SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549

                            FORM 10-K
(  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
         FOR THE FISCAL YEAR ENDED JUNE 30, 2000

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

       For the transaction period from   to

                           Commission file Number 0-27782
                           DIME COMMUNITY BANCSHARES, INC.
               (Exact Name of registrant as specified in its charter)

   Delaware                                            11-3297463
   (State or other jurisdiction of                  (I.R.S. employer
   incorporation or organization)                identification number)

                           209 Havemeyer Street, Brooklyn, NY         11211
   (Address of principal executive offices)                        (Zip Code)

         Registrant's telephone number, including area code: (718) 782-6200

      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 $.01 PER SHARE
                           (Title of Class)

                      PREFERRED STOCK PURCHASE RIGHTS
                               (Title of Class)

   Indicate  by  check  mark whether the Company  (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 twelve months  (or  for  such shorter period that the
Registrant  was  required to file reports) and (2) has  been  subject  to  such
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 Company's knowledge, in definitive proxy  or information statements
incorporated by reference in Part III of this Form 10-K  or  any  amendments to
this Form 10-K.   [ X]

   As  of  September  22,  2000,  there were 11,544,774 shares of the Company's
common stock, $0.01 par value, outstanding.   The aggregate market value of the
voting stock held by non-affiliates of the Company as of September 22, 2000 was
approximately $211,607,500.  This figure is based upon the closing price on the
NASDAQ National Market for a share of the Company's  common  stock on September
22, 2000, which was $22.56 as reported in the Wall Street Journal  on September
23, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE
(1) The Annual Report to Shareholders for the fiscal year ended June 30, 2000
(Item 1 of Part I, and Items 5 through 8 of Part II) and (2) the definitive
Proxy Statement dated October 6, 2000 to be distributed on behalf of the Board
of Directors of Registrant in connection with the Annual Meeting of
Shareholders to be held on November 9, 2000 and any adjournment thereof and
which is expected to be filed with the Securities and Exchange Commission on or
about October 6, 2000 (Part III)

                            TABLE OF CONTENTS
                                                 PAGE
                                    PART I
ITEM 1.  BUSINESS
      GENERAL..........................................................3
      ACQUISITION OF FINANCIAL BANCORP, INC............................3
      ACQUISITION OF CONESTOGA BANCORP, INC............................4
      MARKET AREA AND COMPETITION......................................4
      LENDING ACTIVITIES...............................................5
      ASSET QUALITY...................................................11
      ALLOWANCE FOR LOAN LOSSES.......................................14
      INVESTMENT ACTIVITIES...........................................17
      SOURCES OF FUNDS................................................21
      SUBSIDIARY ACTIVITIES...........................................24
      PERSONNEL.......................................................24
      FEDERAL , STATE AND LOCAL TAXATION
             FEDERAL TAXATION.........................................25
            STATE AND LOCAL TAXATION..................................25
      REGULATION
            GENERAL...................................................26
            IMPACT OF ENACTMENT OF THE GRAMM-LEACH-BLILEY ACT ........26
            REGULATION OF FEDERAL SAVINGS ASSOCIATIONS................27
            REGULATION OF HOLDING COMPANY.............................34
            FEDERAL SECURITIES LAWS...................................35
ITEM 2.
PROPERTIES............................................................35
ITEM 3. LEGAL PROCEEDINGS.............................................36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........36
                                    PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
            MATTERS...................................................36
ITEM 6. SELECTED FINANCIAL DATA.......................................36
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS...................................36

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...37
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................37
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE..........................37
                                   PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY..............37
ITEM 11. EXECUTIVE COMPENSATION.......................................37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT..........................................37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............37
                                    PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                FORM 8-K..............................................38

                SIGNATURES............................................40

   Statements contained in this Annual Report on Form 10-K relating  to  plans,
strategies, economic performance and trends, and other statements that are  not
descriptions  of  historical facts may be forward-looking statements within the
meaning of Section  27A  of  the  Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.  Forward  looking  information  is  inherently
subject  to  various  factors  which  could  cause  actual  results  to  differ
materially  from  these estimates.  These factors include:  changes in general,
economic and market  conditions, or the development of an adverse interest rate
environment that adversely  affects  the  interest  rate spread or other income
anticipated from the Company's operations and investments.   The Company has no
obligation to update these forward looking statements.

                                      -2-

                                    PART I

ITEM 1. BUSINESS

General

   Dime  Community  Bancshares, Inc. (the "Company") is a Delaware  corporation
organized in December,  1995  at the direction of the Board of Directors of The
Dime Savings Bank of Williamsburgh  (the  "Bank")  for the purpose of acquiring
all of the capital stock of the Bank issued  in  the conversion of the Bank, on
June 26, 1996, from a federal mutual savings bank  to  a  federal stock savings
bank (the "Conversion").  In connection with the Conversion, the Company issued
14,547,500 shares (par value $0.01) of common stock at a price  of  $10.00  per
share  to  certain  of the Bank's eligible depositors who subscribed for shares
and to an Employee Stock Ownership Plan ("ESOP") established by the Company.

   The Company is a unitary  savings  and  loan  holding  company, which, under
existing  law,  is  generally  not  restricted  as  to  the  types of  business
activities  in which it may engage, provided that the Bank continues  to  be  a
qualified thrift  lender.  The primary business of the Company is the operation
of its wholly-owned subsidiary,  the  Bank.  Under regulations of the Office of
Thrift Supervision ("OTS") the Bank is a qualified  thrift  lender if its ratio
of  qualified thrift investments to portfolio assets ("QTL Ratio")  is  65%  or
more,  on  a monthly average basis in nine of every twelve months.  At June 30,
2000, the Bank's QTL Ratio was 89.0%, and the Bank has maintained more that 65%
of its portfolio assets in qualified thrift investments in at least nine of the
preceding twelve months.

   The Company  neither  owns  nor  leases  any  property  but instead uses the
premises and equipment of the Bank.  At the present time, the  Company does not
employ any persons other than certain officers of the Bank who do  not  receive
any  extra  compensation as officers of the Company.  The Company utilizes  the
support staff  of  the Bank from time to time, as needed.  Additional employees
may be hired as deemed appropriate by the management of the Company.

   The Bank's principal  business  has  been,  and  continues  to be, gathering
deposits  from customers within its market area, and investing those  deposits,
primarily in  multi-family  and  one-to-four family residential mortgage loans,
mortgage-backed  securities,  and  obligations   of  the  U.S.  Government  and
Government  Sponsored  Entities  ("GSEs").  The  Bank's  revenues  are  derived
principally  from interest on its loan and securities  portfolios.  The  Bank's
primary sources  of  funds  are:  deposits;  loan amortization, prepayments and
maturities;  amortization, prepayments and maturities  of  mortgage-backed  and
investment securities;  and  borrowings,  and,  to a lesser extent, the sale of
fixed-rate mortgage loans to the secondary market.   The  Bank is also a member
of the Federal Home Loan Bank of New York ("FHLBNY").

ACQUISITION OF FINANCIAL BANCORP, INC.

   On January 21, 1999, the Company completed the acquisition of Financial
Bancorp, Inc., ("FIBC") the holding company for Financial Federal Savings Bank,
F.S.B (the "FIBC Acquisition").  Based upon the closing price of the Company's
common stock on January 21, 1999, of $21.25 per share, the total consideration
paid to FIBC stockholders, in the form of cash or the Company's common stock,
was $66.8 million, and was comprised of

                                      -3-

$34.5 million in cash and 1,504,704 shares of the Company's common stock.
The Company's operating results for the fiscal year ended June 30, 1999
reflect the addition of earnings from the acquisition of FIBC for the period
January 22, 1999 through June 30, 1999.  The FIBC Acquisition is being
accounted for as a purchase transaction, and goodwill of $44.2 million
generated from the transaction is being amortized on a straight-line basis
over 20 years.

ACQUISITION OF CONESTOGA BANCORP, INC.

   On  June  26, 1996 the Bank completed the acquisition of Conestoga  Bancorp,
Inc.  ("Conestoga"),  resulting  in  the  merger  of  Conestoga's  wholly-owned
subsidiary,  Pioneer  Savings  Bank, F.S.B. ("Pioneer") with and into the Bank,
with  the  Bank  as  the  resulting  financial   institution   (the  "Conestoga
Acquisition").  The  Conestoga  Acquisition was accounted for in the  financial
statements using the purchase method  of accounting. Under purchase accounting,
the acquired assets and liabilities of  Conestoga  are recognized at their fair
value as of the date of the Conestoga Acquisition.   Shareholders  of Conestoga
were paid approximately $101.3 million in cash, resulting in goodwill  of $28.4
million,  which  is  being  amortized  on  a straight line basis over a 12 year
period.  Since the Conestoga Acquisition occurred  on June 26, 1996, its impact
upon the Company's consolidated results of operations for the fiscal year ended
June 30, 1996 was minimal.

      There are currently no other arrangements, understandings  or  agreements
regarding any such additional acquisition or expansion.

MARKET AREA AND COMPETITION

   The  Bank  has  been,  and  intends  to continue to be, a community-oriented
financial institution providing financial services and loans for housing within
its  market areas. The Bank maintains its  headquarters  in  the  Williamsburgh
section of the borough of Brooklyn. Currently, seventeen additional offices are
located  in  the  boroughs  of  Brooklyn,  Queens, and the Bronx, and in Nassau
County.   The  Bank  gathers  deposits  primarily   from  the  communities  and
neighborhoods in close proximity to its branches. The  Bank's  primary  lending
area  is  larger, and includes much of New York City, Nassau County and eastern
New Jersey.   Most  of  the  Bank's  mortgage  loans  are secured by properties
located in its primary lending area.

   Since  1993,  the Bank's local economy has experienced  strong  performance.
Unemployment has remained low, home sales have increased, residential apartment
and commercial property  vacancy  rates  have  declined considerably, and local
real estate values have increased.  A strong local  economy  existed throughout
the  Company's  entire  fiscal  year  ended  June  30,  2000.   Despite   these
encouraging  trends,  the  outlook  for  the  local  economy remains uncertain.
During  the  fiscal year ended June 30, 1999, troubled economic  conditions  in
several nations  throughout  Europe, Asia and South and Central America created
interest rate volatility for U.S.  government  and  agency  obligations.   As a
result  of  this  interest  rate  volatility, the U.S. stock market, especially
amongst financial institutions, experienced  even  greater  volatility.  Due to
increased  interest  rate  uncertainty,  the overall performance  of  financial
institutions stocks trailed the overall performance of the aggregate U.S. stock
markets during the period July, 1998 through  June,  1999.   During  the fiscal
year  ended  June  30,  2000, the Federal Reserve Board instituted a series  of
interest rate increases in an effort to combat potential inflationary concerns.
As  a  result of these interest  rate  increases,  the  overall  interest  rate
environment remained uncertain, and the financial institution stock performance
continued to trail the aggregate performance of the U.S. stock market.

   The  Bank  faces  significant  competition  both  in  making  loans  and  in
attracting  deposits.  The  Bank's  market area has a high density of financial
institutions, many of which have greater financial resources than the Bank, and
all  of  which  are competitors of the Bank  to  varying  degrees.  The  Bank's
competition for loans  comes  principally from commercial banks, savings banks,
savings  and  loan  associations,  mortgage  banking  companies  and  insurance
companies.  The  Bank  has   recently   faced  increased  competition  for  the
origination of multi-family loans, which  comprised  78.3%  of  the Bank's loan
portfolio at June 30, 2000.  Management anticipates that competition  for  both
multi-family  and  one-to  four-family  loans  will continue to increase in the
future. Thus, no assurances can be made that the  Bank will be able to maintain
its  current  level  of  such  loans.  The Bank's most direct  competition  for

                                      -4-

deposits  has historically come from savings  and  loan  associations,  savings
banks, commercial banks and direct purchases of government securities. The Bank
faces additional  competition  for  deposits from short-term money market funds
and other corporate and government securities  funds,  and from other financial
institutions such as brokerage firms and insurance companies.  Competition  may
also  increase  as  a  result  of  the  lifting  of restrictions on the overall
operations  of  financial institutions, which may permit  additional  firms  to
compete for deposits.

LENDING ACTIVITIES

   LOAN PORTFOLIO  COMPOSITION.    The Bank's loan portfolio consists primarily
of  multi-family  loans  secured  by  apartment   buildings   (including  loans
underlying apartment buildings organized under cooperative form  of  ownership,
"underlying cooperatives"), conventional first mortgage loans secured primarily
by  one-  to  four-family  residences,  including  condominiums and cooperative
apartment share loans, and non-residential (commercial) property loans. At June
30,  2000,  the Bank's loan portfolio totaled $1.72 billion.  Within  the  loan
portfolio, $1.35  billion  or  78.3% were multi-family loans, $239.7 million or
13.9% were loans to finance the  purchase  of one-to four-family properties and
cooperative apartment share loans, $118.6 million or 6.9% were loans to finance
the  purchase  of  commercial  properties, primarily  small  shopping  centers,
warehouses and nursing homes, and  $7.5  million  or 0.4% were loans to finance
multi-family  and residential properties with either  full  or  partial  credit
guarantees provided  by  either the Federal Housing Administration (''FHA'') or
the Veterans' Administration  (''VA'').  Of  the  total mortgage loan portfolio
outstanding  at  that  date,  30.0%  were  fixed-rate  loans   and  70.0%  were
adjustable-rate  loans  (''ARMs''),  of which 92.1% are multi-family  and  non-
residential  property  loans  which carry  a  maturity  of  10  years,  and  an
amortization period of no longer  than  25 years.  At June 30, 2000, the Bank's
loan portfolio also included $1.9 million  in  passbook  loans, $3.4 million in
home improvement loans, and $2.3 million in other consumer loans.

   The types of loans that the Bank may originate are subject  to  federal  and
state  laws  and  regulations.  Interest rates charged by the Bank on loans are
affected  principally  by the demand  for  such  loans,  the  supply  of  money
available  for  lending  purposes,   and   the  rates  offered  by  the  Bank's
competitors.  These  factors are, in turn, affected  by  general  and  economic
conditions, and the fiscal and monetary policy of the federal government.

                                      -5-

The following table sets forth the composition of the Bank's mortgage and other
loan portfolios in dollar amounts and percentages at the dates indicated.

At June 30,
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                            
                                             Percent             Percent             Percent             Percent           Percent
                                 2000           of       1999  of         1998      of        1997     of       1996      of
                                              Total               Total               Total           Total              Total
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                             (Dollars  In Thousands)
Mortgage loans: 
One-to-four family               $212,238     12.32%  $246,075     17.75%  $125,704   13.18%  $140,798   18.68%   $170,182   29.05%
Multi-family and underlying
      cooperative               1,349,854     78.33  1,000,859     72.20    717,638   75.26    498,536   66.15     296,630   50.63
Non-residential                   118,576      6.88     88,837      6.41     50,062    5.25     43,180    5.73      37,708    6.44
FHA/VA insured                      7,536      0.44      9,699      0.70     11,934    1.25     14,153    1.88      16,686    2.85
Cooperative apartment              27,465      1.59     32,893      2.37     42,553    4.46     50,931    6.76      59,083   10.08
- ----------------------------------------------------------------------------------------------------------------------------------
Total mortgage loans            1,715,669     99.56  1,378,363     99.43    947,891   99.40    747,598   99.20     580,289   99.05
- ----------------------------------------------------------------------------------------------------------------------------------

Other loans:
Student loans                         990      0.05        794      0.06        677    0.07      1,005    0.13       1,307    0.22
Passbook savings (secured by
      savings and time
      deposits)                     1,900      0.11      2,271      0.16      2,367    0.25      2,801    0.37       3,044    0.52
Home improvement loans              3,410      0.20      3,666      0.27      1,753    0.18      1,243    0.16         891    0.15
Consumer installment and            1,348      0.08      1,100      0.08        919    0.10      1,027    0.14         323    0.06
Other
- ----------------------------------------------------------------------------------------------------------------------------------
Total other loans                   7,648      0.44      7,831      0.57      5,716    0.60      6,076    0.80       5,565    0.95
- ----------------------------------------------------------------------------------------------------------------------------------
Gross loans                     1,723,317    100.00% 1,386,194    100.00%   953,607  100.00%   753,674  100.00%    585,854  100.00%

Less:
Unearned discounts and net
      deferred loan fees            2,017                2,853                3,486              3,090               2,168
Allowance for loan losses          14,785               15,081               12,075             10,726               7,812
- ----------------------------------------------------------------------------------------------------------------------------------
Loans, net                     $1,706,515           $1,368,260             $938,046           $739,858            $575,874
==================================================================================================================================
Loans serviced for others:
One-to-four family and
      cooperative apartment       $47,909              $53,564              $55,802            $60,242             $63,360
Multi-family and underlying
      cooperative                     281                  293                2,817              9,406              27,690
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans serviced for
      others                      $48,190              $53,857              $58,619            $69,648             $91,050
==================================================================================================================================

 Includes acquisition of $192.3 million loans from FIBC on January 21, 1999,
       which were comprised primarily of one-to-four family loans.
 Includes  acquisition of $113.1 million loans from Conestoga  on  June  26,
       1996, substantially all of which were one-to-four family loans.
 Includes loans held for sale.

                                      -6-

LOAN ORIGINATIONS, PURCHASES, SALES AND SERVICING.    The  Bank originates both
ARMs and fixed-rate loans, which activity is dependent upon customer demand and
market rates of interest, and generally does not purchase whole  mortgage loans
or  loan  participations.  Generally, the Bank sells all originated one-to-four
family  fixed-rate mortgage loans  in  the  secondary  market  to  the  Federal
National  Mortgage Association (''Fannie Mae''), the Federal Home Loan Mortgage
Corporation   (''Freddie   Mac''),  the  State  of  New  York  Mortgage  Agency
(''SONYMA'') and other private  secondary  market  purchasers.  ARMs, including
adjustable-rate  multi-family  loans,  and  fixed-rate  multi-family  and  non-
residential mortgage loans with maturities up to 15 years, are retained for the
Bank's  portfolio. For the fiscal year ended June 30, 2000 origination of  ARMs
totaled $411.0  million   or  84.5%  of  all loan originations. Originations of
fixed-rate mortgage loans totaled $75.4 million,  virtually  all  of which were
multi-family and non-residential real estate loans.  Sales of fixed-rate one-to
four-family mortgage and student loans totaled $1.5 million. The Bank generally
sells  all fixed-rate loans without recourse and retains the servicing  rights.
As of June  30,  2000,  the  Bank was servicing $48.2 million of loans for non-
related institutions. The Bank generally receives a loan servicing fee equal to
0.25% of the outstanding principal balance for servicing loans sold.

   The following table sets forth  the Bank's loan originations, loan sales and
principal repayments for the periods indicated.

                                                                                          For the Years Ended June 30,
                                                                                        ---------------------------------
                                                                                                    
(Dollars  in Thousands)                                                       2000                    1999                 1998
                                                                             --------               --------             --------
Loans (gross):
At beginning of period                                                     $1,386,194               $953,607             $753,674
Mortgage loans originated:
One-to four-family                                                              3,165                 16,657               11,438
Multi-family and underlying cooperative                                       453,682                424,276              292,555
Non-residential                                                                28,824                 28,253               15,929
Cooperative apartment                                                             744                  2,187                1,281
Construction                                                                       24                    130                   -
                                                                             --------               --------             --------
Total mortgage loans originated                                               486,439                471,503              321,203
Other loans originated                                                          8,937                  6,567                5,101
                                                                             --------               --------             --------
Total loans originated                                                        495,376                478,070              326,304
                                                                             --------               --------             --------
Loans acquired                                                                 -                 192,318                   -
Less:
Principal repayments                                                          156,306                230,482              120,240
Loans sold                                                                  1,518                  6,977                5,352
Loans transferred from real estate pending foreclosure                             -                      -                    -
Mortgage loans transferred to Other Real Estate Owned                             429                    342                  779
                                                                             --------               --------             --------
Unpaid principal balance at end of period                                  $1,723,317             $1,386,194             $953,607
                                                                             ========               ========             ========

 Comprised primarily of one-to-four family mortgage loans received in the
      FIBC Acquisition.
 Includes fixed-rate mortgage loans and student loans.

                                      -7-

   LOAN  MATURITY  AND  REPRICING.    The  following table shows the earlier of
maturity or repricing period of the Bank's loan  portfolio  at  June  30, 2000.
Loans  that  have  adjustable rates are shown as being due in the period during
which the interest rates are next subject to change. The table does not include
prepayments or scheduled  principal  amortization.  Prepayments  and  scheduled
principal amortization on the Bank's loan portfolio totaled $156.3 million  for
the year ended June 30, 2000.

                                                                            At June 30, 2000
- --------------------------------------------------------------------------------------------------------------------------------
                                                                      Mortgage  Loans
                                  -----------------------------------------------------------------------
                                                                                               
                                                    Multi-
                                                  family and
                                                  Underlying
                                  One-to-Four-    Cooperative       Non-          FHA/VA      Cooperative     Other       Total
                                    Family          Loans        Residential      Insured      Apartment      Loans       Loans
- --------------------------------------------------------------------------------------------------------------------------------
                                                                  (Dollars In Thousands)
Amount due:
One year or less                      $33,202       $29,649          $4,479          $14        $17,431      $7,008      $91,783
- --------------------------------------------------------------------------------------------------------------------------------
After one year:
One to three years                     18,500       173,399          20,022           16          7,021         640      219,598
More than three years to five
   years                                9,273       265,753          34,456           75            533          -       310,090
More than five years to ten
   years                               38,546       810,126          51,473        2,126            104          -       902,375
More than ten years to twenty
   years                               51,992        70,927           8,146        5,305          2,376          -       138,746
Over twenty years                      60,725            -               -            -              -           -        60,725
- --------------------------------------------------------------------------------------------------------------------------------
Total due or repricing after one
   year                               179,036     1,320,205         114,097        7,522         10,034         640    1,631,534
- --------------------------------------------------------------------------------------------------------------------------------
Total amounts due or repricing,
   gross                             $212,238    $1,349,854        $118,576       $7,536        $27,465      $7,648   $1,723,317
================================================================================================================================

   The  following  table sets forth the dollar amounts in each loan category at
June 30, 2000 that are  due  after  June  30, 2001, and whether such loans have
fixed or adjustable-interest rates.

                                                            Due after June 30, 2001
                                         ---------------------------------------------------
                                                                      
                                             Fixed             Adjustable            Total
                                           ---------            ---------          ---------
                                                      (Dollars In Thousands)
Mortgage loans:
   One-to-four family                       $148,763              $30,273           $179,036
   Multi-family and underlying
      cooperative                            325,050              995,155          1,320,205
   Non-residential                            30,879               83,218            114,097
   FHA/VA insured                              7,522                   -               7,522
   Cooperative apartment                       2,502                7,532             10,034
Other loans                                       -                   640                640
                                           ---------            ---------          ---------
Total loans                                 $514,716           $1,116,818         $1,631,534
                                           =========            =========          =========

   MULTI-FAMILY AND NON-RESIDENTIAL LENDING.    The Bank originates adjustable-
rate and fixed-rate multi-family (five or more units) and non-residential loans
which  are secured primarily by apartment buildings,  underlying  cooperatives,
mixed-use  (residential  combined  with  commercial)  and other non-residential
properties,  generally  located in the Bank's primary lending  area.  The  main
competitors for loans in  this  market  tend to be other small- to medium-sized
local  savings institutions. Multi-family  and  non-residential  loans  in  the
Bank's portfolio  generally  range in amount from $100,000 to $8.7 million, and
have an average loan size of approximately  $827,000.   Multi-family  loans  in
this  range  generally have between 5 and 100 apartments per building. The Bank
had a total of  $1.22  billion  of  multi-family  loans  in  its  portfolio  on
buildings with under 100 units as of June 30, 2000.  Mostly as a result of rent
control and rent stabilization, the associated rent rolls for buildings of this
type  indicate  a  rent  range  that would be considered affordable for low- to
moderate-income households. In addition, at June 30, 2000, the Bank had a total
of  $180.7 million in loans secured  by  mortgages  on  underlying  cooperative
apartment buildings.

                                      -8-

   The  Bank  originated  multi-family loans totaling $453.7 million during the
fiscal year ended June 30,  2000,  versus  $424.3 million during the year ended
June 30, 1999.  At June 30, 2000,  the Bank  had  $57.5  million of commitments
outstanding  to  originate  mortgage  loans,  which  included $2.4  million  of
commitments  to  refinance  existing mortgage loans. This  compares  to  $125.3
million of commitments outstanding  at  June  30,  1999, as recent increases in
interest rates have significantly reduced the multi-family loan origination and
refinance activities.  All the mortgage commitments  outstanding  at  June  30,
2000  were issued to borrowers within the Bank's service area, $56.2 million of
which  are   secured  by  multi-family  and  underlying  cooperative  apartment
buildings.

   As part of  the  underwriting  process  for multi-family and non-residential
loans,  the Bank considers the financial resources  and  income  level  of  the
borrower,  the  borrower's experience in owning or managing similar properties,
the market value  of  the  property  and the Bank's lending experience with the
borrower. The typical adjustable-rate  multi-family  loan carries a maturity of
10 years, and an amortization period of no longer than  25  years.  These loans
have a fixed interest rate that adjusts after the fifth year indexed  to the 5-
year FHLBNY advance rate, but may not adjust below the initial interest rate of
the  loan. Prepayment penalties are assessed throughout the life of the  loans.
The  Bank  also  offers  fixed-rate,  self-amortizing,  multi-family  and  non-
residential loans with maturities of up to 15 years.

   At June 30, 2000, the Bank had multi-family and underlying cooperative loans
totaling  $1.35  billion  in  its portfolio, comprising 78.3% of the gross loan
portfolio. The underwriting standards  for  new  loans  generally require (1) a
maximum  loan-to-value  ratio  of  75% based on an appraisal  performed  by  an
independent, state-certified appraiser  and  (2)  sufficient cash flow from the
underlying  property  to adequately service the debt,  represented  by  a  debt
service ratio not below 1.15.  Of the Bank's multi-family loans, $1.17 billion,
or 86.6%, were secured  by  apartment  buildings  and $180.7 million, or 13.4%,
were secured by underlying cooperatives at June 30,  2000.   Multi-family loans
are generally viewed as exposing the Bank to a greater risk of  loss  than one-
to  four-family  residential  loans and typically involve higher loan principal
amounts. At June 30, 2000, the  Bank  had  127 multi-family and non-residential
loans  with  principal  balances  greater than $2.0  million,  totaling  $419.1
million.  These loans, while underwritten  to  the  same standards as all other
multi-family and non-residential loans, tend to expose  the  Bank  to  a higher
degree of risk due to the potential impact of losses from any one loan relative
to the size of the Bank's capital position.  As of June 30, 2000, none of these
loans  were  in  arrears  nor  in  the  process  of foreclosure.  See ''- Asset
Quality.''

   Repayment of multi-family loans is dependent, in  large  part, on sufficient
cash  flow  from  the  property  to cover operating expenses and debt  service.
Economic events and government regulations,  such  as  rent  control  and  rent
stabilization  laws, which are outside the control of the borrower or the Bank,
could impair the  value of the security for the loan or the future cash flow of
such properties. As  a  result,  rental income might not rise sufficiently over
time to meet increases in the loan  rate at repricing, or increases in overhead
expenses (I.E., utilities, taxes). During  the  last  five  fiscal  years,  the
Bank's  charge-offs  related  to  its  multi-family loan portfolio totaled $1.7
million.  As  of June 30, 2000, the Bank had  $2.6  million  of  non-performing
multi-family loans.  See  "- Asset Quality and - Allowance for Loan Losses" for
discussions  of  the Bank's underwriting  procedures  utilized  in  originating
multi-family loans.

   The Bank's loan  portfolio  also  includes $118.6 million in non-residential
real estate mortgage loans which represented  6.88%  of gross loans at June 30,
2000.  This portfolio is comprised of commercial and industrial properties, and
shopping centers. The Bank utilizes, where appropriate,  rent  or lease income,
business  receipts, the borrowers' credit history and business experience,  and
comparable  appraisal values when underwriting non-residential applications. As
of June 30, 2000,  there  were  no  non-performing non-residential loans in the
Bank's portfolio.  Like multi-family  loans,  the  repayment of non-residential
real estate mortgage loans is dependent, in large part,  upon  sufficient  cash
flows from the property to cover operating expenses and debt service.  For this
reason,  non-residential  real  estate mortgage loans are considered to include
greater risk than one to four-family residential loans.

   The Bank's three largest loans at June 30, 2000, consisted of a $8.7 million
loan secured by a first mortgage  on  a  276 unit apartment building located in
midtown Manhattan originated in May, 1997; an $8.3 million first mortgage loan,
originated in June, 1997, secured by a 631  unit  apartment building located in
the  Forest Hills section of Queens; and a $7.8 million  first  mortgage  loan,
originated in September, 1998, secured by a 129 unit apartment building located
in Manhattan.   As  of  June  30,  2000,  all of these loans were performing in
accordance with their terms.  See "-Regulation  of Federal Savings Associations
- -  Loans  to  One  Borrower."  While the loans are current,  their  large  loan
balances subject the  Bank  to  greater  potential  losses in the event of non-
compliance by the borrower.

                                      -9-

   The Bank also currently services a total of $281,000  in  multi-family loans
for various private investors. These loans were sold in the late 1980s, without
recourse.

   ONE-TO  FOUR-FAMILY MORTGAGE AND COOPERATIVE APARTMENT LENDING.    The  Bank
offers residential  first  mortgage  loans secured primarily by owner-occupied,
one-to-four  family  residences,  including   condominiums,   and   cooperative
apartment  share loans. Lending is primarily confined to an area covered  by  a
50-mile radius  from  the  Bank's  Main  Office  in  Brooklyn.  The Bank offers
conforming  and  non-conforming  fixed-rate  mortgage loans and adjustable-rate
mortgage loans with maturities of up to 30 years  and  a maximum loan amount of
$500,000.  The  Bank's  residential  mortgage loan originations  are  generally
obtained from existing or past loan customers,  depositors of the Bank, members
of the local community and referrals from attorneys,  realtors  and independent
mortgage  brokers  who refer members of the communities located in  the  Bank's
primary lending area.  The Bank is a participating seller/servicer with several
government-sponsored mortgage  agencies:  Fannie Mae,  Freddie Mac, and SONYMA,
and generally underwrites its one-to-four family  residential mortgage loans to
conform with standards required by these agencies.  Although the collateral for
cooperative apartment loans is comprised of shares in a cooperative corporation
(a corporation whose primary asset is the underlying  real estate), cooperative
apartment loans generally are treated as one-to-four family  loans.  The Bank's
portfolio of such loans is $27.5 million, or 1.6% of total loans as of June 30,
2000.   The market for cooperative apartment loan financing has  improved  over
the  past   five  years  with  the  support  of  certain  government  agencies,
particularly   SONYMA   and  Fannie  Mae,  who  are  insuring  and  purchasing,
respectively, cooperative  apartment  share  loans in qualifying buildings. The
Bank adheres to underwriting guidelines established  by  SONYMA  and Fannie Mae
for all fixed-rate cooperative apartment loans which are originated  for  sale.
Adjustable-rate cooperative apartment loans continue to be originated both  for
portfolio and for sale.

   At June 30, 2000, $239.7 million, or 13.9%, of the Bank's loans consisted of
one-to-four  family  and cooperative apartment mortgage loans. ARMs represented
36.5% of total one-to-four-family and cooperative apartment loans, while fixed-
rate mortgages comprised  63.5% of the total.  The majority of these loans were
obtained through the acquisitions  of  Conestoga  and FIBC.  The Bank, which is
not an aggressive one-to-four-family mortgage lender,  currently  offers one-to
four-family  and  cooperative  apartment  mortgage  ARMs secured by residential
properties with rates that adjust every one or three  years. One-to-four family
ARMs are offered with terms of up to 30 years. The interest  rate  at repricing
on  one-to-four  family  ARMs currently offered fluctuates based upon a  spread
above the average yield on  United  States  Treasury  securities, adjusted to a
constant maturity which corresponds to the adjustment period  of  the loan (the
''U.S.  Treasury constant maturity index'') as published weekly by the  Federal
Reserve Board.  Additionally,  one  and  three-year one-to-four family ARMs are
generally subject to limitations on interest  rate  increases  of  2%  and  3%,
respectively, per adjustment period, and an aggregate adjustment of 6% over the
life of the loan.

   The  volume  and  types of ARMs originated by the Bank have been affected by
such market factors as  the  level  of  interest  rates,  competition, consumer
preferences and availability of funds. During the fiscal years  ended  June 30,
1998  and  1999, demand for one-to-four family ARMs was relatively weak due  to
the prevailing low interest rate environment and consumer preference for fixed-
rate loans.   For the year ended June 30, 2000, since the Bank continued to not
aggressively pursue  ARM one- to four-family loans, it originated only $383,000
of one-to four-family  and  cooperative  apartment mortgage ARMs.  Accordingly,
although the Bank will continue to offer one-to  four-family ARMs, there can be
no  assurance that in the future the Bank will be able  to  originate  or  will
desire to originate a sufficient volume of one-to four- family ARMs to increase
or maintain the proportion that these loans bear to total loans.

   The  Bank  currently offers fixed-rate mortgage loans with terms of 10 to 30
years secured by  one-to  four-family  residences  and  cooperative apartments.
Interest  rates charged on fixed-rate loans are based upon  market  conditions.
The Bank generally  originates  fixed-rate  loans for sale in amounts up to the
maximum allowed by Fannie Mae, Freddie Mac and  SONYMA,  with  private mortgage
insurance required for loans with loan-to-value ratios in excess  of  80%.  For
the  year  ended June 30, 2000, the Bank originated $3.8 million of fixed-rate,
one-to four-family residential mortgage and cooperative apartment loans.

   The Bank generally sells its newly originated conforming fixed-rate mortgage
loans  either  to  its  wholly-owned  subsidiary,  DSBW  Residential  Preferred
Funding,  or  in  the  secondary  market  to federal and state agencies such as
Fannie Mae, Freddie Mac and SONYMA, and its  non-conforming fixed-rate mortgage
loans  to  various  private  sector  secondary  market   purchasers.  With  few
exceptions, such as SONYMA, the Bank retains the servicing  rights  on all such
loans  sold.  For  the  year ended June 30, 2000, the Bank sold mortgage  loans
totaling $1.2 million to  non-affiliates.   As  of  June  30,  2000, the Bank's
portfolio of one-to-four family fixed-rate mortgage loans serviced  for  others
totaled $47.9 million.

                                      -10-

   Originated  mortgage  loans  in  the  Bank's  one-to-four  family  portfolio
generally   include  due-on-sale  clauses  which  provide  the  Bank  with  the
contractual right  to  deem  the  loan immediately due and payable in the event
that  the borrower transfers ownership  of  the  property  without  the  Bank's
consent.  It  is the Bank's policy to enforce due-on-sale provisions within the
applicable regulations  and  guidelines  imposed  by New York law and secondary
market purchasers.

   Home equity loans currently are originated to a  maximum  of  $250,000. When
combined with the balance of the first mortgage lien, the home equity  loan may
not  exceed 75% of the appraised value of the property at the time of the  loan
commitment.  The Bank's home equity loans outstanding at June 30, 2000, totaled
$8.7 million against total available credit lines of $16.4 million.  During the
fiscal years ended  June  30,  1998 and 1999, the Bank offered home-equity line
promotions to selected mortgage  customers,  which  resulted in the increase in
credit lines from $1.2 million at June 30, 1997 to $8.7  million  at  June  30,
2000.

   OTHER LENDING.   The Bank also originates other loans, primarily student and
passbook  loans.  Total  other  loans outstanding at June 30, 2000, amounted to
$7.6 million, or 0.44%, of the Bank's  loan portfolio. Passbook loans, totaling
$1.9 million, and home improvement loans,  totaling  $3.4 million, comprise the
majority of the Bank's other loan portfolio.

   LOAN  APPROVAL  AUTHORITY  AND  UNDERWRITING.    The  Board   of   Directors
establishes lending authorities for individual officers as to its various types
of  loan  products.  For  multi-family  and one- to four-family mortgage loans,
including  cooperative  apartment and condominium  loans,  the  Loan  Operating
Committee, which is comprised  of  the  Chief Executive Officer, President, and
Executive Vice President, and the heads of both the residential loan and multi-
family loan origination departments, has  the  authority  to  approve  loans in
amounts  up to $3.0 million. Any loan in excess of $3.0 million, however,  must
be approved  by  the  Board  of Directors.  All loans in excess of $500,000 are
presented to the Board of Directors  for their review.  In addition, regulatory
restrictions  imposed on the Bank's lending  activities  limit  the  amount  of
credit that can  be  extended  to any one borrower to 15% of total capital. See
''- Regulation - Regulation of Federal  Savings  Associations  -  Loans  to One
Borrower.''

   For  all one-to four-family loans originated by the Bank, upon receipt of  a
completed  loan  application  from  a  prospective borrower, a credit report is
ordered,  income,  assets and certain other  information  are  verified  by  an
independent credit agency,  and  if necessary, additional financial information
is required to be submitted by the  borrower.  An  appraisal of the real estate
intended to secure the proposed loan is required, which  currently is performed
by an independent appraiser designated and approved by the  Board of Directors.
In  certain  cases,  the  Bank  may  also require certain environmental  hazard
reports  on  multi-family properties.  It  is  the  Bank's  policy  to  require
appropriate insurance  protection, including title and hazard insurance, on all
real estate mortgage loans  prior  to closing. Borrowers generally are required
to advance funds for certain items such  as  real estate taxes, flood insurance
and private mortgage insurance, when applicable.

ASSET QUALITY

   DELINQUENT LOANS AND FORECLOSED ASSETS. Management  reviews delinquent loans
on a continuous basis and reports monthly to the Board of  Directors  regarding
the  status  of  all  delinquent and non-accrual loans in the Bank's portfolio.
The Bank's real estate  loan servicing policies and procedures require that the
Bank initiate contact with a delinquent borrower as soon after the tenth day of
delinquency as possible.  Generally,  the  policy calls for a late notice to be
sent 10 days after the due date of the late  payment.  If  payment has not been
received  within  30  days of the due date, a letter is sent to  the  borrower.
Thereafter, periodic letters  and  phone calls are placed to the borrower until
payment  is received. In addition, Bank  policy  calls  for  the  cessation  of
interest accruals  on  loans  delinquent  90 days or more. When contact is made
with the borrower at any time prior to foreclosure,  the  Bank  will attempt to
obtain the full payment due, or work out a repayment schedule with the borrower
to avoid foreclosure. Generally, foreclosure proceedings are initiated  by  the
Bank  when  a loan is 90 days past due. As soon as practicable after initiating
foreclosure proceedings  on  a  loan, the Bank prepares an estimate of the fair
value of the underlying collateral.  It is the Bank's general policy to dispose
of properties acquired through foreclosure  or deeds in lieu thereof as quickly
and  as  prudently  as  possible in consideration  of  market  conditions,  the
physical condition of the  property, and any other mitigating conditions.  If a
foreclosure action is instituted  and  the loan is not brought current, paid in
full, or refinanced before the foreclosure sale, the real property securing the
loan is generally sold at foreclosure or  by  the  Bank  as  soon thereafter as
practicable.

                                      -11-

   The Bank retains outside counsel experienced in foreclosure  and  bankruptcy
procedures  to institute foreclosure and other actions on the Bank's delinquent
loans.

   Non-performing  loans  totaled $4.4 million at June 30, 2000, as compared to
$3.0 million at June 30, 1999.   Of  the  $4.4  million non-performing loans at
June  30,  2000, $1.6 million relates to one multi-family  loan  which  entered
foreclosure  in  June,  2000.   The  Company  had  25  loans  totaling $754,000
delinquent 60-89 days at June 30, 2000, as compared to 23 such delinquent loans
totaling $819,000 at June 30, 1999.  The Company has experienced a shift in the
composition  of  its  60-89  day  delinquencies from its conventional  mortgage
portfolio, which loans typically carry  larger  average  balances,  to  smaller
balance FHA/VA insured and consumer loans.

   Under  Statement  of  Financial Accounting Standards No. 114 "Accounting  by
Creditors for Impairment of  a  Loan," ("SFAS 114"), the Company is required to
account for certain loan modifications  or  restructurings  as  ''troubled-debt
restructurings.''  In  general,  the  modification or restructuring of  a  debt
constitutes a troubled-debt restructuring if the Company, for economic or legal
reasons related to the borrower's financial  difficulties,  grants a concession
to   the  borrower  that  the  Company  would  not  otherwise  consider.   Debt
restructurings  or  loan modifications for a borrower do not necessarily always
constitute   troubled-debt    restructurings,    however,   and   troubled-debt
restructurings do not necessarily result in non-accrual  loans. The Company had
one loan classified as troubled-debt restructuring at June  30,  2000, totaling
$700,000,  which was on accrual status as it has been performing in  accordance
with the restructuring  terms  for  over one year. Troubled-debt restructurings
totaled $1.3 million at June 30, 1999,  consisting of 2 loans, as one troubled-
debt restructuring totaling $590,000 was  paid-in-full  during  the fiscal year
ended  June  30,  2000.   The  current  regulations  of  the  Office  of Thrift
Supervision require that troubled-debt restructurings remain classified as such
until either the loan is repaid or returns to its original terms.  The  Company
did not have any new troubled-debt restructurings during the fiscal year  ended
June 30, 2000.

   Under  SFAS  114,  the  Bank  established  guidelines  for  determining  and
measuring  impairment  in loans. In the event the carrying balance of the loan,
including all accrued interest, exceeds the estimate of fair value, the loan is
considered to be impaired and a reserve is established. The recorded investment
in loans deemed impaired  was  approximately  $2.6 million as of June 30, 2000,
compared to $1.6 million at June 30, 1999, and  the average balance of impaired
loans  was  $1.5  million for the year ended June 30,  2000  compared  to  $2.3
million for the year ended June 30, 1999.  At June 30, 2000, reserves have been
provided on all impaired  loans  within  specific  reserves  totaling  $130,000
allocated  within the allowance for loan losses.  Generally, the Bank considers
non-performing  loans  to  be  impaired loans.  However, at June 30, 2000, $1.8
million of one-to four-family, cooperative  apartment  and  consumer  loans  on
nonaccrual  status  are not deemed impaired under SFAS 114.  All of these loans
have outstanding balances  less than $227,000, and are considered a homogeneous
loan pool not covered by SFAS 114.

                                      -12-

   NON-PERFORMING  ASSETS AND  TROUBLED-DEBT  RESTRUCTURINGS.    The  following
table sets forth information  regarding  the  Bank's  non-performing assets and
troubled-debt restructurings at the dates indicated.

                                                                            At June 30,
                                                                                                   
                                                 2000              1999              1998              1997              1996
                                              ---------         ---------         ---------         ---------         ---------
                                                                            (Dollars In Thousands)
Non-performing loans:
   One-to-four family                            $1,769            $1,577              $471            $1,123            $1,149
   Multi-family and underlying
      cooperative                                 2,591             1,248               236             1,613             4,734
   Cooperative apartment                             54               133               133               415               668
   Other loans                                        7                43                44                39                -
                                              ---------         ---------         ---------         ---------         ---------
Total non-performing loans                        4,421             3,001               884             3,190             6,551
Total Other Real Estate Owned                       381               866               825             1,697             1,946
                                              ---------         ---------         ---------         ---------         ---------
Total non-performing assets                      $4,802            $3,867            $1,709            $4,887            $8,497
                                              =========         =========         =========         =========         =========
Troubled-debt restructurings                       $700            $1,290            $3,971            $4,671            $4,671
Total non-performing assets and troubled-
       debt restructurings                       $5,502            $5,157            $5,680            $9,558           $13,168
                                              =========         =========         =========         =========         =========
Impaired loans                                   $2,591            $1,563            $3,136            $4,294            $7,419

Total non-performing loans to total loans          0.26%             0.22%             0.09%             0.43%             1.12%

Total non-performing loans and troubled-
   debt restructurings to total loans              0.30              0.31              0.51              1.05              1.92

Total non-performing assets to total
   assets                                      0.19              0.17              0.11              0.37              0.62

Total non-performing assets and troubled-
   debt restructurings to total assets             0.22              0.23              0.35              0.73              0.96
- --------------------------

 Adjusting total assets at June 30, 1996, for $131.0 million of excess
    subscription proceeds related to the Company's initial public offering,
    total non-performing assets to total assets were 0.68% at June 30, 1996.
    The excess subscription proceeds were refunded by the Company on July 1,
    1996.

   OTHER REAL ESTATE OWNED ("OREO"). Property acquired  by the Bank as a result
of a foreclosure on a mortgage loan is classified as OREO  and  is  recorded at
the lower of the recorded investment in the related loan or the fair  value  of
the  property at the date of acquisition, with any resulting write down charged
to the  allowance  for  loan  losses.  The Bank obtains an appraisal on an OREO
property as soon as practicable after it takes possession of the real property.
The  Bank  will  generally  reassess  the  value  of  OREO  at  least  annually
thereafter.  The  balance  of  other real estate  owned  ("OREO")was  $381,000,
consisting of 7 properties, at June  30,  2000 compared to $866,000, consisting
of 13 properties, at June 30, 1999.  During the year ended June 30, 2000, total
additions to OREO were $429,000.  Offsetting  these  additions, were OREO sales
and  charge-offs  of $1.0 million during the year ended  June  30,  2000.   All
charge-offs were recorded  against  the  allowance  for  losses  on real estate
owned, which was $45,000 as of June 30, 2000.

   CLASSIFIED ASSETS. The Bank's Loan Loss Reserve Committee meets  every other
month  to  review  all problem loans in the portfolio to determine whether  any
loans  require  reclassification   in  accordance  with  applicable  regulatory
guidelines. Recommendations are reported  by the Loan Loss Reserve Committee to
the Board of Directors on a quarterly basis.  The  Loan Loss Reserve Committee,
subject  to  Board  approval,  establishes policies relating  to  the  internal
classification  of loans and believes  that  its  classification  policies  are
consistent with regulatory  policies.  All  non-performing  loans  and OREO are
considered  to be classified assets. In addition, the Bank maintains  a  "watch
list" comprised of 37 loans totaling $3.6 million at June 30, 2000 which, while
performing, are  characterized  by  weaknesses  which require special attention
from management and are considered to be potential  problem loans. All loans on
the  watch  list  are  considered  to  be classified assets  or  are  otherwise
categorized as "Special Mention" as discussed  below.  As  a  result of its bi-
monthly  review  of  the  loan  portfolio, the Loan Loss Reserve Committee  may
decide to reclassify one or more of the loans on the watch list.

   Federal regulations and Bank policy  require  that  loans  and  other assets
considered   to   be  of  lesser  quality  be  classified  as  ''Substandard,''
''Doubtful'' or ''Loss''  assets.  An asset is considered ''Substandard'' if it
is inadequately protected by the current  net  worth and paying capacity of the
obligor  or of the collateral pledged, if any. ''Substandard''  assets  have  a
well-defined  weakness  or  weaknesses  and  are  characterized by the distinct
possibility that the Bank will sustain ''some loss''  if  deficiencies  are not
corrected.  Assets  classified  as  ''Doubtful''  have  all  of  the weaknesses
inherent in those classified ''Substandard'' with the added characteristic that
the weaknesses present make ''collection or liquidation in full,'' on the basis

                                      -13-

of current existing facts, conditions, and values, ''highly questionable  and
improbable.''    Assets   classified   as   ''Loss''   are   those   considered
''uncollectible''  and  of  such  little value that their continuance as assets
without the establishment of a specific  loss  reserve is not warranted. Assets
which do not expose the Bank to sufficient risk  to  warrant  classification in
one  of  the  aforementioned  categories but possess potential weaknesses  that
deserve  management's  attention   are   designated   ''Special   Mention''  by
management.  At  June  30,  2000  the Bank had $2.1 million of loans designated
Special Mention.

   At  June  30,  2000,  the  Bank  had  $7.3   million  of  assets  classified
Substandard, consisting of 39 loans and 7 other real  estate  owned properties,
and no assets classified as Doubtful or Loss.  At June 30, 1999,  the  Bank had
$4.0  million  of  assets classified Substandard, consisting of 29 loans and  9
other real estate owned  properties, $328,000 of assets classified as Doubtful,
consisting of 1 loan, and no assets classified as Loss.

   The following table sets  forth  at  June  30,  2000  the  Bank's  aggregate
carrying  value  of  the assets classified as Substandard, Doubtful or Loss  or
designated as Special Mention.

                                 Special Mention            Substandard                  Doubtful                     Loss
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                               
                                Number       Amount       Number       Amount       Number       Amount       Number       Amount
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                       (Dollars In Thousands)
Mortgage Loans:
   One-to-four family                3         $357           27       $2,976           -           $-              -         $-
   Multi-family and
     underlying
     cooperative                     2        1,476            6        3,646           -            -              -          -
   Cooperative apartment             7          272            6          298           -            -              -          -
                                ------       ------       ------       ------       ------       ------         ------     ------
Total Mortgage Loans                12        2,105           39        6,920           -            -              -          -
                                ------       ------       ------       ------       ------       ------         ------     ------
Other Real Estate Owned:
   One-to-four family               -            -             1          134           -            -              -          -
   Cooperative apartment            -            -             6          247           -            -              -          -
                                ------       ------       ------       ------       ------       ------         ------     ------
Total Other Real Estate
   Owned                            -            -             7          381           -            -              -          -
                                ------       ------       ------       ------       ------       ------         ------     ------
Total                               12       $2,105           46       $7,301           -           $-              -         $-
                                ======       ======       ======       ======       ======       ======         ======     ======

ALLOWANCE FOR LOAN LOSSES

   The Bank has established a Loan Loss Reserve Committee and has charged
it with, among other things, specific responsibility for monitoring
the adequacy of the loan loss reserve. The Loan Loss Reserve Committee's
findings,  along with recommendations for additional loan loss reserve
provisions, if any, are reported directly to senior management of the Bank,
and to the Board of Directors. The Allowance for Loan Losses is supplemented
through a periodic provision for loan losses based on the Loan Loss Reserve
Committee's evaluation of several variables, including the level of
non-performing loans, the ratio of reserves to total performing loans, the
level and composition of new loan activity, and an estimate of future losses
determinable at the date the portfolio is evaluated. Such evaluation, which
includes a review of all loans on which full collectibility may not be
reasonably assured, considers among other matters, the fair value of
the underlying collateral, economic conditions, historical loan loss
experience and other factors that warrant recognition in providing for an
adequate loan loss allowance. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review the
Bank's allowance for loan losses, its valuation of OREO, and both the
level of loans in foreclosure and pending foreclosure. Based on their
judgments about information available to them at the time of
their examination, the regulators may require the Bank to recognize
additions to the allowance.

   Loan loss reserves are established based upon a review of the two
componentsof the Bank's loan portfolio, performing loans and non-performing
loans. Performing loans are reviewed based upon the premise that certain
loans within the loan portfolio have incurred losses as of the balance
sheet date which have not yet been identified.  The evaluation process is
thus based upon the Bank's historical loss experience.

   Non-performing loans are reviewed individually to determine if the
liquidation value of the underlying collateral is sufficient to pay off the
existing debt. Should the bank determine that a non-performing loan is
likely to result in a principal

                                      -14-

loss, the loan is then placed into one of four classifications. The
particular classification assigned to any one loan, or proportion thereof,
(loss, doubtful, substandard or special mention) is based upon the actual
level of loss attributable to that loan, as determined by the Loan Loss
Reserve Committee. The Bank will then increase its general valuation
allowance in an amount established by the Loan Loss Reserve Committee to
appropriately reflect the anticipated loss from each loss classification
category.

   Specific reserves are established against loans classified as ''loss.''
Rather than an estimation of potential loss, the establishment of a specific
reserve represents the identification of an actual loss which will result in
a charge-off. This loss amount will be set aside on the Bank's balance sheet
as a specific reserve and will serve to reduce the carrying value of the
associated loan. The Bank's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by
various regulatory agencies which can order the establishment of additional
general or specific loss allowances.

   The Bank has maintained its allowance for loan losses to a level which
management believes is adequate to absorb probable losses that may be incurred
within the Bank's loan portfolio.  The allowance for loan losses decreased
$296,000 from June 30, 1999 to June 30, 2000, as net charge-offs of $536,000
were partially offset by provisions to the allowance of $240,000.
Of the total net charge-offs during the fiscal year ended June 30, 2000,
$454,000 related to a loan pool participation investment acquired from FIBC.
Upon consummating the FIBC acquisition, we provided reserves within our
overall loan loss allowance to cover this potential loss on the loan pool
investment.  After attempting to recover this portion of the total investment,
we determined in November, 1999, that it would not be collectible
and should be charged-off.

                                      -15-

   The following table sets forth activity in the Bank's allowance for loan
losses at or for the dates indicated.

                                                                        At or for the Year Ended June 30,
                                                -------------------------------------------------------------------------------
                                                                                                    
                                                   2000              1999             1998              1997             1996
                                                 --------          --------         --------          --------         --------
                                                                         (Dollars In Thousands)
Total loans outstanding at end of period   $1,721,200        $1,383,341         $950,121          $750,584         $583,686
                                                 ========          ========         ========          ========         ========
Average total loans outstanding            $1,563,656        $1,164,982         $843,148          $648,357         $449,063
                                                 ========          ========         ========          ========         ========
ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of period                    $15,081           $12,075          $10,726            $7,812           $5,174
Provision for loan losses                             240               240            1,635             4,200            2,979
Charge-offs
   One-to-four family                                (500)              (10)            (165)             (104)             (21)
   Multi-family and underlying cooperative             -                (98)             (49)             (985)            (553)
   Non-residential                                     -                 -                -                 -              (274)
   FHA/VA insured                                      -                 -                -                 -                -
   Cooperative apartment                              (24)              (62)            (112)             (276)            (170)
   Other                                              (21)              (38)              (2)              (23)              (5)
                                                 --------          --------         --------          --------         --------
Total charge-offs                                    (545)             (208)            (328)           (1,388)          (1,023)
                                                 --------          --------         --------          --------         --------
Recoveries                                              9                 7               42               102               14
                                                 --------          --------         --------          --------         --------
Reserve acquired in purchase acquisition               -              2,967               -                 -               668
                                                 --------          --------         --------          --------         --------
Balance at end of period                          $14,785           $15,081          $12,075           $10,726           $7,812
                                                 ========          ========         ========          ========         ========
Allowance for loan losses to total loans
   at end of period                                  0.86%             1.09%            1.27%             1.43%            1.34%

Allowance for loan losses to total non-
   performing loans at end of period               334.43            502.53         1,365.95            336.24           119.25

Allowance for loan losses to total non-
   performing loans and troubled-debt
   restructurings at end of period                 288.71            351.46           248.71            136.45            69.61

Ratio of net charge-offs to average loans
   outstanding during the period                     0.03              0.03             0.03              0.20             0.22

ALLOWANCE FOR LOSSES ON OTHER REAL ESTATE
OWNED:
Balance at beginning of period                       $149              $164             $187              $114              $-
Provision charged to operations                        25                16              114               450              586
Charge-offs, net of recoveries                       (129)              (31)            (137)             (377)            (472)
                                                 --------          --------         --------          --------         --------
Balance at end of period                              $45              $149             $164              $187             $114
                                                 ========          ========         ========          ========         ========
_______________________________________

 Total loans represents loans, net, plus the allowance for loan losses.
    During the fiscal year ended June 30, 1999, the Bank acquired $192.3
    million of loans from FIBC.

                                      -16-

   The following table sets forth the Bank's allowance for loan losses
allocated by loan category and the percent of loans in each category to total
loans at the dates indicated.

                                                                At June 30,
- ---------------------------------------------------------------------------------------------------------------------------------
                         2000                   1999                    1998                    1997                  1996
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                          
                            Percent                 Percent                 Percent                Percent               Percent
                            of Loan                 of Loan                 of Loan                of Loan               of Loan
                            in Each                 in Each                 in Each                in Each               in Each
                            Category                Category                Category               Category              Category
               Allowance    to Total  Allowance     to Total    Allowance   to Total   Allowance   to Total    Allowance to Total
                Amount      Loans(1)   Amount       Loans     Amount     Loans   Amount    Loans    Amount   Loans
- ---------------------------------------------------------------------------------------------------------------------------------
                                                     (Dollars in Thousands)
Impaired
  loans         $130       0.15         $62         0.11%        $23         0.33%       $122        0.58%      $955     1.30%
One-to-four
  family           3,176      12.23       4,112        17.86         669        13.32         820       19.04      1,171    29.90
Multi-family
  and
  underlying
  cooperative     10,000      78.65       9,652        72.63      10,160        75.90       7,398       66.83      3,808    50.81
Non-
  residential      1,095       6.92         699         6.45         445         5.32         862        5.84        605     6.63
Cooperative
  apartment          254       1.60         414         2.39         605         4.52       1,355        6.89      1,085    10.38
Other                130       0.45         142         0.56         173         0.61         169        0.82        188     0.98
- ---------------------------------------------------------------------------------------------------------------------------------
Total            $14,785     100.00%    $15,081       100.00%    $12,075       100.00%    $10,726      100.00%    $7,812   100.00%
=================================================================================================================================

 Total loans represent gross loans less FHA and VA loans, which are
       government guaranteed loans.
 The Bank adopted SFAS 114 effective July 1, 1995.  Prior to this date,
       impaired loans were not measured. At June 30, 1999, 1998, 1997 and 1996,
       impaired loans represent 0.11%, 0.33%, 0.57% and 1.27% of total loans.

INVESTMENT ACTIVITIES

   INVESTMENT STRATEGIES OF THE  COMPANY - The Company's principal asset is its
investment in the Bank's common stock, which amounted to $194.4 million at June
30, 2000.  The Company's other investments  at that date totaled $60.1 million.
The  largest component of these investments were  Ginnie  Mae  adjustable  rate
mortgage-backed  securities  totaling  $42.0 million, which are tied closely to
short-term  borrowings.   The  remaining $18.9  of  investment  securities  are
utilized  for general business activities,  which  may  include,  but  are  not
limited  to:  (1)  repurchases  of  Common  Stock,  (2)  acquisition  of  other
companies,  (3)  subject  to  applicable limitations, the payment of dividends,
and/or (4) investments in the equity securities of other financial institutions
and other investments not permitted  for federally-insured institutions.  There
can be no assurance that the Company will  engage in any of these activities in
the future.

   Otherwise, the investment policy of the Company  calls  for  investments  in
relatively  short-term, liquid securities similar to such securities defined in
the securities investment policy of the Bank.

   INVESTMENT  POLICY  OF  THE  BANK.   The securities investment policy of the
Bank, which is established by its  Board  of Directors, is designed to help the
Bank achieve its overall asset/liability management  objectives. Generally, the
policy  calls  for  management to emphasize principal preservation,  liquidity,
diversification, short  maturities  and/or  repricing  terms,  and  a favorable
return  on  investment when selecting new investments for the Bank's portfolio.
The Bank's current  securities investment policy permits investments in various
types of liquid assets  including  obligations of the U.S. Treasury and federal
agencies, investment grade corporate  obligations,  various  types of mortgage-
backed securities, commercial paper, certificates of deposit, and federal funds
sold  to select financial institutions periodically approved by  the  Board  of
Directors.

   Investment  strategies are implemented by the Asset and Liability Management
Committee  ("ALCO")  comprised  of  the  Chief  Executive  Officer,  President,
Executive Vice  President and other senior management officers.  The strategies
take  into account  the  overall  composition  of  the  Bank's  balance  sheet,
including  loans  and  deposits,  and  are  intended to protect and enhance the
Company's earnings and market value.  The strategies  are  reviewed  monthly by
the ALCO and reported regularly to the Board of Directors.

   The Company did not engage in any hedging transactions utilizing derivative
instruments (such as interest rate swaps and caps) during the fiscal year ended
June 30, 2000, and did not have any such hedging transactions in place at June
30, 2000.  In the future, the Company may, with Board approval, engage in
hedging transactions utilizing derivative instruments.

                                      -17-

   MORTGAGE-BACKED  SECURITIES.   In its securities investment activities  over
the past few years the  Company has increased its purchases of  mortgage-backed
securities,  which  provide   the  portfolio  with  investments  consisting  of
desirable repricing, cash flow  and  credit  quality characteristics. Mortgage-
backed  securities  generally  yield  less than the  loans  that  underlie  the
securities because of the cost of payment  guarantees  and  credit enhancements
that  reduce  credit  risk  to  the investor. While mortgage-backed  securities
backed by federally sponsored agencies  carry a reduced credit risk as compared
to whole loans, such securities remain subject  to  the  risk  that fluctuating
interest rates, along with other factors such as the geographic distribution of
the underlying mortgage loans, may alter the prepayment rate of  such  mortgage
loans  and  so affect both the prepayment speed, and value, of such securities.
However, mortgage-backed  securities  are  more liquid than individual mortgage
loans and may readily be used to collateralize  borrowings of the Company.  The
Company's investment in mortgage-backed securities  totaled  $442.7 million, or
17.7% of total assets at June 30, 2000.  Approximately 36.8% of  the  mortgage-
backed  securities portfolio, was comprised of securities backed by either  the
Governmental  National  Mortgage  Association (''Ginnie Mae''), Freddie Mac, or
Fannie Mae.  In addition to the superior  credit quality provided by the agency
backing, the mortgage-backed securities portfolio  also  provides  the  Company
with important interest rate risk management features.

   At  June  30, 2000, the Company had $279.9 million in CMOs and REMICs, which
comprise the largest  component  of the Bank's mortgage-backed securities.  All
of the securities are either backed  by  U.S  agency  obligations  or have been
issued  by  highly reputable financial institutions.  In addition, all  of  the
non-agency backed  obligations had been rated in the highest rating category by
at least one nationally  recognized  rating agency at the time of purchase.  In
addition,  none  of  these  securities have  stripped  principal  and  interest
components  and  the  Company  is   positioned  in  priority  tranches  in  all
securities.  The majority of these securities  have  been purchased using funds
from short-term borrowings as part of reverse repurchase transactions, in which
these  securities act as collateral for the borrowed funds.   As  of  June  30,
2000, the  fair  value of these securities was approximately $7.8 million below
their cost basis,  due primarily to reductions in market values associated with
increased short-term  interest  rates during the period May, 1999 through June,
2000.

   The Company's remaining mortgage-backed securities portfolio is comprised of
a $116.0 million investment in adjustable  rate  Ginnie  Mae,  Freddie  Mac and
Fannie  Mae  pass-through  securities  which  have an average term to next rate
adjustment of less than one year, a $31.9 million investment in seasoned fixed-
rate Ginnie Mae, Fannie Mae and Freddie Mac pass-through  securities,  with  an
estimated  remaining  life  of  less  than  three  years,  and  a $15.2 million
investment in mortgage-backed securities, which provide a return  of  principal
and  interest on a monthly basis, and have original maturities of between  five
to seven years, at which point the entire remaining principal balance is repaid
(the ''balloon'' payment).

   GAAP  requires  that  investments  in  equity  securities  that have readily
determinable fair values and all investments in debt securities  be  classified
in  one  of  the  following  three  categories  and  accounted for accordingly:
trading  securities,  securities  available  for sale, or  securities  held  to
maturity.   The  Company  had no securities classified  as  trading  securities
during the year ended June  30,  2000, and does not intend to trade securities.
Unrealized gains and losses on available  for sale securities are excluded from
earnings  and  are  reported as a separate component  of  stockholders'  equity
referred  to  as  other  comprehensive  income,  net  of  deferred  taxes.   At
June 30, 2000, the  Company  had  $550.5  million  of  securities classified as
available for sale which represented 22.00% of total assets  at  June 30, 2000.
Given  the  size  of  the available for sale portfolio, future fluctuations  in
market values of these securities could result in fluctuations in the Company's
stockholders' equity.

   The maturities on the  Bank's fixed-rate mortgage-backed securities (balloon
payment securities, seasoned  Ginnie  Mae's  and  Freddie Mac's) are relatively
short  as  compared  to the final maturities on its ARMs  and  CMO  portfolios.
Except for fixed rate mortgage backed securities acquired from Conestoga, which
were  generally  classified  as  available  for  sale,  the  Company  typically
classifies purchased fixed rate mortgage-backed securities as held-to-maturity,
and carries the securities  at  amortized cost.  The Company has the intent and
ability to hold these securities  to  final  maturity.   The  Company typically
classifies purchased ARMs and CMOs as available for sale, in recognition of the
greater  prepayment uncertainty associated with these securities,  and  carries
these securities at fair market value.

The following  table  sets  forth  activity  in  the  Company's mortgage-backed
securities portfolio for the periods indicated.

                                      -18-

                                                                   For the Year Ended June 30,
                                                    ---------------------------------------------------
                                                                                 
                                                      2000                 1999                 1998
                                                    ---------            ---------            ---------
                                                                    (Dollars In Thousands)
Amortized cost at beginning of period                $530,306             $408,086             $306,164
Purchases/ Sales (net)                                    247              263,644              193,086
Principal repayments                                  (78,874)            (179,434)             (90,686)
Premium and discount amortization, net                   (190)                 230                 (478)
Securities acquired in purchase of FIBC(1)                 -                37,780                   -
                                                    ---------            ---------            ---------
Amortized cost at end of period                      $451,489             $530,306             $408,086
                                                    =========            =========            =========

 Amount comprised of $13.8 million of Freddie Mac securities, $8.7 million
of Fannie Mae securities and $15.3 of Ginnie Mae securities.

The following table sets forth the amortized cost and fair value of the
Company's securities at the dates indicated.

                                                          At June 30,
                     -------------------------------------------------------------------------------------------------------------
                                               2000                          1999                             1998
                     -------------------------------------------------------------------------------------------------------------
                                                                                                  
                                    Amortized                         Amortized                         Amortized
                                       Cost        Fair Value           Cost         Fair Value           Cost          Fair Value
                                     ---------      ---------         ---------       ---------         ---------        ---------
                                                                    (Dollars In Thousands)
Mortgage-backed securities:
Ginnie Mae                            $133,222       $132,477          $133,057        $133,337           $87,889          $89,706
Fannie Mae                              15,558         15,427            25,317          25,355            33,085           33,420
Freddie Mac                             14,929         14,853            22,994          23,093            31,778           32,016
CMOs                                   287,780        279,867           348,938         344,254           255,334          256,176
                                     ---------      ---------         ---------       ---------         ---------        ---------
Total mortgage-backed
  Securities                           451,489        442,624           530,306         526,039           408,086          411,318
                                     ---------      ---------         ---------       ---------         ---------        ---------
Investment securities:
U.S. treasury and agency                67,686         65,788            87,475          86,553            92,825           93,302
Other                               58,860         57,194            77,746          76,704            57,981           58,322
                                     ---------      ---------         ---------       ---------         ---------        ---------
Total investment securities            126,546        122,982           165,221         163,257           150,806          151,624
Equity securities                       14,948         15,490            14,162          15,142            10,425           12,675
Net unrealized(loss)gain           (11,683)            -             (5,692)             -              5,069               -
                                     ---------      ---------         ---------       ---------         ---------        ---------
Total securities, net                 $581,300       $581,096          $703,997        $704,438          $574,386         $575,617
                                     =========      =========         =========       =========         =========        =========

 Includes $13.8 million of Freddie Mac securities, $8.7 million of Fannie
     Mae securities, $15.3 million in Ginnie Mae securities, $37.2 million in
     agency obligations, and $6.6 million in equity securities acquired from
     FIBC.

 The net unrealized (loss) gain at June 30, 2000, 1999  and 1998 relates to
     available for sale securities in accordance with Statement of Financial
     Accounting Standards No. 115 "Accounting for Investments in Debt and Equity
     Securities" ("SFAS 115").  The net unrealized gain is presented in order to
     reconcile the ''Amortized Cost'' of the Company's securities portfolio to
     the recorded value  reflected in the Consolidated Statements of Condition.

   CORPORATE  DEBT  OBLIGATIONS.    The  Company  invests  in   the  short-term
investment  grade  debt  obligations  of  various corporations. Corporate  debt
obligations generally carry both a higher rate of return and a higher degree of
credit  risk  than  U.S.  Treasury securities with  comparable  maturities.  In
addition, corporate securities  are  generally less liquid than comparable U.S.
Treasury securities. In recognition of  the  additional  risks  associated with
investing  in  these  securities,  the  Company's investment policy limits  new
investments in corporate obligations to those  companies which are rated single
''A'' or better by one of the nationally recognized rating agencies, and limits
investments in any one corporate entity to the lesser  of 1% of total assets or
15%  of  the  Company's  equity. At June 30, 2000, the Company's  portfolio  of
corporate debt obligations totaled $55.0 million, or 2.20% of total assets.

The following table sets forth  the  amortized  cost  and  fair  value  of  the
Company's  securities, by accounting classification and by type of security, at
the dates indicated.

                                      -19-

                                                          At June 30,
                     -----------------------------------------------------------------------------------------------------------
                                               2000                          1999                            1998
                     -----------------------------------------------------------------------------------------------------------
                                                                                                 
                                    Amortized                         Amortized                         Amortized
                                       Cost        Fair Value           Cost         Fair Value           Cost        Fair Value
                                     ---------      ---------         ---------       ---------         ---------      ---------
                                                                    (Dollars In Thousands)
Held-to-Maturity:
Mortgage-backed securities:
Pass through securities                $13,329        $13,263           $22,820         $23,192           $46,714        $47,443
                                     ---------      ---------         ---------       ---------         ---------      ---------
Total mortgage-backed
       securities                       13,329         13,263            22,820          23,192            46,714         47,443
Investment securities               17,489         17,351            31,698          31,768            78,091         78,593
                                     ---------      ---------         ---------       ---------         ---------      ---------
Total Held-to Maturity                 $30,818        $30,614           $54,518         $54,960          $124,805       $126,036
                                     =========      =========         =========       =========         =========      =========
Available-for-Sale:
Mortgage-backed securities:
Pass through securities               $150,380       $149,494          $158,548        $158,593          $106,038       $107,699
CMOs                                   287,780        279,867           348,938         344,254           255,334        256,176
                                     ---------      ---------         ---------       ---------         ---------      ---------
Total mortgage-backed
       securities                      438,160        429,361           507,486         502,847           361,372        363,875
Investment securities              109,057        105,631           133,523         131,489            72,715         73,031
Equity securities                       14,948         15,490            14,162          15,142            10,425         12,675
Net unrealized(loss)gain           (11,683)            -             (5,692)             -              5,069             -
                                     ---------      ---------         ---------       ---------         ---------      ---------
Total Available-for-Sale              $550,482       $550,482          $649,479        $649,478          $449,581       $449,581
                                     =========      =========         =========       =========         =========      =========
Total securities, net                 $581,300       $581,096          $703,997        $704,438          $574,386       $575,617
                                     =========      =========         =========       =========         =========      =========

 Includes  $37.8  million  of mortgage-backed pass-through securities, $37.2
     million in investment securities  and  $6.6  million  in  equity  securiies
     acquired from FIBC, all of which were classified as available for sale.

 Mortgage-backed securities include investments in CMOs and REMICs.

 Includes corporate debt obligations.

 The net unrealized (loss) gain at June 30, 2000, 1999 and 1998 relates  to
    available  for  sale  securities  in  accordance with SFAS No. 115. The net
    unrealized gain is presented in order to  reconcile  the ''Amortized Cost''
    of the Company's securities portfolio to the recorded  value   reflected in
    the Consolidated Statements of Condition.

                                      -20-

   The  following table sets forth certain information regarding the  amortized
cost, fair value and weighted average yield of the Company's securities at June
30, 2000,  by  remaining  period  to  contractual  maturity.  With  respect  to
mortgage-backed  securities,  the  entire  amount  is reflected in the maturity
period  that  includes  the final security payment date  and,  accordingly,  no
effect has been given to  periodic  repayments  or  possible prepayments. Other
than obligations of federal agencies and GSEs, the Company  has  no investments
in securities issued by any one entity in excess of 10% of stockholders' equity
at June 30, 2000.

                                                                                  At June 30, 2000
                                        -----------------------------------------------------------------------------------------
                                                     Held-to-Maturity                                Available-for Sale
                                        -----------------------------------------------------------------------------------------
                                                                                                    
                                                                         Weighted                                       Weighted
                                        Amortized                        Average        Amortized                        Average
                                          Cost          Fair Value        Yield           Cost           Fair Value       Yield
                                        --------         --------         ------         --------         --------        ------
                                                                              (Dollars In Thousands)
Mortgage-backed securities:
Due within 1 year                           $593             $588           6.19%          $2,506           $2,327          6.00%
Due after 1 year but within 5 years       10,054            9,998           7.04            3,043            3,014          6.98
Due  after  5  years  but within 10
   years                                   2,682            2,677           7.96            8,094            7,856          6.46
Due after ten years                           -                -              -           424,517          416,164          6.69
                                        --------         --------                        --------         --------
Total                                     13,329           13,263           7.19          438,160          429,361          6.69
                                        --------         --------                        --------         --------
U.S. Treasury and Agency:
Due within 1 year                             -                -              -               998              997          5.89
Due after 1 year but within 5 years       12,440           12,296           6.58           54,249           52,496          6.03
Due  after  5  years  but within 10
   years                                      -                -              -                -                -             -
Due after ten years                           -                -              -                -                -             -
                                        --------         --------                        --------         --------
Total                                     12,440           12,296           6.58           55,247           53,493          6.02
                                        --------         --------                        --------         --------
Corporate and Other
Due within 1 year                          3,172            3,171           6.10           12,175           12,152          6.26
Due after 1 year but within 5 years          748              747           6.04           41,635           39,986          6.22
Due  after  5  years  but within 10
   years                                   1,129            1,137           7.30               -                -             -
Due after ten years                           -                -              -                -                -             -
                                        --------         --------                        --------         --------
Total                                      5,050            5,056           6.36           53,810           52,138          6.23
                                        --------         --------                        --------         --------
Equity Securities
Due within 1 year                             -                -              -             7,372            8,638            -
Due after 1 year but within 5 years           -                -              -                -                -             -
Due  after  5  years  but within 10
   years                                      -                -              -                -                -             -
Due after ten years                           -                -              -             7,576            6,852            -
                                        --------         --------                        --------         --------
Total                                         -                -            6.36           14,948           15,490            -
                                        --------         --------                        --------         --------
Total:
Due within 1 year                          3,765            3,759           6.12           23,051           24,114          6.20
Due after 1 year but within 5 years       23,242           23,041           6.76           98,927           95,496          6.13
Due  after  5  years  but within 10
   years                                   3,811            3,814           7.77            8,094            7,856          6.46
Due after ten years                           -                -              -           432,093          423,016          6.69
                                        --------         --------                        --------         --------
Total                                    $30,819          $30,614           6.81%        $562,165         $550,482          6.57%
                                        ========         ========                        ========         ========

SOURCES OF FUNDS

   GENERAL.    Deposits,  repayments  of  loans and mortgage-backed securities,
investment  security  maturities and redemptions,  and  short-  to  medium-term
borrowings  from  the  FHLBNY,  which  include  both  advances  and  repurchase
agreements treated as financings, are the Bank's primary sources of funding for
its lending and investment activities. The

                                      -21-

Bank is also active in the secondary mortgage market, selling  substantially
all  of  its new long-term, fixed-rate residential mortgage product to either
Fannie Mae, Freddie Mac, or SONYMA.

   DEPOSITS.   The Bank offers a variety of deposit  accounts having a range of
interest  rates  and terms. The Bank presently offers savings  accounts,  money
market  accounts,  checking   accounts,   NOW   and  Super  NOW  accounts,  and
certificates of deposit. The flow of deposits is  influenced  significantly  by
general   economic  conditions,  changes  in  prevailing  interest  rates,  and
competition   from   other  financial  institutions  and  investment  products.
Traditionally, the Bank has relied upon customer service, convenience and long-
standing relationships  with  customers.   The  communities  in  which the Bank
maintains branch offices have historically provided the Bank with nearly all of
its  deposits.  At  June  30,  2000, the Bank had deposit liabilities of  $1.22
billion, down $27.9 million from  June  30, 1999.  Within total deposits, $75.6
million,  or  6.2%,  consisted of certificates  of  deposit  with  balances  of
$100,000 or greater. Individual  Retirement Accounts (''IRA's'') totaled $108.7
million, or 8.9% of total deposits.

In June, 2000, the Bank's Board of  Directors  approved  acceptance of brokered
certificates  of deposits up to an aggregate limit of $120.0  million.   As  of
June 30, 2000,  no  brokered  certificates  of  deposit  had  been  acceptance.
Brokered  certificates of deposits, if accepted by the Bank, would be  utilized
by the Bank solely as a funding alternative to borrowings.

The following  table  presents the deposit activity of the Bank for the periods
indicated.

                                                                           For the Year Ended June 30,
                                                            -----------------------------------------------------
                                                                                           
                                                              2000                  1999                  1998
                                                            ---------             ---------             ---------
                                                                              (Dollars In Thousands)
Deposits                                                   $2,178,658            $1,686,616            $1,373,072
Withdrawals                                                 2,223,597             1,754,874             1,345,095
                                                            ---------             ---------             ---------
Deposits (Withdrawals) in excess of (deposits)                (44,939)              (68,258)               27,977
withdrawals
Deposits acquired in purchase of FIBC                          -                230,627                    -
Deposits relinquished in sale                                 (17,949)                   -                     -
Interest credited                                              43,103                42,479                42,713
                                                            ---------             ---------             ---------
TOTAL (DECREASE) INCREASE IN DEPOSITS                        $(19,785)             $204,848               $70,690
                                                            =========             =========             =========

 Amount comprised of $123.0 million in certificates of deposit, $67.4 in
    savings accounts, $15.1 million in checking accounts, $16.7 million in
    money market accounts, and $7.5 million in NOW and Super NOW accounts.

   At June 30, 2000 the  Bank  had  $75.6  million  in  certificate  of deposit
accounts over $100,000 maturing as follows:

                                                           Weighted
                                                           Average
                                          Amount             Rate
                                         ---------        ---------
                                            (Dollars In Thousands)
Maturity Period
Within three months                        $15,246             5.07%
After three but within six months            9,593             5.12
After six but within twelve months          24,557             5.69
After 12 months                             26,229             5.99
                                         ---------
Total                                      $75,625             5.60%
                                         =========

                                      -22-

   The  following  table  sets  forth  the  distribution  of the Bank's deposit
accounts  and  the  related  weighted  average  interest  rates  at  the  dates
indicated.

                                                                         At June 30,
                       ------------------------------------------------------------------------------------------------------
                                       2000                                  1999                          1998
                       -----------------------------------    -------------------------------   -----------------------------
                                                                                        
                                      Percent     Weighted               Percent    Weighted               Percent    Weighted
                                     of Total     Average               of Total    Average                of Total    Average
                           Amount    Deposits      Rate       Amount    Deposits     Rate        Amount    Deposits     Rate
                       ----------    --------    ---------    --------  --------    --------    --------   --------   --------
                                                                       (Dollars In Thousands)
Checking accounts         $54,358        4.46%         -%      $50,414      4.70%         -%     $32,782       3.57%         -%
NOW and Super NOW
   accounts                26,787        2.20       1.24        25,687      2.06       1.22       17,927       1.73       1.24
Money market accounts     146,066       11.98       4.37        52,979      4.25       3.55       30,567       2.94       3.09
Savings accounts          373,772       30.66       2.08       406,602     32.60       2.09      340,481      32.79       2.27
Certificates of
   deposit                618,165       50.70       5.51       703,251     56.39       5.31      612,328      58.97       5.84
                       ----------    --------                 --------  --------                --------   --------
Totals                 $1,219,148      100.00%              $1,238,933    100.00%             $1,034,085     100.00%
                       ==========    ========                 ========  ========                ========   ========

   The  following  table  presents,  by  interest  rate  ranges,  the amount of
certificate  accounts  outstanding  at  the  dates indicated and the period  to
maturity of the certificate accounts outstanding at June 30, 2000.

                                  Period  to  Maturity  at  June 30, 2000                               Total at June 30,
                          -------------------------------------------------------            ------------------------------------
                                                                                                 
                          Less than         One to         Four to      Over Five
Interest Rate Range       One Year       Three Years      Five Years       Years               2000          1999          1998
- ---------------           ---------       ---------       ---------      --------            --------      --------      --------
                                                                            (Dollars In Thousands)
4.00% and below             $38,686             $-              $-            $-              $38,686       $29,558            $1
4.01% to 5.00%              179,076           5,429             354            -              184,859       346,694       135,153
5.01% to 6.00%              158,094         121,575          10,299           167             290,135       178,183       233,082
6.01% to 7.00%               33,085          54,013          11,226             3              98,327       120,238       231,204
7.01% and above               5,997             161              -             -                6,158        28,578        12,888
                          ---------       ---------       ---------      --------            --------      --------      --------
Total                      $414,938        $181,178         $21,879           170            $618,165      $703,251      $612,328
                          =========       =========       =========      ========            ========      ========      ========

      BORROWINGS.    The  Bank  has been a member and shareholder of the FHLBNY
since February 14, 1980. One of the  privileges accorded FHLBNY shareholders is
the ability to borrow money under various  lending  (referred  to  as Advances)
programs  at competitive interest rates.  The Bank, as a member of the  FHLBNY,
is provided  with  a  borrowing  line  which equaled $724.8 million at June 30,
2000.   From  time  to  time, the Bank borrows  from  the  FHLBNY  for  various
purposes.

        The Bank had borrowings  from  the  Federal  Home Loan Bank of New York
totaling  $555.0  million  and  $250.0  million  at  June 30,  2000  and  1999,
respectively.  The  average  cost  of  FHLB  Advances  was  5.89%   and  5.96%,
respectively,  during  the years ended June 30, 2000 and 1999, and the  average
interest rate on outstanding FHLBNY Advances was 6.07% and 5.52%, respectively,
at June 30, 2000 and 1999.   At June 30, 2000, the Bank maintained in excess of
$610.5 million of qualifying collateral  (principally  real  estate  loans), as
defined by the FHLBNY, to secure such advances.

   Securities sold with agreement to repurchase totaled $434.0 million  at June
30, 2000.  The investment and mortgage-backed securities sold with agreement to
repurchase  mature at various periods beginning in September, 2000.  Borrowings
under such reverse  repurchase agreements involve the delivery of securities to
broker-dealers who arrange  the  transactions. The securities remain registered
in  the  name  of  the  Bank,  and are returned  upon  the  maturities  of  the
agreements.  Funds  to  repay the Bank's  securities  sold  with  agreement  to
repurchase at maturity will  be  provided  primarily  by cash received from the
maturing securities.

                                      -23-

   Presented below is information concerning securities sold with agreements to
repurchase and FHLB Advances for the years ended June 30, 2000, 1999 and 1998:

Securities Sold Under Agreements to Repurchase:

                                                                         At or For the Year Ended June 30,
                                                            -----------------------------------------------------
                                                                                           
                                                               2000                  1999                  1998
                                                            ---------             ---------             ---------
                                                                            (Dollars In Thousands)
Balance outstanding at end of period                         $434,027              $481,660              $256,601
Average interest cost at end of period                           6.37%                 5.28%                 5.74%
Average balance outstanding                                   456,155               381,996               145,676
Average interest cost during the year                            5.66%                 5.45%                 5.95%
Carrying value of underlying collateral                      $456,844              $496,500              $267,469
Estimated market value of underlying collateral               447,715               491,750               268,991
Maximum balance outstanding at month end during period        486,936               481,660               256,601

FHLB Advances:

                                                                         At or For the Year Ended June 30,
                                                            -----------------------------------------------------
                                                                                           
                                                               2000                  1999                  1998
                                                            ---------             ---------             ---------

Balance outstanding at end of period                         $555,000              $250,000              $103,505
Average interest cost at end of period                           6.07%                 5.52%                 6.05%
Average balance outstanding                                   466,158               201,494                86,709
Average interest cost during the year                            5.89%                 5.96%                 6.04%
Maximum balance outstanding at month end during period        560,000               260,000               103,505

SUBSIDIARY ACTIVITIES

   In  addition  to  the  Bank,  the Company's direct and indirect subsidiaries
consist of six active wholly-owned  subsidiary  corporations,  one  of which is
directly owned by the Company and five of which are directly owned by the Bank.
In  addition,  DSBW Preferred Funding Corp. is a direct subsidiary of Havemeyer
Equities Inc., a  direct  subsidiary of the Bank.  The following table presents
an overview of the Company's subsidiaries as of June 30, 2000.

                                                                  
                                                  Year/ State of
COMPANY                                           Incorporation            Primary Business Activities

Havemeyer Equities Inc.                           1977 / New York          Ownership of DSBW Preferred Funding Corp.
Boulevard Funding Corp.                           1981 / New York          Currently Inactive
Havemeyer Investments Inc.                        1997 / New York          Sale of annuity products
DSBW Preferred Funding Corp.                      1998 / Delaware          Real Estate Investment Trust investing in multi-
                                                                              family and non-residential real estate loans.
DSBW Residential Preferred Funding Corp.          1998 / Delaware          Real Estate Investment Trust investing in one- to
                                                                              four-family real estate loans
842 Manhattan Avenue Corp. (1)                    1995/ New York           Management and ownership of real estate.

 Acquired from FIBC on January 21, 1999.

PERSONNEL

   As  of  June 30, 2000, the Company had 248  full-time employees and 81 part-
time employees.   The  employees are not represented by a collective bargaining
unit, and the Company considers its relationship with its employees to be good.

                                      -24-

FEDERAL, STATE AND LOCAL TAXATION

FEDERAL TAXATION

   GENERAL.  The following is a discussion of material tax matters and does not
purport to be a comprehensive  description  of  the tax rules applicable to the
Bank  or  the Company. The Bank was last audited for  its  taxable  year  ended
December 31,  1988.   For federal income tax purposes, the Company and the Bank
file consolidated income  tax  returns on a June 30 fiscal year basis using the
accrual method of accounting and  will be subject to federal income taxation in
the  same  manner  as  other  corporations   with  some  exceptions,  including
particularly the Bank's tax reserve for bad debts, discussed below.

   TAX BAD DEBT RESERVES.  The Bank, as a "large  bank" (one with assets having
an adjusted basis of more than $500 million), is unable  to  make  additions to
its  tax bad debt reserve, is permitted to deduct bad debts only as they  occur
and is required to recapture (i.e. take into income), over a multi-year period,
a portion  of  the balance of its bad debt reserves as of June 30, 1997.  Since
the Bank has already  provided a deferred income tax liability for this tax for
financial reporting purposes,  there  was  no  adverse  impact  to  the  Bank's
financial  condition or results of operations from the enactment of the federal
legislation that imposed such recapture.  The recapture is suspended during the
tax years ended  June  30,  1997  and  1998,  based upon the Bank's origination
levels for certain residential loans which met  the  minimum levels required by
the  Small  Business Job Protection Act of 1996, (the "1996  Act")  to  suspend
recapture for that tax year.

   DISTRIBUTIONS.   To   the   extent   that   the   Bank  makes  "non-dividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the Bank's "base year reserve,"  i.e.  its  reserve as of
June 30, 1989, to the extent thereof and then from its supplemental reserve for
losses on loans, and an amount based on the amount distributed will be included
in the Bank's taxable income.  Non-dividend distributions include distributions
in  excess  of  the  Bank's  current  and accumulated earnings and profits,  as
calculated  for federal income tax purposes,  distributions  in  redemption  of
stock, and distributions in partial or complete liquidation. Dividends paid out
of the Bank's  current  or  accumulated  earnings  and  profits  will not be so
included in the Bank's income.

   The  amount  of  additional  taxable  income  created  from  a  non-dividend
distribution  is  an amount that, when reduced by the tax attributable  to  the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the amount of such distribution (but not in excess of the amount
of  such reserves) would  be  includable  in  income  for  federal  income  tax
purposes,  assuming  a  35% federal corporate income tax rate. See "Regulation"
and "Dividend Policy" for  limits  on the payment of dividends by the Bank. The
Bank does not intend to pay dividends  that  would result in a recapture of any
portion of its tax bad debt reserves.

   CORPORATE  ALTERNATIVE  MINIMUM  TAX. The Code  imposes  a  tax  ("AMT")  on
alternative minimum taxable income ("AMTI")  at a rate of 20%. AMTI is adjusted
by determining the tax treatment of certain items  in a manner that negates the
deferral  of income resulting from the regular tax treatment  of  those  items.
Thus, the Bank's  AMTI  is increased by an amount equal to 75% of the amount by
which the Bank's adjusted current earnings exceeds its AMTI (determined without
regard to this adjustment and prior to reduction for net operating losses).

STATE AND LOCAL TAXATION

    STATE OF NEW YORK. The  Bank  and the Company are subject to New York State
franchise tax on one of several alternative  bases,  whichever  results  in the
highest tax, and will file combined returns for purposes of this tax. The basic
tax  is  measured  by "entire net income," which is federal taxable income with
adjustments. For New  York State tax purposes, so long as the Bank continues to
meet certain definitional  tests  relating  to its assets and the nature of its
business, it will be permitted deductions, within specified formula limits, for
additions to its bad debt reserves for purposes  of  computing  its  entire net
income.  The  Bank's  deduction  with respect to "qualifying loans," which  are
generally loans secured by certain  interests in real property, may be computed
using an amount based on the Bank's actual  loss  experience  (the  "Experience
Method")  or  an amount equal to 32% of the Bank's entire net income (the  "PTI
Method"), computed  without  regard to this deduction and reduced by the amount
of any permitted addition to the Bank's reserve for non-qualifying loans.

   New York State (the "State")  enacted legislation, which enables the Bank to
avoid the recapture into income of  the  State tax bad debt reserves unless one
of the following events occur: 1) the Bank's  retained  earnings represented by
the reserve is used for purposes other than to absorb losses  from  bad  debts,
including   dividends   in  excess  of  the  Bank's  earnings  and  profits  or

                                      -25-

distributions in liquidation  or  in  redemption of stock; 2) the Bank fails to
qualify as a thrift as provided by the  State  tax law, or 3) there is a change
in state tax law.

   The Bank's deduction with respect to non-qualifying  loans  must be computed
under  the  Experience Method which is based on the Bank's actual  charge-offs.
Each year the  Bank  will  review  the  most  favorable  way  to  calculate the
deduction attributable to an addition to the tax bad debt reserves.

   The New York State tax rate for the 1999 calendar year is 10.53%  (including
a  commuter  transportation  surcharge)  of net income. In general, the Company
will  not  be required to pay New York State  tax  on  dividends  and  interest
received from the Bank.

   CITY OF NEW  YORK.  The Bank and the Company are also subject to a similarly
calculated New York City  banking  corporation tax of 9% on income allocated to
New York City.

   New York City also enacted legislation which conformed its tax law regarding
bad debt deductions to New York State's tax law.

   STATE OF DELAWARE. As a Delaware  holding  company  not  earning  income  in
Delaware,  the  Company  is exempted from Delaware corporate income tax, but is
required to file an annual  report and pay an annual franchise tax to the State
of Delaware.

REGULATION

GENERAL

   The Bank is subject to extensive regulation, examination, and supervision by
the OTS, as its chartering agency,  and  the  FDIC, as its deposit insurer. The
Bank's  deposit  accounts  are  insured up to applicable  limits  by  the  Bank
Insurance Fund ("BIF")  and the Savings  Association  Insurance  Fund  ("SAIF")
which are administered by the FDIC, and the Bank is a member of the FHLBNY. The
Bank must file reports with the OTS and the FDIC concerning its activities  and
financial  condition, and it must obtain regulatory approvals prior to entering
into certain  transactions,  such  as  mergers  with, or acquisitions of, other
depository institutions. The OTS and the FDIC conduct  periodic examinations to
assess  the  Bank's  compliance  with  various  regulatory  requirements.  This
regulation and supervision establishes a comprehensive framework  of activities
in  which  a savings association can engage and is intended primarily  for  the
protection of  the  insurance fund and depositors.  The Company, as a publicly-
held unitary savings  and  loan  holding  company,  is required to file certain
reports  with,  and  otherwise comply with, the rules and  regulations  of  the
Securities and Exchange  Commission  (the ''SEC'') under the federal securities
laws and of the OTS.

   The OTS and the FDIC have significant  discretion  in  connection with their
supervisory  and  enforcement  activities  and examination policies,  including
policies with respect to the classification  of assets and the establishment of
adequate  loan  loss  reserves  for regulatory purposes.  Any  change  in  such
policies, whether by the OTS, the  FDIC  or the Congress, could have a material
adverse impact on the Company, the Bank, and the operations of both.

   The  following  discussion is intended to  be  a  summary  of  the  material
statutes and regulations  applicable  to  savings associations, and it does not
purport to be a comprehensive description of all such statutes and regulations.

IMPACT OF ENACTMENT OF THE GRAMM-LEACH-BLILEY ACT

On November 12, 1999, the Gramm-Leach-Bliley  Act,  or  Gramm-Leach  was signed
into   law.   Among  other  things,  Gramm-Leach  establishes  a  comprehensive
framework  to  permit  affiliations among commercial banks, insurance companies
and other financial service  providers.  Generally, the new law (i) repeals the
historical restrictions and eliminates  many  federal and state law barriers to
affiliations among banks and securities firms,  insurance  companies  and other
financial  service  providers,  (ii)  provides  a  uniform  framework  for  the
activities  of  banks,  savings institutions and their holding companies, (iii)
broadens the activities that  may  be  conducted  by national banks and banking
subsidiaries of bank holding companies, (iv) provides an enhanced framework for
protecting  the  privacy  of consumer's information, (v)  adopts  a  number  of
provisions related to the capitalization,  membership, corporate governance and
other  measures designed to modernize the FHLB  system,  (vi)  requires

public disclosure  of certain agreements relating to funds expended in
connection with the Community Reinvestment Act and (vii) addresses a variety
of other legal and regulatory issues affecting both day-to-day operations and
long-term activities of  financial   institutions,  including  the  functional
regulation  of  bank securities activities.

                                      -26-

Gramm-Leach  also  restricts  the  powers  of  new  unitary  savings  and  loan
association holding companies.  Unitary savings and loan holding companies that
are "grandfathered,"  I.E.,  became  a unitary savings and loan holding company
pursuant to an application filed with  the  OTS before May 4, 1999, such as us,
retain their authority under the prior law.  All other savings and loan holding
companies would be limited to financially related  activities  permissible  for
bank  holding  companies,  as  defined  under  Gramm-Leach.   Gramm  Leach also
prohibits non-financial companies from acquiring grandfathered savings and loan
association holding companies.

Gramm-Leach  also requires financial institutions to disclose, on ATM machines,
any non-customer  fees  and to disclose to their customers upon the issuance of
an ATM card any fees that  may be imposed by the institution on ATM users.  For
older ATMs, financial institutions will have until December 31, 2004 to provide
such notices.

Bank holding companies are permitted  to engage in a wider variety of financial
activities than permitted under the prior  law,  particularly  with  respect to
insurance  and  securities activities. In addition, in a change from the  prior
law, bank holding  companies  will  be in a position to be owned, controlled or
acquired by any company engaged in financially related activities.
We do not believe that the new law will have a material adverse affect upon our
operations in the near term. However,  to the extent the new law permits banks,
securities firms and insurance companies  to  affiliate, the financial services
industry may experience further consolidation.   This could result in a growing
number of larger financial institutions that offer a wider variety of financial
services  than  we  currently offer and that can aggressively  compete  in  the
markets we currently serve.

REGULATION OF FEDERAL SAVINGS ASSOCIATIONS

   BUSINESS ACTIVITIES.    The  Bank  derives its lending and investment powers
from the Home Owner's Loan Act, as amended  (''HOLA''),  and the regulations of
the OTS thereunder. Under these laws and regulations, the  Bank  may  invest in
mortgage  loans  secured  by residential and commercial real estate, commercial
and consumer loans, certain types of debt securities, and certain other assets.
The Bank may also establish  service corporations that may engage in activities
not otherwise permissible for  the  Bank,  including certain real estate equity
investments and securities and insurance brokerage. These investment powers are
subject  to  various  limitations,  including (a)  a  prohibition  against  the
acquisition of any corporate debt security that is not rated in one of the four
highest rating categories; (b) a limit  of  400% of an association's capital on
the aggregate amount of loans secured by non-residential  real estate property;
(c)  a limit of 20% of an association's assets on commercial  loans,  with  the
amount  of  commercial  loans in excess of 10% of assets being limited to small
business loans; (d) a limit  of 35% of an association's assets on the aggregate
amount of consumer loans and acquisitions  of  certain  debt  securities; (e) a
limit of 5% of assets on non-conforming loans (loans in excess  of the specific
limitations  of  HOLA);  and (f) a limit of the greater of 5% of assets  or  an
association's capital on certain  construction  loans  made  for the purpose of
financing what is or is expected to become residential property.

   LOANS  TO  ONE  BORROWER.    Under HOLA, savings associations are  generally
subject to the same limits on loans  to one borrower as are imposed on national
banks. Generally, under these limits, a savings association may not make a loan
or extend credit to a single or related  group of borrowers in excess of 15% of
the association's unimpaired capital and surplus.  Additional  amounts  may  be
lent,  not in excess of 10% of unimpaired capital and surplus, if such loans or
extensions  of  credit are fully secured by readily-marketable collateral. Such
collateral is defined  to  include  certain  debt  and  equity  securities  and
bullion,  but  generally  does  not  include real estate. At June 30, 2000, the
Bank's limit on loans to one borrower  was $29.1 million. At June 30, 2000, the
Bank's largest aggregate amount of loans  to one borrower was $15.7 million and
the second largest borrower had an aggregate balance of $14.3 million.

                                      -27-

   QTL  TEST.  HOLA requires a savings association  to  meet  a  QTL  test.   A
savings association may satisfy the QTL test by maintaining at least 65% of its
''portfolio  assets''  in  certain ''qualified thrift investments'' in at least
nine months of the most recent twelve-month period. ''Portfolio assets'' means,
in general, an association's  total assets less the sum of (a) specified liquid
assets up to 20% of total assets,  (b)  certain intangibles, including goodwill
and credit card and purchased mortgage servicing  rights,  and (c) the value of
property  used  to  conduct  the  association's  business.  ''Qualified  thrift
investments'' includes various types of loans made for residential  and housing
purposes,  investments  related  to  such purposes, including certain mortgage-
backed  and  related securities, small business  loans,  education  loans,  and
credit card loans. At June 30, 2000, the Bank maintained 89.0% of its portfolio
assets in qualified  thrift  investments.  The  Bank had also satisfied the QTL
test  in each of the prior 12 months and, therefore,  was  a  qualified  thrift
lender.  A savings association may also satisfy the QTL test by qualifying as a
"domestic  building  and  loan  association" as defined in the Internal Revenue
Code of 1986.

   A savings association that fails  the  QTL  test  must  either operate under
certain  restrictions  on  its  activities  or convert to a bank  charter.  The
initial  restrictions include prohibitions against  (a)  engaging  in  any  new
activity not  permissible  for  a  national  bank,  (b)  paying  dividends  not
permissible  under  national  bank regulations, (c) obtaining new advances from
any  FHLB, and (d) establishing  any  new  branch  office  in  a  location  not
permissible  for  a national bank in the association's home state. In addition,
within one year of  the date a savings association ceases to meet the QTL test,
any company controlling  the  association  would  have  to  register under, and
become subject to the requirements of, the Bank Holding Company Act of 1956, as
amended.  If  the  savings association does not requalify under  the  QTL  test
within the three-year period after it failed the QTL test, it would be required
to terminate any activity  and to dispose of any investment not permissible for
a national bank and would have to repay as promptly as possible any outstanding
advances from any FHLB. A savings  association that has failed the QTL test may
requalify under the QTL test and be  free of such limitations, but it may do so
only once.

   CAPITAL REQUIREMENTS.   The OTS regulations  require savings associations to
meet three minimum capital standards: a tangible  capital  ratio requirement of
1.5%  of  total assets as adjusted under the OTS regulations and  a  risk-based
capital ratio  requirement  of  8%  of  core and supplementary capital to total
risk-based assets.  The OTS regulations also  provide that the minimum leverage
capital ratio, or core capital to total adjusted assets, under Office of Thrift
Supervision regulations for a depository institution that has been assigned the
highest composite rating of 1 under the Uniform  Financial  Institutions Rating
is  3%  and  that  the minimum leverage capital ratio for any other  depository
institution is 4%, unless a higher capital ratio is warranted by the particular
circumstances or risk  profile  of  the depository institution.  In determining
the  amount of risk-weighted assets for  purposes  of  the  risk-based  capital
requirement,  a  savings  association  must  compute  its  risk-based assets by
multiplying  its  assets  and certain off-balance sheet items by  risk-weights,
which range from 0% for cash  and  obligations  issued  by  the  United  States
Government  or  its  agencies,  to  100%  for consumer and commercial loans, as
assigned by the OTS capital regulation based  on  the  risks  OTS  believes are
inherent in the type of asset.

   Tangible  capital  is  defined,  generally,  as  common stockholders' equity
(including retained earnings), certain noncumulative  perpetual preferred stock
and  related  earnings,  minority  interests  in  equity  accounts   of   fully
consolidated  subsidiaries,  less  intangibles  other  than  certain  purchased
mortgage servicing rights and investments in and loans to subsidiaries  engaged
in  activities  not  permissible  for  a national bank. Core capital is defined
similarly  to  tangible  capital,  but  core   capital  also  includes  certain
qualifying   supervisory   goodwill   and   certain   purchased   credit   card
relationships.  Supplementary capital currently includes  cumulative  preferred
stock, long-term  perpetual  preferred stock, mandatory convertible securities,
subordinated debt and intermediate  preferred  stock,  and  the  allowance  for
possible  loan  losses.   The OTS and other federal banking regulators adopted,
effective October 1, 1998,  an amendment to their risk-based capital guidelines
that  permits  insured depository  institutions  to  include  in  supplementary
capital up to 45%  of  the  pretax  net  unrealized  holding  gains  on certain
available-for-sale  equity  securities,  as  such  gain are computed under  the
guidelines.    The   allowance  for  loan  and  lease  losses   includable   in
supplementary capital is limited to a maximum of 1.25% of risk-weighted assets,
and the amount of supplementary  capital  that may be included as total capital
cannot exceed the amount of core capital.

   The  OTS  regulations require a savings association  with  ''above  normal''
interest rate  risk  to deduct a portion of such capital from its total capital
to account for the ''above normal'' interest rate risk. A savings association's
interest rate risk is measured by the decline in the net portfolio value of its
assets (I.E., the difference  between  incoming  and  outgoing  discounted cash
flows from assets, liabilities and off-balance sheet contracts) resulting  from
a hypothetical 2% increase or decrease in market rates of interest, divided  by
the  estimated  economic  value  of  the association's assets, as calculated in
accordance with guidelines set forth by  the OTS. At the times when the 3-month
Treasury bond equivalent yield falls below  4%,  an association may compute its
interest  rate  risk  on  the basis of a decrease equal  to  one-half  of  that
Treasury rate rather than on  the  basis  of  2%.  A  savings association whose
measured  interest rate risk exposure exceeds 2% would be  considered  to  have

                                      -28-

''above normal''  risk.  The interest rate risk component is an amount equal to
one-half of the difference  between  the  association's  measured interest rate
risk  and 2%, multiplied by the estimated economic value of  the  association's
assets.  That  dollar amount is deducted from an association's total capital in
calculating compliance  with  its  risk-based capital requirement. Any required
deduction for interest rate risk becomes effective on the last day of the third
quarter following the reporting date  of  the  association's  financial data on
which  the interest rate risk was computed.  The OTS has indefinitely  deferred
the implementation  of the intrest rate risk component in the computation of an
institution's risk-based  capital  requirements.   The OTS continues to monitor
the  interest rate risk of individual institutions and  retains  the  right  to
impose additional capital requirements on individual institutions.

      The table below presents the Bank's regulatory capital as compared to the
OTS regulatory capital requirements at June 30, 2000:

                                             Actual                      Minimum Capital Requirement
                                  -----------------------------         ----------------------------
                                                                       
                                    Amount             Ratio             Amount            Ratio
                                   ---------         ---------         ----------        ----------
As of June 30, 2000:                                 (Dollars In Thousands)
   Tangible                         $136,772              5.76%           $35,600               1.5%
   Leverage Capital                  136,772              5.76             94,934               4.0%
   Risk-based capital                151,556             11.62            104,386               8.0%

The following is a reconciliation of generally accepted accounting principles
(GAAP) capital to regulatory capital for the Bank:

                                                          At June 30, 2000
                                                                
                                         Tangible           Leverage          Risk-Based
                                          Capital            Capital           Capital
                                        ---------           ---------          ---------
                                                       (Dollars In Thousands)
GAAP capital                             $194,236            $194,236           $194,236
                                        ---------           ---------          ---------
Non-allowable assets:
Unrealized loss on available for
   sale securities                          6,550               6,550              6,550
Goodwill                                  (60,254)            (60,254)           (60,254)
Core deposit intangible                    (3,760)             (3,760)            (3,760)
General valuation allowance                    -                   -              14,784
                                        ---------           ---------          ---------
Regulatory capital                        136,772             136,772            151,556
Minimum capital requirement                35,600              94,934            104,386
                                        ---------           ---------          ---------
Regulatory capital excess                $101,172             $41,838            $47,170
                                        =========           =========          =========

   LIMITATION  ON  CAPITAL  DISTRIBUTIONS.    OTS  regulations currently impose
limitations upon capital distributions by savings associations,  such  as  cash
dividends, payments to repurchase or otherwise acquire its shares, payments  to
shareholders   of   another   institution  in  a  cash-out  merger,  and  other
distributions charged against capital.

Under  the OTS regulations governing  capital  distributions,  certain  savings
associations  are permitted to pay capital distributions during a calendar year
that do not exceed  the association's net income for the year plus its retained
net income for the prior  two years, without notice to, or the approval of, the
OTS.  However, a savings association  subsidiary  of a savings and loan holding
company, such as the Company, will continue to have  to  file an application to
receive the approval of the OTS.  In addition, the OTS can  prohibit a proposed
capital distribution, otherwise permissible under the regulation,  if  the  OTS
has  determined that the association is in need of more than normal supervision
or if  it  determines  that  a  proposed  distribution  by an association would
constitute  an unsafe or unsound practice. Furthermore, under  the  OTS  prompt
corrective action  regulations,  the  Bank  would be prohibited from making any
capital distribution if, after the distribution,  the  Bank  failed to meet its
minimum  capital  requirements, as described above. See '' - Prompt  Corrective
Regulatory Action.''

   LIQUIDITY.   The  Bank  is  required to maintain an average daily balance of
liquid assets (cash, certain time  deposits,  bankers'  acceptances,  specified
United  States  Government,  state  or  federal  agency  obligations, shares of
certain  mutual  funds  and  certain corporate debt securities  and  commercial
paper) equal to a monthly average  of  not  less than a specified percentage of

                                      -29-

its  net  withdrawable  deposit  accounts  plus  short-term   borrowings.  This
liquidity requirement may be changed from time to time by the OTS to any amount
within  the  range  of  4%  to 10% depending upon economic conditions  and  the
savings flows of member institutions,  and is currently 4%.  Monetary penalties
may be imposed for failure to meet these  liquidity  requirements.  The  Bank's
average  liquidity  ratio  for  the  month  ended June 30, 2000 was 12.1% which
exceeded  the  applicable requirements. The Bank  has  never  been  subject  to
monetary penalties for failure to meet its liquidity requirements.

   ASSESSMENTS.    Savings  associations  are required by OTS regulation to pay
assessments  to  the  OTS  to  fund the operations  of  the  OTS.  The  general
assessment,  paid  on  a  semi-annual  basis,  is  computed  upon  the  savings
association's total assets, including consolidated subsidiaries, as reported in
the  association's  latest  quarterly  Thrift  Financial  Report.   The  Bank's
assessment expense during the  year  ended June 30, 2000 totaled $360,000.  The
OTS has adopted amendments to its regulations,  effective January 1, 1999, that
are intended to assess savings associations on a  more  equitable  basis.   The
regulations  base the assessment for an individual savings association on three
components: the  size  of  the  association,  on  which the basic assessment is
based;  the association's supervisory condition, which  results  in  percentage
increases  for  any savings institution with a composite rating of 3, 4 or 5 in
its most recent safety  and  soundness  examination;  and the complexity of the
association's operations, which results in percentage increases  for  a savings
association  that managed over $1 billion in trust assets, serviced for  others
loans aggregating more than $1 billion, or had certain off-balance sheet assets
aggregating more  than $1 billion.  In order to avoid a disproportionate impact
upon the smaller savings institutions, which are those whose total assets never
exceeded $100.0 million,  the  regulations  provide  that  the  portion  of the
assessment  based on asset size will be the lesser of the assessment under  the
amended regulations or the regulations before the amendment.

   BRANCHING.    Subject  to  certain limitations, HOLA and the OTS regulations
permit federally chartered savings  associations  to  establish branches in any
state  of  the  United  States. The authority to establish  such  a  branch  is
available  (a)  in  states  that   expressly   authorize  branches  of  savings
associations located in another state and (b) to  an  association  that  either
satisfies  the  QTL  test  for  a  "qualified thrift lender," or qualifies as a
''domestic building and loan association''  under  the Internal Revenue Code of
1986,  which  imposes  qualification  requirements  similar   to  those  for  a
''qualified thrift lender'' under HOLA. See ''QTL Test.'' The authority  for  a
federal  savings  association  to  establish an interstate branch network would
facilitate a geographic diversification  of  the association's activities. This
authority under HOLA and the OTS regulations preempts  any state law purporting
to regulate branching by federal savings associations.

   COMMUNITY REINVESTMENT.   Under the CRA, as implemented  by OTS regulations,
a  savings  association has a continuing and affirmative obligation  consistent
with its safe  and  sound operation to help meet the credit needs of its entire
community, including  low  and  moderate income neighborhoods. The CRA does not
establish specific lending requirements  or programs for financial institutions
nor does it limit an institution's discretion  to develop the types of products
and  services  that it believes are best suited to  its  particular  community,
consistent with  the  CRA.  The  CRA  requires  the OTS, in connection with its
examination  of a savings association, to assess the  association's  record  of
meeting the credit  needs of its community and to take such record into account
in its evaluation of  certain  applications  by  such association. The CRA also
requires all institutions to make public disclosure  of  their CRA ratings. The
Bank  received an "Outstanding" CRA performance rating and  a  ''Satisfactory''
CRA compliance rating in its most recent examination.  In May, 2000, the OTS
proposed regulations implementing the requirements under Gramm-Leach tha
insured depository institutions publicly disclose certain agreements that
are in fulfillment of CRA.  We have no such agreement in place at this time.

   In April  1995,  the  OTS  and  the  other  federal banking agencies adopted
amendments revising their CRA regulations. Among  other things, the amended CRA
regulations substitute for the prior process-based  assessment  factors  a  new
evaluation  system that rates an institution based on its actual performance in
meeting community  needs.  In  particular,  the amended system focuses on three
tests: (a) a lending test, to evaluate the institution's record of making loans
in its service areas; (b) an investment test,  to  evaluate  the  institution's
record of investing in community development projects, affordable housing,  and
programs  benefiting low or moderate income individuals and businesses; and (c)
a service test,  to evaluate the institution's delivery of services through its
branches, ATMs, and other offices. The amended CRA regulations also clarify how
an  institution's CRA  performance  would  be  considered  in  the  application
process.

   TRANSACTIONS  WITH  RELATED  PARTIES.    The  Bank's  authority to engage in
transactions with its ''affiliates'' is limited by the OTS  regulations  and by
Sections  23A  and  23B  of  the  Federal Reserve Act (''FRA''). In general, an
affiliate of the Bank is any company  that  controls  the  Bank  or  any  other
company  that  is controlled by a company that controls the Bank, excluding the
Bank's subsidiaries  other than those that are insured depository institutions.
Currently, a subsidiary  of a bank that is not also a depository institution is
not treated as an affiliate  of  the bank for purposes of Sections 23A and 23B,
but the Federal Reserve

                                      -30-

Bank has proposed  treating  any  subsidiary  of a bank
that is engaged in activities not permissible for bank holding companies  under
the  BHCA  as  an  affiliate  for  purposes  of  Sections 23A and 23B.  The OTS
regulations  prohibit a savings association (a) from  lending  to  any  of  its
affiliates that  is  engaged  in  activities  that are not permissible for bank
holding companies under Section 4(c) of the Bank  Holding  Company  Act  (''BHC
Act'')  and  (b)  from purchasing the securities of any affiliate other than  a
subsidiary. Section  23A  limits  the aggregate amount of transactions with any
individual  affiliate  to  10%  of the  capital  and  surplus  of  the  savings
association  and also limits the aggregate  amount  of  transactions  with  all
affiliates to  20% of the savings association's capital and surplus. Extensions
of credit to affiliates  are  required to be secured by collateral in an amount
and of a type described in Section  23A, and the purchase of low quality assets
from affiliates is generally prohibited.  Section  23B  provides  that  certain
transactions  with affiliates, including loans and asset purchases, must be  on
terms  and  under   circumstances,   including   credit   standards,  that  are
substantially  the  same or at least as favorable to the association  as  those
prevailing  at  the  time   for   comparable  transactions  with  nonaffiliated
companies. In the absence of comparable  transactions,  such  transactions  may
only  occur  under terms and circumstances, including credit standards, that in
good faith would be offered to or would apply to nonaffiliated companies.

   The Bank's  authority to extend credit to its directors, executive officers,
and 10% shareholders,  as  well  as  to entities controlled by such persons, is
currently governed by the requirements  of  Sections 22(g) and 22(h) of the FRA
and Regulation O of the Federal Reserve Board (''FRB'') thereunder. Among other
things, these provisions require that extensions  of  credit to insiders (a) be
made  on  terms  that  are  substantially  the  same  as,  and  follow   credit
underwriting procedures that are not less stringent than, those prevailing  for
comparable  transactions with unaffiliated persons and that do not involve more
than the normal risk of repayment or present other unfavorable features and (b)
not exceed certain  limitations  on  the  amount  of  credit  extended  to such
persons, individually and in the aggregate, which limits are based, in part, on
the  amount of the association's capital. In addition, extensions of credit  in
excess  of  certain  limits  must  be  approved  by  the association's board of
directors.

   ENFORCEMENT.   Under the Federal Deposit Insurance  Act  (''FDI  Act''), the
OTS  has primary enforcement responsibility over savings associations  and  has
the authority  to bring enforcement action against all ''institution-affiliated
parties,'' including  any controlling stockholder or any shareholder, attorney,
appraiser and accountant  who  knowingly  or  recklessly  participates  in  any
violation  of  applicable  law  or  regulation  or  breach of fiduciary duty or
certain other wrongful actions that causes or is likely  to cause a more than a
minimal  loss  or  other  significant  adverse  effect  on  an insured  savings
association. Civil penalties cover a wide range of violations  and  actions and
range  from  $5,000  for  each day during which violations of law, regulations,
orders, and certain written  agreements  and  conditions  continue,  up  to  $1
million  per  day  for  such  violations  if  the person obtained a substantial
pecuniary gain as a result of such violation or  knowingly or recklessly caused
a substantial loss to the institution. Criminal penalties for certain financial
institution crimes include fines of up to $1 million and imprisonment for up to
30  years.  In  addition,  regulators  have  substantial   discretion  to  take
enforcement  action  against  an  institution  that  fails to comply  with  its
regulatory requirements, particularly with respect to its capital requirements.
Possible enforcement actions range from the imposition  of  a  capital plan and
capital  directive  to  receivership,  conservatorship,  or the termination  of
deposit insurance. Under the FDI Act, the FDIC has the authority  to  recommend
to  the  Director  of  OTS  that enforcement action be taken with respect to  a
particular savings association.  If  action is not taken by the Director of the
OTS, the FDIC has authority to take such action under certain circumstances.

   STANDARDS FOR SAFETY AND SOUNDNESS.    Pursuant  to  the requirements of the
FDI  Act,  as  amended  by  FDICIA  and  the  Riegle Community Development  and
Regulatory Improvement Act of 1994 (''Community  Development  Act''),  the OTS,
together with the other federal bank regulatory agencies, have adopted a set of
guidelines  prescribing  safety and soundness standards pursuant to FDICIA,  as
amended.  The  guidelines establish  general  standards  relating  to  internal
controls and information  systems,  internal audit systems, loan documentation,
credit  underwriting,  interest rate exposure,  asset  growth,  asset  quality,
earnings and compensation,  fees  and  benefits.  In  general,  the  guidelines
require, among other things, appropriate systems and practices to identify  and
manage  the  risks  and  exposures  specified in the guidelines. The guidelines
prohibit excessive compensation as an  unsafe and unsound practice and describe
compensation  as  excessive  when  the  amounts   paid   are   unreasonable  or
disproportionate  to the services performed by an executive officer,  employee,
director or principal  shareholder.   In  addition, the OTS adopted regulations
pursuant to FDICIA that authorize, but do not  require,  the  OTS  to  order an
institution that has been given notice by the OTS that it is not satisfying any
of  such safety and soundness standards to submit a compliance plan. If,  after
being so notified, an institution fails to submit an acceptable compliance plan
or fails  in any material respect to implement an accepted compliance plan, the
OTS must issue  an  order  directing  action  to correct the deficiency and may
issue   an   order  directing  other  actions  of  the  types   to   which   an
undercapitalized  association is subject under the ''prompt corrective action''
provisions of FDICIA. If an institution fails to comply with such an order, the
OTS may seek to enforce  such order in judicial proceedings and to impose civil
money penalties.

                                      -31-

   REAL ESTATE LENDING STANDARDS.    The  OTS  and  the  other  federal banking
agencies  adopted regulations to prescribe standards for extensions  of  credit
that (a) are  secured  by  real  estate  or  (b)  are  made  for the purpose of
financing the construction of improvements on real estate. The  OTS regulations
require  each  savings  association to establish and maintain written  internal
real estate lending standards  that  are consistent with safe and sound banking
practices and appropriate to the size  of  the  association  and the nature and
scope  of  its  real  estate  lending  activities. The standards also  must  be
consistent with accompanying OTS guidelines, which include loan-to-value ratios
for the different types of real estate loans.  Associations  are also permitted
to make a limited amount of loans that do not conform to the proposed  loan-to-
value  limitations  so  long  as  such  exceptions  are  reviewed and justified
appropriately. The guidelines also list a number of lending situations in which
exceptions to the loan-to-value standards are justified.

   PROMPT  CORRECTIVE  REGULATORY  ACTION.    Under  the OTS prompt  corrective
action regulations, the OTS is required to take certain,  and  is authorized to
take other, supervisory actions against undercapitalized savings  associations.
For  this  purpose,  a  savings  association  would  be  placed  in one of five
categories based on the association's capital. Generally, a savings association
is  treated  as  ''well  capitalized''  if its ratio of total capital to  risk-
weighted assets is at least 10.0%, its ratio  of  core capital to risk-weighted
assets is at least 6.0%, its ratio of core capital  to total assets is at least
5.0%, and it is not subject to any order or directive  by  the  OTS  to  meet a
specific  capital  level. A savings association will be treated as ''adequately
capitalized'' if its ratio of total capital to risk-weighted assets is at least
8.0%, its ratio of core  capital  to risk-weighted assets is at least 4.0%, and
its ratio of core capital to total  assets  is  at  least  4.0%  (3.0%  if  the
association  receives  the  highest  rating on the CAMEL financial institutions
rating system). A savings association  that  has  a total risk-based capital of
less than 8.0% or Tier 1 risk-based capital ratio that  is  less than 4.0% or a
leverage  ratio  (3.0% leverage ratio if the association receives  the  highest
rating on the CAMEL  financial  institutions rating system) is considered to be
''undercapitalized.'' A savings association that has a total risk-based capital
of less than 6.0% or a Tier 1 risk-based  capital  ratio or a leverage ratio of
less  than  3.0%  is  considered  to  be ''significantly undercapitalized.''  A
savings association that has a tangible  capital  to  assets  ratio equal to or
less than 2% is deemed to be ''critically undercapitalized.'' The  elements  of
an   association's  capital  for  purposes  of  the  prompt  corrective  action
regulations are defined generally as they are under the regulations for minimum
capital  requirements.  As  of  the most recent notification from the Office of
Thrift  Supervision  categorized  the   Bank  as  well  capitalized  under  the
regulatory framework for prompt corrective  action.  There are no conditions or
events  since  that  notification that management  believes  have  changed  the
institution's category.  See ''- Capital Requirements.''

   The severity of the  action  authorized  or  required  to be taken under the
prompt  corrective  action  regulations  increases as an association's  capital
deteriorates within the three undercapitalized categories. All associations are
prohibited  from  paying dividends or other  capital  distributions  or  paying
management fees to  any controlling person if, following such distribution, the
association  would be  undercapitalized.  An  undercapitalized  association  is
required to file  a  capital  restoration  plan  within 45 days of the date the
association receives notice that it is within any of the three undercapitalized
categories.  The  OTS  is  required  to monitor closely  the  condition  of  an
undercapitalized association and to restrict  the  asset  growth, acquisitions,
branching,  and  new  lines  of business of such an association.  Significantly
undercapitalized associations  are  subject  to restrictions on compensation of
senior executive officers; such an association  may  not,  without OTS consent,
pay any bonus or provide compensation to any senior executive officer at a rate
exceeding the officer's average rate of compensation (excluding  bonuses, stock
options and profit-sharing) during the 12 months preceding the month  when  the
association   became   undercapitalized.   A   significantly   undercapitalized
association may also be subject, among other things, to forced changes  in  the
composition  of  its  board  of  directors  or  senior  management,  additional
restrictions  on  transactions  with affiliates, restrictions on acceptance  of
deposits from correspondent associations, further restrictions on asset growth,
restrictions on rates paid on deposits,  forced  termination  or  reduction  of
activities  deemed  risky,  and  any  further  operational  restrictions deemed
necessary by the OTS.

   If one or more grounds exist for appointing a conservator or receiver for an
association,  the OTS may require the association to issue additional  debt  or
stock, sell assets,  be acquired by a depository association holding company or
combine with another depository  association. The OTS and the FDIC have a broad
range of grounds under which they  may appoint a receiver or conservator for an
insured depository association. Under  FDICIA, the OTS is required to appoint a
receiver (or with the concurrence of the  FDIC, a conservator) for a critically
undercapitalized  association  within 90 days  after  the  association  becomes
critically undercapitalized or,  with the concurrence of the FDIC, to take such
other action that would better achieve  the  purposes  of the prompt corrective
action provisions. Such alternative action can be renewed for successive 90-day
periods.   However,   if   the   association   continues   to   be   critically
undercapitalized  on  average during the quarter that begins 270 days after  it
first became critically  undercapitalized, a receiver must be appointed, unless
the OTS makes certain

                                      -32-

findings  with which the FDIC concurs and the Director of
the OTS and the Chairman of the FDIC certify that the association is viable. In
addition, an association that is critically undercapitalized is subject to more
severe  restrictions  on  its activities,  and  is  prohibited,  without  prior
approval of the FDIC from,  among  other things, entering into certain material
transactions or paying interest on new  or  renewed  liabilities at a rate that
would significantly increase the association's weighted average cost of funds.

   When  appropriate,  the  OTS  can  require corrective action  by  a  savings
association holding company under the ''prompt  corrective  action'' provisions
of FDICIA.

   INSURANCE OF DEPOSIT ACCOUNTS.  Savings associations are subject  to a risk-
based assessment system for determining the deposit insurance assessments to be
paid  by  insured  depository  institutions.   Under  the risk-based assessment
system, which began in 1993, the FDIC assigns an institution  to  one  of three
capital  categories based on the institution's financial information as of  the
reporting  period  ending seven months before the assessment period.  The three
capital categories consist of (a) well capitalized, (b) adequately capitalized,
or (c) undercapitalized.   The  FDIC  also assigns an institution to one of the
three supervisory subcategories within  each  capital  group.   The supervisory
subgroup  to  which  an  institution  is  assigned  is based upon a supervisory
evaluation provided to the FDIC by the institution's  primary federal regulator
and information that the FDIC determines to be relevant  to  the  institution's
financial  condition  and  the  risk posed to the deposit insurance funds.   An
institution's assessment rate depends  on  the capital category and supervisory
category  to  which  it  is assigned.  Under the  regulation,  there  are  nine
assessment risk classifications  (i.e.,  combinations  of  capital  groups  and
supervisory  subgroups)  to  which  different  assessment  rates  are  applied.
Assessment  rates  currently range from 0.0% of deposits for an institution  in
the highest category  (i.e.,  well-capitalized  and  financially sound, with no
more than a few minor weaknesses) to 0.27% of deposits  for  an  institution in
the   lowest  category  (i.e.,  undercapitalized  and  substantial  supervisory
concern).  The FDIC is authorized to raise the assessment rates as necessary to
maintain  the required reserve ratio of 1.25%.  Both the BIF and SAIF currently
satisfy the  reserve ratio requirement.  If the FDIC determines that assessment
rates should be  increased,  institutions  in  all  risk  categories  could  be
affected.   The FDIC has exercised this authority several times in the past and
could raise insurance assessment rates in the future.  If such action is taken,
it could have an adverse effect upon the earnings of the Bank.

   The Funds  Act of 1996 also amended the FDIA to recapitalize the SAIF and to
expand the assessment  base  for the payments of FICO bonds.  Beginning January
1, 1997, the assessment base included the deposits of both BIF and SAIF-insured
institutions.  Until December  31, 1999, or such earlier date on which the last
savings association ceases to exist,  the rate of assessment for BIF-assessable
deposits shall be one-fifth of the rate  imposed  on  SAIF-assessable deposits.
For the semi-annual period beginning on July 1, 1997, the  rates  of assessment
for  FICO bonds are 0.0126% for BIF-assessable deposits and 0.0630%  for  SAIF-
assessable  deposits.   For  the semi-annual period beginning July 1, 1998, the
rates of assessment for the FICO  bonds  is 0.0122% for BIF-assessable deposits
and 0.0610 for SAIF-assessable deposits.

   PRIVACY PROTECTION.  The OTS has recently  adopted  regulations implementing
the  privacy  protection  provisions  of  Gramm-Leach.  The regulations,  which
require each financial institution to adopt  procedures  to  protect customers'
and customers' "non-public personal information" will become effective November
13,  2000,  however, full compliance will be optinal until July 1, 2001.  The
Bank  will  be required to disclose  our  privacy  policy,  including
identifying with whom we share  "non-public  personal  information,"  to
customers   at   the  time  of establishing  the customer relationship and
annually thereafter.  In  addition, the Bank will be  required  to  provide
its customers with the ability to "opt-out"  of having us share their personal
information  with  unaffiliated  third parties.   The  Bank  currently  has
a  privacy protection policy in place and intends to review and amend this
policy, if  necessary  for compliance with the regulations.  We do not
believe that these regulations will have a material impact on our business,
financial condition or results of operations.

   Gramm-Leach also provides for the ability of each state to enact legislation
that  is more protective of consumers' personal information.   Currently  there
are a number  of  privacy bills pending in the New York legislature.  No action
has been taken on any  of  these  bills,  and we cannot predict what impact, if
any, these bills will have.

   INSURANCE ACTIVITIES.  As a federal savings bank, we are generally
permitted to engage in certain insurance activities through subsidiaries.
In August, 2000, the OTS and the other federal banking agencies proposed
regulations pursuant to Gramm-Leach which would prohibit depository
institutions from conditioning the extension of credit to individuals
upon either the purchase of an insurance product or annuity or an agreement
by the consumer not to purchase an insurance product or annuity from an entity
that is not affiliated with the depository institution. The proposed
regulations would also require

                                      -33-

prior disclosure of this prohibition to
potential insurance product or annuity customers.  We do not believe
that these regulations, if adopted as proposed, would have a material
impact on our operations.

   FEDERAL HOME LOAN BANK SYSTEM.   The Bank  is  a member of the FHLBNY, which
is one of the regional FHLBs composing the FHLB System.  Each  FHLB  provides a
central credit facility primarily for its member institutions. The Bank,  as  a
member  of  the FHLBNY, is required to acquire and hold shares of capital stock
in the FHLB in  an  amount at least equal to the greater of 1% of the aggregate
principal  amount  of  its   unpaid  residential  mortgage  loans  and  similar
obligations at the beginning of  each  year  or one-twentieth{ }of its advances
(borrowings) from the FHLBNY. The Bank was in  compliance with this requirement
with  an  investment in FHLB stock at June 30, 2000,  of  $42.4  million.   Any
advances from  a FHLB must be secured by specified types of collateral, and all
long-term advances  may be obtained only for the purpose of providing funds for
residential housing finance.  The FHLBNY paid dividends on the capital stock of
$2.6 million during the  fiscal  year  ended June 30, 2000, $1.5 million during
the fiscal year ended June 30, 1999, and  $663,000  during the years ended June
30,  1998.   If  dividends were reduced, or interest on  future  FHLB  advances
increased, the Bank's  net  interest  income  would  likely  also  be  reduced.
Further,  there can be no assurance that the impact of FDICIA and the Financial
Institutions  Reform,  Recovery and Enforcement Act of 1989 (''FIRREA'') on the
FHLBs will not also cause a decrease in the value of the FHLB stock held by the
Bank.

   FEDERAL RESERVE SYSTEM.    The  Bank is subject to provisions of the FRA and
the FRB's regulations pursuant to which depository institutions may be required
to maintain non-interest-earning reserves  against  their  deposit accounts and
certain  other  liabilities.  Currently,  reserves  must be maintained  against
transaction  accounts (primarily NOW and regular checking  accounts).  The  FRB
regulations generally  require  that reserves be maintained in the amount of 3%
of the aggregate of transaction accounts  up  to  $44.3  million. The amount of
aggregate transaction accounts in excess of $44.3 million are currently subject
to a reserve ratio of 10%, which ratio the FRB may adjust  between  8% and 14%.
The  FRB  regulations  currently  exempt  $4.9  million of otherwise reservable
balances from the reserve requirements, which exemption  is adjusted by the FRB
at the end of each year. The Bank is in compliance with the  foregoing  reserve
requirements.  Because  required  reserves  must  be  maintained in the form of
either vault cash, a non-interest-bearing account at a Federal Reserve Bank, or
a  pass-through  account  as  defined by the FRB, the effect  of  this  reserve
requirement  is  to reduce the Bank's  interest-earning  assets.  The  balances
maintained to meet  the  reserve requirements imposed by the FRB may be used to
satisfy liquidity requirements imposed by the OTS. FHLB System members are also
authorized to borrow from  the  Federal  Reserve  ''discount  window,'' but FRB
regulations  require  such  institutions  to  exhaust  all FHLB sources  before
borrowing from a Federal Reserve Bank.

REGULATION OF HOLDING COMPANY

   The Company is a non-diversified unitary savings association holding company
within  the meaning of HOLA, as amended. As such, the Company  is  required  to
register  with  the  OTS  and  is  subject  to  OTS  regulations, examinations,
supervision and reporting requirements. In addition, the  OTS  has  enforcement
authority  over  the  Company and its non-savings association subsidiaries,  if
any. Among other things, this authority permits the OTS to restrict or prohibit
activities that are determined  to  be  a serious risk to the financial safety,
soundness, or stability of a subsidiary savings association.

   HOLA  prohibits  a  savings  association  holding   company,   directly   or
indirectly, or through one or more subsidiaries, from acquiring another savings
association  or  holding company thereof, without prior written approval of the
OTS; acquiring or  retaining,  with  certain exceptions, more than 5% of a non-
subsidiary savings association, a non-subsidiary  holding  company,  or  a non-
subsidiary company engaged in activities other than those permitted by HOLA; or
acquiring  or retaining control of a depository institution that is not insured
by the FDIC.  In  evaluating  an  application by a holding company to acquire a
savings  association,  the  OTS  must consider  the  financial  and  managerial
resources and future prospects of the company and savings association involved,
the  effect  of  the  acquisition on the  risk  to  the  insurance  funds,  the
convenience and needs of the community, and competitive factors.

   As a unitary savings  and loan holding company, the Company generally is not
restricted under existing  laws as to the types of business activities in which
it may engage, provided that  the  Bank  continues to satisfy the QTL test. See
''- Regulation of Federal Savings Associations - QTL Test'' for a discussion of
the QTL requirements. Upon any non-supervisory  acquisition  by  the Company of
another savings association or of a savings bank that meets the QTL test and is
deemed  to  be  a  savings  association by the OTS and that will be held  as  a
separate subsidiary, the Company  will  become  a  multiple savings association
holding company and will be subject to limitations on  the  types  of  business
activities  in  which  it  can engage. HOLA limits the activities of a multiple
savings  association  holding   company   and   its   non-insured   association
subsidiaries  primarily  to  activities

                                      -34-

permissible for bank holding companies under Section 4(c)(8) of the BHC Act,
subject to the prior approval of the OTS, and to other activities authorized by
OTS regulation.

   The OTS is prohibited from approving any  acquisition that would result in a
multiple savings association holding company controlling  savings  associations
in more than one state, subject to two exceptions: an acquisition of  a savings
association in another state (a) in a supervisory transaction, and (b) pursuant
to authority under the laws of the state of the association to be acquired that
specifically  permit  such acquisitions. The conditions imposed upon interstate
acquisitions by those states  that  have  enacted authorizing legislation vary.
Some  states  impose  conditions  of reciprocity,  which  have  the  effect  of
requiring  that the laws of both the  state  in  which  the  acquiring  holding
company is located  (as  determined  by  the location of its subsidiary savings
association) and the state in which the association  to be acquired is located,
have each enacted legislation allowing its savings associations  to be acquired
by out-of-state holding companies on the condition that the laws of  the  other
state  authorize  such  transactions  on  terms  no more restrictive than those
imposed on the acquiror by the state of the target  association.  Some of these
states  also  impose regional limitations, which restrict such acquisitions  to
states within a  defined  geographic region. Other states allow full nationwide
banking without any condition  of  reciprocity.  Some  states  do not authorize
interstate acquisitions of savings associations.

   Transactions  between  the  Company  and  the  Bank,  including any  of  its
subsidiaries, and any of its affiliates are subject to various  conditions  and
limitations.  See  '' Regulation of Federal Savings Associations - Transactions
with Related Parties.'' The Bank must file an application with the OTS prior to
any declaration of the  payment of any dividends or other capital distributions
to the Company. See ''- Regulation of Federal Savings Associations - Limitation
on Capital Distributions.''

FEDERAL SECURITIES LAWS

   The Company's Common stock is registered with the SEC under Section 12(g) of
the Securities Exchange Act  of  1934,  as  amended  (the "Exchange Act").  The
Company  is  subject  to the information, proxy solicitation,  insider  trading
restrictions and other requirements under the Exchange Act.

ITEM 2 - PROPERTIES
   The  Bank  conducts its  business  through  eighteen  full-service  offices,
including six offices  acquired  from Conestoga in June, 1996, and five offices
acquired from FIBC in January, 1999. The Bank's Main Office and headquarters is
located at 209 Havemeyer Street, Brooklyn, New York. The Bank believes that its
current facilities are adequate to meet the present and immediately foreseeable
needs of the Bank and the Company.

                                                                                        
                                           Leased or           Date Leased      Lease Expiration         Net Book Value
                                            Owned              or Acquired         Date                at June 30, 2000
- -----------------------------------------------------------------------------------------------------------------------

ADMINISTRATIVE OFFICE                      Owned               1989               -                          $3,607,488
   275 South 5{th} Street
   Brooklyn. New York  11211
MAIN OFFICE                                Owned               1906               -                          $1,005,424
   209 Havemeyer Street
   Brooklyn, New York  11211
AVENUE M BRANCH                            Owned               1993               -                            $462,282
   1600  Avenue  M at East 16{th}
   Street Brooklyn, New York  11230
BAYSIDE BRANCH                             Leased              1974               May, 2004                     $44,964
   61-38 Springfield Boulevard
   Bayside, New York  11364
BELLMORE BRANCH                            Owned               1973               -                            $464,589
   2412 Jerusalem Avenue
   Bellmore, New York  11710
BENSONHURST BRANCH                         Owned               1978               -                          $1,195,463
   1545 86{th} Street
   Brooklyn, New York  11228
BRONX BRANCH (1)                           Leased              1965               October, 2006                $124,184
   1931 Turnbull Avenue
   Bronx, New York  10473
FLUSHING BRANCH                            Leased              1974               November, 2013               $194,836
   59-23 Main Street

                                      -35-

   Flushing, New York  11355
GREENPOINT BRANCH                           Owned              1995               -                            $872,597
   814 Manhattan Avenue
   Brooklyn, NY  11222
HELP CENTER                                Leased              1998               May, 2003                     $78,092
   1379 Jerusalem Avenue
   Merrick, New York   11566
HILLCREST BRANCH                           Leased              1971               May, 2001                     $35,317
   176-47 Union Turnpike
   Flushing, New York  11366
JACKSON HEIGHTS BRANCH                     Leased              1990               August, 2005                 $520,180
   75-23 37{th} Avenue
   Jackson Heights, New York 11372

PROPERTIES (CONTINUED)
KINGS HIGHWAY BRANCH                        Owned              1976               -                            $708,107
   1902-1904 Kings Highway
   Brooklyn, New York  11229
LONG ISLAND CITY BRANCH                    Leased              1976               April, 2001                   $64,418
   45-14 46{th} Street
   Long Island City, New York 11104
MARINE PARK BRANCH                          Owned              1993               -                            $795,549
   2172 Coyle Street
   Brooklyn, NY  11229
MERRICK BRANCH                              Owned              1960               -                            $220,067
   1775 Merrick Avenue
   Merrick, New York  11566
PORT WASHINGTON BRANCH                      Owned              1971               -                            $371,312
   1000 Port Washington Boulevard
   Port Washington, New York 11050
SUNNYSIDE BRANCH                            Owned              1962               -                          $2,769,619
   42-25 Queens Boulevard
   Long Island City, New York 11104
WESTBURY BRANCH (2)                                        1994               -                            $477,788
   622 Old Country Road
   Westbury, New York  11590
WHITESTONE BRANCH                           Owned              1979               -                            $758,743
   24-44 Francis Lewis Boulevard
   Whitestone, New York  11357

 The Bank has an option to extend this lease for an additional ten year term
      at fair market rent, as determined by the agreement of the parties or, if
      the parties cannot agree, by arbitration
 This branch office opened April 29, 1995.
 Building owned, land leased.   Lease expires in October, 2003.

ITEM 3 - LEGAL PROCEEDINGS

The  Bank  is  not  involved  in any pending legal proceedings other than legal
actions arising in the ordinary course of its business which, in the aggregate,
involve amounts which are believed  to be immaterial to the financial condition
and results of operations of the Bank.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

                                    PART II

ITEM 5- MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

                                      -36-

Information regarding the market for the Company's common stock and related
stockholder matters appears in the 2000 Annual Report under the caption "Market
for the Company's Common Stock and Related Stockholder Matters," and is
incorporated herein by this reference.

ITEM 6. - SELECTED FINANCIAL DATA

Information regarding selected financial data appears in the 2000 Annual Report
to Shareholders for the year ended June 30, 2000 ("2000 Annual Report") under
the caption "Financial Highlights," and is incorporated herein by this
reference.

ITEM 7. -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Information regarding management's discussion and analysis of financial
condition and results of operations  appears in the 2000 Annual Report under
the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and is incorporated herein
by this reference.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Information regarding market risk appears in the 2000 Annual Report to
Shareholders under the caption "Discussion of Market Risk" and is incorporated
herein by reference.

ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information regarding financial statements and supplementary data, including
the Independent Auditors' Report appears in the 2000 Annual Report under the
captions:

"Independent Auditors' Report," "Consolidated Statements of Financial Condition
at June 30, 2000 and 1999,"

"Consolidated Statements of Operations for each of the years in the three year
period ended June 30, 2000,"

"Consolidated Statements of Stockholders' Equity and Comprehensive Income for
each of the years in the three year period ended June 30, 2000," "Consolidated
Statements of Cash Flows for each of the years in the three year period ended
June 30,2000,"and "Notes to Consolidated Financial Statements," and is
incorporated herein by this reference.

ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

                                   PART III

ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

   Information regarding directors and executive officers of the Company is
presented under the headings "Proposal 1 - Election of Directors - General, "-
Information as to Nominees and Continuing Directors,""- Nominees for Election
as Director," "-Continuing Directors," "-Meetings and Committees of the Board
of Directors,"  "-Executive Officers," "-Directors' Compensation," "-Executive
Compensation," and "-Section 16(a) Beneficial Ownership Reporting Compliance"
in the Company's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on November 9, 2000 (the "Proxy Statement") which will
be filed with the SEC within 120 days of June 30, 2000, and is incorporated
herein by reference.

ITEM 11. - EXECUTIVE COMPENSATION

   Information regarding executive and director compensation  is presented
under the headings "Election of Directors - Directors' Compensation," "-
Executive Compensation," "-Summary Compensation Table," "Employment
Agreements," "- Employee Retention Agreements," "-Employee Severance
Compensation Plan," and "- Benefits," in the Proxy Statement and is
incorporated herein by reference.

ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                                      -37-

   Information regarding security ownership of certain beneficial owners and
management is included under the headings "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement and is incorporated
herein by reference.

ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   Information regarding certain relationships and related transactions is
included under the heading "Transactions with Certain Related Persons" in the
Proxy Statement and is incorporated herein by reference.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,  AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

      The following consolidated financial statements and schedules of the
Company, and the independent auditors' report thereon are included in the
Company's Annual Report to Shareholders for the year ended June 30, 2000,
and are incorporated herein by reference:
      Independent Auditors' Report
      Consolidated Statements of Financial Condition at June 30, 2000 and 1999
      Consolidated Statements of Operations for each of the years in the three
         year period ended June 30, 2000
      Consolidated Statements of Stockholders' Equity and Comprehensive Income
         for each of the years in the three year period ended June 30, 2000
      Consolidated Statements of Cash Flows for each of the years in the three
         year period ended June 30,2000
      Notes to Consolidated Financial Statements
      Quarterly Results of Operations (Unaudited) for each of the years in the
         two year period ended June 30, 2000

      The remaining information appearing in the 2000 Annual Report is not
deemed to be filed as a part of this report, except as expressly provided
herein.

  2. Financial Statement Schedules

   Financial Statement Schedules have been omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or Notes thereto.

(b) Reports on Form 8-K filed during the quarter ended June 30, 2000

      On  April  6,  2000, the Company filed  a  Current  Report  on  Form  8-K
      regarding the issuance  of its preliminary earnings for the quarter
      ended March 31, 2000.

      On April 12, 2000,  the  Company  filed  a  Current  Report  on  Form 8-K
      regarding the issuance of $25.0 million in subordinated notes.

(c)  Exhibits  Required  by  Item  601  of  Securities  and Exchange Commission
Regulation S-K:

EXHIBIT
NUMBER
- ------------
3.1      Certificate of Incorporation of Dime Community Bancshares, Inc.(1)

                                      -38-

3.2      Bylaws of Dime Community Bancshares, Inc. (1)
4.1      Certificate of Incorporation of Dime Community Bancshares, Inc. (See
            Exhibit 3.1 hereto).
4.2      Bylaws of Dime Community Bancshares, Inc. (See Exhibit 3.2 hereto).
4.3      Draft Stock Certificate of Dime Community Bancshares, Inc.  (1)
4.4      Certificate of Designations, Preferences and Rights of Series A Junior
            Participating Preferred Stock (2)
4.5      Rights Agreement, dated as of April 9, 1998, between Dime Community
            Bancorp, Inc. and ChaseMellon  Shareholder Services, L.L.C., as
            Rights Agent (2)
4.6      Form of Rights Certificate (2)
10.1     Agreement and Plan of Merger, dated as of July 18, 1998, by and
            between Dime Community Bancshares, Inc. and Financial Bancorp,
            Inc.(3)
10.2     Amended and Restated Employment Agreement between The Dime Savings
         Bank of Williamsburgh and Vincent F. Palagiano (4)
10.3     Amended and Restated Employment Agreement between The Dime Savings
         Bank of Williamsburgh and Michael P. Devine (4)
10.4     Amended and Restated Employment Agreement between The Dime Savings
         Bank of Williamsburgh and  Kenneth J. Mahon (4)
10.5     Employment Agreement between Dime Community Bancorp, Inc. and Vincent
            F. Palagiano (4)
10.6     Employment Agreement between Dime Community Bancorp, Inc. and Michael
            P. Devine (4)
10.7     Employment Agreement between Dime Community Bancorp, Inc. and
            Kenneth J. Mahon (4)
10.8     Form of Employee Retention Agreements by and among The Dime Savings
            Bank of Williamsburgh, Dime Community Bancorp, Inc. and certain
            executive officers (4)
10.9     The Benefit Maintenance Plan of Dime Community Bancorp, Inc. (5)
10.10    Severance Pay Plan of The Dime Savings Bank of Williamsburgh (4)
10.11    Retirement Plan for Board Members of Dime Community Bancorp, Inc. (5)
10.12    Dime Community Bancorp, Inc. Stock Option Plan for Outside Directors ,
            Officers and Employees, as amended by amendments number 1 and 2.(5)
10.13    Recognition and Retention Plan for Outside Directors, Officers and
            Employees of Dime Community Bancorp, Inc., as amended by amendments
            number 1 and 2. (5)
10.14    Form of stock option agreement for Outside Directors under Dime
         Community Bancorp, Inc. 1996 Stock Option Plan for Outside Directors,
            Officers and Employees. (5)
10.15    Form of stock option agreement for officers and employees under Dime
            Community Bancorp, Inc. 1996 Stock Option Plan for Outside
            Directors,Officers and Employees (5)
10.16    Form of award notice for outside directors under the Recognition and
            Retention Plan for Outside Directors, Officers and Employees of
            Dime Community Bancorp, Inc. (5)
10.17    Form of award notice for officers and employees under the Recognition
            and Retention Plan for Outside Directors, Officers and Employees
            of  Dime Community Bancorp, Inc. (5)
10.18    Financial Federal Savings Bank Incentive Savings Plan in RSI
            Retirement Trust.
10.19    Financial Federal Savings Bank Employee Stock Ownership Plan.
10.20    Option Conversion Certificates between Dime Community Bancshares, Inc.
            and each of Messrs: Russo, Segrete, Calamari, Latawiec, O'Gorman,
            and Ms. Swaya pursuant to Section 1.6(b) of the Agreement and Plan
            of Merger, dated as of July 18, 1998 by and between Dime Community
            Bancshares, Inc. and Financial Bancorp, Inc.
11.0     Statement Re:  Computation of Per Share Earnings
13.1     2000 Annual Report to Shareholders
21.1     Subsidiaries of the Registrant
27.1     Financial Data Schedule (EDGAR filing only)

(1) Incorporated by reference to the registrant's Annual Report of Form 10K for
   the fiscal year ended June 30, 1998, and filed on September 28, 1998.

(2) Incorporated by reference to the registrant's Current  Report  on  Form 8-K
   dated April 9, 1998, and filed on April 16, 1998.

(3)  Incorporated by reference to the registrant's Current Report on Form  8-K,
   dated  July  18,  1998,  and filed on July 20, 1998, and amended in July 27,
   1998.

                                      -39-

(4) Incorporated by reference to Exhibits to the Annual Report on Form 10-K for
   the fiscal year ended June 30, 1997 and filed on September 26, 1997.

(5) Incorporated by reference to the registrant's Annual Report of Form 10K for
   the fiscal year ended June 30, 1997, and filed on September 26, 1997.

(6) Incorporated by reference  to  the registrant's Current Report on Form 8-K,
   dated July 18, 1998, and filed on  July  20,  1998,  and amended in July 27,
   1998.

                                      -40-

SIGNATURES

   Pursuant to the requirements of Section 13 or 15 of the  Securities Exchange
Act of 1934, as amended, the Registrant certifies that it has  duly caused this
report  to  be  signed  on  its  behalf  by  the  undersigned,  thereunto  duly
authorized, in the City of New York, State of New York, on September 28, 2000.

                  Dime Community Bancshares, Inc.

               By:   /S/ VINCENT F. PALAGIANO
                    Vincent F. Palagiano
                    Chairman of the Board and Chief Executive Officer

   Pursuant  to  the  requirements of the Securities Exchange Act of  1934,  as
amended, this report has been signed by the following persons in the capacities
and on the dates indicated.

               NAME                               TITLE                           DATE

/S/ VINCENT F. PALAGIANO
Vincent F. Palagiano                Chairman of the Board and Chief        September 28, 2000
                                    Executive Officer (Principal
                                    executive officer)
/S/ MICHAEL P. DEVINE
Michael P. Devine                   President and Chief Operating          September 28, 2000
                                    Officer and Director
/S/ KENNETH J. MAHON
Kenneth J. Mahon                    Executive Vice President, and          September 28, 2000
                                    Chief Financial Officer
                                    (Principal financial officer)
/S/ ANTHONY BERGAMO
Anthony Bergamo                     Director                               September 28, 2000
/S/ GEORGE L. CLARK, JR.
George L. Clark, Jr.                Director                               September 28, 2000
/S/ STEVEN D. COHN
Steven D. Cohn                      Director                               September 28, 2000
/S/ PATRICK E. CURTIN
Patrick E. Curtin                   Director                               September 28, 2000

                                      -40-

                                                               
/S/ JOSEPH H. FARRELL               Director                               September 28, 2000
Joseph H. Farrell
/S/ FRED P. FEHRENBACH
Fred P. Fehrenbach                  Director                               September 28, 2000
/S/ JOHN J. FLYNN
John J. Flynn                       Director                               September 28, 2000
/S/ MALCOLM T. KITSON
Malcolm T. Kitson                   Director                               September 28, 2000
/S/ STANLEY MEISELS
Stanley Meisels                     Director                               September 28, 2000
/S/ LOUIS V. VARONE
Louis V. Varone                     Director                               September 28, 2000

                                      -41-

                      DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
                   STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
                                      (In Thousands)

                                                                                               
Fiscal Year Ended June 30,                                                2000                 1999           1998
- ------------------------------------------------------------------------------------------------------------------
NUMERATOR:
Net Income                                                             $22,374              $19,861        $13,098
- ------------------------------------------------------------------------------------------------------------------
DENOMINATOR:
Average shares outstanding utilized in the calculation of
   basic earnings per share                                             11,256               10,951         11,001
- ------------------------------------------------------------------------------------------------------------------
Unvested shares of Recognition and Retention Plan                          268                  372            517
Common stock equivalents due to the dilutive effect of
   stock options                                                           252                  528            523
- ------------------------------------------------------------------------------------------------------------------
Average shares outstanding utilized in the calculation of
   diluted earnings per share                                           11,796               11,851         12,041
- ------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
BASIC                                                                    $1.98                $1.81          $1.19
- ------------------------------------------------------------------------------------------------------------------
DILUTED                                                                  $1.90                $1.68          $1.09
- ------------------------------------------------------------------------------------------------------------------

                             FINANCIAL HIGHLIGHTS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Our consolidated financial and other data set forth below is derived in part
from, and should be read in conjunction with our Consolidated Financial
Statements and Notes thereto.  Our earnings per share information for the
fiscal year ended June 30, 1996 is not meaningful since the sale of our common
stock and acquisition of Conestoga Bancorp, Inc. occurred on June 26, 1996.  We
acquired Financial Bancorp, Inc. on January 21, 1999.  Certain amounts as of
and for the years ended June 30, 1999, 1998, 1997 and 1996 have been
reclassified to conform to their June 30, 2000 presentation.

                                                                                                  
  At or for the fiscal years ended June 30,               2000             1999            1998             1997          1996
- -------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL CONDITION DATA :
Total assets                                        $2,502,139       $2,247,615      $1,623,926       $1,315,026     $1,371,821
Loans, net                                       1,706,515        1,368,260         938,046          739,858        575,874
Mortgage-backed securities                             442,690          525,667         410,589          308,525        209,941
Investment securities                              181,033          206,611         174,551          168,596        392,450
Federal funds sold and other short-term                  9,449           11,011           9,329           18,902        115,130
investments
Goodwill                                                60,254           64,871          24,028           26,433         28,438
Deposits                                             1,219,148        1,238,933       1,034,085          963,395        950,114
Borrowings                                           1,014,027          731,660         360,106          139,543         27,708
Stockholders' equity                                   207,169          211,695         186,349          190,889        213,071
Tangible Stockholders' equity                          149,464          145,562         159,558          162,361        184,188
SELECTED OPERATING DATA:
Interest income                                       $165,623         $135,390        $107,127          $89,533        $52,952
Interest expense on deposits and
       borrowings                                       98,820           77,219          56,935           41,564         23,516
Net interest income                                     66,803           58,171          50,192           47,969         29,436
Provision for losses                                       240              240           1,635            4,200          2,979
Net interest income after provision for
       loan losses                                      66,563           57,931          48,557           43,769         26,457
Non-interest income                                      5,043            6,438           6,344            3,630          1,042
Non-interest expense                                34,015           30,493          29,937           27,492         14,021
Income before income tax expense and
       cumulative effect of changes in
       accounting principle                             37,591           33,876          24,964           19,907         13,478
Income tax expense                                  15,217           14,015          11,866            7,591          6,181
Income before cumulative effect of
       changes in accounting principle                  22,374           19,861          13,098           12,316          7,297
Cumulative effect on prior years of
       changing to a different method of
       accounting for postretirement benefits
       other than than pensions :                       -                -               -                -          (1,032)
       Net income                                  $22,374          $19,861         $13,098          $12,316         $6,265
SELECTED FINANCIAL RATIOS AND OTHER DATA :
FINANCIAL AND PERFORMANCE RATIOS:
   Return on average assets                       0.93%            1.02%           0.90%            1.00%          1.07%
   Return on average stockholders' equity        10.65            10.34            7.06             5.94           9.07
   Stockholders' equity to total assets
         at end of period                                 8.28             9.42           11.48            14.52          15.53
   Tangible equity to tangible assets at end of
         period                                           6.11             6.67            9.99            12.62          13.72
   Loans to deposits at end of period                   141.18           111.66           91.88            77.91          61.43
   Loans to earning assets at the end of the period      73.10            65.05           61.51            60.21          46.21
   Average interest rate spread                       2.48             2.61            2.97             3.37           3.85
   Net interest margin                               2.91             3.11            3.58             4.09           4.43
   Average interest earning assets to average
         interest bearing liabilities                   110.04           112.33          115.13           120.13         116.53
   Non-interest expense to average assets             1.41             1.57            2.05             2.24           2.06
   Core non-interest expense to average assets       1.24             1.37            1.73             1.87           2.06
   Efficiency ratio                             46.33            47.84           56.09            54.32          45.98
   Core efficiency ratio                       40.77            41.96           47.39            45.55          45.98
   Effective tax rate                                    40.48            41.37           47.53            38.13          45.86
   Dividend payout ratio                                 34.74            30.36           21.10             0.05           N/A
PER SHARE DATA:
   Diluted Earnings per share                        $1.90            $1.68           $1.09            $0.95           N/A
   Cash dividends per share                               0.66             0.51            0.23            0.045           $-
   Book value per share                                  17.76            16.57           15.30            14.58          14.65
   Tangible book value per share                         12.81            11.39           13.10            12.40          12.66

                                      -1-

                                                                                                  
  DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA             2000             1999            1998             1997          1996
- -------------------------------------------------------------------------------------------------------------------------------
CASH EARNINGS INFORMATION:
   Cash earnings                                       $31,911          $28,124         $20,944          $17,847         $6,472
   Diluted cash earnings per share                   2.71             2.37            1.75             1.37           N/A
   Cash return on average assets                 1.33%            1.45%           1.44%            1.45%          1.10%
   Cash return on average
         stockholders' equity                   15.19            14.65           11.29             8.61           9.32
   Cash non-interest expense to average assets       1.07             1.14            1.41             1.63           2.03
   Cash efficiency ratio                       35.19            34.88           38.46            39.51          45.30
ASSET QUALITY RATIOS AND OTHER DATA:
   Net charge-offs                                        $536             $201            $286           $1,286         $1,009
   Total non-performing loans                            4,421            3,001             884            3,190          6,551
   Other real estate owned, net                            381              866             825            1,697          1,946
      Ratios:
        Non-performing loans to total loans               0.26%            0.22%           0.09%            0.43%          1.12%
        Non-performing loans and real estate
              owned to total assets                       0.19             0.17            0.11             0.37           0.62
ALLOWANCE FOR LOAN LOSSES TO:
        Non-performing loans                            334.43%          502.53%       1,365.95%          336.24%        119.25%
        Total loans                                  0.86             1.09            1.27             1.43           1.34
REGULATORY CAPITAL RATIOS: (Bank only)
   Tangible capital                                       5.76%            5.83%           8.32%            9.86%          9.49%
   Core capital                                           5.76             5.83            8.32             9.87           9.50
   Risk-based capital                                    11.62            11.45           16.58            19.99          21.24
Earnings to Fixed Charges Ratios :
Including interest on deposits                            1.38X            1.44x           1.44x            1.48x          1.57x
Excluding interest on deposits                            1.70             2.03            2.79             7.59          14.37
FULL SERVICE BRANCHES                                       18               19              14               15             15

 Loans, net, represents gross loans less net deferred loan fees and
     allowance for loan losses.

 Amount includes investment in Federal Home Loan Bank of New York capital
    stock.

 Excluding a non-recurring charge of $2.0 million related to the
   recapitalization of the Savings Association Insurance Fund (referred to as
   SAIF) of the Federal Deposit Insurance Corporation, non-interest expense was
   $25.5 million during the year ended June 30, 1997.

 Excluding non-recurring New York State and New York City income tax
   recoveries of $1.9 million and $1.0 million, respectively, income tax
   expense was $10.5 million during the fiscal year ended June 30, 1997.

 We adopted Statement of Financial Accounting Standards No. 106,
   ''Employers' Accounting for Postretirement Benefits Other Than Pensions''
   effective July 1, 1995. We elected to record the full accumulated post
   retirement benefit obligation upon adoption. This resulted in a cumulative
   effect adjustment of $1,032,000 (after reduction for income taxes of
   $879,000) to apply retroactively to previous years the new method of
   accounting, which is shown in the consolidated statement of income for the
   year ended June 30, 1996.

 Excluding a non-recurring charge of $2.0 million relating to the
    recapitalization of the SAIF and the recovery of New York State and City
    deferred income taxes previously provided, net income would have been $10.5
    million, and the return on average assets, return on average stockholders'
    equity, return on average tangible stockholders' equity, non-interest
    expense to average assets, the efficiency ratio, and earnings per share
    would have been 0.86%, 5.08%, 5.85%, 2.07%, 50.30% and $0.81, respectively,
    for the year ended June 30, 1997.

 With the exception of end of period ratios, all ratios are based on average
    daily balances during the indicated periods. Asset Quality Ratios and
    Regulatory Capital Ratios are end of period ratios.

 Income before cumulative effect of changes in accounting principles is used
    to calculate return on average assets and return on average equity ratios.

 Average interest rate spread represents the difference between the
    weighted-average yield on interest-earning assets and the weighted-average
    cost of interest-bearing liabilities.

 The net interest margin represents net interest income as a percentage of
    average interest-earning assets.

 The efficiency ratio represents non-interest expense as a percentage of
    the sum of net interest income and non-interest income, excluding any gains
    or losses on sales of assets.

 In calculating these ratios, amortization expense related to goodwill and
    the SAIF recapitalization charge are excluded from non-interest expense.

 In calculating these ratios, non-interest expense excludes expenses such
    as goodwill amortization and compensation expense related to our s stock
    benefit plans which are accretive to book value.  Excluding the effects of
    the SAIF Special Assessment and the recovery of New York State and City
    deferred income taxes previously provided, cash return on average assets,
    cash return on average stockholders' equity, cash return on average
    tangible stockholders' equity, and cash earnings per share would have been
    1.31%, 7.75%, 8.92%, and $1.24 for the year ended June 30, 1997.

 Total loans represents loans, net, plus the allowance for loan losses.

 For purposes of computing the ratios of earnings to fixed charges,
    earnings represent income before taxes, extraordinary item and cumulative
    effect of accounting changes plus fixed charges.  Fixed charges represent
    total interest expense, including and excluding interest on deposits.

                                      -2-

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

Dime Community Bancshares, Inc.'s (hereafter referred to as the "Company," "us"
and "we") primary business is the operation of its wholly owned subsidiary, The
Dime Savings Bank of Williamsburgh (hereafter referred to as the "Bank").

Our principal business has been, and continues to be, gathering deposits from
customers within our market area, and investing those deposits primarily in
multi-family and one-to-four family residential mortgage loans, mortgage-backed
securities, and obligations of the U.S. Government and Government Sponsored
Entities. Our revenues are derived principally from interest on loan and
securities portfolios. Our primary sources of funds are: deposits; loan
amortization, prepayments and maturities; amortization, prepayments and
maturities of mortgage-backed and investment securities; borrowed funds; and,
to a lesser extent, occasional sales of investments and mortgage-backed
securities.

Our consolidated results of operations are dependent primarily on net interest
income, which is the difference between the interest income earned on our
interest-earning assets, such as loans and securities, and the interest expense
paid on our interest-bearing liabilities, such as deposits. We also generate
non-interest income such as service charges and other fees. Our non-interest
expenses primarily consist of employee compensation and benefits, occupancy
expenses, federal deposit insurance premiums, net costs of other real estate
owned, data processing fees, amortization of goodwill associated with purchase
acquisition accounting and other operating expenses. Our results of operations
are also significantly affected by general economic and competitive conditions
(particularly changes in market interest rates), government policies, changes
in accounting standards and actions of regulatory agencies.

MANAGEMENT STRATEGY

Our primary strategy is to increase our household and deposit market shares in
the communities we serve, either through acquisitions or purchases of deposits,
or by direct marketing, and to increase our product and service utilization for
each individual depositor.  In addition, our primary strategy includes the
origination of, and investment in, mortgage loans, with an emphasis on multi-
family loans. Multi-family lending is a significant business for us and
reflects the fact that much of the housing in our primary lending area is
multi-family housing. We also strive to provide a stable source of liquidity
and earnings through the purchase of investment grade securities; seek to
maintain our asset quality for loans and other investments; and use appropriate
portfolio and asset/liability management techniques in an effort to manage the
effects of interest rate volatility on our profitability and capital.

LOAN ORIGINATIONS WITH AN EMPHASIS ON MULTI-FAMILY LENDING.  We believe that
multi-family loans provide advantages as portfolio investments. First, they
provide a higher yield than single-family loans or investment securities of
comparable maturities or terms to repricing. Second, our market area generally
has provided a stable flow of new and refinanced multi-family loan
originations. In addition to our emphasis on multi-family lending, we will
continue to market and originate residential first mortgage loans secured
primarily by owner-occupied, one-to-four family residences, including
condominiums and cooperative apartments. Third, origination and processing
costs for our multi-family loans are lower per thousand dollars of originations
than comparable single-family costs. In addition, to address the higher credit
risk associated with multi-family lending, we have developed what we believe
are reliable underwriting standards for loan applications in order to maintain
a consistent credit quality for new loans.

FRANCHISE EXPANSION. On January 21, 1999, we completed the acquisition of
Financial Bancorp, Inc. (hereafter referred to as "FIBC"), the holding company
for Financial Federal Savings Bank, F.S.B. (hereafter referred to as the "FIBC
Acquisition").  The total consideration paid to FIBC stockholders, in the form
of cash or our common stock, was $66.8 million and was comprised of $34.5
million in cash and 1,504,704 shares of our common stock.  Our operating
results for the fiscal year ended June 30, 1999 reflect the addition of
earnings from the acquisition of FIBC for the period January 22, 1999 through
June 30, 1999. The FIBC Acquisition was accounted for as a purchase
transaction.

On June 26, 1996, we completed the acquisition of Conestoga Bancorp, Inc.
(hereafter referred to as "Conestoga") resulting in the merger of Conestoga's
wholly owned subsidiary, Pioneer Savings Bank, F.S.B. (hereafter referred to as
the "Conestoga Acquisition"). The Conestoga Acquisition was accounted for in
the financial statements using the purchase method of accounting. Shareholders
of Conestoga were paid approximately $101.3 million in cash. Since the
Conestoga Acquisition occurred on June 26, 1996, its impact upon our
consolidated results of operations for the fiscal year ended June 30, 1996 was
minimal.
                                      -3-

We continue to evaluate acquisition and other growth opportunities as they
become available. Additionally, we plan to supplement this strategy with direct
marketing efforts designed to increase customer household and/or deposit
balances and the number of our services used per household among our existing
customers.

CAPITAL LEVERAGE STRATEGY.  As a result of the initial public offering in June
1996, our capital level significantly exceeded all regulatory requirements. A
portion of the "excess" capital generated by the initial public offering has
been deployed through the use of a capital leverage strategy whereby we invest
in high quality mortgage-backed securities ("leverage assets") funded by short-
term borrowings from various third party lenders. The capital leverage strategy
generates additional earnings for us by virtue of a positive interest rate
spread between the yield on the leverage assets and the cost of the borrowings.
Since the average term to maturity of the leverage assets exceeds that of the
borrowings used to fund their purchase, the net interest income earned on the
leverage strategy would be expected to decline in a rising interest rate
environment.  See "Discussion of Market Risk."  To date, the capital leverage
strategy has been undertaken in accordance with limits established by the Board
of Directors, aimed at enhancing profitability under moderate levels of
interest rate exposure. The assets under the capital leverage program
approximate $445.8 million, $489.6 million and $282.9 million, respectively, at
June 30, 2000, 1999 and 1998.  During the fiscal year ended June 30, 2000, we
reduced our level of new capital leverage strategy activity in response to
reduced pre-tax interest rate spreads on these transactions.

In addition to the capital leverage strategy, we undertook additional medium-
term borrowings of $305.0 million, $146.5 million and $40.3 million from the
Federal Home Loan Bank of New York (referred to as the FHLBNY) during the years
ended June 30, 2000, 1999 and 1998 in order to fund multi-family and underlying
cooperative loan originations and other operations. We earn a net interest rate
spread between the yield on the multi-family and underlying cooperative loans
and the cost of the borrowings. In addition, the medium-term
maturities on a portion of the underlying borrowings have helped us
reduce our exposure to interest rate risk.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of funds are deposits, proceeds from principal and interest
payments on loans, mortgage-backed securities and investments, borrowings, and,
to a lesser extent, proceeds from the occasional sale of investment and
mortgage-backed securities.  While maturities and scheduled amortization of
loans and investments are a predictable source of funds, deposit flows,
mortgage prepayments and securities sales are influenced by interest rates,
economic conditions and competition.

Our primary investing activities are the origination of multi-family and
single-family mortgage loans, and the purchase of mortgage-backed and other
securities. During the year ended June 30, 2000, we originated $495.4 million
in total loans, compared to $478.1 million during the year ended June 30, 1999.
Purchases of mortgage-backed and other securities totaled $219.7 million for
the year ended June 30, 2000 compared to $410.4 million for the year ended June
30, 1999, as a reduction in the level of additional capital leverage
transactions during the fiscal year ended June 30, 2000, resulted in a
reduction in mortgage-backed securities purchases.  These activities were
funded primarily by principal repayments on loans and mortgage-backed
securities, maturities of investment securities, and borrowings by means of
repurchase agreements and FHLBNY Advances. Principal repayments on real estate
loans and mortgage-backed securities totaled $235.7 million during the year
ended June 30, 2000, compared to $315.6 million for the year ended June 30,
1999.  Maturities of investment securities totaled $136.1 million during the
fiscal year ended June 30, 2000, and $90.8 million during the fiscal year ended
June 30, 1999.  Loan and security sales, which totaled $108.3 million and $16.9
million during the fiscal years ended June 30, 2000 and 1999, provided
additional cash flows.  The increase in sales activity during the year ended
June 30, 2000, reflected a re-positioning of our investment and mortgage-backed
securities portfolios to create a closer interest rate repricing match between
these assets and their underlying liabilities.  This increase also
reflected added sales activity during the quarter ended December 31, 1999,
intended to increase our overall liquidity at December 31, 1999 due to
potential customer liquidity concerns regarding the Year 2000 computer
concerns.  See "Discussion of Market Risk."

Deposits decreased $19.8 million during the year ended June 30, 2000.  This
decrease in deposits primarily reflects the sale of $18.0 million of deposits
formerly housed at our Gates Avenue, Brooklyn branch in November, 1999.  The
deposit decline during the fiscal year ended June 30, 2000 also reflects runoff
of maturing higher cost certificates of deposits gathered during deposit rate
promotions which occurred and ended during the fiscal year ended June 30, 1998.
Deposits increased $204.8 million during the fiscal year ended June 30, 1999,
due primarily to the acquisition of $230.7 million in deposits from FIBC.
Deposit flows are affected by the level of interest rates, the interest rates
and products offered by local competitors, and other factors. Certificates of
deposit scheduled to mature in one year or less from June 30, 2000,

                                      -4-

totaled $414.9 million.  Based upon our current pricing strategy and deposit
retention experience, we believe that we will retain a significant portion of
such deposits.  Net borrowings increased $257.4 million during the fiscal year
ended June 30, 2000, with all of the growth occurring in medium-term FHLBNY
advances, which were utilized to fund loan originations during the period.
Borrowings increased $371.6 million during the fiscal year ended June 30,
1999, with the majority of this growth experienced in securities sold under
agreement to repurchase ("Repo Borrowings"), consistent with our capital
leverage strategy.

Stockholders'  equity  decreased $4.5 million during the fiscal year ended June
30, 2000. This decrease  resulted  primarily  from  repurchases of common stock
into treasury of $19.3 million, cash dividends paid of  $7.7 million during the
period  and  an increase in the accumulated other comprehensive  loss  of  $3.0
million related  to  the  decline  in  market  value of investment and mortgage
backed  securities available for sale.  Offsetting  these  decreases,  was  net
income of  $22.4  million  and stock benefit plan amortization of $4.1 million,
related to vesting of shares in our ESOP and RRP benefit plans.

During the year ended June 30,  2000, we paid four cash dividends totaling $7.7
million, or $0.66 per outstanding  common  share  on  the  respective  dates of
record, compared to $5.9 million, or $0.51 per outstanding common share  on the
respective dates of record during the fiscal year ended June 30, 1999.  On July
20,  2000,  we  declared  a  cash  dividend  of  $0.19  per common share to all
shareholders of record on July 28, 2000. This dividend was  paid  on  August 8,
2000.

In  addition,  in  April,  2000,  we issued $25.0 million in subordinated notes
payable, with a stated annual coupon  rate  of  9.25%.   The  proceeds  of  the
issuance  are  intended  to  fund  general  corporate activities including cash
dividend  payments  and  stock repurchases.  However,  the  provisions  of  the
issuance require that we first  meet  the  interest  obligation on these notes,
which  approximates  $2.3  million  annually,  prior to our  authorization  and
payment of common stock cash dividends.

As of June 30, 2000, we had 133,858 shares remaining  to  be  repurchased under
our sixth stock repurchase program, which was initiated in April, 2000. On July
20,  2000,  we  authorized a Seventh Repurchase Program, which allows  for  the
repurchase of up  to  an  additional  576,516  shares of our common stock.  All
shares acquired for the Sixth and Seventh Repurchase Programs will be purchased
in  open  market  or privately negotiated transactions  at  the  discretion  of
management and placed  into treasury.  No deadline has been established for the
completion of the Sixth or Seventh Repurchase Programs.  Based upon the closing
market price of $16.25 per  share  for our common stock as of June 30, 2000, we
would utilize approximately $11.5 million  in  funds in order to repurchase all
of  the  remaining  authorized shares under the Sixth  and  Seventh  Repurchase
Program.

The Bank is required to maintain a minimum average daily balance of liquid
assets as a percentage of net withdrawable deposit accounts plus short-term
borrowings by Office of Thrift Supervision ("OTS") regulations. The minimum
required liquidity ratio is currently 4.0%. At June 30, 2000, the Bank's
liquidity ratio was 12.07%. The levels of the Bank's short-term liquid assets
are dependent on its operating, financing and investing activities during any
given period.

The Bank monitors its liquidity position on a daily basis. Excess short-term
liquidity is invested in overnight federal funds sales and various money market
investments. In the event that it should require funds beyond its ability to
generate them internally, additional sources of funds are available through the
use of the Bank's $724.8 million borrowing limit at the FHLBNY. At June 30,
2000, the Bank had $572.5 million in short- and medium-term advances
outstanding at the FHLBNY.

The Bank is also subject to minimum regulatory capital requirements imposed by
the OTS, which, as a general matter, are based on the amount and composition of
its assets. At June 30, 2000, the Bank was in compliance with all applicable
regulatory capital requirements. Tangible capital totaled $136.8 million, or
5.76% of total tangible assets, compared to a 1.50% regulatory requirement;
leverage capital, at 5.76% of adjusted assets, exceeded the required 4.0%
regulatory minimum, and total risk-based capital, at 11.62% of risk weighted
assets, exceeded the 8.0% regulatory minimum. In addition, at June 30, 2000,
the Bank was considered "well-capitalized" for all regulatory purposes.

DISCUSSION OF MARKET RISK

As a financial institution, our primary component of market risk is interest
rate volatility. Fluctuations in interest rates will ultimately impact both the
level of income and expense recorded on a large portion of our assets and
liabilities, and the market value of all interest-earning assets, other than
those which possess a short term to maturity. During the years ended June 30,
2000, 1999 and 1998, we operated under a challenging interest rate
environment, which features little difference between rates offered on short-
term and long-term investments. Under this "flat yield curve environment,"
financial institutions often experience both increased interest rate
competition related to loan originations, and above-average prepayment
activities related to mortgage-backed investments, both of which adversely
impact long-term

                                      -5-

profitability. The flat yield curve environment experienced during the 1998,
1999 and 2000 fiscal years was a primary factor in the continued reduction of
our interest rate spread.

Since a substantial majority of our interest-earning assets and interest-
bearing liabilities are located at the Bank, virtually all of our interest rate
risk exposure lies at the Bank level.  As a result, all of our significant
interest rate risk procedures are performed at the Bank level.  Based upon our
nature of operations, we are not subject to foreign currency exchange or
commodity price risk. Our real estate loan portfolio, concentrated primarily
within New York City, is subject to risks associated with the local economy.
See "Asset Quality."  In addition, we do not own any trading assets, nor did we
engage in any hedging transactions utilizing derivative instruments (such as
interest rate swaps and caps) during the fiscal year ended June 30, 2000, and
did not have any such hedging transactions in place at June 30, 2000. In the
future, we may, with Board approval, engage in hedging transactions utilizing
derivative instruments.

Our interest rate risk management strategy is designed to stabilize net
interest income and preserve capital over a broad range of interest rate
movements and has three primary components:

ASSETS.  Our largest single asset type is the adjustable-rate multi-family
real estate loan.  Multi-family loans typically carry a shorter average
term to maturity than one-to-four family residential loans, thus
significantly reducing the overall level of interest rate risk.
Approximately 84.5% of multi-family loans originated during the year ended June
30, 2000, were adjustable rate, with repricing typically occurring after five
or seven years, compared to 75% during the previous year. In addition, we have
sought to include various types of adjustable-rate single-family (including
cooperative apartment) whole loans and adjustable and floating-rate investment
securities in our portfolio, which generally have repricing terms of three
years or less. At June 30, 2000, adjustable-rate whole loans totaled $1.21
billion, or 48.2% of total assets, and adjustable-rate investment securities
(CMO's, REMIC's, mortgage-backed securities issued by GSEs and other
securities) totaled $148.9 million, or 6.0% of total assets. At June 30, 1999,
adjustable-rate whole loans totaled $821.3 million, or 36.5% of total assets,
and adjustable-rate securities totaled $149.3 million, or 6.6% of total assets.

DEPOSIT LIABILITIES.  As a traditional community-based savings bank we are
largely dependent upon our base of competitively priced core deposits
(consisting of all deposits except certificates of deposit) to provide
stability on the liability side of the balance sheet.  We have retained many
loyal customers over the years through a combination of quality service,
convenience, and a stable and experienced staff. Core deposits, at June 30,
2000, were $601.0 million, or 49.3% of total deposits. The balance of
certificates of deposit as of June 30, 2000 was $618.2 million, or 50.7% of
total deposits, of which $414.9 million, or 67.1% mature within one year.
Depending on market conditions, we generally price our certificates of
deposit in an effort to encourage the extension of the average maturities
of deposit liabilities beyond one year. During the fiscal years ended
June 30, 2000 and 1999, we experienced significant runoff in higher-cost
certificate of deposit accounts which related to specific rate promotions
offered in previous periods.  Excluding this decrease, we experienced a
strong retention rate on maturing certificates of deposit during both the
fiscal years ended June 30, 2000 and 1999.

WHOLESALE FUNDS.  In June, 2000, we received approval from our Board to accept
brokered deposits as a source of funds, although we did not accept any such
deposits during the fiscal year ended June 30, 2000.  The Bank is a member of
the FHLBNY which provides it with a borrowing line equal to $724.8 million.
The Bank borrows from the FHLBNY for various purposes. At June 30, 2000, the
Bank had outstanding advances of $572.5 million with the FHLBNY.

GAP ANALYSIS

We actively manage interest rate risk through the use of a simulation model
which measures the sensitivity of future net interest income and the net
portfolio value to changes in interest rates. In addition, we regularly monitor
interest rate sensitivity through GAP Analysis, which measures the terms to
maturity or next repricing date of interest-earning assets and interest-bearing
liabilities.

The following table sets forth the amounts of our consolidated interest-earning
assets and interest-bearing liabilities, outstanding at June 30, 2000, which
are anticipated, based upon certain assumptions, to reprice or mature in each
of the future time periods shown. Except as stated below, the amount of assets
and liabilities shown repricing or maturing during a particular period reflect
the earlier of term to repricing or term to repayment of the asset or
liability. The table is intended to provide an approximation of the projected
repricing of assets and liabilities at June 30, 2000 on the basis of
contractual maturities, anticipated prepayments, and scheduled rate adjustments
within a three-month period and subsequent selected time intervals. For
purposes of presentation in the following table, we utilized our historical
deposit decay rate experience, which for savings accounts was 13% in the one
year or less category. For NOW and Super NOW
                                      -6-

accounts and money market accounts, we utilized the most recent decay rates
published by the OTS, which, in the one year or less category, were 37% and
79%, respectively. The loan amounts in the table reflect principal balances
expected to be redeployed and/or repriced as a result of contractual
amortization and anticipated early payoffs of adjustable- and fixed-rate
loans, and as a result of contractual rate adjustments on adjustable-rate
loans. The amounts attributable to mortgage-backed securities reflect
principal balances expected to be redeployed and/or repriced as a result
of anticipated principal repayments, and as a result of contractual rate
adjustments on adjustable-rate mortgage-backed securities.

                                                                                             
                                                    More than      More than    More than                   Non-
                         3 Months    3 Months      6 Months to     1 Year to    3 Years to    More than    interest
  At June 30, 2000       or Less     to 6 Months     1 Year        3 Years      5 Years  to   5 Years      bearing      Total
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST-EARNING                                              (DOLLARS IN THOUSANDS)
ASSETS 
Mortgages and
   other loans            $53,590       $52,600      $105,200       $353,579      $416,497     $739,835        $-     $1,721,300
Investment
   securities               1,285         3,993        16,131         52,919        47,663       16,619         -        138,610
Mortgage-backed
   securities          66,653        37,879        75,758         57,395        42,795      163,211         -        442,690
Federal funds sold          7,488         1,961            -              -             -            -          -          9,449
FHLB capital stock         42,423            -             -              -             -            -          -         42,423
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest
   earning assets         170,439        96,433       197,088        463,893       506,955      919,665         -      2,354,472
LESS:
Allowance for loan
   losses                      -             -             -              -             -            -     (14,785)      (14,785)
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest-earning
   assets                 170,439        96,433       197,088        463,893       506,955      919,665    (14,785)    2,339,687
Non-interest-earning
   assets                      -             -             -              -             -            -     162,452       162,452
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets             $170,439       $96,433      $197,088       $463,893      $506,955     $919,665   $147,667    $2,502,139
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING
LIABILITIES:
Savings Accounts          $11,933       $12,719       $22,004        $74,992       $57,800     $194,324        $-       $373,772
NOW and Super
   NOW accounts             2,478         2,249         3,893          8,844         2,737        6,586         -         26,787
Money market
   accounts                28,848        23,151        33,487         28,807        15,109       16,664         -        146,066
Certificates of
   Deposit                131,865        99,033       184,040        181,179        21,879          169         -        618,165
Borrowed funds            383,319        80,842        30,132        265,029       109,664      120,041         -        989,027
Subordinated Notes             -             -             -              -             -        25,000         -         25,000
Interest-bearing
   escrow                      -             -             -              -             -         3,392         -          3,392
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-
  bearing liabilities     558,443       217,994       273,556        558,851       207,189      366,176         -      2,182,209
Checking accounts              -             -             -              -             -            -      54,358        54,358
Other non-interest
   bearing
   liabilities                 -             -             -              -             -            -      58,403        58,403
Stockholders' equity           -             -             -              -             -            -     207,169       207,169
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities
   and stockholders'
   equity                $558,443      $217,994      $273,556       $558,851      $207,189     $366,176   $319,930    $2,502,139
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitivity
   gap per period       $(388,005)    $(121,562)     $(76,468)      $(94,958)     $299,766     $553,489         -
- ------------------------------------------------------------------------------------------------------------------
Cumulative interest
   sensitivity gap      $(388,005)    $(509,566)    $(586,034)     $(680,992)    $(381,226)    $172,263         -
- ------------------------------------------------------------------------------------------------------------------
Cumulative interest
   sensitivity gap as
   a percent of
   total assets            (15.51)%      (20.37)%      (23.42)%       (27.22)%      (15.24)%       6.88%        -
Cumulative total
   interest-
   earning assets as
   a percent of
   cumulative
   total interest
   bearing liabilities      30.52%        34.37%        44.19%         57.67%        79.01%      107.89%        -

    Interest-earning assets are included in the period in which the
        balances are expected to be redeployed and/or repriced as result of
        anticipated pre-payments, scheduled rate adjustments, and contractual
        maturities.

    Based upon historical repayment experience.

                                      -7-

Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may not react correspondingly
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate with changes in market interest rates,
while interest rates on other types of assets may lag behind changes in market
rates. Additionally, certain assets, such as adjustable-rate loans, have
features, like annual and lifetime rate caps, which restrict changes in
interest rates both on a short-term basis and over the life of the asset.
Further, in the event of a change in interest rates, prepayment and early
withdrawal levels would likely deviate from those assumed in the table.
Finally, the ability of certain borrowers to make scheduled payments on their
adjustable-rate loans may decrease in the event of an interest rate increase.

Our balance sheet is primarily comprised of assets which mature or reprice
within five years, with a significant portion maturing or repricing within one
year. In addition, our deposit base is comprised primarily of savings accounts,
and certificates of deposit with maturities of three years or less.
At June 30, 2000, our interest-bearing liabilities maturing or repricing within
one year totaled $1.05 billion, while interest-earning assets maturing or
repricing within one year totaled $464.0 million, resulting in a negative one-
year interest sensitivity gap of $586.0 million, or 23.4% of total assets. The
increase in the level of the negative one-year interest sensitivity gap
resulted from an increase in the proportion of borrowings maturing or callable
within one year or less.  In comparison, at June 30, 1999, we had a negative
one-year interest sensitivity gap of $366.8 million, or 16.3% of total assets.

Under interest rate scenarios other than that which existed on June 30, 2000,
the gap ratio for our assets and liabilities could differ substantially based
upon different assumptions about how core deposit decay rates and loan
prepayments would change. For example, our interest rate risk management model
assumes that in a rising rate scenario, by paying competitive rates on non-core
deposits, a large share of core deposits will transfer to certificates of
deposit and be retained, although at higher cost to us. Also, loan and
mortgage-backed security prepayment rates would be expected to slow, as
borrowers postpone property sales or loan refinancings until rates again
decline.

INTEREST RATE RISK EXPOSURE COMPLIANCE

Increases in the level of interest rates also may adversely affect the fair
value of our securities and other interest earning assets. Generally, the fair
value of fixed-rate instruments fluctuates inversely with changes in interest
rates. As a result, increases in interest rates could result in decreases in
the fair value of our interest-earning assets, which could adversely affect our
results of operations if they were to be sold, or, in the case of interest-
earning assets classified as available for sale, reduce our stockholders'
equity, if retained. Under Generally Accepted Accounting Principles ("GAAP"),
changes in the unrealized gains and losses, net of taxes, on securities
classified as available for sale will be reflected in our stockholders' equity
through other comprehensive income.  As of June 30, 2000, our securities
portfolio included $550.5 million in securities classified as available for
sale, which possess a gross unrealized loss of $11.7 million. Accordingly, due
to the magnitude of our holdings of securities available for sale, changes in
interest rates could produce significant changes in the value of such
securities and could produce significant fluctuations in our stockholders'
equity through other comprehensive income.  We do not own any trading assets.

On a quarterly basis, an interest rate risk exposure compliance report is
prepared and presented to our Board of Directors. This report, prepared in
accordance with Thrift Bulletin #13a issued by the OTS, presents an analysis of
the net portfolio value resulting from an increase or decrease in the level of
interest rates. The calculated estimates of net portfolio value are compared to
current limits established by management and approved by the Board of
Directors. The following is a summary of the Bank's interest rate exposure
report as of June 30, 2000:
                                      -8-

                                     Projected Net Portfolio Value
                                ----------------------------------------
                                                       Calculated as of
                                Limit                  June 30, 2000
- ------------------------------------------------------------------------
Change in Interest Rate
- - 300 Basis Points              7.00%                        11.47%
- - 200 Basis Points              6.50                         11.11
- - 100 Basis Points              6.00                         10.57
Flat Rate                       5.50                          9.56
+ 100 Basis Points              5.00                          8.26
+ 200 Basis Points              4.50                          6.82
+ 300 Basis Points              4.00                          5.30

The model utilized to create the report presented above makes various estimates
at each level of interest rate change regarding cash flows from principal
repayments on loans and mortgage-backed securities and/or call activity on
investment securities. Actual results could differ significantly from these
estimates which would result in significant differences in the calculated
projected change. In addition, the limits stated above do not necessarily
represent the level of change under which we would undertake specific measures
to realign our portfolio in order to reduce the projected level of change.

ASSET QUALITY

Our real estate loan servicing policies and procedures require that we initiate
contact with a delinquent borrower as soon as possible after a payment is ten
days late. Generally, the policy calls for a late notice to be sent ten days
after the due date of the payment. If payment has not been received within 30
days of the due date, a letter is sent to the borrower. Thereafter, periodic
letters and phone calls are placed to the borrower until payment is received.
In addition, our policy calls for the cessation of interest accruals on loans
delinquent 90 days or more. When contact is made with the borrower at any time
prior to foreclosure, we will attempt to obtain the full payment due, or work
out a repayment schedule with the borrower to avoid foreclosure. Generally, we
initiate foreclosure proceedings when a loan is 90 days past due. If a
foreclosure action is instituted and the loan is not brought current, paid in
full, or refinanced before the foreclosure sale, the real estate property
securing the loan is generally either sold at foreclosure or as soon thereafter
as practicable.

Management reviews delinquent loans on a periodic basis and reports monthly to
the Board of Directors regarding the status of all delinquent and non-accrual
loans in our portfolio. We retain outside counsel experienced in foreclosure
and bankruptcy procedures to institute foreclosure and other actions on our
delinquent loans.  As soon as practicable after initiating foreclosure
proceedings on a loan, we prepare an estimate of the fair value of the
underlying collateral. It is also our general policy to dispose of properties
acquired through foreclosure or deeds in lieu thereof as quickly and as
prudently as possible in consideration of market conditions, the physical
condition of the property, and any other mitigating conditions.

Non-performing loans totaled $4.4 million at June 30, 2000, as compared to $3.0
million at June 30, 1999.  The increase in non-performing loans related
primarily to the addition of one multi-family and underlying cooperative loan
with an aggregate principal amount of $1.6 million in June, 2000. We had 25
loans totaling $754,000 delinquent 60-89 days at June 30, 2000, as compared to
23 such delinquent loans totaling $819,000 at June 30, 1999.  Under GAAP, we
are required to account for certain loan modifications or restructurings as
"troubled-debt restructurings.'' In general, the modification or restructuring
of a debt constitutes a troubled-debt restructuring if we, for economic or
legal reasons related to the borrower's financial difficulties, grant a
concession to the borrower that we would not otherwise consider.  We had one
loan classified as troubled-debt restructuring at June 30, 2000, totaling
$700,000, which is on accrual status as it has been performing in accordance
with the restructuring terms for over one year. The current regulations of the
Office of Thrift Supervision require that troubled-debt restructurings remain
classified as such until either the loan is repaid or returns to its original
terms.  We did not have any new troubled-debt restructurings during the fiscal
year ended June 30, 2000. Troubled-debt restructurings totaled $1.3 million at
June 30, 1999, consisting of two loans. One troubled-debt restructuring
totaling $590,000 was paid-in-full during the fiscal year ended June 30, 2000.

                                      -9-

SFAS 114 provides guidelines for determining and measuring impairment in loans.
For each loan that we determine to be impaired, impairment is measured by the
amount the carrying balance of the loan, including all accrued interest,
exceeds the estimate of fair value.  A specific reserve is established within
the allowance for loan losses.  Generally, we consider non-performing loans to
be impaired loans. The recorded investment in loans deemed impaired was
approximately $2.6 million as of June 30, 2000, consisting of three loans,
compared to $1.6 million at June 30, 1999, consisting of six loans.  The
average balance of impaired loans was $1.5 million for the year ended June 30,
2000 compared to $2.3 million for the year ended June 30, 1999. At June 30,
2000, reserves totaling $130,000 have been allocated within the allowance for
loan losses for impaired loans.  At June 30, 2000, $1.8 million of one-to-four
family, cooperative apartment and consumer loans on nonaccrual status are not
deemed impaired. All of these loans have outstanding balances less than
$227,000, and are considered a homogeneous loan pool which are not required
to be evaluated for impairment.  See "Notes to Consolidated Financial
Statements" for a further discussion of impaired loans.

The balance of other real estate owned ("OREO")was $381,000, consisting of 7
properties, at June 30, 2000 compared to $866,000, consisting of 13 properties,
at June 30, 1999. During the year ended June 30, 2000, total additions to OREO
were $429,000. Offsetting these additions, were OREO sales and charge-offs of
$1.0 million during the year ended June 30, 2000.  All charge-offs were
recorded against the allowance for losses on real estate owned, which was
$45,000 as of June 30, 2000.

The following table sets forth information regarding our non-performing loans,
non-performing assets, impaired loans and troubled-debt restructurings at the
dates indicated.

                                                                                                     
At Year Ended June 30,                                         2000            1999            1998            1997          1996
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                    (Dollars In Thousands)
Non-performing loans:
   One-to-four family                                        $1,769          $1,577            $471          $1,123        $1,149
   Multi-family and underlying cooperative                    2,591           1,248             236           1,613         4,734
   Cooperative apartment                                         54             133             133             415           668
   Other                                                          7              43              44              39            -
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-performing loans                                    4,421           3,001             884           3,190         6,551
Other Real Estate Owned                                         381             866             825           1,697         1,946
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-performing assets                                  $4,802          $3,867          $1,709          $4,887        $8,497
=================================================================================================================================
Troubled-debt restructurings                                   $700          $1,290          $3,971          $4,671        $4,671
Total non-performing assets and
   troubled-debt restructurings                              $5,502          $5,157          $5,680          $9,558       $13,168
Impaired loans                                               $2,591          $1,563          $3,136          $4,294        $7,419
RATIOS:
   Total non-performing loans to total loans                   0.26%           0.22%           0.09%           0.43%         1.12%
   Total non-performing loans and troubled-debt
     restructurings to total loans                             0.30            0.31            0.51            1.05          1.92
   Total non-performing assets to total assets                 0.19            0.17            0.11            0.37          0.62
   Total non-performing assets and troubled-
     debt restructurings to total assets                       0.22            0.23            0.35            0.73          0.96

ANALYSIS OF NET INTEREST INCOME

Our profitability, like that of most financial institutions, is dependent to a
large extent upon our net interest income, which is the difference between our
interest income on interest-earning assets, such as loans and securities, and
our interest expense on interest-bearing liabilities, such as deposits and
borrowings. Net interest income depends upon the relative amounts of interest-
earning assets and interest-bearing liabilities and the interest rates earned
or paid on them.

The following table sets forth certain information relating to our consolidated
statements of operations for the years ended June 30, 2000, 1999 and 1998, and
reflects the average yield on assets and average cost of liabilities for the
periods indicated. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods shown. Average balances are derived from average daily balances. The
yields and costs include fees which are considered adjustments to yields.

                                      -10-

For the years ended June 30,          2000                                   1999                                   1998
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                             
                                                   AVERAGE                              Average                            Average
                        AVERAGE                     YIELD/     Average                  Yield/      Average                 Yield/
                        BALANCE       INTEREST      COST       Balance      Interest    Cost        Balance     Interest    Cost
- ----------------------------------------------------------------------------------------------------------------------------------
                                                    (Dollars In Thousands)
ASSETS:
Interest-earning
  assets
Real estate loans     $1,556,202      $118,436        7.61%  $1,158,549       $91,569        7.90%    $837,755      $69,824   8.33%
  
Other loans                7,454           616        8.26        6,433           558        8.67        5,393          487   9.03
Investment
  securities             155,262         9,715        6.26      176,205        10,654        6.05      164,265       10,798   6.57
  
Mortgage-backed
  securities             473,364        30,750        6.50      478,166        29,683        6.21      349,910       23,463   6.71
  Federal funds sold     101,521         6,106        6.01       52,900         2,926        5.53       44,773        1,892   5.32
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-
  earning assets       2,293,803       165,623        7.22    1,872,253      $135,390        7.24%   1,402,096     $106,464   7.65%
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest earning
  assets                 112,700                                 73,625                                 56,775
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets          $2,406,503                             $1,945,878                             $1,458,871
==================================================================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest bearing
  liabilities:
NOW, Super NOW
  and Money market
  accounts              $124,188        $4,409        3.55      $62,463        $1,542        2.47%     $48,556       $1,131   2.33%
Savings accounts         390,498         7,965        2.04      372,050         7,814        2.10      342,762        7,628   2.26
Certificates of
  deposit                642,017        32,662        5.09      648,776        35,061        5.40      594,098       34,174   5.75
Borrowed funds           927,808        53,784        5.80      583,490        32,802        5.62      232,385       13,908   5.98
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-
  bearing
  liabilities          2,084,511        98,820        4.74%   1,666,779       $77,219        4.63%   1,217,801      $56,935   4.68%
- ----------------------------------------------------------------------------------------------------------------------------------
Checking accounts         76,452                                 51,496                                 31,457
Other non-interest-
  bearing liabilities     35,435                                 35,603                                 24,097
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities      2,196,398                              1,753,878                              1,273,355
Stockholders' equity     210,105                                192,000                                185,516
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities
  and stockholders'
  equity              $2,406,503                              1,945,878                             $1,458,871
==================================================================================================================================
Net interest income/
  interest rate
  spread                           $66,803        2.48%                   $58,171        2.61%                  $50,192   2.97%
==================================================================================================================================
Net interest-earning
  assets/net interest
  margin            $209,292                      2.91%    $205,474                      3.11%    $184,295                3.58%
==================================================================================================================================
Ratio of interest-
  earning assets to
  interest-bearing
        liabilities                                 110.04%                                112.33%                          115.13%
==================================================================================================================================

 In computing the average balance of loans, non-accrual loans have been
     included.  Interest income includes loan servicing fees as defined under
     SFAS 91.
 Includes interest bearing deposits in other banks and FHLB stock.
 Net interest rate spread represents the difference between the average
     yield on interest-earning assets and the average cost of interest-bearing
     liabilities.
 Net interest margin represents net interest income as a percentage of
     average interest-earning assets.

                                      -11-

RATE/VOLUME ANALYSIS

Net interest income can also be analyzed in terms of the impact of changing
interest rates on interest-earning assets and interest-bearing liabilities and
changes in the volume or amount of these assets and liabilities. The following
table represents the extent to which changes in interest rates and changes in
the volume of interest-earning assets and interest-bearing liabilities have
affected our interest income and interest expense during the periods indicated.
Information is provided in each category with respect to (i) variances
attributable to changes in volume (change in volume multiplied by prior rate),
(ii) variances attributable to rate (changes in rate multiplied by prior
volume), and (iii) the net change. Variances attributable to the combined
impact of volume and rate have been allocated proportionately to the changes
due to the volume and the changes due to rate.

                                  YEAR ENDED                           Year Ended                         Year Ended
                                JUNE 30, 2000                         June 30, 1999                      June 30, 1998
                                  COMPARED TO                          Compared to                        Compared to
                                  YEAR ENDED                           Year Ended                         Year Ended
                                 JUNE 30, 1999                        June 30, 1998                     June 30, 1997
                              INCREASE/(DECREASE)                  Increase/(Decrease)                Increase/(Decrease)
                                    DUE TO                                Due to                           Due to
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                           
                       VOLUME       RATE        NET           Volume       Rate        Net       Volume       Rate        Net
- ---------------------------------------------------------------------------------------------------------------------------------
                                                       (Dollars in Thousands)
INTEREST-EARNING
ASSETS:
Real estate loans      $30,829     $(3,962)     $26,867      $26,042      $(4,297)   $21,745      $16,466     $(1,607)    $14,859
Other loans                 87         (29)          58           92          (21)        71           (5)         32          27
Investment
  securities            (1,288)        349         (939)         748         (892)      (144)      (3,317)        462      (2,855)
Mortgage-backed
  securities              (309)      1,376        1,067        8,285       (2,065)     6,220        5,973        (215)      5,758
Other                    2,808         373        3,181          458          (87)       371         (199)          4        (195)
- ---------------------------------------------------------------------------------------------------------------------------------
Total                  $32,127     $(1,893)     $30,233      $35,625      $(7,362)   $28,263      $18,918     $(1,324)    $17,594
=================================================================================================================================
INTEREST-BEARING
LIABILITIES:
NOW, Super NOW
  and Money
  market                $1,858      $1,009       $2,867         $333          $78       $411        $(164)      $(109)      $(273)
  accounts
Savings accounts           381        (230)         151          633         (541)        92         (243)       (306)       (549)
Certificates of
  Deposit                 (377)     (2,022)      (2,399)       3,056       (2,169)       887        4,465         840       5,305
Borrowed funds          19,644       1,338       20,982       20,372       (1,478)    18,894       10,558         330      10,888
- ---------------------------------------------------------------------------------------------------------------------------------
Total                   21,506          95       21,601       24,394       (4,110)    20,284       14,616         755      15,371
=================================================================================================================================
Net change in
  net interest
  income               $10,621     $(1,988)      $8,632      $11,231      $(3,252)    $7,979       $4,302     $(2,079)     $2,223
=================================================================================================================================

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2000 AND JUNE 30, 1999

Assets.  Our  assets  totaled  $2.50  billion  at June 30, 2000, an increase of
$254.5 million from total assets of $2.25 billion at June 30, 1999.  The growth
in assets was experienced primarily in real estate loans which increased $338.0
million  since  June  30,  1999.  The increase in real  estate  loans  resulted
largely from real estate loan  originations of $486.4 million during the fiscal
year  ended  June  30, 2000, of which  $453.7  million  were  multi-family  and
underlying cooperative and non-residential real estate loans.

Offsetting the increase  in real estate loans was an aggregate decline of $99.0
million in investment and  mortgage-backed  securities  available  for sale, of
which  $73.5  million  was experienced in mortgage-backed securities available-
for-sale.  The decline in  available  for  sale securities reflects the sale of
$39.9  million of investment securities and $64.9  million  of  mortgage-backed
securities  during  the  fiscal  year  ended  June  30, 2000.  These sales were
utilized  both  to  generate  additional  liquidity at December  31,  1999,  in
response to concerns regarding possible increased deposit outflows attributable
to customer concerns over the Year 2000, and  a  re-positioning  of  assets  in
response to interest rate increases during the fiscal year ended June 30, 2000.
Additionally,  the  decline  in  mortgage-backed  securities available for sale
reflects the reduced level of purchase

                                      -12-

activity for  such securities during the fiscal year ended June 30, 2000, as we
reduced our capital leverage transaction level  during  this  period.
See "Capital Leverage Strategy."   Additionally, investment securities held to
maturity  declined  $14.2  million  and mortgage-backed securities held to
maturity declined $9.5 million during the fiscal year ended June 30, 2000, due
to scheduled principal repayments on these securities.  The proceeds from
payments on these securities were utilized primarily  to fund either  real
estate loan originations or purchases of investment and mortgage-backed
securities  available for sale.  Other assets increased by $34.1 million due
primarily to our  purchase  of  $30.2  million in Bank Owned Life Insurance
premiums for eligible employees in May, 2000.

LIABILITIES. Total liabilities increased $259.1  million during the fiscal year
ended June 30, 2000, due primarily to an increase  in FHLBNY advances of $305.0
million  during  the  period. The increased FHLBNY advances  were  utilized  to
replace deposit outflows  and  fund  real estate loan originations.  Offsetting
the increase in FHLBNY advances were declines  in deposits and Repo borrowings.
The emphasis on FHLBNY advances versus Repo borrowings  reflects  our desire to
manage interest rate risk by more closely matching the maturities of underlying
borrowings  to  their funded assets, primarily real estate loans and  mortgage-
backed securities.   Deposits  decreased $19.8 million to $1.22 billion at June
30, 2000 from $1.24 billion at June  30,  1999,  due  to both the sale of $18.0
million  in deposits formerly housed at our Gates Avenue,  Brooklyn  branch  in
November,  1999,  and  the  cessation  of  a  deposit  rate  promotion  that we
maintained  from  July, 1997 to June, 1998. Repos declined $47.6 million during
the fiscal year ended  June  30,  2000,  due  to our decreased capital leverage
activity during the period. See "Capital Leverage  Strategy."   In addition, in
April,  2000,  we  issued $25.0 million in subordinated notes payable,  with  a
stated annual interest  rate  of 9.25%.  The proceeds of the issuance are being
utilized to fund general corporate  activities including cash dividend payments
and stock repurchases.

STOCKHOLDERS' EQUITY. Stockholders' equity  decreased  $4.5  million during the
fiscal  year  ended  June  30,  2000.  This  decrease  resulted primarily  from
repurchases of common stock into treasury of $19.3 million, cash dividends paid
of  $7.7  million during the period, and an increase in the  accumulated  other
comprehensive  loss  of  $3.0 million.  The increase in the other comprehensive
loss related to the decline  in  market value of investment and mortgage backed
securities available for sale, due  primarily to the general increase in market
interest rates during the past year.  Offsetting these decreases was net income
of $22.4 million and stock benefit plan amortization of $4.1 million related to
vesting of ESOP and RRP benefits during the fiscal year ended June 30, 2000.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1999 AND JUNE 30, 1998

ASSETS.  Our assets totaled $2.25 billion at June 30, 1999, an increase of
$623.7 million from total assets of $1.62 billion at June 30, 1998. The growth
in assets was experienced primarily in real estate loans and mortgage-backed
securities available for sale, which increased $431.6 million and $139.0
million, respectively.

The increase in real estate loans resulted primarily from originations of
$471.5 million during the fiscal year ended June 30, 1999, of which $452.6
million were multi-family and underlying cooperative and non-residential loans.
The increased loan originations resulted from both an active local real estate
market and a continuation of local competition for interest rates on new loan
originations throughout the year. The increase in real estate loans also
resulted from the acquisition of $192.3 million of such loans from FIBC. The
increase in mortgage-backed securities available for sale resulted from
purchases of $263.6 million during the year ended June 30, 1999, primarily
attributable to the capital leverage program, and $37.8 million of mortgage-
backed securities acquired from FIBC. See "Management Strategy." These
purchases were partially offset by principal repayments of $155.6 million on
these securities. Investment securities available for sale and goodwill
increased $58.5 million and $40.8 million due primarily to the acquisition of
$43.5 million in such securities and the addition of $44.2 million in goodwill
from the FIBC acquisition, which is being amortized over a 20-year period.
Offsetting these increases, investment securities and mortgage-backed
securities held-to-maturity declined $46.4 million and $23.9 million,
respectively, as proceeds from sales, calls, maturities and principal
repayments on these securities were utilized to fund loan originations and
purchases of mortgage-backed securities available for sale.

LIABILITIES.  Liabilities increased $598.3 million during the fiscal year ended
June 30, 1999. The largest components of this increase were deposits, FHLBNY
advances and securities sold under agreement to repurchase, which increased
$204.8 million, $146.5 million, and $225.1 million, respectively. The
acquisition of FIBC resulted in the addition of $230.7 million in deposits and
$42.0 million in securities sold under agreements to repurchase. The growth
in FHLBNY advances of $146.5 million during the fiscal year ended June 30,
1999, was

                                      -13-

utilized to fund both loan originations and a significant portion of the cash
consideration related to the FIBC acquisition. The increase in securities sold
under agreement to repurchase of $183.0 million, exclusive of the FIBC
acquisition, was utilized primarily to fund purchases of mortgage-backed
securities available for sale. Deposits, excluding the effects of the FIBC
acquisition, decreased $25.9 million during the fiscal year ended June 30,
1999, due primarily to the cessation of a deposit rate promotion that we
maintained from July 1997 to June 1998.

STOCKHOLDERS' EQUITY. Stockholders' equity increased $25.3 million during the
fiscal year ended June 30, 1999. This increase resulted primarily from the
addition of $34.7 million in equity resulting from the FIBC acquisition and net
income of $19.9 million. Offsetting these increases, were repurchases of common
stock into treasury of $21.2 million and cash dividends paid of $5.9 million,
and a decline of $6.1 million in accumulated other comprehensive income related
to the net unrealized gain or loss on securities available-for-sale.

COMPARISON OF THE OPERATING RESULTS FOR THE FISCAL YEAR ENDED JUNE 30, 2000 AND
1999

GENERAL. Net income increased $2.5 million  to  $22.4 million during the fiscal
year ended June 30, 2000, compared to $19.9 million  during the year ended June
30, 1999.  The increase in net income resulted from increases  of  $8.6 million
in  net  interest  income,  which  was  partially offset by a decrease of  $1.4
million in non-interest income and increases  of  $3.5  million in non-interest
expense and $1.2 million in income tax expense.

NET  INTEREST  INCOME.  Net interest income for the year ended  June  30,  2000
increased $8.6 million  to  $66.8  million  from  $58.2 million during the year
ended June 30, 1999. The increase was attributable  primarily to an increase of
$421.6 million in average interest-earning assets.  The  interest  rate  spread
declined  13  basis points from 2.61% for the year ended June 30, 1999 to 2.48%
for the year ended June 30, 2000, and the net interest margin declined 20 basis
points from 3.11% to 2.91% during the same period.

The decline in interest rate spread and interest margin both reflect the $344.3
million increase in average borrowed funds, which possess a higher average cost
than deposits,  and  the  ongoing  effects  of  our  continued capital leverage
strategy.  The  interest  rate  differential  between  assets   and  underlying
liabilities under the capital leverage strategy are significantly less than the
interest  rate  differential  between  our  other  interest-earning assets  and
interest-bearing  liabilities.   While  we recently reduced  our  new  activity
related to the capital leverage strategy,  the  average  balance of the capital
leverage assets increased $73.0 million during the fiscal  year  ended June 30,
2000,  due  to  the  retention of a significant portion of the leverage  growth
accumulated during the fiscal years ended June 30, 1998 and 1999.  The declines
in interest rate spread  and net interest margin also reflect the decline of 29
basis points in the average yield on real estate loans. The effects of interest
rate increases by the Federal  Reserve only minimally impacted the yield on our
real estate loans during the fiscal year ended June 30, 2000, since real estate
loans, on average, have a longer  term  to  repricing  than our other interest-
earning assets.  Also contributing to the decline in net  interest margin was a
reduction  from  112.3%  to 110.0% in the ratio of interest earning  assets  to
interest bearing liabilities,  which  resulted  from  a  reduction  in interest
earning  assets  funded  by  stockholders'  equity  (which  bear  no offsetting
interest  expense),  as the percentage of stockholders' equity to total  assets
has declined due to ongoing capital leverage and stock repurchase activities.

INTEREST INCOME.  Interest  income for the fiscal year ended June 30, 2000, was
$165.6 million, an increase of  $30.2  million  from  $135.4 million during the
fiscal year ended June 30, 1999. The increase in interest  income was primarily
attributable  to  increased  interest  income  on  real estate loans  of  $26.9
million,  on  mortgage backed securities of $1.1 million,  and  other  interest
income (comprised  of  commercial  paper, federal funds sold and FHLBNY capital
stock income) of $3.2 million.  The  increase in interest income on real estate
loans  was attributable primarily to an  increase  of  $397.7  million  in  the
average  balance  of  real estate loans, resulting from  $486.4 million of real
estate loans originated  during  the  fiscal  year  ended  June  30, 2000.  The
average balance of other interest earning assets increased $48.6 million due to
an  increase  in  liquid securities maintained near December 31, 1999,  due  to
liquidity concerns  related  to  the  Year 2000, as well as an increase of $1.2
million  in average balance of FHLBNY capital  stock.   The  average  yield  on
mortgage backed  securities  and other interest earnings assets increased by 29
basis points and 48 basis points,  respectively due to recent general increases
in interest rates.  Overall, the yield  on  interest-earning  assets declined 2
basis  points  from 7.24% during the fiscal year ended June 30, 1999  to  7.22%
during the fiscal  year  ended  June  30,  2000.  The  decline was attributable
primarily  to  a  decline  in average yield on real estate loans  of  29  basis
points, reflecting continued  competition  on  lending  in  our  local  market.
Further, since real estate loans, on average, have a longer term to repricing

                                      -14-

than our other interest-earning  assets,  the effects of recent market interest
rate increases take longer to impact their  overall  yield.   In  addition, the
yield  on real estate loans during the most recent fiscal year experienced  the
delayed  effect  of  high  prepayment activity which occurred during the fiscal
year ended June 30, 1999, which lowered the overall portfolio yield.  We expect
the effects of recent interest  rate  increases and slower prepayment levels to
be recognized more fully in the overall real estate loan portfolio yield during
the fiscal year ended June 30, 2001.

INTEREST EXPENSE.  Interest expense increased  $21.6  million, to $98.8 million
during  the  fiscal  year ended June 30, 2000, from $77.2  million  during  the
fiscal  year ended June  30,  1999.   This  increase  resulted  primarily  from
increased  interest  expense of $21.0 million on borrowed funds, which resulted
from an increase in the  average  balance  of  $344.3 million during the fiscal
year ended June 30, 2000, compared to the fiscal  year ended June 30, 1999. The
increase  in  the  average  balance of borrowed funds resulted  primarily  from
growth of $305.0 million in FHLBNY  advances  during the period July 1, 1999 to
June 30, 2000.  The FHLBNY advances are generally  medium-term interest-bearing
liabilities, which are utilized to fund loan originations  and  replace deposit
outflows. Additionally, the interest expense on NOW, Super Now and Money Market
accounts  increased  $2.9  million  due to increased average balance  and  cost
related  to our recent money market promotion.   This  increase  was  partially
offset by  a  decline  in  interest expense on certificates of deposits of $2.4
million, which resulted from  a reduction of 31 basis points in average cost on
certificates of deposits, which  resulted  from  the  cessation of deposit rate
promotions that we maintained from July 1997 to June 1998.    The  average cost
of  interest-bearing liabilities increased 11 basis points to 4.74% during  the
year  ended  June  30,  2000,  from 4.63% during the fiscal year ended June 30,
1999, due primarily to the increase in the average cost of borrowed funds of 18
basis points during the period.

PROVISION FOR LOAN LOSSES.  The  provision  for loan losses was $240,000 during
both the fiscal years ended June 30, 2000 and  1999.  See "Asset Quality."  The
increase in non-performing loans of $1.4 million  during  the fiscal year ended
June  30,  2000,  resulted  solely  from the addition of one multi-family  loan
totaling $1.8 million to non-performing loans in June, 2000.  This loan entered
non-performing  status as a result of  the  unanticipated  deterioration  of  a
portion of the underlying collateral, and not as a result of real estate market
declines.   Excluding  this  loan,  non-performing  loans  experienced  general
decline during  the  fiscal  year  ended  June  30,  2000, reflecting continued
stability  in  the  local real estate market.  The allowance  for  loan  losses
declined $296,000 during  the  fiscal  year ended June 30, 2000, as net charge-
offs of $536,000 exceeded the provision  of  $240,000 during the period. Of the
total  net charge-offs during the fiscal year ended  June  30,  2000,  $454,000
related  to  a  loan  pool  participation  investment acquired from FIBC.  Upon
consummating the FIBC acquisition, we provided reserves within our overall loan
loss  allowance  in  anticipation  of this potential  loss  on  the  loan  pool
investment.  After attempting to recover  this portion of the total investment,
we determined in November, 1999, that it would not be collectible and should be
charged-off.  While we have continued our loan  loss  provisions in response to
our continued growth in real estate loans, we have allowed  our  allowance  for
loan  losses to decline as a percentage of loans due to the continuation of low
charge-off and non-performing loan to average loan percentages.

NON-INTEREST INCOME.  Non-interest income declined $1.4 million to $5.0 million
during the fiscal year ended June 30, 2000, from $6.4 million during the fiscal
year ended  June  30,  1999.  The  net  gain or loss on sales of investment and
mortgage-backed securities and other assets,  declined $2.4 million during this
period, as a net loss of $1.6 million was recorded during the fiscal year ended
June 30, 2000, compared to a net gain of $804,000  recorded  during  the fiscal
year ended June 30, 1999.  The securities sales transactions during the  fiscal
year  ended  June  30,  1999, which resulted in a net gain of $668,000, related
primarily to disposals of  equity  investments which we felt were at attractive
sales values.  The securities sales  transactions  during the fiscal year ended
June  30,  2000,  which  resulted  in  a net loss of $2.6  million,  were  made
primarily to generate additional liquidity  at  December  31,  1999, related to
possible increased deposit outflows resulting from consumer concerns  over  the
Year 2000, as well as the re-positioning of assets in response to interest rate
increases  during  the  most  recent  fiscal  year.  See "Liquidity and Capital
Resources."  The loss on the sale of securities  during  the  fiscal year ended
June 30, 2000, was partially offset by a gain of $1.2 million on  the  sale  of
deposits  formerly  housed  at  our Gates Avenue, Brooklyn branch. In addition,
other income also decreased $189,000,  due primarily to a reduction of $566,000
in  prepayment penalty income, as increased  interest  rates  during  the  most
recent  fiscal  year  have  substantially  reduced the level of loan prepayment
activity.

                                      -15-

Offsetting these decreases was an increase in  service charges and fees of $1.2
million  due  mainly  to  increased service fees and  charges  on  deposits  of
$984,000, resulting primarily  from  adjustments in our deposit fee and service
charges and the addition of the five branches acquired from FIBC.

NON-INTEREST EXPENSE. Non-interest expense  increased  $3.5 million, from $30.5
million during the fiscal year ended June 30, 1999, to $34.0 million during the
fiscal year ended June 30, 2000.  The increase in non-interest expense reflects
increases  of  $270,000  related  to  salaries  and benefits expense,  $756,000
related to occupancy and equipment expense, $340,000 related to data processing
costs, $1.2 million related to goodwill amortization,  and $1.4 million related
to other expenses.  Excluding a non-recurring reduction in compensation expense
of  $1.4  million, which related to a gain on the curtailment  of  our  defined
benefit pension  plan,  salaries and benefits would have increased $1.6 million
and non-interest expense would have increased by $4.9 million during the fiscal
year ended June 30, 2000 compared to 1999.

A significant portion of  the  increase  in salaries and benefits and occupancy
and equipment expenses resulted from the addition  of  new  employees, property
and  equipment  in  the  FIBC  acquisition.  The remaining salary  and  benefit
expense increase reflects base salary  and  staff  increases  during  the  past
fiscal  year.   The  remaining  increase  in  occupancy  and  equipment expense
reflects   non-recurring   real  estate  tax  refunds  of  $190,000  on  branch
properties, which were recorded  as  a  reduction  of  occupancy  and equipment
expense during the fiscal year ended June 30, 1999.

Increased  data  processing costs of $340,000 resulted from additional  systems
activity related to  growth  in both loan activity due to originations over the
past twelve months and deposit  activity related to the acquisition of the five
branches from FIBC.

The increase in goodwill amortization  expense of $1.2 million and core deposit
intangible  expense of $460,000 (included  in  other  expense),  resulted  from
goodwill of $44.2  million and core deposit intangible of $4.9 million added in
the FIBC acquisition,  for  which  five  months  of  amortization  expense  are
reflected  during  the fiscal year ended June 30, 1999, compared to a full year
of amortization expense  reflected in the fiscal year ended June 30, 2000.  The
increase in other expenses  resulted primarily from increased supplies, postage
and telephone expenses associated with operations of the branches acquired from
FIBC,  and  increased advertising  expenses  associated  with  recent  customer
promotions.

INCOME TAX EXPENSE.  Income  tax  expense increased $1.2 million, or 9%, during
the fiscal year ended June 30, 2000  compared to the fiscal year ended June 30,
1999, due primarily to the increase of  $3.7 million, or 11%, in pre-tax income
during the same period.  Our effective tax  rate  declined slightly during this
period, as additional tax benefits realized during  the  fiscal year ended June
30, 2000, associated with activities of subsidiary companies,  were offset by a
decline  in non-recurring income tax benefits from $398,000 during  the  fiscal
year ended  June  30,  1999  to  $256,000 during the fiscal year ended June 30,
2000.  These income tax recoveries  are  related to adjustments associated with
reconciling the recorded income tax expense to the income tax expense reflected
in the subsequent tax return filing for the respective prior year.

COMPARISON OF THE OPERATING RESULTS FOR THE FISCAL YEAR ENDED JUNE 30, 1999 AND
1998

GENERAL.  Net income for the fiscal year ended June 30, 1999, totaled $19.9
million compared to $13.1 million for the fiscal year ended June 30, 1998. The
increase in net income resulted primarily from an increase of $8.0 million in
net interest income, a decline of $1.4 million in the provision for
loan losses, and an increase of $94,000 in non-interest income.

NET INTEREST INCOME.  Net interest income for the fiscal year ended June 30,
1999 increased $8.0 million to $58.2 million from $50.2 million during the
fiscal year ended June 30, 1998. The increase was attributable primarily to an
increase of $470.2 million in average interest-earning assets, offset by a
decline in the net interest rate spread of 37 basis points. The net interest
margin declined 47 basis points from 3.58% for the fiscal year ended June 30,
1998 to 3.11% for the fiscal year ended June 30, 1999.

The narrowing interest rate spread and margin reflect, in part, our exposure to
interest rate risk resulting from certain changes in the shape of the yield
curve (particularly a flattening or inverting of the yield curve) and to
differing indices upon which the yield on our interest-earning assets and the
cost of its interest-bearing liabilities are based. For example, over the
period July 1, 1997 to June 30, 1999, the market experienced a more significant

                                      -16-

reduction in interest rates on long-term instruments as compared to the
reduction in interest rates on short-term instruments resulting in rates on
long-term instruments approximating (and in some cases, going below) the rates
on short-term instruments. More importantly, the spreads earned on the rate
differential between assets and the liabilities funding such assets have
narrowed more with respect to long-term assets as compared to short-term
assets. Since a larger percentage of our assets are longer term, we experienced
a continuous narrowing of spreads as well as a negative impact on net interest
income that was more than offset by our growth in interest-earning assets. The
narrowing of the spread and margin also reflects the continued activities of
the capital leverage program, as the interest rate spread between assets and
underlying liabilities under the capital leverage program are significantly
less than the interest rate spread between our other interest-earning assets
and interest-bearing liabilities.

INTEREST INCOME.  Interest income for the fiscal year ended June 30, 1999, was
$135.4 million, an increase of $28.3 million from $107.1 million during the
fiscal year ended June 30, 1998. The increase in interest income was
attributable to increased interest income on real estate loans and mortgage-
backed securities of $21.7 million and $6.2 million, respectively. The increase
in interest income on real estate loans was attributable primarily to an
increase of $320.8 million in the average balance of real estate loans,
resulting from both $471.5 million of real estate loans originated during the
fiscal year ended June 30, 1999, and $192.3 million of real estate loans
acquired from FIBC on January 21, 1999. The increase in interest income on
mortgage-backed securities was also attributable primarily to an increase in
the average balance of $313.9 million, resulting from mortgage-backed
securities purchased in accordance with our capital leverage program during the
fiscal year ended June 30, 1999, and $37.8 million added in the FIBC
Acquisition. Overall, the yield on interest-earning assets decreased 41 basis
points from 7.64% during the fiscal year ended June 30, 1998 to 7.23% during
the fiscal year ended June 30, 1999. The decline was attributable primarily to
a decrease of 43 basis points in the average yield on real estate loans
resulting primarily from continued competition in the real estate lending
market and the continued flat yield curve environment. The decline also
reflects declines in the average yield on mortgage-backed securities and
investment securities of 50 basis points and 52 basis points, respectively, due
to declines in overall interest rates during the fiscal year ended June 30,
1999.

INTEREST EXPENSE.  Interest expense increased $20.3 million, to $77.2 million
during the fiscal year ended June 30, 1999, from $56.9 million during the
fiscal year ended June 30, 1998. This increase resulted primarily from
increased interest expense of $18.9 million on borrowed funds, which resulted
from an increase in the average balance of $351.1 million during the fiscal
year ended June 30, 1999 compared to the fiscal year ended June 30, 1998. The
increase in the average balance of borrowed funds resulted primarily from
$183.0 million of borrowed funds added during the fiscal year ended June 30,
1999 under the capital leverage program. The increase in the average balance of
borrowed funds also reflects our use of FHLBNY advances, which generally are
medium-term interest-bearing liabilities, to fund our loan originations. In
addition, the average cost of interest-bearing liabilities decreased five basis
points to 4.63% during the fiscal year ended June 30, 1999, from 4.68% during
the fiscal year ended June 30, 1998, reflecting the decline in the average cost
of certificates of deposit and borrowed funds of 35 basis points and 36 basis
points, respectively. The decline in the average cost of borrowed funds
resulted from reductions in overall interest rates, while the reduction in the
average cost of certificates of deposit resulted from both lower overall
interest rates and the cessation of deposit rate promotions that we maintained
from July 1997 to June 1998. While the decline in the average cost of
certificates of deposits and borrowed funds helped reduce the average cost of
interest-bearing liabilities during the fiscal year ended June 30, 1999, their
respective average balances increases of $54.7 million and $351.1 million
contributed to the increase in the average cost of interest-bearing
liabilities.

PROVISION FOR LOAN LOSSES. The provision for loan losses decreased $1.4 million
to $240,000 for the fiscal year ended June 30, 1999, from $1.6 million for the
fiscal year ended June 30, 1998. The allowance for loan losses has increased
$3.0 million from June 30, 1998 to June 30, 1999, due primarily to the addition
of $3.0 million in loan loss reserves from FIBC which we determined was
adequate to cover potential losses on the loans acquired from FIBC. The
reduction in our loan loss provision from the prior fiscal year resulted from
continued stability of non-performing loan and charge-offs which totaled
$201,000 during the fiscal year ended June 30, 1999, compared to $286,000
during the fiscal year ended June 30, 1998. See "Asset Quality."

NON-INTEREST INCOME. Non-interest income increased $94,000 to $6.4 million
during the fiscal year ended June 30, 1999, from $6.3 million during the fiscal
year ended June 30, 1998. Service charges and fees increased $471,000 due
primarily to increased service fees and charges on deposits of $619,000,
resulting primarily from adjustments in our deposit fee and service charges.
Other income increased $1.7 million due primarily to

                                      -17-

increased loan prepayment penalties of $1.6 million, which resulted from
increased interest rate competition on new loans.  Offsetting these increases
was a reduction in the gains on sales and redemptions of securities and other
assets of $2.1 million, due primarily to a non-recurring gain of $2.0 million
from the sale of a branch premise in Roslyn, New York during the fiscal year
ended June 30, 1998.

NON-INTEREST EXPENSE.  Non-interest expense increased $556,000, from $29.9
million during the fiscal year ended June 30, 1998, to $30.5 million during the
fiscal year ended June 30, 1999. During the fiscal year ended June 30, 1998, we
recorded one-time charges of $1.6 million of benefit costs and $598,000 of RRP
costs associated with an early retirement option that we offered and was
accepted by eligible employees. Excluding this charge to expense, non-interest
expense increased $2.8 million during the fiscal year ended June 30, 1999.
Salaries and employee benefit expense increased $1.2 due to staffing and salary
increases during the past 12 months and additional salary expense resulting
from the FIBC acquisition. Compensation expense related to our ESOP and RRP
decreased by approximately $263,000 due to the reduction in our average stock
price.

Occupancy and equipment expense declined $28,000 due primarily to refunds of
$190,000 related to real estate taxes on branch properties, which were recorded
as a reduction of occupancy and equipment expense during the fiscal year ended
June 30, 1999, and cost savings associated with the sale of our Roslyn office
in May 1998. These cost savings were partially offset by increased expenses
associated with the five branch offices obtained in the FIBC acquisition. Data
processing costs increased $147,000 during the fiscal year ended June 30, 1999,
compared to the fiscal year ended June 30, 1998, due primarily to increased
loan activity resulting from the FIBC acquisition and Year 2000 compliance
costs.

The provision for losses on other real estate owned declined $98,000 due to the
low level of real estate owned during the fiscal year ended June 30, 1999.

Goodwill expense increased $977,000 due to the increased goodwill of $44.2
million associated with the FIBC acquisition.

Other expenses increased $748,000 due primarily to increased expenses
associated with former operations of FIBC and an increase of $301,000 in core
deposit premium amortization.

INCOME TAX EXPENSE.  Income tax expense totaled $14.0 million for the fiscal
year ended June 30, 1999, compared to $11.9 million for the fiscal year ended
June 30, 1998, an increase of $2.1 million. During the fiscal year ended June
30, 1999, we recorded income tax expense benefits totaling $670,000 related to
recoveries of previously recorded deferred taxes and adjustments from the
filing of its June 1998 tax returns. Excluding these income tax benefits, our
income tax expense would have increased $2.8 million, reflecting an increase of
$8.9 million in pretax income, offset by a reduction in the effective tax rate
from 47.5% during the fiscal year ended June 30, 1998, to 43.3% during the
fiscal year ended June 30, 1999.

YEAR 2000 COMPUTER CONCERN

We did not experience any significant interruptions in any computer operations
related to the Year 2000 computer concern.  Our loan and deposit functions were
not affected by the change into the Year 2000.  Additionally, we did not
encounter any significant delays in loan payments from borrowers due to
difficulties they may have encountered as a result of the Year 2000 computer
concern.

IMPACT OF INFLATION AND CHANGING PRICES

The Financial Statements and Notes thereto presented herein have been prepared
in accordance with GAAP, which require the measurement of financial position
and operating results in terms of historical dollars without considering the
changes in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased costs of our operations.
Unlike industrial companies, nearly all of our assets and liabilities are
monetary in nature. As a result, interest rates have a greater impact on our
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
price of goods and services.

                                      -18-

IMPACT OF ENACTMENT OF THE GRAMM-LEACH-BLILEY ACT

On November 12, 1999, the Gramm-Leach-Bliley  Act,  or Gramm-Leach was enacted.
Gramm-Leach  establishes,  among  other  things, a comprehensive  framework  to
permit  affiliations  among commercial banks,  insurance  companies  and  other
financial service providers.  Generally, the new law (i) repeals the historical
restrictions and eliminates many federal and state law barriers to affiliations
among banks and securities  firms,  insurance  companies  and  other  financial
service  providers,  (ii)  provides  a uniform framework for the activities  of
banks, savings institutions and their  holding  companies,  (iii)  broadens the
activities that may be conducted by national banks and banking subsidiaries  of
bank  holding companies, (iv) provides an enhanced framework for protecting the
privacy of consumer's information, (v) adopts a number of provisions related to
the  capitalization,   membership,  corporate  governance  and  other  measures
designed to modernize the  FHLB  system,  (vi)  requires  public  disclosure of
certain agreements relating to funds expended in connection with the  Community
Reinvestment  Act  and  (vii) addresses a variety of other legal and regulatory
issues  affecting  both  day-to-day  operations  and  long-term  activities  of
financial institutions, including  the functional regulation of bank securities
activities.

Gramm-Leach  also  restricts  the  powers  of  new  unitary  savings  and  loan
association holding companies.  Unitary savings and loan holding companies that
are "grandfathered," I.E., became a  unitary  savings  and loan holding company
pursuant to an application filed with the OTS before May  4,  1999, such as us,
retain their authority under the prior law.  All other savings and loan holding
companies  would  be limited to financially related activities permissible  for
bank  holding companies,  as  defined  under  Gramm-Leach.   Gramm  Leach  also
prohibits non-financial companies from acquiring grandfathered savings and loan
association holding companies.

Gramm-Leach  also requires financial institutions to disclose, on ATM machines,
any non-customer  fees  and to disclose to their customers upon the issuance of
an ATM card any fees that  may be imposed by the institution on ATM users.  For
older ATMs, financial institutions will have until December 31, 2004 to provide
such notices.

Bank holding companies are permitted  to engage in a wider variety of financial
activities than permitted under the prior  law,  particularly  with  respect to
insurance  and  securities activities. In addition, in a change from the  prior
law, bank holding  companies  will  be in a position to be owned, controlled or
acquired by any company engaged in financially related activities.

We do not believe that the new law will have a material adverse affect upon our
operations in the near term. However,  to the extent the new law permits banks,
securities firms and insurance companies  to  affiliate, the financial services
industry may experience further consolidation.   This could result in a growing
number of larger financial institutions that offer a wider variety of financial
services  than  we  currently offer and that can aggressively  compete  in  the
markets we currently serve.

IMPACT OF RECENT ACCOUNTING STANDARDS

In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ("SFAS 133") "Accounting for Derivative
Instruments and Hedging Activities" as amended in June, 1999 by SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," and in June, 2000, by SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,"
(collectively SFAS 133).  SFAS 133 requires that entities recognize all
derivatives as either assets or liabilities in the statement of financial
condition and measure those instruments at fair value.  Under SFAS 133 an
entity may designate a derivative as a hedge of exposure to either changes in:
(a) fair value of a recognized asset or liability or firm commitment, (b) cash
flows of a recognized or forecasted transaction, or (c) foreign currencies of a
net investment in foreign operations, firm commitments, available-for-sale
securities or a forecasted transaction.  Depending upon the effectiveness of
the hedge and/or the transaction being hedged, any changes in the fair value of
the derivative instrument is either recognized in earnings in the current year,
deferred to future periods, or recognized in other comprehensive income.
Changes in the fair value of all derivative instruments not recognized as hedge
accounting are recognized in current year earnings.  SFAS 133 is required for
all fiscal quarters or fiscal years beginning after June 15, 2000.  The Company
adopted SFAS 133 effective July 1, 2000.  No adjustment was required as a
result of the change in accounting principle.

                                      -19-

In December, 1999, the Securities and Exchange Commission (referred to as the
SEC) issued Staff Accounting Bulletin No. 101 (referred to as SAB 101),
"Revenue Recognition in Financial Statements."  SAB 101 summarizes certain of
the SEC's views on applying generally accepted accounting principles to revenue
recognition in financial statements.  On June 26, 2000, the SEC issued SAB 101B
to defer the effective date of implementation of SAB 101 until no later than
the fourth fiscal quarter of fiscal years beginning after December 31, 1999.
The Company is required to adopt SAB 101 by June 30, 2001.  The Company does
not expect the adoption of SAB 101 to have a material impact on the
consolidated financial statements.

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the Nasdaq National Market and quoted under the
symbol "DCOM." Prior to June 15, 1998, our common stock was quoted under the
symbol "DIME."

The following table shows the high and low sales price for our common stock and
dividends declared during the period indicated.  Our common stock began trading
on June 26, 1996, the date of the initial public offering.

                                   Fiscal Year End June 30, 2000                              Fiscal Year End June 30, 1999
                                                                                                
Quarter Ended                                   High            Low                                      High            Low
                                Dividends       Sales           Sales                    Dividends       Sales           Sales
                                Declared        Price           Price                    Declared        Price           Price
- --------------------------------------------------------------------------------------------------------------------------------
September 30{th}                   $0.15         $23{1/2}        $20{1/8}                 $0.10           $28{1/2}      $15{1/4}
December 31{st}                     0.17          22{1/8}         17                       0.12            27{7/16}      14{3/4}
March 31{st}                        0.17          17{7/8}         13{1/4}                  0.14            25{3/8}       19{3/4}
June 30{th}                         0.17          18{1/2}         15{3/8}                  0.15            23{7/8}       20

On June 30, 2000, the last trading date in the fiscal year, our stock closed at
$16{1/4}. At September 22, 2000, we had approximately XXX shareholders of
record, not including the number of persons or entities holding stock in
nominee or street name through various brokers and banks. There were 11,664,174
shares of common stock outstanding at June 30, 2000.

As the principal asset of the Company, the Bank could be called upon to provide
the principal source of funds for payment of dividends by the Company.  The
Bank will not be permitted to pay dividends on its capital stock if its
stockholders' equity would be reduced below applicable regulatory requirements
or the amount required for the liquidation account established during the
Bank's conversion. See Note 2 to the Consolidated Financial Statements of the
Company for a further discussion of the liquidation account.  The OTS limits
all capital distributions by the Bank directly or indirectly to us, including
dividend payments.  As the subsidiary of a savings and loan holding company,
the Bank must file a notice with the OTS for each capital distribution.
However, if the total amount of all capital distributions (including each
proposed capital distribution) for the applicable calendar year exceeds net
income for the calendar year to date plus the retained net income (i.e., net
income after deducting prior capital distributions) for the preceding two
years, then the Bank must file an application to receive the approval of thew
OTS for the proposed capital distribution.  In addition, capital distributions
from the Bank to the Company, if in excess of established limits, could result
in recapture of the Bank's New York State and City bad debt reserves.

Unlike the Bank, we are not subject to OTS regulatory restrictions on the
payment of dividends to our shareholders, although the source of such dividends
will be dependent on the net proceeds retained by us and earnings thereon and
may be dependent, in part, upon dividends from the Bank. We are subject,
however, to the requirements of Delaware law, which generally limit dividends
to an amount equal to the excess of our net assets (the amount by which total
assets exceed total liabilities) over its statutory capital, or if there is no
such excess, to its net profits for the current and/or immediately preceding
fiscal year.

RESEARCH REPORTS

As of the date of this report, the following investment firms have issued
research reports on us:

            Advest, Inc.;  Friedman, Billings, Ramsey & Co., Inc.;
            Keefe Bruyette & Woods, Inc.;  Lehman Brothers, Inc.
            McConnell Budd & Downes;  Merrill Lynch & Co.;
            Ryan, Beck & Co.;  Sandler O'Neill & Partners, L.P.

                                      -20-

Copies of these research reports are available upon request to:
            Dime Community Bancshares, Inc.
            Investor Relations,
            209 Havemeyer Street,
            Brooklyn, NY 11211

                                      -21-

                         INDEPENDENT AUDITORS' REPORT

To the Stockholders and the Board of Directors of
  Dime Community Bancshares, Inc. and Subsidiaries

We have audited the accompanying consolidated statements of financial condition
of Dime Community Bancshares, Inc. and Subsidiaries (the ''Company'') as of
June 30, 2000 and 1999, and the related consolidated statements of operations,
changes in stockholders' equity and comprehensive income and cash flows for
each of the three years in the period ended June 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 2000 in
conformity with accounting principles generally accepted in the United States
of America.

           /S/ DELOITTE & TOUCHE LLP

New York, New York
August 11, 2000

                                      -22-

               DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                  (Dollars in thousands except share amounts)

                                                                                                     
JUNE 30,                                                                                             2000                   1999
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Cash and due from banks                                                                           $15,371                  $17,801
Investment securities held-to-maturity (estimated fair value of
   $17,351 and $31,768 at June 30, 2000 and 1999, respectively)  (Note 4)                          17,489                   31,698
Investment securities available for sale (at estimated fair value) (Note 4):
    Bonds and notes (amortized cost of $109,057 and $133,523 at
       June 30, 2000 and 1999, respectively)                                                      105,631                  131,490
    Marketable equity securities (historical cost of $14,948 and
       $14,162 at June 30, 2000 and 1999, respectively)                                            15,490                   15,142
Mortgage-backed securities held-to-maturity (estimated fair
   value of $13,263 and $23,192 at June 30, 2000 and 1999,
   respectively) (Note 5)                                                                          13,329                   22,820
Mortgage backed securities available for sale (at estimated fair value)
   (amortized cost of $438,160 and $507,486 at June 30, 2000 and 1999,
   respectively)(Note 5)                                                                          429,361                  502,847
Federal funds sold and short-term investments                                                       9,449                   11,011
Loans (Note 6):
    Real estate                                                                                 1,713,552                1,375,510
    Other loans                                                                                     7,648                    7,831
    Less allowance for loan losses (Note 7)                                                       (14,785)                 (15,081)
- ----------------------------------------------------------------------------------------------------------------------------------
   Total loans, net                                                                             1,706,415                1,368,260
- ----------------------------------------------------------------------------------------------------------------------------------
Loans held for sale                                                                                   100                       -
Premises and fixed assets, net (Note 9)                                                            14,771                   14,975
Federal Home Loan Bank of New York capital stock (Note 10)                                         42,423                   28,281
Other real estate owned, net (Note 7)                                                                 381                      866
Goodwill (Note 3)                                                                                  60,254                   64,871
Other assets (Notes 15 and 16)                                                                     71,675                   37,553
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                                   $2,502,139               $2,247,615
==================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors (Note 11)                                                                    $1,219,148               $1,238,933
Escrow and other deposits                                                                          35,161                   44,705
Securities sold under agreements to repurchase (Note 12)                                          434,027                  481,660
Federal Home Loan Bank of New York advances (Note 13)                                             555,000                  250,000
Subordinated notes payable (Note 14)                                                               25,000                      -
Other liabilities (Note 16)                                                                        26,634                   20,622
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                               2,294,970                2,035,920
- ----------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 17)

Stockholders' Equity
Preferred stock ($0.01 Par, 9,000,000 shares authorized, none issued
   outstanding at  June 30, 2000 and 1999)                                                             -                        -
Common stock ($0.01 par, 45,000,000 shares authorized, 14,583,765 shares and
   14,583,400 shares issued at June 30, 2000 and 1999, respectively, and
   11,664,174 and 12,775,588 shares outstanding at June 30, 2000 and 1999,
   respectively)                                                                                      145                      145
Additional paid-in capital                                                                        150,034                  148,865
Retained earnings (Note 2)                                                                        133,769                  119,100
Accumulated other comprehensive loss, net of deferred taxes                                        (6,309)                  (3,323)
Unallocated common stock of Employee Stock Ownership Plan  (Note 16)                               (6,853)                  (8,016)
Unearned common stock of Recognition and Retention Plan  (Note 16)                                 (4,324)                  (6,040)
Common stock held by Benefit Maintenance Plan (Note 16)                                            (1,790)                    (831)
Treasury stock, at cost (2,919,591 shares and 1,807,812 shares at
   June 30, 2000 and 1999, respectively ) (Note 19)                                               (57,503)                 (38,205)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                        207,169                  211,695
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                     $2,502,139               $2,247,615
==================================================================================================================================

See Notes to consolidated financial statements.

                                      -23-

               DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands except per share amounts)

                                                                                                    
FOR THE YEARS ENDED JUNE 30,                                                      2000                 1999                1998
- --------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
Loans secured by real estate                                                  $118,436              $91,569              $69,824
Other loans                                                                        616                  558                  487
Investment securities                                                            9,715               10,654               10,798
Mortgage-backed securities                                                      30,750               29,683               23,463
Other                                                                            6,106                2,926                2,555
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST  INCOME                                                         165,623              135,390              107,127
- --------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits  and escrow                                                            45,036               44,417               43,027
Borrowed funds                                                                  53,784               32,802               13,908
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE                                                          98,820               77,219               56,935
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                                             66,803               58,171               50,192
- --------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses                                                          240                  240                1,635
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                             66,563               57,931               48,557
- --------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Service charges and other fees                                                   4,065                2,823                2,352
Net (loss) gain on sales of loans                                                  (11)                  66                  108
Net (loss) gain on sales and redemptions of securities, deposits
   and other assets                                                             (1,567)                 804                2,873
Other                                                                            2,556                2,745                1,011
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME                                                        5,043                6,438                6,344
- --------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits                                                  12,635               12,365               12,748
ESOP and RRP compensation expense                                                4,095                4,517                5,378
Occupancy and equipment                                                          3,739                2,983                3,011
Federal deposit insurance premiums                                                 360                  404                  350
Data processing costs                                                            1,656                1,316                1,169
Provision for losses on other real estate owned                                     25                   16                  114
Goodwill amortization                                                            4,617                3,382                2,405
Other                                                                            6,888                5,510                4,762
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSE                                                      34,015               30,493               29,937
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                                                      37,591               33,876               24,964
Income tax expense                                                              15,217               14,015               11,866
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                     $22,374              $19,861              $13,098
================================================================================================================================

EARNINGS PER SHARE:
BASIC                                                                            $1.98                $1.81                $1.19
================================================================================================================================
DILUTED                                                                          $1.90                $1.68                $1.09
================================================================================================================================

See Notes to consolidated financial statements.

                                      -24-

               DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                           AND COMPREHENSIVE INCOME
                  (Dollars in thousands except per share data)

                                                                                                       
FOR THE YEARS ENDED JUNE 30,                                                         2000                 1999              1998
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK (PAR VALUE $0.01):
Balance at beginning and end of period                                                $145                $145              $145
- --------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period                                                     148,865             143,322           141,716
Issuance of common stock                                                                -                3,327                -
Stock options exercised                                                                  2                 468                52
Tax benefit of RRP shares                                                              164                 312                33
Amortization of excess fair value over cost - ESOP stock                             1,003               1,436             1,521
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                           150,034             148,865           143,322
- --------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance at beginning of period                                                     119,100             105,158            94,695
Net income for the period                                                           22,374              19,861            13,098
Cash dividends declared and paid                                                    (7,705)             (5,919)           (2,635)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                           133,769             119,100           105,158
- --------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET:
Balance at beginning of period                                                      (3,323)              2,763             2,031
Change in other comprehensive income (loss) during the period,
   net of deferred taxes                                                            (2,986)             (6,086)              732
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                            (6,309)             (3,323)            2,763
- --------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN:
Balance at beginning of period                                                      (8,016)             (9,175)          (10,324)
Amortization of earned portion of ESOP stock                                         1,163               1,159             1,149
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                            (6,853)             (8,016)           (9,175)
- --------------------------------------------------------------------------------------------------------------------------------
RECOGNITION AND RETENTION PLAN:
Balance at beginning of period                                                      (6,040)             (6,963)           (9,671)
Common stock acquired by RRP                                                          (212)               (999)               -
Amortization of earned portion of RRP stock                                          1,928               1,922             2,708
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                            (4,324)             (6,040)           (6,963)
- --------------------------------------------------------------------------------------------------------------------------------
TREASURY STOCK:
Balance at beginning of period                                                     (38,205)            (48,470)          (27,703)
Issuance of stock in acquisition                                                        -               31,463                -
Purchase of treasury shares, at cost                                               (19,298)            (21,198)          (20,767)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                           (57,503)            (38,205)          (48,470)
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK HELD BY BENEFIT MAINTENANCE PLAN:
Balance at beginning of period                                                        (831)               (431)               -
Common stock acquired                                                                 (959)               (400)             (431)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                            (1,790)               (831)             (431)
- --------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF COMPREHENSIVE INCOME
Net Income                                                                          22,374              19,861            13,098
Reclassification adjustment for securities sold, net of taxes of
   $(1,194), $263 and $436 during the years ended June 30, 2000,
   1999 and 1998                                                                     1,402                (309)             (512)
Net unrealized securities gains (losses) arising during the period,
   net of taxes of $(3,738), $(4,921) and $624 during the years
   ended June 30, 2000, 1999 an 1998                                                (4,388)             (5,777)              732
- --------------------------------------------------------------------------------------------------------------------------------
Comprehensive Income                                                               $19,388             $13,775           $13,318
================================================================================================================================

See Notes to consolidated financial statements.

                                      -25-

               DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Dollars In thousands)

                                                                                                        
FOR THE YEARS ENDED JUNE 30,                                                            2000                1999             1998
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income                                                                          $22,374             $19,861           $13,098
Adjustments to reconcile net income to net cash provided by
   operating activities:
Net gain on investment and mortgage backed securities called                             -                 (113)               (9)
Net loss (gain) on investment and mortgage backed securities sold                     2,599                (555)           (1,123)
Net loss (gain) on sale of loans held for sale                                           11                 (66)             (108)
Net loss (gain) on sales and disposals of other assets                                  191                  -             (1,973)
Net depreciation and amortization                                                       716               1,660               847
ESOP and RRP compensation expense                                                     4,095               4,517             5,378
Provision for loan losses                                                               240                 240             1,635
Goodwill amortization                                                                 4,617               3,382             2,405
Originations of loans held for sale                                                  (1,258)             (6,468)           (5,009)
Proceeds from sales of loans held for sale                                            1,147               7,075             4,838
Increase in other assets and other real estate owned                                (30,612)             (3,005)           (3,476)
Decrease (increase) in receivable for securities sold                                    -               18,008           (18,008)
(Decrease) increase in payable for securities purchased                                  -              (12,062)           12,062
Increase in other liabilities                                                         6,012               6,617             5,447
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by Operating Activities                                            10,132              39,091            16,004
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in short-term investments                                                1,562              37,618             9,573
Proceeds from maturities of investment securities held to maturity                    4,220               4,830            10,250
Proceeds from maturities of investment securities available for sale                131,922              85,979            63,145
Proceeds from calls of investment securities held to maturity                        10,000              41,660            42,500
Proceeds from calls of investment securities available for sale                       2,400              30,268            11,500
Proceeds from sales of investment securities available for sale                      39,867               9,373            13,437
Proceeds from sales of mortgage backed securities held to maturity                    1,955                  -              5,317
Proceeds from sales and calls of mortgage backed securities available
   for sale                                                                          64,937                  -             92,776
Purchases of investment securities held to maturity                                      -                   -            (29,082)
Purchases of investment securities available for sale                              (150,751)           (146,786)         (112,930)
Purchases of mortgage backed securities available for sale                          (68,960)           (263,644)         (290,576)
Principal collected on mortgage backed securities held to maturity                    7,532              23,822            26,216
Principal collected on mortgage backed securities available for sale                 71,342             155,612            64,470
Net increase in loans                                                              (338,395)           (241,114)         (199,545)
Cash disbursed in acquisitions, net of cash acquired                                     -              (33,644)               -
(Purchases) sales of fixed assets, net                                               (1,080)               (819)            4,262
Purchase of Federal Home Loan Bank stock                                            (14,142)            (15,417)           (2,432)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in Investing Activities                                              (237,591)           (312,262)         (291,119)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in due to depositors                                        (27,913)            (21,978)           74,947
Net (decrease) increase in escrow and other deposits                                 (1,416)             19,893               421
(Decrease) Increase in securities sold under agreements to repurchase               (47,633)            157,906           180,268
Proceeds from Federal Home Loan Bank of New York Advances                           305,000             146,495            40,295
Proceeds from subordinated notes payable                                             25,000                  -                 -
Common stock issued for exercise of Stock Options and tax benefits of
   RRP                                                                                  164                 906                85
Purchase of common stock by the Recognition and Retention Plan                         (212)               (999)               -
Purchase of common stock by Benefit Maintenance Plan                                   (959)               (400)             (431)
Cash dividends paid to stockholders                                                  (7,704)             (5,919)           (2,635)
Purchase of treasury stock                                                          (19,298)            (21,198)          (20,767)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by Financing Activities                                           225,029             274,706           272,183
- ---------------------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND DUE FROM BANKS                                       (2,430)              1,535            (2,932)
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD                                         17,801              16,266            19,198
- ---------------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS, END OF PERIOD                                              $15,371             $17,801           $16,266
=================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes                                                          $12,800             $11,462           $10,984
=================================================================================================================================
Cash paid for interest                                                              $97,421             $74,939           $54,941
=================================================================================================================================
Transfer of loans to Other real estate owned                                           $429                $342              $779
=================================================================================================================================
Change in unrealized gain (loss) on available for sale securities, net
   of deferred taxes                                                                $(2,986)            $(6,086)             $732
=================================================================================================================================

On January 21, 1999, the Bank acquired all of the outstanding common stock of
Financial Bancorp, Inc. in exchange for a combination of cash and common stock
of Dime Community Bancshares, Inc.  In connection with this acquisition, the
following assets were acquired and liabilities assumed:

Fair Value of Investments, Loans and Other Assets Acquired, net      $369,398
Dime Community Bancshares, Inc. Common Stock Issued                   (34,664)
Cash paid                                                             (33,251)
                                                                     --------
Deposits and Other Liabilities Assumed                               $301,483
                                                                     ========
See Notes to consolidated financial statements.

                                      -26-

               DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

1.   NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS - Dime Community Bancshares, Inc. (the "Company" OR
"DCB"), is a Delaware corporation organized by The Dime Savings Bank of
Williamsburgh (the "Bank") for the purpose of acquiring all of the capital
stock of the Bank issued in the Conversion on June 26, 1996.  Presently, the
significant assets of the Company are the capital stock of the Bank, the
Company's loan to the Bank's ESOP, investments retained by the Company, and an
investment real estate property owned through the Company's wholly-owned
subsidiary, 842 Manhattan Avenue Corporation.  The Company is subject to the
financial reporting requirements of the Securities Exchange Act of 1934, as
amended.

The Bank was originally founded in 1864 as a New York State-chartered mutual
savings bank.  On November 1995, the Bank converted to a federal stock savings
bank.  The Bank has been, and intends to continue to be, a community-oriented
financial institution providing financial services and loans for housing within
its market areas.  The Bank maintains its headquarters in the Williamsburgh
section of the borough of Brooklyn.  Seventeen additional offices are located
in the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The accounting and reporting
policies of the Company conform to generally accepted accounting principles.
The following is a description of the significant policies:

PRINCIPLES OF CONSOLIDATION - The accompanying 2000, 1999 and 1998 consolidated
financial statements include the accounts of the Company, and its wholly-owned
subsidiaries, the Bank and 842 Manhattan Avenue Corp.  All financial statements
presented also include the accounts of the Bank's four wholly-owned
subsidiaries, Havemeyer Equities Corp. (''HEC''), Boulevard Funding Corp.
(''BFC''), Havemeyer Investments Inc. ("HII") and DSBW Residential Preferred
Funding Corp. ("DRPFC").  842 Manhattan Avenue Corp. owns and manages a real
estate property which housed a former branch premise of Financial Bancorp, Inc.
("FIBC"), which the Company acquired on January 21, 1999 in connection with its
acquisition of FIBC.  DRPFC, established in March, 1998, invests in real estate
loans and is intended to qualify as a real estate investment trust for federal
tax purposes.  BFC  was established in order to invest in real estate joint
ventures and other real estate assets.  BFC has no investments in real estate
at June 30, 2000, and is currently inactive.  HEC was also originally
established in order to invest in real estate joint ventures and other real
estate assets.  In June, 1998, HEC assumed direct ownership of DSBW Preferred
Funding Corp. ("DPFC").  DPFC, established as a direct subsidiary of the Bank
in March, 1998, invests in real estate loans and is intended to qualify as real
estate investment trust for federal tax purposes.  HEC has no other investments
as of June 30, 2000.  All significant intercompany accounts and transactions
have been eliminated in consolidation.

INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES - Purchases and sales of
investments and mortgage-backed securities are recorded on trade date.  Gains
and losses on sales of investment and mortgage-backed securities are recorded
on the specific identification basis.

SFAS No. 115, ''Accounting for Investments in Debt and Equity Securities''
(''SFAS 115'') requires that debt and equity securities that have readily
determinable fair values be carried at fair value unless they are held to
maturity. Debt securities are classified as held to maturity and carried at
amortized cost only if the reporting entity has a positive intent and ability
to hold these securities to maturity. If not classified as held to maturity,
such securities are classified as securities available for sale or as trading
securities. Unrealized holding gains or losses on securities available for sale
are excluded from net income and reported net of income taxes as other
comprehensive income.  At June 30, 2000 and 1999, all equity securities are
classified as available for sale.

The Company does not acquire securities for the purpose of engaging in trading
activities.

LOANS HELD FOR SALE - Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of aggregate cost or estimated fair
value.  Gains and losses on sales of loans are also accounted for in accordance
with Statement of Financial Accounting Standards No. 134, "Accounting for
Mortgage Securities Retained after the Securitization of Mortgage Loans Held
for Sale by a Mortgage Banking Enterprise" ("SFAS 134").

                                      -27-

SFAS 134 requires that an entity engaged in mortgage banking activities
classify the retained mortgage-backed security or other interest, which
resulted from the securitization of a mortgage loan held for sale based
upon its ability and intent to sell or hold these investments.

ALLOWANCE FOR LOAN LOSSES - It is the policy of the Bank to provide a valuation
allowance for estimated losses on loans based on the Bank's past loan loss
experience, known and inherent risks in the portfolio, adverse situations which
may affect the borrower's ability to repay, estimated value of underlying
collateral and current economic conditions in the Bank's lending area. The
allowance is increased by provisions for loan losses charged to operations and
is reduced by charge-offs, net of recoveries.  While management uses available
information to estimate losses on loans, future additions to or reductions in
the allowance may be necessary based on changes in economic conditions beyond
management's control. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to recognize additions to or
reductions in the allowance based on judgments different from those of
management. Management believes, based upon all relevant and available
information, that the allowance for loan losses is adequate to absorb losses
inherent in the portfolio.

SFAS No. 114, ''Accounting by Creditors for Impairment of a Loan'' (''SFAS
114'') requires all creditors to account for impaired loans, except those loans
that are accounted for at fair value or at the lower of cost or fair value, at
the present value of expected future cash flows discounted at the loan's
effective interest rate. As an expedient, creditors may account for impaired
loans at the fair value of the collateral or at the observable market price of
the loan if one exists.  If the estimated fair value of the impaired loan is
less than the recorded amount, a specific valuation allowance is established or
a write-down is charged against the allowance for loan losses if the impairment
is considered to be permanent.

LOANS - Loans are reported at the principal amount outstanding, net of unearned
income and the allowance for loan losses.  Interest income on loans is recorded
using the level yield method.  Under this method, discount accretion and
premium amortization are included in interest income.

Accrual of interest is discontinued when its receipt is in doubt, generally,
when a loan becomes 90 days past due as to principal or interest.  When
interest accruals are discontinued, any interest credited to income in the
current year is reversed. Payments on nonaccrual loans are applied to
principal.  Management may elect to continue the accrual of interest when a
loan is in the process of collection and the estimated fair value of collateral
is sufficient to cover the principal balance and accrued interest.  Loans are
returned to accrual status once the doubt concerning collectibility has been
removed and the borrower has demonstrated performance in accordance with the
loan terms and conditions.

LOAN FEES - Loan origination fees and certain direct loan origination costs are
deferred and amortized as a yield adjustment over the contractual loan terms.

OTHER REAL ESTATE OWNED, NET - Properties acquired as a result of foreclosure
on a mortgage loan are classified as other real estate owned and are recorded
at the lower of the recorded investment in the related loan or the fair value
of the property at the date of acquisition, with any resulting write down
charged to the allowance for loan losses and any disposition expenses charged
to the valuation allowance for possible losses on other real estate owned.
Subsequent write downs are charged directly to operating expenses.

PREMISES AND FIXED ASSETS - Land is stated at original cost. Buildings and
furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is computed by the straight-line method over the estimated useful
lives of the properties as follows:

Buildings                                           2.22% to 2.50%  per year
Furniture and equipment                                        10%  per year
Computer equipment                                          33.33%  per year

Leasehold improvements are amortized over the remaining non-cancelable terms of
the related leases.

EARNINGS  PER  SHARE ("EPS")- Earnings per share are calculated and reported in
accordance with  Statement of Financial Accounting Standards No. 128, "Earnings
Per Share'' ("SFAS  128").  SFAS 128, requires disclosure of

                                      -28-

basic earnings per share  and diluted earnings  per  share,  for  entities
with  complex  capital structures, on the face of the income statement, along
with a reconciliation of the numerator and denominator of basic and diluted
earnings per share.

The following  is  a  reconciliation  of the numerator and denominator of basic
earnings  per share for the years ended  June  30,  2000,  1999  and  1998  (in
thousands).

                                                                                                 
Fiscal Year Ended June 30,                                              2000                    1999              1998
- ----------------------------------------------------------------------------------------------------------------------
NUMERATOR:
Net Income                                                           $22,374                  $19,861          $13,098
DENOMINATOR:
Average shares outstanding utilized in the calculation of
   basic earnings per share                                           11,276                   10,951           11,001
Unvested shares of Recognition and Retention Plan                        268                      372              517
Common stock equivalents due to the dilutive effect of
   stock options                                                         252                      528              523
- ----------------------------------------------------------------------------------------------------------------------
Average shares outstanding utilized in the calculation of
   diluted earnings per share                                         11,796                   11,851           12,041
======================================================================================================================

Common  stock  equivalents  due  to  the  dilutive  effect of stock options are
calculated based upon the average market value of the  Company's  common  stock
during the fiscal years ended June 30, 2000, 1999 and 1998.

GOODWILL - Goodwill generated from the Company's acquisition of Conestoga
Bancorp, Inc. on June 26, 1996 is recorded on a straight line basis over a
twelve year period. Goodwill generated from the Company's acquisition of
Financial Bancorp, Inc. on January 21, 1999 is recorded on a straight line
basis over a twenty year period.  In March 1995, the FASB issued SFAS No. 121,
''Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of'' which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment and reported at the lower of carrying amount or fair value, less
cost to sell, whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  No such event or change in
circumstance has occurred which has caused the Company to review its recorded
level of goodwill associated with assets acquired from either Conestoga
Bancorp, Inc. or Financial Bancorp, Inc.

INCOME  TAXES - Income taxes are accounted for in accordance with Statement  of
Financial  Accounting  Standards No. 109, "Accounting for Income Taxes," ("SFAS
109") which requires that  deferred taxes be provided for temporary differences
between the book and tax bases of assets and liabilities.

CASH FLOWS - For purposes of the Consolidated Statement of Cash Flows, the
Company considers cash and due from banks to be cash equivalents.

EMPLOYEE BENEFITS - The Company maintains a Retirement Plan and 401(k) Plan for
substantially all of its employees, both of which are tax qualified under the
Employee Retirement Income Security Act of 1974 ("ERISA").

The Company provides additional postretirement benefits to employees, which are
recorded in accordance with Statement of Financial Accounting Standards No.
106, ''Employers' Accounting for Postretirement Benefits Other Than Pensions''
("SFAS 106").  This Statement requires accrual of postretirement benefits (such
as health care benefits) during the years an employee provides services.

The Company maintains an Employee  Stock Ownership Plan for employees ("ESOP").
Compensation expense related to the ESOP is recorded in accordance with SOP 93-
6, which requires the compensation expense  to be recorded during the period in
which  the  shares  become  committed  to  be released  to  participants.   The
compensation expense is measured based upon  the fair market value of the stock
during  the  period,  and, to the extent that the  fair  value  of  the  shares
committed to be released  differs  from  the  original cost of such shares, the
difference is recorded as an adjustment to additional paid-in capital.

                                      -29-

In December, 1996, the Company adopted a Recognition and Retention Plan for
employees and outside directors ("RRP") and a Stock Option Plan for Employees
and Outside Directors (the "Stock Option Plan"), which are subject to the
accounting requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123").  SFAS 123 encourages,
but does not require, companies to record compensation cost for stock-based
employee compensation plans at fair value.  The Company has chosen to continue
to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations ("APB 25").  Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.  To date, no compensation
expense has been recorded for stock options, since, for all granted options,
the market price on the date of grant equals the amount employees must pay to
acquire the stock.   In accordance with APB 25, compensation expense related to
the RRP is recorded for all shares earned by participants during the period at
$18.64 per share, the average historical acquisition cost of all allocated RRP
shares.

FINANCIAL INSTRUMENTS - Statement of Financial Accounting Standards No. 119
"Disclosure About Derivative Financial Instruments and Fair Value of Financial
Instruments" ("SFAS 119")  requires disclosures about financial instruments,
which are defined as futures, forwards, swap and option contracts and other
financial instruments with similar characteristics.  On balance sheet
receivables and payables are excluded from this definition.  The Company did
not hold any derivative financial instruments as defined by SFAS 119 at June
30, 2000, 1999 or 1998.

COMPREHENSIVE INCOME - Comprehensive income for the fiscal years ended June 30,
2000, 1999 and 1998 is determined in accordance with Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income.''  Comprehensive
income includes revenues, expenses, and gains and losses which, under current
GAAP, bypass net income and are typically reported as a component of
stockholders' equity.

DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION - The
Company's financial statements reflect the adoption of Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information ("SFAS 131")".

SFAS 131 establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in subsequent interim financial reports issued to shareholders.  It
also establishes standards for related disclosure about products and services,
geographic areas, and major customers.  The statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments.  Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and assess performance.  The statement also requires that
public enterprises report a measure of segment profit or loss, certain specific
revenue and expense items and segment assets.  It also requires that
information be reported about revenues derived from the enterprises' products
or services, or about the countries in which the enterprises earn revenues and
holds assets, and about major customers, regardless of whether that information
is used in making operating decisions.

The Company has one reportable segment, "Community Banking."  All of the
Company's activities are interrelated, and each activity is dependent and
assessed based on how each of the activities of the Company supports the
others.  For example, commercial lending is dependent upon the ability of the
Bank to fund itself with retail deposits and other borrowings and to manage
interest rate and credit risk.  This situation is also similar for consumer and
residential mortgage lending.  Accordingly, all significant operating decisions
are based upon analysis of the Company as one operating segment or unit.

General information required by SFAS 131 is disclosed in the Consolidated
Financial Statements and accompanying notes.   Additionally, for the years
ended June 30, 2000, 1999, and 1998, there is no customer that accounted for
more than 10% of the Company's revenue.
                                      -30-

RECENTLY ISSUED ACCOUNTING STANDARDS

REVENUE RECOGNITION IN FINANCIAL STATEMENTS - In December, 1999, the Securities
and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements."  SAB 101 summarizes
certain of the SEC's views on applying generally accepted accounting principles
to revenue recognition in financial statements.  On June 26, 2000, the SEC
issued SAB 101B to defer the effective date of implementation of SAB 101 until
no later than the fourth fiscal quarter of fiscal years beginning after
December 31, 1999.  The Company is required to adopt SAB 101 by June 30, 2001.
The Company does not expect the adoption of SAB 101 to have a material impact
on the consolidated financial statements.

DERIVATIVE INSTRUMENTS - In June, 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, ("SFAS 133")
"Accounting for Derivative Instruments and Hedging Activities" as amended in
June, 1999 by SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133," and in
June, 2000, by SFAS 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities," (collectively SFAS 133).  SFAS 133 requires that
entities recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair value.
Under SFAS 133 an entity may designate a derivative as a hedge of exposure to
either changes in: (a) fair value of a recognized asset or liability or firm
commitment, (b) cash flows of a recognized or forecasted transaction, or (c)
foreign currencies of a net investment in foreign operations, firm commitments,
available-for-sale securities or a forecasted transaction.  Depending upon the
effectiveness of the hedge and/or the transaction being hedged, any changes in
the fair value of the derivative instrument is either recognized in earnings in
the current year, deferred to future periods, or recognized in other
comprehensive income.  Changes in the fair value of all derivative instruments
not recognized as hedge accounting are recognized in current year earnings.
SFAS 133 is required for all fiscal quarters or fiscal years beginning after
June 15, 2000.  The Company adopted SFAS 133 on July 1, 2000.  No adjustment
was required as a result of the change in accounting principle.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Areas in the accompanying financial
statements where estimates are significant include the allowance for loans
losses, the carrying value of other real estate, purchase accounting
adjustments related to the acquisitions of Conestoga and FIBC and the fair
value of financial instruments.

RECLASSIFICATION - Certain June 30, 1999, and 1998 amounts have been
reclassified to conform to the June 30, 2000 presentation.

2.   CONVERSION TO STOCK FORM OF OWNERSHIP

On November 2, 1995, the Board of Directors of the Bank adopted a Plan of
Conversion to convert from mutual to stock form. As part of the conversion, the
Company was incorporated under Delaware law for the purpose of acquiring and
holding all of the outstanding stock of the Bank. On June 26, 1996, the Company
completed its initial public offering and issued 14,547,500 shares of common
stock (par value $.01 per share) at a price of $10.00 per share, resulting in
net proceeds of approximately $141,368 prior to the acquisition of stock by the
Employee Stock Ownership Plan.  Costs related to the conversion were charged
against the Company's proceeds from the sale of the stock.

At the time of conversion, the Bank established a liquidation account in an
amount equal to the retained earnings of the Bank as of the date of the most
recent financial statements contained in the final conversion prospectus. The
liquidation account is reduced annually to the extent that eligible account
holders have reduced their qualifying deposits as of each anniversary date.
Subsequent increases will not restore an eligible account holder's interest in
the liquidation account. In the event of a complete liquidation, each eligible
account holder will be entitled to receive a distribution from the liquidation
account in an amount proportionate to the current adjusted qualifying balances
for accounts then held.

                                      -31-

The Company acquired Conestoga Bancorp, Inc. on June 26, 1996.  The liquidation
account previously established by Conestoga's subsidiary, Pioneer Savings Bank,
F.S.A. during its initial public offering in March, 1993, was assumed by the
Company in the acquisition.

The Company acquired FIBC on January 21, 1999.  The liquidation account
previously established by FIBC's subsidiary, Financial Federal Savings Bank
during its initial public offering was assumed by the Company in the
acquisition.

The Company may not declare or pay cash dividends on or repurchase any of its
shares of common stock if the effect thereof would cause stockholders' equity
to be reduced below applicable regulatory capital maintenance requirements, the
amount required for the liquidation account, or if such declaration and payment
would otherwise violate regulatory requirements.

3.   ACQUISITION OF FINANCIAL BANCORP, INC.

On January 21, 1999, the Company completed the acquisition of FIBC, the holding
company for Financial Federal Savings Bank, F.S.B.  Pursuant to the Merger
Agreement, each FIBC stockholder who submitted a valid election for cash
received $39.14 in cash and each FIBC stockholder who submitted a valid
election for DCB common stock received 1.8282 shares of DCB common stock, plus
cash in lieu of any fractional shares, in exchange for each of their shares of
FIBC common stock.  The remaining shares of FIBC common stock for which a valid
election was not submitted were converted into, pursuant to the Merger
Agreement, a combination of DCB stock and cash such that each such shareholder
received $31.257 in cash and 0.3682 shares of DCB common stock for each share
of FIBC common stock, except that all stockholders of FIBC who owned less than
50 shares of FIBC common stock received cash.  Upon consummation of the
acquisition, shares of FIBC common stock that were owned by FIBC as treasury,
that were unallocated shares held in FIBC's Recognition and Retention Plan or
that were held directly by DCB other than in a fiduciary capacity or in
satisfaction of a debt previously contracted were canceled and retired.  No
payment was be made with respect to such shares of FIBC common stock.

Holders of stock options which had been granted by FIBC to purchase 60,133
shares of FIBC common stock were paid an amount in cash computed by multiplying
(i) any positive difference obtained by subtracting the per share exercise
price applicable to such option from $39.14, by (ii) the number of shares of
FIBC common stock subject to such option.  These payments totaled approximately
$1,545.  In addition, holders of stock options which had been granted by FIBC
to purchase 96,975 shares of FIBC common stock were converted into options to
purchase 177,286 shares DCB common stock (the "Converted Options").  The
expiration dates on all Converted Options remained unchanged from initial grant
by FIBC. Based upon the closing price of DCB common stock on January 21, 1999,
the total consideration paid to FIBC stockholders, in the form of cash or DCB
stock, was $66,750.

The Bank received approximately $189,000, $43,800, and $37,800 of net loans,
investment securities, and mortgage-backed securities, respectively, at fair
value and assumed approximately $230,700 of customer deposit liabilities.  A
core deposit premium of $4,950 was recorded related to the deposits assumed and
is being amortized on a straight line basis over six years.

The acquisition was recorded using the purchase method of accounting;
accordingly,  the purchase price was allocated to the respective assets
acquired and liabilities assumed based on their estimated fair values. Goodwill
generated in the transaction of $44,200 is being amortized on a straight line
basis over 20 years for financial reporting purposes.

The information below presents, on an unaudited pro forma basis, the
consolidated statement of operations for the Company for the years ended June
30, 1999 and 1998.  All information below is adjusted for the acquisition of
FIBC, as if the transaction had been consummated on July 1, 1997.

                                      -32-

                                                                                                    
                                                                Actual
                                                          Consolidated            Pro-Forma         Pro Forma            Pro Forma
                                                           for the Six          for the Six           for the              for the
                                                          Months Ended        Months Ended         Year Ended           Year Ended
                                                      June 30, 1999(A)    December 31, 1998      June 30, 1999       June 30, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income                                            $31,607              $29,805            $61,412             $58,682
Provision for possible loan losses                                 120                  292                412               2,068
Non-interest income                                              4,255                4,137              8,392               8,033
Non-interest expense:
   Goodwill and core deposit amortization                        2,543                1,804              4,347               3,636
   Other non-interest expense                                   14,184               15,404             29,588              33,219
Total non-interest expense                                      16,727               17,208             33,935              36,855
Income before income taxes                                     $19,015              $16,442            $35,457             $27,792

(A) Amounts exclude the operations of FIBC during the period January 1, 1999
through January 21, 1999, which are not material to the total combined
operations for the year ended June 30, 1999.

4.   INVESTMENT SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE

The amortized cost, gross unrealized gains and losses and estimated fair value
of investment securities held to maturity at June 30, 2000 were as follows:

                                                  Investment Securities Held to Maturity
                                                                                                   
                                                                              Gross                 Gross
                                                      Amortized             Unrealized           Unrealized         Estimated
                                                        Cost                  Gains                Losses           Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
DEBT SECURITIES:
U.S. Treasury securities and obligations
    of U.S. Government corporations and
    agencies                                           $12,440                  $-                   $(144)           $12,296
Obligations of state and political
    subdivisions                                           554                   15                     -                 569
Corporate securities                                     4,495                   -                      (9)             4,486
- ------------------------------------------------------------------------------------------------------------------------------
                                                       $17,489                  $15                  $(153)           $17,351
- ------------------------------------------------------------------------------------------------------------------------------

The amortized cost and estimated fair value of investment securities held to
maturity at June 30, 2000, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.

                                                Amortized          Estimated
                                                   Cost            Fair Value
- -----------------------------------------------------------------------------
Due in one year or less                            $3,172              $3,171
Due after one year through five years              13,188              13,043
Due after five years through ten years              1,129               1,137
- -----------------------------------------------------------------------------
                                                  $17,489             $17,351
- -----------------------------------------------------------------------------

During the year ended June 30, 2000, proceeds from the calls of investment
securities held to maturity totaled $10,000.  No gain or loss resulted on these
calls.  There were no sales of investment securities held to maturity during
the year ended June 30, 2000.

The amortized/historical cost, gross unrealized gains and losses and estimated
fair value of investment securities available for sale at June 30, 2000 were as
follows:

                                      -33-

                                                  Investment Securities Available for Sale
                                                                                                   
                                                    Amortized/                Gross             Gross
                                                   Historical             Unrealized          Unrealized             Estimated
                                                        Cost                  Gains             Losses              Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
DEBT SECURITIES:
U.S. Treasury securities and obligations
   of U.S. Government corporations and
   agencies                                           $55,246                 $215                $(1,969)             $53,492
Corporate securities                                   52,167                   41                 (1,654)              50,554
Public utilities                                        1,644                   -                     (59)               1,585
                                                      109,057                  256                 (3,682)             105,631
- ------------------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES                                      14,948                1,633                 (1,091)              15,490
- ------------------------------------------------------------------------------------------------------------------------------
                                                     $124,005               $1,889                $(4,773)            $121,121
- ------------------------------------------------------------------------------------------------------------------------------

The amortized cost and estimated fair value of investment securities available
for sale at June 30, 2000, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.

                                           Amortized                Estimated
                                               Cost                Fair Value
- -----------------------------------------------------------------------------
Due in one year or less                      $13,173                  $13,149
Due after one year through five years         95,884                   92,482
Due in five years to ten years                    -                        -
- -----------------------------------------------------------------------------
                                            $109,057                 $105,631
- -----------------------------------------------------------------------------

During the year ended June 30, 2000, proceeds from the sales and calls of
investment securities available for sale totaled $39,867 and $2,400,
respectively.  Net losses of $777 resulted from the sales.  No gain or loss
resulted from the calls.

The amortized cost, gross unrealized gains and losses and estimated fair value
of investment securities held to maturity at June 30, 1999 were as follows:

                                                  Investment Securities Held to Maturity
                                                                                                   
                                                                              Gross                 Gross
                                                      Amortized             Unrealized           Unrealized         Estimated
                                                        Cost                  Gains                Losses           Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
DEBT SECURITIES:
U.S. Treasury securities and obligations
   of U.S. Government corporations and
   agencies                                             $22,401                 $34                  $(35)             $22,400
Obligations of state and political
   subdivisions                                           1,819                  30                    -                 1,849
Corporate securities                                      7,478                  41                    -                 7,519
- ------------------------------------------------------------------------------------------------------------------------------
                                                        $31,698                $105                  $(35)             $31,768
- ------------------------------------------------------------------------------------------------------------------------------

During the year ended June 30, 1999, proceeds from the calls of investment
securities held to maturity totaled $41,660.  A gain of $86 resulted on these
calls.  There were no sales of investment securities held to maturity during
the year ended June 30, 1999.

The amortized/historical cost, gross unrealized gains and losses and estimated
fair value of investment securities available for sale at June 30, 1999 were as
follows:

                                      -34-

                                                  Investment Securities Available for Sale
                                                                                                   
                                                    Amortized/                Gross             Gross
                                                   Historical             Unrealized          Unrealized             Estimated
                                                        Cost                  Gains             Losses              Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
DEBT SECURITIES:
U.S. Treasury securities and obligations
   of U.S. Government corporations and
   agencies                                           $65,074                 $439                $(1,360)             $64,153
Corporate securities                                   63,402                  141                 (1,167)              62,376
Public utilities                                        5,047                   -                     (86)               4,961
                                                      133,523                  580                 (2,613)             131,490
- ------------------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES:                                     14,162                1,614                   (634)              15,142
- ------------------------------------------------------------------------------------------------------------------------------
                                                     $147,685               $2,194                $(3,247)            $146,632
- ------------------------------------------------------------------------------------------------------------------------------

During the year ended June 30, 1999, proceeds from the sales and calls of
investment securities available for sale totaled $9,373 and $30,268,
respectively.  Net gains of $555 and $27, respectively, resulted from the sales
and calls.

5.   MORTGAGE-BACKED SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE

The amortized cost, gross unrealized gains and losses and the estimated fair
value of mortgage-backed securities held to maturity at June 30, 2000 were as
follows:

                                                                     Mortgage-Backed Securities Held to Maturity
                                                                                                   
                                                      Amortized             Unrealized           Unrealized         Estimated
                                                        Cost                  Gains                Losses           Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
GNMA pass-through certificates                           $2,749                  $-                   $(6)              $2,743
FHLMC pass-through certificates                           5,552                   -                   (39)               5,513
FNMA pass-through certificates                            5,028                   4                   (25)               5,007
- ------------------------------------------------------------------------------------------------------------------------------
                                                        $13,329                  $4                  $(70)             $13,263
- ------------------------------------------------------------------------------------------------------------------------------

During the year ended June 30, 2000, proceeds from the sales of mortgage-backed
securities held to maturity totaled $1,955.  Net losses of $4 resulted from
these sales.  The unpaid principal of the securities at the dates of sale were
less than 15% of their acquired par value, and thus were permissible sales
under SFAS 115.

The amortized cost, gross unrealized gains and losses and the estimated fair
value of mortgage-backed securities available for sale at June 30, 2000 were as
follows:

                                                       Mortgage-Backed Securities Available for Sale
                                                                                                   
                                                      Amortized             Unrealized           Unrealized         Estimated
                                                        Cost                  Gains                Losses           Fair Value
- ------------------------------------------------------------------------------------------------------------------------------

Collateralized mortgage obligations                     $287,780                $176                $(8,089)          $279,867
GNMA pass-through certificates                           130,473                 182                   (921)           129,734
FHLMC pass-through certificates                            9,377                  70                   (107)             9,340
FNMA pass-through certificates                            10,530                  59                   (169)            10,420
- ------------------------------------------------------------------------------------------------------------------------------
                                                        $438,160                $487                $(9,286)          $429,361
- ------------------------------------------------------------------------------------------------------------------------------

During the year ended June 30, 2000, proceeds from the sales of mortgage-backed
securities available for sale totaled $64,937.  Net losses of $1,818 resulted
from these sales.

The amortized cost, gross unrealized gains and losses and the estimated fair
value of mortgage-backed securities held to maturity at June 30, 1999 were as
follows:

                                                  Mortgage-Backed Securities Held to Maturity
                                                                                                   
                                                      Amortized             Unrealized           Unrealized         Estimated
                                                        Cost                  Gains                Losses           Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
GNMA pass-through certificates                           $5,772                 $259                  $-                $6,031
FHLMC pass-through certificates                           9,140                   68                   -                 9,208
FNMA pass-through certificates                            7,908                   57                  (12)               7,953
- ------------------------------------------------------------------------------------------------------------------------------
                                                        $22,820                 $384                 $(12)             $23,192
- ------------------------------------------------------------------------------------------------------------------------------

                                      -35-

The amortized cost, gross unrealized gains and losses and the estimated fair
value of mortgage-backed securities available for sale at June 30, 1999 were as
follows:

                                                  Mortgage-Backed Securities Available for Sale
                                                                                                   
                                                      Amortized             Unrealized           Unrealized         Estimated
                                                        Cost                  Gains                Losses           Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations                    $348,938                  $220                $(4,904)         $344,254
GNMA pass-through certificates                          127,285                   730                   (709)          127,306
FHLMC pass-through certificates                          13,854                   105                    (74)           13,885
FNMA pass-through certificates                           17,409                   127                   (134)           17,402
- ------------------------------------------------------------------------------------------------------------------------------
                                                       $507,486                $1,182                $(5,821)         $502,847
- ------------------------------------------------------------------------------------------------------------------------------

There were no sales or calls of mortgage-backed securities held to maturity or
available for sale during the year ended June 30, 1999.

6.   LOANS

The Company's real estate loans are comprised of the following:

    At June 30,                              2000                     1999
- ------------------------------------------------------------------------------
One-to-four family                           $212,138                 $246,075
Multi-family and underlying
       cooperative                          1,349,854                1,000,859
Nonresidential                                118,576                   88,837
F.H.A. and V. A. insured mortgage loans         7,536                    9,699
Co-op loans                                    27,465                   32,893
- ------------------------------------------------------------------------------
                                            1,715,569                1,378,363
Net unearned fees                              (2,017)                  (2,853)
- ------------------------------------------------------------------------------
                                           $1,713,552               $1,375,510
==============================================================================

The Bank originates both adjustable and fixed interest rate real estate loans.
At June 30, 2000, the approximate composition of these loans was as follows:

               Fixed Rate                             Variable Rate
- -----------------------------------      -------------------------------------
                                         Period to Maturity
Period to Maturity       Book Value       or Next Repricing         Book Value
- -----------------------------------      -------------------------------------
1 month-1 year               $2,005      1 month-1 year                $82,669
1 year-3 years                2,702      1 year-3 years                216,256
3 years-5 years              12,581      3 years-5 years               297,508
5 years-10 years            299,961      5 years-10 years              602,416
Over 10 years               199,471      Over 10 years                      -
- -----------------------------------      -------------------------------------
                           $516,720                                 $1,198,849
- -----------------------------------      -------------------------------------

The adjustable rate loans have interest rate adjustment limitations and are
generally indexed to the Federal Home Loan Bank of New York ("FHLBNY") five-
year borrowing funds rate, the one-year constant maturity Treasury index, or
the Federal Home Loan Bank national mortgage contract rate.

A concentration of credit risk exists within the Bank's loan portfolio, as the
majority of real estate loans are collateralized by multi-family and underlying
cooperative properties located in the New York City metropolitan area.

The Company's other loans are comprised of the following:

    At June 30,                                   2000                   1999
- ------------------------------------------------------------------------------
Student loans                                     $990                    $794
Passbook loans (secured by savings
   and time deposits)                            1,900                   2,271
Home improvement loans                           3,410                   3,666
Consumer installment and other loans             1,348                   1,100
- ------------------------------------------------------------------------------
                                                $7,648                  $7,831
- ------------------------------------------------------------------------------

                                      -36-

Loans on which the accrual of interest has been discontinued were $4,421 and
$3,001 at June 30, 2000 and 1999, respectively.  Interest income foregone on
nonaccrual loans was not material during the fiscal years ended June 30, 2000
and 1999.

The Bank had outstanding loans considered troubled-debt restructurings of $700
and $1,290 at June 30, 2000 and 1999, respectively. Income recognized on these
loans was approximately $56 and $125 for the years ended June 30, 2000 and
1999, respectively, compared to interest income of $70 and $183 calculated
under the original terms of the loans, for the years ended June 30, 2000 and
1999, respectively.

The recorded investment in loans for which impairment has been recognized under
the guidance of SFAS 114 was approximately $2,591 and $1,563 at June 30, 2000
and 1999, respectively. The average balance of impaired loans was approximately
$1,482 and $2,329 for the years ended June 30, 2000 and 1999, respectively.
Write-downs on impaired loans were not material during the years ended June 30,
2000 and 1999.  At June 30, 2000 and 1999, specific reserves totaling $130 and
$62 were allocated within the allowance for loan losses for impaired loans.
Net principal received and interest income recognized on impaired loans during
the years ended June 30, 2000 and 1999 were not material.

The following assumptions were utilized in evaluating the loan portfolio
pursuant to the provisions of SFAS 114:

HOMOGENOUS LOANS - One-to-four family residential mortgage loans and loans on
cooperative apartments having a balance of less than $227 and consumer loans
are considered to be small balance homogenous loan pools and, accordingly, are
not covered by SFAS 114.

LOANS EVALUATED FOR IMPAIRMENT - All non-homogeneous loans greater than $1,000
are individually evaluated for potential impairment. Additionally, residential
mortgage loans exceeding $227 and delinquent in excess of 60 days are evaluated
for impairment.  A loan is considered impaired when it is probable that all
contractual amounts due will not be collected in accordance with the terms of
the loan. A loan is not deemed to be impaired if a delay in receipt of payment
is expected to be less than 30 days or if, during a longer period of delay, the
Bank expects to collect all amounts due, including interest accrued at the
contractual rate during the period of the delay. Factors considered by
management include the property location, economic conditions, and any unique
circumstances affecting the loan.  At June 30, 2000 and 1999, all impaired
loans were on nonaccrual status. In addition, at June 30, 2000 and 1999,
respectively, approximately $1,830 and $1,437 of one-to-four family residential
mortgage loans, loans on cooperative apartments and consumer loans with a
balance of less than $227 were on nonaccrual status. These loans are considered
as a homogeneous loan pool not covered by SFAS 114.

RESERVES AND CHARGE-OFFS - The Bank allocates a portion of its total allowance
for loan losses to loans deemed impaired under SFAS 114. All charge-offs on
impaired loans are recorded as a reduction in both loan principal and the
allowance for loan losses. Management evaluates the adequacy of its allowance
for loan losses on a regular basis. At June 30, 2000, management believes that
its allowance is adequate to provide for losses inherent in the total loan
portfolio, including impaired loans.

MEASUREMENT OF IMPAIRMENT - Since all impaired loans are collateralized by real
estate properties, the fair value of the collateral is utilized to measure
impairment.

INCOME RECOGNITION - Accrual of interest is discontinued on loans identified as
impaired and past due ninety days. Subsequent cash receipts are applied
initially to the outstanding loan principal balance. Additional receipts beyond
the recorded outstanding balance at the time interest is discontinued are
recorded as recoveries in the Bank's allowance for loan losses.

                                      -37-

  7. ALLOWANCE FOR LOAN LOSSES AND LOSSES ON OTHER REAL ESTATE OWNED

Changes in the allowance for loan losses were as follows:

For the year ended June 30,                2000          1999             1998
- ------------------------------------------------------------------------------
Balance at beginning of period           $15,081       $12,075         $10,726
Provision charged to operations              240           240           1,635
Loans charged off                           (545)         (208)           (328)
Recoveries                                     9             7              42
Reserve acquired in purchase of FIBC           -         2,967              -
- ------------------------------------------------------------------------------
Balance at end of period                 $14,785       $15,081         $12,075
- ------------------------------------------------------------------------------

Changes in the allowance for losses on real estate owned were as follows:

For the year ended June 30,                2000          1999             1998
- ------------------------------------------------------------------------------
Balance at beginning of period             $149          $164             $187
Provision charged to operations              25            16              114
Charge-offs, net of recoveries             (129)          (31)            (137)
Balance at end of period                    $45          $149             $164

8.   MORTGAGE SERVICING ACTIVITIES

At June 30, 2000 and 1999, the Bank was servicing loans for others having
principal amounts outstanding of approximately $48,190 and $53,857
respectively.  Servicing loans for others generally consists of collecting
mortgage payments, maintaining escrow accounts, disbursing payments to
investors and foreclosure processing. In connection with these loans serviced
for others, the Bank held borrowers' escrow balances of approximately $677 and
$654 at June 30, 2000 and 1999, respectively.

9.   PREMISES AND FIXED ASSETS

The following is a summary of premises and fixed assets:

At June 30,                                      2000                    1999
- -----------------------------------------------------------------------------
Land                                           $2,457                  $2,462
Buildings                                      10,297                  10,689
Leasehold improvements                          9,215                   8,357
Furniture and equipment                         7,814                   7,712
- -----------------------------------------------------------------------------
                                               29,783                  29,220
- -----------------------------------------------------------------------------
Less:  accumulated depreciation
       and amortization                       (15,012)                (14,245)
- -----------------------------------------------------------------------------
                                              $14,771                 $14,975
=============================================================================

Depreciation and amortization expense amounted to approximately $1,080, $954,
and $964 for the years ended June 30, 2000, 1999 and 1998, respectively.

10.   FEDERAL HOME LOAN BANK OF NEW YORK CAPITAL STOCK

The Bank is a Savings Bank Member of the FHLBNY.  Membership requires the
purchase of shares of FHLBNY capital stock at $100 per share. The Bank owned
424,227 and 282,813 shares at June 30, 2000 and 1999, respectively. The FHLBNY
paid dividends on the capital stock of 6.8%, 6.9%, and 7.2% during the years
ended June 30, 2000, 1999 and 1998, respectively.

11.   DUE TO DEPOSITORS

The deposit accounts of each depositor are insured up to $100 by either the
Bank Insurance Fund or the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation ("FDIC").

                                      -38-

Deposits are summarized as follows:

    At June 30,                                                 2000                              1999
- ----------------------------------------------------------------------------------------------------------------
                                                                                        
                                               EFFECTIVE                              Effective
                                                 COST                  LIABILITY         Cost          Liability
- ----------------------------------------------------------------------------------------------------------------
Savings accounts                               2.08%                     $373,772         2.09%         $406,602
Certificates of deposit                        5.51                       618,165         5.31           703,251
Money market accounts                          4.37                       146,066         3.55            52,979
NOW and Super NOW accounts                     1.24                        26,787         1.22            25,687
Non-interest bearing checking accounts           -                         54,358           -             50,414
- ----------------------------------------------------------------------------------------------------------------
                                               3.98%                   $1,219,148         3.85%       $1,238,933
- ----------------------------------------------------------------------------------------------------------------

The distribution of certificates of deposits by remaining maturity was as
follows:

    At June 30,                                2000                1999
- -----------------------------------------------------------------------
Maturity in three months or less             $131,865          $221,368
Over 3 through 6 months                        99,033           137,654
Over 6 through 12 months                      184,040           192,749
Over 12 months                                203,227           151,480
- -----------------------------------------------------------------------
Total certificates of deposit                $618,165          $703,251
- -----------------------------------------------------------------------

The aggregate amount of certificates of deposits with a minimum denomination of
$100 was approximately $75,625 and $78,707 at June 30, 2000 and 1999,
respectively.

12.   SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Presented below is information concerning securities sold with agreement to
repurchase:

                                                                                         
    At or for the year ended June 30,                                  2000                                  1999
- -----------------------------------------------------------------------------------------------------------------
Balance outstanding at end of period                                   $434,027                          $481,660
Average interest cost at end of period                                     6.37%                             5.28%
Average balance outstanding during the year                            $456,155                          $381,996
Average interest cost during the year                                      5.66%                             5.45%
Carrying value of underlying collateral at end of period               $456,844                          $496,500
Estimated fair value of underlying collateral                          $447,715                          $491,750
Maximum balance outstanding at month end during period                 $486,936                          $481,660

13.   FEDERAL HOME LOAN BANK OF NEW YORK ADVANCES

The Bank had borrowings (''Advances'') from the FHLBNY totaling $555,000 and
$250,000 at  June 30, 2000 and 1999, respectively. The average cost of FHLB
advances was 5.89% and 5.96%, respectively, during the years ended June 30,
2000 and 1999, and the average interest rate on outstanding FHLB advances was
6.07% and 5.52%, respectively, at June 30, 2000 and 1999.  At June 30, 2000, in
accordance with the Advances, Collateral Pledge and Security Agreement with the
FHLBNY, the Bank maintained in excess of $610,500 of qualifying collateral with
the FHLBNY (principally real estate loans), as defined by the FHLBNY, to secure
such advances.

14.   SUBORDINATED NOTES PAYABLE

On April 12, 2000, the Company issued subordinated notes in the aggregate
amount of $25.0 million. The notes have a fixed rate of interest of 9.25% and
mature on May 1, 2010.  Interest expense recorded on the notes, inclusive of
amortization of related issuance costs, was $521 during the year ended June 30,
2000.

                                      -39-

15.   INCOME TAXES

The Company's Federal, State and City income tax provisions were comprised of
the following:

 Year Ended June 30,          2000                                    1999                                 1998
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                        
                              STATE                                   State                                State
               FEDERAL      AND CITY       TOTAL        Federal      and City      Total      Federal    and City      Total
- ----------------------------------------------------------------------------------------------------------------------------
Current        $11,569          $677       $12,246       $11,045       $1,685       $12,730    $8,687      $2,698    $11,385
Deferred         2,787           184         2,971         1,915         (630)        1,285       776        (295)       481
- ----------------------------------------------------------------------------------------------------------------------------
               $14,356          $861       $15,217       $12,960       $1,055       $14,015    $9,463      $2,403    $11,866
============================================================================================================================

In  accordance  with SFAS 109, deferred tax assets and liabilities are recorded
for temporary differences  between  the  book  and  tax  bases  of  assets  and
liabilities.

The components of Federal and net State and City deferred income tax assets and
liabilities were as follows:

    At June 30,                                          2000                               1999
- ----------------------------------------------------------------------------------------------------------
                                                                                      
                                                                  STATE                             State
                                            FEDERAL             AND CITY           Federal        and City
- ----------------------------------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
Excess book bad debt over tax
   Bad debt reserve                          $4,027              $2,629             $3,809          $2,691
Employee benefit plans                        2,784               1,635              3,921           2,344
Tax effect of other comprehensive
   loss on securities available               3,271               2,103              1,752             618
   for sale
Other                                            -                   -                 165             102
- ----------------------------------------------------------------------------------------------------------
Total deferred tax assets                    10,082               6,367              9,647           5,755
- ----------------------------------------------------------------------------------------------------------
Less: Valuation allowance on
   deferred tax assets                           -                   -                  -               -
- ----------------------------------------------------------------------------------------------------------
Deferred tax assets after
   valuation allowance                      $10,082              $6,367             $9,647          $5,755
- ----------------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Undistributed earnings of
   subsidiary                                $7,172                 $16             $4,865             $21
Difference in book and tax
   carrying value of fixed assets               324                  52                192               2
Tax effect of purchase
   accounting fair value
   adjustments                                  861                 515                921             549
Other                                           101                  61                 -               -
- ----------------------------------------------------------------------------------------------------------
Total deferred tax liabilities               $8,458                $644             $5,978            $572
- ----------------------------------------------------------------------------------------------------------
Net deferred tax asset                       $1,624              $5,723             $3,669          $5,183
==========================================================================================================

During the year ended June 30, 2000, deferred tax assets include an increase of
$3,004 resulting from adjustments pursuant to SFAS 115.

The provision for income taxes differed from that computed at the Federal
statutory rate as follows:

                                                                      
    Year ended June 30,                        2000                1999                      1998
- --------------------------------------------------------------------------------------------------
Tax at Federal statutory rate               $13,157               $11,856                  $8,737
State and local taxes, net of
   Federal income tax benefit                   560                   685                   1,562
Goodwill amortization                         1,616                 1,185                     843
Benefit plan differences                         42                   406                     532
Adjustments for prior period tax
   returns                                     (153)                   -                       -
Other, net                                       (5)                 (117)                    193
- --------------------------------------------------------------------------------------------------
                                            $15,217               $14,015                 $11,867
==================================================================================================
Effective tax rate                            40.48%                41.37%                  47.53%
==================================================================================================

Savings banks that meet certain definitions, tests, and other conditions
prescribed by the Internal Revenue Code are allowed to deduct, with
limitations, a bad debt deduction.  Prior to August, 1996, this deduction could
be computed as a percentage of taxable income before such deduction ("PTI
Method") or based upon actual loss experience for Federal, New York State and
New York City income taxes.

                                      -40-

Pursuant to SFAS 109, the Bank is not required to provide deferred taxes on its
tax loan loss reserve as of December 31, 1987 ("base year reserve").  The
amount of this reserve on which no deferred taxes have been provided is
approximately $15,280.  This reserve could be recognized as taxable income and
create a current tax liability using the income tax rates then in effect if one
of the following occur: 1) the Bank's retained earnings represented by the
reserve is used for purposes other than to absorb losses from bad debts,
including dividends or distributions in liquidation; 2) the Bank fails to
qualify as a Bank as provided by the Internal Revenue Code, or 3) there is a
change in federal tax law.

On August 20, 1996, Federal legislation was signed into law which repealed the
reserve method of accounting for bad debts, including the percentage of taxable
income method used by the Bank.  This repeal is effective for the Bank's
taxable year beginning January 1, 1996.  In addition, the legislation requires
the Bank to include in taxable income its bad debt reserves in excess of its
base year reserve over a 6 to 8 year period depending upon the maintenance of
certain loan origination levels.  Since the percentage of taxable income method
tax bad debt deduction and the corresponding increase in the tax bad debt
reserve in excess of the base year have been treated as temporary differences
pursuant to SFAS 109, this change in tax law had no effect on the Company's
consolidated statement of operations.

16. EMPLOYEE BENEFIT PLANS

EMPLOYEE RETIREMENT PLAN - The Bank is a participant in a tax-qualified
noncontributory defined benefit retirement plan with the RSI Retirement Trust.
Substantially all full-time employees are eligible for participation after one
year of service. In addition, a participant must be at least 21 years of age at
the date of enrollment.  During the year ended June 30, 1998, the Bank offered
an early retirement program to all Plan participants who met certain
eligibility criterion.  As a result of the early retirement program, a non-
recurring charge of $1,611 was recorded.

Prior to January 21, 1999, FIBC maintained an employee retirement plan covering
all eligible employees (the "FIBC Retirement Plan").  Effective, January 21,
1999, the Bank assumed sponsorship of the FIBC Retirement Plan, for which the
projected benefit obligation and plan assets totaled $2,281 and $2,675,
respectively.  Participants in the FIBC Retirement Plan, by amendment dated
August 17, 1999, were provided with full vesting on their benefits through
January 21, 1999.  The projected benefit obligation and plan assets of the FIBC
Retirement Plan are reflected in the projected benefit obligation and plan
assets of the Bank's pension plan as of June 30, 1999.

Effective April 1, 2000, the Company froze all participant benefits under the
employee retirement plan.  A gain of $1,360 was recorded in June, 2000 related
to this benefit curtailment.

The retirement cost for the pension plan includes the following components
(including a non-recurring charge of $1,611 related to an early retirement
program in 1998, costs associated with the acquired FIBC Retirement Plan
obligation during the period January 21, 1999 to June 30, 1999, and a
curtailment credit of $1,360 during the fiscal year ended June 30, 2000):

                                                                                       
    For the year ended June 30,                         2000                      1999                 1998
- -----------------------------------------------------------------------------------------------------------
Service cost                                             $528                     $444                 $332
Interest cost                                           1,129                      915                  781
Actual return on plan assets                           (1,433)                  (1,272)              (2,931)
Net amortization and deferral                             (32)                     (32)               1,843
Expense associated with early retirement program           -                        -                 1,611
Curtailment credit                                     (1,360)                      -                    -
- -----------------------------------------------------------------------------------------------------------
Net periodic (credit) cost                            $(1,168)                     $55               $1,636
===========================================================================================================

                                      -41-

The funded status of the plan was as follows:

                                                                                            
    JUNE 30,                                                                        2000                     1999
- -----------------------------------------------------------------------------------------------------------------
PROJECTED BENEFIT OBLIGATION:
Balance at beginning of period                                                   $16,604                  $14,286
Service cost                                                                         527                      444
Interest cost                                                                      1,129                      915
Actuarial (gain) loss                                                             (1,298)                    (393)
Benefit payments                                                                    (987)                    (795)
Settlements                                                                         (424)                      (2)
Early retirement obligation                                                           -                      (132)
Obligation of acquired plan                                                       (1,217)                   2,281
- -----------------------------------------------------------------------------------------------------------------
Balance at end of period                                                          14,334                   16,604
- -----------------------------------------------------------------------------------------------------------------
Plan assets at fair value (investments in trust funds
   managed by RSI)
Balance at beginning of period                                                    16,263                   13,599
Return on plan assets                                                              2,639                      786
Contributions                                                                        274                       -
Benefit payments                                                                    (987)                    (795)
Settlements                                                                         (424)                      (2)
Assets of acquired plan                                                               -                     2,675
- -----------------------------------------------------------------------------------------------------------------
Balance at end of period                                                          17,765                   16,263
- -----------------------------------------------------------------------------------------------------------------
FUNDED STATUS:
Excess (Deficiency) of plan assets over projected benefit obligation               3,431                     (341)
Unrecognized gain (loss) from experience different from that assumed              (1,878)                     626
Unrecognized net past service liability                                               -                      (175)
- -----------------------------------------------------------------------------------------------------------------
Prepaid retirement expense included in other assets                               $1,553                     $110
=================================================================================================================

Major assumptions utilized were as follows:
    At June 30,                                     2000                1999
- -----------------------------------------------------------------------------
Discount rate                                       7.75%               7.00%
Rate of increase in compensation levels             5.50                5.00
Expected long-term return on plan assets            9.00                9.00

BENEFIT MAINTENANCE PLAN AND DIRECTORS' RETIREMENT PLAN - During the fiscal
year ended June 30, 1994, the Bank established a Supplemental Executive
Retirement Plan (''SERP'') for its executive officers. The SERP was established
to compensate the executive officers for any curtailments in benefits due to
the statutory limitations on benefit plans. The SERP exists as a nonqualified
plan which supplements the existing qualified plans. Defined benefit and
defined contribution costs are incurred annually related to the SERP.  During
the year ended June 30, 1997, the SERP was renamed the Benefit Maintenance Plan
("BMP"), and sponsorship was transferred to the Company.  As of June 30, 2000
and 1999, the Benefit Maintenance Plan has an investment in the Company's
common stock of $1,790 and $831, respectively.  Accrued benefits under the
defined benefit portion of the BMP was suspended when benefit accruals under
the tax qualified plan were suspended.

Effective July 1, 1996, the Company established a non-qualified Retirement Plan
for all of its outside directors, which will provide benefits to each eligible
outside director commencing upon their termination of Board service or at age
65.  Each outside director who serves or has agreed to serve as an outside
director  will automatically become a participant in the Plan.

The retirement cost for the defined benefit portion of the BMP and Directors'
Retirement plan include the following components:

    For the year ended June 30,        2000          1999               1998
- -----------------------------------------------------------------------------
Service cost                           $151          $141                $104
Interest cost                           282           236                 248
Net amortization and deferral           173           175                 170
Curtailment credit                     (131)           -                   -
- -----------------------------------------------------------------------------
                                       $475          $552                $522
=============================================================================

The defined contribution costs incurred by the Bank related to the BMP/SERP for
the years ended June 30, 2000, 1999 and 1998 were $924, $990 and $522,
respectively.

                                      -42-

The funded status of the defined benefit portion of the plans was as follows:

                                                                                                  
    JUNE 30,                                                                            2000                    1999
- --------------------------------------------------------------------------------------------------------------------
PROJECTED BENEFIT OBLIGATION:
Balance at beginning of period                                                        $3,964                  $3,562
Service cost                                                                             151                     141
Interest cost                                                                            282                     236
Benefit payments                                                                          -                       -
Actuarial (gain) loss                                                                    (55)                     25
Balance at end of period                                                               4,342                   3,964
PLAN ASSETS AT FAIR VALUE:
Balance at beginning of period                                                            -                       -
Contributions                                                                             -                       -
Benefit payments                                                                          -                       -
- --------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                                  -                       -
- --------------------------------------------------------------------------------------------------------------------
FUNDED STATUS:
Deficiency of plan assets over projected benefit obligation                           (4,342)                 (3,964)
Benefit curtailment                                                                      760                      -
Unrecognized gain from experience different from that assumed                            744                   1,088
Unrecognized net past service liability                                                  228                     739
- --------------------------------------------------------------------------------------------------------------------
Accrued expense included in other liabilities                                        $(2,610)                $(2,137)
====================================================================================================================
Amount recognized in statement of financial condition consists of:
   Accrued liability                                                                 $(3,271)                $(2,887)
   Intangible asset                                                                      661                     750
- --------------------------------------------------------------------------------------------------------------------
Net amount recognized                                                                $(2,610)                $(2,137)
====================================================================================================================

Major assumptions utilized were as follows:

    At June 30,                                             2000                                      1999
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                                
                                                                   DIRECTORS'                                     Directors'
                                                                   RETIREMENT                                     Retirement
                                               BMP                   PLAN                       BMP                   Plan
- ----------------------------------------------------------------------------------------------------------------------------
Discount rate                                  7.75%                  7.50%                      7.00%                  7.25%
Rate of increase in compensation levels        5.50                   4.00                       5.00                   4.00

401(K) PLAN - The Bank also has a 401(k) plan which covers substantially all
employees. Prior to May 31, 1996, under such plan the Bank matched 50% of each
participant's contribution up to 6% of the participant's annual compensation
for the first four years of participation and thereafter 100% of the
participant's contribution up to a maximum of 6%.  Effective May 31, 1996, the
plan was amended whereby the Bank ceased all contributions to the plan, and
effective January 1, 1997, the Bank ceased all participant pre-tax
contributions to the Plan.  As a result, no expense was recorded related to the
401(k) plan during the fiscal years ended June 30, 2000, 1999 and 1998.
Effective July 1, 2000, participant contributions of up to 12% of "covered
compensation," as defined by the Plan, and employer profit-sharing type
contributions of 3% of "covered compensation" were reinstated for all
participants of the 401(k) plan.

The 401(k) plan owns participant investments in the Company's common stock for
the accounts of participants which totaled $3,532, $5,001 and $6,630 at June
30, 2000, 1999 and 1998, respectively.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Bank offers additional
postretirement benefits to its retired employees who have provided at least
five (5) consecutive years of credited service and were active employees prior
to April 1, 1991, as follows:

   (1)   Employees who retired prior to April 1, 1991 receive full medical
       coverage in effect until their death at no cost to such retirees;

   (2)   Eligible employees retiring after April 1, 1991 will be eligible for
       continuation of their medical coverage in effect at the time of such
       employees' retirement until their death. Throughout an employee's
       retirement, the Bank will continue to pay the premiums for this coverage
       up to the premium amount paid for the first year of retirement coverage.
       Should the premiums increase, the employee will have to pay the
       differential to maintain full medical coverage.

                                      -43-

Postretirement medical benefits are only available to those full-time employees
who, upon termination of service, start collecting retirement benefits
immediately from the Bank. The Bank reserves the right at any time, and to the
extent permitted by law, to change, terminate or discontinue any of the group
benefits, and can exercise the maximum discretion permitted by law, in
administering, interpreting, modifying or taking any other action with respect
to the plan or benefits.

The postretirement cost includes the following components:

    For the year ended June 30,         2000     1999       1998
- ----------------------------------------------------------------
Service cost                             $50      $48        $37
Interest cost                            197      179        178
Unrecognized past service liability      (17)     (20)       (29)
- ----------------------------------------------------------------
                                        $230     $207       $186
================================================================

The funded status of the postretirement benefit plan was as follows:

                                                                                                  
    JUNE 30,                                                                             2000                   1999
- --------------------------------------------------------------------------------------------------------------------
PROJECTED BENEFIT OBLIGATION:
Balance at beginning of period                                                          $2,888                $2,714
Service cost                                                                                50                    48
Interest cost                                                                              197                   179
Actuarial (gain) loss                                                                     (678)                   80
Benefit payments                                                                          (150)                 (133)
- --------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                                 2,307                 2,888
- --------------------------------------------------------------------------------------------------------------------
PLAN ASSETS AT FAIR VALUE:
Balance at beginning of period                                                              -                     -
Contributions                                                                              150                   133
Benefit payments                                                                          (150)                 (133)
- --------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                                    -                     -
- --------------------------------------------------------------------------------------------------------------------
FUNDED STATUS:
Deficiency of plan assets over projected benefit obligation                             (2,307)               (2,888)
Unrecognized gain (loss) from experience different from that assumed                      (238)                  451
Unrecognized net past service liability                                                   (240)                 (268)
- --------------------------------------------------------------------------------------------------------------------
Accrued expense included in other liabilities                                          $(2,785)              $(2,705)
====================================================================================================================

The assumed medical cost trend rates used in computing the accumulated
postretirement benefit obligation was 6.50% in 1999 and was assumed to decrease
gradually to 5.0% in 2005 and to remain at that level thereafter. Increasing
the assumed medical care cost trend rates by 1% in each year would increase the
accumulated postretirement benefit obligation by approximately $102.  The
assumed discount rate and rate of compensation increase used to measure the
accumulated postretirement benefit obligation at June 30, 2000 were 7.75% and
5.50%, respectively. The assumed discount rate and rate of compensation
increase used to measure the accumulated postretirement benefit obligation at
June 30, 1999 were 7.00% and 5.00%, respectively.

EMPLOYEE STOCK OWNERSHIP PLAN - In connection with the Conversion, the Board of
Directors of the Company adopted the Dime Community Bancshares Employee Stock
Ownership Plan (the "ESOP").  The ESOP borrowed $11,638 from the Company and
used the funds to purchase 1,163,800 shares of the Company's common stock.  The
loan was originally to be repaid principally from the Bank's discretionary
contributions to the ESOP over a period of time not to exceed 10 years from the
date of the Conversion.  Effective July 1, 2000, the loan agreement was amended
to extend the repayment period to thirty years from the date of the Conversion,
with the right of optional prepayment.  The loan had an outstanding balance of
$6,853 and $8,016, respectively at June 30, 2000 and 1999, and a fixed rate of
8.0%.

Shares purchased with the loan proceeds are held in a suspense account for
allocation among participants as the loan is repaid.  Contributions to the ESOP
and shares released from the suspense account are allocated among participants
on the basis of compensation, as described in the plan, in the year of
allocation.  The ESOP vests at a rate of 25% per year of service beginning
after two years with full vesting after five years, or upon attainment of age
65, death, disability, retirement or in the event of a "change of control" of
the Company as defined in the ESOP.  Shares of common stock allocated to
participating employees totaled 116,380, 115,832 and 116,380 during the years
ended June 30, 2000, 1999 and 1998. The ESOP benefit expense recorded in

                                     -44-

accordance with SOP 93-6 for allocated shares totaled $2,167, $2,595 and
$2,670, respectively,  for the years ended June 30, 2000, 1999 and 1998.

STOCK BENEFIT PLANS

      RECOGNITION AND RETENTION PLAN ("RRP") - In December, 1996, the Company's
shareholders approved the RRP, which is designed to encourage key officers and
directors of the Company and Bank to remain with the Company, as well as to
provide these persons with a proprietary interest in the Company.  All
allocated RRP shares vest on February 1{st }of each year over a total period of
five years, and become 100% vested in the event of death, disability or
retirement of the participant, or in the event of a "change of control" of the
Company as defined by the RRP.  The Company continues to account for
compensation expense under the RRP under APB 25, measuring compensation cost
based upon the average acquisition value of the RRP shares.

      The following is a summary of activity related to the RRP for the years
ended June 30, 2000, 1999 and 1998:

    At or for the year ended June 30,               2000      1999      1998
- ----------------------------------------------------------------------------
Shares acquired (a)                                13,586    46,770       -
Shares vested                                     103,456   103,456  164,876
Shares forfeited                                       -      3,200       -
Unallocated shares - end of period                 60,356    46,770       -
Unvested allocated shares -end of period          206,912   310,368  417,024
Compensation recorded to expense                   $1,928    $1,922   $2,708
EFFECTS OF ACCOUNTING FOR COMPENSATION UNDER
   SFAS 123 INSTEAD OF APB 25:
     Decrease in compensation expense                $428      $422     $601
     Increase in Basic EPS                          $0.02     $0.02    $0.03
     Increase in Diluted EPS                        $0.02     $0.02    $0.02

(a) Represents awarded shares retained for tax withholding.

The effects of applying SFAS 123 for disclosing compensation cost may not be
representative of the effect on reported net income for future years.

      STOCK OPTION PLAN - In November, 1996, the Company adopted the Dime
Community Bancshares, Inc. 1996 Stock Option Plan for Outside Directors,
Officers and Employees (the "1996 Stock Option Plan"), which permits the
Company  to grant up to 1,454,750 incentive or non-qualified stock options to
outside directors, officers and other employees of the Company or the Bank.
The Compensation Committee of the Board of Directors administers the Stock
Option Plan and authorizes all option grants.

On December 26, 1996, 1,393,425 stock options were granted to outside
directors, officers and certain employees.  All stock options granted under the
1996 Stock Option Plan expire on December 26, 2006.  One-fifth of the shares
granted to participants under the 1996 Stock Option Plan become exercisable by
participants on December 26, 1997, 1998, 1999, 2000 and 2001, respectively.

On January 21, 1999, holders of stock options which had been granted by FIBC to
purchase 96,975 shares of FIBC common stock were converted into options to
purchase 177,286 shares DCB common stock (the "Converted Options").  The
expiration dates on all Converted Options remained unchanged from initial grant
by FIBC.

On January 20, 2000, 66,500 stock options remaining under the 1996 Stock Option
Plan were granted to officers and certain employees.  All of these stock
options expire on January 20, 2010.  One-fifth of the shares granted to
participants under this grant become exercisable by participants on January 20,
2001, 2002, 2003, 2004 and 2005, respectively.

                                     -45-

Activity related to the Stock Option Plan for the fiscal years ended June 30,
2000, 1999 and 1998 is as follows:

                                                                                                   
Year Ended June 30,                                                           2000                     1999                  1998
- ---------------------------------------------------------------------------------------------------------------------------------
Options outstanding - beginning of year                                  1,525,211                1,388,225             1,393,425
Options granted                                                             66,500                       -                     -
FIBC stock options converted into Company stock options                         -                   177,286                    -
Options exercised                                                              365                   32,300                 3,600
Options forfeited                                                               -                     8,000                 1,600
Options outstanding - end of year                                        1,591,346                1,525,211             1,388,225
Remaining options available for grant under the plan                         4,425                   70,925                62,925
Exercisable options at end of year                                       1,024,946                  771,361               305,225
Weighted average exercise price on exercisable options -
   end of year                                                              $13.45                   $13.10                $14.50

The weighted average fair value per option at the date of grant/conversion for
stock options granted/converted was estimated as follows:

                                                                                       
                                                                                  GRANTED                FIBC CONVERTED
                                                                               OPTIONS                      OPTIONS
- -----------------------------------------------------------------------------------------------------------------------
Estimated fair value on date of grant/conversion                                    $5.69                        $13.81
Pricing methodology utilized                                              Binomial Option               Binomial Option
Expected life (in years)                                                               10                            10
Interest rate                                                                        5.78%                         5.25%
Volatility                                                                          23.42                         22.78
Dividend yield                                                                       1.54                          2.00

[FN]
 Represents weighted average of stock options granted on December 26, 1996
and January 20, 2000.

The Company continues to account for Stock Options under APB 25, accordingly no
compensation cost has been recognized.  Had the Company recorded compensation
expense under the fair value methodology encouraged under SFAS 123,
compensation expense would have increased by $1,108, $1,063 and $1,063,
respectively, for the years ended June 30, 2000, 1999 and 1998, net income
would have decreased by $598, $574 and $574 respectively for the years ended
June 30, 2000, 1999 and 1998, both basic and diluted earnings per share would
have decreased by $0.05 for the years ended June 30, 2000, 1999 and 1998.   The
effects of applying SFAS 123 for disclosing compensation cost may not be
representative of the effect on reported net income for future years.

17.   COMMITMENTS AND CONTINGENCIES

MORTGAGE LOAN COMMITMENTS AND LINES OF CREDIT - At June 30, 2000 and 1999, the
Bank had outstanding commitments to make mortgage loans aggregating
approximately $55,113 and $111,008, respectively.

At June 30, 2000, commitments to originate fixed rate and adjustable rate
mortgage loans were $345 and $54,768 respectively.  Interest rates on fixed
rate commitments ranged between 7.0% to 8.5%. Substantially all of the Bank's
commitments will expire within two months.  A concentration risk exists with
these commitments as virtually all of the outstanding mortgage loan commitments
involve multi-family and underlying cooperative properties located within the
New York City metropolitan area.

The Bank had available at June 30, 2000 unused lines of credit with the Federal
Home Loan Bank of New York totaling $100,000, expiring on September 13, 2000.

LEASE COMMITMENTS - At June 30, 2000, aggregate net minimum annual rental
commitments on leases are as follows:

Year Ended June 30,      Amount
- -------------------------------
2001                       $731
2002                        588
2003                        578
2004                        564
2005                        458
Thereafter                1,301

                                     -46-

Net rental expense for the years ended June 30, 2000, 1999 and 1998
approximated $84, $150, and $183, respectively.

LITIGATION - The Company and its subsidiary are subject to certain pending and
threatened legal actions which arise out of the normal course of business.
Management believes that the resolution of any pending or threatened litigation
will not have a material adverse effect on the financial condition or results
of operations.

18.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial Standards
No. 107, ''Disclosures About Fair Value of Financial Instruments.'' The
estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. However,
considerable judgment is required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

CASH AND DUE FROM BANKS - The fair value is assumed to be equal to their
carrying value as these amounts are due upon demand.

INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES - The fair value of these
securities is based on quoted market prices obtained from an independent
pricing service.

FEDERAL FUNDS SOLD AND SHORT TERM INVESTMENTS - The fair value of these assets,
principally overnight deposits, is assumed to be equal to their carrying value
due to their short maturity.

FEDERAL HOME LOAN BANK OF NEW YORK (FHLBNY) STOCK - The fair value of FHLBNY
stock is assumed to be equal to the carrying value as the stock is carried at
par value and redeemable at par value by the FHLBNY.

LOANS, LOANS HELD FOR SALE AND ACCRUED INTEREST RECEIVABLE - The fair value of
loans receivable is determined by utilizing either secondary market prices, or,
to a greater extent, by discounting the future cash flows, net of prepayments
of the loans using a rate for which similar loans would be originated to new
borrowers with similar terms.  This methodology is applied to all loans,
inclusive of impaired and non-accrual loans.  Accrued interest is stated at
carrying amount.

DEPOSITS AND ACCRUED INTEREST PAYABLE - The fair value of savings, money
market, NOW, Super NOW and checking accounts is assumed to be their carrying
amount. The fair value of certificates of deposit is based upon the discounted
value of contractual cash flows using current rates for instruments of the same
remaining maturity.  Accrued interest payable is stated at its carrying amount.

ESCROW AND OTHER DEPOSITS - The estimated fair value of escrow, other deposits
and borrowed funds is assumed to be the amount payable at the reporting date.

BORROWED FUNDS - The carrying amount is a reasonable estimate of the fair value
for borrowings which are either short term or for which applicable interest
rates reprice based upon changes in market rates.  For medium and long-term
borrowings, fair value is based upon discounted cash flows through contractual
maturity, or earlier call date, if expected to be called at rates currently
offered at the balance sheet date for similar terms.  Accrued interest payable
is stated at its carrying amount.

OTHER LIABILITIES - The estimated fair value of other liabilities, which
primarily include trade accounts payable, is assumed to be their carrying
amount.

COMMITMENTS TO EXTEND CREDIT - The fair value of commitments is estimated using
the fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present

                                      -47-

creditworthiness of the counterparties. For fixed-rate loan commitments,
fair value also considers the difference between current levels of
interest rates and the committed rates.

The estimated fair values of the Company's financial instruments at June 30,
2000 and 1999 were as follows:

                                                                                      
                                                                         CARRYING                FAIR
JUNE 30, 2000                                                            AMOUNT                 VALUE
- -------------------------------------------------------------------------------------------------------
ASSETS:
Cash and due from banks                                                   $15,371               $15,371
Investment securities held to maturity                                     17,489                31,768
Investment securities available for sale                                  121,121               121,121
Mortgage-backed securities held to maturity                                13,329                13,263
Mortgage-backed securities available for sale                             429,361               429,361
Loans and loans held for sale                                           1,706,515             1,726,469
FEDERAL FUNDS SOLD AND SHORT-TERM INVESTMENTS                               9,449                 9,449
FHLB stock                                                                 42,423                42,423
- -------------------------------------------------------------------------------------------------------
LIABILITIES:
Savings, money market, NOW Super NOW and checking accounts                600,983               600,983
Certificates of Deposit                                                   618,165               616,159
Escrow and other deposits                                                  35,161                35,161
Borrowed funds                                                          1,014,027             1,009,778
- -------------------------------------------------------------------------------------------------------
OFF BALANCE SHEET
Commitments to extend credit                                                   -                   (499)
- -------------------------------------------------------------------------------------------------------

                                                                                      
                                                                         CARRYING                FAIR
JUNE 30, 2000                                                            AMOUNT                 VALUE
- -------------------------------------------------------------------------------------------------------
ASSETS:
Cash and due from banks                                                   $17,801               $17,801
Investment securities held to maturity                                     31,698                31,768
Investment securities available for sale                                  146,632               146,632
Mortgage-backed securities held to maturity                                22,820                23,192
Mortgage-backed securities available for sale                             502,847               502,847
Loans and loans held for sale                                           1,368,260             1,375,248
Federal funds sold                                                         11,011                11,011
FHLB stock                                                                 28,281                28,281
- -------------------------------------------------------------------------------------------------------
LIABILITIES:
Savings, money market, NOW Super NOW and checking accounts                543,810               543,810
Certificates of Deposit                                                   703,251               701,695
Escrow and other deposits                                                  36,577                36,577
Borrowed funds                                                            731,660               682,376
- -------------------------------------------------------------------------------------------------------
OFF BALANCE SHEET
Commitments to extend credit                                                   -                 (1,316)
- -------------------------------------------------------------------------------------------------------

19. TREASURY STOCK

The Company repurchased 1,111,779 shares, 937,929 shares and 919,837 shares of
its common stock into treasury during the fiscal years ended June 30, 2000,
1999 and 1998, respectively.  All shares were repurchased in accordance with
applicable regulations of the Office of Thrift Supervision and Securities and
Exchange Commission.  On January 21, 1999, the Company reissued 1,504,704
shares of treasury stock in conjunction with its acquisition of FIBC.

20. REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies.  Failure to meet minimum capital requirements can
initiate certain mandatory-and possibly additional discretionary-actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements.  Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices.  The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

                                      -48-

Quantitative measures that have been established by regulation to ensure
capital adequacy require the Bank to maintain minimum capital amounts and
ratios (set forth in the table below).  The Bank's primary regulatory agency,
the OTS, requires that the Bank maintain minimum ratios of tangible capital (as
defined in the regulations) of 1.5%, leverage capital of 4%, and total risk-
based capital (as defined) of 8%.  In addition, insured institutions in the
strongest financial and managerial condition, with a rating of one (the highest
examination of the Office of Thrift Supervision under the Uniform Financial
Institutions Rating System) are required to maintain a leverage capital ratio
of not less than 3.0% of total assets (the "leverage capital ratio").  For all
other banks, the minimum leverage capital requirement is 4.0%, unless a higher
leverage capital ratio is warranted by the particular circumstances or risk
profile of the institution.  The Bank is also subject to prompt corrective
action requirement regulations set forth by the FDIC.  These regulations
require the Bank to maintain minimum of Total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I capital
(as defined) to average assets (as defined).  Management believes, as of June
30, 2000, that the Bank meets all capital adequacy requirements to which it is
subject.

As of June 30, 2000, the most recent notification from the OTS categorized the
Bank as "well capitalized" under the regulatory framework for prompt corrective
action.  To be categorized as "well capitalized" the Bank must maintain minimum
total risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the
table.  There are no conditions or events since that notification that
management believes have changed the institution's category.

                                                                                                              TO BE CATEGORIZED
                                                                                                            AS "WELL CAPITALIZED"
                                                                                   FOR CAPITAL                   UNDER PROMPT
                                                                                     ADEQUACY                  CORRECTIVE ACTION
                                                           ACTUAL                    PURPOSES                    PROVISIONS
                                                ----------------------------------------------------------------------------------
                                                                                                    
As of June 30, 2000                                  AMOUNT      RATIO          AMOUNT         RATIO         AMOUNT         RATIO
- ----------------------------------------------------------------------------------------------------------------------------------
Tangible capital                                    $136,772       5.76%        $35,600          1.5%           N/A          N/A
Leverage capital                                     136,772       5.76          94,934          4.0%           N/A          N/A
Total risk-based capital (to risk weighted
   assets)                                           151,556      11.62         104,386          8.0%        $130,483      10.00%
Tier I risk-based capital (to risk weighted
   assets)                                           136,772      10.48             N/A          N/A           78,290       6.00
Tier I leverage capital (to average assets)          136,772       5.82             N/A          N/A          117,417       5.00

                                                                                                              TO BE CATEGORIZED
                                                                                                            AS "WELL CAPITALIZED"
                                                                                   FOR CAPITAL                   UNDER PROMPT
                                                                                     ADEQUACY                  CORRECTIVE ACTION
                                                           ACTUAL                    PURPOSES                    PROVISIONS
                                                ----------------------------------------------------------------------------------
                                                                                                    
As of June 30, 1999                                  AMOUNT       RATIO          AMOUNT         RATIO         AMOUNT         RATIO
- ----------------------------------------------------------------------------------------------------------------------------------
Tangible capital                                    $123,817       5.83%         $31,846         1.5%            N/A          N/A
Leverage capital                                     123,817       5.83           63,693         3.0%            N/A          N/A
Total risk-based capital (to risk weighted
   assets)                                           138,123      11.45           96,515         8.0%        $120,644        10.00%
Tier I risk-based capital (to risk weighted
   assets)                                           123,817      10.28              N/A         N/A           72,387         6.00
Tier I leverage capital (to average assets)          123,817       6.52              N/A         N/A           94,904         5.00

The following is a reconciliation of generally accepted accounting principles
(GAAP) capital to regulatory capital for the Bank:

                                      -49-

    At June 30,                                       2000                                              1999
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                 
                                    TANGIBLE        LEVERAGE      RISK-BASED            Tangible        Leverage      Risk-Based
                                     CAPITAL         CAPITAL         CAPITAL             Capital         Capital         Capital
- --------------------------------------------------------------------------------------------------------------------------------
GAAP capital                       $194,236         $194,236        $194,236            $189,405        $189,405        $189,405
Non-allowable assets:
Core deposit intangible              (3,760)          (3,760)         (3,760)             (4,585)         (4,585)         (4,585)
Unrealized loss on
   available for sale
   securities                         6,550            6,550           6,550               3,868           3,868           3,868
Goodwill                            (60,254)         (60,254)        (60,254)            (64,871)        (64,871)        (64,871)
General valuation
   allowance                             -                -           14,784                  -               -           14,306
- --------------------------------------------------------------------------------------------------------------------------------
Regulatory capital                  136,772          136,772         151,556             123,817         123,817         138,123
Minimum capital
   requirement                       35,600           94,934         104,386              31,846          63,693          96,515
- --------------------------------------------------------------------------------------------------------------------------------
Regulatory capital
   excess                          $101,172          $41,838         $47,170             $91,971         $60,124         $41,608
================================================================================================================================

21.   QUARTERLY FINANCIAL INFORMATION

The following represents the unaudited results of operations for each of the
quarters during the fiscal years ended June 30, 2000 and 1999.

                                                                                      
    For the three                   September 30,         December 31,           March 31,            June 30,
    Months ended                      1999                    1999                  2000                2000
- -------------------------------------------------------------------------------------------------------------
Net interest income                 $16,560                $16,729                $16,746             $16,768
Provision for loan losses                60                     60                     60                  60
Net interest income after
   Provision for loan losses         16,500                 16,669                 16,686              16,708
Non-interest income                   2,103                  1,497                  1,442                   1
Non-interest expense                  8,886                  9,009                  8,811               7,309
- -------------------------------------------------------------------------------------------------------------
Income before income taxes            9,717                  9,157                  9,317               9,400
Income tax expense                    4,157                  3,741                  3,555               3,764
- -------------------------------------------------------------------------------------------------------------
Net income                           $5,560                 $5,416                 $5,762              $5,636
=============================================================================================================

EARNINGS PER SHARE (2):
  Basic                               $0.48                  $0.47                  $0.51               $0.52
=============================================================================================================
  Diluted                             $0.45                  $0.45                  $0.49               $0.50
=============================================================================================================

                                                                                      
    For the three                   September 30,         December 31,           March 31,            June 30,
    Months ended                      1998                    1998                  1999                1999
- -------------------------------------------------------------------------------------------------------------
Net interest income                   $12,833                $12,833               $15,913            $16,592
Provision for loan losses                  60                     60                    60                 60
Net interest income after
    provision for loan losses          12,773                 12,773                15,853             16,532
Non-interest income                     1,021                  2,060                 1,482              1,875
Non-interest expense:                   6,692                  7,074                 8,172              8,555
- -------------------------------------------------------------------------------------------------------------
Income before income taxes              7,102                  7,759                 9,163              9,852
Income tax expense                      3,119                  3,074                 3,614              4,208
- -------------------------------------------------------------------------------------------------------------
Net income                             $3,983                 $4,685                $5,549             $5,644
=============================================================================================================

EARNINGS PER SHARE (2):
  Basic                                 $0.38                  $0.46                 $0.49              $0.49
=============================================================================================================
  Diluted                               $0.35                  $0.42                 $0.45              $0.45
=============================================================================================================

 (1) On January 21, 1999, the Company completed the FIBC acquisition.
 (2) The quarterly earnings per share amounts, when added, may not agree to
     earnings per share reported on the Consolidated Statement of Operations
     due to differences in the computed weighted average shares outstanding
     as well as rounding differences.

22. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

The following statements of condition as of June 30, 2000 and 1999, and the
related statements of operations and cash flows for the years ended June 30,
2000, 1999 and 1998 reflect the Company's investment in its wholly-owned
subsidiaries, the Bank and 842 Manhattan Avenue Corp., using the equity method
of accounting:

                                      -50-

                        DIME COMMUNITY BANCSHARES, INC.
                  CONDENSED STATEMENTS OF FINANCIAL CONDITION
                            (Dollars in thousands)

                                                                                               
        At June 30,                                                        2000                                           1999
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Cash and due from banks                                                     $37                                            $61
Investment securities available for sale                                 18,881                                          9,529
Mortgage-backed securities available for sale                            42,015                                         45,248
Federal funds sold and short term investments                             8,830                                          3,517
ESOP loan to subsidiary                                                   6,853                                          8,016
Investment in subsidiary                                                194,422                                        189,575
Receivable for securities sold                                               -                                              -
Other assets                                                              1,256                                            264
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                           $272,294                                       $256,210
==============================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY:
Securities sold under agreement to repurchase                           $39,126                                        $43,766
Subordinated notes payable                                               25,000                                             -
Other liabilities                                                         1,125                                            875
Stockholders' equity                                                    207,043                                        211,569
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY:                            $272,294                                       $256,210
==============================================================================================================================

                        DIME COMMUNITY BANCSHARES, INC.
                      CONDENSED STATEMENTS OF OPERATIONS
                            (Dollars in thousands)

                                                                                                        
For the year ended June 30,                                                   2000                 1999                    1998
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income                                                          $1,214              $1,503                  $2,041
Dividends received from Bank                                                 18,013              54,000                  13,000
Gain on sales of securities                                                     117                 555                     521
Non-interest expense                                                           (447)               (431)                   (481)
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and equity of undistributed
   (overdistributed) earnings of subsidiaries                            18,897              55,627                  15,081
Income tax expense                                                              435                 752                     935
- -------------------------------------------------------------------------------------------------------------------------------
Income before equity of undistributed (overdistributed) earnings
   of Subsidiaries                                                           18,462              54,875                  14,146
Equity in (overdistributed) undistributed earnings of Subsidiaries        3,912             (35,014)                 (1,048)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                  $22,374             $19,861                 $13,098
===============================================================================================================================

 The equity in overdistributed earnings of subsidiaries for the years
     ended June 30, 2000, 1999 and 1998, represents dividends paid to the
     Company by its subsidiaries in excess of the current year's earnings of
     Subsidiaries.

                        DIME COMMUNITY BANCSHARES, INC.
                      CONDENSED STATEMENTS OF CASH FLOWS
                            (Dollars in thousands)

                                                                                                      
For the year ended June 30,                                                   2000                  1999               1998
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                 $22,374                $19,861           $13,098
Adjustments to reconcile net income to net cash provided
   by operating activities:
     Equity in (undistributed) overdistributed earnings of                  (3,912)                35,014             1,048
       Subsdiaries
     Gain on sale of investment securities available for sale                 (117)                  (555)             (520)
     Net accretion of discount on securities available for sale                279                   (283)             (291)
     Decrease (Increase) in other assets                                      (992)                   (80)              160
     Decrease (Increase) in receivable for securities purchased                 -                   1,264            (1,264)
     Decrease in other liabilities                                              (9)                  (747)              (71)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                   17,623                 54,474            12,160
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in federal funds sold and short-term                    (5,313)                (2,226)            4,749
investments
Proceeds from sale of investment securities available for sale                 341                  9,373            13,439
Proceeds from calls and maturities of investment securities
   available for sale                                                           -                   5,000            13,500
Purchases of investment securities available for sale                      (10,069)                (5,425)          (20,940)
Purchases of mortgage-backed securities available for sale                  (9,906)               (54,015)               -
Principal repayments on mortgage-backed securities available for            12,779                  8,485                -
sale
Principal repayments on ESOP loan                                            1,164                    691               911
Cash disbursed in acquisition of Financial Bancorp, net of cash
   acquired                                                                     -                 (33,068)               -
- ---------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities                        (11,004)               (71,185)           11,659
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) Increase in securities sold under agreement to                   (4,640)                43,766                -
repurchase
Proceeds from issuance of subordinated notes payable                        25,000                     -                 -
COMMON STOCK ISSUED FOR EXERCISE OF STOCK OPTIONS                               -                     468                52
CASH DIVIDENDS PAID TO STOCKHOLDERS                                         (7,704)                (5,919)           (2,635)
PURCHASE OF TREASURY STOCK                                                 (19,299)               (21,198)          (20,767)
PURCHASE OF COMMON STOCK BY BENEFIT MAINTENANCE PLAN                            -                    (400)             (431)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities                         (6,643)                16,717           (23,781)
- ---------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS                             (24)                     6                38
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD                                    61                     55                17
- ---------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS, END OF PERIOD                                         $37                    $61               $55
===========================================================================================================================

                               *   *   *   *   *

                                      -51-

                                                               EXHIBIT 21.1

Subsidiaries  of  Dime  Community  Bancshares, Inc. - The following are the
significant subsidiaries of Dime Community Bancshares, Inc.

Name:     The Dime Savings Bank of Williamsburgh

Jurisdiction of incorporation: United States of America

Names under which it does business:

          The Dime Savings Bank of Williamsburgh

Name:     842 Manhattan Avenue Corporation

Jurisdiction of incorporation: New York

Names under which it does business:

          842 Manhattan Avenue Corporation

Subsidiaries of The Dime Savings Bank  of Williamsburgh - The following are
the significant subsidiaries of The Dime Savings Bank of Williamsburgh.

Name:     DSBW Preferred Funding Corporation

Jurisdiction of incorporation: Delaware

Names under which it does business:

          DSBW Preferred Funding Corporation

Name:     Havemeyer Equities, Inc.

Jurisdiction of incorporation: New York

Names under which it does business:

          Havemeyer Equities, Inc.

                                       1

Name:     Havemeyer Investments, Inc.

Jurisdiction of incorporation: New York

Names under which it does business:

          Havemeyer Investments, Inc.

The remaining subsidiaries, which are all  direct  or indirect subsidiaries
of The Dime Savings Bank of Williamsburgh would not, when considered in the
aggregate  as a single subsidiary, constitute a significant  subsidiary  as
defined in 17 C.F.R. 210.1-02 (v) Rule 1-02(v) of Regulation S-X as of June
30, 1999.  For  a  description of the Registrant's subsidiaries, see Item 1
of "Business" of the Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 2000.

                                       2

 9

DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS

                             
                   12-MOS
                          JUN-30-2000
                               JUN-30-2000
                                          15,371
                               0
                                 9,449
                                     0
                    550,482
                          30,818
                            30,614
                                      1,721,300
                                     14,785
                               2,502,139
                                   1,219,148
                                   494,293
                             61,795
                                    519,734
                                0
                                          0
                                           145
                                     207,024
                 207,169
                                119,052
                               40,465
                                 6,106
                               165,623
                              45,036
                              53,784
                           66,803
                                      240
                             (2,599)
                                 34,015
                                 37,591
                      22,374
                                      0
                                            0
                                    22,374
                                     1.98
                                     1.90
                                    7.22
                                      4,421
                                         0
                                   700
                                  3,617
                                15,081
                                      545
                                         9
                               14,785
                            14,785
                                  0
                              0