Bank  competes  with
larger  financial  institutions,   headquartered  both  inside  and  outside  of
Middlesex County,  New Jersey,  that maintain offices in the Bank's market area.
These  competitors  may be able to offer better loan rates from time to time due
to their size, financial resources, and competitive strategy.

Regulation
----------

     General. The Corporation owns all of the capital stock of the Bank and is a
savings and loan holding  company.  As a savings and loan holding  company,  the
Corporation  is  subject  to  regulation  by the  Office of  Thrift  Supervision
("OTS").  As a company whose stock is  publicly-traded,  the Corporation is also
subject to the  reporting,  proxy  solicitation,  and other  regulations  of the
Securities and Exchange Commission ("SEC").

     The Bank is a New Jersey-chartered capital stock savings bank, the accounts
of which are  insured by the FDIC,  and as such,  is subject to the  regulation,
supervision  and  examination  of the New Jersey  Department  of Banking and the
FDIC.  The New Jersey  Department  of Banking (the  "Department")  regulates the
Bank's  internal  organization  as well as its deposit,  lending and  investment
activities.  The Department  must approve  changes to the Bank's  certificate of
incorporation, the establishment or

                                      20


<PAGE>



relocations of branch offices and mergers  involving the Bank. In addition,  the
Department  conducts  periodic  examinations  of the  Bank.  Many  of the  areas
regulated by the Department are subject to similar regulation by the FDIC.

Bank Regulation
---------------

     New Jersey law  provides  that no  dividend  may be paid by the Bank unless
after the payment of such  dividend,  the capital  stock of the Bank will not be
impaired  and  either  the Bank will have a surplus  of not less than 50% of its
capital  stock,  or the payment of such  dividend  will not reduce the statutory
surplus of the Bank.

     Generally,  federal law limits the  activities  and equity  investments  of
FDIC-insured,  state-chartered  banks to those that are permissible for national
banks.

     Insurance of Deposit  Accounts.  The FDIC charges an annual  assessment for
the insurance of deposits  based on the risk a particular  institution  poses to
its deposit  insurance  fund. The  risk-related  assessment  program  provided a
transition period between the prior flat-rate system and the final risk- related
system  that took  effect on January 1, 1994,  in  accordance  with the  Federal
Deposit  Insurance  Corporation  Improvement Act of 1991  ("FDICIA").  This risk
classification  is based  on an  institution's  capital  group  and  supervisory
subgroup assignment.

     On September  30,  1996,  H.R.  1362 was signed into law by the  President.
Title II of H.R. 1362 is titled the Economic Growth and Paperwork  Reduction Act
of 1996 (the "Act").  Among its many provisions,  the Act provides for resolving
the BIF/SAIF premium disparity.  Currently, most insured depository institutions
holding BIF-assessable  deposits pay the statutory minimum of $2,000 for deposit
insurance on these  deposits  while most insured  depository  institutions  with
SAIF-assessable  deposits  pay 23 basis  points per $100 of these  deposits  for
deposit  insurance.  The Bank  currently  pays an insurance  premium to the FDIC
equal to 0.23% of its total deposits.

     The BIF/SAIF legislation provides for a one-time assessment to recapitalize
the SAIF. The assessment will be based on the amount of SAIF-assessable deposits
held by an  institution  as of March 31,  1995 (with  certain  exceptions).  The
assessment  is effective  on  September  30, 1996 and is payable on November 27,
1996.

     The BIF/SAIF  legislation does not specify an actual  assessment but states
that the total  assessment will be equal to the amount necessary to recapitalize
the SAIF as of October  1,  1996.  A recent  report of the  America's  Community
Bankers estimated the assessment at approximately  65.7 basis points per $100 of
SAIF-assessable deposits as of March 31, 1995. The BIF/SAIF legislation provides
that the amount of the special assessment is deductible under section 162 of the
Internal  Revenue Code (the "Code") in the year in which the assessment is paid.
The BIF/SAIF  legislation also provides that section 172(f) of the Code will not
apply  to  deductions  taken  under  section  162 of the  Code  for the  special
assessment.  The  Bank  has  estimated  the  amount  of  the  assessment  to  be
approximately  $2.7  million  before tax  benefit and such amount was accrued on
September 30, 1996.

     Capital  Requirements.  Under FDIC regulations,  state-chartered banks that
are not members of the Federal  Reserve  System ("state  non-member  banks") are
required to maintain a minimum  leverage  capital  requirement  consisting  of a
ratio of Tier 1 capital to total assets of 4%. For institutions other than those
most highly rated by the FDIC,  an  additional  "cushion" of at least 100 to 200
basis points is

                                      21


<PAGE>



required.   Tier  1  capital  is  the  sum  of  common   stockholders'   equity,
noncumulative  perpetual  preferred  stock  (including any related  surplus) and
minority  investments in certain  subsidiaries,  less certain intangible assets,
deferred  tax  assets,  certain  identified  losses and certain  investments  in
securities subsidiaries. As a SAIF-insured,  state-chartered bank, the Bank must
currently also deduct from Tier 1 capital an amount equal to its investments in,
and  extensions of credit to,  subsidiaries  engaged in certain  activities  not
permissible for national banks.

     In addition to the leverage  ratio,  state  nonmember banks must maintain a
minimum ratio of qualifying  total capital to  risk-weighted  assets of at least
8.0%,  of  which  at  least  four  percentage  points  must be  Tier 1  capital.
Qualifying total capital consists of Tier 1 capital plus Tier 2 or supplementary
capital  items which  include  allowances  for loan losses in an amount of up to
1.25% of risk-weighted  assets,  cumulative  preferred stock and preferred stock
with a maturity  of over 20 years and certain  other  capital  instruments.  The
includable  amount of Tier 2 capital  cannot  exceed  the  institution's  Tier 1
capital. Qualifying total capital is further reduced by the amount of the bank's
investments in banking and finance  subsidiaries  that are not  consolidated for
regulatory  capital purposes,  reciprocal  cross-holdings of capital  securities
issued by other banks and certain other deductions. Under the FDIC risk-weighted
system,  all of a bank's balance sheet assets and the credit equivalent  amounts
of certain  off-balance sheet items are assigned to risk weight categories.  The
aggregate  dollar  amount of each  category  is  multiplied  by the risk  weight
assigned to that category.  The sum of these  weighted  values equals the bank's
risk-weighted assets.

     Each federal  banking agency is required to revise its  risk-based  capital
standards for insured  institutions to ensure that those standards take adequate
account of  interest-rate  risk ("IRR"),  concentration  of credit risk, and the
risks of nontraditional activities, as well as to reflect the actual performance
and expected  risk of loss on  multi-family  residential  loans.  The FDIC,  the
Office of the  Comptroller of the Currency,  and the Federal  Reserve Board have
proposed  procedures  for  measuring  IRR exposure and  alternative  methods for
determining what amount of additional capital, if any, a bank may be required to
maintain for IRR.

     Pursuant  to New Jersey  banking  law the  minimum  leverage  capital for a
depository  institution  is a ratio of Tier 1  capital  to total  assets of four
percent.  However, the Commissioner of the Department may require a higher ratio
for a particular depository institution.

     New Jersey  banking law  requires  that a depository  institution  maintain
qualifying  capital of at least eight  percent of its risk weighted  assets.  At
least four  percent of this  qualifying  capital  shall be in the form of Tier 1
capital.  For purposes of New Jersey banking law, risk weighted  assets,  Tier 1
capital,  and  total  assets  are  defined  in the  same  manner  as in the FDIC
regulations.

     The Bank was in  compliance  with  both  the  FDIC and New  Jersey  capital
requirements at September 30, 1996.

     Capital  Distributions.  Earnings  of the  Bank  appropriated  to bad  debt
reserves  and deducted for Federal  income tax  purposes are not  available  for
payment of cash dividends or other distributions to stockholders without payment
of taxes at the then  current  tax rate by the Bank on the  amount  of  earnings
removed from the reserves for such distributions.

     Dividends  payable by the Bank to the Corporation and dividends  payable by
the Corporation to stockholders  are subject to various  additional  limitations
imposed by federal and state laws,  regulations and policies  adopted by federal
and state  regulatory  agencies.  The Bank is  required by federal law to obtain
FDIC  approval  for the  payment  of  dividends  if the  total of all  dividends
declared  by the Bank in any year exceed the total of the Bank's net profits (as
defined)  for that  year and the  retained  net  profits  (as  defined)  for the
preceding two years,  less any required  transfers to surplus.  Under New Jersey
law,

                                      22


<PAGE>



the Bank may not pay dividends unless,  following payment,  the capital stock of
the Bank  would be  unimpaired  and (a) the Bank will have a surplus of not less
than 50% of its capital  stock,  or, if not,  (b) the payment of such  dividends
will not reduce the surplus of the Bank.

     Under applicable regulations,  the Bank would be prohibited from making any
capital  distributions if, after making the  distribution,  the Bank would have:
(i) a total risk-based capital ratio of less than 8.0%; (ii) a Tier 1 risk-based
capital  ratio of less than 4.0%;  or (iii) a leverage  ratio of less than 4.0%,
unless a higher ratio is required by the Commissioner of the Department.

     Loans to One  Borrower.  Generally,  the Bank may not make a loan or extend
credit  to a single  or  related  group of  borrowers  in  excess  of 15% of its
unimpaired capital and surplus.

     Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of New
York,  which is one of 12 regional  FHLBs that  administers  the home  financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB.

     As a member,  the Bank is required to purchase  and  maintain  stock in the
FHLB of New York in an  amount  equal to at  least  1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year. At September 30, 1996,  the Bank had $2.5 million in
FHLB stock, which was in compliance with this requirement.

     Federal Reserve  System.  The Federal Reserve Board requires all depository
institutions  to maintain  non-interest  bearing  reserves at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking  accounts) and non-personal time deposits.  The balances  maintained to
meet the reserve  requirements  imposed by the Federal Reserve Board may be used
to satisfy the liquidity  requirements  that are imposed by the  Department.  At
September 30, 1996, the Bank's total transaction accounts were below the minimum
level for which the Federal Reserve Board requires a reserve.

     State-chartered  savings  banks have  authority  to borrow from the Federal
Reserve Bank "discount  window," but Federal Reserve policy  generally  requires
savings banks to exhaust all reasonable  alternative  sources  before  borrowing
from the Federal Reserve System.  The Bank had no discount window  borrowings at
September 30, 1996.

Holding Company Regulation
--------------------------

     General.  The  Corporation  is a unitary  savings and loan holding  company
subject to regulatory oversight by the OTS. As such, the Corporation is required
to  register  and file  reports  with the OTS and is subject to  regulation  and
examination by the OTS. In addition,  the OTS has enforcement authority over the
Corporation  and  its   non-savings   association   subsidiaries,   should  such
subsidiaries  be formed,  which also  permits  the OTS to  restrict  or prohibit
activities  that are determined to be a serious risk to the  subsidiary  savings
association.  This  regulation  and  oversight  is  intended  primarily  for the
protection of the depositors of the Bank and not for the benefit of stockholders
of the Corporation.

     Qualified  Thrift  Lender  Test.  As a  unitary  savings  and loan  holding
company,  the  Corporation  generally  is not subject to activity  restrictions,
provided the Bank  satisfies  the qualified  thrift lender  ("QTL") test. If the
Corporation  acquires  control  of  another  savings  association  as a separate
subsidiary, it would become a multiple savings and loan holding company, and the
activities of the Corporation and any of its  subsidiaries  (other than the Bank
or any other SAIF-insured savings association) would become

                                      23


<PAGE>



subject to restrictions  applicable to bank holding  companies unless such other
associations  each also  qualify  as a QTL and were  acquired  in a  supervisory
acquisition.

     Restrictions on Acquisitions. The Corporation must obtain approval from the
OTS  before  acquiring  control  of any  other  SAIF-insured  association.  Such
acquisitions  are generally  prohibited if they result in a multiple savings and
loan holding company  controlling  savings  associations in more than one state.
However,  such  interstate  acquisitions  are permitted  based on specific state
authorization or in a supervisory acquisition of a failing savings association.

     Federal  law  generally  provides  that no  "person,"  acting  directly  or
indirectly or through or in concert with one or more other persons,  may acquire
"control," as that term is defined in OTS  regulations,  of a federally  insured
savings  institution  without  giving at least 60 days written notice to the OTS
and providing the OTS an opportunity to disapprove the proposed acquisition.  In
addition,  no company may acquire  control of such an institution  without prior
OTS approval.

     Federal  Securities Law. The Corporation is subject to filing and reporting
requirements  by  virtue  of  having  its  common  stock  registered  under  the
Securities Exchange Act of 1934. Furthermore,  company stock held by persons who
are affiliates (generally officers, directors and principal stockholders) of the
Corporation may not be resold without  registration or unless sold in accordance
with certain resale  restrictions.  If the Corporation  meets specified  current
public  information  requirements,  each affiliate of the Corporation is able to
sell in the public market,  without registration,  a limited number of shares in
any three-month period.

Executive Officers of the Company
---------------------------------

     The executive officers of the Corporation as of September 30, 1996, were as
follows:

         Name                   Age          Position
--------------------------------------------------------------------

Benjamin S. Konopacki...........74   Chairman of the Board
George T. Hornyak, Jr...........46   President and Chief Executive Officer
Ronald E. Vaughn, Jr............40   Senior Vice President-Chief Lending Officer
Thomas Konopacki................39   Executive Vice President-Controller


     The following information describes the principal occupation and employment
of the executive  officers of the  Corporation  and the Bank as of September 30,
1996, during at least the past five years.

     Benjamin S.  Konopacki has been employed by the Bank in various  capacities
since 1954.  From 1965 to 1989,  he served as  President.  From 1965 to 1991, he
served as Chief Executive Officer. In 1989, Mr. Konopacki became Chairman of the
Board. On January 1, 1991, Mr. Konopacki retired as Chief Executive Officer.

     George T.  Hornyak,  Jr. has been employed by the Bank since 1983. In March
1989, Mr. Hornyak was named President and Chief Operating  Officer.  Mr. Hornyak
became  Chief  Executive  Officer of the Bank on  January 1, 1991.  He is also a
director of Mercer Mutual Insurance Company.

     Ronald E.  Vaughn,  Jr. has been  employed by the Bank since  August  1988.
Since  January  1990,  he has served as Senior Vice  President  - Chief  Lending
Officer.  From  August  1985 to August  1988,  Mr.  Vaughn was Vice  President -
Residential Lending of Lincoln Federal Savings and Loan Association,  Westfield,
New Jersey.

                                      24


<PAGE>




     Thomas  Konopacki has been employed by the Bank since 1976 and is currently
Executive Vice President and Chief Financial  Officer.  Mr. Konopacki has served
in that capacity since January 1990.

Item  2.  Properties
--------------------

     The Bank owns its home office which is located at 6 Jackson  Street,  South
River, New Jersey. The Bank also owns the three full-service branch offices that
it operates.

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

     From time to time the  Registrant  is a party to legal  proceedings  in the
ordinary  course of  business  wherein it  enforces  its  security  interest  in
mortgage loans made by it.

     On July 6, 1994, the Bank discovered that a portfolio of approximately $8.4
million of bridge loans believed to be secured by  residential  real estate were
in  fact  made  to  fictitious   borrowers  and   collateralized  by  fictitious
properties.   The  loans  had  been  extended  based  upon  fraudulent  mortgage
applications and related documentation submitted to the Bank by its then general
counsel.

     During the fiscal  year  ended  September  30,  1995,  the Bank  received a
settlement  of $2.6  million  from its surety  bond claim  regarding  the bridge
loans, and $275,000  received upon the sale of a personal  residence,  which was
part of the estate of the responsible  party,  and charged-off  amounts totaling
$202,000 to reduce the  receivable to $1.7  million,  which is included in other
assets in the consolidated statements of financial condition.  During the fiscal
year ended  September 30, 1996,  approximately  $100,000 was collected  from the
estate and through the settlement of a lawsuit.  The receivable at September 30,
1996 was reduced to $1.6 million,  its estimated realizable value. To the extent
the Corporation is unable to collect on the pending litigation,  the Corporation
may have to charge-off additional amounts in future periods. Management believes
the remaining  balance is collectable  through the malpractice  insurance policy
relevant to the attorney  responsible  for the fraud.  The Bank has filed claims
under the  malpractice  insurance  coverage  available  in order to recover  all
unpaid amounts.  A trial date of January 13, 1997 has been  established for this
litigation.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ended September 30, 1996.

                                    PART II

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

     The information contained under the section captioned "Common Stock" in the
Corporation's  Annual Report to Stockholders for the fiscal year ended September
30, 1996 (the "Annual Report"), is incorporated herein by reference.

Item  6.  Selected Financial Data
----------------------------------

     The information  contained in the table captioned  "Consolidated  Financial
Highlights" in the Annual Report is incorporated herein by reference.

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

     The information contained in the section captioned "Management's Discussion
and Analysis of Financial  Condition  and Results of  Operations"  in the Annual
Report is incorporated herein by reference.

                                      25


<PAGE>




Item  8.  Financial Statements and Supplementary Data
-----------------------------------------------------

     The  Corporation's  Consolidated  Financial  Statements  listed  in Item 14
herein are incorporated herein by reference.

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

     The  Corporation  discontinued  the  engagement  of Stephen P. Radics & Co.
("Radics"),  its  independent  auditors,  and  notified  Radics of its action on
November  30,  1994.  The  Corporation's  Board of  Directors  engaged KPMG Peat
Marwick LLP as the Corporation's auditors for the year ended September 30, 1995.
The  determination  to replace Radics was recommended by the audit committee and
approved by the full Board of Directors of the Corporation.

     The report of Radics for the fiscal years ended September 30, 1993 and 1994
contained no adverse  opinion or  disclaimer of opinion and was not qualified or
modified as to  uncertainty,  audit scope or accounting  principles.  During the
fiscal  years  ended  September  30,  1993 and 1994 and during  the period  from
September 30, 1994 to November 30, 1994, there were no disagreements between the
Corporation and Radics concerning accounting principles or practices,  financial
statement disclosure, or auditing scope or procedure.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

     The  information  contained  under the  section  captioned  "Proposal  I --
Election of Directors" in the  Corporation's  definitive proxy statement for the
Corporation's  1997 Annual Meeting of  Stockholders  (the "Proxy  Statement") is
incorporated herein by reference.

     Additional  information  concerning  executive  officers is included  under
"Part I - Executive Officers of the Registrant."

Item 11.  Executive Compensation
---------------------------------

     The  information  contained  under the  section  captioned  "Proposal  I --
Election of  Directors  --  Executive  Compensation"  in the Proxy  Statement is
incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

      (a) Security Ownership of Certain Beneficial Owners

          Information  required by this item is incorporated herein by reference
          to the section  captioned  "Voting  Securities and Certain  Beneficial
          Owners Thereof" in the Proxy Statement.

      (b) Security Ownership of Management

          Informaton  required by this item is incorporated  herein by reference
          to the section captioned  "Proposal I -- Election of Directors" in the
          Proxy Statement.

      (c) Management of the Corporation knows of no arrangements,  including any
          pledge by any person of securities of the  Corporation,  the operation
          of which may at a subsequent date result in a change in control of the
          Registrant.

                                      26


<PAGE>




Item 13.  Certain Relationships and Related Transactions
---------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the  section  captioned  "Proposal  I --  Election  of  Directors  -- Certain
Transactions With the Company" in the Proxy Statement.

                                    PART IV

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

(a)(1)      The  Consolidated  Financial Statements  and Independent  Auditors' 
            Report included in the Annual Report, listed below, are incorporated
            herein by reference.

      1.    Independent Auditors' Report1

      2.    Pulse Bancorp, Inc.

            (a)   Consolidated  Statements  of  Financial Condition at September
                  30, 1996 and 1995

            (b)   Consolidated Statements of Income for each of the years in the
                  three-year period ended September 30, 1996

            (c)   Consolidated Statements of Changes in Stockholders' Equity fo
                  each of the years in the three-year period ended September 30,
                  1996

            (d)   Consolidated Statements of Cash Flows for each of the years in
                  the three-year period ended September 30, 1996

            (e)   Notes to Consolidated Financial Statements

(a)(2)      All schedules have been omitted, because the required information is
            either  inapplicable  or included  in the Notes  to Consolidated 
            Financial Statements.

(a)(3)      Exhibits are  either  filed or  attached  as  part of this Report or
            incorporated herein by reference.

            3(i)        Certificate of Incorporation2

            3(ii) Bylaws3

            10.1  Employment Agreement with Benjamin S. Konopacki4

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


     1 In  accordance  with  Rule  2-05 of  Regulation  S-X  and  Note 1 to Rule
14a-3(b)(1) of the proxy rules of the SEC, the independent  auditors'  report of
Radics & Co., Inc. LLC is filed as Exhibit 99.

     2 Incorporated by reference to the Registrant's  Registration  Statement on
Form S-4 (33-23154) declared effective by the Commission on December 7, 1989.

     3 Incorporated by reference to the Registrant's  Annual Report on Form 10-K
for the fiscal year ended September 30, 1995.

     4 Incorporated by reference to the Registrant's  Annual Report on Form 10-K
for the fiscal year ended September 30, 1993.

                                      27


<PAGE>




            10.2  Employment Agreement with George T. Hornyak, Jr.4

            10.3  Employment Agreement with Thomas Konopacki4

            10.4  1986 Stock Option and Incentive Plan5

            10.5  1993 Stock Option and Incentive Plan6

            13    Annual Report to Stockholders for the fiscal year ended 
                  September 30, 1996

            21    Subsidiaries of the Registrant7

            99    Independent Auditors' Report of Radics & Co., LLC

(b)         No Reports on Form 8-K were filed during the last quarter of the
            period covered by this
            report.

(c)         Exhibits to this Form 10-K are attached or incorporated by referenc
            as stated above.


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

     5 Incorporated by reference to the Registrant's  Annual Report on Form 10-K
for the fiscal year ended September 30, 1989.

     6  Incorporated  by reference to the  Registrant's  Proxy  Statement  dated
December 18, 1992 for the 1993 Annual Meeting of Stockholders.

     7 Incorporated by reference to the Registrant's  Annual Report on Form 10-K
for the fiscal year ended September 30, 1994.

                                      28


<PAGE>



                                  SIGNATURES

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

                                                PULSE BANCORP, INC.

Dated: December 26, 1996                       By:  /s/ George T. Hornyak, Jr.
                                                     --------------------------
                                                     George T. Hornyak, Jr.
                                                     President, Chief Executive
                                                      Officer and Director (Duly
                                                      Authorized Representative)

     Pursuant to the  requirement of the Securities  Exchange Act of 1934,  this
Report has been signed below by the following persons on behalf of the Registrat
and in the capacities indicated as of December 26, 1996.

By:   /s/ George T. Hornyak, Jr.                By:   /s/ Wayne A. Kronowski
      --------------------------                      -----------------------
      George T. Hornyak, Jr.                          Wayne A. Kronowski
      President, Chief Executive                      Director
      Office and Director (Principal
      Executive Officer)

By:   /s/ Edwin A. Kolodziej                    By:   /s/ Joseph Chadwick
      -----------------------                         -----------------------
      Edwin A. Kolodziej                              Joseph Chadwick
      Director                                        Director

By:   /s/ Benjamin S. Konopacki                 By:   /s/ Edwin A. Roginski
      -------------------------                       ------------------------
      Benjamin S. Konopacki                           Edwin A. Roginski
      Chairman of the Board                           Director

                                                By:   /s/ Thomas Konopacki
                                                     ------------------------
                                                     Thomas Konopacki
                                                     Executive Vice President - 
                                                      Controller 
                                                     (Principal Financial and
                                                     Accounting Officer)