<PAGE>
 
As filed with the Securities and Exchange Commission on October 2, 1997
                                                    Registration No. 333-_______

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM S-1
                            REGISTRATION STATEMENT
                       UNDER THE SECURITIES ACT OF 1933
                        RICHMOND COUNTY FINANCIAL CORP.

                         RICHMOND COUNTY SAVINGS BANK
                              401(k) SAVINGS PLAN

            (exact name of registrant as specified in its charter)

DELAWARE                                 6036                Being applied for
(state or other jurisdiction of    (Primary Standard           (IRS Employer 
incorporation or organization)        Industrial            Identification No.)
                                  Classification Code
                                        Number)

                             1214 Castleton Avenue
                         Staten Island, New York 10310
                                (718) 448-2800
              (Address, including zip code, and telephone number,
       including area code, of registrant's principal executive offices)

                              Michael F. Manzulli
                     President and Chief Executive Officer
                         Richmond County Savings Bank
                         Staten Island, New York 10310
                                (718) 448-2800
           (Name, address, including zip code, and telephone number,
                  including area code, of agent for service)

                                  Copies to:
                         Douglas P. Faucette, Esquire
                        Lawrence M.F. Spaccasi, Esquire
                             Marc P. Levy, Esquire
                           Geoffrey W. Ryan, Esquire
                          Muldoon, Murphy & Faucette
                          5101 Wisconsin Avenue, N.W.
                            Washington, D.C. 20016
                                (202) 362-0840

     Approximate date of commencement of proposed sale to public: As soon as 
practicable after this Registration Statement becomes effective.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 
1933, check the following box. [X]

     If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier 
effective registration statement for the same offering. [_]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) 
under the Securities Act, check the following box and list the Securities Act 
registration number of the earlier effective registration statement for the same
offering. [_]

     If delivery of the prospectus is expected to be made pursuant to Rule 434, 
please check the following box. [_]

================================================================================
                        Calculation of Registration Fee
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                Proposed Maximum     Proposed Maximum      Amount of
  Title of each Class of         Amount to       Offering Price     Aggregate Offering    Registration 
Securities to be Registered    be Registered       Per Share             Price(2)             Fee
-------------------------------------------------------------------------------------------------------
<S>                            <C>              <C>                 <C>                   <C> 
       Common Stock              26,423,550         $10.00            $264,235,500          $80,072
     $.01 par value(1)             Shares
-------------------------------------------------------------------------------------------------------
      Participation                286,347         --------             --------              (3)
        Interests                  Shares
=======================================================================================================

</TABLE> 

(1) Includes shares of Common Stock to be issued to the Richmond County Savings 
    Foundation, a private foundation.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) The securities of Richmond County Financial Corp. to be purchased by
    Richmond County Savings Bank 401(k) Savings Plan are included in the amount
    shown for Common Stock. Accordingly, no separate fee is required for the
    participation interests. In accordance with Rule 457(h) of the Securities
    Act, as amended, the registration fee has been calculated on the basis of
    the number of shares of Common Stock that may be purchased with the current
    assets of such Plan.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES 
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE 
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
 
[To be used in connection with sales to Participants in the RICHMOND COUNTY
SAVINGS BANK 401(k) Savings Plan]


PROSPECTUS SUPPLEMENT
---------------------


                        RICHMOND COUNTY FINANCIAL CORP.

                         RICHMOND COUNTY SAVINGS BANK
                        286,347 Participation Interests
                         RICHMOND COUNTY SAVINGS BANK 
                              401(k) SAVINGS PLAN

        This Prospectus Supplement relates to the offer and sale to participants
(the "Participants") in The Richmond County Savings Bank 401(k) Savings Plan in
RSI Retirement Trust (the "Plan") of participation interests and shares of
common stock, par value $.01 per share of Richmond County Financial Corp. (the
"Common Stock"), as set forth herein.

        In connection with the proposed conversion of Richmond County Savings
Bank (the "Bank") from a mutual savings bank to a stock savings bank (the
"Conversion") the Plan has been amended to permit the investment of Plan assets
in Common Stock of Richmond County Financial Corp. (the "Holding Company"). The
amended Plan will permit Participants to direct the trustee of the Plan (the
"Trustee") to invest in Common Stock with amounts in the Plan attributable to
such Participants. Such investments in Common Stock would be made by means of
the Richmond County Financial Corp. Stock Fund (the "Employer Stock Fund").
Based upon the value of the Plan assets at June 30, 1997, 286,347 shares of
Common Stock could be purchased with Plan assets (assuming a purchase price of
$10.00 per share). This Prospectus Supplement relates to the initial election of
Participants to direct that all or a portion of their accounts be invested in
the Employer Stock Fund in connection with the Conversion and also to elections
by Participants to direct that all or a portion of their accounts be invested in
the Employer Stock Fund after the Conversion.

        The Prospectus dated ____________________, 1997 of the Holding Company
(the "Prospectus"), which is attached to this Prospectus Supplement, includes
detailed information with respect to the Conversion, the Common Stock and the
financial condition, results of operations and business of the Bank. This
Prospectus Supplement, which provides detailed information with respect to the
Plan, should be read only in conjunction with the Prospectus and should be
retained for future reference.

        FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS."

     THE DATE OF THIS PROSPECTUS SUPPLEMENT IS ____________________, 1997.
<PAGE>
 
        THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK,
THE NEW YORK STATE BANKING DEPARTMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER STATE OR FEDERAL AGENCY OR ANY STATE SECURITIES
COMMISSION, NOR HAS SUCH COMMISSION OR OTHER AGENCY OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

        THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT FEDERALLY INSURED OR GUARANTEED, NOR ARE THE SHARES OF
COMMON STOCK GUARANTEED BY THE COMPANY OR THE BANK. THE ENTIRE AMOUNT OF A
PURCHASER'S PRINCIPAL IS SUBJECT TO LOSS.

        No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Bank or the Plan.  This
Prospectus Supplement does not constitute an offer to sell or solicitation of
an offer to buy any securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.  Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Bank or the Plan since the date hereof, or
that the information herein contained or incorporated by reference is correct
as of any time subsequent to the date hereof. 
<PAGE>
 
                               TABLE OF CONTENTS


THE OFFERING ....................................................  1
     Securities Offered..........................................  1
     Election to Purchase Common Stock in the Conversion.........  1
     Value of Participation Interests............................  1
     Method of Directing Transfer................................  2
     Time for Directing Transfer.................................  2
     Irrevocability of Transfer Direction........................  2
     Direction to Purchase Common Stock After the Conversion.....  2
     Purchase Price of Common Stock..............................  3
     Nature of a Participant's Interest in the Common Stock......  3
     Voting and Tender Rights of Common Stock....................  3

DESCRIPTION OF THE PLAN..........................................  4
     Introduction................................................  4
     Eligibility and Participation...............................  5
     Contributions Under the Plan................................  5
     Limitations on Contributions................................  6
     Investment of Contributions.................................  8
     Benefits Under the Plan..................................... 11
     Withdrawals and Distributions From the Plan................. 11
     Administration of the Plan.................................. 12
     Reports to Plan Participants................................ 13
     Plan Administrator.......................................... 13
     Amendment and Termination................................... 13
     Merger, Consolidation or Transfer........................... 14
     Federal Income Tax Consequences............................. 14
     ERISA and Other Qualification............................... 16
     Restrictions on Resale...................................... 16
     SEC Reporting and Short-Swing Profit Liability.............. 17

EXPERTS.......................................................... 18

LEGAL OPINIONS................................................... 18
<PAGE>
 
                                 THE OFFERING


SECURITIES OFFERED

        The securities offered hereby are participation interests in the Plan.
Up to 286,347 shares (assuming the actual purchase price is $10.00 per share) of
Common Stock may be acquired by the Plan to be held in the Employer Stock Fund.
The Holding Company is the issuer of the Common Stock. Only salaried employees
of the Bank (hereinafter referred to as the "Employer") may participate in the
Plan. The Common Stock to be issued hereby is conditioned on the consummation of
the Conversion. A Participant's investment in units in the Employer Stock Fund
in the Conversion is subject to the priority set forth in the Plan of
Conversion.

        Information with regard to the Plan is contained in this Prospectus
Supplement and information with regard to the Conversion and the financial
condition, results of operations and business of the Bank is contained in the
attached Prospectus.  The address of the principal executive office of the Bank
is 1214 Castleton Avenue, Staten Island, New York 10310.  The Bank's telephone
number is (718) 448-2800.

ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION

        In connection with the Bank's Conversion, the Plan has been amended to
permit each Participant to direct that all or part of the funds which represent
his or her beneficial interest in the assets of the Plan may be transferred to
an investment fund that will invest in Common Stock (the Employer Stock Fund)
and, to the extent shares are available to use such funds to purchase Common
Stock issued in connection with the Conversion, and to purchase Common Stock in
the open market.  If there is not enough Common Stock in the Conversion to fill
all subscriptions, the Common Stock would be apportioned and the Plan may not
be able to purchase all of the Common Stock requested by the Participants. In
such case, the Trustee will purchase shares in the open market after the
Conversion to fulfill Participants' requests.  Such purchases may be at prices
higher than the purchase price in the Conversion.  The ability of each
Participant to  invest in the Employer Stock Fund  in the Conversion pursuant
to directions to transfer all or a portion of their beneficial assets in the
Plan will be based on such Participant's status as an Eligible Account Holder
or Supplemental Eligible Account Holder pursuant to the Plan of Conversion, the
subscription priorities set forth in the Plan of Conversion and the
availability of Common Stock.  The Trustee of the Plan will follow the
Participants' directions.  Funds not transferred to the Employer Stock Fund
will remain in the other investment funds of the Plan as directed by the
Participant on the attached Enrollment and Investment Application.

VALUE OF PARTICIPATION INTERESTS

        The market value of the assets of the Plan, as of June 30, 1997, was
$2,863,477 and each Participant was informed of the value of his or her
beneficial interest in the Plan. This value

                                       1
<PAGE>
 
represented the past contributions to the Plan by the Employers and the
Participants and any earnings or losses thereon, less previous withdrawals.

METHOD OF DIRECTING TRANSFER

        The last page of this Prospectus Supplement is a form to direct a
transfer to the Employer Stock Fund (the "Investment Form"). If a Participant
wishes to transfer all or part (in multiples of not less than 1%) of his or her
beneficial interest in the assets of the Plan to the Employer Stock Fund being
established in connection with the Conversion, he or she should indicate that
decision in part 2 of the Investment Form. If a Participant does not wish to
make such an election, he or she does not need to take any action.

TIME FOR DIRECTING TRANSFER

        The deadline for submitting a direction to transfer amounts to the
Employer Stock Fund which will purchase Common Stock issued in connection with
the Conversion is ten days prior to the Expiration Date of the Offering. The
Investment Form should be returned to the Bank's Human Resources Department by
_:__ p.m. on such date.

IRREVOCABILITY OF TRANSFER DIRECTION

        A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in connection with
the Conversion shall be irrevocable. Participants, however, will be able to
direct the investment of their accounts ("Accounts") after the Conversion under
the Plan as explained below.

DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION

        After the Conversion, a Participant shall be able to direct that a
certain percentage (in multiples of not less than 1%) of the net value of such
Participant's interests in the trust find established for the Plan (the "Trust
Fund") be transferred to the Employer Stock Fund and invested in Common Stock,
or to the other investment funds available under the Plan. Alternatively, a
Participant may direct that a certain percentage of such Participant's interest
in the Employer Stock Fund be transferred to the Trust Fund to be invested in
accordance with the terms of the Plan. Participants will be permitted to direct
that future contributions made to the Plan by or on their behalf will be
invested in Common Stock. Following the initial election, the allocation of a
Participant's interest in the Employer Stock Fund may be changed once each
calendar quarter in any plan year by filing a written notice with the plan
administrator at least ten days before the effective date of the change. Special
restrictions apply to transfers directed by those Participants who are officers,
directors and principal shareholders of the Bank who are subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "1934 Act").

                                       2
<PAGE>
 
PURCHASE PRICE OF COMMON STOCK

        The funds transferred to the Employer Stock Fund for the purchase of
Common Stock in connection with the Conversion will be used by the Trustee to
purchase shares of Common Stock. The price to be paid by the Trust Fund for such
shares of Common Stock will be the same price as is paid by all persons who
purchase shares of Common Stock in the Conversion.

        Common Stock purchased by the Trustee after the Conversion will be
acquired in open market transactions. The prices paid by the Trustee for shares
of Common Stock will not exceed "adequate consideration" as defined in Section
3(18) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Transaction fees associated with purchase, sale or transfer of the
Common Stock after the Conversion will be paid by ______.

NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK

        The Common Stock will be held in the name of the Trustee for the Plan,
as trustee. Each Participant has an allocable interest in the investment funds
of the Plan but not in any particular assets of the Plan. Accordingly, a
specific number of shares of Common Stock will not be directly attributable to
the account of any Participant. Earnings, e.g., gains and losses, are allocated
to the Account of a Participant based on units in the Employer Stock Fund held
by the Participants. Therefore, earnings with respect to a Participant's Account
should not be affected by the investment designations (including investments in
Common Stock) of other Participants.

VOTING AND TENDER RIGHTS OF COMMON STOCK

        The Trustee generally will exercise voting and tender rights
attributable to all Common Stock held by the Trust Fund as directed by
Participants with interests in the Employer Stock Fund. With respect to each
matter as to which holders of Common Stock have a right to vote, each
Participant will be allocated a number of voting instruction rights reflecting
such Participant's proportionate interest in the Employer Stock Fund. The number
of shares of Common Stock held in the Employer Stock Fund that are voted in the
affirmative and negative on each matter shall be proportionate to the number of
voting instruction rights exercised in the affirmative and negative,
respectively. In the event of a tender offer for Common Stock, the Plan provides
that each Participant will be allotted a number of tender instruction rights
reflecting such Participant's proportionate interest in the Employer Stock Fund.
The percentage of shares of Common Stock held in the Employer Stock Fund that
will be tendered will be the same as the percentage of the total number of
tender instruction rights that are exercised in favor of tendering. The
remaining shares of Common Stock held in the Employer Stock Fund will not be
tendered. The Plan makes provision for Participants to exercise their voting
instruction rights and tender instruction rights on a confidential basis.

                                       3
<PAGE>
 
                            DESCRIPTION OF THE PLAN

I.      INTRODUCTION

        The Plan was established effective January 1, 1992 as Richmond County
Savings Bank 401(k) Savings Plan in the Retirement System for Savings
Institutions (the "Plan").   The Plan is a cash or deferred arrangement
established in accordance with the requirements under Section 401(a) and
Section 401(k) of the Internal Revenue Code of 1986 (the "Code").  The Plan
will be submitted to the Internal Revenue Service (the "IRS") in a timely
manner for a determination that the Plan, as amended and restated, is qualified
under Section 401(a) of the Code, and that its related trust(s) are qualified
under Section 501(a) of the Code.

        The Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code.  The Bank
will adopt any amendments to the Plan that may be necessary to ensure the
qualified status of the Plan under the Code and applicable Treasury Regulations.

        Employee Retirement Income Security Act. The Plan is an "individual
        ---------------------------------------
account plan" other than a "money purchase pension plan" within the meaning of
ERISA. As such, the Plan is subject to all of the provisions of Title I
(Protection of Employee Benefit Rights) and Title II (Amendments to the Internal
Revenue Code Relating to Retirement Plans) of ERISA, except the funding
requirements contained in Part 3 of Title I of ERISA which by their terms do not
apply to an individual account plan (other than a money purchase pension plan).
The Plan is not subject to Title IV (Plan Termination Insurance) of ERISA.
Neither the funding requirements contained in Part 3 of Title I of ERISA nor the
plan termination insurance provisions contained in Title IV of ERISA will be
extended to Participants (as defined below) or beneficiaries under the Plan.

        APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL
RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE BANK. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON WITHDRAWALS
MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59-1/2, REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS EMPLOYMENT WITH THE BANK OR AFTER
TERMINATION OF EMPLOYMENT.

        Reference to Full Text of Plan. The following statements are summaries
        ------------------------------
of certain provisions of the Plan. They are not complete and are qualified in
their entirety by the full text of the Plan. Copies of the Plan are available to
all employees by filing a request with the Plan Administrator, Dorothy
Episcopia, Richmond County Savings Bank, 207 Taylor Street, Staten Island, New
York 10310. The Plan Administrator's telephone number is (718) 448-2800. Each
employee is urged to read carefully the full text of the Plan.

                                       4
<PAGE>
 
II.     ELIGIBILITY AND PARTICIPATION

        Any salaried employee of the Employer is eligible to participate in the
Plan as soon as the employee reaches age 21 and completes one year of service
with the Employer. In order to commence participation, an employee must submit
an enrollment form at least 10 days in advance of the date he desires to enter
the Plan. Employees compensated on an hourly, daily, commission, fee or retainer
basis, leased employees (within the meaning of Section 414(n) of the Code) and
employees covered by a collective bargaining agreement which does not expressly
provide for their coverage under the Plan, are not eligible to participate in
the Plan.

        As of June 30, 1997, there were approximately 201 employees eligible to
participate in the Plan, and 192 employees had elected to participate in the
Plan.

III.    CONTRIBUTIONS UNDER THE PLAN

        401(k) Plan Contributions. Subject to certain limitations on
        -------------------------
contributions, each Participant in the Plan is permitted to elect to reduce such
Participant's Compensation (as defined below) pursuant to a "Compensation
Reduction Agreement" by an amount not less than 2% and not more than 9% and have
that amount contributed to the Plan on such Participant's behalf. Such amounts
are credited to the Participant's "Basic Contribution Account." See "Section IV
Limitations on Contributions" below. For purposes of the Plan, "Compensation"
means the base compensation receivable by an Employee from the Employer for the
calendar year prior to any reductions pursuant to the Compensation Reduction
Agreement. Compensation includes salary, Basic Contributions, wages, overtime
and wage continuation payments to an employee who is absent due to an illness or
disability of a short-term nature. "Compensation" does not include commissions,
expense allowances, severance pay, fees, bonuses, incentive payments,
contributions other than Basic Contributions made to the Plan and contributions
made by the Employer to any other pension, insurance welfare or other employee
benefit plan. As of January 1, 1997, the annual compensation of each Participant
taken into account under the Plan is limited to $160,000 (adjusted for increases
in the cost of living as permitted by the Code). Generally, a Participant may
elect to modify the amount contributed to the Plan under such participant's
Compensation Reduction Agreement not more often than once in any calendar
quarter by providing notice to the Plan Administrator at least 10 days before
commencement of the first day of the payroll period for which the modification
is to become effective. However, special restrictions apply to persons subject
to Section 16 of the 1934 Act. Basic Contributions are transferred by the 
Employer to the Trustee of the Plan.


        Notwithstanding the preceding, a Participant who receives a hardship
distribution under the terms of the Plan may not be eligible to make additional
contributions under a Compensation Reduction Agreement or have matching
contributions made on his behalf for a period of twelve (12) months after the
receipt of the hardship distribution.

                                       5
<PAGE>
 
        Employer Contributions. The Employer contributes to the Plan for each
        ----------------------
Plan Year 50% of the Participant's Basic Contributions, up to a 6% of the
Participant's Compensation for the Plan Year. Such amounts are credited to the
Participant's "Matching Contribution Account." After the Conversion, at the
discretion of the Bank, the Employer contributions may be credited to the
Participant's Account in Richmond County Savings Bank Employee Stock Ownership
Plan. At its discretion, the Employer may make an additional contribution to the
Plan as of the end of the Plan Year in an amount determined by the Employer for
the purpose of ensuring that the Plan complies with Section 401(k) of the Code.
Such amounts are credited to Participants' "Special Contribution Accounts" based
on each Participant's compensation. Special Contributions may be made only to
the accounts of non-highly compensated employees.

IV.     LIMITATIONS ON CONTRIBUTIONS

        Limitations on Annual Additions and Benefits. Pursuant to the
        --------------------------------------------
requirements of the Code, the Plan provides that the amount of contributions
allocated to each Participant's Basic Contribution Account and Matching
Contribution Account during any Plan Year may not exceed the lesser of 25% of
the Participant's (s)415 Compensation for the Plan Year or $30,000 (adjusted for
increases in the cost of living as permitted by the Code). A Participant's
(s)415 Compensation is a Participant's Compensation, excluding any Employer
contribution to the Plan or to any other plan of deferred compensation or any
distributions from a plan of deferred compensation. In addition, annual
additions shall be limited to the extent necessary to prevent the limitations
set forth in the Code for all of the qualified defined benefit plans and defined
contribution plans maintained by the Bank from being exceeded. To the extent
that these limitations would be exceeded by reason of excess annual additions
with respect to a Participant, such excess will be disposed of as follows:

        (i) Any excess amount in the Participant's Account will be used to
reduce the Employer's contributions for such Participant in the next Limitation
Year, and each succeeding Limitation Year if necessary;

        (ii) If, an excess amount still exists, and the Participant is not
                                                                       ---
covered by the Plan at the end of the Limitation Year, the excess amount will be
held unallocated in a suspense account which will then be applied to reduce
future Employer contributions for all remaining Participants in the next
Limitation Year, and each succeeding Limitation Year if necessary;

        (iii) If a suspense account is in existence at any time during the
Limitation Year, it will not participate in the allocation of investment gains
and losses.

        Limitation on 401(k) Plan Contributions.  The annual amount of deferred
        ---------------------------------------
Compensation under a Compensation Reduction Agreement of a Participant (when
aggregated with any elective deferrals of the Participant under a simplified
employee pension plan or a tax-deferred annuity) may not exceed $7,000 adjusted
for increases in the cost of living as permitted by the Code (the limitation
for 1997 is $9,500).  Contributions in excess of this limitation ("excess
deferrals") will be included in the Participant's gross income for federal
income tax purposes in the year they are 

                                       6
<PAGE>
 
made. In addition, any such excess deferral will again be subject to federal
income tax when distributed by the Plan to the Participant, unless the excess
deferral (together with any income allocable thereto) is distributed to the
Participant not later than the first April 15th following the close of the
taxable year in which the excess deferral is made. Any income on the excess
deferral that is distributed not later than such date shall be treated, for
federal income tax purposes, as earned and received by the Participant in the
taxable year in which the excess deferral is made.

        Limitation on Plan Contributions for Highly Compensated Employees.
        -----------------------------------------------------------------
Sections 401(k) and 401(m) of the Code limit the amount of Deferred Compensation
that may be made to the Plan in any Plan Year on behalf of Highly Compensated
Employees (defined below) in relation to the amount of Deferred Compensation
made by or on behalf of all other employees eligible to participate in the Plan.
Specifically, the actual deferral percentage (i.e., the average of the ratios,
calculated separately for each eligible employee in each group, by dividing the
amount of Deferred Compensation credited to the Basic Contribution Account of
such eligible employee by such eligible employee's compensation for the Plan
Year) of the Highly Compensated Employees may not exceed the greater of (i) 125%
of the actual deferral percentage of all other eligible employees, or (ii) the
lesser of (x) 200% of the actual deferral percentage of all other eligible
employees, or (y) the actual deferral percentage of all other eligible employees
plus two percentage points. In addition, the actual contribution percentage for
such Plan Years (i.e., the average of the ratios calculated separately for each
eligible employee in each group, by dividing the amount of voluntary employee
and employer matching contributions credited to the Matching Contribution
Account and Special Contribution Account of such eligible employee by such
eligible employee's compensation for the Plan Year) of the Highly Compensated
Employees may not exceed the greater of (i) 125% of the actual contribution
percentage of all other eligible employees, or (ii) the lesser of (x) 200% of
the actual contribution percentage of all other eligible employees, or (y) the
actual contribution percentage of all other eligible employees plus two
percentage points.

        In general, a Highly Compensated Employee includes any employee who, (1)
was a five percent owner of the Employer at any time during the year or
preceding year; or (2) had compensation for the preceding year in excess of
$80,000 and, if the Employer so such year. The dollar amounts in the foregoing
sentence are for 1997. Such amounts are adjusted annually to reflect increases
in the cost of living.

        In addition, the compensation of an employee who is a family member of a
5% owner, or one of the ten most highly compensated employees during the
relevant period is aggregated with that of the Highly Compensated Employee. All
such family members are treated as a single employee with respect to the
application of the limitations on Highly Compensated Employees.

        In order to prevent the disqualification of the Plan, any amount
contributed by Highly Compensated Employees that exceed the average deferral
limitation in any Plan Year ("excess contributions"), together with any income
allocable thereto, must be distributed to such Highly Compensated Employees
before the close of the following Plan Year. However, the Employer 

                                       7
<PAGE>
 
will be subject to a 10% excise tax on any excess contributions unless such
excess contributions, together with any income allocable thereto, either are
recharacterized or are distributed before the close of the first 2-1/2 months
following the Plan Year to which such excess contributions relate.

        Top-Heavy Plan Requirements. If for any Plan Year the Plan is a 
        ---------------------------
Top-Heavy Plan (as defined below), then (i) the Bank may be required to make
certain minimum contributions to the Plan on behalf of non-key employees (as
defined below), and (ii) certain additional restrictions would apply with
respect to the combination of annual additions to the Plan and projected annual
benefits under any defined benefit plan maintained by the Bank.

        In general, the Plan will be regarded as a "Top-Heavy Plan" for any Plan
Year if, as of the last day of the preceding Plan Year, the aggregate balance
of the Accounts of Participants who are Key Employees exceeds 60% of the
aggregate balance of the Accounts of all Participants.  Key Employees generally
include any employee who, at any time during the Plan Year or any of the four
preceding Plan Years, is (1) an officer of the Bank having annual compensation
in excess of $60,000 who is in an administrative or policy-making capacity, (2)
one of the ten employees having annual compensation in excess of $30,000 and
owning, directly or indirectly, the largest interests in the Bank, (3) a 5%
owner of the Bank, (i.e., owns directly or indirectly more than 5% of the stock
of the Bank, or stock possessing more than 5% of the total combined voting
power of all stock of the Bank) or (4) a 1% owner of the Bank having annual
compensation in excess of $150,000.  The dollar amounts in the foregoing
sentence are for 1997.

V.      INVESTMENT OF CONTRIBUTIONS

        All amounts credited to Participants' Accounts under the Plan are held
in the Plan Trust (the "Trust") which is administered by the Trustee appointed
by the Bank's Board of Trustees.

        Prior to [insert date of Prospectus here], the Accounts of a Participant
held in the Trust have been invested by the Trustee at the direction of the
Participant in the following funds:

        a.      Core Equity Fund;
        b.      Emerging Growth Equity Fund;
        c.      Value Equity Fund;
        d.      Actively Managed Bond Fund;
        e.      Intermediate - Term Bond Fund;
        f.      Short-Term Investment Fund; and
        g.      International Fund.

        The Plan, as amended effective _______, 1997, now provides that in
addition to the Funds specified above, a Participant who is employed by the Bank
may direct the Trustee to invest all or a portion of his Basic Contribution
Account and Rollover Account in the Employer Stock Fund.

                                       8
<PAGE>
 
        Participants in the Plan may direct the Trustee to invest all or a
portion of his Basic Contribution Account, Matching Contribution Account,
Rollover Account and Special Contribution Account in the Employer Stock Fund.

        Once in any calendar quarter a Participant may elect (in increments of
1%), to have both past and future contributions and additions to the
Participant's Basic Contribution Account and Rollover Account invested either in
the Employer Stock Fund or among such other Funds. Participants may also elect
to have past contributions to their Matching Contribution Accounts invested in
either the Employer Stock Fund or among such other Funds. Participants Matching
Contribution Accounts may be invested in Employer Stock under the proposed terms
of The Richmond County Savings Bank Employee Stock Ownership Plan being
implemented by the Bank. These elections will be effective on the effective date
of the Participant's written notice to the plan administrator, provided such
notice is filed with the administrator at least 10 days before it is to become
effective. Any amounts credited to a Participant's Account for which investment
directions are not given will be invested in the Short-Term Investment Fund in
accordance with the terms of the Plan. Because investment allocations only are
required to be made in increments of 1%, Participants can invest their Accounts
in each of the 8 available investment funds. Diversification with respect to the
investment of a Participant's Account may be achieved through the 8 investment
options available to Participants and the opportunity for Participants to make
investment designations up to four times each year.

        A Participant who receives a loan from the Plan has a separate account
established under the Plan. The amount of the loan is obtained from the 
Investment Accounts in which the Borrower's accounts are invested on a pro-rata
basis according to the terms of the Plan. The balance of a Participant's loan
account represents the unpaid principal and interest (if any) of such
participant's loan from the Plan. Repayments of principal and payments of
interest on loans are invested by the Trustee in the same manner as if the
repayment were a contribution.

        The Participants interest in the Employer Stock Fund consists of units
whose value is related to a pro rata portion of the net asset value ("NAV") of
the Employer Stock Fund. The NAV is determined daily and all realized and
unrealized gains, dividends, and expenses are used to calculate the NAV. For
purposes of such valuation, all assets of the Trust are valued at their fair
market value.

                                       9
<PAGE>
 
        A.      Previous Funds.
                --------------
        Prior to _________________________, contributions under the Plan were
invested in the seven Funds specified above.  The annual percentage return on
these funds for the prior three years was:


                                                1996    1995    1994
                                                --------------------

        a.      Core Equity Fund                21.53%  40.17%  1.31%

        b.      Emerging Growth Equity Fund     27.09   42.83   3.53

        c.      Value Equity Fund               25.90   33.96  (1.14)

        d.      Actively Managed Bond Fund       3.15   17.70  (4.21)

        e.      Intermediate-Term Bond Fund      4.02   13.99  (2.54)

        f.      Short-Term Investment Fund       4.70    5.39   3.40

        g.      International Equity Fund       10.86   12.46   0.77


        B.      The Employer Stock Fund.
                -----------------------

        The Employer Stock Fund will consist of investments in Common Stock made
on and after the effective date of the Conversion. Each Participant's
proportionate undivided beneficial interest in the Employer Stock Fund is
measured by units. Each day a unit value will be calculated by determining the
market value of the Common Stock actually held and adding to that any cash held
by the Trustee. This total will be divided by the number of units outstanding to
determine the unit value of the Employer Stock Fund.

        On the occasion of the payment of a cash dividend, the unit value will
be determined before the dividend is distributed. The Trustee may use the
dividend to purchase additional shares of Common Stock, thereby increasing the
total value of the Employer Stock Fund, and the value of each unit. The Board of
Directors of the Holding Company may consider a policy of paying cash dividends
on the Common Stock in the future; however, no decision as to the amount or
timing of cash dividends, if any, has been made. The Trustee will, to the extent
practicable, use all amounts held by it in the Employer Stock Fund to purchase
shares of Common Stock of the Bank. It is expected that all purchases will be
made at prevailing market prices. Under certain circumstances, the Trustee may
be required to limit the daily volume of shares purchased. Pending investment in
Common Stock, assets held in the Employer Stock Fund will be placed in bank
deposits and other short-term investments.

        Any brokerage commissions, transfer fees and other expenses incurred in
the sale and purchase of Common Stock for the Employer Stock Fund will be paid
out of a cash account managed by the trustee. Therefore, although Participants'
accounts will not be directly adjusted for such fees, the market value of their
accounts will be reduced.

                                       10
<PAGE>
 
        As of the date of this Prospectus Supplement, none of the shares of
Common Stock have been issued or are outstanding and there is no established
market for the Common Stock. Accordingly, there is no record of the historical
performance of the Employer Stock Fund. Performance will be dependent upon a
number of factors, including the financial condition and profitability of the
Holding Company and the Bank and market conditions for the Common Stock
generally. See "Market for the Common Stock" in the Prospectus.

        INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN SPECIAL RISKS
IN INVESTMENTS IN COMMON STOCK OF THE COMPANY. FOR A DISCUSSION OF THESE RISK
FACTORS, SEE "RISK FACTORS" IN THE PROSPECTUS.

VI.     BENEFITS UNDER THE PLAN

        Vesting. A Participant, at all times, has a fully vested, nonforfeitable
        -------
interest in his Basic Contribution Account and the earnings thereon under the
Plan. A Participant vests in his Matching Contribution Account under the Plan
according to the following schedule:

         Period of Service           Vested Percentage
         -----------------           -----------------
                        
         less than 2 years                    0%
         2 years                             20       
         3 years                             40
         4 years                             60       
         5 years                             80
         6 years or more                    100                   
                                           
For purposes of vesting, years of service from age 18 are counted.

VII.    WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN

        Withdrawals Prior to Termination of Employment.  Subject to the hardship
        ----------------------------------------------
distribution rules under the Plan, a Participant may withdraw all or a portion
of his (i) Basic Contribution Account, (ii) Rollover Contribution Account and
(iii) the vested interest in his Matching Contribution Account.  The hardship
distribution requirements ensure that Participants have a true financial need
before a withdrawal may be made.

        A Participant may make a withdrawal from his Basic Contribution Account,
Rollover Contribution Account, and Matching Contribution Account after he turns
59-1/2. A Participant after attaining age 59-1/2 may withdraw contributions to
his Basic Contribution Account, contributions to his Rollover Contribution
Account or the vested portion of his Matching Contribution Account at any time.
However, such withdrawals may not be made more often than two times during any
Plan Year.

                                       11
<PAGE>
 
        Distribution Upon Retirement, Disability or Termination of Employment. 
        ---------------------------------------------------------------------
Payment of benefits to a Participant who retires, incurs a disability, or
otherwise terminates employment generally shall be made in a lump sum cash
payment as soon as administratively feasible after such termination of
employment if the vested value of the Participant's Account is $3,500 or less. 
If the vested portion of the Participant's Account balance is greater than
$3,500, the Participant may request a distribution (subject to the minimum
distribution rules) in a lump sum payment:  (a) as soon as administratively
possible after termination, (b) as of any Valuation Date up to 13 months after
termination or (c) as of the date the Participant attains normal retirement
age.  At the request of the Participant, the distribution may include an in
kind distribution of Common Stock of the Holding Company equal to the number of
shares that can be purchased with the Participant's balance in the Employer
Stock Fund.  Benefit payments ordinarily shall be made not later than 60 days
following the end of the Plan Year in which occurs the latest of the
Participant's:  (i) termination of employment; (ii) the attainment of age 65 or
(iii) 10th anniversary of commencement of participation in the Plan; but in no
event later than the April 1 following the calendar year in which the
Participant attains age 70-1/2.  However, if the vested portion of the
Participant's Account balances exceeds $3,500, no distribution shall be made
from the Plan prior to the Participant's attaining age 65 unless the
Participant elects to receive an earlier distribution. 

        Distribution upon Death. A Participant who dies prior to the benefit
        -----------------------
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse shall have his benefits paid to the surviving spouse
in a lump sum as soon as administratively possible following the date of his
death, unless the Participant elected prior to his death or the beneficiary so
elects within 90 days of the Participant's death, to receive such distribution
in a lump sum payment as of any Valuation Date which occurs within one year of
the Participant's death. With respect to an unmarried Participant, and in the
case of a married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary of a deceased Participant
shall be made in the form of a lump-sum payment in cash or in Common Stock in
the same manner described above as to a Participant with a surviving spouse.

        Nonalienation of Benefits.  Except with respect to federal income tax
        -------------------------
withholding and as provided with respect to a qualified domestic relations
order (as defined in the Code), benefits payable under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any kind,
either voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights
to benefits payable under the Plan shall be void.

ADMINISTRATION OF THE PLAN

        The Trustee with respect to the Plan is the named fiduciary of the Plan
for purposes of Section 402 of ERISA.

                                       12
<PAGE>
 
        Trustees. The Trustee is appointed by the Board of Trustees of the Bank
        --------
to serve at its pleasure. The current Trustee of the Plan is the RSI Retirement
Trust. However, an additional Trustee is being appointed to hold funds invested
in the Employer Stock Fund.

        The Trustee receives, holds and invests the contributions to the Plan in
trust and distributes them to Participants and beneficiaries in accordance with
the terms of the Plan and the directions of the Plan Administrator.  The
Trustee is responsible for investment of the assets of the Trust.

REPORTS TO PLAN PARTICIPANTS

        The Administrator (as defined below) will furnish to each Participant a
statement at least quarterly showing (i) the balance in the Participant's
Account as of the end of that period, (ii) the amount of contributions
allocated to such participant's Account for that period, and (iii) the
adjustments to such participant's Account to reflect earnings or losses (if
any).

PLAN ADMINISTRATOR

        Pursuant to the terms of the Plan, the Plan is administered by one or
more persons who are appointed by and who serve at the pleasure of the Bank (the
"Administrator"). Currently, the Administrator is Dorothy Episcopia, Vice
President and Human Resources Officer of the Bank. The address and telephone
number of the Administrator is c/o 207 Taylor Street, Staten Island, New York
10310; (718) 448-2800. The Administrator is responsible for the administration
of the Plan, interpretation of the provisions of the Plan, prescribing
procedures for filing applications for benefits, preparation and distribution of
information explaining the Plan, maintenance of Plan records, books of account
and all other data necessary for the proper administration of the Plan, and
preparation and filing of all returns and reports relating to the Plan which are
required to be filed with the U.S. Department of Labor and the IRS, and for all
disclosures required to be made to Participants, Beneficiaries and others under
Sections 104 and 105 of ERISA.

AMENDMENT AND TERMINATION

        It is the intention of the Bank to continue the Plan indefinitely. 
Nevertheless, the Bank may terminate the Plan at any time.  If the Plan is
terminated in whole or in part, then regardless of other provisions in the
Plan, each employee affected by such termination shall have a fully vested
interest in his Accounts.  The Bank reserves the right to make, from time to
time, any amendment or amendments to the Plan which do not cause any part of
the Trust to be used for, or diverted to, any purpose other than the exclusive
benefit of Participants or their beneficiaries; provided, however, that the
Bank may make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with ERISA.

                                       13
<PAGE>
 
MERGER, CONSOLIDATION OR TRANSFER

        In the event of the merger or consolidation of the Plan with another
plan, or the transfer of the Trust assets to another plan, the Plan requires
that each Participant would (if either the Plan or the other plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan had then terminated).

FEDERAL INCOME TAX CONSEQUENCES

        The following is only a brief summary of certain federal income tax
aspects of the Plan which are of general application under the Code and is not
intended to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan. The
summary is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the consequences under applicable state and local income tax laws may
not be the same as under the federal income tax laws. PARTICIPANTS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY DISTRIBUTION FROM THE PLAN AND
TRANSACTIONS INVOLVING THE PLAN.

        The Plan will be submitted to the IRS in a timely manner for a
determination that it is qualified under Section 401(a) and 401(k) of the Code,
and that the related Trust is exempt from tax under Section 501(a) of the Code.
A plan that is "qualified" under these sections of the Code is afforded special
tax treatment which include the following: (1) The sponsoring employer is
allowed an immediate tax deduction for the amount contributed to the Plan each
year; (2) Participants pay no current income tax on amounts contributed by the
employer on their behalf; and (3) earnings of the plan are tax-deferred thereby
permitting the tax-free accumulation of income and gains on investments. The
Plan will be administered to comply in operation with the requirements of the
Code as of the applicable effective date of any change in the law. The Bank
expects to timely adopt any amendments to the Plan that may be necessary to
maintain the qualified status of the Plan under the Code. Following such an
amendment, the Bank will submit the Plan to the IRS for a determination that the
Plan, as amended, continues to qualify under Sections 401(a) and 501(a) of the
Code and that it continues to satisfy the requirements for a qualified cash or
deferred arrangement under Section 401(k) of the Code. Should the Plan receive
from the IRS an adverse determination letter regarding its tax exempt status,
all participants would generally recognize income equal to their vested interest
in the Plan, the participants would not be permitted to transfer amounts
distributed from the Plan to an IRA or to another qualified retirement plan, and
the Bank may be denied certain deductions taken with respect to the Plan.

        Lump Sum Distribution. A distribution from the Plan to a Participant or
        ---------------------
the beneficiary of a Participant will qualify as a Lump Sum Distribution if it
is made: (i) within one taxable year of the Participant or beneficiary; (ii) on
account of the Participant's death, disability or separation 

                                       14
<PAGE>
 
from service, or after the Participant attains age 59-1/2; and (iii) consists of
the balance to the credit of the Participant under this Plan and all other
profit sharing plans, if any, maintained by the Bank. The portion of any Lump
Sum Distribution that is required to be included in the Participant's or
beneficiary's taxable income for federal income tax purposes (the "total taxable
amount") consists of the entire amount of such Lump Sum Distribution less the
amount of after-tax contributions, if any, made by the Participant to any other
profit sharing plans maintained by the Bank which is included in such
distribution.

        Averaging Rules.  The portion of the total taxable amount of a Lump Sum
        ---------------
Distribution that is attributable to participation after 1973 in this Plan or
in any other profit-sharing plan maintained by the Bank (the "ordinary income
portion") will be taxable generally as ordinary income for federal income tax
purposes.  However, a Participant who has completed at least five years of
participation in this Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's
participation in this Plan or any other profit-sharing plan maintained by the
Employers), may elect to have the ordinary income portion of such Lump Sum
Distribution taxed according to a special averaging rule ("five-year
averaging").  The election of the special averaging rules may apply only to one
Lump Sum Distribution received by the Participant or beneficiary, provided such
amount is received on or after the Participant turns 59-1/2 and the recipient
elects to have any other Lump Sum Distribution from a qualified plan received
in the same taxable year taxed under the special averaging rule.  Under a
special grandfather rule, individuals who turned 50 by 1986 may elect to have
their Lump Sum Distribution taxed under either the five-year averaging rule or
under the prior law ten-year averaging rule.  Such individuals also may elect
to have that portion of the Lump Sum Distribution attributable to the
participant's pre-1974 participation in the Plan taxed at a flat 20% rate as
gain from the sale of a capital asset.

        Common Stock Included in Lump Sum Distribution. If a Lump Sum
        ----------------------------------------------
Distribution includes Common Stock, the distribution generally will be taxed in
the manner described above, except that the total taxable amount will be reduced
by the amount of any net unrealized appreciation with respect to such Common
Stock, i.e., the excess of the value of such Common Stock at the time of the
distribution over its cost or other basis of the securities to the Trust. The
tax basis of such Common Stock to the Participant or beneficiary for purposes of
computing gain or loss on its subsequent sale will be the value of the Common
Stock at the time of distribution less the amount of net unrealized
appreciation. Any gain on a subsequent sale or other taxable disposition of such
Common Stock, to the extent of the amount of net unrealized appreciation at the
time of distribution, will be considered long-term capital gain regardless of
the holding period of such Common Stock. Any gain on a subsequent sale or other
taxable disposition of the Common Stock in excess of the amount of net
unrealized appreciation at the time of distribution will be considered either
short-term capital gain or long-term capital gain depending upon the length of
the holding period of the Common Stock. The recipient of a distribution may
elect to include the amount of any net unrealized appreciation in the total
taxable amount of such distribution to the extent allowed by the regulations to
be issued by the IRS.

                                       15
<PAGE>
 
        Distributions: Rollovers and Direct Transfers to Another Qualified Plan
        -----------------------------------------------------------------------
or to an IRA. Pursuant to a change in the law, effective January 1, 1993,
------------
virtually all distributions from the Plan may be rolled over to another
qualified Plan or to an IRA without regard to whether the distribution is a Lump
Sum Distribution or a Partial Distribution. Effective January 1, 1993,
Participants have the right to elect to have the Trustee transfer all or any
portion of an "eligible rollover distribution" directly to another plan
qualified under Section 401(a) of the Code or to an IRA. If the Participant does
not elect to have an "eligible rollover distribution" transferred directly to
another qualified plan or to an IRA, the distribution will be subject to an
mandatory federal withholding tax equal to 20% of the taxable distribution. An
"eligible rollover distribution" means any amount distributed from the Plan
except: (1) a distribution that is (a) one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the Participant or the joint lines of the Participant and his or
her designated beneficiary, or (b) for a specified period of ten years or more;
(2) any amount that is required to be distributed under the minimum distribution
rules; and (3) any other distributions excepted under applicable federal law.
The tax law change described above did not modify the special tax treatment of
Lump Sum Distributions, that are not rolled over or transferred i.e., forward
averaging, capital gains tax treatment and the nonrecognition of net unrealized
appreciation, discussed earlier.

ERISA AND OTHER QUALIFICATION

        As noted above, the Plan is subject to certain provisions of the
Employee Retirement Income Security Act of 1974, as amended, and will be 
submitted to the IRS for a determination that it is qualified under
Section 401(a) of the Code.

        THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT
INTENDED TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.

RESTRICTIONS ON RESALE

        Any person receiving a distribution of shares of Common Stock under the
Plan who is an "affiliate" of the Bank as the term "affiliate" is used in Rules
144 and 405 under the Securities Act of 1933, as amended (the "Securities Act")
(e.g., directors, officers and substantial shareholders of the Bank) may reoffer
or resell such shares only pursuant to a registration statement filed under the
Securities Act assuming the availability thereof, pursuant to Rule 144 or some
other exemption of the registration requirements of the Securities Act Any
person who may be an "affiliate" of the Bank may wish to consult with counsel
before transferring any Common Stock owned by him. In addition, Participants are
advised to consult with counsel as to the applicability of Section 16 of the
1934 Act which may restrict the sale of Common Stock where acquired under the
Plan, or other sales of Common Stock.

                                       16
<PAGE>
 
        Persons who are not deemed to be "affiliates" of the Bank at the time of
resale will be free to resell any shares of Common Stock to them under the
Plan, either publicly or privately, without regard to the Registration and
Prospectus delivery requirements of the Securities Act or compliance with the
restrictions and conditions contained in the exemptive rules thereunder.  An
"affiliate" of the Bank is someone who directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control,
with the Bank.  Normally, a director, principal officer or major shareholder of
a corporation may be deemed to be an "affiliate" of that corporation.  A person
who may be deemed an "affiliate" of the Bank at the time of a proposed resale
will be permitted to make public resales of the Bank's Common Stock only
pursuant to a "reoffer" Prospectus or in accordance with the restrictions and
conditions contained in Rule 144 under the Securities Act or some other
exemption from registration, and will not be permitted to use this Prospectus
in connection with any such resale.  In general, the amount of the Bank's
Common Stock which any such affiliate may publicly resell pursuant to Rule 144
in any three-month period may not exceed the greater of one percent of the
Bank's Common Stock then outstanding or the average weekly trading volume
reported on the National Association of Securities Dealers Automated Quotation
System during the four calendar weeks prior to the sale.  Such sales may be
made only through brokers without solicitation and only at a time when the Bank
is current in filing the reports required of it under the 1934 Act.  

SEC REPORTING AND SHORT-SWING PROFIT LIABILITY

        Section 16 of the 1934 Act imposes reporting and liability requirements
on officers, directors and persons beneficially owning more than ten percent of
public companies such as the Holding Company. Section 16(a) of the 1934 Act
requires the filing of reports of beneficial ownership. Within ten days of
becoming a person subject to the reporting requirements of Section 16(a), a Form
3 reporting initial beneficial ownership must be filed with the Securities and
Exchange Commission. Certain changes in beneficial ownership, such as purchases,
sales, gifts and participation in savings and retirement plans must be reported
periodically, either on a Form 4 within ten days after the end of the month in
which a change occurs, or annually on a Form 5 within 45 days after the close of
the Bank's fiscal year. Participation in the Employer Stock Fund of the Plan by
officers, directors and persons beneficially owning more than ten percent of
Common Stock of the Holding Company must be reported to the SEC annually on a
Form 5 by such individuals. At ____________, 1997, _____% of the Plan assets
were allocated to executive officers.

        In addition to the reporting requirements described above, Section 16(b)
of the 1934 Act provides for the recovery by the Holding Company of profits
realized by any officer, director or any person beneficially owning more than
ten percent of the Holding Company's Common Stock ("Section 16(b) Persons")
resulting from the purchase and sale or sale and purchase of the Holding
Company's Common Stock within any six-month period.

        The SEC has adopted rules that provide exemption from the profit
recovery provisions of Section 16(b) for participant-directed employer security
transactions within an employee benefit plan, such as the Plan, provided certain
requirements are met. These requirements generally 

                                       17
<PAGE>
 
involve restrictions upon the timing of elections to acquire or dispose of
employer securities for the accounts of Section 16(b) Persons.

        Except for distributions of Common Stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, Section 16(b) Persons are required to hold shares of Common Stock
distributed from the Plan for six months following such distribution.  

                                    EXPERTS

        The financial statements and schedule of Richmond County Savings Bank
401(k) Savings Plan as of December 31, 1996 and 1995 and for the years then
ended have been included herein in reliance upon the report of Ernst & Young
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

                                LEGAL OPINIONS

        The validity of the issuance of the Common Stock will be passed upon by
Muldoon, Murphy & Faucette, Washington, D.C., which firm acted as special
counsel for the Bank in connection with the Bank's Conversion from a mutual
savings bank to a stock based organization.

                                       18
<PAGE>
 
                         RICHMOND COUNTY SAVINGS BANK
                  401(K) SAVINGS PLAN IN RSI RETIREMENT TRUST
                                Investment Form



Name of Plan Participant:                                  
                          -----------------------------------

Social Security Number:                                    
                          -----------------------------------


        1.      INSTRUCTIONS. In connection with the proposed Conversion of
                ------------        
Richmond County Savings Bank from a mutual savings bank to a stock based
organization (the "Conversion"), Richmond County Savings Bank 401(k) Savings
Plan in RSI Retirement Trust ("Plan") has been amended to permit participants to
direct their current account balances for their Basic Contribution Account,
Company Contribution Account and Rollover Account into a new fund: the Employer
Stock Fund. The percentage of a participant's account transferred at the
direction of the participant into the Employer Stock Fund will be used to
purchase shares of common stock of Richmond County Financial Corp. (the "Common
Stock").

        To direct a transfer of all or a part of the funds credited to your
accounts to the Employer Stock Fund, you should complete and file this form with
the Human Resources Department, no later than 10 days prior to the expiration
date of the Offering (__________________, 1997.) A representative for the Plan
Administrator will retain a copy of this form and return a copy to you. If you
need any assistance in completing this form, please contact Dorothy Episcopia at
(718) 448-2800, extension 291 . If you do not complete and return this form to
the Plan Administrator by ______________, the funds credited to your accounts
under the Plan will continue to be invested in accordance with your prior
investment direction, or in accordance with the terms of the Plan if no
investment direction has been provided.

2.  INVESTMENT DIRECTIONS. I hereby authorize the Plan Administrator to direct
the Trustee to invest the following percentage (in multiples of not less than
_%) of my Basic Contribution Account, Company Contribution Account and Rollover
Account in the Employer Stock Fund:

      a.      Core Equity Fund ____%
      b.      Emerging Growth Fund ____%
      c.      Value Equity Fund ____%
      d.      Actively Managed Bond Fund ____%
      e.      Intermediate - Term Investment Fund ____%
      f.      Short-Term Investment Fund ____%
      g.      International Equity Fund ____%

NOTE: The total percentage of directed investments, above, may not exceed 100%.

3.    STATUS. Enter information below for all accounts you had at the
Eligibility Record Date (June 30, 1996) and the Supplemental Eligibility Record
Date (September 30, 1997).


        ============================================================
          Account Title
        (Names on Account)      Account Number          Date Opened
        ------------------------------------------------------------

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

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

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

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

        ============================================================


If additional space is needed, please use the back of this form.

                                       19
<PAGE>
 
4.  ACKNOWLEDGMENT OF PARTICIPANT.  I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan.  I acknowledge
that I have received a copy of the Prospectus and the Prospectus Supplement.


-----------------------------           -----------------
Signature of Participant                Date
-------------------------------------------------------------------------------

ACKNOWLEDGMENT OF RECEIPT BY ADMINISTRATOR. This Investment Form was received by
the Plan Administrator and will become effective on the date noted below.

-----------------------------           -----------------
By:______________                       Date


        THE PARTICIPATION INTERESTS REPRESENTED BY COMMON STOCK OFFERED HEREBY
ARE NOT DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE BANK INSURANCE FUND OR THE
SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE COMPANY OR BANK.
THE COMMON STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF
THE PRINCIPAL INVESTED.

                                       20
<PAGE>
 
                             Financial Statements
                          and Supplemental Schedules

                         Richmond County Savings Bank
                              401(k) Savings Plan
                            in RSI Retirement Trust

                    Years ended December 31, 1996 and 1995
                      with Report of Independent Auditors
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                             Financial Statements
                          and Supplemental Schedules

                    Years ended December 31, 1996 and 1995



                                   Contents
<TABLE>
<S>                                                                    <C>
Report of Independent Auditors.......................................... F-1
 
Financial Statements
 
Statement of Net Assets Available for Plan Benefits
 with Fund Information.................................................. F-2
Statement of Changes in Net Assets Available for Plan Benefits
 with Fund Information.................................................. F-3
Notes to Financial Statements........................................... F-5
 
Supplemental Schedules
 
Assets Held for Investment.............................................. F-13
Reportable Transactions................................................. F-14
</TABLE>

A schedule of party-in-interest transactions has not been presented because
there were no party-in-interest transactions which are prohibited by ERISA
Section 406 and for which there are no statutory or administrative
exemptions.
<PAGE>
 
                  [LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]

                        Report of Independent Auditors

The Board of Trustees
Richmond County Savings Bank

We have audited the accompanying statements of net assets available for Plan
benefits with fund information of the Richmond County Savings Bank 401(k)
Savings Plan in RSI Retirement Trust (the "Plan") as of December 31, 1996 and
1995, and the related statements of changes in net assets available for Plan
benefits with fund information for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the net assets available for Plan benefits at December
31, 1996 and 1995, and the changes in its net assets available for Plan benefits
for the years then ended in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment as of December 31, 1996 and reportable transactions for the
year then ended are presented for purposes of complying with the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974, and are not a required part of the
financial statements. The Fund Information in the statement of net assets
available for Plan benefits with fund information and the statement of changes
in net assets available for Plan benefits with fund information is presented for
purposes of additional analysis rather than to present the net assets available
for Plan benefits with fund information and changes in net assets available for
Plan benefits of each fund. The supplemental schedules and Fund Information have
been subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.


                                            /s/ Ernst & Young LLP

July 14, 1997

                                                                             F-1
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

   Statement of Net Assets Available for Plan Benefits with Fund Information

<TABLE>
<CAPTION>
 
                                  Emerging                                       Actively                 
                        Core       Growth     Value   Short-Term  Intermediate-  Managed   International               
                       Equity      Equity     Equity  Investment    Term Bond      Bond       Equity      
                        Fund        Fund       Fund      Fund         Fund         Fund        Fund      Loans      Total 
                      ------------------------------------------------------------------------------------------------------ 
<S>                   <C>         <C>        <C>      <C>          <C>           <C>        <C>          <C>      <C> 
December 31, 1996:
 Investments, at fair
  value (Note 4)      $1,018,580  $453,008   $366,136   $312,458   $146,299      $149,890   $13,282      $    --  $2,459,653
 Loans receivable from
  participants                --        --         --         --         --            --        --       79,839      79,839
                      ------------------------------------------------------------------------------------------------------   
Net assets available
 for Plan benefits    $1,018,580  $453,008   $366,136   $312,458   $146,299      $149,890   $13,282      $79,839  $2,539,492
                      ====================================================================================================== 
December 31, 1995:
 Investments, at fair
  value (Note 4)      $  651,533  $284,997   $238,678   $304,269   $ 67,040      $139,201   $    --      $    --  $1,685,718
 Loans receivable from
  participants                --        --         --         --         --            --        --       47,360      47,360     
                      ------------------------------------------------------------------------------------------------------   
Net assets available
 for Plan benefits    $  651,533  $284,997   $238,678   $304,269   $ 67,040      $139,201   $    --      $47,360  $1,733,078
                      ====================================================================================================== 
</TABLE> 

See accompanying notes.

F-2
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

   Statement of Changes in Net Assets Available for Plan Benefits with Fund
                                  Information

                         Year ended December 31, 1996

<TABLE>
<CAPTION>
 
                                        Emerging                                       Actively                 
                              Core       Growth     Value    Short-Term  Intermediate-  Managed   International               
                             Equity      Equity     Equity   Investment    Term Bond      Bond       Equity      
                              Fund        Fund       Fund      Fund         Fund         Fund        Fund      Loans      Total 
                          -------------------------------------------------------------------------------------------------------- 
<S>                         <C>        <C>         <C>       <C>         <C>           <C>        <C>          <C>      <C> 
Additions                                       
Employee contributions    $  154,864  $ 80,434    $ 63,749  $ 38,066      $ 15,517    $ 29,269     $ 1,751     $    --  $  383,650
Employee rollover                                                                                                       
 contributions                    --        --          --    17,718            --          --          --          --      17,718
Employer contributions        56,449    29,255      22,704    14,597         5,792      10,720         598          --     140,115
Interest on loans                 --        --          --        --            --          --          --       5,501       5,501
Net realized and                                                                                                         
 unrealized appreciation                                                                                                
 in fair value of                                                                                                        
 investments                 168,055    85,663      72,808    12,804         3,557       4,523         446          --     347,856
                          --------------------------------------------------------------------------------------------------------  
Total additions              379,368   195,352     159,261    83,185        24,866      44,512       2,795       5,501     894,840

Benefits distributed         (24,658)  (13,881)    (11,640)   (7,512)      (10,117)    (20,618)         --          --     (88,426)
Transfers between funds       12,337   (13,460)    (20,163)  (67,484)       64,510     (13,205)     10,487      26,978          --
                          -------------------------------------------------------------------------------------------------------- 
Increase in net assets
 available for Plan
 benefits                    367,047   168,011     127,458     8,189        79,259      10,689      13,282      32,479     806,414
Net assets available for                                                        
 Plan benefits,
 beginning of year           651,533   284,997     238,678   304,269        67,040     139,201          --      47,360   1,733,078
                          -------------------------------------------------------------------------------------------------------- 
Net assets available for
 Plan benefits, end of
 year                     $1,018,580  $453,008    $366,136  $312,458      $146,299    $149,890     $13,282     $79,839  $2,539,492 
                          ========================================================================================================
</TABLE>

See accompanying notes.

F-3
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

   Statement of Changes in Net Assets Available for Plan Benefits with Fund 
Information

                         Year ended December 31, 1995

<TABLE>
<CAPTION>

                                 Core            Emerging         Value         Short-Term    Intermediate- 
                                Equity        Growth Equity      Equity        Investment      Term Bond   
                                 Fund             Fund            Fund            Fund          Fund      
                            --------------------------------------------------------------------------------
<S>                             <C>           <C>                <C>           <C>             <C>   
                                         
Additions                                
Employee contributions          $105,639      $   49,404         $  46,108     $   39,893      $ 14,204   
Employee rollover                        
   contributions                       -             531               531          3,185             -   
Employer contributions            47,951          22,299            20,855         18,351         6,540   
Interest on loans                      -               -                 -              -             -   
Net realized and                                                              
   unrealized appreciation                                                    
   in fair value of                                                           
   investments                   167,454          76,917            55,294         12,540         7,146   
                            --------------------------------------------------------------------------------
Total additions                  321,044         149,151           122,788         73,969        27,890   
                                                                             
Benefits distributed             (23,106)        (11,770)          (10,481)       (11,497)       (2,118)  
Transfers between funds            4,346         (28,258)          (26,448)        58,075        (5,398)  
                            --------------------------------------------------------------------------------
                                                                             
Increase in net assets                                                       
   available for Plan                                                        
   benefits                      302,284         109,123            85,859        120,547        20,374   
Net assets available for                                                     
   Plan benefits,                                                            
   beginning of year             349,249         175,874           152,819        183,722        46,666   
                            --------------------------------------------------------------------------------
Net assets available for                                                                             
   Plan benefits, end of                                                     
   year                         $651,533      $  284,997         $ 238,678     $  304,269      $ 67,040   
                            ================================================================================

<CAPTION>

                               Actively        International  
                                Managed            Equity
                               Bond Fund            Fund        Loans         Total
                            -------------------------------------------------------------
<S>                            <C>             <C>            <C>            <C>     

Additions
Employee contributions         $  28,210       $  -           $     -        $  283,458
Employee rollover                                                    
   contributions                       -          -                 -             4,247
Employer contributions            13,001          -                 -           128,997
Interest on loans                      -          -             3,237             3,237
Net realized and                                                       
   unrealized appreciation                                             
   in fair value of                                                    
   investments                    18,268          -                 -           337,619
                            -------------------------------------------------------------
Total additions                   59,479          -             3,237           757,558
                                                                       
Benefits distributed              (4,296)         -            (1,335)          (64,603)
Transfers between funds           (9,744)         -             7,427                 -
                            -------------------------------------------------------------
                                                                       
Increase in net assets                                                 
   available for Plan                                                  
   benefits                       45,439          -             9,329           692,955
Net assets available for                                               
   Plan benefits,                                                      
   beginning of year              93,762          -            38,031         1,040,123
                            -------------------------------------------------------------
Net assets available for                                                                       
   Plan benefits, end of                                               
   year                        $ 139,201       $  -           $47,360        $1,733,078
                            =============================================================

</TABLE>


See accompanying notes.

F-4
<PAGE>
 
                          Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                         Notes to Financial Statements

                               December 31, 1996


                                                                         
1. Description of the Plan

The following brief description of the Richmond County Savings Bank 401(k)
Savings Plan in RSI Retirement Trust (the "Plan") provides only general
information. Participants should refer to the Plan document for more complete
information.

General

The Plan is a defined contribution plan covering all eligible employees of
Richmond County Savings Bank (the "Bank"). The Plan was created on January 1,
1992, as subsequently amended through August 30, 1995, and is administered by
RSI Retirement Trust (the "Trust"). The Trust is a multiple employer trust,
subject to the requirements of the Employee Retirement Income Security Act of
1974 ("ERISA"), that provides retirement benefits for the employees of savings
banks and their allied organizations. The assets of all participating member
organizations are held in this common trust and are collectively invested and
reinvested by the Trust in its capacity as Trustee.

Eligibility

Any full time, salaried employee who reaches the age of 21 who is not covered by
a collective bargaining agreement shall be eligible to participate as of the
first day of any payroll period of any calendar month following one year of
employment.

Contributions

Employee contributions are made in accordance with salary deduction agreements
pursuant to Internal Revenue Code Section 401(k). Subject to certain limitations
set forth in the Plan document, the amount of contributions authorized by
eligible employees prior to August 30, 1995 shall not be less than 2% nor
greater than 6% of an employee's base salary (limited to $9,240). Effective
August 30, 1995, eligible employees may contribute up to 9% of their base salary
(limited to $9,500). The Bank makes matching contributions in an amount equal to
50% of an employee's contributions up to 6%.


                                                                             F-5
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)




1. Description of the Plan (continued)

New employees joining the Bank may be eligible to deposit any distributions from
a previous employer's tax-qualified defined contribution plan as set forth in
the Plan document and continue to defer income taxes on that distribution. These
rollover contributions can be made even if the employee is not yet eligible to
join the Plan.

Prior to May 24, 1995, participants in the Plan could invest their voluntary
contributions, rollover contributions and the Bank's matching contributions in
multiples of 25% in accordance with any one of the available investment options.
Those who first elect to participate or, if applicable, make a rollover
contribution on or after May 24, 1995 may direct that their contributions be
made to specific investment accounts in multiples of 1%. Investment direction
changes and transfers among the various Plan investment options are limited to
once each calendar quarter, but any participant in the Plan on May 24, 1995 may
redirect his investment one additional time if it is done within 60 days of May
24, 1995. The Plan utilizes the following RSI Retirement Trust investment funds:

   Core Equity Fund--The Core Equity Fund is an equity based securities fund.
   Investments are made primarily in common stocks of a broadly diversified
   group of large, high quality, competitively strong companies that in the view
   of the investment manager exhibit sustainable growth and dividend earnings.
   It offers investors the potential for long-term capital appreciation, with
   income as a secondary goal. The Core Equity Fund is managed by Retirement
   System Investors, Inc.

   Emerging Growth Equity Fund--The Emerging Growth Equity Fund is an aggressive
   growth equity fund that seeks capital appreciation by investing in rapidly
   growing emerging companies that, in the view of the investment manager, have
   higher than average potential for earnings growth. The Emerging Growth Equity
   Fund is managed by The Putnam Advisory Company, Inc. and Friess Associates,
   Inc.


                                                                             F-6
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)



1. Description of the Plan (continued)

   Value Equity Fund--The Value Equity Fund is a growth and income equity based
   securities fund that seeks capital appreciation over the longer term. It
   invests in financially strong companies with medium to large market
   capitalizations. (In the view of the investment manager, these companies are
   currently out of favor with investors but have had good earnings growth
   records in the past and offer prospects for significant earnings and dividend
   growth. In the view of the investment manager, these stocks are currently
   undervalued and selling below their potential value.) The Value Equity Fund
   is managed by Retirement System Investors, Inc.

   Intermediate-Term Bond Fund--The Intermediate-Term Bond Fund invests in a
   high quality, diversified portfolio of debt securities that mature within ten
   years, or have expected average lives of ten years or less. At least 65% of
   the investments in this fund are in U.S. Government or U.S. Government Agency
   issues which have the highest credit rating. At the time of purchase, at
   least 75% of the holdings must have a quality rating of "AA" or better, with
   a minimum quality rating of "A" for other holdings. This investment fund's
   goal is to achieve income and price appreciation. The Intermediate-Term Bond
   Fund is managed by Retirement System Investors, Inc.

   Actively Managed Bond Fund--The Actively Managed Bond Fund invests in high
   quality fixed-income securities (bonds and other debt securities), with
   maturities that could range from three months to 30 years. The fund's
   investment managers frequently adjust the maturity structure of the portfolio
   to respond to perceived changes in the relative attractiveness of the
   fixed-income market. At the time of purchase, at least 75% of the investments
   in this fund must have a rating of "AA" or better, with a minimum rating of
   "A" for other holdings, and at least 65% of the investments must be in U.S.
   Government or U.S. Government Agency issues. The fund seeks to achieve both
   income and price appreciation. The Actively Managed Bond Fund is managed by
   Retirement System Investors, Inc.

   Short-Term Investment Fund--The Short-Term Investment Fund invests in high
   quality cash equivalent types of securities normally maturing in one year or
   less. While the fund may invest in U.S. Government instruments with
   maturities up to two years, the maximum average maturity of the fund's
   holdings will not exceed one year. This investment fund offers substantial
   liquidity and capital preservation. The Short-Term Investment Fund is managed
   by Retirement System Investors, Inc.


                                                                             F-7
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)



1. Description of the Plan (continued)

   International Equity Fund--The International Equity Fund seeks capital
   appreciation and income by investing in stocks of companies headquartered in
   foreign countries. Each selection is based on companies whose current prices,
   in the view of the investment manager, do not reflect the true earnings
   potential and, therefore, are selling at "undervalued" prices. Investments in
   foreign markets with unacceptable political or economic risks are avoided.
   Holdings are concentrated in the larger markets of Europe, Australia and the
   Far East. In addition, the portfolio manager will invest in emerging markets,
   as opportunities arise. The International Equity Fund is managed by Morgan
   Grenfell Investment Services Limited.

Loans/Hardship Withdrawals

Upon application of any participant, the Bank may direct the Trustee of the Plan
to make a loan from the participant's employee contribution account, vested
matching contribution account and rollover contribution account. All loans are
limited to the lesser of 50% of the participant's accounts or $50,000 and bear
interest at a fixed rate of prime plus 1% (rounded to the nearest 1/4% of 1%)
determined at the time of borrowing and fixed for the life of the loan. Further
restrictions on the principal amount and term of loans do exist and are
discussed in the Plan document.

In addition, participants may obtain withdrawals based on immediate financial
needs as outlined in the Plan document.

Participant's Accounts

Separate accounts are maintained for each participant to accumulate values
resulting from Bank, employee and rollover contributions. Participant's accounts
are credited with contributions made on their behalf in accordance with employee
salary deduction arrangements, the Bank's matching contributions and Plan
earnings. Plan earnings and losses are allocated based on account balances and
investment options which the participant chooses.


                                                                             F-8
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)



1. Description of the Plan (continued)

Vesting

Participants are fully vested in their accrued benefits in all accounts other
than their employer matching accounts at all times and such accrued benefits are
nonforfeitable at all times. Employer matching contributions become vested and
nonforfeitable as follows:

<TABLE>
<CAPTION>

          Number of Years of Service as Defined            % Vested and 
                   in the Plan Document                    Nonforfeitable
          -------------------------------------     ---------------------------
          <S>                                       <C> 
          Less than 2 years                                     0%
          2 years but less than 3 years                        20
          3 years but less than 4 years                        40
          4 years but less than 5 years                        60
          5 years but less than 6 years                        80
          6 or more years                                     100
</TABLE>

For participants hired prior to January 1, 1994, their vesting period commences
on date of enrollment in the Plan, regardless of prior periods of service at the
Bank. For employees hired on or subsequent to January 1, 1994, their vesting
period begins upon date of hire, provided the employee has attained the age of
18.

A participant, upon leaving the Bank prior to achieving two years of employment,
forfeits the value of all matching contributions and earnings on those
contributions made by the employer. The forfeited amount is deducted from the
amount due from the Bank for the employer contribution in the following quarter.

Payment of Benefits

Upon retirement, a participant may elect to receive their vested account balance
either in a lump-sum amount or in monthly, quarterly, semi-annual or annual
installments.

                                                                             F-9
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)


1. Description of the Plan (continued)

Administrative Expenses

All administrative expenses of the Plan are paid by the Bank, except expenses
directly related to the managing of each fund (such as investment management
fees, commissions and other transaction costs) which are charged against the
assets of the total applicable fund to which such expenses directly relate.

2. Summary of Accounting Policies

Basis of Accounting and Presentation

The financial statements have been prepared on the accrual basis of accounting.

Valuation

Investments consist of unit shares of funds offered by RSI Retirement Trust, a
registered investment company. Valuation of these shares by the Trust is based
on the underlying value of the net assets of each fund.

Except for debt securities with remaining maturities of 60 days or less which
are valued at book value, investments within each fund for which markets are
available are valued at their last available quote.

Investment transactions within each fund are recorded on a trade date basis.
Dividend income is recognized on the ex-dividend date or when the dividend
information is known; interest income, including, where applicable, amortization
of discount and premium on investments and zero coupon bonds, is recognized on
the accrual basis.


                                                                            F-10
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)


2. Summary of Accounting Policies (continued)

Risks and Uncertainties

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
The Plan sponsor believes that the estimates utilized in preparing its financial
statements are reasonable and prudent. Actual results could differ from these
estimates.

3. Plan Termination

Although it has not expressed any intent to do so, the Bank has the right under
the Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of a Plan termination,
participants become 100% vested in all matching contributions.

4. Investments

Investments in the Plan as of December 31, 1996 and 1995 are:

<TABLE>
<CAPTION>

                                              1996                        1995
                                   --------------------------  ---------------------------
                                       Units     Fair Value        Units      Fair Value
                                   --------------------------  ---------------------------
   <S>                                <C>        <C>              <C>         <C> 
   Core Equity Fund                   16,866     $1,018,580       13,111      $  651,533
   Emerging Growth Equity Fund         6,701        453,008        5,358         284,997
   Value Equity Fund                   8,349        366,136        6,852         238,678
   Short-Term Investment Fund         15,256        312,458       15,555         304,269
   Intermediate-Term Bond Fund         4,876        146,299        2,324          67,040
   Actively Managed Bond Fund          4,719        149,890        4,520         139,201
   International Equity Fund             289         13,282            -               -
                                               --------------               ---------------
   Total                                         $2,459,653                   $1,685,718
                                               ==============               ===============
</TABLE>

Net realized and unrealized appreciation on the above investment funds was
$347,856 and $337,619 for the years ended December 31, 1996 and 1995,
respectively.


                                                                            F-11
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)


5. Income Tax Status

The Plan obtained its latest determination letter on December 13, 1995, in which
the Internal Revenue Service stated that the Plan, as amended through March 10,
1994, was in compliance with the applicable requirements of the Internal Revenue
Code. Management is not aware of any cause of action, series of events or
amendments that might adversely affect the qualified status of the Plan.


                                                                            F-12
<PAGE>
 
                            Supplemental Schedules
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                          Assets Held for Investment

                               December 31, 1996

<TABLE>
<CAPTION>

                                              Number of Units     Fair
                                                   Held           Value           Cost
                                             -----------------------------------------------
<S>                                           <C>               <C>            <C>    
Units in RSI Retirement Trust Series
   Pooled Investment Funds:
     Core Equity Fund                             16,866        $1,018,580     $  689,045
     Emerging Growth Equity Fund                   6,701           453,008        284,354
     Value Equity Fund                             8,349           366,136        250,047
     Short-Term Investment Fund                   15,256           312,458        285,966
     Intermediate-Term Bond Fund                   4,876           146,299        136,599
     Actively Managed Bond Fund                    4,719           149,890        130,182
     International Equity Fund                       289            13,282         12,836
                                                              ------------------------------
                                                                 2,459,653      1,789,029

   Loans to participants                                            79,839         79,839
                                                              ------------------------------
Total                                                           $2,539,492     $1,868,868
                                                              ==============================
</TABLE>

                                                                            F-13
<PAGE>
 
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                            Reportable Transactions

                         Year ended December 31, 1996

<TABLE>
<CAPTION>
 
                                       Purchases                         Sales
                              -------------------------     ------------------------------
                               Number of      Purchase        Number of 
                              Transactions    Price           Transactions      Proceeds
                              ------------   ----------     ---------------    -----------
<S>                           <C>            <C>            <C>                <C> 

Core Equity Fund                   89        $289,050            41            $  82,037
Emerging Growth Equity Fund        85         139,906            40               57,816
Value Equity Fund                  83         102,283            38               47,940
Short-Term Investment Fund         82         101,068            33              103,563
Intermediate-Term Bond Fund        83          95,022            33               19,427
</TABLE>


                                                                            F-14
<PAGE>
 
[To be used in connection with the Syndicated Community Offering only]


SYNDICATED PROSPECTUS SUPPLEMENT



                        RICHMOND COUNTY FINANCIAL CORP.

          (PROPOSED HOLDING COMPANY FOR RICHMOND COUNTY SAVINGS BANK)


                       __________ SHARES OF COMMON STOCK


     Richmond County Financial Corp. (the "Company"), a Delaware corporation, is
offering for sale in a syndicated community offering (the "Syndicated Community
Offering") __________ shares, at a per share price of $_____, of its common
stock, $0.01 par value (the "Common Stock"), to be issued upon the conversion of
Richmond County Savings Bank, Staten Island, New York (the "Bank") from a New
York chartered mutual savings bank to a New York chartered stock savings bank
and the issuance of the Bank's outstanding capital stock to the Company pursuant
to a plan of conversion (the "Plan of Conversion").  The remaining __________
shares of the Common Stock have been subscribed for in subscription and
community offerings (the "Subscription and Community Offerings") by the Bank's
holders of deposit accounts with the Bank with a balance of $100 or more as of
June 30, 1996, by the Richmond County Savings Bank Employee Stock Ownership
Plan, a tax-qualified employee benefit plan, and related trust (the "ESOP"), by
holders of deposit accounts with a balance of $100 or more as of September 30,
1997, and then by certain members of the general public.  See "The Conversion -
General."  Contained herein is the Prospectus in the form used in the
Subscription and Community Offerings.  The purchase price for all shares
purchased in the Syndicated Community Offering will be the same as the price
paid by subscribers in the Subscription and Community Offerings (the "Purchase
Price").  The Purchase Price of $10.00 per share is the amount to be paid for
each share at the time a purchase order is submitted.  See the cover page of the
Prospectus and the table below for information as to the method by which the
range within which the number of shares offered may vary and the method of
subscribing for shares of the Common Stock.  For a discussion of certain factors
that should be considered by each prospective investor, see "Risk Factors" on
pages ___ through ___.

     Funds submitted to the Bank with purchase orders will earn interest at the
Bank's passbook rate of interest from the date of receipt until completion or
termination of the Conversion.  The Syndicated Community Offering will expire no
later than _______________, 1998, unless extended by the Bank and the Company
with the approval of the Superintendent of Banks of the State of New York and
the Federal Deposit Insurance Corporation, if necessary.  Such extensions may
not go beyond _______________, 1999.  If an extension of time has been granted,
all subscribers will be notified of such extension, and of their rights to
confirm their subscriptions, or to modify or rescind their subscriptions and
have their funds returned promptly with interest, and of the time period within
which the subscriber must notify the Bank of his intention to confirm, modify or
rescind his subscription.  If an affirmative response to any resolicitation is
not received by the Bank and the Company from subscribers, such orders will be
rescinded and all funds will be returned promptly with interest.  The minimum
number of shares which may be purchased is 25 shares.  Except for the
<PAGE>
 
ESOP, which may purchase up to 8% of the total number of shares of Common Stock
issued in the Conversion, no person, together with associates of and persons
acting in concert with such person, may purchase in the Community Offering and
the Syndicated Community Offering more than $250,000 of the aggregate value of
Common Stock offered in the Conversion. See "Plan of Conversion - Limitations on
Common Stock Purchases." The Company reserves the right, in its absolute
discretion, to accept or reject, in whole or in part, any or all subscriptions
in the Syndicated Community Offering.

     The Company and the Bank have engaged Sandler O'Neill & Partners, L.P.
("Sandler O'Neill") to assist them in the sale of the Common Stock in the
Syndicated Community Offering.  It is anticipated that Sandler O'Neill will use
the services of other registered broker-dealers ("Selected Dealers") and that
fees to Sandler O'Neill and such Selected Dealers will be an amount not to
exceed 7.0% of the aggregate Purchase Price of the shares sold in the Syndicated
Community Offering.  Neither Sandler O'Neill nor any Selected Dealer shall have
any obligation to take or purchase any shares of Common Stock in the Syndicated
Community Offering.

     [The Company has applied to the National Association of Securities Dealers
("NASD") to have its Common Stock quoted on the Nasdaq National Market under the
symbol "____."]  Prior to this Offering, there has not been a public market for
the Common Stock, and there can be no assurance that an active and liquid
trading market for the Common Stock will develop.  The absence or discontinuance
of a market may have an adverse impact on both the price and liquidity of the
stock.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK, THE
NEW YORK STATE BANKING BOARD, THE NEW YORK STATE BANKING DEPARTMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION, OR ANY OTHER
AGENCY, NOR HAS SUCH COMMISSION, BOARD, DEPARTMENT, CORPORATION OR ANY STATE
SECURITIES COMMISSION OR OTHER AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSIT ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE COMPANY OR THE BANK.  THE COMMON
STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL INVESTED.

                                       2
<PAGE>
 
<TABLE>
<CAPTION>
 
                                                   Estimated                           Estimated Net Pro-
                                                 Underwriting        Estimated Net     ceeds of Subscrip-
                                                  Commissions         Proceeds of        tion, Community
                               Syndicated          and Other          Syndicated         and Syndicated
                               Community           Fees and            Community            Community
                             Offering Price       Expenses(1)          Offering          Offerings(2)(3)
=======================================================================================================
<S>                         <C>                  <C>                 <C>               <C>
Minimum Per Share                $10.00            $                  $                  $
-------------------------------------------------------------------------------------------------------
Midpoint Per Share               $10.00            $                  $                  $
-------------------------------------------------------------------------------------------------------
Maximum Per Share                $10.00            $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Minimum(5)                 $                 $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Midpoint                   $                 $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Maximum(5)                 $                 $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Maximum,
 As Adjusted(6)                  $                 $                  $                  $
=======================================================================================================
</TABLE> 

-----------------
(1) Consists of a pro rata allocation of estimated expenses of the Bank and the
    Company in connection with the Conversion (other than estimated fees to be
    paid to Sandler O'Neill for services in connection with the Subscription and
    Community Offerings) and estimated compensation of Sandler O'Neill and
    Selected Dealers in connection with the sale of the remaining shares in the
    Syndicated Community Offering which fees are estimated to be $__________ and
    $__________ at the minimum and the maximum of the estimated price range and
    may be deemed to be underwriting fees.  The information under "Pro Forma
    Data" in the Prospectus was based on the assumptions stated therein, which
    may differ from the estimates used for this table.  See "The Conversion -
    Marketing and Underwriting Arrangements" for a more detailed discussion of
    fee arrangements.

(2) The Company applied to retain up to 50% of the net proceeds.  The balance of
    the net proceeds will be transferred to the Bank in exchange for all of the
    capital stock of the Bank to be issued in connection with the Conversion.

(3) The net proceeds of the Subscription and Community Offerings (based upon the
    sale of the __________ shares subscribed for at a price of $10.00 per share
    and after allocation of a pro rata portion of the estimated expenses
    relating to the Conversion) are estimated to be $__________.

(4) Based on an estimated price range of $__________ to $__________ at $_____
    per share (the "Estimated Price Range).  The Total Minimum reflects the sale
    of __________ shares at a per share price of $10.00, leaving a total of
    __________ shares to be sold in the Syndicated Community Offering.

(5) Gives effect to an increase in the number of shares which could occur due to
    an increase in the Estimated Price Range of up to 15% to reflect changes in
    market and financial conditions following commencement of the offerings.
    See "The Conversion - Stock Pricing."  For a discussion of the distribution
    and allocation of the additional shares, see "The Conversion - Subscription
    Rights and Limitations on Common Stock Purchases."


                       SANDLER O'NEILL & PARTNERS, L.P.

                       _________________________________


       The date of this Prospectus Supplement is _______________, 1997.

                                       3
<PAGE>
 
PROSPECTUS

                        RICHMOND COUNTY FINANCIAL CORP.
          (Proposed Holding Company for Richmond County Savings Bank)
                       21,275,000 Shares of Common Stock

     Richmond County Financial Corp. (the "Company"), a Delaware corporation, is
offering up to 21,275,000 shares of its common stock, par value $.01 per share
(the "Common Stock"), in connection with the conversion of Richmond County
Savings Bank (the "Bank") from a New York State chartered mutual savings bank to
a New York State chartered stock savings bank and the issuance of the Bank's
capital stock to the Company pursuant to the Bank's plan of conversion (the
"Plan" or "Plan of Conversion"). The simultaneous conversion of the Bank to
stock form, the issuance of the Bank's capital stock to the Company and the
offer and sale of the Common Stock by the Company are herein referred to as the
"Conversion." In certain circumstances, the Company may increase the amount of
Common Stock offered hereby up to 24,466,250 shares. See Footnote 4 to the table
below.

                                                   (continued on following page)
                             _____________________

     FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" ON PAGES 13 THROUGH 22.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK,
THE NEW YORK STATE BANKING BOARD, THE NEW YORK STATE BANKING DEPARTMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION, OR ANY
OTHER AGENCY, NOR HAS SUCH COMMISSION, BOARD, DEPARTMENT, CORPORATION OR ANY
STATE SECURITIES COMMISSION OR OTHER AGENCY PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

     THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSIT ACCOUNTS AND ARE
NOT INSURED OR GUARANTEED BY THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE COMPANY OR THE BANK.  THE COMMON
STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL INVESTED.
<TABLE>
<CAPTION>
 
 
                                                           Estimated Underwriting 
                                                           Commissions and Other Fees
                                Subscription Price (1)     and Expenses(2)                Estimated Net Proceeds(3)
<S>                                 <C>                      <C>                          <C>
Minimum Per Share                   $      10.00             $     0.33                   $       9.67
                                                                                          
Midpoint Per Share                  $      10.00             $     0.31                   $       9.69
                                                                                          
Maximum Per Share                   $      10.00             $     0.29                   $       9.71
                                                                                          
Total Minimum(1)                    $157,250,000             $5,216,600                   $152,033,400
                                                                                          
Total Midpoint(1)                   $185,000,000             $5,660,300                   $179,339,700
                                                                                          
Total Maximum (1)                   $212,750,000             $6,103,900                   $206,646,100

Total Maximum as adjusted(4)        $244,662,500             $6,614,200                   $238,048,300
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by Keller &
    Company, Inc. ("Keller") dated September 12, 1997, which states that the
    estimated pro forma market value of the Common Stock being offered for sale
    in the Conversion ranged from $157,250,000 to $212,750,000 with a midpoint
    of $185,000,000 taking into account the contribution to the Richmond County
    Savings Foundation (the "Foundation") of an amount of Common Stock equal to
    8% of the Common Stock sold in the Conversion (the "Valuation Range").  The
    independent appraisal of Keller is based upon estimates and projections that
    are subject to change and the valuation must not be construed as a
    recommendation as to the advisability of purchasing the Common Stock nor an
    assurance that a purchaser of Common Stock will thereafter be able to sell
    the Common Stock at prices within the Valuation Range.  Based on the
    Valuation Range, the Board of Directors of the Company and the Board of
    Trustees of the Bank established an estimated price range of the Common
    Stock being offered for sale in the Conversion within the Valuation Range of
    $157.3 million to $212.8 million (the "Estimated Price Range") or between
    15,725,000 and 21,275,000 shares of Common Stock issued at the $10.00  per
    share price (the "Purchase Price") to be paid for each share of Common Stock
    subscribed for or purchased in the Offering.  See "The Conversion - Stock
    Pricing."
(2) Consists of the estimated costs to the Bank and the Company arising from the
    Conversion, including estimated fixed expenses of approximately $2.8
    million, and marketing fees to be paid to Sandler O'Neill & Partners, L.P.
    ("Sandler O'Neill") estimated to be between $2.5 million and $3.3 million at
    the minimum and maximum of the Estimated Price Range, respectively.  See
    "The Conversion - Marketing and Underwriting Arrangements."  The actual fees
    and expenses may vary from the estimates.  See "Pro Forma Data" for the
    assumptions used to arrive at these estimates.
(3) Actual net proceeds may vary substantially from estimated amounts depending
    upon the number of shares sold in the offerings and other factors.  Includes
    the purchase of shares of Common Stock by the Richmond County Savings Bank
    Employee Stock Ownership Plan and related trust (the "ESOP") which is
    intended to be funded by a loan to the ESOP from the Company or from a third
    party, which will be deducted from the Company's stockholders' equity.  See
    "Use of Proceeds" and "Pro Forma Data."
(4) As adjusted to reflect the sale of up to an additional 15% of the Common
    Stock which may be offered at the Purchase Price, without resolicitation of
    subscribers or any right of cancellation, due to regulatory considerations,
    changes in market or general financial and economic conditions.  See "Pro
    Forma Data" and "The Conversion - Stock Pricing."  For a discussion of the
    distribution and allocation of the additional shares, if any, see "The
    Conversion - Subscription Offering and Subscription Rights," "- Community
    Offering" and  "- Limitations on Common Stock Purchases."


                            _______________________

                        SANDLER O'NEILL & PARTNERS, L.P.
                            _______________________

             The date of this Prospectus is _______________, 1997.
<PAGE>
 
(continued from previous page)

   NON-TRANSFERABLE RIGHTS TO SUBSCRIBE FOR THE COMMON STOCK IN A SUBSCRIPTION
OFFERING (THE "SUBSCRIPTION OFFERING") HAVE BEEN GRANTED IN THE FOLLOWING ORDER
OF PRIORITY TO:  1) THE BANK'S ELIGIBLE ACCOUNT HOLDERS (DEFINED AS HOLDERS OF
DEPOSIT ACCOUNTS TOTALLING $100 OR MORE AS OF JUNE 30, 1996); (2) THE COMPANY'S
AND BANK'S TAX-QUALIFIED EMPLOYEE BENEFIT PLANS (COLLECTIVELY, THE "EMPLOYEE
PLANS"), INCLUDING THE ESOP WHICH INTENDS TO SUBSCRIBE FOR UP TO 8% OF THE
COMMON STOCK ISSUED IN CONNECTION WITH THE CONVERSION (INCLUDING SHARES ISSUED
TO THE RICHMOND COUNTY SAVINGS FOUNDATION); AND (3) THE BANK'S SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS (DEFINED AS HOLDERS OF DEPOSIT ACCOUNTS TOTALLING $100
OR MORE AS OF SEPTEMBER 30, 1997).   SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE.
PERSONS FOUND TO BE TRANSFERRING SUBSCRIPTION RIGHTS WILL BE SUBJECT TO
FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED
BY THE NEW YORK BANKING DEPARTMENT (THE "NYBD").  Concurrently, and subject to
the prior rights of holders of subscription rights, the Company is offering the
shares of Common Stock not subscribed for in the Subscription Offering for sale
in a community offering to certain members of the general public (the "Community
Offering").  Shares not subscribed for in the Subscription and Community
Offerings will be offered to certain members of the general public in a
syndicated community offering (the "Syndicated Community Offering") (the
Subscription Offering, Community Offering and the Syndicated Community Offering
are referred to collectively as the "Offerings").

   Except for the ESOP, no Eligible Account Holder or Supplemental Eligible
Account Holder may, in their respective capacities as such, purchase in the
Subscription Offering more than $250,000 of Common Stock; no person, together
with associates and persons acting in concert with such person, may purchase in
the Community Offering and Syndicated Community Offering more than $250,000 of
Common Stock; and no person, together with associates of and persons acting in
concert with such person, may purchase in the aggregate more than the overall
maximum purchase limitation of 1.0% of the total number of shares of Common
Stock offered in the Conversion; provided, however, such purchase limitations
may be increased and the amount that may be subscribed for may be increased or
decreased at the sole discretion of the Bank and Company without further
approval of subscribers or the Bank's depositors.  The minimum purchase is 25
shares.  See "The Conversion - Subscription Offering and Subscription Rights,"
"- Community Offering" and "- Limitations on Common Stock Purchases."

   Pursuant to the Plan, the Company intends to establish the Richmond County
Savings Foundation (the "Foundation"), a charitable foundation, in connection
with the Conversion.  The Plan provides that the Bank and the Company will
create and fund the Foundation with shares of Common Stock contributed by the
Company from authorized but unissued shares, in an amount equal to 8% of the
number of shares of Common Stock sold in the Conversion.  The Foundation will be
dedicated to charitable purposes within the Bank's local community.  For a
discussion of the Foundation and its effects on the Conversion, see "Risk
Factors - Effects of the Establishment of the  Foundation," "Pro Forma Data,"
and "The Conversion - Establishment of Charitable Foundation."

   The Bank has engaged Sandler O'Neill to consult with and advise the Company
and the Bank in the Offerings and Sandler O'Neill has agreed to use its best
efforts to assist the Company with the solicitation of subscriptions and
purchase orders for shares of Common Stock in the Offerings.  Sandler O'Neill is
not obligated to take or purchase any shares of Common Stock in the Offerings.
The Bank and the Company will pay a fee to Sandler O'Neill which will be based
on the aggregate Purchase Price of the Common Stock sold in the Offerings.  The
Company and the Bank have agreed to indemnify Sandler O'Neill against certain
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act").  See "The Conversion - Marketing and Underwriting
Arrangements."

   THE SUBSCRIPTION AND COMMUNITY OFFERINGS WILL TERMINATE AT  __________, NEW
YORK TIME, ON __________, 1997 (THE "EXPIRATION DATE") UNLESS EXTENDED BY THE
BANK AND THE COMPANY, WITH THE APPROVAL OF THE SUPERINTENDENT OF BANKS OF THE
STATE OF NEW YORK (THE "SUPERINTENDENT") AND THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC"), IF NECESSARY.  Orders submitted are irrevocable until
the completion of the Conversion; provided, that if the Conversion is not
completed within 45 days after the close of the Subscription and Community
Offerings, unless such period has been extended with the consent of the
Superintendent and FDIC, if necessary, all subscribers will have their funds
returned promptly with interest, and all withdrawal authorizations will be
cancelled.  Such extensions may not go beyond _________, 1999.  See "The
Conversion - Procedure for Purchasing Shares in Subscription and Community
Offerings."

   The Company has applied to the [NATIONAL ASSOCIATION OF SECURITIES DEALERS,
INC. ("NASD")]  to have its Common Stock quoted on the [NASDAQ NATIONAL MARKET]
("Nasdaq") under the symbol "____."  Prior to this offering there has not been a
public market for the Common Stock, and there can be no assurance that an active
and liquid trading market for the Common Stock will develop, or that resales of
the Common Stock can be made at or above the Purchase Price.  To the extent an
active and liquid trading market does not develop, the liquidity and market
value of the Common Stock may be adversely affected.  See "Risk Factors -
Absence of Market for Common Stock" and "Market for the Common Stock."

                                       2
<PAGE>


              [MAP OUTLINING THE LOCATIONS OF THE BANKING OFFICES
                 OF RICHMOND COUNTY SAVINGS BANK APPEARS HERE]

                                       3



<PAGE>
 
                  SUMMARY OF THE CONVERSION AND THE OFFERINGS
 
     The following summary of the Conversion and the Offerings is qualified in
its entirety by the more detailed information appearing elsewhere in this
Prospectus.
 
<TABLE>
<S>                          <C>
Risk Factors..............   A purchase of the Common Stock involves a
                             substantial degree of risk. Eligible Account
                             Holders, Supplemental Eligible Account Holders and
                             other prospective investors should carefully
                             consider the matters set forth under "Risk
                             Factors." THE SHARES OF COMMON STOCK OFFERED HEREBY
                             ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
                             OTHER GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY
                             THE COMPANY OR THE BANK.

Richmond County
 Financial Corp...........   Richmond County Financial Corp. is a Delaware
                             corporation organized at the direction of the Bank
                             to become a savings and loan holding company and
                             own all of the Bank's capital stock to be issued
                             upon its conversion from mutual form to stock form.
                             To date, the Company has not engaged in any
                             business. Its executive office is located at 1214
                             Castleton Avenue, Staten Island, New York 10310 and
                             its telephone number is (718) 448-2800.

Richmond County
 Savings Bank.............   The Bank is a New York State chartered mutual
                             savings bank. At June 30, 1997, the Bank had total
                             assets of $993.4 million, total deposits of $884.5
                             million and net worth of $100.9 million and
                             operated thirteen full service offices. The Bank is
                             located at 1214 Castleton Avenue, Staten Island,
                             New York 10310 and its telephone number is (718)
                             448-2800.

                             The Bank's current operating strategy consists
                             primarily of:

                             . investing primarily in one- to four-family, and
                               to a lesser extent, commercial real estate,
                               construction and development, commercial and
                               other loans and in investment-grade securities;

                             . attempting to increase its position as a lender
                               to businesses operating in its primary market
                               area, as well as other areas of the New York City
                               metropolitan area by offering its commercial loan
                               and deposit products to small and medium-sized
                               businesses;

                             . increasing the yield and duration of its
                               securities investments by emphasizing the
                               purchase of government agency and privately
                               issued mortgage-backed and mortgage-related
                               securities with estimated average lives of three
                               to five years and de-emphasizing its investment
                               in U.S. Treasury obligations, and corporate and
                               other debt securities;

                             . maintaining a low cost of funds by attracting and
                               retaining core deposits by providing enhanced
                               service;

                             . attempting to attract new deposit customers by
                               competitively pricing certificate of deposit
                               products and offering a greater variety of
                               duration of such deposits;

                             . developing wholesale borrowing sources such as
                               FHLB advances, reverse repurchase agreements, and
                               brokered certificates of deposit as another means
                               of funding asset growth; and

                             . managing its interest rate risk by originating or
                               purchasing adjustable rate loans and generally
                               selling fixed-rate loans with maturities of more
                               than 15 years.
</TABLE>

                                       4
<PAGE>
 
<TABLE>
<S>                          <C>                      
The Conversion and
 Reasons for Conversion....  The Board of Trustees of the Bank has adopted a
                             Plan of Conversion pursuant to which the Bank
                             intends to convert to a New York State-chartered
                             stock savings bank and issue all of its stock to
                             the Company. The Company is offering shares of its
                             Common Stock in the Offerings in connection with
                             the Bank's Conversion. Management believes the
                             Conversion offers a number of advantages,
                             including: (i) providing a larger capital base on
                             which to operate; (ii) providing enhanced future
                             access to capital markets; (iii) providing enhanced
                             ability to diversify into other financial services
                             related activities; and (iv) providing enhanced
                             ability to increase its presence in the communities
                             it serves and to geographically expand its
                             operations and market area through marketing and
                             business development, the acquisition or
                             establishment of branch offices or the acquisition
                             of other financial institutions. The Conversion and
                             the Offerings are subject to approval by the
                             Superintendent and non-objection by the FDIC, and
                             approval of Eligible Account Holders at a special
                             meeting to be held on __________, 1997 (the
                             "Special Meeting"). The Superintendent issued an
                             approval letter on _______, 1997 and the FDIC
                             issued a notice of intent not to object to the
                             Conversion on _______, 1997. See "The Conversion--
                             General."
 
The Richmond County
 Savings Foundation....      The Bank's Plan of Conversion provides for the
                             establishment of a charitable foundation in
                             connection with the Conversion. The Foundation,
                             which will be incorporated under Delaware law as a
                             non-stock corporation, will be funded with a
                             contribution by the Company equal to 8% of the
                             Common Stock sold in the Conversion. The authority
                             for the affairs of the Foundation will be vested in
                             the Board of Directors of the Foundation, which
                             will initially be comprised of the members of the
                             Bank's Board of Trustees. See "The Conversion -
                             Establishment of Charitable Foundation."
 
Terms of the Offering...     The shares of Common Stock to be sold in connection
                             with the Conversion are being offered at a fixed
                             price of $10.00 per share in the Subscription
                             Offering pursuant to subscription rights in the
                             following order of priority to: (i) holders of
                             deposit accounts with a balance of $100 or more on
                             June 30, 1996 ("Eligible Account Holders"); (ii)
                             the Bank's Employee Plans, including the ESOP; and
                             (iii) depositors whose accounts in the Bank totaled
                             $100 or more on September 30, 1997 ("Supplemental
                             Eligible Account Holders"). Concurrently, and
                             subject to the prior rights of holders of
                             subscription rights, any shares of Common Stock not
                             subscribed for in the Subscription Offering are
                             being offered in the Community Offering at $10.00
                             per share to certain members of the general public.
                             Subscription rights will expire if not exercised by
                             _______, New York Time, on __________, 1997, unless
                             extended by the Bank and the Company. See "The
                             Conversion -Subscription Offering and Subscription
                             Rights" and " -Community Offering."
 
</TABLE> 

                                       5
<PAGE>
 
<TABLE> 
<S>                          <C> 
Procedure for Ordering 
 Shares and Prospectus    
 Delivery..............      Forms to order Common Stock offered in the
                             Subscription Offering and the Community Offering
                             will only be distributed with or be preceded by a
                             Prospectus. Any person receiving a stock order and
                             certification form who desires to subscribe for
                             shares must do so prior to the Expiration Date by
                             delivering to the Bank a properly executed stock
                             order and certification form together with full
                             payment. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT
                             BE REVOKED OR MODIFIED WITHOUT THE CONSENT OF THE
                             COMPANY AND BANK. To ensure that each purchaser
                             receives a prospectus at least 48 hours prior to
                             the Expiration Date in accordance with Rule 15c2-8
                             of the Securities Exchange Act of 1934, as amended
                             (the "Exchange Act"), no prospectus will be mailed
                             any later than five days prior to the Expiration
                             Date or hand delivered any later than two days
                             prior to such date. The Bank is not obligated to
                             accept subscriptions not submitted on an original
                             stock order form. See "The Conversion - Procedure
                             for Purchasing Shares in Subscription and Community
                             Offerings."
 
 
Form of Payment for 
 Shares................      Payment for subscriptions may be made: (i) in cash
                             (if delivered in person); (ii) by check or money
                             order; or (iii) by authorization of withdrawal from
                             deposit accounts maintained at the Bank. Orders for
                             Common Stock submitted by subscribers in the
                             Subscription Offering which aggregate $50,000 or
                             more must be paid by official bank or certified
                             check or by withdrawal authorization from a deposit
                             account of the Bank. No wire transfers will be
                             accepted. See "Conversion - Procedure for
                             Purchasing Shares in Subscription and Community
                             Offerings."
 
Nontransferability of
 Subscription Rights...      The subscription rights of Eligible Account
                             Holders, Supplemental Eligible Account Holders and
                             the Employee Plans, including the ESOP, are
                             nontransferable. See "The Conversion -Restrictions
                             on Transfer of Subscription Rights and Shares."
 
Purchase Limitations...      No Eligible Account Holder or Supplemental Eligible
                             Account Holder may purchase in the Subscription
                             Offering more than $250,000 of Common Stock. No
                             person, together with associates and persons acting
                             in concert with such person, may purchase in the
                             Community Offering and the Syndicated Community
                             Offering more than $250,000 of Common Stock. No
                             person, together with associates or persons acting
                             in concert with such person, may purchase in the
                             aggregate more than 1% of the Common Stock offered
                             (the "overall maximum purchase limitation").
                             However, the Employee Plans, including the ESOP,
                             may purchase up to 10% of the Common Stock issued,
                             including shares issued to the Foundation. It is
                             anticipated that the ESOP will subscribe to
                             purchase 8% of the Common Stock issued, including
                             shares issued to the Foundation. The minimum
                             purchase is 25 shares of Common Stock. At any time
                             during the Conversion and without approval of the
                             Bank's depositors or a resolicitation of
                             subscribers, the Bank and the Company may, in their
                             sole discretion, decrease the maximum purchase
                             limitation below $250,000 of Common Stock; however,
                             such amount may not be reduced to less than 0.10%
                             of the Common Stock offered. Additionally, at any
                             time during the Conversion, the Bank and the
                             Company may, in their sole discretion, increase the
                             maximum purchase limitation in the Subscription and
                             Community Offerings to an amount in excess of
                             $250,000 up to a maximum of 5% of the shares to be
                             issued in the Conversion. Similarly, the 1.0%
                             overall maximum purchase limitation may be
                             increased up to 5% of the total shares of Common
                             Stock offered in the Conversion.
</TABLE> 

                                       6
<PAGE>
 
<TABLE> 
<S>                          <C> 
Securities Offered       
 and Purchase Price.....     The Company is offering between 15,725,000 and
                             21,275,000 shares of Common Stock at a Purchase
                             Price of $10.00 per share. The maximum of the
                             Estimated Price Range may be increased by up to 15%
                             and the maximum number of shares of Common Stock to
                             be issued may be increased up to 24,466,250 shares
                             due to regulatory considerations and changes in
                             market or general financial or economic conditions.
                             See "The Conversion -Stock Pricing" and "-Number of
                             Shares to be Issued."
 
Appraisal..............      The Purchase Price per share has been fixed at
                             $10.00. The total number of shares to be issued in
                             the Conversion is based upon an independent
                             appraisal prepared by Keller, dated as of September
                             12, 1997, which states that the estimated pro forma
                             market value of the Common Stock ranged from
                             $157,250,000 to $212,750,000. The final aggregate
                             value will be determined at the time of closing of
                             the Offerings and is subject to change due to
                             changing market conditions and other factors. See
                             "The Conversion - Stock Pricing."
 
Use of Proceeds.........     The Company will use 50% of the net proceeds of the
                             Offerings to purchase all of the outstanding common
                             stock of the Bank to be issued in the Conversion. A
                             portion of net proceeds retained by the Company
                             will be used for general business activity,
                             including a loan by the Company directly to the
                             ESOP to enable the ESOP to purchase up to 8% of the
                             Common Stock issued in the Conversion, including
                             shares issued to the Foundation. The Company
                             intends to initially invest the remaining net
                             proceeds primarily in mortgage-backed and mortgage
                             related securities and investment grade debt and
                             equity securities. The Bank intends to utilize net
                             proceeds for general business purposes, including
                             investments in loans and securities as well as for
                             the possible expansion of its facilities and
                             operations through marketing, business development,
                             or acquisitions of other financial institutions,
                             branch offices or other financial services
                             companies, although the Company and the Bank have
                             no current arrangements, understandings or
                             agreements regarding any such transactions, other
                             than a lease on a public accommodation office to be
                             opened on Staten Island in 1998 and plans to open
                             new branch offices on Staten Island in 1998. See
                             "Use of Proceeds."
 
Dividend Policy.........     Upon Conversion, the Board of Directors of the
                             Company will have the authority to declare
                             dividends on the Common Stock, subject to statutory
                             and regulatory requirements. In the future, the
                             Board of Directors of the Company may consider a
                             policy of paying cash dividends on the Common
                             Stock. However, no decision has been made with
                             respect to such dividends, if any. See "Dividend
                             Policy."
</TABLE> 

                                       7
<PAGE>
 
<TABLE> 
<S>                          <C> 
Benefits of the Conversion 
 to Management..........     Among the benefits to the Bank and the Company
                             anticipated from the Conversion is the ability to
                             attract and retain personnel through the use of
                             stock options and other stock related benefit
                             programs. Subsequent to the Conversion, the Company
                             intends to adopt a Stock Program (as defined
                             herein) and Stock Option Plan (as defined herein)
                             for the benefit of directors, officers and
                             employees. If such benefit plans are adopted within
                             one year after the Conversion, such plans will be
                             subject to stockholders' approval at a meeting of
                             stockholders which may not be held earlier than six
                             months after the Conversion. The Company intends to
                             adopt a stock benefit plan which would provide for
                             the granting of Common Stock to officers, directors
                             and employees of the Bank and Company in an amount
                             equal to 4% of the Common Stock issued in the
                             Conversion, including shares issued to the
                             Foundation (the "Stock Program"). The Company also
                             intends to adopt a stock option plan which would
                             provide the Company with the ability to grant
                             options to officers, directors and employees of the
                             Bank and Company to purchase Common Stock equal to
                             10% of the number of shares of Common Stock issued
                             in the Conversion, including shares issued to the
                             Foundation (the "Stock Option Plan"). Additionally,
                             certain officers of the Company and the Bank will
                             be provided with employment agreements or change in
                             control agreements which provide such officers with
                             employment rights and/or payments upon their
                             termination of service following a change in
                             control. For a further description of the Stock
                             Program and Stock Option Plan, see "Risk Factors -
                             Stock Based Benefits to Management, Employment
                             Contracts and Change in Control Payments" and
                             "Management of the Bank- Benefit Plans." See
                             "Management of the Bank- Subscriptions of Executive
                             Officers, Directors and Trustees," "The Conversion -
                             Establishment of Charitable Foundation" and
                             "Restrictions on Acquisition of the Company and the
                             Bank -Restrictions in the Company's Certificate of
                             Incorporation and Bylaws."
 
Voting Control of Officers   
 and Directors............   Trustees, Directors and executive officers of the
                             Bank and the Company expect to purchase
                             approximately 1.8% or 1.4% of shares of Common
                             Stock outstanding, based upon the minimum and the
                             maximum of the Estimated Price Range including
                             shares issued to the Foundation, respectively.
                             Additionally, assuming the implementation of the
                             ESOP, Stock Program and Stock Option Plan,
                             directors, executive officers and employees have
                             the potential to control the voting of
                             approximately 21.7% or 21.2% of the Common Stock at
                             the minimum and the maximum of the Estimated Price
                             Range, including shares issued to the Foundation,
                             respectively. Additionally, the Foundation will
                             hold Common Stock in an amount equal to 8% of the
                             Common Stock sold in the Conversion, which such
                             shares of Common Stock may be voted as directed by
                             the Board of Directors of the Foundation, who are
                             also Directors or officers of the Company and the
                             Bank. See "The Conversion -Establishment of
                             Charitable Foundation," "Management of the Bank-
                             Subscriptions of Executive Officers, Directors and
                             Trustees," and "Restrictions on Acquisition of the
                             Company and the Bank -Restrictions in the Company's
                             Certificate of Incorporation and Bylaws."
 
Expiration Date for the      
 Subscription Offering....   The Expiration Date for the Subscription Offering
                             is ________ New York Time on _______________, 1997
                             unless extended by the Bank and the Company. See
                             "The Conversion -Subscription Offering and
                             Subscription Rights."
 
Expiration Date for the      
 Community Offering......    The Expiration Date for the Community Offering is
                             _______ New York Time on ____________, 1997, unless
                             extended by the Bank and the Company. See "The
                             Conversion - Community Offering."

</TABLE> 

                                       8
<PAGE>
 
<TABLE> 
<S>                          <C> 
Market for Stock..........   As a mutual institution, the Bank has never issued
                             capital stock and, consequently, there is no
                             existing market for the Common Stock. The Company
                             has applied to have its Common Stock quoted on the
                             [NASDAQ NATIONAL MARKET] under the symbol "____"
                             subject to the completion of the Conversion and
                             compliance with certain conditions, including the
                             presence of at least three registered and active
                             market makers. See "Market for the Common Stock."
 
No Board Recommendations..   The Bank's Board of Trustees and the Company's
                             Board of Directors are not making any
                             recommendations to depositors or other potential
                             investors regarding whether such persons should
                             purchase the Common Stock. An investment in the
                             Common Stock must be made pursuant to each
                             investor's evaluation of his or her best interests.
 
Conversion Center.........   If you have any questions regarding Conversion,
                             call the Conversion Center at (___) ________.

</TABLE> 

                                       9
<PAGE>
 
           SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE BANK

   Set forth below are selected consolidated financial and other data of the
Bank.  These financial data are derived in part from, and should be read in
conjunction with, the Consolidated Financial Statements of the Bank and Notes
thereto presented elsewhere in this Prospectus.

<TABLE>
<CAPTION>
                                                             At June 30,
                                       ----------------------------------------------------
                                         1997       1996       1995       1994       1993
                                       --------   --------   --------   --------   --------
SELECTED FINANCIAL CONDITION DATA:                      (In thousands) 
<S>                                    <C>        <C>        <C>        <C>        <C> 
Total assets.......................    $993,370   $914,483   $851,751   $825,663   $779,728
Loans receivable, net(1)...........     496,258    419,270    392,409    355,850    355,281
Debt and equity securities(2):                                         
  Available for sale...............      19,706     21,659        607          -          -
  Held-to-maturity.................     205,201    307,700    287,879    328,779    331,840
Mortgage-backed and mortgage                                           
  related securities, net(2):                                          
  Available for sale...............      27,398      1,394      1,683          -          -
  Held-to-maturity.................     185,122     80,284     92,404     74,961     44,422
Intangible Assets(3)...............       1,527      1,802      2,115      2,428      2,715
Deposits...........................     884,531    817,928    764,062    748,638    713,906
Net worth..........................     100,865     89,901     81,166     73,550     63,407

<CAPTION> 
                                                      For the Year Ended June 30,
                                       ----------------------------------------------------
                                         1997       1996       1995       1994       1993
                                       --------   --------   --------   --------   --------
SELECTED OPERATING DATA:                                     (In thousands)
<S>                                    <C>        <C>        <C>        <C>        <C> 
Interest income....................    $ 65,781   $ 59,063   $ 54,321   $ 51,608   $ 53,003
Interest expense...................      27,707     26,254     22,456     20,207     22,280
                                       --------   --------   --------   --------   --------
 Net interest income                                                   
    before provision for                                               
    loan losses....................      38,074     32,809     31,865     31,401     30,723
Provision for loan losses..........       1,080      1,600        600        859      2,331
                                       --------   --------   --------   --------   --------
 Net interest income after                                             
    provision for loan losses......      36,994     31,209     31,265     30,542     28,392
                                       --------   --------   --------   --------   --------
Non-interest income................       2,861      2,827      2,659      2,961      3,153
Non-interest expense...............      19,667     18,503     18,139     17,287     16,555
                                       --------   --------   --------   --------   --------
Income before income taxes                                             
 and cumulative effect of                                              
 changes in accounting                                                 
 principles........................      20,188     15,533     15,785     16,216     14,990
Provision for income taxes.........       9,463      6,803      6,919      7,305      7,300
                                       --------   --------   --------   --------   --------
Cumulative effect of changes                                           
   in accounting principles(4).....          --         --     (1,316)     1,232         --
                                       --------   --------   --------   --------   --------
Net income.........................    $ 10,725   $  8,730   $  7,550   $ 10,143   $  7,690
                                       ========   ========   ========   ========   ======== 
</TABLE>

                                       10
<PAGE>
 
<TABLE>
<CAPTION>
                                                     At or For the Year Ended
                                                             June 30,
                                         ---------------------------------------------------
                                           1997       1996      1995       1994       1993
                                         -------    -------    -------    -------    -------
                                                       (dollars in thousands)
<S>                                      <C>        <C>        <C>        <C>        <C>
SELECTED FINANCIAL RATIOS AND
OTHER DATA(5):
PERFORMANCE RATIOS:
Return on average assets..............      1.13%      0.99%      0.91%      1.27%      1.11%
Return on average net worth...........     11.25      10.25       9.80      14.97      13.00
Average net worth to
    average assets....................     10.07       9.70       9.29       8.50       8.52
Net worth to total assets
   at end of period...................     10.15       9.83       9.53       8.91       8.13
Net interest rate spread(6)...........      3.68       3.53       3.66       3.85       3.99
Net interest margin(7)................      4.24       4.01       4.06       4.16       4.31
Average interest-earning assets
   to average interest-bearing
   liabilities........................    118.32     115.19     113.96     111.64     110.32
Total non-interest expense
   to average assets(8)...............      1.99       2.07       2.15       2.13       2.34
Efficiency ratio(9)...................     46.08      51.04      51.63      49.40      47.95
Net interest income to
   operating expenses.................    193.59     177.32     175.67     181.65     185.58
REGULATORY CAPITAL RATIOS(10):
Leverage capital......................     10.02%      9.70%      9.25%      8.60%      7.77%
Total risk-based capital..............     19.71      19.22      18.33      16.23      15.28
Tier I capital........................     18.79      18.33      17.92      15.71      14.52
ASSET QUALITY RATIOS AND DATA:
Total non-performing loans(11)........   $ 3,877    $ 3,820    $ 2,995    $ 5,389    $ 5,375
Real estate owned, net................       662        612        335        441      2,336
Total non-performing assets(12).......     4,539      4,432      3,330      5,830      7,711
Non-performing loans as a
   percent of loans, net(11)..........      0.78%      0.91%      0.76%      1.51%      1.51%
Non-performing assets as a percent
  of total assets(12).................      0.46       0.48       0.39       0.71       0.99
Allowance for loan losses
  as a percent of loans, net(1).......      1.10       1.14       0.83       0.87       0.77
Allowance for possible loan
losses as a percent of total
  non-performing loans(1)(11).........    141.09     125.55     109.35      57.64      50.88
OTHER DATA:
Number of full service customer
 facilities...........................        13         13         13         13         13
</TABLE>

                                                        (footnotes on next page)

                                       11
<PAGE>
 
___________________
(1)   Loans, net, consist of gross loans receivable excluding the allowance for
      loan losses.  The allowance for loan losses at June 30, 1997, 1996, 1995,
      1994 and 1993 was $5.5 million, $4.8 million, $3.3 million, $3.1 million
      and $2.7 million, respectively.  Loans, net, at June 30, 1996, includes
      $1.2 million of loans held for sale.
(2)   The Bank adopted Statement of Financial Accounting Standards ("SFAS") No.
      115 ("SFAS No. 115"), "Accounting for Certain Investments in Debt and
      Equity Securities," as of July 1, 1994, and reclassified securities having
      a market value of $26 million from its held-to-maturity portfolio to its
      available-for-sale portfolio in November 1995 pursuant to a Financial
      Accounting Standards Board ("FASB")  interpretation of SFAS No. 115.
(3)   Represents premium on core deposits acquired which amounted to $3.2
      million and which is being amortized on a straight line basis over a ten
      year period.
(4)   Cumulative effect of changes in accounting principles reflects a charge,
      net of tax, of $1.3 million for the year ended June 30, 1995, resulting
      from the adoption of SFAS No. 106 ("SFAS No. 106"), "Employer's Accounting
      For Post-Retirement Benefits Other than Pensions," and a credit to
      earnings of $1.2 million for the year ended June 30, 1994, resulting from
      the adoption of SFAS No. 109 ("SFAS No. 109"), "Accounting for Income
      Taxes."  See "Management's Discussion and Analysis of Financial Condition
      and Results of Operations - Cumulative Effect of Changes in Accounting
      Principles."
(5)   Asset Quality Ratios and Regulatory Capital Ratios are end of period
      ratios.  With the exception of end of period ratios, all ratios are based
      on average monthly balances during the indicated periods and are
      annualized where appropriate.
(6)   The net interest rate spread represents the difference between the
      weighted average yield on average interest-earning assets and the weighted
      average cost of average interest-bearing liabilities.
(7)   The net interest margin represents net interest income as a percent of
      average interest-earning assets.
(8)   Total non-interest expense excludes the effect of amortization of goodwill
      and the one-time special assessment of $493,000 to recapitalize the
      Savings Association Insurance Fund (the "SAIF").  See "Regulation and
      Supervision - Insurance of Deposit Accounts."  Including the effects of
      the amortization of goodwill and of the SAIF special assessment, total
      non-interest expense to average assets for the year ended June 30, 1997
      would be 2.08%.
(9)   The efficiency ratio represents the ratio of non-interest expense,
      excluding the effect of amortization of goodwill and the one-time special
      assessment of $493,000 to recapitalize the SAIF, divided by the sum of net
      interest income and non-interest income. Including the effects of the
      amortization of goodwill and the SAIF special assessment, the efficiency
      ratio for the year ended June 30, 1997 would be 48.04%.
(10)  For definitions and further information relating to the Bank's regulatory
      capital requirements, see "Regulation and Supervision - FDIC Regulations -
      Capital Requirements."  See "Regulatory Capital Compliance" for the Bank's
      pro forma capital levels as a result of the Offerings.
(11)  It was the Bank's policy to generally cease accruing interest on all
      commercial real estate, construction and commercial loans 90 days or more
      past due, on all consumer loans which were 120 days or more past due, and
      on all one- to four-family residential mortgage loans which were 180 days
      or more past due. Effective July 1, 1997, the Bank revised this policy
      such that it does not accrue interest on any loans, including one- to
      four-family loans secured by real estate, which are more than ninety days
      delinquent as to principal and interest unless, in the opinion of
      management, collection is probable.  See "Business of the Bank -
      Delinquent Loans, Real Estate Owned and Classified Assets." Assuming the
      revised policy was in effect, the Bank's total non-performing loans would
      have been $3.9 million, $3.8 million, $3.0 million, $5.4 million and $5.4
      million  at June 30, 1997, 1996, 1995, 1994 and 1993, respectively.
(12)  Non-performing assets consist of non-performing loans and real estate
      owned, net ("REO").  The Bank had no troubled debt restructurings at any
      of the dates presented.

                                       12
<PAGE>
 
                                  RISK FACTORS

     The following risk factors, in addition to those discussed elsewhere in
this Prospectus, should be considered by investors in deciding whether to
purchase the Common Stock offered hereby.

SENSITIVITY TO INCREASES IN INTEREST RATES

     The Bank's profitability is dependent to a large extent upon its net
interest income, which is the difference between its interest income on
interest-earning assets, such as loans and securities, and its interest expense
on interest-bearing liabilities, such as its deposits and borrowed funds.
Accordingly, the Bank's results of operations and financial condition are
largely dependent on movements in market interest rates and its ability to
manage its assets and liabilities in response to such movements.

     While the Bank emphasizes investment in adjustable rate or shorter term
loans, the Bank currently originates and sells fixed-rate one- to four-family
mortgage loans with terms in excess of fifteen years. However, from time to
time, the Bank may retain such loans in its portfolio depending on its interest
rate risk position. At June 30, 1997, 72.5% of the Bank's gross loans had
adjustable interest rates and its fixed-rate mortgage loan portfolio had an
average weighted maturity of 17.25 years. At such date, $39.0 million, or 8.9%,
of the Bank's securities had adjustable interest rates and its securities
portfolio had a weighted average maturity of 3.3 years. At June 30, 1997, the
Bank had $209.1 million of certificates of deposit with maturities of one year
or less and $27.4 million of certificates of deposit over $100,000 ("jumbo
certificates of deposit"). Such jumbo certificates of deposit tend to be less
stable sources of funding as compared to money market, savings, retail checking/
negotiable order of withdrawal ("NOW") accounts and commercial checking accounts
(collectively, "core deposits") and, at June 30, 1997, represented 3.5% of the
Bank's interest-bearing liabilities. As a result, the ratio of the Bank's
interest-earning assets repricing or maturing within one year or less as
compared to its interest-bearing liabilities maturing or repricing in one year
or less ("one year gap position") was positive 3.5%. Therefore, the yield on
interest-earning assets of the Bank may adjust to changes in interest rates
faster than the cost of the Bank's interest-bearing liabilities and the Bank's
net income may be adversely affected during periods of declining interest rates.

     Significant increases in the level of market interest rates also may
adversely affect the fair value of the Bank's securities and other interest-
earning assets. At June 30, 1997, $398.4 million, or 91.1%, of the Bank's
securities had fixed interest rates. Generally, the value of fixed-rate 
interest-earning assets fluctuates inversely with changes in interest rates. As
a result, increases in interest rates could result in decreases in the market
value of fixed-rate interest-earning assets which could adversely affect the
Bank's results of operations if sold. In the case of interest-earning assets
classified as available-for-sale, such increases in interest rates could
adversely affect the Bank's net worth.

     Increases in market interest rates also can affect the type (fixed-rate or
adjustable-rate) and amount of loans originated by the Bank and the average life
of loans and securities, which can adversely impact the yields earned on the
Bank's loan and securities portfolio. In periods of decreasing interest rates,
the average life of loans held by the Bank may be shortened to the extent
increased prepayment activity occurs during such periods which, in turn, may
result in the Bank investing funds from such prepayments in lower yielding
assets. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Management of Interest Rate Risk." In addition,
increases in interest rates would result in interest rates on the Bank's
adjustable-rate loans increasing, thereby resulting in increased loan payment
amounts by the borrowers which, in turn, may result in higher delinquencies on
such loans.

POTENTIAL LOW RETURN ON EQUITY FOLLOWING THE CONVERSION

     At June 30, 1997, the Bank's ratio of net worth to assets was 10.2%. The
Company's equity position will be significantly increased as a result of the
Conversion. On a pro forma basis as of June 30, 1997, assuming the sale of
Common Stock at the midpoint of the Estimated Price Range, the Company's ratio
of

                                       13
<PAGE>
 
equity to assets would exceed 22.8%. The Company's ability to deploy this new
capital through investments in interest-bearing assets, such as loans and
securities, which bear rates of return comparable to its current investments,
will be significantly affected by industry competition for such investments. The
Company currently anticipates that it will take time to prudently deploy such
capital. As a result, the Company's return on equity initially is expected to be
below its historical return on equity and may be below peer group institutions
after the Conversion.

INCREASED LENDING RISKS ASSOCIATED WITH COMMERCIAL REAL ESTATE, MULTI-FAMILY,
CONSTRUCTION AND DEVELOPMENT AND COMMERCIAL LENDING

     At June 30, 1997, the Bank's commercial real estate, multi-family,
construction and development and commercial loan portfolios totaled $68.4
million, or 13.6% of total loans and 7.2% of total interest-earning assets. At
that date, commercial real estate loans totaled $40.7 million, or 8.1% of total
loans, construction and development loans totaled $18.3 million, or 3.6% of
total loans, commercial loans totaled $6.7 million, or 1.3% of total loans, and
multi-family loans totaled $2.7 million, or 0.5% of total loans. Additionally at
such date, the Bank had $21.3 million of outstanding commitments to fund such
loans.

     Although the Bank's level of commercial real estate, multi-family,
construction and development and commercial lending has historically been
relatively modest in comparison to its one- to four-family residential lending,
the Bank is attempting to increase its emphasis on such types of loans.
Commercial real estate and multi-family loans are generally viewed as exposing
the lender to a greater risk of loss than one- to four-family residential loans,
as their repayment is dependent, in large part, on sufficient income from the
property to cover operating expenses and debt service and such loans generally
involve larger loan balances. Economic events and government regulations, which
are outside the control of the borrower or lender, could impact the value of the
security for the loan or the future cash flow of the affected properties.
Additionally, although commercial real estate and multi-family values have
stabilized in recent periods, the decline in real estate and multi-family values
experienced in the Bank's primary market area in the late 1980s and early 1990s
was more pronounced with respect to commercial real estate and multi-family
properties than one- to four-family residential properties. Construction and
development financing is also generally considered to involve a higher degree of
credit risk than long-term financing on improved, owner-occupied real estate as
the risk of loss on such loans is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction compared
to the estimated cost (including interest) of construction. If the estimate of
value proves to be inaccurate, the property securing the loan, when completed,
may have a value which is insufficient to assure full repayment of the loan.

     The Bank also makes secured and unsecured commercial loans. Unsecured
commercial loans are generally considered to involve a higher degree of risk
than secured commercial loans and real estate lending, due to the absence of
collateral securing the loan. Secured commercial loans are generally secured by
real estate, equipment, leases, inventory and accounts receivable. As of June
30, 1997, approximately 53.3% of the Bank's commercial loans were secured by
real estate and 8.0% were secured by other forms of collateral. Accordingly, the
value of the collateral securing the Bank's commercial loans may not be as easy
to ascertain as compared to real property, and such collateral may depreciate
over time and may not be as readily saleable as compared to real property. Both
secured and unsecured commercial loans are often substantially dependent upon
the success of the borrower's business. Accordingly, commercial loans involve a
greater degree of risk than a one- to four-family mortgage loan and other types
of mortgage loans. See "Business of the Bank -- Lending Activities."

     In the event the Bank were to further increase its investment in commercial
real estate, multi-family, construction and development and commercial lending,
the Bank may make additional or increased provisions for loan losses which would
adversely affect the Bank's net income.

                                       14
<PAGE>
 
EFFECTS OF THE ESTABLISHMENT OF THE FOUNDATION

     Pursuant to the Plan, the Bank and the Company intend to voluntarily
establish the Foundation in connection with the Conversion. The Foundation will
be incorporated under Delaware law as a non-stock corporation and will be funded
with shares of Common Stock contributed by the Company. The contribution of
Common Stock to the Foundation will be dilutive to the ownership and voting
interests of stockholders and will have an adverse impact on the reported
earnings of the Company in fiscal 1998, the fiscal year in which the Foundation
will be funded.

     Dilution of Stockholders' Interests. The Company proposes to fund the
Foundation with Common Stock of the Company in an amount equal to 8% of the
Common Stock to be sold in the Conversion. At the minimum, midpoint and maximum
of the Estimated Price Range, the contribution to the Foundation would equal
1,258,000, 1,480,000 and 1,702,000 shares, with a value of $12.6 million, $14.8
million and $17.0 million, respectively, based on the Purchase Price of $10.00
per share. Assuming the sale of Common Stock at the maximum of the Estimated
Price Range, upon completion of the Conversion and establishment of the
Foundation, the Company will have 22,977,000 shares issued and outstanding of
which the Foundation will own 1,702,000 shares, or 7.4%. AS A RESULT, PERSONS
PURCHASING SHARES OF COMMON STOCK IN THE CONVERSION WILL HAVE THEIR OWNERSHIP
AND VOTING INTERESTS IN THE COMPANY DILUTED BY 7.4%, AS COMPARED TO COMPLETING
THE CONVERSION WITHOUT THE FOUNDATION. SEE "PRO FORMA DATA."

     Impact on Earnings. The contribution of Common Stock to the Foundation will
have an adverse impact on the Company's and the Bank's earnings in the year in
which the contribution is made. The Company will recognize the full expense in
the amount of the contribution of Common Stock to the Foundation in the quarter
in which it occurs, which is expected to be the first quarter of 1998. The
amount of the contribution will range from $12.6 million to $17.0 million, based
on the minimum and maximum of the Estimated Price Range. The contribution
expense will be partially offset by the tax benefit related to the expense. The
Company and the Bank have been advised by their independent tax advisors that
the contribution to the Foundation will be tax deductible, subject to an annual
limitation based on 10% of the Company's annual taxable income. Assuming a
contribution of $17.0 million in Common Stock (based on the maximum of the
Estimated Price Range), the Company estimates a net tax effected expense of
$9.4 million (based upon a 45% tax rate). If the Foundation had been established
at June 30, 1997, the Bank would have reported net income of $1.7 million for
the year ended June 30, 1997 rather than reporting net income of $10.7 million
for the year ended June 30, 1997. Management cannot predict earnings for fiscal
1998, but expects that the establishment and funding of the Foundation will have
an adverse impact on the Company's earnings for the quarter in which the
Foundation is funded. In addition to the contribution to the Foundation, the
Bank expects in the future to continue making ordinary charitable contributions
within its community but the Company and the Bank do not currently anticipate
making additional contributions to the Foundation within the first five years
following the initial contribution.

     Tax Considerations. The Company and the Bank have been advised by their
independent tax advisors that an organization created for the above purposes
would qualify as a Section 501(c)(3) exempt organization under the Internal
Revenue Code of 1986, as amended (the "Code"), and would be classified as a
private foundation. The Foundation will submit a request to the Internal Revenue
Service (the "IRS") to be recognized as an exempt organization. The Company and
the Bank have received an opinion of their independent tax advisors that the
Foundation would qualify as a Section 501(c)(3) exempt organization under the
Code. The independent tax advisors' opinion further provides that there is
substantial authority for the position that the Company's contribution of its
own stock to the Foundation would not constitute an act of self-dealing, and
that the Company would be entitled to a deduction in the amount of the fair
market value of the stock at the time of the contribution less the nominal par
value that the Foundation is required to pay to the Company for such stock,
subject to an annual limitation based on 10% of the Company's annual taxable
income. The Company, however, would be able to carry forward any unused portion
of the deduction

                                       15
<PAGE>
 
for five years following the contribution. Thus, while the Company would have
received a charitable contribution deduction of approximately $2.1 million in
1997 (based upon the sale of stock at the maximum of the Estimated Price Range,
a contribution of $17.0 million of Common Stock and the Bank's pre-tax income
for 1997), the Company is permitted under the Code to carryover the excess
contribution in the five following years. Assuming the sale of Common Stock at
the midpoint of the Estimated Price Range, the Company estimates that
substantially all of the deduction should be deductible over the six-year
period. Although the Company and the Bank have received an opinion of
their independent tax advisors that the Company will be entitled to the
deduction for the charitable contribution, there can be no assurances that the
IRS will recognize the Foundation as a Section 501(c)(3) exempt organization or
that the deduction will be permitted. In such event, the Company's tax benefit
related to the Foundation would have to be fully expensed, resulting in a
further reduction in earnings in the year in which the IRS makes such a
determination.

     Comparison of Valuation and Other Factors Assuming the Foundation is Not
Established as Part of the Conversion. The establishment of the Foundation was
taken into account by Keller in determining the estimated pro forma market value
of the Common Stock of the Company. The aggregate price of the shares of Common
Stock being offered in the Subscription and Community Offerings is based upon
the independent appraisal conducted by Keller of the estimated pro forma market
value of the Common Stock of the Company. The pro forma aggregate price of the
Common Stock being offered for sale in the Conversion is currently estimated to
be between $157.3 million and $212.8 million, with a midpoint of $185.0 million.
The pro forma price to book ratio and the pro forma price to earnings ratio, at
and for the year ended June 30, 1997, are 76.10% and 13.16x, respectively, at
the midpoint of the Estimated Price Range. In the event that the Conversion did
not include the Foundation, Keller has estimated that the estimated pro forma
market value of the Common Stock would be $217.2 million at the midpoint based
on a pro forma price to book ratio and the pro forma price to earnings ratio at
76.00% and 13.56x, respectively. The amount of Common Stock being offered for
sale in the Conversion at the midpoint of the Estimated Price Range is
approximately $32.2 million less than the estimated amount of Common Stock that
would be offered in the Conversion without the Foundation based on the estimate
provided by Keller. Accordingly, certain account holders of the Bank who
subscribe to purchase Common Stock in the Subscription Offering would receive
fewer shares depending on the size of a depositor's stock order and the amount
of his or her qualifying deposits in the Bank and the overall level of
subscriptions. See "Comparison of Valuation and Pro Forma Information with No
Foundation." This estimate by Keller was prepared solely for purposes of
providing Eligible Account Holders and subscribers with information with which
to make an informed decision on the Conversion.

     The decrease in the amount of Common Stock being offered as a result of the
contribution of Common Stock to the Foundation will not have a significant
effect on the Company or the Bank's capital position. The Bank's regulatory
capital is significantly in excess of its regulatory capital requirements and
will further exceed such requirements following the Conversion. The Bank's
leverage and risk-based capital ratios at June 30, 1997 were 10.02% and 19.71%,
respectively. Assuming the sale of shares at the midpoint of the Estimated Price
Range, the Bank's pro forma leverage and risk-based capital ratios at June 30,
1997 would be 15.9% and 30.7%, respectively. On a consolidated basis, the
Company's pro forma stockholders' equity would be $262.9 million, or
approximately 22.47% of pro forma consolidated assets, assuming the sale of
shares at the midpoint of the Estimated Price Range and pro forma stockholders'
equity per share and pro forma net earnings per share would be $13.14 and $0.77,
respectively. If the Foundation was not being established in the Conversion,
based on the Keller estimate, the Company's pro forma stockholders' equity would
be approximately $285.8 million, or approximately 24.26% of pro forma
consolidated assets at the midpoint of the estimate, and pro forma stockholder's
equity per share and pro forma net earnings per share would be $13.16 and $0.74,
respectively. See "Comparison of Valuation and Pro Forma Information with No
Foundation."

     Potential Anti-Takeover Effect. Upon completion of the Conversion, the
Foundation will own 7.4% of the total shares of the Company's Common Stock
outstanding. Such shares will be owned solely by the

                                       16
<PAGE>
 
Foundation and the Foundation's Board of Directors will exercise sole voting
power over such shares. As the Foundation's Board of Directors will be comprised
initially of the members of the Board of Trustees of the Bank, management of the
Company and the Bank may benefit to the extent that the Board of Directors of
the Foundation determines to vote the shares of Common Stock held by the
Foundation in favor of proposals supported by the Company and the Bank.
Furthermore, in such an event, when the Foundation's shares are combined with
shares purchased directly by officers and directors of the Company, shares held
by the Stock Program trust, and shares held by the ESOP trust, the aggregate of
such shares could exceed 20% of the Company's outstanding Common Stock, which
could enable management to defeat stockholder proposals requiring 80% approval.
Consequently, such potential voting control might preclude takeover attempts
that certain stockholders deem to be in their best interest, and might tend to
perpetuate management. However, since the ESOP shares are allocated to all
eligible employees of the Bank, and any unallocated shares will be voted by an
independent trustee, and because the Stock Program must first be approved by
stockholders no sooner than six months following completion of the Conversion,
and awards under such proposed plans may be granted to employees other than
executive officers and trustees, management of the Company does not expect to
have voting control of all shares covered by the ESOP and other stock-based
benefit plans. See " - Certain Anti-Takeover Provisions - Voting Control of
Officers and Trustees." Moreover, as the Foundation sells its shares of Common
Stock over time, its ownership interest and voting power in the Company is
expected to decrease.

     Potential Challenges. The establishment and funding of a charitable
foundation as part of a conversion of a mutual savings institution to stock form
is innovative and has, to the Bank's knowledge, been done in a limited number of
instances. As such, the Foundation is subject to the Superintendent's approval
of the Conversion and the FDIC's nonobjection to the Conversion and may also be
subject to potential challenges notwithstanding that the Board of Directors of
the Company and the Board of Trustees of the Bank have carefully considered the
various factors involved in the establishment of the Foundation in reaching
their determination to establish the Foundation as part of the Conversion. See
"The Conversion - Establishment of Charitable Foundation - Purpose of the
Foundation." If challenges were to be instituted seeking to require the Bank to
eliminate establishment of the Foundation in connection with the Conversion, no
assurances can be made that the resolution of such challenges would not result
in a delay in the consummation of the Conversion or that any objecting persons
would not be ultimately successful in obtaining such removal or other relief
against the Company or the Bank. Additionally, if the Company and the Bank are
forced to eliminate the Foundation, the Company may be required to resolicit
subscribers in the Offerings.

HIGHLY COMPETITIVE INDUSTRY AND GEOGRAPHIC AREA

     The Bank faces significant competition in its primary market area both in
attracting deposits and in originating loans. The Bank had a lending market
share of approximately 7.2% in the Borough of Staten Island for 1996. The Bank's
share of deposits in the Borough of Staten Island amounted to approximately
14.2% in June of 1996, according to a survey by a nationally-recognized bank
consulting firm. While the Bank's primary market area generally consists of the
Borough of Staten Island and the area surrounding its branch office in the
Borough of Brooklyn, the Bank may, in the future, expand its market area to
include other areas of the New York City metropolitan area. The New York City
metropolitan area is a highly competitive market for financial services. The
Bank faces direct competition from a significant number of financial
institutions operating in its market area, many with a state-wide or regional
presence, and, in some cases, a national presence. This competition arises from
commercial banks, savings banks, mortgage banking companies, credit unions and
other providers of financial services, many of which are significantly larger
than the Bank and, therefore, have greater financial and marketing resources
than those of the Bank. There are eleven depository institutions with retail
operations located in the Borough of Staten Island. See "Business of the Bank -
Market Area."

                                       17
<PAGE>
 
WEAKNESS IN LOCAL ECONOMY

     During the late 1980s to the early 1990s, the New York City metropolitan
area experienced reduced employment as a result of layoffs in the financial
services industry, corporate relocations and the general decline of the local,
regional and national economies. Additionally, during that period the area
experienced a general weakening of real estate values and a decline in home
sales and construction. While Staten Island's significant concentration of
government employees somewhat mitigated the impact of the recession, the
financial services industry historically also has been a significant source of
employment in the Bank's primary market area. As a result, loan delinquencies
increased and the underlying values of properties securing non-performing loans
made by lending institutions generally declined resulting in substantial losses
to some institutions. In 1993, however, the economy of the Bank's primary market
area began to stabilize as demonstrated by improved employment and economic
indicators. Since such time, residential real estate values in the Bank's
primary market have stabilized and recently have begun to improve. However,
commercial real estate values, which previously experienced the greatest
declines during the late 1980s and early 1990s, have only recently begun to
stabilize and have not improved as much as residential real estate and generally
remain below the values experienced in the late 1980s.

     Although the current national and local economic conditions have
significantly improved since the early 1990s, there can be no assurances that
conditions in the local economy, national economy, or real estate market in
general will not deteriorate and adversely affect the financial condition and
results of operations of the Bank. Based on information available to management
at this time, management believes the current allowance for loan losses is
adequate. Although management of the Bank believes that the current allowance
for loan losses is adequate in light of current economic conditions, many
factors may require additions to the allowance for loan losses in future periods
above those reasonably anticipated. Future adjustments to the allowance also may
be necessary if economic or other conditions differ substantially from those
underlying the assumptions used in making such estimates. See "Business of the
Bank--Allowance for Loan Losses."

CERTAIN ANTI-TAKEOVER PROVISIONS

     Provisions in the Company's and the Bank's Governing Instruments. Certain
provisions of the Company's Certificate of Incorporation and Bylaws,
particularly a provision limiting voting rights, and the Bank's Restated
Organization Certificate (the "Restated Organization Certificate") and Bylaws,
as well as certain federal and state regulations, assist the Company in
maintaining its status as an independent publicly owned corporation. These
provisions provide for, among other things, supermajority voting, staggered
boards of directors, noncumulative voting for directors, limits on the calling
of special meetings of shareholders, limits on the ability to vote Common Stock
in excess of 10% of outstanding shares, and certain uniform price provisions for
certain business combinations. The New York State Banking Board ("NYBB")
regulations prohibit, for a period of one year following the date of conversion,
offers to acquire or the acquisition of beneficial ownership of more than 10% of
the outstanding stock of the Bank. The Bank's Restated Organization Certificate
also prohibits, for three years, the acquisition, directly or indirectly, of the
beneficial ownership of more than 10% of the Bank's equity securities. Any
person, or group acting in concert, violating this restriction may not vote the
Bank's or Company's securities in excess of 10%. These provisions in the Bank's
and the Company's governing instruments may discourage potential proxy contests
and other potential takeover attempts, particularly those which have not been
negotiated with the Board of Directors, and thus, generally may serve to
perpetuate current management. See "Restrictions on Acquisitions of the Company
and the Bank."

     Voting Control of Officers and Trustees. Trustees, directors and executive
officers of the Bank and the Company expect to purchase approximately 1.8% or
1.4% of the shares of Common Stock to be issued in the Conversion, based upon
the minimum and the maximum of the Estimated Price Range, respectively,
exclusive of shares that may be attributable to directors and officers through
the Stock Program, the Stock Option Plan and the ESOP, which may give directors,
trustees, executive officers and employees the potential

                                       18
<PAGE>
 
to control the voting of an additional 20.0% of the Company's Common Stock on a
fully diluted basis at the maximum of the Estimated Price Range. In addition,
the Foundation will be funded with a contribution by the Company equal to 8% of
the Common Stock sold in the Conversion, may be voted as determined by the
Directors of the Foundation who are also Directors and officers of the Company
and Bank. Management's potential voting control could, together with additional
stockholder support, defeat stockholder proposals requiring 80% approval of
stockholders. As a result, this potential voting control may preclude takeover
attempts that certain stockholders deem to be in their best interest and may
tend to perpetuate existing management. See "Restrictions on Acquisition of the
Company and the Bank - Restrictions in the Company's Certificate of
Incorporation and Bylaws" and "The Conversion - Establishment of Charitable
Foundation."

ABSENCE OF MARKET FOR COMMON STOCK

     The Company, as a newly organized company, has never issued capital stock,
and consequently, there is no established market for its Common Stock at this
time. The Company has applied to have its Common Stock quoted on the [NASDAQ
NATIONAL MARKET] under the symbol "____." A public trading market having the
desirable characteristics of depth, liquidity and orderliness depends upon the
existence of willing buyers and sellers at any given time, the presence of which
is dependent upon the individual decisions of buyers and sellers over which
neither the Company nor any market maker has control. Accordingly, there can be
no assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, will continue, nor is there any assurance that
purchasers of the Common Stock will be able to sell their shares at or above the
Purchase Price. In the event a liquid market for the Common Stock does not
develop or market makers for the Common Stock discontinue their activities, such
occurrences may have an adverse impact on the liquidity of the Common Stock and
the market value of the Common Stock.

STOCK-BASED BENEFITS TO MANAGEMENT, EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL
PAYMENTS

     Stock Program. The Company intends to adopt the Stock Program which would
provide stock grants of Common Stock to non-employee trustees and directors and
selected officers and employees of the Company and Bank and intends to seek
stockholder approval of such plan at a meeting of stockholders following the
Conversion, which may be held no earlier than six months after completion of the
Conversion. The Company expects to fund Stock Program with Common Stock in an
amount equal to 4% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation, or 679,320 shares and 919,080 shares
at the minimum and maximum of the Estimated Price Range, respectively. These
shares will be provided to the Stock Program either through open market
purchases by a trust established for the Stock Program or from authorized but
unissued Common Stock. See "- Possible Dilutive Effect of Stock Program and
Stock Option Plan."

     Although no specific award determinations have been made, the Company
anticipates that it will provide awards under the Stock Program to the trustees,
directors and selected officers and employees of the Company and Bank to the
extent permitted by applicable regulations. Current NYBB and FDIC regulations
provide that, to the extent any non-tax qualified stock or stock option plan is
implemented within one year after conversion, no individual may receive more
than 25% of the shares of any such stock-based benefit plan and non-employee
directors or trustees may not receive more than 5% individually, or 30% in the
aggregate, of the shares awarded under any such plan. The shares granted under
the Stock Program will be awarded at no cost to the recipients. Under the terms
of the Stock Program, an independent trustee will vote unallocated shares in the
same proportion as it receives instructions from recipients with respect to
allocated shares which have not been earned and distributed. Recipients will
vote allocated shares. The plan trustee will not vote allocated shares which
have not been distributed if it does not receive instructions from the
recipient. The specific terms of the Stock Program intended to be adopted and
the amounts of awards thereunder have not yet been determined by the Board of
Directors, and any such determination will include consideration of various
factors, including but not limited to, the financial condition of the Company,
current and past performance of plan participants and tax and securities law and
regulation requirements. The stock-

                                       19
<PAGE>
 
based benefits provided under the Stock Program and Stock Option Plan, discussed
below, may be provided under separate plans established for officers and
employees and non-employee trustees and directors or such benefits may be
provided for under a single master stock-based benefit plan adopted by the
Company which would incorporate the benefits and features of the separate plans
(the "Master Stock-Based Benefit Plan"). Additionally, the granting or vesting
of awards under such benefit plans may be conditioned upon the achievement of
individual or company-wide performance goals, including the achievement by the
Company or Bank of specified levels of net income or returns on equity or
assets. The implementation of the Stock Program will likely result in increased
compensation expenses to the Company and may have a dilutive effect on existing
stockholders. See "Management of the Bank - Benefit Plans - Stock Program" and
"- Possible Dilutive Effect of Stock Program and Stock Option Plan."

     Stock Option Plan. The Company also intends to adopt a stock-based benefit
plan which would provide options to purchase Common Stock ("Stock Options") to
officers, employees and non-employee trustees and directors of the Company and
Bank and intends to seek stockholder approval of such plan at a meeting of
stockholders following the Conversion, which may be held no earlier than six
months after completion of the Conversion. Although no specific determinations
have been made, the Company expects that non-employee directors and selected
officers and employees of the Company and Bank will be granted options to
purchase Common Stock in an amount equal to 10% of the Common Stock issued in
connection with the Conversion, including shares issued to the Foundation (or
1,698,300 shares and 2,297,700 shares at the minimum and maximum of the
Estimated Price Range, respectively). It is currently intended that the exercise
price of all Stock Options will be at least equal to the fair market value of
the underlying Common Stock on the date of grant. Stock Options will permit such
trustees, directors, officers and employees to benefit from any increase in the
market value of the shares in excess of the exercise price at the time of
exercise. The specific terms of the Stock Option Plan intended to be adopted and
amounts and awards thereunder have not yet been determined by the Board and any
such determination will include consideration of various factors, including but
not limited to, the financial condition of the Company, current and past
performance of award recipients and tax and securities law and regulation
requirements. The Stock Options discussed above may be provided under a single
stock option plan, may be granted under Stock Option Plan for officers and
employees and non-employee directors or may be provided for under the Master
Stock-Based Benefit Plan which would incorporate the features and benefits of
the Stock Option Plan and the Stock Program, and benefits awarded thereunder may
be conditioned upon the achievement of individual or company-wide performance
goals, including the achievement by the Company or Bank of specified levels of
net income or returns on equity or assets. The implementation of such Stock
Option Plan may have a dilutive effect upon existing stockholders of the Company
to the extent option exercises are satisfied with authorized but unissued shares
and will likely result in increased compensation expenses to the Company. See "-
Possible Dilutive Effect of Stock Program and Stock Option" and "Management of
the Bank - Benefit Plans - Stock Option Plan."

     Change In Control Provisions. The Company and the Bank intend to enter into
employment or change in control agreements with certain officers of the Bank and
Company which will provide for benefits and cash payments in the event of their
termination following a change in control of the Company or Bank. These
provisions may have the effect of increasing the cost of acquiring the Company
or Bank, thereby discouraging future attempts to take over the Company or the
Bank. Additionally, the Bank intends to adopt an employee severance compensation
plan, which similarly provides a cash payment and benefits to eligible employees
upon such employees' termination following a change in control of the Company or
Bank, which also may have the effect of increasing the cost of acquiring the
Company or Bank. Based on current salaries, cash payments to be paid in the
event of a change in control pursuant to the terms of the employment agreements,
change in control agreements and the employee severance compensation plan would
be approximately $___ million. However, the actual amount to be paid in the
event of a change in control of the Bank or the Company cannot be estimated at
this time because the actual amount is based on the average salary of the
employee and other factors existing at the time of the change in control. See
"Restrictions on Acquisition of the Company and the Bank- Restrictions in the
Company's Certificate of Incorporation and

                                       20
<PAGE>
 
Bylaws," "Management of the Bank - Employment Agreements," "- Change in Control
Agreements," "- Employee Severance Compensation Plan," "- Benefit Plans - Stock
Option Plan" and "- Benefit Plans - Stock Program."

POSSIBLE DILUTIVE EFFECT OF STOCK PROGRAM AND STOCK OPTION PLAN

     Following the Conversion, the Stock Program will acquire an amount of
shares equal to 4% of the shares of Common Stock issued in the Conversion,
either through open market purchases or the issuance of authorized but unissued
shares of Common Stock from the Company. If the Stock Program is funded by the
issuance of authorized but unissued shares, the voting interests of existing
shareholders will be diluted by 3.8%. Also following the Conversion, the Company
intends to implement the Stock Option Plan which will provide trustees,
directors and selected employees of the Company and the Bank with Stock Options
to purchase authorized but unissued shares in an amount equal to 10% of the
Common Stock issued in the Conversion. If all of the Stock Options intended to
be granted were to be exercised using authorized but unissued Common Stock and
if the Stock Program were funded with authorized but unissued shares, the voting
interests of existing stockholders would be diluted by 12.3%.

POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS

     The Bank has received an opinion of Keller that subscription rights granted
to Eligible Account Holders have no value. However, this opinion is not binding
on the IRS. If the subscription rights granted to Eligible Account Holders or
Supplemental Eligible Account Holders are deemed to have an ascertainable value,
such recipients could be taxed upon receipt or exercise of such subscription
rights. Additionally, the Bank could recognize a gain for tax purposes on such
distribution. Whether subscription rights are considered to have ascertainable
value is an inherently factual determination. See "The Conversion - Effects of
Conversion" and "- Tax Aspects."

POSSIBLE INCREASE IN ESTIMATED PRICE RANGE AND NUMBER OF SHARES ISSUED

     The number of shares to be sold in the Conversion may be increased as a
result of an increase in the Estimated Price Range of up to 15% to reflect
changes in market and financial conditions following the commencement of the
Subscription and Community Offerings. In the event that the Estimated Price
Range is so increased, it is expected that the Company will sell up to
24,466,250 shares of Common Stock at the Purchase Price for an aggregate
purchase price of up to $244,662,500 which, when aggregated with the shares
contributed to the Foundation will result in the issuance of up to 26,423,500
shares. An increase in the number of shares issued will decrease a subscriber's
pro forma net earnings per share and stockholders' equity per share and will
increase the Company's pro forma consolidated stockholders' equity and net
earnings. Such an increase will also increase the Purchase Price as a percentage
of pro forma stockholders' equity per share and net earnings per share.

ROLE OF THE CONVERSION AGENT

     The Bank has engaged Sandler O'Neill as a conversion agent and Sandler
O'Neill has agreed to assist the Bank and the Company in its solicitation of
subscriptions and purchase orders for Common Stock in the Offerings. Sandler
O'Neill has not prepared any report or opinion constituting recommendations or
advice to the Bank. In addition, Sandler O'Neill has expressed no opinion as to
the prices at which Common Stock to be issued in the Offerings may trade.
Furthermore, Sandler O'Neill has not verified the accuracy or completeness of
the information contained in the Prospectus or the Proxy Statement. See "The
Conversion - Plan of Distribution," "- Marketing and Underwriting Arrangements."

                                       21
<PAGE>
 
POTENTIAL DELAYS OF CONSUMMATION OF THE CONVERSION

     Orders submitted in the Subscription Offering, Community Offering and/or
Syndicated Community Offering are irrevocable. The Company and the Bank expect
to complete the Conversion within the time periods indicated in this Prospectus.
Nevertheless, it is possible that several factors, including, but not limited
to, a delay in receiving regulatory approval of the final updated appraisal
prepared by Keller, a delay in processing orders in the event the Offerings are
oversubscribed or a delay caused by regulatory or legal challenges to the
establishment and funding of the Foundation or other actions taken in connection
with the Conversion could significantly delay the completion of the Conversion.
Subscribers will have no access to subscription funds and/or shares of Common
Stock until the Conversion is completed or terminated. In the event the
Conversion is terminated, subscribers will be refunded their subscription funds,
together with interest at a rate equal to the Bank's interest rate paid on
passbook accounts, or will have their withdrawal authorization terminated. See
"The Conversion."

                        RICHMOND COUNTY FINANCIAL CORP.

     Richmond County Financial Corp. is a Delaware Corporation recently
organized at the direction of the Board of Trustees of the Bank for the purpose
of acquiring all of the capital stock of the Bank to be issued in the
Conversion. The Company expects to receive approval from the Office of Thrift
Supervision ("OTS") to become a savings and loan holding company and, upon
completion of the Conversion, will be subject to regulation by the OTS. See "The
Conversion - General" and "Regulation and Supervision - Holding Company
Regulation." Upon consummation of the Conversion, the Company will have no
significant assets other than all of the shares of the Bank's capital stock
acquired in the Conversion and an amount equal to 50% of the net proceeds of the
Conversion, including the loan to the ESOP, and will have no significant
liabilities. The Company intends to use a portion of the net proceeds it retains
to loan to the ESOP funds to enable the ESOP to purchase up to 8% of the stock
issued in connection with the Conversion, including shares issued to the
Foundation. The remaining net proceeds will be used for general business
activities, including the funding of the Stock Program and Stock Option Plan.
Initially, net proceeds are expected to be invested by the Company in primarily
mortgage-backed and mortgage-related securities and investment-grade debt and
equity securities. See "Use of Proceeds."

     Concurrent with the organization of the Company, the Company has hired a
President and Chief Operating Officer and a Chief Financial Officer and
Secretary, both of whom were not previously employed by the Bank but have
significant experience in the financial services industry. The management of the
Holding Company is set forth under "Management of the Company." Initially, the
Company will neither own nor lease any property, but will instead use the
premises, equipment and furniture of the Bank. At the present time, the Company
does not intend to employ any persons other than the current officers of the
Company but will utilize the support staff of the Bank from time to time.
Additional employees will be hired as appropriate to the extent the Company
expands its business in the future.

     Management believes that the holding company structure will provide the
Company additional flexibility to diversify its business activities and to
expand its geographical presence through existing or newly formed subsidiaries
(which subsidiaries could be financial institutions), or through acquisitions of
or mergers with other financial institutions and financial services related
companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities (other than a lease on a public
accommodation office to be opened on Staten Island in 1998 and plans to open
new branch offices on Staten Island in 1998), the Company will be in a
position after the Conversion, subject to regulatory limitations and the
Company's financial position, to take advantage of any such acquisition and
expansion opportunities that may arise. The initial activities of the Company
are anticipated to be funded by the proceeds to be retained by the Company,
income thereon and through dividends from the Bank.

                                       22
<PAGE>
 
     The Company's executive office is located at the administrative offices of
the Bank, 1214 Castleton Avenue, Staten Island, New York 10310. Its telephone
number is (718) 448-2800.

                         RICHMOND COUNTY SAVINGS BANK

     The Bank was organized in 1886 as a New York State chartered mutual savings
bank. The Bank has long standing ties to Staten Island with over 111 years of
continuous service to the residents and businesses of Staten Island and has
served the area around its office in Brooklyn for over 20 years. The Bank's
deposit accounts are insured to the maximum allowable amount by the Bank
Insurance Fund ("BIF") and SAIF as administered by the FDIC. Including the
Bank's principal office, which is located in the Borough of Staten Island, the
Bank services its customers from twelve full service banking facilities located
in the Borough of Staten Island, and one full service banking facility located
in the Borough of Brooklyn. The Bank intends to open one public accommodation
office in Staten Island during 1998 and also is considering opening two new 
full-service branches. With the exception of the lease on the new public
accommodation office, there are no current arrangements, understandings or
agreements, written or oral, regarding such new offices, and no assurances can
be made that such offices will be opened. At June 30, 1997, the Bank had total
assets of $993.4 million, total deposits of $884.5 million, net worth of $100.9
million and had a leverage capital ratio of 10.02% and a total risk-based
capital ratio of 19.71%. See "Regulation and Supervision--FDIC Regulations--
Capital Requirements."

     The Bank is a community-oriented savings institution whose businesses
primarily consist of accepting deposits from customers in its primary market
area consisting of Staten Island and the area around its branch office in
Brooklyn and investing those funds in mortgage loans secured by one- to four-
family residences and commercial properties and construction and development and
commercial loans, home equity, student and consumer loans and in mortgage-backed
and mortgage related securities and debt and equity securities. The Bank's
primary market area consists of the Borough of Staten Island and the area around
its branch office in the Borough of Brooklyn. See "Business of the Bank -
Lending Activities."

     As of June, 1996, based on a survey by a nationally-recognized bank
consulting firm, the Bank had 14.2% of total deposits in Staten Island, and for
1996, the Bank had a lending market share of approximately 7.2% on Staten
Island, placing the Bank among the leaders in both loans originated and deposits
in Staten Island. The Bank's operating strategy emphasizes customer service,
security and convenience, and the Bank attributes the loyalty of its customer
base to its commitment to maintaining customer satisfaction. The Bank attempts
to set itself apart from its larger competitors by providing the type of
personalized service not generally available from larger banks while offering a
greater variety of products and services than is typically available from
smaller, local depository institutions.

     At June 30, 1997, the Bank's gross loan portfolio totaled $503.3 million,
or 50.7% of total assets, of which $394.6 million were one- to four-family
loans, $2.7 million were multi-family loans, $40.7 million were commercial real
estate loans, $18.3 million were construction and development loans, $6.7
million were commercial loans, $16.7 million were home equity loans and $23.6
million were student and consumer loans. The Bank originates one- to four-family
loans generally secured by properties located in the Bank's primary market area.
See "Business of the Bank - Lending Activities."

     The Bank's securities investment activities primarily consist of
investments in mortgage-backed and mortgage related securities and various
investment-grade debt and equity securities. At June 30, 1997, the Bank's
securities portfolio totaled $437.4 million, or 44.0% of total assets, of which
$47.1 million was categorized as available-for-sale and $390.3 million was
classified as held-to-maturity. At June 30, 1997, the Bank's mortgage-backed and
mortgage related securities portfolio totaled $212.5 million, or 21.4% of total
assets, of which $27.4 million was classified as available-for-sale and $185.1
million was classified as held-to-maturity, and consisted of mortgage-backed
securities, guaranteed or issued by Governmental-sponsored and federal agencies
such as the Government National Mortgage Association ("GNMA"), Fannie

                                       23
<PAGE>
 
Mae ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") and
collateralized mortgaged obligations ("CMOs") issued by FNMA, FHLMC and private
issuers. At June 30, 1997, the Bank's debt securities portfolio totaled $205.2
million, or 20.7% of total assets all of which were classified as held to
maturity. The Bank's debt securities generally consist of United States
Government securities, obligations of FNMA, FHLMC and the Federal Home Loan Bank
(the "FHLB"), obligations of corporate issuers, public utility bonds and bonds
issued by New York State. At June 30, 1997, the Bank's equity securities
portfolio totaled $19.7 million, or 2.0% of total assets, all of which was
classified as available-for-sale. The Bank's equity securities portfolio at such
date consisted primarily of preferred stock. See "Business of the Bank -
Securities Investment Activities."

     At June 30, 1997, the Bank's deposit accounts totaled $884.5 million, or
99.1% of total liabilities, of which $586.5 million, or 65.7%, were comprised of
core deposits. In addition to core deposits, the Bank had $298.1 million of
certificate accounts, or 33.7% of total liabilities, of which $209.1 million
were certificates of deposit with maturities of one year or less and $27.4
million were jumbo certificates of deposit.

     The Bank's executive office is located at 1214 Castleton Avenue, Staten
Island, New York 10310. Its telephone number is (718) 448-2800.

                      RICHMOND COUNTY SAVINGS FOUNDATION

     In furtherance of the Bank's commitment to the communities it serves, the
Bank's Plan of Conversion provides for the establishment of a charitable
foundation in connection with the Conversion. The Plan provides that the Bank
and the Company will create the Richmond County Savings Foundation, which will
be incorporated under Delaware law as a non-stock corporation. The Foundation
will be funded with shares of Common Stock contributed by the Company, as
further described below. The Company and the Bank believe that the funding of
the Foundation with Common Stock of the Company is a means of establishing a
common bond between the Bank and its community and thereby enables the Bank's
community to share in the potential growth and success of the Company over the
long term. While the Bank has made charitable contributions in the past, the
Bank has not previously formed a charitable foundation nor has it made
contributions to charitable organizations of the magnitude of the contribution
that will be made to the Foundation in the Conversion. By further enhancing the
Bank's visibility and reputation in its local community, the Bank believes that
the Foundation will enhance the long-term value of the Bank's community banking
franchise. See "The Conversion - Establishment of Charitable Foundation -
Structure of the Foundation."

     The members of the Foundation will be the Board of Directors of the
Foundation. The authority for the affairs of the Foundation will be vested in
the Board of Directors of the Foundation, which will initially be comprised of
the Board of Trustees of the Bank, who will receive no fees for serving on the
Foundation's Board of Directors. The Board of Directors of the Foundation may be
expanded in the future to include certain members of the community. The
Directors of the Foundation will be responsible for establishing the policies of
the Foundation with respect to grants or donations by the Foundation, consistent
with the purposes for which the Foundation was established. Although no formal
policy governing Foundation grants exists at this time, the Foundation's Board
of Directors will adopt such a policy upon establishment of the Foundation. The
Directors of the Foundation will be responsible for directing the activities of
the Foundation, including the management of the Common Stock held by the
Foundation.

     The Company proposes to fund the Foundation by contributing to the
Foundation immediately following the Conversion a number of shares of authorized
but unissued Common Stock equal to 8% of the Common Stock sold in the Offerings,
or 1,258,000, 1,480,000 and 1,702,000 shares at the minimum, midpoint and
maximum, respectively, of the Estimated Price Range. Such contribution, once

                                       24
<PAGE>
 
made, will not be recoverable by the Company or the Bank. Assuming the sale of
shares at the maximum of the Estimated Price Range and the issuance of shares to
the Foundation, the Company will have 22,977,000 shares issued and outstanding,
of which the Foundation will own 1,702,000 shares, or 7.4%. DUE TO THE ISSUANCE
OF ADDITIONAL SHARES OF COMMON STOCK TO THE FOUNDATION, PERSONS PURCHASING
SHARES IN THE CONVERSION WILL HAVE THEIR OWNERSHIP AND VOTING INTERESTS IN THE
COMPANY DILUTED BY 7.4%. SEE "PRO FORMA DATA." The establishment of the
Foundation was taken into account in determining the estimated pro forma market
value of the Common Stock. In the event the Conversion did not include the
Foundation, Keller has estimated that the pro forma market value of the Common
Stock would be $217.2 million at the midpoint of the Estimated Price Range
rather than $199.8 million. See "Risk Factors - Effects of the Establishment of
the Foundation - Comparison of Valuation and Other Factors Assuming the
Foundation is Not Established as Part of the Conversion" and "Pro Forma Data."

     As a result of the establishment of the Foundation, the Company will
recognize an expense of the full amount of the contribution, offset in part by a
corresponding tax benefit, during the quarter in which the contribution is made,
which is expected to be the first quarter of 1998. Such expense will reduce
earnings and have a material impact on the Company's earnings for the fiscal
year in which it is made. While management cannot predict earnings for fiscal
1998, it expects that the establishment and funding of the Foundation will have
an adverse impact on the Company's earnings for the year in which it is made.
Assuming a contribution of $17.0 million in Common Stock in fiscal 1998, based
on the maximum of the Estimated Price Range and assuming a tax rate of 45%, the
Company estimates a net tax effected expense of $9.4 million. If the Foundation
had been established at June 30, 1997, the Bank would have recorded net income
of $1.7 million, rather than recording net income of $10.7 million for the year
ended June 30, 1997, based on an assumed tax rate of 47%. In addition to the
contribution of Common Stock by the Company to the Foundation, the Bank expects
in the future to continue making ordinary charitable contributions within its
community. The Bank does not anticipate making future charitable contributions
to the Foundation during the first five years following the initial contribution
to the Foundation. For further discussion of the Foundation and its impact on
purchasers in the Conversion, see "Risk Factors - Effects of the Establishment
of the Foundation," "Pro Forma Data" and "The Conversion - Effects of the
Establishment of the Foundation."

     The establishment and funding of a charitable foundation as part of a
conversion of a mutual savings institution to stock form is innovative and has
only been done in a limited number of instances. As such, the establishment of
the Foundation in connection with the Conversion and the Superintendent's
approval and FDIC's non-objection to the Plan of Conversion may be subject to
potential challenges which could result in delays in the Conversion. See "Risk
Factors - Effects of the Establishment of the Foundation - Potential
Challenges."

                                       25
<PAGE>
 
                         REGULATORY CAPITAL COMPLIANCE

     At June 30, 1997, the Bank exceeded each of its regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the
FDIC capital standards as of June 30, 1997, on an historical and pro forma basis
assuming that the indicated number of shares were sold as of such date and
receipt by the Bank of 50% of the net proceeds. For purposes of the table below,
the amount expected to be borrowed by the ESOP and the cost of its shares
expected to be acquired by the Stock Program are deducted from pro forma
regulatory capital.

<TABLE>
<CAPTION>
                                                                      Pro Forma at June 30, 1997 
                                                                Based Upon the Sale at $10.00 Per Share
                                                          --------------------------------------------------
                                                             15,725,000 Shares         18,500,000 Shares 
                                     Historical at            (Minimum of the           (Midpoint of the 
                                     June 30, 1997         Estimated Price Range)    Estimated Price Range)
                                ----------------------    -----------------------    -----------------------
                                              Percent                    Percent                    Percent     
                                                 of                         of                         of       
                                  Amount     Assets(2)      Amount      Assets(2)      Amount      Assets(2)
                                ----------   ---------    ----------    ---------    ----------    ---------
                                                      (Dollars in thousands)                                    
<S>                             <C>          <C>          <C>           <C>          <C>           <C>          
GAAP(3) Capital                   $100,865     10.15%       $159,333      15.15%       $169,889      15.99%     
                                  ========     =====        ========      =====        ========      =====
Leverage Capital:                                                                                               
   Capital Level(4)               $ 99,063     10.02%       $157,531      15.04%       $168,067      15.89%     
   Requirement(5)                   39,561      4.00          41,900       4.00          42,323       4.00      
                                  --------     -----        --------      -----        --------      -----      
   Excess                         $ 59,502      6.02%       $115,631      11.04%       $125,764      11.89%     
                                  ========     =====        ========      =====        ========      =====
Tier I Capital:                                                                                                 
   Capital Level(4)               $ 99,063     18.79%       $157,531      28.22%       $168,087      29.81%     
   Requirement                      21,090      4.00          22,330       4.00          22,554       4.00      
                                  --------     -----        --------      -----        --------      -----      
   Excess                         $ 77,973     14.79%       $135,201      24.22%       $145,533      25.81%     
                                  ========     =====        ========      =====        ========      =====
Risk-Based Capital:                                                                                             
   Capital Level(4)(6)            $103,910     19.71%       $162,378      29.09%       $172,934      30.67%     
   Requirement                      42,181      8.00          44,660       8.00          45,107       8.00      
                                  --------     -----        --------      -----        --------      -----      
   Excess                         $ 61,729     11.71%       $117,718      21.09%       $127,827      22.67%     
                                  ========     =====        ========      =====        ========      =====
</TABLE>
<TABLE> 
<CAPTION> 
                                              Pro Forma at June 30, 1997 
                                        Based Upon the Sale at $10.00 Per Share
                                   -------------------------------------------------
                                     21,275,000 Shares          24,466,250 Shares
                                      (Maximum of the          (15% Above Maximum
                                         Estimated              of the Estimated      
                                        Price Range)             Price Range)(1) 
                                   ----------------------    -----------------------
                                                 Percent                   Percent
                                                   of                         of 
                                     Amount     Assets(2)      Amount      Assets(2)
                                   ----------   ---------    ----------    --------- 
                                                      (Dollars in thousands)                                    
<S>                                <C>          <C>          <C>           <C>    
                                                                              
GAAP(3) Capital                    $180,445      16.82%      $192,535       17.74% 
                                   ========      =====       ========       =====  
Leverage Capital:                                                                
   Capital Level(4)                $178,643      16.72%      $190,733       17.65% 
   Requirement(5)                    42,745       4.00         43,228        4.00 
                                   --------      -----       --------       -----  
   Excess                          $135,898      12.72%      $147,505       13.65% 
                                   ========      =====       ========       =====  
Tier I Capital:                                                                  
   Capital Level(4)                $178,643      31.37%      $190,733       33.12% 
   Requirement                       22,777       4.00         23,034        4.00 
                                   --------      -----       --------       -----  
   Excess                          $155,866      27.37%      $167,699       29.12% 
                                   ========      =====       ========       =====  
Risk-Based Capital:                                                              
   Capital Level(4)(6)             $183,490      32.22%      $195,580       33.96% 
   Requirement                       45,555       8.00         46,067        8.00 
                                   --------      -----       --------       -----  
   Excess                          $137,935      24.22%      $149,513       25.96% 
                                   ========      =====       ========       =====  
</TABLE> 

(1)    As adjusted to give effect to an increase in the number of shares which
       could occur due to an increase in the Estimated Price Range of up to 15%
       as a result of regulatory considerations or changes in market or general
       financial or economic conditions following the commencement of the
       Subscription and Community Offering.
(2)    Leverage capital levels are shown as a percentage of average assets.
       Risk-based capital levels are calculated on the basis of a percentage of
       risk-weighted assets.
(3)    GAAP defined as Generally Accepted Accounting Principles.
(4)    Pro forma capital levels assume  receipt by the Bank of 50% of the net
       proceeds from the shares of Common Stock sold at the minimum, midpoint
       and maximum of the Estimated Price Range.  These levels also assume
       funding by the Bank of the Stock Program equal to 4% of the Common Stock
       issued and repayment of the Company's loan to the ESOP to enable the ESOP
       to purchase 8% of the Common Stock issued, plus the Common Stock issued
       to the Foundation, valued at the minimum, midpoint and maximum of the
       Estimated Price Range.  See "Management of the Bank - Benefit Plans" for
       a discussion of the Stock Program and ESOP.  With respect to the Stock
       Program, such amounts are assumed to be $5.7 million, $6.7 million, $7.7
       million and $8.8 million at the minimum, midpoint, maximum and maximum,
       as adjusted, of the Estimated Price Range, respectively.  With respect to
       the ESOP loan, such amounts are assumed to be $13.6 million, $16.0
       million, $18.4 million and $21.1 million, at the minimum, midpoint,
       maximum, and maximum, as adjusted, of the Estimated Price Range
       respectively.
(5)    The current leverage capital requirement for savings banks is 3% of total
       adjusted assets for savings banks that receive the highest supervisory
       rating for safety and soundness and that are not experiencing or
       anticipating significant growth.   The current leverage capital ratio
       applicable to all other savings banks is 4% to 5%.  See "Regulation and
       Supervision - FDIC Regulations - Capital Requirements."  The Company will
       not be subject to regulatory capital requirements.
(6)    Assumes net proceeds are invested in assets that carry a risk-weighting
       equal to the actual risk weighting of the Bank's assets as of June 30,
       1997.

                                       26
<PAGE>
 
                                USE OF PROCEEDS

     Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently anticipated
that the net proceeds from the sale of the Common Stock will be between $152.0
million and $206.6 million (or $238.0 million if the Estimated Price Range is
increased by 15%). See "Pro Forma Data" and "The Conversion - Stock Pricing" as
to the assumptions used to arrive at such amounts. The Company will be unable to
utilize any of the net proceeds of the Offerings until the consummation of the
Conversion.

     The Company will purchase all of the outstanding capital stock of the Bank
to be issued upon Conversion in exchange for 50% of the net proceeds of the
Offerings. Based on net proceeds of $152.0 million to $206.6 million, the
Company expects to utilize between $76.0 million and $103.3 million of net
proceeds to purchase the common stock of the Bank. Such portion of net proceeds
received by the Bank from the Company will be added to the Bank's general funds
which the Bank currently intends to utilize for general corporate purposes,
including investment in loans and securities. The Bank may also use such funds
for the expansion of its facilities, and to expand its operations in its primary
market area and other areas within the New York City metropolitan area through
marketing and business development, acquisitions of other financial
institutions, branch offices or other financial services companies. To the
extent that the Stock Program or Stock Option Plan, which the Company or the
Bank intend to adopt subsequent to the Conversion, are not funded with
authorized but unissued common stock of the Company, the Company or Bank may use
net proceeds from the Conversion to fund the purchase of stock to be awarded
under such plans. See "Risk Factors - Stock-Based Benefits to Management,
Employment Contracts and Change in Control Payments" and "Management of the 
Bank - Benefit Plans - Stock Option Plan" and " - Stock Program."

     The Company intends to use a portion of the net proceeds it retains (i.e.,
50% of the net proceeds, which based on net proceeds of $152.0 million to $206.6
million will be between $76.0 million and $103.3 million) to make a loan
directly to the ESOP to enable the ESOP to purchase in the Conversion, or in the
open market to the extent Common Stock is not available to fill the ESOP's
subscription, 8% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation. Based upon the sale of 15,725,000
shares or 21,275,000 shares at the minimum and maximum of the Estimated Price
Range, and the issuance of shares to the Foundation, the amount of the loan to
the ESOP would be $13.6 million or $18.4 million, respectively (or $21.1 million
if the Estimated Price Range is increased by 15%), with a term of 20 years at
the prevailing prime rate of interest, which currently is 8.50%. The Company and
Bank may alternatively choose to fund the ESOP's stock purchases through a loan
by a third party financial institution. See "Management of the Bank - Benefit
Plans - ESOP." The remaining net proceeds retained by the Company will initially
be invested in mortgage-backed and mortgage related securities and investment-
grade debt and equity securities.

     The net proceeds retained by the Company may also be used to support the
future geographic and operational expansion through increased marketing and
business development efforts, branch acquisitions, the establishment of branch
offices and the acquisition of savings associations and commercial banks or
their assets, including those located within the Bank's market area or
diversification into other banking related businesses. The Company and the Bank
have no current arrangements, understandings or agreements regarding any such
transactions other than the lease on a public accommodation office on Staten
Island to be opened in 1998 and plans to open new branch offices on Staten
Island in 1998. The Company, upon the Conversion, will be a unitary savings and
loan holding company, which under existing laws would not be restricted as to
the types of business activities in which it may engage. See "Regulation and
Supervision - Holding Company Regulation" for a description of certain
regulations applicable to the Company .

                                       27
<PAGE>
 
     Upon completion of the Conversion, the Board of Directors of the Company
will have the authority to adopt stock repurchase plans, subject to statutory
and regulatory requirements. Unless approved by the Superintendent, the Company,
pursuant to NYBB regulations, may not repurchase any Common Stock in the first
year after conversion and, during the next two following years, may only
repurchase up to 5% of its outstanding capital stock during each twelve-month
period. Further, the Company may not repurchase any of its Common Stock if the
repurchases would cause the Bank to become "undercapitalized" within the meaning
of the FDIC prompt corrective action regulation. See "Regulation and 
Supervision - Prompt Corrective Regulatory Action." In addition, the FDIC
prohibits an insured mutual state savings bank which has converted from the
mutual to stock form of ownership from repurchasing its capital stock within one
year following the date of its conversion to stock form, except that stock
repurchases of no greater than 5% of a bank's outstanding capital stock may be
repurchased during this one-year period where compelling and valid business
reasons are established to the satisfaction of the FDIC.

     Based upon facts and circumstances following the Conversion and subject to
applicable regulatory requirements, the Board of Directors may determine to
repurchase stock in the future. Such facts and circumstances may include but not
be limited to: (i) market and economic factors such as the price at which the
stock is trading in the market, the volume of trading, the attractiveness of
other investment alternatives in terms of the rate of return and risk involved
in the investment, the ability to increase the book value and/or earnings per
share of the remaining outstanding shares, and the opportunity to improve the
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans; and (iii) any other circumstances in which
repurchases would be in the best interests of the Company and its shareholders.
In the event the Company determines to repurchase stock, such repurchases may be
made at market prices which may be in excess of the Purchase Price in the
Conversion and in excess of the per share book value. To the extent that the
Company repurchases stock at market prices in excess of the per share book
value, such repurchases may have a dilutive effect upon the interests of
existing stockholders. Any stock repurchases will be subject to the
determination of the Board of Directors that both the Company and the Bank will
be capitalized in excess of all applicable regulatory requirements after any
such repurchases and that such capital will be adequate, taking into account,
among other things, the level of non-performing and other risk assets, the
Company's and the Bank's current and projected results of operations and
asset/liability structure, the economic environment, tax and other
considerations. See "The Conversion - Certain Restrictions on Purchase or
Transfer of Shares After Conversion."

                                DIVIDEND POLICY

     Upon Conversion, the Board of Directors of the Company will have the
authority to declare dividends on the Common Stock, subject to statutory and
regulatory requirements. Following the Conversion, the Board of Directors
intends to consider a policy of paying cash dividends on the Common Stock.
However, no decision has been made as to the amount or timing of such dividends,
if any.

     The Bank will not be permitted to pay dividends on its common stock or
repurchase shares of its common stock if its stockholder's equity would be
reduced below the amount required for the liquidation account. See "The
Conversion - Liquidation Rights." Under New York State Banking Law, dividends
may be declared and paid only out of the net profits of the Bank. The approval
of the Superintendent is required if the total of all dividends declared in any
calendar year will exceed net profits for that year plus the retained net
profits of the preceding two years, less any required transfer to surplus or a
fund for the retirement of any preferred stock. In addition, no dividends may be
declared, credited or paid if the effect thereof would cause the Bank's capital
to be reduced below the amount required by the Superintendent or the FDIC. See
"Regulation and Supervision." As of June 30, 1997, the Bank had $59.5 million
available for the payment of dividends without prior approval of the
Superintendent. Subsequent to the Conversion, the availability

                                       28
<PAGE>
 
of the Bank's funds for the payment of dividends may be limited by the
liquidation account. See "The Conversion - Liquidation Rights." Dividends or any
repurchase by the Bank of its stock in excess of the Bank's current and
accumulated earnings could result in the realization by the Bank of taxable
income. See "Federal and State Taxation - Federal Taxation."

     Unlike the Bank, the Company is not subject to the restrictions imposed by
the New York State Banking Law on the payment of dividends to its stockholders,
although the source of such dividends will be, in part, dependent upon dividends
from the Bank in addition to the net proceeds retained by the Company and
earnings thereon. The Company is subject, however, to the requirements of
Delaware law, which generally limit dividends to an amount equal to the excess
of the net assets of the Company (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.

                          MARKET FOR THE COMMON STOCK

     The Company was recently formed and has never issued capital stock. The
Bank, as a mutual institution, has never issued capital stock. The Company has
applied to have its Common Stock quoted on the [NASDAQ NATIONAL MARKET] under
the symbol "____" subject to the completion of the Conversion and compliance
with certain conditions including the presence of at least three registered and
active market makers. The Company will seek to encourage and assist at least
three market makers to make a market in its Common Stock. Making a market
involves maintaining bid and ask quotations and being able, as principal, to
effect transactions in reasonable quantities at those quoted prices, subject to
various securities laws and other regulatory requirements. Sandler O'Neill has
advised the Company that it intends to make a market in the Common Stock
following the completion of the Conversion, but it is under no obligation to do
so. There can be no assurance that the Common Stock will be able to meet the
applicable listing criteria in order to maintain its quotation on the [NASDAQ
NATIONAL MARKET] or that an active and liquid trading market will develop or, if
developed, will be maintained. A public market having the desirable
characteristics of depth, liquidity and orderliness, however, depends upon the
presence in the marketplace of both willing buyers and sellers of Common Stock
at any given time, which is not within the control of the Company. No assurance
can be given that an investor will be able to resell the Common Stock at or
above the Purchase Price of the Common Stock after the Conversion. See "Risk
Factors - Absence of Market for Common Stock."

                                       29
<PAGE>
 
                                CAPITALIZATION

     The following table presents the historical capitalization of the Bank at
June 30, 1997, and the pro forma consolidated capitalization of the Company
after giving effect to the Conversion, including the issuance of shares to the
Foundation, based upon the sale of the number of shares indicated in the table
and the other assumptions set forth under "Pro Forma Data."

<TABLE>
<CAPTION>
                                                          Company Pro Forma Based Upon Sale at $10.00 Per Share
                                             ------------------------------------------------------------------------------------
                                                                                                                    24,466,250
                                                                 15,725,000       18,500,000      21,275,000          Shares
                                                                   Shares           Shares          Shares          (15% above
                                                                 (Minimum of     (Midpoint of    (Maximum of        Maximum of
                                                 Bank             Estimated        Estimated       Estimated         Estimated
                                              Historical         Price Range)     Price Range)    Price Range)    Price Range)(1)
                                             -------------       -------------   -------------   -------------   ----------------
                                                                          (In thousands)
<S>                                          <C>                 <C>             <C>             <C>             <C>
Total deposits(2).........................     $   884,531         $   884,531     $   884,531     $   884,531     $   884,531
                                               ===========         ===========     ===========     ===========     ===========
Stockholders' equity:
  Preferred Stock, $.01 par value,
    5,000,000 shares authorized;
    none to be issued.....................     $        --         $        --     $        --     $        --     $        --
  Common Stock, $.01 par value,
    75,000,000 shares authorized;
    shares to be issued as reflected......              --                 170             200             230             264
  Additional paid-in capital(3)...........              --             151,863         179,139         206,416         237,784
  Net worth(4)............................         100,555             100,555         100,555         100,555         100,555
Less:
   Expense of contributions to
      Foundation..........................              --              12,580          14,800          17,020          19,573
Plus:
   Tax effect of contribution
      to Foundation(5)....................              --              (6,919)         (8,140)         (9,361)        (10,765)

   Net unrealized gain on securities
      available-for-sale, net of taxes....             310                 310             310             310             310

Less:
   Common Stock acquired by the
     ESOP(6)..............................              --             (13,586)        (15,984)        (18,381)        (21,139)

   Common Stock acquired by the
     Stock Program(7).....................              --              (6,793)         (7,992)         (9,190)        (10,569)
                                               -----------         -----------     -----------     -----------     -----------
Total stockholders' equity................     $   100,865         $   238,180     $   262,888     $   287,599     $   316,013
                                               ===========         ===========     ===========     ===========     ===========
</TABLE>

____________________

(1)    As adjusted to give effect to an increase in the number of shares which
       could occur due to an increase in the Estimated Price Range of up to 15%
       as a result of regulatory considerations or changes in market or general
       financial and economic conditions following the commencement of the
       Subscription and Community Offerings.
(2)    Does not reflect withdrawals from deposit accounts for the purchase of
       Common Stock in the Conversion.  Such withdrawals would reduce pro forma
       deposits by the amount of such withdrawals.
(3)    Reflects the issuance of shares sold in the Offerings and the issuance of
       additional shares of Common Stock to the Foundation at a value of $10.00
       per share.  No effect has been given to the issuance of additional shares
       of Common Stock pursuant to the Company's Stock Option Plan intended to
       be adopted by the Company and presented for approval of stockholders at a
       meeting of stockholders following the Conversion.  The Stock Option Plan
       would provide the grant of Stock Options to purchase an amount of Common
       Stock equal to 10% of the shares of Common Stock issued in the
       Conversion.  See "Management of the Bank - Benefit Plans - Stock Option
       Plan."  Additional paid-in capital has been adjusted to reflect the
       issuance of additional shares of Common Stock to the Foundation at the
       Purchase Price.
(4)    The net worth of the Bank will be substantially restricted after the
       Conversion.  See "The Conversion - Liquidation Rights."
(5)    Represents the tax effect of the contribution of Common Stock to the
       Foundation based on a 45% tax rate.  The realization of the deferred tax
       benefit is limited annually to 10% of the Company's annual taxable
       income, subject to the ability of the Company to carry forward any unused
       portion of the deduction for five years following the year in which the
       contribution is made.
(6)    Assumes that 8% of the shares issued in connection with the Conversion,
       including shares issued to the Foundation, will be purchased by the ESOP
       and the funds used to acquire the ESOP shares will be borrowed from the
       Company.  The Common Stock acquired by the ESOP is reflected as a
       reduction of stockholders' equity.  See "Management of the Bank - Benefit
       Plans - ESOP" and "- Benefit Plans -Stock Program."
(7)    Assumes that, subsequent to the Conversion, an amount equal to 4% of the
       shares of Common Stock sold in the Conversion and issued to the
       Foundation is purchased by the Stock Program through open market
       purchases.  The Common Stock purchased by the Stock Program is reflected
       as a reduction of stockholder's equity.  See "Risk Factors - Possible
       Dilutive Effect of Stock Program and Stock Option Plan," Footnote 2 to
       the tables under "Pro Forma Data" and "Management of the Bank - Benefit
       Plans - Stock Program."

                                       30
<PAGE>
 
                                 PRO FORMA DATA

     The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $152.0 million and $206.6 million based upon
the following assumptions: (i) $3.0 million will be sold to executive officers,
Trustees, Directors and employees of the Bank and Company, the ESOP will
purchase 8% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation, and the remaining shares will be sold
in the Subscription and Community Offerings; (ii) Sandler O'Neill will receive a
fee equal to 1.75% of the aggregate Purchase Price of the shares sold in the
Subscription Offering and Community Offering, except that no fee will be paid
with respect to shares purchased by the Employee Plans, including the ESOP,
officers, employees, Trustees and Directors of the Bank and Company and members
of their immediate families; (iii) the Company will issue to the Foundation an
amount of Common Stock equal to 8% of the Common Stock sold in the Conversion
from authorized but unissued shares; and (iv) Conversion expenses, excluding the
marketing fees paid to Sandler O'Neill, will be approximately $2.8 million.
Actual Conversion expenses may vary from those estimated.

     Pro forma consolidated net income of the Company for the year ended June
30, 1997 has been calculated as if the Common Stock had been sold at the
beginning of the respective periods and the net proceeds had been invested at
5.45% (the one year U.S. Treasury bill rate as of June 30, 1997). The tables do
not reflect the effect of withdrawals from deposit accounts for the purchase of
Common Stock. The pro forma after-tax yield for the Company and the Bank is
assumed to be 3.0% for the year ended June 30, 1997 (based on an assumed tax
rate of 45.0%). Historical and pro forma per share amounts have been calculated
by dividing historical and pro forma amounts by the indicated number of shares
of Common Stock, as adjusted to give effect to the purchase of shares by the
ESOP and the effect of the issuance of shares to the Foundation. No effect has
been given in the pro forma stockholders' equity calculations for the assumed
earnings on the net proceeds. As discussed under "Use of Proceeds," the Company
will retain 50% of the net Conversion proceeds.

     The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company. The pro forma stockholders' equity is not intended to represent the
fair market value of the Common Stock and may be greater than amounts that would
be available for distribution to stockholders in the event of liquidation.

     The following tables summarize historical data of the Bank and pro forma
data of the Company at or for the year ended June 30, 1997, based on the
assumptions set forth above and in the table and should not be used as a basis
for projections of market value of the Common Stock following the Conversion.
The tables below give effect to the Stock Program, which is expected to be
adopted by the Company following the Conversion and presented to stockholders
for approval at a meeting of stockholders. See Footnote 2 to the tables and
"Management of the Bank - Benefit Plans - Stock Program." No effect has been
given in the tables to the possible issuance of additional shares reserved for
future issuance pursuant to the Stock Option Plan to be adopted by the Board of
Directors of the Company and presented to stockholders for approval at a meeting
of stockholders, nor does book value as presented give any effect to the
liquidation account to be established for the benefit of Eligible Account
Holders or, in the event of liquidation of the Bank, to the tax effect of the
bad debt reserve and other factors. See Footnote 3 to the tables below, "The
Conversion - Liquidation Rights" and "Management of the Bank - Benefit Plans -
Stock Option Plan." THE FOLLOWING TABLE GIVES EFFECT TO THE ISSUANCE OF
AUTHORIZED BUT UNISSUED SHARES OF THE COMPANY'S COMMON STOCK TO THE FOUNDATION
CONCURRENTLY WITH THE COMPLETION OF THE CONVERSION. THE VALUATION RANGE, AS SET
FORTH HEREIN AND IN THE TABLE BELOW, TAKES INTO ACCOUNT THE DILUTIVE IMPACT OF
THE ISSUANCE OF SHARES TO THE FOUNDATION.

                                       31
<PAGE>
 
<TABLE>
<CAPTION>

                                                              At or For the Year Ended June 30, 1997
                                     ----------------------------------------------------------------------------------------------
                                         15,725,000               18,500,000                  21,275,000             24,466,250
                                       Shares Sold at           Shares Sold at              Shares Sold at         Shares Sold at
                                      $10.00 Per Share         $10.00 Per Share            $10.00 Per Share       $10.00 Per Share
                                         (Minimum                 (Midpoint                   (Maximum           (15% above Maximum
                                     of Estimated Price        of Estimated Price        of Estimated Price      of Estimated Price
                                           Range)                    Range)                    Range)                  Range)(7)
                                     ----------------------------------------------------------------------------------------------
                                                            (In Thousands, Except Per Share Amounts)
<S>                                     <C>                       <C>                       <C>                      <C>
Gross proceeds.......................      $   157,250               $   185,000               $   212,750              $   244,662
Plus:  Shares acquired by
 Richmond County Savings
 Foundation (equal to 8% of
 stock issued in Conversion).........           12,580                    14,800                    17,020                   19,573
                                           -----------               -----------               -----------              -----------
Pro forma market capitalization......      $   169,830               $   199,800               $   229,770              $   264,235
                                           ===========               ===========               ===========              ===========
Gross proceeds.......................      $   157,250               $   185,000               $   212,750              $   244,662
Less:  Offering expenses and
          commissions................           (5,216)                   (5,660)                   (6,103)                  (6,614)

                                           -----------               -----------               -----------              -----------
Estimated net proceeds...............          152,034                   179,340                   206,647                  238,048
Less:  Common Stock purchased                  
         by ESOP.....................          (13,586)                  (15,984)                  (18,381)                 (21,138)

       Common Stock purchased
         by Stock Program............           (6,793)                   (7,992)                   (9,190)                 (10,569)

                                           -----------               -----------               -----------              -----------
   Estimated net proceeds,
    as adjusted......................      $   131,655               $   155,364               $   179,076              $   206,341
                                           ===========               ===========               ===========              ===========
Net income(1):
   Historical........................      $    10,725               $    10,725               $    10,725              $    10,725
   Pro forma income on net
    proceeds, as adjusted............            3,916                     4,627                     5,337                    6,155
   Pro forma ESOP
    adjustment(2)....................             (373)                     (439)                     (505)                    (581)
   Pro forma Stock Program
    adjustment(3)....................             (747)                     (879)                   (1,011)                  (1,162)
                                           -----------               -----------               -----------              -----------
         Pro forma net income........      $    13,521               $    14,034               $    14,546              $    15,137
                                           ===========               ===========               ===========              ===========
Per share net income(1):
   Historical........................      $      0.63               $      0.58               $      0.50              $      0.43
   Pro forma income on net
    proceeds, as adjusted............             0.25                      0.25                      0.25                     0.25
   Pro forma ESOP
    adjustment(2)....................            (0.02)                    (0.02)                    (0.02)                   (0.02)
   Pro forma Stock Program
    adjustment(3)....................            (0.04)                    (0.04)                    (0.04)                   (0.04)
                                           -----------               -----------               -----------              -----------
         Pro forma net
          income per share...........      $      0.82               $      0.77               $      0.69              $      0.62
                                           ===========               ===========               ===========              ===========
Stockholders' equity:
   Historical........................      $   100,865               $   100,865               $   100,865              $   100,865
   Estimated net proceeds............          152,033                   179,339                   206,646                  238,048
   Plus:  Tax benefit of
    Foundation.......................            5,661                     6,660                     7,659                    8,807
   Less:  Common Stock acquired 
          by ESOP(2).................          (13,586)                  (15,984)                  (18,381)                 (21,138)
          Common Stock acquired 
          by Stock Program(3)........           (6,793)                   (7,992)                   (9,190)                 (10,569)
                                           -----------               -----------               -----------              -----------
       Pro forma stockholders'
          equity(3)(4)(5)............      $   238,180               $   262,888               $   287,599              $   316,013
                                           ===========               ===========               ===========              ===========
Stockholders' equity per
 share(6):
   Historical........................      $      5.93               $      5.04               $      4.39              $      3.81
   Estimated net proceeds............             8.95                      8.97                      8.99                     9.00
   Plus:  Tax benefit of
    Foundation........................            0.33                      0.33                      0.33                     0.33
   Less:  Common Stock acquired 
          by ESOP(2)..................           (0.80)                    (0.80)                    (0.80)                   (0.80)

          Common Stock acquired
           by Stock Program(3)........           (0.40)                    (0.40)                    (0.40)                   (0.40)
                                           -----------               -----------               -----------              -----------
   Pro forma
        stockholders' equity
          per share(3)(4)(5).........      $     14.01               $     13.14               $     12.51              $     11.94
                                           ===========               ===========               ===========              ===========
Offering price as a percentage
   of pro forma stockholders'
    equity per share.................            71.38%                    76.10%                    79.94%                   83.75%

Offering price to pro forma
 net earnings per share(7)...........            11.61x                    13.16x                    14.60x                   16.13x

</TABLE>

                         (See footnotes on next page)

                                       32
<PAGE>
 
____________________
(1)  Does not give effect to the non-recurring expense that will be recognized
     in fiscal 1998 as a result of the establishment of the Foundation. The
     Company will recognize an after-tax expense for the amount of the
     contribution to the Foundation which is expected to be $6.7 million, $7.8
     million, $9.0 million and $10.3 million at the minimum, midpoint, maximum
     and maximum as adjusted, of the Estimated Price Range, respectively.
     Assuming the contribution to the Foundation was expensed during the year
     ended June 30, 1997, pro forma net earnings per share would be $0.40,
     $0.31, $0.24 and $0.18, at the minimum, midpoint, maximum and maximum as
     adjusted, respectively. Per share net income data is based on 16,983,000,
     19,980,000, 22,977,000 and 26,423,500 shares outstanding which represents
     shares sold in the Conversion, shares contributed to the Foundation and
     shares to be allocated or distributed under the ESOP and Stock Program for
     the period presented.
(2)  It is assumed that 8% of the shares of Common Stock issued in connection
     with the Conversion, including shares issued to the Foundation, will be
     purchased by the ESOP.  For purposes of this table, the funds used to
     acquire such shares are assumed to have been borrowed by the ESOP from the
     Company.  The amount to be borrowed is reflected as a reduction of
     stockholders' equity.  The Bank intends to make annual contributions to the
     ESOP in an amount at least equal to the principal and interest requirement
     of the debt.  The Bank's total annual payment of the ESOP debt is based
     upon twenty equal annual installments of principal, with an assumed
     interest rate at 8.5%.  The pro forma net earnings assumes:  (i) that the
     Bank's contribution to the ESOP is equivalent to the debt service
     requirement for the year ended June 30, 1997, and was made at the end of
     the period; (ii) that 1,358,640, 1,598,400, 1,831,150 and 2,113,884 shares
     at the minimum, midpoint, maximum and 15% above the maximum of the range,
     respectively, were committed to be released during the year ended June 30,
     1997 at an average fair value of $10.00 per share in accordance with
     Statement of Position ("SOP") 93-6; and (iii) only the ESOP shares
     committed to be released were considered outstanding for purposes of the
     net earnings per share calculations.  See "Management of the Bank - Benefit
     Plans - ESOP."
(3)  Gives effect to the Stock Program expected to be adopted by the Company
     following the Conversion and presented for approval at a meeting of
     stockholders.  If the Stock Program  is approved by stockholders, the Stock
     Program intends to acquire an amount of Common Stock equal to 4% of the
     shares of Common Stock issued in connection with the Conversion, including
     shares issued to the Foundation, or 679,320, 799,200, 919,080 and 1,056,942
     shares of Common Stock at the minimum, midpoint, maximum and 15% above the
     maximum of the Estimated Price Range, respectively, either through open
     market purchases, if permissible, or from authorized but unissued shares of
     Common Stock or treasury stock of the Company, if any.  In calculating the
     pro forma effect of the Stock Program, it is assumed that the shares were
     acquired by the Stock Program at the beginning of the period presented in
     open market purchases at the Purchase Price and that 20% of the amount
     contributed was an amortized expense during such period.  The issuance of
     authorized but unissued shares of the Company's Common Stock to the Stock
     Program instead of open market purchases would dilute the voting interests
     of existing stockholders by approximately 3.8% and pro forma net earnings
     per share would be $0.84, $0.74, $0.67 and $0.61 at the minimum, midpoint,
     maximum and 15% above the maximum of the range, respectively and pro forma
     stockholders' equity per share would be $13.87, $13.04, $12.42 and $11.88
     at the minimum, midpoint, maximum and 15% above the maximum of the range,
     respectively.  There can be no assurance that the actual purchase price of
     the shares granted under the Stock Program will be equal to the Purchase
     Price.  See "Management of the Bank - Benefit Plans - Stock Program."
(4)  No effect has been given to the issuance of additional shares of Common
     Stock pursuant to the Stock Option Plan expected to be adopted by the
     Company following the Conversion.  The Company expects to present the Stock
     Option Plan for approval at a meeting of stockholders.  If the Stock Option
     Plan  is approved by stockholders, an amount equal to 10% of the Common
     Stock issued in connection with the Conversion, including shares issued to
     the Foundation, or 1,698,300, 1,998,000, 2,297,700 and 2,642,355 shares at
     the minimum, midpoint, maximum and 15% above the maximum of the Estimated
     Price Range, respectively, will be reserved for future issuance upon the
     exercise of options to be granted under the Stock Option Plan.  The
     issuance of Common Stock pursuant to the exercise of Stock Options under
     the Stock Option Plan will result in the dilution of existing stockholders'
     interests.  Assuming all options were exercised at the end of the period at
     an exercise price of $10.00  per share, the pro forma net earnings per
     share would be $0.81, $0.72, $0.65 and $0.59, respectively, and the pro
     forma stockholders' equity per share would be $13.66, $12.87, $12.29 and
     $11.78, respectively.  See "Management of the Bank - Benefit Plans - Stock
     Option Plan."
(5)  The net worth of the Bank will continue to be substantially restricted
     after the Conversion.  See "Dividend Policy," "The Conversion - Liquidation
     Rights" and "Regulation and Supervision - New York State Law."
(6)  Stockholders' equity per share data is based upon 16,983,000, 19,980,000,
     22,977,000 and 26,423,500 shares outstanding representing shares sold in
     the conversion, shares contributed to the Foundation and shares purchased
     by the ESOP and Stock Program.
(7)  As adjusted to give effect to an increase in the number of shares which
     could occur due to an increase in the Estimated Price Range of up to 15% as
     a result of regulatory considerations or changes in market or general
     financial and economic conditions following the commencement of the
     Subscription and Community Offerings.

                                       33
<PAGE>
 
      COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH NO FOUNDATION

     In the event that the Foundation was not being established as part of the
Conversion, Keller has estimated that the pro forma aggregate market
capitalization of the Company would be approximately $217.2 million, at the
midpoint, which is approximately $17.4 million greater than the pro forma
aggregate market capitalization of the Company if the Foundation is included.
The pro forma price to book ratio and pro forma price to earnings ratio would be
the same under both the current appraisal and the estimate of the value of the
Company without the Foundation. Further, assuming the midpoint of the Estimated
Price Range, pro forma consolidated net earnings would be $14.0 million with the
Foundation and $14.8 million without the Foundation, assuming the midpoint of
the Estimated Price Range. In this regard, pro forma stockholders' equity per
share and pro forma net income per share would be $13.16 and $0.74,
respectively, at the midpoint of the estimate, assuming no Foundation, and
$13.14 and $0.77, respectively, with the Foundation. There is no assurance that
in the event the Foundation was not formed that the appraisal prepared at that
time would have concluded that the pro forma market value of the Company would
be the same as that estimated herein. Any appraisal prepared at that time would
be based on the facts and circumstances existing at that time, including, among
other things, market and economic conditions.

     For comparative purposes only, set forth below are certain pricing ratios
and financial data and ratios, at the minimum, midpoint, maximum and maximum, as
adjusted, of the Estimated Price Range, assuming the Conversion was completed at
June 30, 1997.

<TABLE>
<CAPTION>
                                                         At the Minimum              At the Midpoint
                                                     ------------------------    ------------------------
                                                        With           No           With           No
                                                     Foundation    Foundation    Foundation    Foundation
                                                     ----------    ----------    ----------    ----------
                                                                (Dollars in thousands)
<S>                                                  <C>           <C>           <C>           <C>
Estimated offering amount.........................   $  157,250    $  184,620    $  185,000    $  217,200
Pro forma market capitalization...................      169,830       184,620       199,800       217,200
Total assets......................................    1,130,685     1,150,161     1,155,394     1,178,307
Total liabilities.................................      892,505       892,505       892,505       892,505
Pro forma stockholders' equity....................      238,180       257,656       262,888       285,802
Pro forma consolidated net earnings...............       13,521        14,176        14,034        14,805
Pro forma stockholders' equity per share..........        14.01         13.96         13.14         13.16
Pro forma consolidated net earnings per share.....         0.82          0.83          0.77          0.74
Pro Forma Pricing Ratios:
   Offering price as a percentage of pro forma
     stockholders' equity per share...............        71.38%        71.65%        76.10%        76.00%
   Offering price to pro forma net earnings
     per share....................................        11.61x        12.03x        13.16x        13.56x
   Offering price to assets.......................        14.85%        16.05%        17.07%        18.43%
Pro Forma Financial Ratios:
   Return on assets (annualized)..................         1.18%         1.23%         1.20%         1.26%
   Return on stockholders' equity (annualized)....         5.68          5.50          5.34          5.18
   Stockholders' equity to assets.................        20.83         22.40         22.42         24.26

<CAPTION>
                                                                                     At the Maximum,
                                                         At the Maximum                as Adjusted
                                                     ------------------------    ------------------------
                                                        With           No           With           No
                                                     Foundation    Foundation    Foundation    Foundation
                                                     ----------    ----------    ----------    ----------
                                                                (Dollars in thousands)
<S>                                                  <C>           <C>           <C>           <C>
Estimated offering amount.........................   $  212,750    $  249,780    $  244,662    $  287,247
Pro forma market capitalization...................      229,770       249,780       264,235       287,247
Total assets......................................    1,180,103     1,206,452     1,208,518     1,238,820
Total liabilities.................................      892,505       892,505       892,505       892,505
Pro forma stockholders' equity....................      287,599       313,947       316,013       346,315
Pro forma consolidated net earnings...............       14,546        15,434        15,137        16,157
Pro forma stockholders' equity per share..........        12.51         12.57         11.94         12.06
Pro forma consolidated net earnings per share.....         0.69          0.67          0.62          0.61
Pro Forma Pricing Ratios:
   Offering price as a percentage of pro
      forma stockholders' equity per share........       79.94%        79.56%        83.75%        82.94%
   Offering price to pro forma
      net earnings per share......................        14.60x        14.95x        16.13x        16.43x
   Offering price to assets.......................        19.19%        20.70%        21.52%        23.19%
Pro Forma Financial Ratios:
   Return on assets (annualized)..................         1.22%         1.28%         1.23%         1.30%
   Return on stockholders' equity (annualized)....         5.06          4.92          4.79          4.67
   Stockholders' equity to assets.................        24.02         26.02         25.73         27.96
</TABLE>

                                       34
<PAGE>
 
                 RICHMOND COUNTY SAVINGS BANK AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

     The following Consolidated Statements of Income of the Bank for each of the
years in the three-year period ended June 30, 1997 have been audited by Ernst &
Young LLP, independent certified public accountants, whose report thereon
appears elsewhere in this Prospectus. Such report includes an explanatory
paragraph relating to changes in accounting principles. These statements should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
                                                           For the Year
                                                          Ended June 30,
                                                  -----------------------------
                                                   1997       1996       1995
                                                  -------    -------    -------
                                                          (In thousands)
<S>                                               <C>        <C>        <C>
Interest income:                                           
  Loans.................................          $38,068    $33,807    $31,492
  Debt and equity securities............           16,754     17,873     16,673
  Mortgage-backed and mortgage                       
    related securities..................            9,588      5,402      5,076
  Federal funds sold....................              961      1,570        879
  Other.................................              410        411        201
                                                  -------    -------    -------
   Total interest income................           65,781     59,063     54,321
                                                  -------    -------    -------
Interest expense........................           27,707     26,254     22,456
                                                  -------    -------    -------
Net interest income.....................           38,074     32,809     31,865
Provision for loan losses...............            1,080      1,600        600
                                                  -------    -------    -------
Net interest income after provision                
  for loan losses.......................           36,994     31,209     31,265
                                                  -------    -------    -------
Non-interest income:                                       
  Fee income............................            2,962      2,717      2,550
  Net (loss) gain on sales of securities               
    and loans...........................             (107)        42        (12)
  Other.................................                6         68        121
                                                  -------    -------    -------
   Total non-interest income............            2,861      2,827      2,659
                                                  -------    -------    -------
Non-interest expense:                                      
  Salaries and employee benefits........            9,850      9,261      8,753
  Occupancy costs.......................            3,063      3,029      2,660
  Computer service fees.................            2,166      1,873      1,190
  Advertising...........................              817        634        487
  Amortization of deposit premium.......              313        313        313
  FDIC insurance premiums...............              624        251      1,679
  Other.................................            2,834      3,142      3,057
                                                  -------    -------    -------
    Total non-interest expense..........           19,667     18,503     18,139
Income before income taxes..............           20,188     15,533     15,785
Provision for income taxes..............            9,463      6,803      6,919
                                                  -------    -------    -------
Income before cumulative effect of      
  change in accounting principle........           10,725      8,730      8,866
                                                  -------    -------    -------
Cumulative effect of change in          
  accounting principle..................               --         --     (1,316)
                                                  -------    -------    -------
Net income..............................          $10,725    $ 8,730    $ 7,550
                                                  =======    =======    =======
</TABLE>

(See accompanying notes to the consolidated financial statements)

                                       35
<PAGE>
 
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

     The Company has only recently been formed and, accordingly, has no results
of operations. The Bank's results of operations are dependent primarily on net
interest income, which is the difference between the income earned on its loan
and securities portfolios and its cost of funds, consisting of the interest paid
on deposits. The Bank's non-interest expense principally consists of
compensation and benefits, occupancy costs, federal deposit insurance premiums
and other expenses. Results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in interest
rates, government policies and actions of regulatory authorities. See
"Regulation and Supervision" for a discussion of the regulatory changes
resulting from the recapitalization of the SAIF and the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") and the impact of such
changes on the Bank. Future changes in applicable law, regulations or government
policies may materially impact the Bank.

MANAGEMENT STRATEGY

     The Bank's operating strategy emphasizes customer service and convenience,
and the Bank attributes the loyalty of its customer base to its commitment to
maintaining customer satisfaction. The Bank attempts to set itself apart from
its larger competitors by providing the type of personalized service not
generally available from larger banks while offering a greater variety of
products and services than is typically available from smaller, local depository
institutions.

     The Bank's historical operating strategy has concentrated on maintaining
profitability and asset quality by primarily investing in one- to four-family
mortgage loans and in U.S. Government and agency debt securities, as well as
debt and equity securities of corporate issuers. In the last few years, the Bank
began to pursue a strategy, in conjunction with its traditional thrift lending
and securities investment strategy, of focusing on small and medium-sized retail
businesses as both lending and deposit customers by emphasizing the origination
of commercial real estate, construction and commercial loans, as well as
increasing the marketing of its business checking accounts and other business-
related services. In this regard, during 1996 and 1997, the Bank hired
additional lending personnel who have commercial real estate and commercial
lending experience in the Bank's primary market area. In addition, the Bank is
increasing the merchant services it provides, such as merchant credit card
processing, letters of credit, sweep accounts and increased night depository
services. The Bank intends to continue this strategy, maintaining its
traditional focus of investing in residential mortgage loans and soliciting
deposits from individuals in its primary market area, while strengthening the
Bank's position as a provider of loans and financial services to the local
business community.

     The Bank's current operating strategy consists primarily of: (i) investing
primarily in one- to four-family, and to a lesser extent, commercial real
estate, construction and development, commercial and other loans and in
investment-grade securities; (ii) attempting to increase its position as a
lender to businesses operating in its primary market area, as well as other
areas within the New York City metropolitan area by offering its commercial loan
and deposit products to small and medium-sized businesses; (iii) increasing the
yield and duration of its securities investments by emphasizing the purchase of
government agency and privately issued mortgage-backed and mortgage-related
securities with estimated average lives of three to five years and de-
emphasizing its investment in U.S. Treasury obligations, corporate and other
debt securities; (iv) maintaining a low cost of funds by attracting and
retaining core deposits by providing enhanced service; (v) attempting to attract
new deposit customers by competitively pricing certificate of deposit products
and offering a greater variety of durations of such deposits; (vi) developing
wholesale 

                                       36
<PAGE>
 
borrowing sources such as FHLB advances, reverse repurchase agreements, and
brokered certificates of deposit as another means of funding asset growth; and
(vii) managing its interest rate risk by originating or purchasing adjustable
rate loans and generally selling fixed-rate loans with maturities of more than
15 years.

MANAGEMENT OF INTEREST RATE RISK

     The principal objective of the Bank's interest rate risk management is to
evaluate the interest rate risk inherent in certain balance sheet accounts,
determine the level of risk appropriate given the Bank's business strategy,
operating environment, capital and liquidity requirements and performance
objectives, and manage the risk consistent with the Board of Trustees' approved
guidelines. Through such management, the Bank seeks to reduce the vulnerability
of its operations to changes in interest rates. The Bank's Board of Trustees
reviews the Bank's interest rate risk position at least quarterly. The Bank's
Asset/Liability Committee is comprised of the Bank's senior management under the
direction of the Board of Trustees, with senior management responsible for
reviewing with the Board of Trustees its activities and strategies, the effect
of those strategies on the Bank's net interest margin, the market value of the
portfolio and the effect that changes in the interest rates will have on the
Bank's portfolio and the Bank's exposure limits. In addition, the Bank has
established an Interest Rate Risk Management Committee, a subcommittee of the
Asset/Liability Committee, which is charged with developing an interest rate
forecast for the Bank, establishing and maintaining a measurement system and
providing management reports, and formulating and recommending strategies to the
Asset/Liability Committee. The Interest Rate Risk Management Committee meets at
least monthly, and reports monthly to the Asset/Liability Committee and the
Board of Trustees. See "Risk Factors - Sensitivity to Increases in Interest
Rates."

     In recent years, the Bank has utilized the following strategies to manage
interest rate risk: (1) emphasizing the origination and retention of fixed-rate
mortgage loans having terms to maturity of not more than fifteen years,
adjustable-rate loans and consumer loans consisting primarily of home equity
loans and lines of credit; (2) selling substantially all fixed-rate mortgage
loans with terms of more than fifteen years without recourse and on a servicing
retained basis; and (3) investing in short term and, to a lesser extent,
adjustable rate securities which may generally bear lower yields as compared to
longer term investments, but which better position the Bank for increases in
market interest rates. The Bank currently does not participate in hedging
programs, interest rate swaps or other activities involving the use of off-
balance sheet derivative financial instruments.

     The Bank has recently begun to emphasize its investment in mortgage-backed
and mortgage related securities with estimated average lives of three to five
years and to de-emphasize its investment in U.S. Treasury securities, corporate
and other debt securities. As a result, at June 30, 1997, mortgage-backed and
mortgage related securities and debt securities totaled 48.6% and 46.9%, of
total securities, respectively, as compared to 19.9% and 79.7%, respectively, at
June 30, 1996. The weighted average maturity of the Bank's securities portfolio
increased to 3.3 years at June 30, 1997 from 2.4 years at June 30, 1996. This
strategy has been accomplished by primarily reinvesting maturing U.S. Treasury
obligations and other debt securities in mortgage-backed and mortgage related
securities, primarily government agency and privately issued CMOs. While this
strategy has, in part, resulted in the increase in the average yield of the
Bank's securities portfolio, it has also resulted in an increase in the weighted
average duration of such portfolio which could increase the Bank's exposure to
interest rate risk in a period of rising interest rates. In pursuing this
strategy, the Bank considered the relative stability of its core deposits.

     Gap Analysis. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest rate
sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset
or liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference 

                                       37
<PAGE>
 
between the amount of interest-earning assets maturing or repricing within a
specific time period and the amount of interest-bearing liabilities maturing or
repricing within that same time period. A gap is considered positive when the
amount of interest rate sensitive assets exceeds the amount of interest rate
sensitive liabilities. A gap is considered negative when the amount of interest
rate sensitive liabilities exceeds the amount of interest rate sensitive assets.
At June 30, 1997, the Bank's one-year gap position, the difference between the
amount of interest-earning assets maturing or repricing within one year and
interest-bearing liabilities maturing or repricing within one year, was positive
3.5%. Accordingly, in a period of increasing interest rates, it is expected that
the Bank may be better situated to invest in higher yield interest-bearing
assets which may result in yields on its interest-earning assets increasing
faster than the cost of its interest-bearing liabilities. Conversely, during a
period of declining interest rates, it is expected that the overall yield on the
Bank's interest-earning assets may decline more quickly than the costs of
interest-bearing liabilities, which would adversely affect net interest income.

     The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1997, which are anticipated
by the Bank, based upon certain assumptions, to reprice or mature in each of the
future time periods shown (the "GAP Table"). Except as stated below, the amount
of assets and liabilities shown which reprice or mature during a particular
period were determined in accordance with the earlier of term to repricing or
the contractual maturity of the asset or liability. The table sets forth an
approximation of the projected repricing of assets and liabilities at June 30,
1997, on the basis of contractual maturities, anticipated prepayments, and
scheduled rate adjustments within a three month period and subsequent selected
time intervals. For loans on residential properties, adjustable-rate loans, and
fixed-rate loans, prepayment rates were assumed to range from 6% to 18%
annually. Mortgage-backed securities were assumed to prepay at rates between 8%
and 30% annually. Savings and NOW accounts were assumed to decay at 10%, 5%, 5%,
40%, 20%, 20% and 0%, and money market savings accounts were assumed to decay at
25%, 15%, 10%, 50%, 0%, 0% and 0%, for the periods of three months or less,
three to six months, six to 12 months, one to three years, three to five years,
five to ten years and more than ten years, respectively. These assumptions are
generally based on the FDIC's deposit decay guidelines and the Bank's historical
experience. Prepayment and deposit decay rates can have a significant impact on
the Bank's estimated gap. While the Bank believes such assumptions to be
reasonable, there can be no assurance that assumed prepayment rates and decay
rates will approximate actual future loan prepayment and deposit withdrawal
activity. See "Business of the Bank - Lending Activities," "- Securities
Investment Activities" and "- Sources of Funds."

                                       38
<PAGE>
 
<TABLE>
<CAPTION>
                                                                           At June 30, 1997
                                                 -------------------------------------------------------------------
                                                      3             More than           More than       More than 1
                                                    Months         3 Months to         6 Months to        Year to
                                                   or Less           6 Months            1 Year           3 Years
                                                 -----------     ---------------     -------------     -------------
                                                                     (Dollars in thousands)
<S>                                              <C>           <C>               <C>               <C>
INTEREST-EARNING ASSETS(1):
Debt and equity securities(2)................    $ 22,785            $ 22,603          $ 45,406          $ 92,916
Mortgage-backed and mortgage related
    securities(2)............................      21,302              18,873            31,361            41,014
Real estate loans, net(3)(4).................      43,899              40,268            58,485           156,927
Commercial loans.............................       5,338                  17                50               200
Consumer and student loans(4)................      16,556                 281               560             2,312
Other interest-earning assets................      12,847                  --                --                --
                                                 --------            --------          --------          --------
     Total interest-earning assets...........     122,727              82,042           135,862           293,369
                                                 --------            --------          --------          --------
INTEREST-BEARING LIABILITIES:
Money market savings accounts................      11,078               6,903             5,341            14,460
NOW accounts.................................       1,803                 901               901             7,212
Savings accounts.............................      43,680              21,840            21,840           174,722
Certificates of deposit......................      58,434              77,726            72,917            66,307
                                                 --------            --------          --------          --------
     Total interest-bearing liabilities......     114,995             107,370           100,999           262,701
                                                 --------            --------          --------          --------
Interest sensitivity gap(5)..................    $  7,732            $(25,328)         $ 34,863          $ 30,668
                                                 ========            ========          ========          ========
Cumulative interest sensitivity gap..........    $  7,732            $(17,596)         $ 17,267          $ 47,935
                                                 ========            ========          ========          ========
Cumulative interest sensitivity gap as a
 percentage of total assets..................        0.78%              (2.55)%            3.51%             3.09%
Cumulative interest sensitivity gap as a
 percentage of total interest-earning
 assets......................................        0.81               (1.85)             1.82              5.05
Cumulative net interest-earning assets
 as a percentage of cumulative
 interest-bearing liabilities................      106.72               92.09            105.34            108.18
</TABLE>

<TABLE>
<CAPTION>
                                                                       At June 30, 1997
                                                  -----------------------------------------------------------
                                                  More than         More than
                                                  3 Years to        5 Years to        More than
                                                   5 Years           10 Years          10 Years       Total
                                                  ----------        ----------        ---------      --------
                                                                     (Dollars in thousands)
<S>                                               <C>               <C>              <C>            <C>
INTEREST-EARNING ASSETS(1):
Debt and equity securities(2).................    $ 24,416          $ 15,422         $  1,359        $224,907
Mortgage-backed and mortgage related
  securities(2)...............................      31,069            32,220           36,681         212,520
Real estate loans, net(3)(4)..................      74,576            78,272           16,372         468,799
Commercial loans..............................         239               819               --           6,663
Consumer and student loans(4).................       1,469             2,410               --          23,588
Other interest-earning assets.................          --                --               --          12,847
                                                  --------          --------         --------        --------
     Total interest-earning assets............     131,769           129,143           54,412         949,324
                                                  --------          --------         --------        --------
INTEREST-BEARING LIABILITIES:
Money market savings accounts.................          --                --               --          37,782
NOW accounts..................................       3,606             3,606               --          18,029
Savings accounts..............................      87,361            87,361               --         436,804
Certificates of deposit.......................      18,815             3,867               --         298,066
                                                  --------          --------         --------        --------
     Total interest-bearing liabilities.......     109,782            94,834               --         790,681
                                                  --------          --------         --------        --------
Interest sensitivity gap(5)...................    $ 21,987          $ 34,309         $ 54,412        $158,643
                                                  ========          ========         ========        ========
Cumulative interest sensitivity gap...........    $ 69,922          $104,231         $158,643
                                                  ========          ========         ========
Cumulative interest sensitivity gap as a
  percentage of total assets..................        2.21%             3.45%            5.48%
Cumulative interest sensitivity gap as a
  percentage of total interest-earning
  assets......................................        7.37             10.98            16.71
Cumulative net interest-earning assets as a
  percentage of cumulative interest-bearing
  liabilities.................................      110.05            113.18           120.06
</TABLE>
--------------------
(1)    Interest-earning assets are included in the period in which the balances
       are expected to be redeployed and/or repriced as a result of anticipated
       prepayments, scheduled rate adjustments, and contractual maturities.
(2)    Debt and equity and mortgage-backed and mortgage related securities are
       shown excluding the market value adjustment of $587,000 before tax, from
       the implementation of SFAS No.  115.  Equity securities primarily consist
       of callable preferred stock, the maturities of which have been assumed to
       be the date on which they are initially callable.
(3)    For purposes of the gap analysis, the allowance for loan losses and non-
       performing loans have been excluded.
(4)    Loans held for sale are included in the 3 months or less category.
(5)    Interest sensitivity gap represents the difference between net interest-
       earning assets and interest-bearing liabilities.

                                       39
<PAGE>
 
     Certain shortcomings are inherent in the method of analysis presented in
the GAP Table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable-rate loans, have
features which restrict changes in interest rates both on a short-term basis and
over the life of the asset. Further, in the event of changes in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the table. Finally, the ability of many borrowers
to service their adjustable-rate loans may decrease in the event of an interest
rate increase.

     Net Portfolio Value. The Bank's interest rate sensitivity is also monitored
by management through the use of a Net Portfolio Value Model which generates
estimates of the change in the Bank's net portfolio value ("NPV") over a range
of interest rate scenarios. NPV is the present value of expected cash flows from
assets, liabilities, and off-balance sheet contracts. The NPV ratio, under any
interest rate scenario, is defined as the NPV in that scenario divided by the
market value of assets in the same scenario. The model assumes estimated loan
prepayment rates, reinvestment rates and deposit decay rates similar to the
assumptions utilized for the GAP Table. The Sensitivity Measure is the decline
in the NPV ratio, in basis points, caused by a 2% increase or decrease in rates,
whichever produces a larger decline. The higher an institution's Sensitivity
Ratio, the greater its exposure to interest rate risk is considered to be. The
following NPV Table sets forth the Bank's NPV as of June 30, 1997.

<TABLE>
<CAPTION>
    Change in                                         NPV as % of Portfolio
  Interest Rates            Net Portfolio Value          Value of Assets
 In Basis Points     ------------------------------------------------------
   (Rate Shock)       Amount     $ Change   % Change   NPV Ratio   % Change
----------------     --------    --------   --------   ---------   --------
                                  (Dollars in thousands)
<S>                  <C>        <C>        <C>        <C>         <C>
400                  $ 96,204   $(54,195)    (36.03)%   10.59%     (31.90)%
300                   109,236    (41,163)    (27.37)    11.75      (24.44)
200                   123,369    (27,030)    (17.97)    12.95      (16.72)
100                   137,445    (12,954)     (8.61)    14.09       (9.39)
Static                150,399         --         --     15.55          --
(100)                 160,080      9,681       6.44     15.76        1.35
(200)                 167,712     17,313      11.51     16.24        4.44
(300)                 174,964     24,565      16.33     16.68        7.27
(400)                 228,947     78,548      52.23     20.57       32.28
</TABLE>

     As of June 30, 1997, the Bank's NPV was $150.4 million, or 15.55% of the
market value of assets. Following a 200 basis point increase in interest rates,
the Bank's "post shock" NPV was $123.4 million, or 12.95% of the market value of
assets. The change in the NPV ratio or the Bank's Sensitivity Measure was
negative 2.60%.

     As is the case with the GAP Table, certain shortcomings are inherent in the
methodology used in the above interest rate risk measurements. Modeling changes
in NPV require the making of certain assumptions which may or may not reflect
the manner in which actual yields and costs respond to changes in market
interest rates. In this regard, the NPV Table presented assumes that the
composition of the Bank's interest sensitive assets and liabilities existing at
the beginning of a period remains constant over the period being measured and
also assumes that a particular change in interest rates is reflected uniformly
across the yield curve regardless of the duration to maturity or repricing of
specific assets and liabilities. Also, the model does not take into account the
Bank's business or strategic plans. Accordingly, although the NPV Table 

                                       40
<PAGE>
 
provides an indication of the Bank's interest rate risk exposure at a particular
point in time, such measurements are not intended to and do not provide a
precise forecast of the effect of changes in market interest rates on the Bank's
net interest income and will differ from actual results.

ANALYSIS OF NET INTEREST INCOME

     Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest income
depends on the relative amounts of interest-earning assets and interest-bearing
liabilities and the interest rate earned or paid on them.

                                       41
<PAGE>
 
     Average Balance Sheet. The following table sets forth certain information
relating to the Bank at June 30, 1997 and for the years ended June 30, 1997,
1996 and 1995. The average yields and costs are derived by dividing income or
expense by the average balance of interest-earning assets or interest-bearing
liabilities, respectively, for the periods shown and reflect annualized yields
and costs. Average balances are derived from average monthly balances. The
yields and costs include fees which are considered adjustments to yields.

<TABLE>
<CAPTION>
                                                                              For the Year Ended June 30,
                                                                           --------------------------------
                                                     At June 30, 1997                    1997
                                                   ---------------------   --------------------------------
                                                                 Average                            Average
                                                                 Yield/     Average                 Yield/
                                                    Balance       Cost      Balance     Interest     Cost
                                                   ----------   --------   ----------   --------   --------
                                                                           (Dollars in thousands)
<S>                                                <C>          <C>        <C>          <C>        <C>
ASSETS:                                           
  Interest-earning assets(1):                     
    Debt and equity securities....................   $224,907      6.33%     $271,721    $16,754      6.17%
    Mortgage-backed and mortgage related          
      securities, net.............................    212,520      7.22       142,330      9,588      6.74
    Real estate loans, net(2)(3)..................    466,557      7.89       436,887     35,165      8.05
    Commercial loans, net(2)......................      6,482      9.66         6,358        617      9.70
    Consumer and student loans....................     23,219      9.51        23,145      2,286      9.88
    Other interest-earning assets.................     12,847      5.60        17,505      1,371      7.83 
                                                     --------                --------   --------
        Total interest-earning assets.............    946,532      7.35       897,946     65,781      7.33
                                                                 ------                 --------   -------
  Non-interest-earning assets.....................     46,838                  48,554
                                                     --------                --------
        Total assets..............................   $993,370                $946,500
                                                     ========                ========
LIABILITIES AND NET WORTH:                        
  Interest-bearing liabilities:                   
    Money market savings accounts.................   $ 37,782      3.45%     $ 37,552      1,308      3.48%
    Savings accounts..............................    437,694      2.78       432,162     11,813      2.73
    NOW accounts..................................     18,030      2.26        15,652        370      2.36
    Certificates of deposit.......................    298,066      5.37       273,546     14,206      5.19
                                                     --------                --------   --------
        Total interest-bearing liabilities........    791,572      3.78       758,912     27,697      3.65
                                                                 ------                 --------    ------
  Non-interest-bearing liabilities................    100,933                  92,254
                                                     --------                --------
        Total liabilities.........................    892,505                 851,166
  Total net worth.................................    100,865                  95,334
                                                     --------                --------
        Total liabilities and net worth...........   $993,370                $946,500
                                                     ========                ========
  Net interest income/interest rate spread(4).....                 3.57%                 $38,084      3.68%
                                                                 ======                  =======    ======
  Net interest margin as a percentage of          
    interest-earning assets(5)....................                                                    4.24%
                                                                                                    ======
  Ratio of interest-earning assets to             
    interest-bearing liabilities..................               119.58%                            118.32%
                                                                 ======                             ======
<CAPTION>
                                                                            For the Year Ended June 30,
                                                            ---------------------------------------------------------------
                                                                        1996                             1995
                                                            -----------------------------    ------------------------------
                                                                                   Average                          Average
                                                            Average                Yield/    Average                Yield/
                                                            Balance    Interest     Cost     Balance    Interest     Cost
                                                            -------    ---------  --------   --------   --------   --------
                                                               (Dollars in thousands)     
<S>                                                         <C>        <C>        <C>        <C>        <C>        <C>
ASSETS:                                                     
  Interest-earning assets(1):                             
    Debt and equity securities....................         $304,133    $17,873      5.88%   $301,204    $16,673      5.54%
    Mortgage-backed and mortgage related                    
      securities, net.............................           84,270      5,402      6.41      89,535      5,076      5.67
    Real estate loans, net(2)(3)..................          374,055     30,902      8.26     352,417     28,843      8.18 
    Commercial loans, net(2)......................            5,915        620     10.48       5,114        486      9.50 
    Consumer and student loans....................           22,396      2,285     10.20      20,670      2,163     10.46
    Other interest-earning assets.................           33,667      1,981      5.88      17,059      1,080      6.33  
                                                           --------    -------              --------    -------
        Total interest-earning assets.............          824,436     59,063      7.16     785,999     54,321      6.91  
                                                                       -------     -----                -------    ------
  Non-interest-earning assets.....................           53,852                           42,826
                                                           --------                         --------
        Total assets..............................         $878,288                         $828,825
                                                           ========                         ========
LIABILITIES AND NET WORTH:                                  
  Interest-bearing liabilities:                           
    Money market savings accounts.................         $ 28,430        987      3.47%   $ 25,058    $   735      2.93%     
    Savings accounts..............................          430,500     11,841      2.75     462,720     12,647      2.73
    NOW accounts..................................           14,602        354      2.42      13,724        365      2.66
    Certificates of deposit.......................          242,197     12,826      5.30     188,212      8,656      4.60
                                                           --------    -------              --------    -------
        Total interest-bearing liabilities........          715,729     26,008      3.63     689,714     22,403      3.25 
                                                                       -------    ------                -------     -----
  Non-interest-bearing liabilities................           77,372                           62,109
                                                           --------                         --------
        Total liabilities.........................          793,101                          751,823 
  Total net worth.................................           85,187                           77,002
                                                           --------                         --------
                                                               
        Total liabilities and net worth...........         $878,288                         $828,825
                                                           ========                         ========
  Net interest income/interest rate spread(4).....                     $33,055      3.53%               $31,918      3.66%      
                                                                       =======    ======                =======    ======
                                                             
  Net interest margin as a percentage of                  
    interest-earning assets(5)....................                                  4.01%                            4.06%
                                                                                  ======                           ======
                                                                        
  Ratio of interest-earning assets to                     
    interest-bearing liabilities..................                                115.19%                          113.96%
                                                                                  ======                           ======
</TABLE>
--------------------
(1)   Includes related assets available-for-sale and unamortized discounts and
      premiums.
(2)   Amount is net of deferred loan fees, deferred mortgage interest,
      unamortized discounts net and allowance for loan losses and includes loans
      held for sale and non-performing loans.
(3)   Real estate loans, net includes one- to four-family, multi-family,
      commercial real estate, construction and development and home equity
      loans.
(4)   Net interest rate spread represents the difference between the yield on
      interest-earning assets and the cost of interest-bearing liabilities.
(5)   Net interest margin represents net interest income divided by average
      interest-earning assets.

                                       42
<PAGE>
 
     Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning assets
and interest-bearing liabilities have affected the Bank's interest income and
interest expense during the periods indicated. Information is provided in each
category with respect to: (i) changes attributable to changes in volume (changes
in volume multiplied by prior rate); (ii) changes attributable to changes in
rate (changes in rate multiplied by prior volume); and (iii) the net change. The
changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.

<TABLE>
<CAPTION>
 
                                                     Year Ended                                 Year Ended
                                                    June 30, 1997                              June 30, 1996
                                                     Compared to                                Compared to
                                                     Year Ended                                 Year Ended
                                                    June 30, 1996                              June 30, 1995
                                            --------------------------------          ---------------------------------
                                              Increase (Decrease)                       Increase (Decrease)
                                                    Due to                                    Due to
                                            -----------------------                   -----------------------
                                             Volume           Rate      Net            Volume           Rate       Net
                                            --------         ------    -----          --------         ------     ----- 
                                                                             (In thousands)
<S>                                          <C>             <C>       <C>            <C>               <C>       <C>
INTEREST-EARNING ASSETS(1):
  Debt and equity securities                  $(1,971)       $  852    $(1,119)        $  164           $1,036   $1,200
  Mortgage-backed and mortgage
    related securities, net                     3,895           291      4,186           (311)             637      326
  Real estate loans, net                        5,068          (805)     4,263          1,776              283    2,059
  Commercial loans                                 43           (46)        (3)            81               53      134
  Consumer and student loans                       74           (73)         1            177              (55)     122
  Other interest-earning assets                (1,137)          527       (610)           983              (82)     901
                                              -------        ------    -------         ------           ------   ------
       Total interest-earning assets            5,972           746      6,718          2,870            1,872    4,742
                                              -------        ------    -------         ------           ------   ------
INTEREST-BEARING LIABILITIES:
  Money market savings accounts                   318             3        321            107              145      252
  Savings accounts                                 50           (78)       (28)          (897)              91     (806)
  NOW accounts                                     25            (9)        16             23              (34)     (11)
  Certificates of deposit                       1,648          (268)     1,380          2,725            1,445    4,170
       Total interest-bearing liabilities       2,041          (352)     1,689          1,958            1,647    3,605
                                              -------        ------    -------         ------           ------   ------
Net change in net interest income             $ 3,931        $1,098    $ 5,029         $  912           $  225   $1,137
                                              =======        ======    =======         ======           ======   ======
</TABLE>
-----------------------
(1) Includes assets available-for-sale.

                                       43
<PAGE>
 
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND JUNE 30, 1996

     Total assets increased by $78.9 million, or 8.6%, from $914.5 million at
June 30, 1996 to $993.4 million at June 30, 1997. The growth in assets is
primarily attributable to a $77.0 million, or 18.4%, increase in loans
receivable, net, and a $26.4 million, or 6.4%, increase in the securities
portfolio. The increase in loans receivable, net, from $419.3 million at June
30, 1996 to $496.3 million at June 30, 1997, was primarily due to increased
originations of one- to four-family loans. Originations of one- to four-family
loans increased from $53.9 million in fiscal 1996 to $100.5 million in fiscal
1997 due to the introduction of the Bank's use of mortgage brokers, increased
marketing of its loan products and the expansion of its loan products. The
increase in loans was funded primarily through deposit inflows, primarily in
certificate of deposit accounts which increased by $44.1 million, or 17.4%, and
a $14.8 million, or 19.0%, increase in non-interest bearing checking accounts.

     During 1996, the Bank began to restructure its securities portfolio in an
attempt to increase the yield and the duration on such portfolio while
continuing to monitor its interest rate risk position. The Bank began to
reinvest funds from its maturing U.S. Treasury obligations and corporate debt
into private and government agency mortgage-backed and mortgage related
securities with estimated average lives of three to five years. As a result, at
June 30, 1997, debt and equity securities totaled $224.9 million, a decrease of
$104.5 million, or 31.7%, compared to $329.4 million at June 30, 1996, while
mortgage-backed and mortgage related securities increased by $130.8 million, or
160.2%, from $81.7 million at June 30, 1996 to $212.5 million at June 30, 1997.
Substantially all of the increase in mortgage-backed and mortgage related
securities was due to the purchase of CMOs.

     Total deposits at June 30, 1997 were $884.5 million, an increase of $66.6
million, or 8.1%, compared to $817.9 million at June 30, 1996. The increase was
primarily due to an increase of $44.1 million, or 17.4%, in certificates of
deposit from $253.9 million at June 30, 1996 to $298.1 million at June 30, 1997.
The increase in certificates of deposit was primarily attributable to
competitive pricing and increased marketing of such deposit products. The growth
in deposits was also attributable to an increase in non-interest bearing
checking accounts and money market accounts which increased by $18.7 million, or
16.7%, due to the Bank's increased marketing efforts on business deposit
accounts. The Bank's core deposit accounts, which totalled $564.0 million at
June 30, 1996, increased by $22.5 million during the year ended June 30, 1997.

     Net worth increased by $11.0 million, or 12.2%, from $89.9 million at June
30, 1996 to $100.9 million at June 30, 1997, resulting in the Bank's ratio of
net worth to total assets increasing from 9.8% at June 30, 1996 to 10.2% at June
30, 1997.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1997 AND JUNE 30,
1996.

     General. Net income for the year ended June 30, 1997 increased by $2.0
million, or 22.8%, from $8.7 million for the year ended June 30, 1996 to $10.7
million for the year ended June 30, 1997. The increase was due primarily to an
increase in net interest income which resulted from an increase in the average
balance of interest-earning assets and a higher weighted average yield on its
securities portfolio, offset, in part, by increases in non-interest expenses,
including the one-time SAIF special assessment and increased compensation and
advertising costs.

     Interest Income. Interest income amounted to $65.8 million for the year
ended June 30, 1997, representing an increase of $6.7 million from the year
ended June 30, 1996. The increase was the result of a $73.5 million increase in
average interest-earning assets and a 17 basis point increase in the yield on

                                       44
<PAGE>
 
interest-earning assets. The increase in average interest-earning assets was
primarily due to an increase in one- to four-family loans due to the
introduction of the Bank's use of mortgage brokers and increased marketing
efforts. The increase in the average interest rate on interest-earning assets,
which increased from 7.16% to 7.33%, was primarily due to the reallocation of
interest-earning assets from lower-yielding U.S. Government securities to 
higher-yielding mortgage-backed and mortgage related securities. This was
partially offset by a 21 basis point decline in the yield on real estate loans,
net, due primarily to a repricing of adjustable rate loans in a lower interest
rate environment. Interest income on mortgage-backed and mortgage related
securities increased $4.2 million, or 77.0%, from $5.4 million for the year
ended June 30, 1996 to $9.6 million at June 30, 1997. This increase was
primarily due to an increase in the average balance of mortgage-backed and
mortgage related securities of $58.1 million, which resulted from the
restructuring of the securities portfolio and the investment of excess funds not
utilized for loan demand in mortgage-backed and mortgage related securities. The
yield on the mortgage-backed and mortgage related securities portfolio increased
by 33 basis points due to the higher rate environment for new purchases and the
repricing of adjustable-rate securities purchased in prior periods. Interest
income on debt and equity securities decreased $1.1 million, or 6.3%, due to
management's restructuring of its securities portfolio resulting in a $32.4
million decrease in the average balance of such securities offset in part by the
increased yield on such securities. See "--Management of Interest Rate Risk."

     Interest income on loans increased $4.3 million, from $33.8 million for the
year ended June 30, 1996 to $38.1 million at June 30, 1997. The increase in
interest income on loans was a result of growth in the average balance of one-to
four- family loans outstanding partially offset by a 24 basis point decrease in
the average yield on loans, which occurred due to a repricing of adjustable rate
loans in a lower interest rate environment. The increase in the average balance
of loans was primarily due to an increase in residential one- to four-family
loans, resulting primarily from the investment of funds resulting from the
growth in deposits.

     Interest Expense. Interest expense increased $1.4 million, or 5.3%, from
$26.3 million for the year ended June 30, 1996 to $27.7 million for the year
ended June 30, 1997. This increase reflects a $43.2 million increase in the
average balance of interest-bearing liabilities. The increase in average
interest-bearing liabilities was primarily attributable to an increase in the
average balance of certificates of deposits and money market savings accounts,
which increased as a result of the Bank's strategy of attracting more
certificates of deposits through additional certificate of deposit products,
competitive pricing of such products, and related marketing of commercial
deposit accounts. The average cost of the Bank's interest-bearing liabilities
remained relatively stable at 3.65% for the year ended June 30, 1997 as compared
to 3.63% for the year ended June 30, 1996.

     Provision for Loan Losses. The Bank's provision for loan losses was $1.1
million for the year ended June 30, 1997 compared to $1.6 million for the year
ended June 30, 1996. The 1997 provision was based on management's evaluation of
its loan portfolio and real estate market conditions. In particular, management
considered the continued growth in the portfolio, as well as the decrease in its
non-performing loans. The Bank's non-performing loans as a percentage of total
loans improved from 0.91% at June 30, 1996 to 0.78% at June 30, 1997. At June
30, 1997, the Bank's allowance for loan losses as a percentage of total non-
performing loans was 141.1%, compared to 125.5% at June 30, 1996. At June 30,
1997, the Bank's allowance for loan losses as a percentage of loans receivable,
net, was 1.10%, as compared to 1.14% at June 30, 1996. To the extent the Bank
increases its investment in commercial real estate, commercial and other loans
which entail higher risk than one- to four-family loans, the Bank may determine
to increase its allowance for loan losses through additional loan loss
provisions which may adversely affect net income. See "Risk Factors -Increased
Lending Risks Associated with Commercial Real Estate, Multi-Family, 

                                       45
<PAGE>
 
Construction and Development and Commercial Lending" and "Business of the Bank -
Delinquent Loans, Real Estate Owned and Classified Assets" and "- Allowance for
Loan Losses."

     Non-Interest Income. Non-interest income is composed of fee income and
profits from the sale of securities and loans. Total non-interest income for the
year ended June 30, 1997 increased $34,000, or 1.2%, to $2.9 million for the
year ended June 30, 1997. Fee income increased $245,000, or 9.0%, from $2.7
million for the year ended June 30, 1996 to $3.0 million for the year ended June
30, 1997 due to an increase in the Bank's deposit accounts. Net gains/losses on
sales of securities and loans changed from a net gain of $42,000 for the year
ended June 30, 1996 to a net loss of $107,000 for the year ended June 30, 1997,
primarily as a result of the Bank's sale of lower-yielding U.S. Treasury and
corporate obligations.

     Non-Interest Expense. Non-interest expense increased by $1.2 million, or
6.5%, from $18.5 million for the year ended June 30, 1996 to $19.7 million for
the year ended June 30, 1997, primarily due to the one-time special SAIF
assessment and an increase in compensation and employee benefits. Compensation
and employee benefits increased by $589,000, or 6.4%, from $9.3 million for the
year ended June 30, 1996 to $9.9 million for the year ended June 30, 1997,
primarily as a result of the retention of new personnel in various areas of the
Bank's operations and normal salary increases. Deposit insurance premiums
increased $373,000, or 148.6%, from $251,000 for the year ended June 30, 1996 to
$624,000 for the year ended June 30, 1997, due to the increase in average
deposits from $715.7 million for the year ended June 30, 1996 to $758.9 million
for the year ended June 30, 1997. In addition, the Bank paid a one-time special
assessment to the SAIF of $493,000 in October 1996 based on the amount of SAIF-
insured deposits the Bank maintains. Advertising and promotion expense increased
$183,000, or 28.9%, from $634,000 for the year ended June 30, 1996 to $817,000
for the year ended June 30, 1997, primarily as a result of the Bank's special
anniversary promotion throughout October 1996 and additional marketing of the
Bank's loan and deposit products. The Bank expects that compensation and
employee benefits expense may increase after the Conversion, primarily as a
result of the adoption of various employee benefit plans and compensation
adjustments contemplated in connection with the Conversion. See "Management of
the Bank--Benefit Plans." In addition, the Bank expects non-interest expense to
increase in future periods as a result of the Bank's intention to open a public
accommodation office during 1998. The Bank is also considering opening two new
full-service branches in 1998, although no assurances can be made in this
regard. If the Bank were to open two new branches, non-interest expenses would
be expected to increase further in future periods. See "Business of the Bank--
Properties."

     Income Taxes. Total income tax expense was $9.5 million for the year ended
June 30, 1997 compared to $6.8 million for the year ended June 30, 1996. The
increase was due primarily to an increase in pre-tax income for 1997. The
effective tax rate was 47.0% for the year ended June 30, 1997 as compared to
43.9% for the year ended June 30, 1996.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30,
1995.

     General. Net income for the year ended June 30, 1996 was $8.7 million,
compared to $7.6 million for the year ended June 30, 1995. The increase was the
result of a $1.3 million charge in fiscal 1995, due to a change in accounting
principles from the Bank's adoption of SFAS No. 106. Excluding the effect of
SFAS No. 106, net income decreased from $8.9 million for the year ended June 30,
1995 to $8.7 million for the year ended June 30, 1996, due in part to higher 
non-interest expenses and a higher provision for loan losses, partially offset
by a decrease in FDIC insurance premiums and an increase in net interest income.

                                       46
<PAGE>
 
     Interest Income. Total income from interest-earning assets increased from
$54.3 million for the year ended June 30, 1995 to $59.1 million for the year
ended June 30, 1996, primarily due to an increase of $38.4 million in the
average balance of interest-earning assets and a 25 basis point increase in the
yield on interest-earning assets. The average balance of interest-earning assets
increased due in part to a $21.6 million, or 6.1%, increase in the average
balance of real estate loans. As a result, interest income on the Bank's real
estate loan portfolio increased $2.1 million, or 7.3% , from $28.8 million for
the year ended June 30, 1995 to $30.9 million for the year ended June 30, 1996
due to the increase in the average balance of such loans and an increase in the
average yield from 8.18% for fiscal 1995 to 8.26% for fiscal 1996. Interest
income on consumer and student loans also increased from $2.2 million for the
year ended June 30, 1995 to $2.3 million for the year ended June 30, 1996, as a
result of an increase of $1.7 million in the average balance of such loans which
was offset, in part, by a decrease in the average yield of such loans from
10.50% for fiscal 1995 to 10.21% for fiscal 1996.

     Interest income from debt and equity securities increased $1.2 million, or
7.2%, from $16.7 million for the year ended June 30, 1995 to $17.9 million for
the year ended June 30, 1996, as a result of the increase in the average balance
of such securities as well as a 29 basis point increase in the average yield on
such securities. Interest income on mortgage-backed and mortgage-related
securities also increased by $326,000, or 6.4%, from $5.1 million for the year
ended June 30, 1995 to $5.4 million for the year ended June 30, 1996, due to a
74 basis point increase in the average yield on such securities, which was
partially offset by a $5.3 million decrease in the average balance of such
securities.

     Interest Expense. Interest expense for the year ended June 30, 1996 was
$26.3 million, as compared to $22.5 million for the year ended June 30, 1995, an
increase of $3.8 million, or 17.0%. The increase is primarily due to a $26.0
million increase in average interest-bearing deposits and a 38 basis point
increase in the average cost of interest-bearing deposits. The increase in
average interest-bearing deposits was primarily attributable to an increase in
the average balance of certificates of deposits due to competitive pricing and
increased marketing of such deposit products. As a result, the average rate paid
on certificate accounts increased from 4.58% for fiscal 1995 to 5.29% for fiscal
1996.

     Provision for Loan Losses. The Bank's provision for loan losses was $1.6
million for the year ended June 30, 1996 as compared with $600,000 for the year
ended June 30, 1995. The increase in the provision was due primarily to
management's assessment of its loan portfolio, the growth in the portfolio and
the level of non-performing loans. In particular, non-performing loans increased
from $2.8 million at June 30, 1995 to $3.6 million at June 30, 1996. The
increase in non-performing loans was attributable to a $447,000 increase in non-
performing commercial real estate loans. At June 30, 1995, the Bank's allowance
for loan losses to total non-performing loans and total loans was 109.3% and
0.83%, respectively, as compared to 125.5% and 1.14%, respectively, at June 30,
1996. See "Risk Factors - Increased Lending Risks Associated with Commercial
Real Estate, Multi-Family, Construction and Development and Commercial Lending"
and "Business of the Bank - Delinquent Loans, Real Estate Owned and Classified
Assets" and "- Allowance for Loan Losses."

     Non-Interest Income. Non-interest income increased by $168,000, or 6.3%,
from $2.7 million for the year ended June 30, 1995 to $2.8 million for the year
ended June 30, 1996. The increase was primarily due to the increase in fee
income of $167,000, or 6.5%, from $2.6 million for the year ended June 30, 1995
to $2.7 million for the year ended June 30, 1996, which increase is primarily
attributable to the increase in deposits.

     Non-Interest Expense. Non-interest expense increased slightly by $364,000,
or 2.0%, from $18.1 million for the year ended June 30, 1995 to $18.5 million
for the year ended June 30, 1996. This increase

                                       47
<PAGE>
 
is primarily a result of an increase in non-interest expenses of $768,000, or
20.8%, from $4.8 million for the year ended June 30, 1995 to $5.7 million for
the year ended June 30, 1996, as a result of an increase in compensation and
employee benefits of $508,000, from $8.8 million for 1995 to $9.3 million for
1996, as a result of normal salary increases. Non-interest expense was also
impacted by a $369,000, or 13.9%, increase in occupancy costs from $2.7 million
for the year ended June 30, 1995 to $3.0 million for the year ended June 30,
1996, due to the Bank instituting a repair and renovation program for the branch
offices, as well as a $683,000, or 57.4%, increase in computer service fees from
$1.2 million for the year ended June 30, 1995 to $1.9 million for the year ended
June 30, 1996, as a result of the installation of a new computer network and
equipment at all branch locations and the change in payment method for check
processing charges. These items were offset by a reduction in FDIC deposit
insurance premiums, from $1.7 million for the year ended June 30, 1995 to
$251,000 for the year ended June 30, 1996 due to a reduction in the assessment
rate imposed by the FDIC. See "Regulation and Supervision - Insurance of Deposit
Accounts."

     Income Taxes. The provision for income taxes decreased by $116,000, or
1.7%, from $6.9 million for the year ended June 30, 1995 to $6.8 million for the
year ended June 30, 1996, primarily as a result of the decrease in income before
income taxes. The effective tax rate was 43.9% for the year ended June 30, 1996
as compared to 43.8% for the prior year.

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

     In December 1990, the FASB issued SFAS No. 106. SFAS No. 106 focuses
principally on post-retirement health care benefits and significantly changed
the previous practice of accounting for post-retirement benefits on a cash basis
to requiring accrual during the years that the employee renders the necessary
service, of the expected cost of providing those benefits to an employee and the
employee's beneficiaries and covered dependents. SFAS No. 106 became effective
for fiscal years beginning after December 15, 1992, and adoption was required on
a prospective basis. The Bank adopted SFAS No. 106 effective July 1, 1994, which
resulted in a charge, net of tax, of $1.3 million.

LIQUIDITY AND CAPITAL RESOURCES

     The Bank's primary sources of funds are deposits, proceeds from the
principal and interest payments on loans, mortgage-backed and mortgage related
and debt and equity securities, and to a significantly lesser extent, proceeds
from the sale of fixed-rate mortgage loans to the secondary market. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit outflows, mortgage prepayments and mortgage loan sales
are greatly influenced by general interest rates, economic conditions and
competition.

     The primary investing activities of the Bank are the origination of
primarily residential one-to four-family and, to a lesser extent, commercial
real estate, construction and development, multi-family and other loans and the
purchase of mortgage-backed and mortgage related and debt and equity securities.
During the years ended June 30, 1997, 1996, and 1995, the Bank's loan
originations totaled $137.2 million, $94.3 million and $78.9 million,
respectively. Purchases of mortgage-backed, mortgage related and debt and equity
securities totaled $195.4 million, $166.5 million, and $121.9 million for the
years ended June 30, 1997, 1996, and 1995, respectively. These activities were
funded primarily by deposit growth, principal repayments on loans, mortgage-
backed and mortgage related securities and debt and equity securities. Loan
sales provided additional liquidity to the Bank, totaling $2.0 million, $10.0
million and $1.6 million for the years ended June 30, 1997, 1996 and 1995,
respectively. The Bank experienced a net increase in total deposits of $66.6
million, $53.9 million and $15.4 million for the years ended June 30, 1997,
1996, and 1995, respectively. Deposit flows are affected by the level of
interest rates, the interest rates and products offered by the local
competitors, the Bank and other factors.

                                       48
<PAGE>
 
     The Bank closely monitors its liquidity position on a daily basis. Excess
short-term liquidity is invested in overnight federal funds sold. On a longer-
term basis, the Bank maintains a strategy of investing in various lending
products as described in greater detail under "Business of the Bank--Lending
Activities." In the event the Bank should require funds beyond its ability to
generate them internally, additional sources of funds are available through the
Bank's $10.0 million line of credit and through reverse repurchase agreements.
In addition, the Bank has applied to become a member of the FHLB system, which
upon membership will provide the Bank with access to FHLB advances. See
"Business of the Bank--Sources of Funds--Borrowed Funds." At June 30, 1997, the
Bank had no outstanding borrowings.

     Loan commitments totaled $49.4 million at June 30, 1997, comprised of $20.2
million in one- to four-family loan commitments and $2.6 million in commercial
real estate loan commitments, $11.5 million in construction loan commitments,
$7.2 million in commercial loan commitments and $7.9 million in home equity loan
commitments. Management of the Bank anticipates that it will have sufficient
funds available to meet its current loan commitments. Certificates of deposit
which are scheduled to mature in one year or less from June 30, 1997 totaled
$209.1 million. Based upon past experience and the Bank's current pricing
strategy, management believes that a significant portion of such deposits will
remain with the Bank.

     At June 30, 1997, the Bank exceeded all of its regulatory capital
requirements with a leverage capital level of $99.1 million, or 10.02% of
adjusted assets, which is above the required level of $39.6 million, or 4.0% of
adjusted assets and risk-based capital of $103.9 million, or 19.71% of adjusted
assets, which is above the required level of $42.2 million, or 8.0%. See
"Regulatory Capital Compliance."

     The Bank's most liquid assets are cash and interest-bearing demand
accounts. The levels of these assets are dependent on the Bank's operating,
financing, lending and investing activities during any given period. At June 30,
1997, cash and interest-bearing demand accounts totaled $26.5 million, or 2.7%
of total assets.

IMPACT OF INFLATION AND CHANGING PRICES

     The Consolidated 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 dollar amounts
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
cost of the Bank's operations. Unlike industrial companies, nearly all of the
assets and liabilities of the Bank are monetary in nature. As a result, interest
rates have a greater impact on the Bank's 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.

IMPACT OF NEW ACCOUNTING STANDARDS

     In November 1993, the AICPA issued SOP 93-6 ("SOP 93-6"), "Employers'
Accounting for Employee Stock Ownership Plans," which is effective for years
beginning after December 15, 1993. SOP 93-6 requires the application of its
guidance for shares acquired by ESOPs after December 31, 1992 but not yet
committed to be released as of the beginning of the year SOP 93-6 is adopted.
SOP 93-6 changes the measure of compensation expense recorded by employers for
leveraged ESOPs from the cost of ESOP shares to the fair value of ESOP shares.
The Company has adopted an ESOP in connection with the Conversion, which is
expected to purchase 8% of the Common Stock sold in the Conversion. Under SOP 
93-6, the Company will recognize compensation cost equal to the fair value of
the ESOP shares during the periods in which they become committed to be
released. To the extent that the fair value of the Company's ESOP shares differ
from the cost of such shares, this differential will be charged or credited to
equity.

                                       49
<PAGE>
 
Employers with internally leveraged ESOPs such as the Company will not report
the loan receivable from the ESOP as an asset and will not report the ESOP debt
from the employer as a liability. However, the effects of SOP 93-6 on future
operating results cannot be determined at this time.

     In November 1995, the FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation" ("SFAS No. 123"). This statement establishes financial accounting
standards for stock-based employee compensation plans. SFAS No. 123 permits the
Bank to choose either a new fair value based method or the current Accounting
Principles Board ("APB") Opinion 25 intrinsic value based method of accounting
for its stock-based compensation arrangements. SFAS No. 123 requires pro forma
disclosures of net earnings and earnings per share computed as if the fair value
based method had been applied in financial statements of companies that continue
to follow current practice in accounting for such arrangements under APB Opinion
25. SFAS No. 123 applies to all stock-based employee compensation plans in which
an employer grants shares of its stock or other equity instruments to employees
except for employee stock ownership plans. SFAS No. 123 also applies to plans in
which the employer incurs liabilities to employees in amounts based on the price
of the employer's stock, (e.g., stock option plans, stock purchase plans,
restricted stock plans, and stock appreciation rights). The statement also
specifies the accounting for transactions in which a company issues stock
options or other equity instruments for services provided by nonemployees or to
acquire goods or services from outside suppliers or vendors. The recognition
provisions of SFAS No. 123 for companies choosing to adopt the new fair value
based method of accounting for stock-based compensation arrangements may be
adopted immediately and will apply to all transactions entered into in fiscal
years that begin after December 15, 1995, however disclosure of the pro forma
net earnings and earnings per share, as if the fair value method of accounting
for stock-based compensation had been elected, is required for all awards
granted in fiscal years beginning after December 31, 1994. Any effect that this
statement will have on the Bank will be applicable upon the consummation of the
Conversion.

     In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No.
125"). This Statement provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components approach,
after a transfer of financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has incurred and derecognizes
financial assets it no longer controls and liabilities that have been
extinguished. The financial-components approach focuses on the assets and
liabilities that exist after the transfer. Many of these assets and liabilities
are components of financial assets that existed prior to the transfer. If a
transfer does not meet the criteria for a sale, the transfer is accounted for as
a secured borrowing with pledge of collateral. The Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and should be applied prospectively. Earlier
or retroactive application of this Statement is not permitted. Management has
determined that this Statement will not have a material impact on the Company's
consolidated financial statements.

     In February 1997, the FASB released SFAS No. 128, "Earnings Per Share"
("SFAS No. 128"). SFAS No. 128 establishes standards for computing and
presenting earnings per share ("EPS") and applies to entities with publicly held
common stock or potential common stock. SFAS No. 128 simplifies the standards
for computing earnings per share previously found in APB Opinion No. 15,
Earnings Per Share, and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
numerator and denominator of the diluted EPS computation. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if

                                       50
<PAGE>
 
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion No. 15. SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted.

     In March 1997, the FASB issued SFAS No. 129, "Disclosure of Information
About Capital Structure" ("SFAS No. 129). SFAS No. 129 continues the existing
requirements to disclose the pertinent rights and privileges of all securities
other than ordinary common stock but expands the number of companies subject to
portions of its requirements. Specifically, the Statement requires all entities
to provide the capital structure disclosures previously required by APB Opinion
No. 15. Companies that were exempt from the provisions of APB Opinion No. 15
will now need to make those disclosures.

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general purpose financial statements. SFAS No. 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from net worth
and additional paid-in capital in the equity section of a statement of financial
position. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. Management is in the process of
determining the impact, if any, this statement will have on the Bank.

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires disclosures for
each segment that are similar to those required under current standards with the
addition of quarterly disclosure requirements and a finer partitioning of
geographic disclosures. It requires limited segment data on a quarterly basis.
It also requires geographic data by country, as opposed to broader geographic
regions as permitted under current standards. SFAS No. 131 is effective for
fiscal year beginning after December 15, 1997 with earlier application
permitted.

                            BUSINESS OF THE COMPANY

GENERAL

     The Company was incorporated in September 1997 at the direction of the
Board of Trustees of the Bank for the purpose of becoming a holding company to
own all of the outstanding capital stock of the Bank. Upon consummation of the
Conversion, it is anticipated that the Bank will become a wholly-owned
subsidiary of the Company. Upon the consummation of the Conversion, the Company
will be a savings and loan holding company regulated by the OTS. See "Regulation
and Supervision - Holding Company Regulation."

     The Company is currently not an operating company. Following the
Conversion, in addition to directing, planning and coordinating the business
activities of the Bank, the Company will initially invest net proceeds it
retains primarily in mortgage-backed and mortgage related securities and
investment-grade debt and equity securities. In addition, the Company intends to
fund the loan to the ESOP to enable the 

                                       51
<PAGE>
 
ESOP to subscribe for 8% of the Common Stock issued in connection with the
Conversion, including shares issued to the Foundation; however, a third party
lender may be utilized to lend funds to the ESOP. See "Use of Proceeds." In the
future, the Company may expand its operations in the Bank's primary market area
or other areas surrounding the New York City metropolitan area by marketing and
business development, acquiring or organizing other operating subsidiaries,
including other financial institutions and financial services companies. Other
than a lease on a public accommodation office to be opened on Staten Island in
1998 and plans to open new branch offices on Staten Island in 1998, there are no
current agreements or understandings for an expansion of the Company's
operations. Initially, the Company will neither own nor lease any property from
any third party, but will instead use the premises, equipment and furniture of
the Bank.

     Concurrent with the organization of the Company, a new President and Chief
Operating Officer and a new Chief Financial Officer and Secretary have been
retained by the Company, both of whom were not previously employed by the Bank
but have significant experience in the financial services industry. See
"Management of the Company." At the present time, the Company does not intend to
employ any persons other than its current officers and certain officers of the
Bank, who will not be separately provided cash compensation by the Company. The
Company may utilize the support staff of the Bank from time to time, if needed.
Additional employees will be hired as appropriate to the extent the Company
expands its business in the future.

                                       52
<PAGE>
 
                              BUSINESS OF THE BANK

GENERAL

     The Bank is a community-oriented mutual savings bank which was originally
chartered by the State of New York in 1886. The Bank's principal business
consists of the acceptance of retail deposits from the general public in the
areas surrounding its branch offices and the investment of those deposits,
together with funds generated from operations and borrowings, primarily in one-
to four-family residential mortgage loans and, to a lesser extent, commercial
real estate loans and in mortgage-backed and mortgage related securities and
various debt and equity securities. The Bank also invests in construction and
development, commercial, home equity and consumer and student loans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Management Strategy." The Bank's revenues are derived principally
from the interest on its mortgage, consumer and commercial loans and securities.
The Bank's primary sources of funds are deposits, principal and interest
payments on loans and securities, and proceeds from the sale of loans and
securities.

MARKET AREA

     The Bank has been, and intends to continue to be, a community-oriented
financial institution offering a variety of financial services to meet the needs
of the communities it serves. The Bank currently operates twelve full service
banking offices in the Borough of Staten Island, and one full service banking
office in the Borough of Brooklyn. Additionally, the Bank intends to open a
public accommodation office in 1998 and is considering opening two new full-
service branches. With the exception of the lease on the new public
accommodation office, there are no current arrangements, understandings or
agreements, written or oral, regarding such offices, and no assurances can be
made that such offices will be opened.

     The Bank's primary deposit gathering area is currently concentrated around
the areas where its full service banking offices are located in Staten Island
and Brooklyn  which the Bank generally considers to be its primary market area.
The Bank's primary lending area has also historically been concentrated in
Staten Island  and, to a lesser extent, in the  area around its office in
Brooklyn.  As of June 1996, based on a survey by a nationally-recognized bank
consulting firm, the Bank had 14.2% of total deposits in Staten Island, and for
1996, the Bank had a lending market share of approximately 7.2% in Staten
Island, placing the Bank among the leaders in both loans originated and deposits
in Staten Island.  The Bank and Company may, in the future, consider expanding
the market area served by the Bank and Company to other areas in the New York
City metropolitan area including northern New Jersey, Connecticut and upstate
New York.

     The economy of the New York City metropolitan area has historically
benefitted from having a large number of corporate headquarters and a diversity
of financial service entities.  Additionally, Staten Island has historically
benefitted from steady residential growth and an expanding base of industrial,
service and high technology businesses.  During the late 1980s and early 1990s,
however, due in part to the effects of a prolonged period of weakness in the
national economy, the decline in the regional economy, layoffs in the financial
services industry and corporate relocations, the New York City metropolitan area
experienced reduced levels of employment.  These conditions, in conjunction with
a surplus of available commercial and residential property, resulted in an
overall decline in the underlying values of properties located in the area
during the late 1980s and early 1990s.  Staten Island, due to its location and
its relatively large population of government employees, was somewhat insulated
from the economic decline of the late 1980s and early 1990s.  Since 1993, the
prices and values of real estate have stabilized and, in certain areas, the
prices and values of real estate  have increased.  In the last several years,
the New York City metropolitan area has benefitted from the resurgence and
growth in employment and profitability experienced by national securities 

                                       53
<PAGE>
 
and investment banking firms, many of which are domiciled in the Borough of 
Manhattan, as well as the growth and profitability of other financial services 
companies, such as money center banks. However, there can be no assurances that
such decline could not reoccur. See "Risk Factors - Weakness in Local Economy."

COMPETITION

     The Bank faces significant competition both in making loans and in
attracting deposits.  The New York City metropolitan area has a high density of
financial institutions, many of which are branches of significantly larger
institutions 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 savings banks, commercial banks, savings and
loan associations, mortgage banking companies, credit unions and insurance
companies and other financial service companies.  Its most direct competition
for deposits has historically come from savings and loan associations, savings
banks, commercial banks and credit unions.  The Bank faces additional
competition for deposits from non-depository competitors such as the mutual fund
industry, securities and brokerage firms and insurance companies.  There are
eleven depository institutions with operations in the Borough of Staten Island.
Competition may also increase as a result of the lifting of restrictions on the
interstate operations of financial institutions.

LENDING ACTIVITIES

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

                                       54
<PAGE>
 
     The following table sets forth the composition of the Bank's loan
portfolio, including loans held for sale, in dollar amounts and in percentages
of the respective portfolios at the dates indicated.

<TABLE>
<CAPTION>

                                                                            At June 30,
                                             -----------------------------------------------------------------------
                                                         1997                    1996                   1995
                                             --------------------------  ---------------------  --------------------
                                                              Percent                Percent                Percent  
                                                  Amount      of Total    Amount     of Total    Amount     of Total 
                                             --------------------------  ---------------------  --------------------
                                                                       (Dollars in thousands)
<S>                                             <C>           <C>        <C>         <C>        <C>         <C>
Real estate loans:
   One- to four-family..........................  $394,588       78.4%   $325,139       76.3%   $303,734       76.2% 
   Multi-family.................................     2,705        0.5       1,238        0.3         811        0.2  
   Commercial real estate.......................    40,713        8.1      39,892        9.3      40,037       10.1  
   Construction and development.................    18,343        3.7      12,812        3.0      10,487        2.6  
   Home equity..................................    16,729        3.3      18,054        4.2      16,518        4.1  
Commercial......................................     6,662        1.3       6,300        1.5       5,039        1.3  
Consumer and student............................    23,589        4.7      22,932        5.4      21,795        5.5 
                                                   -------      -----     -------      -----     -------      ----- 
      Gross loans...............................   503,329      100.0%    426,367      100.0%    398,421      100.0% 
                                                                =====                  =====                  =====  
Less:
   Unamortized discounts, net...................      (788)                  (947)                (1,105)
   Deferred loan fees...........................      (813)                (1,354)                (1,632)
   Allowance for possible loan losses...........    (5,470)                (4,796)                (3,275)
                                                  --------               --------               --------
      Total loans, net..........................   496,258                419,270                392,409
Less:
   Loans held for sale, net:
      One- to four-family.......................        --                  1,155                     --
                                                  --------               --------               --------
        Loans receivable held for
          investment, net.......................  $496,258               $418,115               $392,409
                                                  ========               ========               ========
</TABLE> 
<TABLE>
<CAPTION>
                                                                            At June 30,
                                                             -------------------------------------------
                                                                    1994                   1993
                                                             ---------------------  --------------------
                                                                          Percent                Percent
                                                              Amount     of Total    Amount     of Total
                                                             ---------------------  --------------------
                                                                       (Dollars in thousands)
<S>                                                           <C>         <C>        <C>         <C>
Real estate loans:
   One- to four-family......................................  $273,063       75.5%   $274,136       76.0%
   Multi-family.............................................       920        0.3         936        0.2
   Commercial real estate...................................    39,220       10.8      35,949       10.0
   Construction and development.............................     6,677        1.9       6,011        1.7
   Home equity..............................................    16,775        4.6      20,430        5.7
Commercial..................................................     5,426        1.5       4,282        1.2
Consumer and student........................................    19,663        5.4      18,957        5.2
                                                               -------      -----     -------      -----
      Gross loans...........................................   361,744      100.0%    360,701      100.0%
                                                                            =====                  =====
Less:
   Unamortized discounts, net...............................    (1,263)                (1,420)
   Deferred loan fees.......................................    (1,525)                (1,265)
   Allowance for possible loan losses.......................    (3,106)                (2,735)
                                                               -------                -------
      Total loans, net......................................   355,850                355,281
Less:
   Loans held for sale, net:
   One- to four-family......................................        --                     --
                                                              --------               --------
      Loans receivable held for
        investment, net.....................................  $355,850               $355,281
                                                              ========               ========
</TABLE> 
                                       55
<PAGE>
 
  Loan Originations. The Bank originates both adjustable-rate and fixed-rate 
one- to four-family loans, commercial real estate loans, home equity loans,
construction and development loans, commercial loans, consumer loans and student
loans. The Bank's one- to four-family mortgage lending activities are conducted
primarily through the utilization of mortgage brokers and by the Bank's loan
personnel generally operating in the Bank's loan center. Although the Bank has
authorized the use of approximately 100 mortgage brokers in connection with one-
to four-family loan originations, the Bank primarily utilizes the services of
seven mortgage brokers operating primarily on Staten Island and in Brooklyn.
During fiscal 1997, the Bank originated $73.9 million of one- to four-family
loans through mortgage brokers and $26.6 million of such loans through Bank
personnel. Recently, the Bank began offering through brokers its fully processed
loan program, which is a zero point loan that is originated and processed by the
broker. The Bank pays mortgage brokers a processing fee for a fully processed
loan. All loans are underwritten by the Bank pursuant to the Bank's loan
underwriting policies and procedures.

  Recently, the Bank has placed increased emphasis on the origination of
commercial real estate, construction and development and commercial loans as
part of its efforts to broaden the services it provides to the Staten Island
business community.  In this regard, the Bank has recently hired  commercial
lending personnel with experience in the Bank's primary market area and may add
additional personnel as needed.  In addition, the Bank has increased its
marketing efforts with respect to commercial real estate, construction and
development and commercial lending by making its existing business customers
aware of the expanded products and services available to businesses.  See "Risk
Factors--Increased Lending Risks Associated With Commercial Real Estate, Multi-
Family, Construction and Development and Commercial Lending."  The Bank's
ability to originate loans is dependent upon  customer demand, demand for fixed-
rate or adjustable-rate loans and expected future levels of interest rates.

  Generally, all loans are originated for investment with the exception of
longer-term fixed-rate one- to four-family mortgage loans. It is currently the
general policy of the Bank to sell substantially all of the one- to four-family
fixed-rate mortgage loans with maturities over fifteen years that it originates
and to retain all adjustable-rate one- to four-family mortgage loans which it
originates. However, from time to time, the Bank may retain fixed-rate mortgage
loans with terms over fifteen years depending on the asset quality and the
interest rate risk position of the Bank. The one- to four-family loan products
currently originated for sale by the Bank include a variety of mortgage loans
which conform to the underwriting standards specified by FNMA and FHLMC
("conforming loans"). Loans which do not conform to FNMA or FHLMC standards due
to loan amounts ("jumbo loans") are originated for the portfolio. With the
exception of customary provision relating to breaches of representations and
warranties, sales of loans are made without recourse to the Bank in the event of
default by the borrower. The Bank generally retains the servicing rights on the
mortgage loans sold to FHLMC.

  At June 30, 1997, the Bank was servicing its portfolio of $503.3 million of
loans receivable and  $50.1 million of loans for others, primarily consisting of
conforming fixed-rate loans sold by the Bank.  Loan servicing includes
collecting and remitting loan payments, accounting for principal and interest,
contacting delinquent mortgagors, supervising foreclosures and property
dispositions in the event of unremedied defaults, making certain insurance and
tax payments on behalf of the borrowers, and generally administering the loans.

  During the fiscal years ended June 30, 1997 and June 30, 1996, the Bank
originated $100.5 million and $54.0  million of fixed-rate and adjustable-rate
one- to four-family loans, respectively, of which $98.5 million and $43.9
million, respectively, were retained by the Bank.  The fixed-rate loans retained
by the Bank consisted primarily of loans with terms of 15 years or less.  The
Bank recognizes, at the time of sale, the cash gain or loss on the sale of the
loans based on the difference between the net cash proceeds received and the
carrying value of the loans sold.  At June 30, 1997, the Bank had no mortgage
loans held for sale.  The Bank has, in the past, from time to time, purchased
participations in loans, primarily one- to four-family mortgage loans, and had
$1.3 million of participations in loans at June 30, 1997.

                                       56
<PAGE>
 
  The following tables set forth the Bank's loan originations, purchases, sales
and principal repayments for the periods indicated.
<TABLE>
<CAPTION>
                                                                For the Year Ended June 30,
                                                           -----------------------------------
                                                              1997         1996        1995
                                                           ----------  -----------  ----------
                                                                    (In thousands)
<S>                                                        <C>           <C>        <C>
Gross loans(1):
Balance outstanding at beginning of period................... $426,367    $398,421   $361,744
                                                              --------    --------   --------
   Loans originated:
      One- to four-family....................................  100,487      53,957     53,355
      Multi-family...........................................    1,616         540         --
      Commercial real estate.................................    4,454       6,408      5,805
      Construction and development...........................   13,444       9,080      7,520
      Home equity............................................    5,824       6,049      2,581
      Commercial.............................................    3,636      11,280      2,449
      Consumer and student...................................    7,790       7,011      7,143
                                                              --------    --------   --------
         Total loans originated..............................  137,251      94,325     78,853
   Loans purchased...........................................      910          --         --
                                                              --------    --------   --------
         Total loans originated and purchased................  138,161      94,325     78,853
                                                              --------    --------   --------

Less:
   Principal repayments......................................   58,485      55,799     39,803
   Sales of loans............................................    2,004       9,972      1,609
   Transfers to real estate owned............................      673         608        764
   Principal charged off.....................................       37          --         --
                                                              --------    --------   --------
         Total loans.........................................  503,329     426,367    398,421
Less:
   Loans held for sale, net..................................       --       1,155         --
                                                              --------    --------   --------
   Loans receivable held for investment at
   end of period............................................. $503,329    $425,212   $398,421
                                                              ========    ========   ========
</TABLE>
____________________
(1) Gross loans includes loans receivable held for investment and loans held for
    sale.

                                       57
<PAGE>
 
     Loan Maturity.  The following table shows the contractual maturity of the
Bank's loan portfolio at June 30, 1997.  The table does not include prepayments
or scheduled principal amortization.  Prepayments and scheduled principal
amortization on mortgage loans totalled $58.5 million, $55.8 million and $39.8
million for the years ended June 30, 1997, 1996 and 1995, respectively.

<TABLE>
<CAPTION>
                                                                                             At June 30, 1997
                                                                -------------------------------------------------------------------
                                                                                           Real Estate Loans
                                                                -------------------------------------------------------------------
                                                                   One- to                               Construction
                                                                    Four-       Multi-    Commercial         and            Home
                                                                    Family      Family    Real Estate     Development       Equity
                                                                -----------  ----------  -------------  ---------------  ----------
                                                                                            (In thousands)
<S>                                                              <C>           <C>          <C>             <C>         <C>
Amounts due:
   Within one year.............................................  $    227      $   --       $   315         $17,273       $    --
                                                                 --------      ------       -------         -------       -------
   After one year:
       More than one year to three years.......................     1,749          --           345           1,070            --
       More than three years to five years.....................     4,458          --         1,178              --            28
       More than five years to 10 years........................    24,039         310        12,962              --           805
       More than 10 years to 20 years..........................    74,312       2,395        23,897              --        12,955
       More than 20 years......................................   289,803          --         2,016              --         2,941
                                                                  -------       -----        ------           -----       -------
       Total due after June 30, 1998...........................   394,361       2,705        40,398           1,070        16,729
                                                                  -------       -----        ------           -----       -------
       Total amount due........................................  $394,588      $2,705       $40,713         $18,343       $16,729
                                                                 ========      ======       =======         =======       =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                      At June 30, 1997
                                                                              -----------------------------------
                                                                                           Consumer      Total
                                                                                             and         Loans
                                                                               Commercial   Student    Receivable
                                                                              -----------  ---------   ----------
                                                                                          (In thousands)
<S>                                                                             <C>         <C>         <C>
Amounts due:
   Within one year...........................................................   $ 4,878     $ 1,745     $ 24,438
   After one year:                                                              -------     -------     --------
       More than one year to three years.....................................       793       5,615        9,572
       More than three years to five years...................................       720       2,248        8,632
       More than five years to 10 years......................................        --       6,670       44,786
       More than 10 years to 20 years........................................       271       7,219      121,049
       More than 20 years....................................................        --          92      294,852
                                                                                -------     -------     --------
       Total due after June 30, 1998.........................................     1,784      21,844      478,891
                                                                                -------     -------     --------

       Total amount due......................................................   $ 6,662     $23,589     $503,329
Less:                                                                           =======     =======     --------
          Unamortized discounts, net.............................................................            788
          Deferred loan fees, net................................................................            813
          Allowance for possible loan losses.....................................................          5,470
                                                                                                        --------
Loans receivable held for investment, net........................................................       $496,258
                                                                                                        ========
</TABLE>

                                       58
<PAGE>
 
  The following table sets forth at June 30, 1997, the dollar amount of gross
loans receivable contractually due after June 30, 1998, and whether such loans
have fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
                                                    Due After June 30, 1998
                                                -----------------------------------
                                                 Fixed       Adjustable    Total
                                                ---------   -----------  ----------
                                                        (In thousands)
<S>                                             <C>         <C>          <C>
Real estate loans:

 One- to four-family..........................   $115,301      $279,060   $394,361

 Multi-family.................................        214         2,491      2,705

 Commercial real estate.......................      3,189        37,209     40,398

 Construction and development.................         --         1,070      1,070

 Home equity..................................      8,021         8,708     16,729
                                                 --------      --------   --------
  Total real estate loans.....................    126,725       328,538    455,263

Commercial loans..............................         --         1,784      1,784

Consumer and student loans....................      9,297        12,547     21,844
                                                 --------      --------   --------
  Total loans receivable......................   $136,022      $342,869   $478,891
                                                 ========      ========   ========
</TABLE>

  One- to Four-Family Loans.  The Bank currently offers both fixed-rate and
adjustable-rate mortgage loans secured by one- to four-family residences located
in the Bank's primary market area, primarily with maturities up to thirty years.
One- to four-family mortgage loan originations are obtained through the use of
mortgage brokers,  the Bank's  loan center, existing or past customers,
advertising, and referrals from real estate brokers and attorneys.

  At June 30, 1997, the Bank's one- to four-family loans totalled $394.6
million, or 78.4%, of gross loans.  Of the one- to four-family loans outstanding
at that date, 29% were fixed-rate mortgage loans and 71% were adjustable-rate
mortgage loans.  The Bank offers fixed-rate mortgage loans with terms of fifteen
and thirty years.  The Bank sells substantially all fixed-rate residential
mortgage loans it originates with terms in excess of fifteen years, except for
non-conforming loans, to FHLMC, and retains the servicing on all loans sold,
although the Bank may retain fixed-rate mortgage loans with terms of in excess
of fifteen years, depending on the asset quality and the interest rate risk
position of the Bank.  The Bank generally retains for its portfolio shorter-
term, fixed rate loans with maturities of fifteen years or less and all
adjustable-rate one- to four-family loans.

  The Bank currently offers a number of adjustable-rate mortgage loans with
terms of up to thirty years and interest rates which adjust annually from the
outset of the loan or which adjust annually after a one, three, five or seven
year initial fixed period.  Forty-year terms are available on certain
adjustable-rate loans.  The interest rates for the Bank's adjustable-rate
mortgage loans are indexed to the one or three year U.S. Treasury Securities
Index.  Interest rate adjustments on loans are limited to a 2% periodic
adjustment cap (2.5% on five-year adjustable-rate loans) and a maximum
adjustment of 6% over the life of the loan.  Certain

                                       59
<PAGE>
 
of the Bank's adjustable-rate mortgage loans can be converted to a fixed-rate
loan with interest rates based upon the then-current market rates plus a varying
margin.

  The volume and type of adjustable-rate mortgage loans originated by the Bank
have been affected by such market factors as the level of interest rates,
competition, consumer preferences and the availability of funds.  The
origination of adjustable-rate residential mortgage loans, as opposed to fixed-
rate residential mortgage loans, helps reduce the Bank's exposure to increases
in interest rates.  However, adjustable-rate loans generally pose credit risks
not inherent in fixed-rate loans, primarily because as interest rates rise, the
underlying payments of the borrower rise, thereby increasing the potential for
default.  Periodic and lifetime caps on interest rate increases help to reduce
the risks associated with adjustable-rate loans but also limit the interest rate
sensitivity thereof.

  One- to four-family residential mortgage loans are generally underwritten
according to FNMA or FHLMC guidelines.  The Bank currently originates one- to
four-family residential mortgage loans in amounts up to 80% of the lower of the
appraised value or the selling price of the property securing the loan and up to
97% of the appraised value or selling price if private mortgage insurance is
obtained.   Mortgage loans originated by the Bank include due-on-sale clauses
which provide the Bank with the contractual right to deem the loan immediately
due and payable in the event the borrower transfers ownership of the property
without the Bank's consent.  Due-on-sale clauses are an important means of
adjusting the yields on the Bank's fixed-rate mortgage loan portfolio and the
Bank has generally exercised its rights under these clauses.

  In an effort to provide financing for low and moderate income home buyers, the
Bank participates in residential mortgage programs and products sponsored by the
State of New York Mortgage Association ("SONYMA").  The SONYMA mortgage programs
provide low and moderate income households with fixed-rate loans which are
generally below prevailing fixed-rate mortgages and which allow below market
down payments.  At June 30, 1997, $8.9 million, or 1.8% of total loans, were
sponsored by SONYMA.

  Commercial Real Estate Lending. The Bank originates commercial real estate
loans that are generally secured by properties used for business purposes or a
combination of residential and retail purposes which are located in the Bank's
primary market area. All mixed-use properties are classified as commercial real
estate. At June 30, 1997, the Bank's commercial real estate loan portfolio
totalled approximately $40.7 million or 8.1% of total loans. The Bank's
underwriting procedures provide that commercial real estate loans generally may
be made in amounts up to 75% of the lower of the appraised value or sales price
of the property, subject to the Bank's current regulatory loans-to-one-borrower
limit. These loans may be made with terms up to twenty years and are generally
offered at interest rates which adjust every one, three or five years, utilizing
the corresponding U.S. Treasury Securities Index as a base. The Bank also offers
fixed rate commercial real estate loans with a ten year term. In reaching its
decision on whether to make a commercial real estate loan, the Bank considers
the net operating income of the property and the borrower's expertise, credit
history and profitability. In addition, the Bank considers the business
activities and present and past uses of the properties in evaluating potential
environmental issues and, where such consideration indicates a need, a more
detailed investigation by a qualified environmental expert is conducted. The
Bank has generally required that the properties securing commercial real estate
loans have debt service coverage ratios (the ratio of earnings before debt
service to debt service) of at least 1.2x. Exceptions to this ratio are
considered on an individual basis and must be approved by the appropriate
lending authority. Generally, all commercial real estate loans made to
corporations, partnerships and other business entities require personal
guarantees by the principals; however, exceptions may be made for existing
customers of the Bank, with approval of the Board of Trustees. The largest
commercial real estate loan in the Bank's portfolio at June 30, 1997, was a $2.8
million loan secured by a nursing home located on Staten Island.

                                       60
<PAGE>
 
  Loans secured by commercial real estate properties generally involve larger
principal amounts and a greater degree of risk than one- to four-family
residential mortgage loans. Because payments on loans secured by commercial real
estate properties are often dependent on successful operation or management of
the properties, repayment of such loans may be affected by adverse conditions in
the real estate market or the economy.  The Bank seeks to minimize these risks
through its underwriting standards, which require such loans to be qualified on
the basis of the property's income and debt service coverage ratio. See "Risk
Factors--Increased Lending Risks Associated With Commercial Real Estate, Multi-
Family, Construction and Development and Commercial Lending."  As part of the
operating strategy, the Bank intends to continue to emphasize its commercial
real estate lending activities in its primary market area depending on the
demand for such loans and commercial real estate market conditions.

  Construction and Development Lending. The Bank originates construction and
development loans for the development of commercial and residential property
located in its primary market area, and may originate construction and
development loans outside its primary market area to existing customers. At June
30, 1997, the Bank had $26.9 million of construction loans most of which were
committed to the construction of one- to four-family properties; $18.3 million
of these loans were outstanding at that date. The Bank originates loans for the
acquisition of commercial and residential property located in its primary market
area only if such acquisition loan is part of an overall development loan.
Construction loans are offered primarily to experienced local developers
operating in the Bank's primary market area and, to a lesser extent, to
individuals for the construction of their residence. The majority of the Bank's
construction loans are originated primarily to finance the construction of one-
to four-family, owner-occupied residential real estate, and commercial real
estate properties located in the Bank's primary market area. Construction loans
are generally offered with terms up to two years. Construction loans may be made
in amounts up to 70% of the estimated cost of construction, or up to 80% in the
case of loans to individuals for the construction of their residence. With
respect to construction loans, the Bank generally requires borrowers with whom
the Bank does not have experience to secure permanent financing commitments from
generally recognized lenders for an amount equal to or greater than the amount
of the loan. In some cases, the Bank may itself provide permanent financing.
Loan proceeds are disbursed periodically in increments as construction
progresses and as inspections by the Bank's lending officers warrant.

  The Bank originates land loans to local developers for the purpose of holding
or developing the land for sale.  At June 30, 1997, the Bank had $1.3 million of
land loans.  Such loans are secured by a lien on the property, are limited to
65% of the appraised value of the secured property on raw land and up to 75% on
developed building lots, and have a term of up to two years, with a floating
interest rate based on the prime rate (which is the prime rate as published in
The Wall Street Journal and The New York Times).  The principal of the loan is
reduced as lots are sold and released.  The Bank's land loans are generally
secured by property in its primary market area; however, the Bank may originate
land loans outside its primary market area to existing customers.  In addition,
the Bank generally originates such loans to developers with whom it has
established relationships and obtains personal guarantees.

  Construction and development financing is generally considered to involve a
higher degree of credit risk than long-term financing on improved, owner-
occupied real estate.  Risk of loss on a construction loan is dependent largely
upon the accuracy of the initial estimate of the property's value at completion
of construction or development compared to the estimated cost (including
interest) of construction and other assumptions, including the estimated time to
sell residential properties.  If the estimate of value proves to be inaccurate,
the Bank may be confronted with a project, when completed, having a value which
is insufficient to assure full repayment.  See "Risk Factors--Increased Lending
Risks Associated with Commercial Real Estate, Multi-Family, Construction and
Development and Commercial Lending."  The largest construction loan in the
Bank's portfolio at June 30, 1997 was a $840,000 loan for the construction of a
one-family residential unit in the Borough of Staten Island.

                                       61
<PAGE>
 
  Home Equity Lending.   The Bank offers fixed-rate, fixed-term home equity
loans and lines of credit and adjustable-rate home equity loans in its primary
market area.  At June 30, 1997, the Bank's home equity loans and lines of credit
totalled $16.7 million, or 3.3%, of the Bank's gross loans.  Fixed-rate, fixed-
term home equity loans and lines of credit are offered in amounts up to 75% (80%
if the Bank holds the first mortgage) of the appraised value of the property
(including the first mortgage) with a maximum loan amount of  $250,000.  Fixed-
rate, fixed-term home equity loans and lines of credit are offered with terms up
to ten years, with interest-only payments during the first five years and
repayment of principal and interest during the final five years.  Adjustable-
rate home equity loans are offered in amounts up to 75% (80% if the Bank holds
the first mortgage) of the appraised value of the property (including the first
mortgage) with terms of up to twenty years with a maximum amount of $75,000.
Adjustable-rate loans are indexed to the  prime rate (which is the prime rate as
published in the Wall Street Journal and the New York Times).

  Commercial Lending.  The Bank also originates commercial loans to small and
medium sized businesses operating in the Bank's primary market area.  At June
30, 1997, the Bank had $6.7 million of commercial loans which amounted to 1.3%
of the Bank's total loans receivable.  Although such loans are  sometimes
secured by equipment, leases, inventory and accounts receivable, in the case of
the Bank, the majority of its commercial loans are secured by real estate.  Term
loans are generally offered with adjustable rates of interest and terms of up to
five years.  Secured commercial loans will be made in an amount up to 90% of the
value of the property securing the loan.  All term loans fully amortize during
the term of such loan.  Business lines of credit have terms of up to five years
if secured and two years if unsecured.  Secured lines of credit will be made in
amounts up to 90% of the value of the property securing the line.  Business
lines of credit adjust on a daily basis and are indexed to the prime rate.

  The Bank also issues both secured and unsecured letters of credit to business
customers of the Bank.  Secured letters of credit will be issued in amounts up
to 100% of the value of the collateral securing the letter of credit.
Acceptable collateral includes an assigned deposit account with the Bank, real
estate or marketable securities.  Letters of credit have a maximum term of two
years.

  In making commercial loans, the Bank considers primarily the financial
resources of the borrower, the borrower's ability to repay the loan out of net
operating income, the Bank's lending history with the borrower and the value of
any collateral.  Generally, if the borrower is a corporation, partnership or
other business entity, personal guarantees by the principals are required.
However, personal guarantees may not be required on such loans depending on the
creditworthiness of the borrower and other mitigating circumstances.  The Bank's
largest commercial loan at June 30, 1997 was $1.7 million.  At such date, the
Bank had $2.2 million of unadvanced commercial lines of credit.

  Unlike mortgage loans, which generally are made on the basis of the borrower's
ability to make repayment from his or her employment or other income, and which
are secured by real property whose value tends to be more easily ascertainable,
commercial loans are of higher risk and typically are made on the basis of the
borrower's ability to make repayment from the cash flow of the borrower's
business.  As a result, the availability of funds for the repayment of
commercial loans may be substantially dependent on the success of the business
itself.  Further, any collateral securing such loans may depreciate over time,
may be difficult to appraise and may fluctuate in value based on the success of
the business.  See "Risk Factors--Increased Lending Risks Associated with
Commercial Real Estate, Multi-Family, Construction and Development and
Commercial Lending."

  Consumer and Student Lending.  The Bank's portfolio of consumer and student
loans primarily consists of student loans, unsecured personal loans and
overdraft lines of credit.  As of June 30, 1997, consumer and student loans
amounted to $23.6 million, or 4.7% of the Bank's total loan portfolio, of which

                                       62
<PAGE>
 
$14.9 million were student loans.  The Bank offers student loans through the
Federal Family Education Loan Program, a federal program governed by the New
York State Higher Education Services Corporation ("NYSHESC").  The Bank offers
both subsidized and unsubsidized Federal Stafford Loans and Federal Parent
Loans.  NYSHESC is responsible for the final approval of and guarantees all
student loans made by the Bank.  The terms and rates of the loans are set by
NYSHESC.  The Bank is permitted to charge an origination fee, currently 3.0% of
the loan amount, which fee is subject to change by the NYSHESC.

  Consumer loans may entail a greater degree of credit risk than do residential
mortgage loans, particularly in the case of consumer loans that are unsecured.
Consumer loan collections on these loans are dependent on the borrower's
continuing financial stability and, therefore, are more likely to be adversely
affected by job loss, divorce, illness or personal bankruptcy.  Finally, the
application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans in the event of a default.

  Loan Approval Procedures and Authority.  The Board of Trustees establishes the
lending policies and loan approval limits of the Bank.  The Board of Trustees
has established the Residential/Commercial/Construction Lending Committee which
is comprised of five members of the Board of Trustees.  The Committee discusses
and approves all loans and lines of credit in amounts greater than management
has authority to approve, within the Committee's designated authority as
established from time to time by the Board of Trustees.  Loans which exceed the
Committee's authority are approved or denied by the Board of Trustees.

  The Board of Trustees has authorized the following persons to approve loans up
to the amounts indicated: residential mortgage loans of up to $500,000 and home
equity loans of up to $250,000 can be approved by two members of the
Residential/Commercial/Construction Committee, plus the senior retail loan
officer and another loan officer; secured or unsecured commercial loans of up to
$25,000 can be approved by either the senior commercial loan officer, the
commercial loan officer or a vice president within the Business division;
secured or unsecured commercial loans up to $100,000 can be approved by any two
of the senior commercial loan officer, the commercial loan officer or a vice
president with the Business division; secured or unsecured commercial loans up
to $500,000 can be approved by two members of the
Residential/Commercial/Construction Committee and any two of the senior
commercial loan officer, the commercial loan officer or a vice president within
the business division; and commercial real estate and construction and
development loans up to $500,000 can be approved by two members of the
Residential/Commercial/Construction Committee and any two of the senior
commercial loan officer, the commercial loan officer, a vice president or
assistant secretary in the Business division.  Any loans above the authorized
limits must be approved by the respective committee, if in an amount of up to
$500,000 ($100,000 for unsecured commercial loans), or by the Board of Trustees.
Individual loans to one borrower may not exceed $4.0 million and aggregate loans
to one borrower may not exceed $5.0 million, without Board approval.  Total
aggregate loans are also subject to the Bank's regulatory loans-to-one-borrower
limit, which at June 30, 1997 was $10 million.  See "Regulation and Supervision-
-New York State Law."

  With respect to all loans originated by the Bank, upon receipt of a completed
loan application from a prospective borrower, a credit report is ordered and
certain other information is verified by an independent credit agency.  If
necessary, additional financial information may be required.  An appraisal of
real estate intended to secure a proposed loan generally is required to be
performed by appraisers approved by the Bank.  For proposed mortgage loans, the
Board annually approves independent appraisers used by the Bank and approves the
Bank's appraisal policy.  The Bank's policy is to obtain title and hazard
insurance on all mortgage loans and the Bank may require borrowers to make
payments to a mortgage escrow account for the payment of property taxes.  Any
exceptions to the Bank's underwriting policies must be noted on an underwriting
analysis sheet and presented to the Senior Loan Officer for approval.

                                       63
<PAGE>
 
DELINQUENT LOANS, REAL ESTATE OWNED AND CLASSIFIED ASSETS

  Management and the Board of Trustees perform a monthly review of all
delinquent loans.  The procedures taken by the Bank with respect to
delinquencies vary depending on the nature of the loan and period of
delinquency.  The Bank generally requires that delinquent mortgage loans be
reviewed and that a delinquency notice be mailed no later than the thirtieth day
of delinquency and a late charge is assessed after fifteen days.  The Bank's
policies provide that telephone contact will be attempted to ascertain the
reasons for delinquency and the prospects of repayment.  When contact is made
with the borrower at any time prior to foreclosure, the Bank will attempt to
obtain full payment or work out a repayment schedule with the borrower to avoid
foreclosure. Mortgage loans which are more than 45 days delinquent are referred
to the Bank's attorneys for collection.  If the loan becomes 75 days delinquent,
the Bank's attorneys are instructed to commence foreclosure proceedings.

  It  was the Bank's  policy to discontinue accruing interest on all commercial
real estate, construction and commercial loans which were past due 90 days, on
all consumer loans which were past due 120 days, and on all one- to four-family
residential mortgage loans which were past due 180 days, or when in the opinion
of management such suspension was warranted.  Effective July 1, 1997, the Bank
revised this policy such that it does not accrue interest on any loans,
including one- to four-family loans secured by real estate, which are more than
90 days delinquent unless, in the opinion of management, collection is probable.
Property acquired by the Bank as a result of foreclosure on a mortgage loan is
classified as "real estate owned" and is recorded at the lower of the unpaid
principal balance or fair value less costs to sell at the date of acquisition
and thereafter.  For loans in excess of $25,000, fair value must be
substantiated by an appraisal of the property and, thereafter, appraisal of the
property on an as-needed basis.  At June 30, 1997, the Bank had $4.5 million of
nonperforming assets (defined as non-accruing loans and REO).

  At June 30, 1997, the Bank's real estate owned, net, consisting of foreclosed
assets totalled $662,000,  which at such date was comprised of seven one- to
four-family properties.  Bank personnel generally conduct periodic external
inspections on all properties securing loans in foreclosure and generally
conducts external appraisals on all properties prior to taking ownership of the
property.  Based upon such inspections and appraisals, the Bank will charge off
any loan principal it deems appropriate at such time.  Bank personnel conduct
monthly reviews of its foreclosed real estate and periodically adjust its
valuation allowance for possible declines in the value of real estate owned.
The Bank had no allowance for possible losses on real estate owned at June 30,
1997. The Bank is currently offering for sale all real estate owned as a result
of foreclosure through brokers and through its own personnel.  The Bank's
policies generally permit the financing of the sale of its foreclosed real
estate on substantially the same terms applicable to its other real estate
mortgage loans.

  Federal regulations and the Bank's Classification of Assets Policy require
that the Bank utilize an internal asset classification system as a means of
reporting problem and potential problem assets.  The Bank currently classifies
problem and potential problem assets 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 include those characterized by the distinct
possibility that the insured institution will sustain some loss if the
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 of currently 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 currently expose the insured institution to a sufficient degree of risk to
warrant classification in one of the aforementioned categories but possess
weaknesses are required to be designated "Special Mention."

                                       64
<PAGE>
 
  When an insured institution classifies one or more assets, or portions
thereof, as Substandard or Doubtful, it is required to establish a general
valuation allowance for possible loan losses in an amount deemed prudent by
management unless the loss of principal appears to be remote.  General valuation
allowances represent loss allowances which have been established to recognize
the inherent risk associated with lending activities, but which, unlike specific
allowances, have not been allocated to particular problem assets.  When an
insured institution classifies one or more assets, or portions thereof, as Loss,
it is required either to establish a specific allowance for losses equal to 100%
of the amount of the assets so classified or to charge off such amount.

  A savings institution's determination as to the classification of its assets
and the amount of its valuation allowances is subject to review by the FDIC and
NYBD, which can order the establishment of additional general or specific loss
allowances.  The FDIC, in conjunction with the other federal banking agencies,
recently adopted an interagency policy statement on the allowance for loan and
lease losses.  The policy statement provides guidance for financial institutions
on both the responsibilities of management for the assessment and establishment
of adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines.  Generally, the policy
statement recommends that institutions have effective systems and controls to
identify, monitor and address asset quality problems; that management has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
While the Bank believes that it has established an adequate allowance for
possible loan losses, there can be no assurance that regulators, in reviewing
the Bank's loan portfolio, will not request the Bank to materially increase at
that time its allowance for possible loan losses, thereby negatively affecting
the Bank's financial condition and earnings at that time.  Although management
believes that adequate specific and general loan loss allowances have been
established, actual losses are dependent upon future events and, as such,
further additions to the level of specific and general loan loss allowances may
become necessary.

  All residential real estate loans with loan balances in excess of $500,000 are
reviewed annually.  Commercial real estate and construction loans with a balance
in excess of $400,000 are also reviewed annually.  Additionally, loans with
balances of $1.0 million or more will be reviewed semi-annually, if conditions
warrant.  Loan reviews are performed by the Loan Reviewer, a person not directly
involved in the lending or loan administration process.  Each loan reviewed is
submitted to the Loan Review Committee, composed of the Loan Reviewer, Senior
Real Estate and Commercial Loan Officer, the foreclosure officer and certain
members of the Board of Trustees.  Meetings are held on a quarterly or on an as-
needed basis.  Upon review, the Committee will classify the loan and comment as
to any corrective action needed.  The Senior Real Estate Loan Officer will
report to the Board of Trustees the findings of the Loan Review Committee on an
on-going basis.  A report summarizing the results of loan reviews is submitted
to the Board on a quarterly basis, or as meetings occur.

  At June 30, 1997, the Bank had $3.4 million of assets designated by the Bank
as Substandard, consisting of seventeen loans, no assets classified by the Bank
as Doubtful, and no assets classified by the Bank as Loss, respectively. At June
30, 1997, the Bank had $903,000 of assets designated by the Bank as Special
Mention, consisting of twelve loans which were designated Special Mention due to
past loan delinquencies.

                                       65
<PAGE>
 
  The following table sets forth delinquencies in the Bank's loan portfolio as
of the dates indicated:
<TABLE>
<CAPTION>

                                                    At June 30, 1997
                                   ---------------------------------------------------
                                            60-89 Days              90 Days or More
                                   --------------------------   ----------------------
                                                    Principal                Principal
                                       Number        Balance      Number      Balance
                                      of Loans       of Loans    of Loans     of Loans
                                   -------------  ------------  ----------  -----------
                                                   (Dollars in thousands)
<S>                                <C>             <C>          <C>         <C>          

One- to four-family...........              3      $  338           20      $2,306
Multi-family..................             --          --           --          --
Commercial real estate........              1       1,102            6         876
Construction and development..              1         100            3         341
Home equity...................             --          --            1          30
Commercial loans..............              1          18           --          --
Consumer and student loans....             67         213           89         324
                                           --      ------          ---      ------
    Total.....................             73      $1,771          119      $3,877
                                           ==      ======          ===      ======
Delinquent loans to
  total loans(1)..............                       0.35%                    0.77%
                                                   ======                   ======
<CAPTION>
                                                 At June 30, 1996                                 At June 30, 1995
                                --------------------------------------------------  -----------------------------------------------
                                      60-89 Days                90 Days or More            60-89 Days            90 Days or More
                                --------------------------  ----------------------  -----------------------  ----------------------
                                                Principal                Principal                Principal              Principal
                                   Number        Balance      Number      Balance      Number      Balance      Number    Balance
                                  of Loans      of Loans     of Loans    of Loans     of Loans    of Loans     of Loans   of Loans
                                -----------  -------------  ----------  ----------  -----------  ----------  ----------- ----------
                                                                           (Dollars in thousands)
<S>                               <C>        <C>            <C>          <C>         <C>         <C>         <C>         <C>
One- to four-family..............     7         $  901        16         $1,837            2      $  276          18      $1,736
Multi-family.....................    --             --        --             --           --          --          --          --
Commercial real estate...........    --             --         4            939           --          --           4         593
Construction and development.....     1            385         7            687            2       1,202           3         423
Home equity......................    --             --         4             94            2          87           2          43
Commercial loans.................     1            118        --             --            1          30          --          --
Consumer and student loans.......    25             71        77            263           34          88          64         200
                                   ----         ------      ----         ------         ----      ------        ----      ------
Total............................    34         $1,475       108         $3,820           41      $1,683          91      $2,995
                                   ====         ======      ====         ======         ====      ======        ====      ======
Delinquent loans to total                                
 loans(1)........................                 0.35%                    0.91%                    0.42%                   0.76%
                                                  ====                     ====                     ====                    ====
</TABLE>                                                  
-----------------------------------
(1) Total loans includes loans receivable held-for-investment, less deferred
    loan fees, deferred mortgage interest and unamortized discounts, net.

                                       66
<PAGE>    
 
  Non-Performing Assets.  The following table sets forth information regarding
the Bank's nonperforming assets.
<TABLE>
<CAPTION>

                                                                                           At June 30,
                                                                       -------------------------------------------------
                                                                         1997      1996       1995      1994      1993
                                                                       --------  --------  ---------  --------  --------
                                                                                      (Dollars in thousands)
<S>                                                                     <C>       <C>       <C>       <C>       <C>
Non-accrual loans:

  One- to four-family................................................     $1,676    $1,695    $1,590    $1,862    $1,554
  Multi-family.......................................................          -         -         -         -         -
  Commercial real estate.............................................        876       939       593     1,747     1,702
  Construction and development.......................................        120       120       108       215       538
  Commercial.........................................................          -         -         -         -       100
  Consumer and student...............................................          -         -         -        52         -
                                                                          ------    ------    ------    ------    ------
    Total non-accrual loans..........................................      2,672     2,754     2,291     3,876     3,894
Loans contractually past due 90 days
  or more and still accruing interest(1).............................      1,205     1,066       704     1,513     1,481
                                                                          ------    ------    ------    ------    ------
    Total non-performing loans.......................................      3,877     3,820     2,995     5,389     5,375
Real estate owned....................................................        662       612       335       441     2,336
                                                                          ------    ------    ------    ------    ------
    Total non-performing assets......................................     $4,539    $4,432    $3,330    $5,830    $7,711
                                                                          ======    ======    ======    ======    ======

Allowance for possible
  loan losses as a percent of loans(2)...............................       1.10%     1.14%     0.83%     0.87%     0.77%

Allowance for possible
  loan losses as a percent
  of total non-performing loans(3)...................................     141.09    125.55    109.35     57.64     50.88

Non-performing loans
  as a percent of loans(2)(3)........................................       0.78      0.91      0.76      1.51      1.51

Non-performing assets
  as a percent of total assets(3)....................................       0.46      0.48      0.39      0.71      0.99
</TABLE>
--------------------
(1) Includes consumer and student loans.
(2) Loans include loans receivable held for investment, net, excluding the
    allowance for possible loan losses.
(3) It was the Bank's policy to generally cease accruing interest on all
    commercial real estate, construction and commercial loans 90 days or more
    past due, on all consumer loans which were 120 days or more past due, and on
    all one- to four-family residential mortgage loans which were 180 days or
    more past due. Effective July 1, 1997, the Bank revised this policy such
    that it does not accrue interest on any loans, including one- to four-family
    loans secured by real estate, which are more than ninety days delinquent as
    to principal and interest unless, in the opinion of management, collection
    is probable.  See "Business of the Bank - Delinquent Loans, Real Estate
    Owned and Classified Assets."

                                       67
<PAGE>
 
     Non-accrual loans totalled $2.7 million as of June 30, 1997, and included
twenty one- to four-family loans, with an aggregate balance of $1.7 million and
eight commercial real estate loans and construction loans with an aggregate
balance of $996,000.  Non-accrual loans do not include student loans delinquent
90 days or more as the Bank does not classify such loans as non-accrual because
delinquent principal and interest on guaranteed student loans is guaranteed by
the U.S. government.

ALLOWANCE FOR LOAN LOSSES

   The allowance for possible loan losses is maintained through provisions for
possible loan losses based on management's on-going evaluation of the risks
inherent in its loan portfolio in consideration of the trends in its loan
portfolio, the national and regional economies and the real estate market in the
Bank's primary lending area. The allowance for possible loan losses is
maintained at an amount management considers adequate to cover estimated losses
in its loan portfolio which are deemed probable and estimable based on
information currently known to management. The Bank's loan loss allowance
determinations also incorporate factors and analyses which consider the
potential principal loss associated with the loan, costs of acquiring the
property securing the loan through foreclosure or deed in lieu thereof, the
periods of time involved with the acquisition and sale of such property, and
costs and expenses associated with maintaining and holding the property until
sale and the costs associated with the Bank's inability to utilize funds for
other income producing activities during the estimated holding period of the
property.

   As of June 30, 1997, the Bank's allowance for possible loan losses was $5.5
million, or 1.1%, of total loans and 141.1% of non-performing loans as compared
to $4.8 million, or 1.1% of total loans and 125.5% of non-performing loans as of
June 30, 1996.  The Bank had total non-performing loans of $3.9 million and $3.8
million at June 30, 1997 and June 30, 1996, respectively, and non-performing
loans to total loans of 0.78% and 0.91%, respectively.  The Bank will continue
to monitor and modify its allowance for possible loan losses as conditions
dictate.  The Board of Trustees reviews the adequacy of the allowance for
possible loan losses quarterly.  While management believes that, based on
information currently available, the Bank's allowance for possible loan losses
is sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that the Bank's level of allowance for loan losses will
be sufficient to cover future loan losses incurred by the Bank or that future
adjustments to the allowance for loan losses will not be necessary if economic
and other conditions differ substantially from the economic and other conditions
used by management to determine the current level of the allowance for loan
losses.  Management may in the future increase its level of loan loss allowance
as a percentage of total loans and non-performing loans in the event it
increases the level of multi-family, commercial real estate, construction and
development or other lending as a percentage of its total loan portfolio.  In
addition, the FDIC and NYBD as an integral part of their examination process
periodically review the Bank's allowance for loan losses.  Such agencies may
require the Bank to make additional provisions for estimated loan losses based
upon judgments different from those of management.

                                       68
<PAGE>
 
   The following table sets forth activity in the Bank's allowance for loan
losses for the periods set forth in the table.
<TABLE>
<CAPTION>
                                                        At or For the Year Ended June 30,
                                                 ----------------------------------------------
                                                    1997     1996     1995     1994     1993
                                                 ---------  -------  -------  -------  --------
                                                                  (In thousands)
<S>                                                <C>       <C>      <C>      <C>      <C>
Balance at beginning of period....................  $4,796    $3,275   $3,106   $2,735   $2,843
Provision for loan losses.........................   1,080     1,600      600      859    2,331
Charge-offs:
   Real estate loans..............................     174       166      384      565    2,255
   Commercial real estate.........................      15        --        6      118       17
   Consumer and student loans.....................     286       186      150      133      242
                                                    ------    ------   ------   ------   ------
        Total charge-offs.........................     475       352      540      816    2,514
Recoveries:
   Real estate loans..............................      45        97       48      241       23
   Commercial real estate.........................      --       122       --       --       --
   Consumer and student loans.....................      24        54       61       87       52
                                                    ------    ------   ------   ------   ------
        Total recoveries..........................      69       273      109      328       75
Net charge-offs (recoveries)......................     406        79      431      488    2,439
                                                    ------    ------   ------   ------   ------
Balance at end of period..........................  $5,470    $4,796   $3,275   $3,106   $2,735
                                                    ======    ======   ======   ======   ======
</TABLE>

                                       69
<PAGE>
 
  The following tables set forth the Bank's percent of allowance for loan losses
to total allowance and the percent of loans to total loans in each of the
categories listed at the dates indicated.

<TABLE>
<CAPTION>
                                                                        At June 30,
                             -------------------------------------------------------------------------------------------------------
                                           1997                            1996                                1995
                             ---------------------------------  --------------------------------   ---------------------------------
                                                   Percent of                         Percent of                         Percent of
                                      Percent of   Loans in              Percent of   Loans in              Percent of   Loans in
                                      Allowance      Each                Allowance      Each                Allowance      Each
                                      to Total    Category to            to Total    Category to            to Total    Category to
                             Amount   Allowance   Total Loans   Amount   Allowance   Total Loans   Amount   Allowance   Total Loans
                             ------   ----------  ------------  ------   ----------  -----------   ------   ----------  ------------
                                                                 (Dollars in thousands)
<S>                          <C>      <C>         <C>           <C>      <C>         <C>           <C>      <C>         <C>
Real estate(1).............. $2,619      48%            94%     $2,173      45%           93%      $2,084      64%           93%
Commercial..................    355       6              1         380       8             2          472      14             1
Consumer and student........    321       6              5         315       7             5          295       9             6
Unallocated.................  2,175      40              -       1,928      40             -          424      13             -
                             ------     -----        -----      ------     -----       -----       ------     -----       -----
Total allowance for
 possible loan losses....... $5,470     100.0%       100.0%     $4,796     100.0%      100.0%      $3,275     100.0%      100.0%
                             ======     =====        =====      ======     =====       =====       ======     =====       =====



<CAPTION>
                                                         At June 30,
                             --------------------------------------------------------------------
                                        1994                              1993
                             --------------------------------------------------------------------
                                                   Percent of                         Percent of
                                      Percent of   Loans in               Percent of   Loans in
                                      Allowance      Each                 Allowance      Each
                                      to Total    Category to             to Total    Category to
                             Amount   Allowance   Total Loans    Amount   Allowance   Total Loans
                             ------   ----------  -----------   --------  ----------  -----------
                                                    (Dollars in thousands)
<S>                          <C>      <C>         <C>           <C>       <C>         <C>
Real estate(1).............. $1,892      61%           93%        $1,814     66%           94%
Commercial..................    427      14             2            542     20             1
Consumer and student........    255       8             5            238      9             5
Unallocated.................    532      17             -            141      5             -
                             ------     -----       -----         ------    -----       -----
Total allowance for
 possible loan losses....... $3,106     100.0%      100.0%        $2,735    100.0%      100.0%
                             ======     =====       =====         ======    =====       =====
</TABLE>
____________________
(1)  Real estate includes one- to four-family, commercial real estate,
     construction and development and home equity loans.

                                       70
<PAGE>
 
SECURITIES INVESTMENT ACTIVITIES

  The Board of Trustees sets the securities investment policy of the Bank.  The
Bank considers the ability of an investment to provide earnings consistent with
factors of quality, maturity, marketability and risk diversification.  While the
Board of Trustees has final authority and responsibility for the securities
investment portfolio, the Bank has established a Management Investment Committee
comprised of eight officers including the Investment Officer to supervise the
Bank's securities investment program.  The Chief Executive Officer is an ex-
officio member thereof.  The Management Investment Committee reports to the
Asset/Liability Committee.  The  Management Investment Committee meets monthly
and evaluates all investment activities for safety and soundness, adherence to
the Bank's investment policy, and assurance that authority levels are
maintained.  The Bank's Investment Officer is responsible for making securities
investment portfolio decisions in accordance with the Bank's policies.  While
the Investment Officer has the authority to conduct trades within specific
guidelines established by the Bank's investment policy, all transactions are
reviewed by the Asset/Liability  Committee on an ongoing  basis and reported to
the Board of Trustees on a monthly basis.

  The Bank's current policies generally permit securities investments in various
types of assets, including  U.S. Government and agency securities, investment-
grade corporate debt obligations, various types of mortgage-backed and mortgage-
related securities, including CMOs, insured certificates of deposits and
corporate equities.  In addition, the Bank's policies permit investments in
short-term commercial paper and various municipal and other bonds and
obligations.  The Bank's current securities investment strategy is to
deemphasize its investment in U.S. government obligations, corporate debt and
municipal bonds and to emphasize the purchase of mortgage-backed and mortgage
related securities and equities in order to increase its overall investment
securities yield while remaining in short- and medium-term investments for
purposes of interest rate risk management.

  The Bank currently does not participate in hedging programs, interest rate
swaps, or other activities involving use of off-balance sheet derivative
financial instruments.  Similarly, the Bank does not invest in mortgage-related
securities which are deemed to be "high risk" by the federal banking regulators
or purchase bonds which are not rated investment grade.

  At June 30, 1997, the Bank had $437.4 million in securities, consisting
primarily of U.S. Government and agency obligations, mortgage-backed and
mortgage related securities, municipal, public utility and corporate obligations
and preferred and common stocks.  SFAS No. 115 requires the Bank to designate
its securities as held-to-maturity, available for sale or trading depending on
the Bank's intent regarding its investments.  The Bank does not currently
maintain a trading portfolio of securities.  In accordance with the Special
Report of the FASB regarding SFAS No. 115, in   November, 1995, the Bank
reclassified $26 million of securities from held to maturity to available-for-
sale.  See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Comparison of Financial Condition at June 30, 1997 and
June 30, 1996."  As of June 30, 1997, $47.1 million of the Bank's securities
portfolio, or 4.7% of total assets was classified as available-for-sale, with an
average life of the portfolio of 5.3 years.  At such date, $390.3 million of the
Bank's securities portfolio, or 39.3% of total assets, was classified as held-
to-maturity, with a market value of $391.9 million and an average life of the
portfolio of 3.0 years.

  Mortgage-Backed and Mortgage Related Securities.  The Bank purchases mortgage-
backed and mortgage related securities in order to:  (i) generate positive
interest rate spreads with minimal administrative expense and (ii) improve its
credit risk as a result of the guarantees provided by FHLMC, FNMA, and GNMA.
The Bank has primarily invested in mortgage-backed securities issued or
sponsored by FNMA, FHLMC and GNMA and private issuers.  The Bank also invests in
mortgage related securities, primarily CMOs, issued or sponsored by FNMA and
FHLMC as well as private issuers.  At June 30, 1997, mortgage-

                                       71
<PAGE>
 
backed and mortgage related securities totalled $212.5 million, or 21.4% of
total assets and 22.5% of total interest earning assets of which $27.4 million
was classified as available-for-sale and $185.1 million was classified as held-
to-maturity as compared to $81.7 million, or 9.9% of total interest earning
assets at June 30, 1996. The increase in such securities reflects management's
recent revision to its securities investment strategy whereby it has decreased
its emphasis on debt securities by investing funds from maturing debt securities
into mortgage-backed and mortgage-related securities. At June 30, 1997, 18.4% of
the mortgage-backed and mortgage related securities were adjustable-rate and
81.6% were fixed-rate. The mortgage-backed and mortgage related securities
portfolio had coupon rates ranging from 5% to 11% and had a weighted average
yield of 7.22% at June 30, 1997. The estimated fair value of the Bank's 
mortgage-backed securities available-for-sale at June 30, 1997, was $27.4 
million, which is $114,000 greater than the amortized cost of $27.3 million.

  Mortgage-backed securities are created by the pooling of mortgages and
issuance of a security with an interest rate which is less than the interest
rate on the underlying mortgage.  Mortgage-backed securities typically represent
a participation interest in a pool of single-family or multi-family mortgages,
although the Bank focuses its investments on mortgage-backed securities backed
by single-family mortgages.  The issuers of such securities (generally U.S.
Government agencies and government sponsored enterprises, including FNMA, FHLMC
and GNMA) pool and resell the participation interests in the form of securities
to investors such as the Bank and guarantee the payment of principal and
interest to investors.  Mortgage-backed securities generally yield less than the
loans that underlie such securities because of the cost of payment guarantees
and credit enhancements.  In addition, mortgage-backed securities are usually
more liquid than individual mortgage loans and may be used to collateralize
certain liabilities and obligations of the Bank.  Investments in mortgage-backed
securities involve a risk that actual prepayments will be greater than estimated
prepayments over the life of the security, which may require adjustments to the
amortization of any premium or accretion of any discount relating to such
instruments thereby impacting  the net yield on such securities.  There is also
reinvestment risk associated with the cash flows from such securities or in the
event such securities are redeemed by the issuer.  In addition, the market value
of such securities may be adversely affected by changes in interest rates.  The
Bank estimates prepayments for its mortgage-backed securities at purchase to
ensure that prepayment assumptions are reasonable considering the underlying
collateral for the mortgage-backed securities at issue and current mortgage
interest rates and to determine the yield and estimated maturity of its
mortgage-backed security portfolio.  Of the Bank's $212.5 million mortgage-
backed securities portfolio at June 30, 1997, $35.1 million with a weighted
average yield of 6.03% had contractual maturities within five years and $177.4
million with a weighted average yield of 7.46% had contractual maturities over
five years.  However, the actual maturity of a mortgage-backed security may be
less than its stated maturity due to prepayments of the underlying mortgages.
Prepayments that are faster than anticipated may shorten the estimated life of
the security and may result in a loss of any premiums paid and thereby reduce
the net yield on such securities.  Although prepayments of underlying mortgages
depend on many factors, the difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates generally is the
most significant determinant of the rate of prepayments.  During periods of
declining mortgage interest rates, refinancing generally increases and
accelerates the prepayment of the underlying mortgages and the related security.
Under such circumstances, the Bank may be subject to reinvestment risk because,
to the extent that the Bank's mortgage-backed securities prepay faster than
anticipated, the Bank may not be able to reinvest the proceeds of such
repayments and prepayments at a comparable rate.

  CMOs are a type of debt security issued by a special purpose entity that
aggregates pools of mortgages and mortgage-backed securities and creates
different classes of CMO securities with varying maturities and amortization
schedules as well as a residual interest with each class possessing different
risk characteristics.  The cash flows from the underlying collateral is
generally divided into "tranches" or classes whereby tranches have descending
priorities with respect to the distribution of principal and interest 

                                       72
<PAGE>
 
repayment of the underlying mortgages and mortgage-backed securities as opposed
to pass through mortgage-backed securities where cash flows are distributed pro
rata to all security holders. In contrast to mortgage-backed securities from
which cash flow is received (and hence, prepayment risk is shared) pro rata by
all securities holders, the cash flow from the mortgages or mortgage-backed
securities underlying CMOs is paid in accordance with a predetermined priority
to investors holding various tranches of such securities or obligations. A
particular tranche of CMOs may therefore carry prepayment risk that differs from
that of both the underlying collateral and other tranches. Accordingly, CMOs
attempt to moderate reinvestment risk associated with conventional mortgage-
backed securities resulting from unexpected prepayment activity. Investments in
CMOs involve a risk that actual prepayments will differ from those estimated in
pricing the security, which may result in adjustments to the net yield on such
securities. Additionally, the market value of such securities may be adversely
affected by changes in the market interest rates. Management believes these
securities may represent attractive alternatives relative to other investments
due to the wide variety of maturity, repayment and interest rate options
available.

  At June 30, 1997, the Bank's CMO portfolio totalled $115.2 million, or 11.6%,
of total assets and 12.2% of total interest earning assets, consisting of $78.3
million of CMOs issued by private issuers such as PNC Mortgage Corporation,
Prudential Home Mortgage Securities, Inc., and GE Capital Mortgage Services,
Inc. and $36.9 million issued by government sponsored agencies such as FNMA and
FHLMC.  Prior to purchasing CMOs, each CMO is tested for Federal Financial
Institutions Examination Counsel ("FFIEC") qualification as it is the policy of
the Bank to limit its privately issued CMOs to non-high risk securities rated
"AAA" by two rating agencies with an average life of ten years or less.  The
Bank also limits the amount of such investments to 15% of the Bank's assets and
5% of the Bank's assets for any individual issuer of privately issued CMOs.  For
government sponsored CMOs, the Bank's policy limits such investments to non-high
risk securities that have an average life of ten years or less.  The Bank also
limits the amount of such investments to $10 million per transaction.  The Bank
monitors the credit rating of its CMOs on a regular basis.  The current
securities investment policy of the Bank prohibits the purchase of higher risk
CMOs, which are defined as those securities exhibiting significantly greater
volatility of estimated average life and price relative to interest rates than
do standard 30-year fixed rate securities.  At June 30, 1997, $15.6 million of
the Bank's CMO portfolio was classified as available-for-sale and $99.6 million
was classified as held-to-maturity with a market value of $99.7 million.  At
such date, the Bank's CMO portfolio had an average estimated life of 2.8 years
and an average weighted yield of 7.33%.

  Debt and Equity Securities.  The Bank's investment in debt securities
generally consists of investments in U.S. Treasury securities and debt
securities issued by government sponsored agencies such as FNMA, FHLB and FHLMC.
The Bank also invests in debt securities issued by industrial and financial
companies and obligations of municipalities and public utilities.  During 1997,
the Bank revised its investment strategy whereby it has decreased its emphasis
on investment in debt securities and has emphasized its investment in mortgage-
backed and mortgage-related securities.  The Bank's current policy is to allow
such securities to mature.

  U.S. Government and Agency Obligations.  At June 30, 1997, the Bank's U.S.
  --------------------------------------                                    
Government securities portfolio totalled $52.8 million, all of which were
classified as held-to-maturity.  Such portfolio primarily consists of short- to
medium-term (maturities of one to five years) securities.  At June 30, 1997, the
Bank's agency securities portfolio totalled $39.5 million, all of which was
classified as held-to-maturity and consisted of agency callable debentures.  The
Bank's callable agency debentures generally are callable on either a quarterly
or semi-annual basis following a holding period of three to six  months.  The
current policy of the Bank limits the purchase of agency debt obligations to a
maturity of ten years or less and limits such purchases to $10 million per
transaction.

                                       73
<PAGE>
 
  Corporate Bonds.  The Bank's corporate bond portfolio, which at June 30, 1997
  ---------------                                                              
totalled $68.5 million, all of which is classified as held-to-maturity, was
composed primarily of short- and medium-term, fixed-rate investment grade
corporate issues.  At June 30, 1997, the portfolio had an average life of
approximately 1.1 years and an average coupon rate of 7.0%.  The Bank's policy
limits investments in corporate bonds to bonds rated "A" or higher and to a
total investment of 25% of the Bank's assets, with a 1% limitation of a single
issuer.

  Public Utility Bonds.  The Bank's public utility bond portfolio, which at June
  --------------------                                                          
30, 1997 totalled $36.5 million, all of which are classified as held-to-
maturity, generally consists of bonds issued by electric and gas utilities and
telephone companies.  All of the Bank's public utility bonds are rated "A" or
higher.  The Bank's policies limit investments in gas and electric utility bonds
and telephone company bonds to 10% of total assets, each, and limit investment
in obligations of any one issuer to 1% of assets.  At June 30, 1997, the average
life of the portfolio was approximately 1.9 years and the portfolio had an
average coupon rate of 6.50%.

  Municipal Bonds.  The Bank's municipal bond portfolio, which at June 30, 1997
  ---------------                                                              
was comprised of bonds issued by New York State agencies which totalled $1.1
million, had an estimated fair value of $1.2 million.  All of such securities
were classified as held-to-maturity and were comprised of revenue bonds.  All of
the Bank's municipal bonds are currently rated "A" or better.  At such date the
average life of the portfolio was approximately 11.3 years and the portfolio had
an average coupon rate of 6.10%.  Interest earned on municipal bonds is exempt
from federal, state and local income taxes.

  Equity Securities.  At June 30, 1997, the Bank's equity securities portfolio
  -----------------                                                           
totalled $19.7 million all of which were classified as available-for-sale.  Such
portfolio consisted of a $1.7 million investment in mutual funds, and $14.1
million in preferred stock issued by corporate issuers and $3.8 million of
common stock.  The Bank benefits from its investment in common and preferred
stocks due to a tax deduction the Bank receives with regard to dividends paid by
corporate issuers on equity securities held by other corporate entities such as
the Bank.  Accordingly, on  a tax equivalent basis, the yield on the Bank's
equity portfolio was 8.54%.  The Bank's policy limit for its common and
preferred stock investments is 5% of its total assets with a 0.5% limitation on
the purchase of any single issuer, with the exception of government agency
preferred stock, which limit is 5% per issuer.  The Bank's current policies
permit the purchase of preferred stock rated "AA" or better.  The substantial
majority of the Bank's preferred stock is redeemable by issuers after five
years.  The Bank has retained an independent third party to advise it on its
common stock portfolio.  The independent third party does not have discretionary
authority to purchase or sell common stock on behalf of the Bank.  See
"Regulation and Supervision--FDIC Regulations."

                                       74
<PAGE>
 
  The following table sets forth the composition of the Bank's debt and equity
and mortgage-backed and mortgage related securities portfolios in dollar amounts
and in percentages at the dates indicated:
<TABLE>
<CAPTION>

                                                                                  At June 30,
                                                      --------------------------------------------------------------------
                                                                1997                  1996                   1995
                                                      -----------------------  ---------------------  --------------------
                                                                     Percent                Percent                Percent
                                                          Amount    of Total     Amount    of Total     Amount    of Total
                                                       ----------  ----------  ---------  ----------  ---------  ---------
                                                                        (Dollars in thousands)
<S>                                                    <C>            <C>      <C>          <C>       <C>          <C>
Debt securities:
   Corporate bonds.....................................  $ 68,483      15.66%   $110,714      26.94%   $108,334      28.32%
   U.S. Government obligations.........................    52,757      12.06     120,045      29.21     152,783      39.94
   Agency securities...................................    39,457       9.02      49,472      12.03          --         --
   Public Utilities....................................    36,489       8.34      39,257       9.55      13,237       3.46
   Municipal bonds.....................................     1,149       0.26       1,188       0.28       1,199       0.31
   Other debt obligations(1)...........................     6,866       1.57       6,976       1.70      12,326       3.22
                                                          -------      -----     -------      -----     -------      -----
       Total debt securities...........................   205,201      46.91     327,652      79.71     287,879      75.25
                                                          -------      -----     -------      -----     -------      -----
Equity securities:
   Preferred stock.....................................    14,158       3.24          24       0.01          34       0.01
   Common stock........................................     3,814       0.87         156       0.04         149       0.04
   Mutual funds........................................     1,734       0.40       1,527       0.37         424       0.11
                                                          -------      -----     -------      -----     -------      -----
       Total equity securities.........................    19,706       4.51       1,707       0.42         607       0.16
                                                          -------      -----     -------      -----     -------      -----
Mortgage-backed and mortgage
  related securities:
   FHLMC...............................................    82,237      18.80      80,284      19.53      92,404      24.15
   GNMA................................................    11,824       2.70       1,394       0.34       1,683       0.44
   Private issuer......................................     3,276       0.75          --         --          --         --
   Agency CMOs.........................................    36,934       8.44          --         --          --         --
   Private issuer CMOs.................................    78,249      17.89          --         --          --         --
                                                          -------      -----     -------      -----     -------      -----
       Total mortgage-backed and mortgage
       related securities..............................   212,520      48.58      81,678      19.87      94,087      24.59
                                                          -------      -----     -------      -----     -------      -----
                Total securities.......................  $437,427     100.00%   $411,037     100.00%   $382,573     100.00%
                                                         ========     ======    ========     ======    ========     ======

Debt and equity securities
  available-for-sale...................................  $ 19,706       4.51%   $ 21,659       5.27%   $    607       0.16%
Debt and equity securities held-to-maturity............   205,201      46.91     307,700      74.86     287,879      75.25
                                                          -------      -----     -------      -----     -------      -----
         Total debt and equity securities..............   224,907      51.42     329,359      80.13     288,486      75.41
                                                          -------      -----     -------      -----     -------      -----
Mortgage-backed and mortgage related
  securities available-for-sale........................    27,398       6.26       1,394       0.34       1,683       0.44
Mortgage-backed and mortgage related
  securities held-to-maturity..........................   185,122      42.32      80,284      19.53      92,404      24.15
                                                          -------      -----     -------      -----     -------      -----
  Total mortgage-backed and mortgage
   related securities..................................   212,520      48.58      81,678      19.87      94,087      24.59
                                                          -------      -----     -------      -----     -------      -----
         Total securities..............................  $437,427     100.00%   $411,037     100.00%   $382,573     100.00%
                                                         ========     ======    ========     ======    ========     ======
</TABLE>
------------------
(1)  Consists of railroad, foreign and other bonds.

                                       75
<PAGE>
 
  The following table sets forth the Bank's securities activities for the
periods indicated:
<TABLE>
<CAPTION>
                                                          For the Year
                                                          Ended June 30,
                                            ----------------------------------------
                                                   1997        1996       1995
                                            --------------  ----------  ------------
                                                          (In thousands)
<S>                                            <C>          <C>        <C>
BEGINNING BALANCE.............................   $411,037    $382,573   $403,740
                                                 --------    --------   --------
Debt and equity securities purchased - held-
  to-maturity.................................     17,611     150,256     90,365
Debt and equity securities purchased -
  available-for-sale..........................     17,678       1,064      2,273

Mortgage-backed and mortgage related
  securities purchased -
   held-to-maturity...........................    133,668      15,197     29,218
Mortgage-backed and mortgage related
securities purchased -
 available-for-sale...........................     26,478          --         --

LESS:
Sale of debt and equity securities -
 available-for-sale...........................     11,938          10      2,132
Sale of mortgage-banked and mortgage related 
  securities - available-for-sale.............         --       5,940         --
Principal repayments on mortgage - backed
 and mortgage related securities - held-to-
  maturity....................................     25,315      21,305      9,757
Principal repayments on mortgage-backed
 and mortgage relates securities - available-
  for-sale..................................          479         410        505
Maturities of debt securities.................    127,005     107,658    125,877
Maturities of mortgage-backed and
 mortgage related securities..................      3,609          --         --
Realized (gains) losses received on sales
 of mortgage-backed and mortgage related
 securities...................................         --         (19)        --
Realized and unrealized (gains) losses
 on debt and equity securities................        110          (9)       125
Accretion of discount/Amortization of
 (premium)....................................      1,039       2,769      4,753
Change in net unrealized (gains) losses
 on available-for-sale securities.............       (450)        (11)      (126)
                                                 --------    --------   --------
ENDING BALANCE................................   $437,427    $411,037   $382,573
                                                 ========    ========   ========
</TABLE>

                                       76
<PAGE>
 
  The following table sets forth certain information regarding the amortized
cost and market values of the Bank's debt and equity and mortgage-backed and
mortgage related securities, at the dates indicated:
<TABLE>
<CAPTION>
                                                                                  At June 30,
                                                -----------------------------------------------------------------------------
                                                         1997                        1996                        1995
                                                ---------------------       ---------------------       ---------------------
                                                Amortized     Market        Amortized     Market        Amortized     Market
                                                  Cost        Value            Cost       Value           Cost        Value
                                                ---------    --------       ----------   --------       ---------   ---------
                                                                                (In thousands)
<S>                                             <C>          <C>            <C>          <C>            <C>         <C>
Debt securities held-to-maturity:
 U.S. Government obligations...................  $ 52,757    $ 52,815        $100,093    $ 99,897        $152,783    $152,590
 Agency securities.............................    39,457      39,522          49,472      49,076              --          --
 Municipal bonds...............................     1,149       1,198           1,188       1,212           1,199       1,226
 Corporate obligations.........................   104,972     104,930         149,970     149,431         121,571     121,709
 Other debt obligations........................     6,866       6,897           6,977       6,993          12,326      12,229
                                                 --------    --------        --------    --------        --------    -------
  Total debt securities held-to-
   maturity....................................   205,201     205,362         307,700     306,609         287,879     287,754
                                                 --------    --------        --------    --------        --------    -------
Debt securities available-for-sale:
 U.S. Government obligations...................        --          --          19,967      19,952              --         --
                                                 --------    --------        --------    --------        --------    -------
 Total debt securities available-for sale......        --          --          19,967      19,952              --         --
                                                 --------    --------        --------    --------        --------    -------
Equity securities available-for-sale:
 Mutual funds..................................     1,629       1,734           1,521       1,527             457        424
 Preferred stock...............................    14,027      14,158              27          24              36         34
 Common stock..................................     3,578       3,814             109         156             109        149
                                                 --------    --------        --------    --------        --------    -------
  Total equity securities
    available-for-sale.........................    19,234      19,706           1,657       1,707             602        607
                                                 --------    --------        --------    --------        --------    -------
Mortgage-backed and mortgage related
 securities:
 Held-to-maturity:
  FHLMC........................................    82,237      83,584          80,284      80,631          92,404     92,589
  Private issuer...............................     3,276       3,281              --          --              --         --
  Agency CMOs..................................    32,248      32,336              --          --              --         --
  Private Issuer CMOs..........................    67,361      67,392              --          --              --         --
                                                 --------    --------        --------    --------        --------    -------
Total mortgage-backed and mortgage
 related securities held-to-maturity...........   185,122     186,593          80,284      80,631          92,404     92,589
                                                 --------    --------        --------    --------        --------    -------
 Available-for-sale:
  GNMA.........................................    11,710      11,824           1,292       1,394           1,562      1,683
  Agency CMOs..................................     4,693       4,686
  Private issuer CMOs..........................    10,881      10,888              --          --              --         --
                                                 --------    --------        --------    --------        --------    -------
   Total mortgage-backed and mortgage related
    securities available-for-sale..............    27,284      27,398           1,292       1,394           1,562      1,683
                                                 --------    --------        --------    --------        --------    -------
Net unrealized (losses) gains
    on available-for-sale securities...........       586          --             137          --             126         --
                                                 --------    --------        --------    --------        --------    -------
Total securities...............................  $437,427    $439,059        $411,037    $410,293        $382,573   $382,632
                                                 ========    ========        ========    ========        ========   ========
</TABLE>

                                       77
<PAGE>
 
  The table below sets forth certain information regarding the carrying value,
weighted average yields and contractual maturities of the Bank's securities
portfolio as of June 30, 1997.
<TABLE>
<CAPTION>

                                                                      At June 30, 1997
                                  --------------------------------------------------------------------------------------------
                                                            More than One          More than Five
                                    One Year or Less       Year to Five Years    Years to Ten Years      More than Ten Years
                                  --------------------    -------------------    -------------------     --------------------
                                              Weighted               Weighted               Weighted                Weighted
                                   Carrying    Average    Carrying    Average    Carrying    Average     Carrying   Average
                                    Value       Yield      Value       Yield      Value       Yield       Value      Yield
                                  ---------   --------    --------   --------    --------   --------     --------   ---------
                                                                      (Dollars in thousands)
<S>                               <C>         <C>       <C>          <C>         <C>        <C>        <C>          <C>

Held-to-maturity:
 Debt securities:
  Municipal bonds................ $    --         --%   $    100       6.20%     $  290       6.50%    $    759       5.94%
  U.S. Government obligations....  21,374       6.50      31,383       6.03          --         --           --         --
  Agency securities..............      --         --      38,459       6.42         998       7.09           --         --
  Public utilities...............  16,346       6.37      18,438       6.56       1,105       6.48          600       7.32
  Corporate obligations..........  42,802       6.40      25,681       6.08          --         --           --         --
  Other debt obligations.........   4,594       5.70       2,272       7.16          --         --           --         --
                                    -----                  -----                  -----                   -----
   Total debt securities held-
     to-maturity.................  85,116       6.38     116,333       6.27       2,393       6.74        1,359       6.55
                                   ------                -------                  -----                   -----
Mortgage-backed and mortgage
 related securities:
 FHLMC...........................   2,197       6.05      32,871       6.03          --         --       47,169       7.78
 Private issuer..................      --         --          --         --          --         --        3,276       7.27
 Agency CMOs.....................      --         --          --         --          --         --       32,248       7.62
 Private issuer CMOs.............      --         --          --         --          --         --       67,361       7.22
                                    -----                  -----                   ----                  ------
  Total mortgage-backed and
    mortgage related securities
    held-to-maturity.............   2,197       6.05      32,871       6.03          --         --      150,054       7.48
                                    -----                 ------                  -----                 -------
 Total securities
  held-to-maturity...............  87,313       6.37     149,204       6.22       2,393       6.74      151,413       7.47
                                   ------                -------                  -----                 -------
Available-for-sale:
 Mortgage-backed and mortgage
  related securities:
  GNMA...........................      --         --          --         --          36       8.34       11,788       7.35
  Agency CMOs....................      --         --          --         --          --         --        4,686       7.33
  Private issuer CMOs............      --         --          --         --          --         --       10,888       7.19
                                  -------               --------                 ------                  ------
   Total mortgage-backed and
    mortgage related securities
    available-for-sale...........      --         --          --         --          36       8.34       27,362       7.28
 Equity securities:
  Mutual Funds...................      --         --          --         --          --         --           --         --
  Preferred stock................      --         --          --         --          --         --           --         --
  Common stock...................      --         --          --         --          --         --           --         --
                                  -------               --------                 ------                --------
   Total equity securities.......      --         --          --         --          --         --           --         --
                                  -------               --------                 ------                --------
   Total securities available-
    for-sale.....................      --         --          --         --          36       8.34       27,362       7.28
                                  -------               --------                 ------                --------
Total Securities................. $87,313       6.37    $149,204       6.22      $2,429       6.76     $178,775       7.44
                                  =======               ========                 ======                ========
<CAPTION>

                                       At June 30, 1997
                                     --------------------
                                           Total
                                     --------------------
                                                Weighted
                                     Carrying   Average
                                      Value      Yield
                                     --------   --------
                                   (Dollars in thousands)
<S>                                  <C>        <C>

Held-to-maturity:
 Debt securities:
  Municipal bonds................    $  1,149      6.10%
  U.S. Government obligations....      52,757      6.22
  Agency securities..............      39,457      6.43
  Public utilities...............      36,489      6.48
  Corporate obligations..........      68,483      6.28
  Other debt obligations.........       6,866      6.18
                                        -----
   Total debt securities held-
     to-maturity.................     205,201      6.32
                                      -------
Mortgage-backed and mortgage
 related securities:
 FHLMC...........................      82,237      7.03
 Private issuer..................       3,276      7.27
 Agency CMOs.....................      32,248      7.62
 Private issuer CMOs.............      67,361      7.22
                                       ------
  Total mortgage-backed and
    mortgage related securities
    held-to-maturity.............     185,122      7.21
                                      -------
 Total securities
  held-to-maturity...............     390,323      6.74
                                      -------
Available-for-sale:
 Mortgage-backed and mortgage
  related securities:
  GNMA...........................      11,824      7.35
  Agency CMOs....................       4,686      7.33
  Private issuer CMOs............      10,888      7.19
                                       ------
   Total mortgage-backed and
    mortgage related securities
    available-for-sale...........      27,398      7.28
                                       ------
 Equity securities:
  Mutual Funds...................       1,734      3.95
  Preferred stock................      14,158      6.20
  Common stock...................       3,814      1.63
                                        -----
   Total equity securities.......      19,706      5.12
                                       ------
   Total securities available-
    for-sale.....................      47,104      6.38
                                       ------
Total Securities.................    $437,426      6.70
                                     ========

</TABLE>

                                       78
<PAGE>
 
SOURCES OF FUNDS

  General.  Deposits, repayments and prepayments of loans and securities,
proceeds from sales of loans and securities, and proceeds from maturing
securities and cash flows from operations are the primary sources of the Bank's
funds for use in lending, investing and for other general purposes.  To a lesser
extent, the Bank utilizes borrowed funds to fund its operations.  The Bank has
applied for membership in the FHLB system, which, if approved, will provide
another source of borrowed funds.

  Deposits.  The Bank offers a variety of deposit accounts with a range of
interest rates and terms.  The Bank's deposit accounts consist of savings,
retail checking/NOW accounts, commercial checking accounts, money market
accounts, club accounts and certificates of deposit accounts.  The Bank offers
jumbo certificate of deposit accounts and also offers Individual Retirement
Accounts ("IRAs") and other qualified plan accounts.  While jumbo certificate
accounts are accepted by the Bank, and may be subject to preferential rates, the
Bank does not actively solicit such deposits as such deposits are more difficult
to retain than core deposits.

  At June 30, 1997, the Bank's deposits totalled $884.5 million, of which 89.5%
were interest-bearing deposits. For the year ended June 30, 1997, the average
balance of core deposits totalled $563.8 million, or 67.3% of total average
deposits. At June 30, 1997, the Bank had a total of $298.1 million in
certificates of deposit, of which $209.1 million had maturities of one year or
less. For the year ended June 30, 1996, the average balance of core deposits
represented approximately 69.0% of total deposits and certificate accounts
represented 31.0%, as compared to core deposits representing 67.3% of total
deposits and certificate accounts representing 32.7% of deposits for the year
ended June 30, 1997. See "Risk Factors - Sensitivity to Increases in Interest
Rates." Although the Bank has a significant portion of its deposits in savings
accounts, management monitors activity on the Bank's savings accounts and, based
on historical experience and the Bank's current pricing strategy, believes it
will continue to retain a large portion of such accounts. The Bank is not
limited with respect to the rates it may offer on deposit products.

  The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition.  The Bank's deposits are obtained predominantly from the areas in
which its branch offices are located.  The Bank relies primarily on customer
service and long-standing relationships with customers to attract and retain
these deposits; however, market interest rates and rates offered by competing
financial institutions affect the Bank's ability to attract and retain deposits.
The Bank uses traditional means of advertising its deposit products, including
television and print media and generally does not solicit deposits from outside
its market area.  While the Bank has historically not accepted brokered
deposits, the Bank is currently in the process of establishing relationships
with deposit brokers and may, in the future, utilize brokered deposits as a
funding source, depending on market conditions.

                                       79
<PAGE>
 
 The following table presents the deposit activity of the Bank for the periods
indicated.

<TABLE>
<CAPTION>
                                              For the Year Ended June 30,
                                             ------------------------------
                                              1997        1996       1995
                                             -------     -------    -------
<S>                                          <C>         <C>        <C>
                                                       (In thousands)
Net deposits (withdrawals)................   $38,896     $27,612    $(7,032)
Interest credited on deposit accounts.....    27,707      26,254     22,456
                                             -------     -------    -------
Total increase in deposit accounts........   $66,603     $53,866    $15,424
                                             =======     =======    =======

</TABLE>
  At June 30, 1997, the Bank had outstanding $27.4 million in certificate of
deposit accounts in amounts of $100,000 or more, maturing as follows:

<TABLE>
<CAPTION>
                                                            Weighted
        Maturity Period                Amount             Average Rate
-----------------------------------  -----------        ----------------
<S>                                  <C>                <C>
                                           (Dollars in thousands)
Three months or less................  $ 5,528                 5.06%
Over three through six months.......    5,727                 5.37
Over six through 12 months..........    6,296                 5.31
Over 12 months......................    9,890                 5.99
                                       ------
Total...............................  $27,441                 5.53
                                       ======
</TABLE>

                                       80
<PAGE>
 
  The following table sets forth the distribution of the Bank's average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits presented.  Averages for the periods presented utilize
average month-end balances.
<TABLE>
<CAPTION>


                                                                   For the Year Ended June 30,
                                  --------------------------------------------------------------------------------------------------
                                                1997                               1996                              1995
                                  ---------------------------------  --------------------------------  -----------------------------
                                               Percent                           Percent                           Percent
                                              of Total   Weighted               of Total   Weighted               of Total  Weighted
                                   Average     Average    Average    Average     Average    Average    Average     Average   Average
                                   Balance    Deposits     Rate      Balance    Deposits     Rate      Balance    Deposits     Rate
                                  ---------  ----------  ---------  ---------  ----------  ---------  ---------  ---------  -------
                                                                       (Dollars in thousands)
<S>                               <C>        <C>         <C>        <C>        <C>         <C>        <C>        <C>        <C>
Money market accounts............  $ 37,552       4.48%      3.48%   $ 28,430       3.64%      3.47%   $ 25,058       3.37%    2.93%
Savings accounts.................   432,162      51.61       2.74     430,500      55.09       2.75     462,720      62.15     2.74
NOW accounts.....................    15,652       1.87       2.36      14,602       1.87       2.42      13,724       1.84     2.66
Non-interest-bearing accounts....    78,483       9.37         --      65,670       8.40         --      54,864       7.37      --
                                  ---------     ------               --------     ------               --------     ------
  Total..........................   563,849      67.33       2.40     539,202      69.00       2.44     556,366      74.73     2.48
                                  ---------     ------               --------     ------               --------     ------

Certificates of deposit:
  Less than six months...........    30,437       3.64       4.38      30,360       3.89       4.55      33,593       4.51     3.52
  Over six through 12 months.....    46,188       5.52       4.90      39,924       5.11       4.91      35,013       4.70     3.94
  Over 12 through 24 months......   121,109      14.46       5.33     100,840      12.91       5.49      56,846       7.63     5.10
  Over 24 months.................    52,787       6.30       5.75      54,496       6.97       5.66      52,649       7.07     5.30
  Certificates over $100,000.....    23,025       2.75       5.32      16,577       2.12       5.39      10,111       1.36     4.73

    Total certificates of deposit   273,546      32.67                242,197      31.00                188,212      25.27         
                                   --------     ------               --------     ------               --------     ------
       Total average deposits....  $837,395     100.00%              $781,399     100.00%              $744,578     100.00%
                                   ========     ======               ========     ======               ========     ======
</TABLE>

                                       81
<PAGE>
 
  The following table presents, by various rate categories, the amount of
certificate of deposit accounts outstanding at the dates indicated.
<TABLE>
<CAPTION>
 
                                          Period to Maturity from June 30, 1997                            At June 30,
                          ---------------------------------------------------------------------    --------------------------
                          Less than    One to    Two to      Three to    Four to    Five years 
                          One Year   Two years Three years  Four years  Five years   or more        1997       1996      1995
                          ---------- --------- ----------- ----------- ------------ -----------    ------    -------   ------
                                                                       (In thousands)
<S>                      <C>         <C>       <C>         <C>         <C>          <C>          <C>         <C>       <C> 
Certificates of deposit:
0 to 4.00%.............  $  3,231       $    29     $   --     $   --     $   109     $   --     $  3,369     $  2,972   $  2,085
4.01 to 5.00%..........    68,377         7,118         39         --          --         --       75,534      155,120     78,134
5.01 to 6.00%..........   134,924        51,941      4,919      4,186       6,105      3,250      205,325       63,573     87,760
6.01 to 7.00%..........     2,545           490      1,771        285       3,845        617        9,553       28,167     58,495
7.01 to 8.00%..........        --            --         --        558       3,727         --        4,285        4,095         --
Over 8.00%.............        --            --         --         --          --         --           --           --         --  
                         --------       -------     ------     ------     -------     ------     --------     --------   --------
    Total..............  $209,077       $59,578     $6,729     $5,029     $13,786     $3,867     $298,066     $253,927   $226,474
                         ========       =======     ======     ======     =======     ======     ========     ========   ========
</TABLE>

                                       82
<PAGE>
 
  Borrowed Funds.  The Bank has historically not utilized borrowings as a source
of funding and has primarily depended on retail deposits to provide funding.  At
June 30, 1997, the Bank had no borrowed funds.  However, the Bank currently
maintains a $10.0 million line of credit with a regional financial institution
and has the ability to obtain funding through the use of reverse repurchase
agreements entered into with a nationally recognized investment banking firm.
The reverse purchase agreements  would generally be short-term and
collateralized by U.S. Treasury obligations or other liquid securities.  In
order to provide the Bank with an additional source of funding, the Bank has
recently applied to become a member of the FHLB, and anticipates receiving
approval by the end of October 1997.  The Bank, upon approval of its
application, may utilize advances from the FHLB from time-to-time as an
alternative to retail deposits to fund its operations in the future.  FHLB
advances may also be used to acquire certain other assets as may be deemed
appropriate for investment purposes.  These advances would  be collateralized
primarily by certain of the Bank's mortgage loans and mortgage-backed
securities.  See "Regulation and Supervision--Federal Home Loan Bank System."
Such advances are made pursuant to several different credit programs, each of
which has its own interest rate and range of maturities.  The maximum amount
that the FHLB will advance to member institutions fluctuates from time-to-time
in accordance with the policies of the OTS and the FHLB.

OTHER ACTIVITIES

  In addition to its traditional lending and deposit products, the Bank also
offers certain merchant banking services.  These include providing credit card
deposit accounts to local merchants. The Bank receives a processing fee from the
customer for each credit card transaction processed.  The Bank also receives
monthly income from terminal and printer sales and rentals.  For the year ended
June 30, 1997, $65,000, or 2.2% of total fee income, was attributable to credit
card processing fees.  In addition, the Bank has endorsed and promotes a credit
card through a national affinity credit card bank.  Under the program, the
affinity credit card bank receives and underwrites all credit card applications.
The Bank receives royalty payments based on new accounts and renewal accounts,
as well as a portion of finance charges assessed.  For the year ended June 30,
1997, the Bank received $42,000, or 1.4% of total fee income, through the
affinity credit card program.

SUBSIDIARY ACTIVITIES

  RCSB Corp.  RCSB Corp. ("RCSB"), a wholly-owned subsidiary of the Bank
incorporated in the State of New York in 1976, was formed to purchase three
branch buildings from the Bank, which are leased back to the Bank and which is
currently the only business activity conducted by RCSB.  The assets of RCSB
totalled $812,000 at June 30, 1997.

  Richmond Enterprises, Inc.  Richmond Enterprises, Inc., a wholly-owned
subsidiary of the Bank incorporated in the State of New York in 1983, previously
was a partner in a joint-venture real estate development project with a local
developer.  The development was completed in 1986, and Richmond Enterprises,
Inc. has been inactive since that date.  Its total assets as of June 30, 1997
were $4,000.

                                       83
<PAGE>
 
Properties

  The Bank currently conducts its business through thirteen full service banking
offices.  The following table sets forth the Bank's offices as of June 30, 1997.
The table does not include the public accommodation office the Bank intends to
open in 1998, nor does it include the two full service branch office facilities
the Bank is considering establishing.  With the exception of the lease for the
public accommodation office, there are no current agreements, understandings or
arrangements, oral or written, with respect to such offices, and no assurances
can be given that such offices will be opened.
<TABLE>
<CAPTION>
 
                                              Original                        Net Book Value    
                                                Year                           of Property or         Total 
                                  Leased       Leased            Date of         Leasehold          Deposits at 
                                    or           or               Lease       Improvements at         Branch 
           Location               Owned       Acquired          Expiration     June 30, 1997          Office
-----------------------------    -------     -----------       -------------  ----------------     -------------
Administrative/Home Office:                                    (DOLLARS IN THOUSANDS)
<S>                              <C>             <C>               <C>             <C>                    <C>  
West New Brighton Office (1):     Owned          1916              --             $ 563                 $ 57,019
1214 Castleton Avenue
Staten Island, NY  10310

BRANCH OFFICES:

Port Richmond Office (2):         Leased         1976            2001               118                   63,329
282 Port Richmond Avenue
Staten Island, NY 10302

Great Kills Office:               Owned          1975              --               677                   91,016
3879 Amboy Road
Staten Island, NY 10308

Annadale Office (2):              Leased         1976            2001               368                   64,678
820 Annadale Road
Staten Island, NY 10312

Bull's Head Office (2):           Leased         1976            2001               328                   61,792
1460 Richmond Avenue                             
Staten Island, NY 10314                          

Dongan Hills Office:              Owned          1974              --               537                   72,010
1833 Hylan Boulevard                             
Staten Island, NY 10305                          

New Springville Office:           Leased         1976            2005               333                  116,118
2555 Richmond Avenue                             
Staten Island, NY 10134                          

Woodrow Plaza Office:             Leased         1983            2013               191                   54,052
645-100 Rossville Avenue                         
Staten Island, NY 10309                          

Tottenville Office:               Owned          1988              --               274                   25,728
179 Main Street
Staten Island, NY 10307
 
</TABLE> 

                                       84
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                                                        Net Book Value
                                                        Original                        of Property or
                                                          Year                            Leasehold               Total
                                 Leased                  Leased          Date of         Improvements           Deposits at
                                    or                    or              Lease              at                   Branch
Location                          Owned                 Acquired        Expiration       June 30, 1997             Office
--------------------------      ---------             -----------       ----------       -------------          -----------
<S>                             <C>                   <C>               <C>              <C>                    <C>        
Westerleigh Office:               Owned                   1992              --             $   404                $ 57,067
832 Jewett Avenue
Staten Island, NY 10314

Eltingville Office (3):           Owned                   1992              --               1,340                  77,011
4523 Amboy Road
Staten Island, NY 10312

Grasmere Office:                  Leased                  1992            2005                 121                  51,268
1100 Hylan Boulevard
Staten Island, NY 10305

Brooklyn Office:                  Leased                  1977            1997                 346(4)               93,443
132 Avenue U
Brooklyn, NY 11223

PUBLIC ACCOMMODATION OFFICE:
Brooklyn Public Accommodation     Leased                  1980            1999                  --                      --
Office
81 Avenue U
Brooklyn, NY 11223
 
---------------------------
</TABLE>

(1)  Certain portions of the Bank's administrative operations are located at
     properties not included in the table.
(2)  Property is owned by RCSB Corp.
(3)  Eltingville office includes the Bank's lending center.
(4)  Together with Brooklyn Public Accommodation Office.


LEGAL PROCEEDINGS

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

PERSONNEL

     As of June 30, 1997, the Bank had 249 full-time employees and 113 part-time
employees.  The employees are not represented by a collective bargaining unit
and the Bank considers its relationship with its employees to be good.  See
"Management of the Bank - Benefit Plans" for a description of certain
compensation and benefit programs offered to the Bank's employees.

                                       85
<PAGE>
 
                           FEDERAL AND STATE TAXATION

FEDERAL TAXATION

     General.  The Company and the Bank will report their income on a
consolidated basis, using a calendar year and 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 treatment
of its reserve for bad debts discussed below.  The following discussion of tax
matters is intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Bank or the Company.  The Bank
had been audited by the IRS for the year ended December 31, 1992 resulting in a
refund of $27,000. The Bank was also audited by the State of New York for the
three-year period ended December 31, 1993, resulting in an assessment of tax
plus interest in the amount of $4,000.

     Bad Debt Reserves.    The Small Business Job Protection Act of 1996 (the
"1996 Act"), which was enacted on August 20, 1996, made significant changes to
provisions of the Code relating to a savings institution's use of bad debt
reserves for federal income tax purposes and requires such institutions to
recapture (i.e. take into income) certain portions of their accumulated bad debt
reserves.  The effect of the 1996 Act on the Bank is discussed below.  Prior to
the enactment of the 1996 Act, the Bank was permitted to establish tax reserves
for bad debts and to make annual additions thereto, which additions, within
specified formula limits, were deducted in arriving at the Bank's taxable
income.  The Bank's deduction with respect to "qualifying loans," which are
generally loans secured by certain interests in real property, could be computed
using an amount based on a six-year moving average of the Bank's actual loss
experience (the "Experience Method"), or a percentage equal to 8% of the Bank's
taxable income (the "PTI Method"), computed without regard to this deduction and
with additional modifications and reduced by the amount of any permitted
addition to the non-qualifying reserve.    The Bank's deduction with respect to
non-qualifying loans was required to be computed under the Experience Method.

     The 1996 Act.  Under the 1996 Act, for its current and future taxable
years, the Bank is not permitted to make additions to its tax bad debt reserves.
In addition, the Bank is required to recapture (i.e. take into income) over a
six year period the excess of the balance of its tax bad debt reserves as of
December 31, 1995 over the balance of such reserves as of December 31, 1987.  As
of December 31, 1995, $2.5 million of the Bank's bad debt reserve was subject to
recapture for which deferred taxes have been provided.

     Distributions.  Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of December 31, 1987) to the extent thereof, and an
amount based on the amount distributed (but not in excess of the amount of such
reserves) will be included in the Bank's income.  The term "Non-dividend
distributions" is defined as 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 cause this pre-1988 reserve to be 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, if, after the
Conversion, the Bank makes a non-dividend distribution to the Company,
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 Supervision" and "Dividend Policy" for limits on the payment of
dividends by the Bank.  

                                       86
<PAGE>
 
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 on alternative
minimum taxable income ("AMTI") at a rate of 20%.  Only 90% of AMTI can be
offset by net operating loss carryforwards.  The adjustment to AMTI based on
book income will be an amount equal to 75% of the amount by which a
corporation's adjusted current earnings exceeds its AMTI (determined without
regard to this adjustment and prior to reduction for net operating losses).
Certain payments of AMTI may be used as credits against regular tax liabilities
in future years.  For tax years prior to the 1996 tax year, the excess of the
bad debt reserve deduction using the percentage of taxable income method over
the deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI.  In addition,
for taxable years beginning after December 31, 1986 and before January 1, 1996,
an environmental tax of .12% of the excess of AMTI (with certain modifications)
over $2 million, is imposed on corporations, including the Bank, whether or not
an Alternative Minimum Tax ("AMT") is paid.  The Bank has not been subject to
the AMT, and no such amounts have been accrued for carryover.

     Dividends Received Deduction and Other Matters.  The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations.  The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
except that if the Company and the Bank own more than 20% of the stock of a
corporation distributing a dividend, then 80% of any dividends received may be
excluded.

STATE AND LOCAL TAXATION

     New York State and New York City Taxation.  The Bank is subject to the New
York State Franchise Tax on Banking Corporations in an annual amount equal to
the greater of (i) 9% of the Bank's "entire net income" allocable to New York
State during the taxable year, or (ii) the applicable alternative minimum tax.
The alternative minimum tax is generally the greatest of (a) .01% of the average
value of the taxable assets allocable to New York State with certain
modifications, (b) 3% of the Bank's "alternative entire net income" allocable to
New York State or (c) $250.  Entire net income is similar to federal taxable
income, subject to certain modifications (including that net operating losses
cannot be carried back or carried forward) and alternative entire net income is
equal to entire net income without certain adjustments.  The Bank is also
subject to New York City Corporation Tax which is imposed using SMTI or
alternative taxable income method.  For purposes of computing its entire net
income, the Bank is permitted a deduction for an addition to the reserve for
losses on qualifying real property loans.  For New York State and City purposes,
the applicable percentage to calculate bad debt deduction under the percentage
of taxable income method is 32%.  The New York State and New York City tax laws
were recently amended to prevent the recapture of tax bad debt reserves that
would otherwise occur as a result of the enactment of the 1996 Act for both New
York State and City tax purposes.  See "- Federal Taxation - Bad Debt Reserves."
However, the New York bad debt reserve is subject to recapture for "non-dividend
distributions" in a manner similar to the recapture of the federal bad debt
reserves for such distributions.  See "- Federal Taxation - Distributions".
Also, the New York bad debt reserve is subject to recapture in the event that
the Bank fails to satisfy certain definitional tests relating to its assets and
the nature of its business.  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.

     A Temporary Metropolitan Transportation Business Tax Surcharge on banking
corporations doing business in the metropolitan district has been applied since
1982.  The Bank does all of its business within this District and is subject to
this surcharge.  For the tax year ended December 31, 1997, the surcharge rate is
17% of the New York State Franchise Tax liability.

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     Delaware State Taxation.  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 with and pay an annual franchise tax to the
State of Delaware.

                           REGULATION AND SUPERVISION

GENERAL

     The Bank is a New York State chartered mutual savings bank and its deposit
accounts are insured up to applicable limits by the FDIC under the BIF.  The
Bank is subject to extensive regulation by the Superintendent, the NYBB, the
NYBD, as its chartering agency, and by the FDIC, as the deposit insurer.  The
Bank must file reports with the NYBD and the FDIC concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as establishing branches and mergers
with, or acquisitions of, other depository institutions.  There are periodic
examinations by the NYBD and the FDIC to assess the Bank's compliance with
various regulatory requirements and financial condition.  This regulation and
supervision establishes a framework of activities in which a savings bank can
engage and is intended primarily for the protection of the insurance fund and
depositors.  The regulatory structure also gives the regulatory authorities
extensive 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 regulation, whether by the NYBD,
the FDIC or through legislation, could have a material adverse impact on the
Company and the Bank and their operations and stockholders.  The Holding Company
will also be required to file certain reports with, and otherwise comply with
the rules and regulations, of the OTS, the NYBD and of the Securities and
Exchange Commission ("SEC") under the federal securities laws.  Certain of the
regulatory requirements applicable to the Bank and to the Holding Company are
referred to below or elsewhere herein.

NEW YORK STATE LAW
 
     The Bank derives its lending, investment and other authority primarily from
the applicable provisions of New York State Banking Law and the regulations of
the NYBB, as limited by FDIC regulations.  See "- Investment Activities."  Under
these laws and regulations, savings banks, including the Bank, may invest in
real estate mortgages, consumer and commercial loans, certain types of debt
securities, including certain corporate debt securities and obligations of
federal, state and local governments and agencies, certain types of corporate
equity securities and certain other assets.  Under the statutory authority for
investing in equity securities, a savings bank may directly invest up to 7.5% of
its assets in certain corporate stock and may also invest up to 7.5% of its
assets in certain mutual fund securities.  Investment in the stock of a single
corporation is limited to the lesser of 2% of the outstanding stock of such
corporation or 1% of the savings bank's assets, except as set forth below.  Such
equity securities must meet certain tests of financial performance.  A savings
bank's lending powers are not subject to percentage of asset limitations,
although there are limits applicable to single borrowers.  A savings bank may
also, pursuant to the "leeway" authority, make investments not otherwise
permitted under the New York State Banking Law.  This authority permits
investments  not otherwise authorized of up to 1% of the savings bank's assets
in any single investment, subject to certain restrictions and to an aggregate
limit for all such investments of up to 5% of assets.  Additionally, in lieu of
investing in such securities in accordance with and reliance upon the specific
investment authority set forth in the New York State Banking Law, savings banks
are authorized to elect to invest under a "prudent person" standard in a wider
range of debt and equity securities as compared to the types of investments
permissible under such specific investment authority.  However, in the event a
savings bank elects to utilize the "prudent person" standard, it will be unable
to avail itself of the other provisions 

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of the New York State Banking Law and regulations which set forth specific
investment authority. A New York State chartered stock savings bank may also
exercise trust powers upon approval of the New York State Banking Board.

     New York State chartered savings banks may also invest in subsidiaries
under their service corporation investment power.  A savings bank may use this
power to invest in corporations that engage in various activities authorized for
savings banks, plus any additional activities which may be authorized by the
NYBD.  Investment by a savings bank in the stock, capital notes and debentures
of its service corporations is limited to 3% of the bank's assets, and such
investments, together with the bank's loans to its service corporations, may not
exceed 10% of the savings bank's assets.

     The exercise by an FDIC-insured savings bank of the lending and investment
powers of a savings bank under the New York State Banking Law is limited by FDIC
regulations and other federal law and regulations.  In particular, the
applicable provisions of New York State Banking Law and regulations governing
the investment authority and activities of an FDIC insured state-chartered
savings bank have been effectively limited by the Federal Deposit Insurance
Corporation Improvement Act of 1991 and the FDIC regulations issued pursuant
thereto.  See "- Investment Activities."
 
     With certain limited exceptions, a New York State chartered savings bank
may not make loans or extend credit for commercial, corporate or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's net worth.  The Bank currently
complies with all applicable loans-to-one-borrower limitations.

     Under New York State Banking Law, a New York State chartered stock savings
bank may declare and pay dividends out of its net profits, unless there is an
impairment of capital, but approval of the Superintendent is required if the
total of all dividends declared in a calendar year would exceed the total of its
net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.

     Under the New York State Banking Law, the Superintendent may issue an order
to a New York State chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts.  Upon a finding by the NYBB that any
director, trustee or officer of any banking organization has violated any law,
or has continued unauthorized or unsafe practices in conducting the business of
the banking organization after having been notified by the Superintendent to
discontinue such practices, such director, trustee or officer may be removed
from office by the NYBB after notice and an opportunity to be heard.  The Bank
does not know of any past or current practice, condition or violation that might
lead to any proceeding by the Superintendent or the NYBB against the Bank or any
of its Trustees or officers.  The Superintendent also may take possession of a
banking organization under specified statutory criteria.

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<PAGE>
 
FDIC REGULATIONS

     Capital Requirements.  The FDIC has adopted risk-based capital guidelines
to which the Bank is subject.  The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations.  The Bank is required
to maintain certain levels of regulatory capital in relation to regulatory risk-
weighted assets.  The ratio of such regulatory capital to regulatory risk-
weighted assets is referred to as the Bank's "risk-based capital ratio."  Risk-
based capital ratios are determined by allocating assets and specified off-
balance sheet items to four risk-weighted categories ranging from 0% to 100%,
with higher levels of capital being required for the categories perceived as
representing greater risk.

     These guidelines divide a savings bank's capital into two tiers.  The first
tier ("Tier I") includes common equity, retained earnings, certain non-
cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions.  Savings banks are required to maintain a total risk-based
capital ratio of 8%, of which at least 4% must be Tier I capital.

     In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio (Tier I capital to adjusted total assets as specified in
the regulations).  These regulations provide for a minimum Tier I leverage ratio
of 3% for banks that meet certain specified criteria, including that they have
the highest examination rating and are not experiencing or anticipating
significant growth.  All other banks are required to maintain a Tier I leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points.  The
FDIC may, however, set higher leverage and risk-based capital requirements on
individual institutions when particular circumstances warrant.  Savings banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.

     The following is a summary of the Bank's regulatory capital at June 30,
1997:

          GAAP Capital to Total Assets             10.15%
          Total Capital to Risk-Weighted Assets    19.71%
          Tier I Leverage Ratio                    10.02%

     In August 1995, the FDIC, along with the other federal banking agencies,
adopted a regulation providing that the agencies will take account of the
exposure of a bank's capital and economic value to changes in interest rate risk
in assessing a bank's capital adequacy.  According to the agencies, applicable
considerations include the quality of the bank's interest rate risk management
process, the overall financial condition of the bank and the level of other
risks at the bank for which capital is needed.  Institutions with significant
interest rate risk may be required to hold additional capital.  The agencies
also have issued a joint policy statement providing guidance on interest rate
risk management, including a discussion of the critical factors affecting the
agencies' evaluation of interest rate risk in connection with capital adequacy.
The agencies have determined not to proceed with a previously issued proposal to
develop a supervisory framework for measuring interest rate risk and an explicit
capital component for interest rate risk.

     Standards for Safety and Soundness.  Federal law requires each federal
banking agency to prescribe for depository institutions under its jurisdiction
standards relating to, among other things, internal controls; information
systems and audit systems; loan documentation; credit underwriting; interest
rate risk exposure; 

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<PAGE>
 
asset growth; compensation; fees and benefits; and such other operational and
managerial standards as the agency deems appropriate. The federal banking
agencies adopted final regulations and Interagency Guidelines Establishing
Standards for Safety and Soundness (the "Guidelines") to implement these safety
and soundness standards. The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at insured depository institutions before capital becomes impaired. The
Guidelines address internal controls and information systems; internal audit
system; credit underwriting; loan documentation; interest rate risk exposure;
asset growth; asset quality; earnings and compensation; fees and benefits. If
the appropriate federal banking agency determines that an institution fails to
meet any standard prescribed by the Guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve compliance
with the standard, as required by the Federal Deposit Insurance Act, as amended,
("FDI Act"). The final regulation establishes deadlines for the submission and
review of such safety and soundness compliance plans.

     Real Estate Lending Standards.  The FDIC and the other federal banking
agencies have adopted regulations that prescribe standards for extensions of
credit that (i) are secured by real estate or (ii) are made for the purpose of
financing the construction or improvements on real estate.  The FDIC regulations
require each institution 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 institution and the nature and scope of its real
estate lending activities.  The standards also must be consistent with
accompanying FDIC guidelines, which include loan-to-value limitations for the
different types of real estate loans.  Institutions 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 standard are justified.

     Dividend Limitations.  The FDIC has authority to use its enforcement powers
to prohibit a savings bank from paying dividends if, in its opinion, the payment
of dividends would constitute an unsafe or unsound practice.  Federal law
prohibits the payment of dividends by a bank that will result in the bank
failing to meet applicable capital requirements on a pro forma basis.
Additionally, the Bank, as a subsidiary of a savings and loan holding company,
will be required to provide the OTS with 30 days prior written notice before
declaring any dividend.  The Plan of Conversion also restricts the Bank's
payment of dividends in the event the dividend would impair the liquidation
account established in connection with the Conversion.  The Bank is also subject
to dividend declaration restrictions imposed by New York law.  See "- New York
State Law" and  "Dividend Policy."

INVESTMENT ACTIVITIES

     Since the enactment of FDICIA, all state-chartered financial institutions,
including savings banks and their subsidiaries, have generally been limited to
activities as principal and equity investments of the type and in the amount
authorized for national banks, notwithstanding state law.  FDICIA and the FDIC
regulations thereunder permit certain exceptions to these limitations.  For
example, certain state chartered banks, such as the Bank, may, with FDIC
approval, continue to exercise state authority to invest in common or preferred
stocks listed on a national securities exchange or the Nasdaq National Market
and in the shares of an investment company registered under the Investment
Company Act of 1940, as amended.  Such banks may also continue to sell savings
bank life insurance.  In addition, the FDIC is authorized to permit such
institutions to engage in state authorized activities or investments that do not
meet this standard (other than non-subsidiary equity investments) for
institutions that meet all applicable capital requirements if it is determined
that such activities or investments do not pose a significant risk to the BIF.
The FDIC has recently proposed revisions to its regulations governing the
procedures for institutions seeking approval to engage in such activities or
investments.  These proposed revisions would, among other things, streamline
certain application procedures for healthy banks and impose certain quantitative
and qualitative restrictions 

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on a bank's dealings with its subsidiaries engaged in activities not permitted
for national bank subsidiaries. All non-subsidiary equity investments, unless
otherwise authorized or approved by the FDIC, must have been divested by
December 19, 1996, pursuant to a FDIC-approved divestiture plan unless such
investments were grandfathered by the FDIC. The Bank received grandfathering
authority from the FDIC in February, 1993 to invest in listed stocks and/or
registered shares subject to the maximum permissible investment of 100% of Tier
1 capital, as specified by the FDIC's regulations, or the maximum amount
permitted by New York State Banking Law, whichever is less. Such grandfathering
authority is subject to termination upon the FDIC's determination that such
investments pose a safety and soundness risk to the Bank or in the event the
Bank converts its charter or undergoes a change in control. As of June 30, 1997,
the Bank had $8.6 million of securities which were subject to such
grandfathering authority.

PROMPT CORRECTIVE REGULATORY ACTION

     Federal law requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements.  For these purposes, the law establishes five
capital tiers:  well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.

     The FDIC has adopted regulations to implement the prompt corrective action
legislation.  Among other things, the regulations define the relevant capital
measures for the five capital categories.  An institution is deemed to be "well
capitalized" if it has a total risk-based capital ratio of 10% or greater, a
Tier I risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or
greater, and is not subject to a regulatory order, agreement or directive to
meet and maintain a specific capital level for any capital measure.  An
institution is deemed to be "adequately capitalized" if it has a total risk-
based capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4% or
greater, and generally a leverage ratio of 4% or greater.  An institution is
deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a
leverage ratio of less than 4%.  An institution is deemed to be "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%, a
Tier I risk-based capital ratio of less than 3%, or a leverage ratio of less
than 3%.  An institution is deemed to be "critically undercapitalized" if it has
a ratio of tangible equity (as defined in the regulations) to total assets that
is equal to or less than 2%.

     "Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan.  A bank's compliance with such plan is required to be
guaranteed by any company that controls the undercapitalized institutions in an
amount equal to the lesser of 5.0% of the Bank's total assets when deemed
undercapitalized or the amount necessary to achieve the status of adequately
capitalized.  If an "undercapitalized" bank fails to submit an acceptable plan,
it is treated as if it is "significantly undercapitalized."  "Significantly
undercapitalized" banks are subject to one or more of a number of additional
restrictions, including but not limited to an order by the FDIC to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cease receipt of deposits from correspondent banks or dismiss
directors or officers, and restrictions on interest rates paid on deposits,
compensation of executive officers and capital distributions by the parent
holding company.  "Critically undercapitalized" institutions also may not,
beginning 60 days after becoming "critically undercapitalized," make any payment
of principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into any material transaction outside the
ordinary course of business.  In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator.
Generally, subject to a narrow exception, the appointment of a receiver or
conservator is required for a "critically undercapitalized" institution within
270 days after it obtains such status.

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TRANSACTIONS WITH AFFILIATES

     Under current federal law, transactions between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act.  An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary.  In a holding company context, at a minimum, the parent holding
company of a savings bank and any companies which are controlled by such parent
holding company are affiliates of the savings bank.  The FRB has proposed
regulations that would treat as an affiliate any subsidiary of a savings bank
that engages in activities not permissible for the parent savings bank to engage
in directly.  Generally, Section 23A limits the extent to which the savings bank
or its subsidiaries may engage in "covered transactions" with any one affiliate
to an amount equal to 10% of such savings bank's capital stock and surplus, and
contains an aggregate limit on all such transactions with all affiliates to an
amount equal to 20% of such capital stock and surplus.  The term "covered
transaction" includes the making of loans or other extensions of credit to an
affiliate; the purchase of assets from an affiliate, the purchase of, or an
investment in, the securities of an affiliate; the acceptance of securities of
an affiliate as collateral for a loan or extension of credit to any person; or
issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate.  Section 23A also establishes specific collateral requirements for
loans or extensions of credit to, or guarantees, acceptances on letters of
credit issued on behalf of an affiliate.  Section 23B requires that covered
transactions and a broad list of other specified transactions be on terms
substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with nonaffiliates.

     Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders.  Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers, and shareholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the board of directors of the savings bank.  Any "interested"
director may not participate in the voting.  The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000.  Further, pursuant to Section 22(h), loans to
directors, executive officers and principal shareholders must be made on terms
substantially the same as offered in comparable transactions to other persons
except for extensions of credit made pursuant to a benefit or compensation
program that is widely available to the institution's employees and does not
give preference to insiders over other employees.  Section 22(g) of the Federal
Reserve Act places additional limitations on loans to executive officers.

ENFORCEMENT

     The FDIC has extensive enforcement authority over insured savings banks,
including the Bank.  This enforcement authority includes, among other things,
the ability to assess civil money penalties, to issue cease and desist orders
and to remove directors and officers.  In general, these enforcement actions may
be initiated in response to violations of laws and regulations and to unsafe or
unsound practices.

     The FDIC has authority under federal law to appoint a conservator or
receiver for an insured savings bank under certain circumstances.  The FDIC is
required, with certain exceptions, to appoint a receiver or conservator for an
insured state savings bank if that savings bank was "critically
undercapitalized" on average during the calendar quarter beginning 270 days
after the date on which the savings bank became "critically undercapitalized."
For this purpose, "critically undercapitalized" means having a ratio of tangible
capital to 

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total assets of less than 2%. See "- Prompt Corrective Regulatory Action." The
FDIC may also appoint a conservator or receiver for a state savings bank on the
basis of the institution's financial condition or upon the occurrence of certain
events, including: (i) insolvency (whereby the assets of the savings bank are
less than its liabilities to depositors and others); (ii) substantial
dissipation of assets or earnings through violations of law or unsafe or unsound
practices; (iii) existence of an unsafe or unsound condition to transact
business; (iv) likelihood that the savings bank will be unable to meet the
demands of its depositors or to pay its obligations in the normal course of
business; and (v) insufficient capital, or the incurring or likely incurring of
losses that will deplete substantially all of the institution's capital with no
reasonable prospect of replenishment of capital without federal assistance.

INSURANCE OF DEPOSIT ACCOUNTS

     The FDIC has adopted a risk-based insurance assessment system.  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, consisting of (1) well capitalized, (2)
adequately capitalized or (3) undercapitalized, and one of three supervisory
subcategories within each capital group.  The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and additional information
which 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.  Assessment rates for BIF and SAIF deposits currently
range from 0 basis points to 27 basis points.  The FDIC is authorized to raise
the assessment rates in certain circumstances including to maintain or achieve
the designated reserve ratio of 1.25%, which requirement the BIF and the SAIF
currently meet.  The FDIC has exercised its authority to raise rates in the past
and may raise insurance premiums in the future.  If such action is taken by the
FDIC, it could have an adverse effect on the earnings of the Bank.  In addition,
recent legislation requires BIF-insured institutions like the Bank to assist in
the payment of Financing Corporation bonds.

     Under the FDI Act, insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
Division.  The management of the Bank does not know of any practice, condition
or violation that might lead to termination of deposit insurance.

FEDERAL RESERVE SYSTEM

     The Federal Reserve Board regulations require depository institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts).  The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows:  for that portion of transaction accounts
aggregating $49.3 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3%; and for accounts greater than $49.3
million, the reserve requirement is $1.5 million plus 10% (subject to adjustment
by the Federal Reserve Board between 8% and 14%) against that portion of total
transaction accounts in excess of $49.3 million.  The first $4.4 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements.  The Bank is in compliance
with the foregoing 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 Federal Reserve Board,
the effect of this reserve requirement is to reduce the Bank's interest-earning
assets.  FHLB System members are also authorized to borrow from the Federal
Reserve "discount window," but Federal 

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<PAGE>
 
Reserve Board regulations require institutions to exhaust all FHLB sources
before borrowing from a Federal Reserve Bank.

COMMUNITY REINVESTMENT ACT

     Federal Regulation.  Under the Community Reinvestment Act, as amended
("CRA"), as implemented by FDIC regulations, a savings bank 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 FDIC, in connection with its examination of a savings institution,
to assess the institution'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 institution.  The FIRREA amended the CRA to require, effective July 1,
1990, public disclosure of an institution's CRA rating and require the FDIC to
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system which replaced the five-tiered numerical
rating system.  The Bank's latest CRA rating, received from the FDIC was
"Satisfactory."

     New York State Regulation.  The Bank is also subject to provisions of the
New York State Banking Law which impose continuing and affirmative obligations
upon banking institutions organized in New York State to serve the credit needs
of its local community ("NYCRA"), which are substantially similar to those
imposed by the CRA.  Pursuant to the NYCRA, a bank must file an annual NYCRA
report and copies of all federal CRA reports with the NYBD.  The NYCRA requires
the NYBD to make an annual written assessment of a bank's compliance with the
NYCRA, utilizing a four-tiered rating system, and make such assessment available
to the public.  The NYCRA also requires the Superintendent to consider a bank's
NYCRA rating when reviewing a bank's application to engage in certain
transactions, including mergers, asset purchases and the establishment of branch
offices or automated teller machines, and provides that such assessment may
serve as a basis for the denial of any such application.  The Bank's latest
NYCRA rating received from the NYBD was "Satisfactory."

FEDERAL HOME LOAN BANK SYSTEM

     The Bank has applied to become a member of the FHLB System, which consists
of 12 regional FHLBs.  The Bank expects to receive approval of its application
in October 1997.  The FHLB provides a central credit facility primarily for
member institutions.  The Bank, as a member of the FHLB, will be required to
acquire and hold shares of capital stock in the FHLB in an amount at least equal
to 1% of the aggregate principal amount of its unpaid residential mortgage loans
and similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB, whichever is greater.  FHLB advances must be secured
by specified types of collateral and all long-term advances may only be obtained
for the purpose of providing funds for residential housing finance.

     The FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs.  These
requirements could reduce the amount of dividends that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their members.  If dividends were reduced, the Bank's net interest
income will likely also be reduced.  Further, there can be no assurance that the
impact of recent or future legislation on the FHLBs will not also cause a
decrease in the value of the FHLB stock that will be held by the Bank.

                                       95
<PAGE>
 
HOLDING COMPANY REGULATION

     Federal law allows a state savings bank that qualifies as a "qualified
thrift lender" ("QTL"), discussed below, to elect to be treated as a savings
association for purposes of the savings and loan holding company provisions of
the Home Owners' Loan Act, as amended ("HOLA").  Such election would result in
its holding company being regulated as a savings and loan holding company by the
OTS rather than as a bank holding company by the Federal Reserve Board.  The
Bank has made such election and has applied to the OTS to become a savings and
loan holding company.  Assuming the application is approved, the Company will be
regulated as a non-diversified unitary savings and loan holding company within
the meaning of the HOLA.  As such, the Company will be required to register with
the OTS and will be subject to OTS regulations, examinations, supervision and
reporting requirements.  In addition, the OTS has enforcement authority over the
Company and its non-savings institution subsidiaries.  Among other things, this
authority permits the OTS to restrict or prohibit activities that are determined
to be a serious risk to the subsidiary savings institution.  Additionally, the
Bank will be required to notify the OTS at least 30 days before declaring any
dividend to the Company.

     As a unitary savings and loan holding company, the Company generally will
not be restricted under existing laws as to the types of business activities in
which it may engage.  Upon any non-supervisory acquisition by the Company of
another savings association as a separate subsidiary, the Company would become a
multiple savings and loan holding company and would be subject to extensive
limitations on the types of business activities in which it could engage.  The
HOLA limits the activities of a multiple savings and loan holding company and
its non-insured institution subsidiaries primarily to activities permissible for
bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, as
amended ("BHC Act"), subject to the prior approval of the OTS, and to other
activities authorized by OTS regulation.  Multiple savings and loan holding
companies are prohibited from acquiring or retaining, with certain exceptions,
more than 5% of a non-subsidiary holding company, or a non-subsidiary company
engaged in activities other than those permitted by the HOLA.  Recently proposed
legislation would treat all savings and loan holding companies as bank holding
companies and would limit the activities of such companies to those permissible
for bank holding companies.

     The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than 5% of
the voting stock of another savings institution or holding company thereof or
from acquiring such an institution or company by merger, consolidation or
purchase of its assets, without prior written approval of the OTS.  In
evaluating applications by holding companies to acquire savings institutions,
the OTS must consider the financial and managerial resources and future
prospects of the company and institution involved, the effect of the acquisition
on the risk to the insurance funds, the convenience and needs of the community
and competitive factors.

     The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions in
more than one state, except:  (i) interstate supervisory acquisitions by savings
and loan holding companies, and (ii) the acquisition of a savings institution in
another state if the laws of the state of the target savings institution
specifically permit such acquisitions.  The states vary in the extent to which
they permit interstate savings and loan holding company acquisitions.

     In order to elect and continue to be regulated as a savings and loan
holding company by the OTS (rather than as a bank holding company by the Federal
Reserve Board), the Bank must continue to qualify as a QTL.  In order to qualify
as a QTL, the Bank must maintain compliance with a Qualified Thrift Lender Test
("QTL Test").  Under the QTL Test, a savings institution is required to maintain
at least 65% of its "portfolio assets" (total assets less: (i) specified liquid
assets up to 20% of total assets; (ii) intangibles, 

                                       96
<PAGE>
 
including goodwill; and (iii) the value of property used to conduct business) in
certain "qualified thrift investments" (primarily residential mortgages and
related investments, including certain mortgage-backed and related securities)
in at least 9 months out of each 12 month period. A holding company of a savings
institution that fails the QTL test must either convert to a bank holding
company and thereby become subject to the regulation and supervision of the
Federal Reserve Board or operate under certain restrictions. As of June 30,
1997, the Bank maintained in excess of 79.9% its portfolio assets in qualified
thrift investments. The Bank also met the QTL test in each of the prior 12
months and, therefore, met the QTL test. Recent legislative amendments have
broadened the scope of "qualified thrift investments" that go toward meeting the
QTL test to fully include credit card loans, student loans and small business
loans. 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.

     New York State Holding Company Regulation.  In addition to the federal
holding company regulations, a bank holding company organized or doing business
in New York State may be also subject to regulation under the New York State
Banking Law.  The term "bank holding company," for the purposes of the New York
State Banking Law, is defined generally to include any person, company or trust
that directly or indirectly either controls the election of a majority of the
directors or owns, controls or holds with power to vote more than 10% of the
voting stock of a bank holding company or, if the company is a banking
institution, another banking institution, or 10% or more of the voting stock of
each of two or more banking institutions, including commercial banks and state
savings banks and savings and loan associations organized in stock form.  In
general, a holding company controlling, directly or indirectly, only one banking
institution will not be deemed to be a bank holding company for the purposes of
the New York State Banking Law.  Under New York State Banking Law, the prior
approval of the NYBD is required before:  (1) any action is taken that causes
any company to become a bank holding company; (2) any action is taken that
causes any banking institution to become or to be merged or consolidated with a
subsidiary of a bank holding company; (3) any bank holding company acquires
direct or indirect ownership or control of more than 5% of the voting stock of a
banking institution; (4) any bank holding company or subsidiary thereof acquires
all or substantially all of the assets of a banking institution; or (5) any
action is taken that causes any bank holding company to merge or consolidate
with another bank holding company.  Additionally, certain restrictions apply to
New York State bank holding companies regarding the acquisition of banking
institutions which have been chartered five years or less and are located in
smaller communities.  Officers, directors and employees of New York State  bank
holding companies are subject to limitations regarding their affiliation with
securities underwriting or brokerage firms and other bank holding companies and
limitations regarding loans obtained from its subsidiaries.  Although the
Company will not be a bank holding company for purposes of New York State law
upon the Effective Date of the Conversion, any future acquisition of ownership,
control, or the power to vote 10% or more of the voting stock of another banking
institution or bank holding company would cause it to become such.

INTERSTATE BANKING AND BRANCHING

     The Company, as a savings and loan holding company, will be limited under
HOLA with respect to its acquisition of a savings association located in a state
other than New York.  In general, a savings and loan holding company may not
acquire an additional savings association subsidiary that is located in a state
other than the home state of its first savings association subsidiary unless
such an interstate acquisition is permitted by the statutes of such other state.
Many states permit such interstate acquisitions if the statutes of the home
state of the acquiring savings and loan holding company satisfy various
reciprocity conditions.  New York is one of a number of states that permit,
subject to the reciprocity conditions of the New York Banking Law, out-of-state
bank and savings and loan holding companies to acquire New York savings
associations.

                                       97
<PAGE>
 
     In contrast, bank holding companies are generally authorized to acquire
banking subsidiaries in more than one state irrespective of any state law
restrictions on such acquisitions.  The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("Interstate Banking Act"), which was enacted
on September 29, 1994, permits approval under the BHC Act of the acquisition of
a bank located outside of the holding company's home state regardless of whether
the acquisition is permitted under the law of the state of the acquired bank.
The Federal Reserve Board may not approve an acquisition under the BHC Act that
would result in the acquiring holding company controlling more than 10% of the
deposits in the United States or more than 30% of the deposits in any particular
state.

     In the past, branching across state lines was not generally available to a
state bank such as the Bank.  Out-of-state branches of savings banks are
authorized under the New York Banking Law, but similar authority does not exist
generally under the laws of most other states.  The Interstate Banking Act
permitted, beginning June 1, 1997, the responsible federal banking agencies to
approve merger transactions between banks located in different states,
regardless of whether the merger would be prohibited under the law of the two
states.  The Interstate Banking Act also permitted a state to "opt in" to the
provisions of the Interstate Banking Act prior to June 1, 1997, and permits a
state to "opt out" of the provisions of the Interstate Banking Act by adopting
appropriate legislation before that date.  Accordingly, the Interstate Banking
Act, beginning no later than June 1, 1997, permitted a bank, such as the Bank,
to acquire branches in a state other than New York unless the other state has
opted out of the Interstate Banking Act.  The Interstate Banking Act also
authorizes de novo branching into another state if the host state enacts a law
           -- ----                                                            
expressly permitting out of state banks to establish such branches within its
borders.

     The Interstate Banking Act may facilitate the further consolidation of the
banking industry.  The effect of the Interstate Banking Act on the Bank, if any,
is likely to occur as banking institutions, state legislators, and bank
regulators respond to the new federal regulatory structure.  The states will
have to establish appropriate corporate law, tax and regulatory structures to
adjust to the growth of new interstate banks.

FEDERAL SECURITIES LAWS

     The Company has filed with the SEC a registration statement under the
Securities Act for the registration of the Common Stock to be issued pursuant to
the Conversion.  Upon completion of the Conversion, the Company's Common Stock
will be registered with the SEC under the Exchange Act.  The Company will then
be subject to the information, proxy solicitation, insider trading restrictions
and other requirements under the Exchange Act.

     The registration under the Securities Act of shares of the Common Stock to
be issued in the Conversion does not cover the resale of such shares.  Shares of
the Common Stock purchased by persons who are not affiliates of the Company may
be resold without registration.  Shares purchased by an affiliate of the Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the
other conditions of Rule 144 (including those that require the affiliate's sale
to be aggregated with those of certain other persons) would be able to sell in
the public market, without registration, a number of shares not to exceed, in
any three-month period, the greater of (i) 1% of the outstanding shares of the
Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks.  Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.

                                       98
<PAGE>
 
                           MANAGEMENT OF THE COMPANY

DIRECTORS OF THE COMPANY

     The Board of Directors of the Company is divided into three classes, each
of which contains one-third of the Board.  The directors shall be elected by the
stockholders of the Company for staggered three year terms, or until their
successors are elected and qualified.  One class of directors, consisting of
Messrs. James L. Kelley, T. Ronald Quinlan, Jr. and Anthony E. Burke, has a term
of office expiring at the first annual meeting of stockholders, a second class,
consisting of Messrs. William C. Frederick and Maurice K. Shaw, has a term
expiring at the second annual meeting of stockholders and a third class,
consisting of Messrs. Michael F. Manzulli, Godfrey H. Carstens, Jr. and Robert
S. Farrell, has a term of office expiring at the third annual meeting of
stockholders.  The biographical information of each Director, except Messrs.
Manzulli and Burke, is set forth under "Management of the Bank - Trustees of the
Bank."


EXECUTIVE OFFICERS OF THE COMPANY

     The following individuals are executive officers of the Company and hold
the offices set forth below opposite their names.


                                                   Position(s) Held
Name                            Age(1)             With the Company  
----                            ----               ----------------
Michael F. Manzulli                56    Chairman of the Board and Chief
                                         Executive Officer

Anthony E. Burke                   50    President and Chief Operating Officer

Thomas R. Cangemi                  29    Chief Financial Officer and Secretary

Andrew M. Sisock                   43    Vice President and Accounting Officer
________________
(1)  As of June 30, 1997.

     The executive officers of the Company are elected annually and hold office
until their respective successors have been elected and qualified or until
death, resignation, retirement or removal by the Board of Directors.

                                       99
<PAGE>
 
BIOGRAPHICAL INFORMATION

     Michael F. Manzulli is Chairman of the Board of Directors and Chief
Executive Officer of the Company and Trustee, President and Chief Executive
Officer of the Bank.  Mr. Manzulli has served as a Trustee of the Bank since
1990, and was named President and Chief Executive Officer in June of 1992.  Mr.
Manzulli is the managing partner of the law firm of Lahr, Dillon, Manzulli,
Kelley & Penett, P.C., where he practiced law prior to becoming President and
Chief Executive Officer.  Mr. Manzulli is also the Chairman of the Staten Island
Partnership, Inc., and serves on the Board of Directors of the Staten Island
Economic Development Corp., St. Elizabeth Ann Nursing Home, the Staten Island
Historical Society and Notre Dame Academy.  He is also a member of the Advisory
Board of the Salvation Army - Staten Island.  Mr. Manzulli holds a B.S. from
Niagara University and a Bachelor of Law degree from St. John's University
School of Law.

     Anthony E. Burke is a Director of the Company and, effective October __,
1997, will commence his duties as President and Chief Operating Officer of the
Company. Prior to joining the Company, Mr. Burke was a partner for thirteen
years with the financial services industry group of Ernst & Young LLP, where he
worked for twenty-five years. Mr. Burke has represented community banks
(including the Bank), international banks, mortgage banks and real estate
ventures, and also has extensive experience in the mergers and acquisitions
area. Mr. Burke is a C.P.A., and is a member of the American Institute of
Certified Public Accountants. He has a B.S. in economics from St. John's
University and an M.B.A. in accounting and finance from the Columbia University
Graduate School of Business.

     Thomas R. Cangemi has been appointed the Chief Financial Officer and
Secretary of the Company and will commence his duties effective October __,
1997. From December 1996 until joining the Company, Mr. Cangemi was Senior Vice
President, Chief Financial Officer and Corporate Secretary of a New York-based
commercial bank. From January 1996 until December 1996, he was Director of
Corporate SEC Reporting for Sensormatic Electronics Corporation, Boca Raton,
Florida. Prior to January 1996, Mr. Cangemi was Vice President and Chief
Financial Officer of a publicly-held savings and loan holding company and its
subsidiary federal savings bank located in the New York area. Before 1993, Mr.
Cangemi was a member of the SEC Professional Practice Group of a national
accounting firm. Mr. Cangemi holds a B.B.A. from the School of Professional
Accountancy at Dowling College, and is a C.P.A. and a member of the American
Institute of Certified Public Accountants.

     Andrew M. Sisock joined the Bank in 1975, and served as Vice President and
Comptroller until 1993, when he was named Senior Vice President and Financial
Comptroller; he was appointed Senior Vice President and Senior Financial Officer
in 1996. Mr. Sisock is also the Vice President and Accounting Officer of the
Company and a Director and Treasurer of both RCSB Corp. and Richmond
Enterprises, Inc. His primary areas of responsibility are overseeing financial
and regulatory reporting, investment policy, interest rate risk policy and
internal controls. Mr. Sisock has a B.S. in Business Administration from
Pennsylvania State University and an M.B.A. in Finance from St. John's
University. Mr. Sisock is a graduate of the National School of Finance and
Management at Fairfield University.

                                      100
<PAGE>
 
                             MANAGEMENT OF THE BANK

TRUSTEES OF THE BANK

     The Directors of the Company are also Trustees of the Bank, with the
exception of Mr. Burke. Upon consummation of the Conversion, the current
Trustees of the Bank will become Directors of the stock chartered Bank. The
following table sets forth certain information regarding the Board of Trustees
of the Bank.
<TABLE>
<CAPTION>
 
                                                POSITION(S) HELD           TERM
           NAME                AGE(1)           WITH THE BANK             EXPIRES
           ----                ---              ----------------          -------
<S>                             <C>      <C>                              <C>
Godfrey H. Carstens, Jr.         69      Trustee                             2000

Robert S. Farrell                71      Trustee                             2000

William C. Frederick, M.D.       69      Trustee                             1999

James L. Kelley                  55      Trustee                             1998

Michael F. Manzulli              56      President, Chief Executive          2000
                                         Office and Trustee
T. Ronald Quinlan, Jr.           70      Trustee                             1998

Maurice K. Shaw                  58      Trustee                             1999
</TABLE>
----------------------
(1)     As of June 30, 1997.

EXECUTIVE OFFICERS OF THE BANK WHO ARE NOT TRUSTEES

     The following table sets forth certain information regarding the executive
officers of the Bank with the exception of Mr. Manzulli whose background is
discussed under "Management of the Company - Biographical Information."
<TABLE>
<CAPTION>
 
                                                          Position(s) Held
            Name                Age(1)                     With the Bank
            ----                ---                       ----------------
<S>                             <C>      <C>
John M. McKenna                  61      Executive Vice President

Stephen G.C. Campbell            54      Senior Vice President and Senior Auditor

Peter J. Esposito                54      Senior Vice President - Commercial Lending
                                         
Charles F. Hermann, III          54      Senior Vice President - Special Services

Andrew M. Sisock                 43      Senior Vice President and Senior Financial Officer
                                         
Nelson C. Sundback               55      Senior Vice President - Information Systems/Operations
                                         
Robert J. O'Rourke               60      Vice President - Lending

John J. Amodio                   55      Director of Commercial Banking Services
--------------------------
</TABLE>

(1)     As of June 30, 1997.

                                      101
<PAGE>
 
     The executive officers of the Bank are elected annually and will hold
office in the converted Bank until the annual meeting of the Board of Directors
of the Bank held immediately after the first annual meeting of stockholders of
the Bank subsequent to Conversion, and until their successors are elected and
qualified or until death, resignation, retirement or removal by the Board of
Directors.  Officers are re-elected by the Board of Directors annually.

BIOGRAPHICAL INFORMATION

TRUSTEES OF THE BANK

Godfrey H. Carstens, Jr. has served as a Trustee of the Bank since 1973. He is
the owner and president of Carstens Electrical Supply Co., an electrical supply
company located in Staten Island, New York. He is also a member of the Board of
Trustees of Staten Island University Hospital, and of the West Brighton Civic
Association.

Robert S. Farrell has served as a Trustee of the Bank since 1973.  He has been
president of H.S. Farrell, Inc., a lumber, millwork and building materials
supply company located in Staten Island, New York, since 1986, and has held
other positions with the firm for over fifty years.  He is also a member of the
Board of the Northfield Local Development Corp., and of the Port Richmond Board
of Trade.

William C. Frederick, M.D. has served as a Trustee of the Bank since 1980.  Dr.
Frederick is a surgeon in Staten Island and is affiliated with St. Vincent's
Hospital, Staten Island University Hospital and Bayley Seton Hospital.

James L. Kelley has served as a Trustee of the Bank since January 1997.  Mr.
Kelley is a partner of the law firm of Lahr, Dillon, Manzulli, Kelley & Penett,
P.C., which serves as general counsel to the Bank.  Mr. Kelly holds a B.S. from
St. Peter's College, New Jersey, and a Bachelor of Law degree from St. John's
University School of Law.

T. Ronald Quinlan, Jr. has served as a Trustee since 1978.  Mr. Quinlan retired
in 1993 as owner and President of Quinlan Fuel Service, a fuel oil company
located in Staten Island, New York.  He is a member of the West Brighton and
Lighthouse Civic Associations.

Maurice K. Shaw has served as a Trustee since 1979.  He is Senior Vice President
in charge of corporate affairs of Brooklyn Union Gas Co., where he has been
employed since 1960.  Mr. Shaw is a member of the Board of Directors of the
Staten Island Partnership, Inc., the Staten Island Economic Development Corp.
and the Staten Island Chamber of Commerce.

                                      102
<PAGE>
 
EXECUTIVE OFFICERS OF THE BANK WHO ARE NOT TRUSTEES

John M. McKenna joined the Bank in 1992 as Executive Vice President.  Mr.
McKenna also serves as a Director and President of RCSB Corp. and Richmond
Enterprises, Inc.  Mr. McKenna's primary responsibilities include overseeing the
general operations of the Bank, including finance, information systems, deposits
and facilities.  Mr. McKenna has a B.S. from the City University of New York.

Stephen G.C. Campbell joined the Bank in 1980 as assistant vice president and
branch manager and has served in numerous managerial positions.  He served as
Senior Vice President and Senior Loan Officer from December 1991 until May of
1997, when he was named Senior Vice President and Senior Auditor.  He is
responsible for the administration and management of the Auditing Department.
Mr. Campbell attended Pace College and Rutgers University and is a graduate of
the National School of Finance and Management at Fairfield University.

Peter J. Esposito joined the Bank in 1975 as Real Estate Appraiser and
Inspector.  From 1975 to 1979, he served as Assistant Secretary and Senior Real
Estate Appraiser.  He was named Assistant Vice President of the Mortgage and
Servicing Department in 1985, and was promoted to the position of Vice President
in Charge of Commercial Real Estate and Construction Lending in 1992.  In 1996,
he was appointed Senior Vice President of the aforementioned department, and was
simultaneously named head of the Business Services Division.  Mr. Esposito holds
a professional designation as Senior Residential Appraiser with the Appraisal
Institute, formerly the Society of Real Estate Appraisers.  He is a graduate of
the Realtor's Institute, Ithaca College.  Mr. Esposito is also a licensed
insurance broker and possesses related experience in the construction and real
estate development fields.  He currently serves on the Boards of Trustees of
both the South Shore Rotary and the Staten Island chapter of the Leukemia
Society and is involved with numerous charitable organizations.

Charles F. Hermann, III joined the Bank in 1968 and has served the Bank in
various positions.  He was appointed Senior Vice President in December 1985 and
currently serves as Senior Vice President - Special Services.  He is responsible
for the management of the Insurance and Security Departments of the Bank.  Mr.
Hermann is also a Vice President and Director of RCSB Corp. and Richmond
Enterprises, Inc.  He is a graduate of the American Institute of Banking and
attended St. John's University.

Nelson C. Sundback joined the Bank in 1968 and has served in numerous managerial
positions.  He was named Senior Vice President -- Information Systems/Operations
in November 1993.  His primary areas of responsibility include the management
and supervision of the Bank's Operations, Pension, Insurance, ATM and Network
Computer Departments.  Mr. Sundback is also Secretary of RCSB Corp. and Richmond
Enterprises, Inc.  Mr. Sundback attended St. John's University and the College
of Staten Island.  Mr. Sundback is a graduate of the National School of Finance
and Management at Fairfield University and the American Institute of Banking.

                                      103
<PAGE>
 
John J. Amodio joined the Bank in April 1997 as Director of Commercial Banking
Services.  From 1973 to 1980 Mr. Amodio was Senior Vice President, and from 1982
to 1991 was President and Chief Executive Officer of a Staten Island-based
commercial bank.  Prior to joining the Bank, he was President of Amodio &
Associates, Ltd., a management consulting organization, from 1991 to 1995, and
was President of TAM Restaurant Group, Inc., a restaurant, catering and
concessions management firm, from 1995 until 1997.  Mr. Amodio's primary
responsibility is to direct the development of the Bank's commercial banking
services.  Mr. Amodio is a former director and president of the NYS Society of
Certified Public Accountants, Staten Island Chapter, Chairman of the Board of
Meals on Wheels of Staten Island, and is the Chairman of the Staten Island
Rotary Foundation.  Mr. Amodio has a B.B.A. in Accounting from Iona College and
is a C.P.A.  He is also a graduate of the Commercial Bank Management Program at
Columbia University.

Robert J. O'Rourke joined the Bank in 1996 as Vice President -- Lending. Prior
to joining the Bank, he was President of Robert O'Rourke Inc. Real Estate, a
firm he formed in 1992 which specialized in analysis, appraisal and coordinating
assignments of metropolitan New York area properties for financing and
certiorari purposes. Mr. O'Rourke has over eighteen years of financial
institution experience, the majority as a Senior and Executive Vice President in
charge of the mortgage and real estate department of a New York-based savings
bank. He is an MAI designated member of the Appraisal Institute and a Certified
General Appraiser in New York and New Jersey. He is a licensed real estate
broker in New York and is a member of the New York and Staten Island Real Estate
Boards. Mr. O'Rourke is a member of the Friendly Sons of St. Patrick-New York
and is a board member of the Staten Island Botanical Gardens. Mr. O'Rourke is
primarily responsible for overseeing the residential mortgage and consumer
lending departments of the Bank. Mr. O'Rourke has a B.A. from Fordham University
and is a graduate of the National School of Savings Banking, Fairfield
University.

MEETINGS AND COMMITTEES OF THE BOARDS OF THE BANK AND THE COMPANY

     The Board of Trustees meets monthly and may have additional special
meetings as may be called by the President or at the written request of three
trustees. During the fiscal year ended June 30, 1997, the Board held twelve
meetings. There are currently eight committees of the Board of Trustees
consisting of the Executive/Finance Committee, the Examining/Audit Committee,
the Residential/Commercial/Construction Committee, the Loan Review Committee,
the Personnel Committee, the Insurance Committee, the By-Laws Committee and the
Buildings & Grounds Committee. Subsequent to the Conversion, the Board of
Trustees may consider and make revisions to the current structure of its
committees.

     The Board of Trustees of the Bank has established the following committees:

     The Executive/Finance Committee consists of the entire Board of Trustees.
The purpose of this Committee is to exercise the authority of the Board of
Trustees with respect to matters requiring action between meetings of the Board
of Trustees.  Any actions by this Committee requires subsequent ratification by
the Board of Trustees at the next regular meeting.  The Committee meets at least
four times per year as well as on an as needed basis.

     The Examining/Audit Committee consists of Messrs. Farrell, Frederick,
Quinlan, Shaw and DeForest (Emeritus).  The Bank's internal auditor and
compliance officer report to this committee.  The duty of this committee is to
examine the records and affairs of the Bank in conformity with the Banking Laws
of the State of New York applying to examinations and the Federal laws and
regulations relating to bank independent audit committees, and to determine the
Bank's true financial condition and its safety and soundness.  It inquires into
the policies of management for the purpose of determining whether such policies
are sound and consistent with the requirements of the law and inquires into and
reviews management's responsibility for the Bank's compliance with safety and
soundness laws and regulations, and management's responsibility for 

                                      104
<PAGE>
 
the Bank's system of internal controls, and into such other matters as are
necessary to enable the Trustees to determine whether adequate protection is
afforded depositors and reviews management reports and the reports of the Bank's
independent public accountant. The committee generally meets on a bimonthly
basis and met five times in fiscal 1997.

     The Residential/Commercial/Construction Committee consists of Messrs.
Carstens, Farrell, Frederick, Quinlan and Shaw.  This committee is responsible
for reviewing and approving mortgage loans, home equity loans, commercial real
estate, construction, and commercial loans in amounts within its designated
authority.  The committee generally meets bimonthly, depending on loan volume,
and met 21 times in fiscal 1997.

     The Loan Review Committee consists of Messrs. Carstens, Farrell, Frederick,
Quinlan and Shaw.  This committee reviews the workout solutions of problem
loans, and approves the classification of assets and the establishment of
adequate valuation allowances.  This committee meets at least semi-annually and
met three times in fiscal 1997.

     The Personnel Committee consists of Messrs. Carstens, Farrell, Frederick
and Shaw.  This committee is responsible for all matters regarding compensation
and fringe benefits.  The committee meets at least semi-annually and met three
times in fiscal 1997.

     The Insurance Committee consists of Messrs. Carstens, Frederick, Kelley and
Shaw.  This committee is responsible for ensuring that adequate insurance
coverage is in place for the Bank's assets and trustees, officers and employees.
The committee meets at least semi-annually and met twice in fiscal 1997.

     The Bylaws Committee consists of Messrs. Frederick, Kelley and Quinlan, and
is responsible for reviewing and proposing revisions to the By-Laws of the Bank,
as necessary.  The committee meets on an as-needed basis and did not meet in
fiscal 1997.

     The Buildings and Grounds Committee consists of Messrs. Carstens, Farrell,
Kelley and Quinlan.  This committee is responsible for supervising the
maintenance and upkeep of the Bank's physical plant.  This committee meets on an
as-needed basis and did not meet in fiscal 1997.

     Additionally, the Bank has a number of other management committees
including the Asset/Liability Committee, the Interest Rate Risk Committee, the
Internal Control Committee, the Risk Management Committee, the Investment
Committee and the Compliance Committee.

     The Board of Directors of the Company has established the following
committees:  the Audit Committee consisting of Messrs. Farrell, Frederick,
Quinlan and Shaw; the Pricing Committee consisting of the entire Board of
Directors; and the Compensation Committee consisting of Messrs. Carstens,
Farrell, Frederick and Shaw.

COMPENSATION OF TRUSTEES

     Trustees of the Bank, except Mr. Manzulli, receive fees of $1,200 per Board
meeting attended and $650 per Committee meeting attended.

                                      105
<PAGE>
 
Trustees Emeritus

     The Bank maintains a Board of Trustees Emeritus which currently consists of
three former Trustees of the Bank.  Pursuant to the Bank's bylaws, Trustees are
automatically retired on December 31 of the year they reach age 75 and any
Trustee who retires because of such age limitation is eligible to be elected as
a Trustee Emeritus.  Trustees Emeritus have no vote and receive the same meeting
fees as Trustees of the Bank.

                                      106
<PAGE>
 
EXECUTIVE COMPENSATION

     Summary Compensation Table.  The following table sets forth the cash
compensation paid by the Bank as well as certain other compensation paid or
accrued for services rendered in all capacities during the fiscal year ended
June 30, 1997, to the Chief Executive Officer and the other executive officer of
the Bank who received salary and bonus in excess of $100,000 ("Named Executive
Officers").
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Long-Term Compensation
                                                                              ------------------------------------------------------
                                        Annual  Compensation(1)                       Awards              Payouts
                                ----------------------------------------------------------------------------------------------------
                                                                   Other                      Securities
                                                                  Annual       Restricted    Underlying    LTIP       All Other
Name and Principal                                             Compensation   Stock Awards  Options/SARs  Payouts    Compensation
Positions                       Year    Salary     Bonus($)       ($)(2)         ($)(3)        (#)(4)     ($)(5)        ($)(6)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>   <C>          <C>         <C>            <C>           <C>           <C>        <C>

Michael F. Manzulli             1997  $324,416           -           -              -             -            -       $26,980
 President and Chief
 Executive Officer

John M. McKenna                 1997  $128,308      $6,500           -              -             -           -        $ 3,102
 Executive Vice President and
 Chief Operating Officer
</TABLE>
_________________________                                                   
(1)   Under Annual Compensation, the column titled "Salary" includes salary
      deferred by the Named Executive Officer under the Bank's 401(k) Plan and
      the column titled "Bonus" consists of board approved discretionary bonus
      as well as attendance bonuses, loan referral bonuses and recruitment
      bonuses.
(2)   For 1997, there were no (a) perquisites over the lesser of $50,000 or 10%
      of the individual's total salary and bonus for the year; (b) payments of
      above-market preferential earnings on deferred compensation; (c) payments
      of earnings with respect to long-term incentive plans prior to settlement
      or maturation; (d) tax payment reimbursements; or (e) preferential
      discounts on stock. For 1997, the Bank had no restricted stock or stock
      related plans in existence.
(3)   Does not include awards pursuant to the Stock Program, which may be
      granted in conjunction with a meeting of shareholders of the Company,
      subject to regulatory and shareholder approval, as such awards were not
      earned, vested or granted in fiscal 1997. For a discussion of the terms of
      the Stock Program which is intended to be adopted by the Company, see 
      "-Benefit Plans - Stock Program." For 1997, the Bank had no stock plans in
      existence.
(4)   No stock options or SARs were earned or granted in 1997. For a discussion
      of the Stock Option Plan which is intended to be adopted by the Company,
      see "Benefit Plans - Stock Option Plan."
(5)   For 1997, there were no payouts or awards under any long-term incentive
      plan.
(6)   Other compensation includes other benefits such as the Bank's matching
      contribution under the Bank's 401(k) Plan, amounts contributed by the Bank
      pursuant to the Bank's Benefit Restoration Plan, and automobile allowance.

                                      107
<PAGE>
 
REPORT OF INDEPENDENT COMPENSATION CONSULTANT

     Pursuant to the NYBB regulations governing the Conversion, the Bank must
obtain the opinion of an independent compensation consultant as to whether or
not the total compensation for the executive officers, directors or trustees of
the Bank, viewed as a whole and on an individual basis, is reasonable and proper
in comparison to the compensation provided to executive officers, directors or
trustees of similar publicly-traded financial institutions.  The Bank has
obtained an opinion from William M. Mercer, Incorporated, which provides that,
based upon published professional survey data of similarly situated publicly-
traded financial institutions operating in the relevant markets as of
September 28, 1997, with respect to the total cash compensation (base salary
and annual incentive) for executive officers and total compensation for trustees
of the Bank, such compensation, viewed as a whole and on an individual basis, is
reasonable and proper in comparison to the compensation provided to similarly
situated publicly-traded financial institutions, and that, with respect to the
amount of shares of Common Stock to be reserved under the ESOP, the Stock
Program and Stock Option Plan, as a whole, such amounts reserved for granting
are reasonable in comparison to similar publicly-traded financial institutions.

EMPLOYMENT AGREEMENTS

     Upon the Conversion, the Bank intends to enter into employment agreements
with Messrs. ________________ and ____ other officers of the Bank (individually,
the "Executive"), and the Company intends to enter into employment agreements
with Messrs. Manzulli, Burke and Cangemi (collectively, the "Employment
Agreements"). The Employment Agreements are intended to ensure that the Bank and
the Company will be able to maintain a stable and competent management base
after the Conversion. The continued success of the Bank and the Company depends
to a significant degree on the skills and competence of the above referenced
officers.

     The Employment Agreements provide for three-year terms for each Executive.
The terms of the Employment Agreements shall be extended on a daily basis unless
written notice of non-renewal is given by the Board of Directors. The Employment
Agreements provide that the Executive's base salary will be reviewed annually.
The base salaries which will be effective for such Employment Agreements for
Messrs. ________________ will be $_______, $_______, $_______, respectively. In
addition to the base salary, the Employment Agreements provide for, among other
things, participation in stock benefits plans and other fringe benefits
applicable to executive personnel. The agreements provide for termination by the
Bank or the Company for cause, as defined in the Employment Agreements, at any
time. In the event the Bank or the Company chooses to terminate the Executive's
employment for reasons other than for cause, or in the event of the Executive's
resignation from the Bank and the Company upon: (i) failure to re-elect the
Executive to his current offices; (ii) a material change in the Executive's
functions, duties or responsibilities; (iii) a reduction in the benefits and
perquisites being provided to the Executive under the Employment Agreement; (iv)
liquidation or dissolution of the Bank or the Company; or (v) a breach of the
agreement by the Bank or the Company, the Executive or, in the event of death,
his beneficiary would be entitled to receive an amount equal to the remaining
base salary payments due to the Executive for the remaining term of the
Employment Agreement and the contributions that would have been made on the
Executive's behalf to any employee benefit plans of the Bank and the Company
during the remaining term of the agreement. The Bank and the Company would also
continue and pay for the Executive's life, health, dental and disability
coverage for the remaining term of the Agreement. Upon any termination of the
Executive, the Executive is subject to a one year non-competition agreement.

     Under the Employment Agreements, if voluntary or involuntary termination
follows a change in control of the Bank or the Company, the Executive or, in the
event of the Executive's death, his beneficiary, would be entitled to a
severance payment equal to the greater of: (i) the payments due for the
remaining

                                      108
<PAGE>
 
terms of the agreement; or (ii) three times the average of the five preceding
taxable years' annual compensation. The Bank and the Company would also continue
the Executive's life, health, and disability coverage for thirty-six months.
Notwithstanding that both the Bank and Company Employment Agreements provide for
a severance payment in the event of a change in control, the Executive would
only be entitled to receive a severance payment under one agreement.

     Payments to the Executive under the Bank's Employment Agreement will be
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank.  Payment under the Company's Employment Agreement would be made by the
Company.  All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the Employment
Agreements shall be paid by the Bank or Company, respectively, if the Executive
is successful on the merits pursuant to a legal judgment, arbitration or
settlement.  The Employment Agreements also provide that the Bank and Company
shall indemnify the Executive to the fullest extent allowable under New York and
Delaware law, respectively.  In the event of a change in control of the Bank or
the Company, the total amount of payments due under the Agreements, based solely
on cash compensation paid to the officers who will receive Employment Agreements
over the past five fiscal years and excluding any benefits under any employee
benefit plan which may be payable, would be approximately $___________.

CHANGE IN CONTROL AGREEMENTS

     Upon Conversion, the Bank intends to enter into two-year Change in Control
Agreements (the "CIC Agreements") with Messrs. ________________, none of whom
will be covered by employment contracts.  Commencing on the first anniversary
date and continuing on each anniversary thereafter, the Bank CIC Agreements may
be renewed by the Board of Directors of the Bank for an additional year.  The
Bank's CIC Agreements will provide that in the event voluntary or involuntary
termination follows a change in control of the Company or the Bank, the officer
would be entitled to receive a severance payment equal to ___  times the
officer's average annual compensation for the five most recent taxable years.
The Bank would also continue and pay for the officer's life, health and
disability coverage for  ___ months following termination.  In the event of a
change in control of the Company or the Bank, the total payments that would be
due under the CIC Agreements, based solely on the current annual compensation
paid to the officers covered by the CIC Agreements and excluding any benefits
under any employee benefit plan which may be payable, would be approximately
$___________.

EMPLOYEE SEVERANCE COMPENSATION PLAN

     The Bank's Board of Directors intends to, upon Conversion, establish the
Richmond County Savings Bank Employee Severance Compensation Plan ("Severance
Plan") which will provide eligible employees with severance pay benefits in the
event of a change in control of the Bank or the Company following Conversion.
Management personnel with Employment Agreements or CIC Agreements are not
eligible to participate in the Severance Plan.  Generally, employees are
eligible to participate in the Severance Plan if they have completed at least
one year of service with the Bank.  The Severance Plan vests in each participant
a contractual right to the benefits such participant is entitled to thereunder.
Under the Severance Plan, in the event of a change in control of the Bank or the
Company, eligible employees who are terminated from or terminate their
employment within one year (for reasons specified under the Severance Plan),
will be entitled to receive a severance payment.  If the participant, whose
employment has terminated, has completed at least one year of service, the
participant will be entitled to a cash severance payment equal to one-twelfth of
annual compensation for each year of service up to a maximum of 199% of annual
compensation.  Such payments may tend to discourage takeover attempts by
increasing costs to be incurred by the Bank in the event of a takeover.  In the
event the provisions of the Severance Plan are triggered, the total amount of
payments that would be due thereunder, based solely upon current salary levels,
would be approximately 

                                      109
<PAGE>
 
$___________.  However, it is management's belief that substantially all of the
Bank's employees would be retained in their current positions in the event of a
change in control, and that any amount payable under the Severance Plan would be
considerably less than the total amount that could possibly be paid under the
Severance Plan.

BENEFIT PLANS

     Retirement Plan.  The Bank sponsors a defined benefit pension plan known as
The Retirement Plan of Richmond County Savings Bank in RSI Retirement Trust
("Retirement Plan").  The Retirement Plan is intended to satisfy the tax
qualification requirements of Section 401(a) of the Code.

     Employees generally become eligible to participate in the Retirement Plan
upon their attainment of age 21 and the completion of one year of eligibility
service.  The plan defines a year of eligibility service as a 12-month period,
coinciding with the employee's anniversary during which an employee completes
1,000 hours of service.  The Retirement Plan excludes from becoming eligible to
participate employees (i) paid on an hourly-rate or contract basis, (ii)
regularly employed outside the Bank's own offices in connection with the
operation and maintenance of building and other property acquired through
foreclosure or deed, or (iii) leased employees.
 
     The Retirement Plan provides for a normal retirement benefit to
participants upon retirement at or after the later of (i) attainment of age 65
or (ii) the fifth anniversary of initial participation in the plan. The annual
normal retirement benefit for a participant under the Retirement Plan equals the
sum of (i) 1.67% of the "Average Annual Earnings" (as defined in the plan)
multiplied by the participant's "Credited Service" (as defined by the plan) (up
to a maximum of 35 years); plus (ii) 0.23% of the participant's Average Annual
Earnings, which exceed the participant's "Covered Compensation" (as defined by
the plan) multiplied by the participant's credited service (up to maximum of 35
years); plus (iii) 1% of the participant's Average Annual Earnings, multiplied
by the participant's Credited Service which exceeds 35 years.

     A participant may also become eligible to receive an early retirement
benefit upon the completion of at least ten consecutive years of "Vested
Service" (as defined in the plan) with the Bank and (i) attainment of age 60, or
(ii) completion of 30 years of vested service, or (iii) at the time the sum of
the participant's age and Vested Service equals or exceeds 85.  Early retirement
benefits are generally calculated in the same manner as a participant's normal
retirement benefits but may be actuarially reduced if paid prior to the
participant's "Normal Retirement Date" (as defined by the plan).  Participants
generally become vested in their benefits under the Retirement Plan upon
completing at least five years of Vested Service.

     The plan generally pays benefits in the form of a straight life annuity
with respect to unmarried participants and in the form of a 50% qualified joint
and survivor annuity (with the spouse as designated beneficiary) for married
participants.  Other forms of benefit payments, including a lump sum, are
available under the Retirement Plan.

                                      110
<PAGE>
 
     The following table sets forth the estimated annual benefits payable under
the Retirement Plan upon a participant's retirement at age 65 for the year ended
June 30, 1997, expressed in the form of a straight life annuity, and any related
amounts payable under the Benefit Restoration Plan (see description below).
Covered compensation under the Retirement Plan basically includes the base
salary for participants, and does not consider any cash bonus amounts.  The
benefits listed in the table below for the Retirement Plan and Benefit
Restoration Plan are not subject to a deduction for social security benefits or
any other offset amount.
<TABLE>
<CAPTION>
                   
                                         Years of Service                   
   Final Average  -----------------------------------------------------------
   Compensation      15        20        25         30        35        40
   -------------  --------  --------  --------   --------  --------  --------
<S>               <C>       <C>       <C>        <C>       <C>       <C> 
     $ 50,000     $ 13,215  $ 17,820  $ 22,025   $ 26,430  $ 30,835  $ 33,335
      100,000       27,485    36,820    45,775     54,930    64,085    69,085
      150,000       41,715    55,620    69,525     83,430    97,335   104,835
      200,000       55,965    74,620    93,275    111,930   130,585   140,585
      250,000       70,215    93,820   117,025    140,430   163,835   176,335
      300,000       84,486   112,620   140,775    188,930   197,085   212,085
      350,000       98,716   131,620   184,525    197,430   230,335   247,835
      400,000      112,985   150,830   188,275    225,930   263,335   283,585
      450,000      127,215   169,620   212,025    254,430   296,835   319,335
      500,000      141,485   188,620   236,775    282,930   330,085   355,085
      550,000      155,715   207,820   259,525    311,430   363,335   390,835
</TABLE>

  The approximate years of service, as of June 30, 1997, for the named executive
officers are as follows:
   
                                                        Years of Service
                                                        ----------------
Michael F. Manzulli                                             5

John M. McKenna                                                 5

  401(k) Plan.  The Bank also sponsors the Richmond County Savings Bank 401(k)
Savings Plan ("401(k) Plan"), a tax-qualified profit sharing and salary
reduction plan under Sections 401(a) and 401(k) of the Code.  Generally,
employees other than (i) employees compensated on an hourly, daily, commission,
fee or retainer basis or (ii) leased employees become eligible to participate in
the 401(k) Plan upon the attainment of age 21 and the completion of one year of
service (i.e., 12 months of service).  Under the 401(k) Plan, participants may
make salary reduction contributions equal to 2% to 9% of their compensation or
the 

                                      111
<PAGE>
 
legally permissible limit (currently $9,500). The Bank matches 50% of the first
6% of compensation deferred by a participant.

  Participants are always 100% vested in their salary reduction contributions.
Participants become 20% vested in Bank matching contributions after the
completion of two years of service with the Bank. Participants' vested interest
in Bank matching contribution increase by 20% for each additional year of
service completed, so that after the completion of 6 years of service,
participants are 100% vested in Bank matching contributions. A participant who
terminates employment due to death, disability, or retirement immediately
becomes fully vested in the Bank's matching contributions credited to his or her
account regardless of the participant's years of service. A participant's vested
portion of his or her 401(k) Plan account is distributable from the 401(k) Plan
upon the termination of the participant's employment, death, disability or
retirement. In addition, a participant may be eligible for hardship withdrawals
and loans under the 401(k) Plan. Any distribution made to a participant prior to
the participant's attainment of age 59 1/2 is subject to a 10% excise tax in
addition to federal income taxes. The Board of Directors may at any time
discontinue the Bank's contributions to employee accounts.  For the years ended
June 30, 1997, 1996 and 1995, the Bank's matching contributions to the 401(k)
Plan were $136,000, $133,000 and $118,000, respectively.

  The 401(k) Plan permits participants to direct the investment of their 401(k)
plan account into various investment alternatives.  The investment accounts are
valued daily and participants are provided with information regarding the market
value of the participant's investments and all contributions made on his or her
behalf on at least a quarterly basis.  In connection with the Conversion, the
Bank intends to amend the 401(k) Plan to permit participants to invest in an
"Employer Stock Fund" as one of the investment alternatives.  The Employer Stock
Fund will be invested primarily in shares of Common Stock.  The trustee may
follow the voting directions of 401(k) Plan participants investing in the
Employer Stock Fund; provided that the trustee determines such voting is
consistent with its fiduciary duties.  However, the trustee is not required to
follow the voting directions of the 401(k) Plan participants with respect to
Common Stock held in the Employer Stock Fund.

  ESOP.  In connection with the Conversion, the Bank also intends to implement
an employee stock ownership plan.  An ESOP is a tax-qualified retirement plan
designed to invest primarily in employer securities.  The Bank will make
contributions to the ESOP on behalf of all ESOP participants.  The ESOP will
provide eligible employees with the opportunity to receive a Bank-funded
retirement benefit based primarily on the value of the Common Stock. The Bank
anticipates that the eligibility requirements for the ESOP will be similar to
those of the 401(k) Plan. Specifically, the Bank anticipates all full-time
salaried employees of the Bank who have completed a year of service with the
Bank will be eligible to participate in the ESOP.

  The Bank expects the ESOP to purchase 8.0% of the Common Stock issued in
connection with the Conversion, including the issuance of shares to the
Foundation. As part of the Conversion and in order to fund the ESOP's purchase
of the Common Stock issued in the Conversion, the ESOP intends to borrow funds
from the Company equal to 100% of the aggregate purchase price of the Common
Stock. Alternatively, the Company and Bank may choose to fund the ESOP's
purchase of stock through a loan from a third-party financial institution. The
Common Stock purchased by the ESOP with the loan proceeds will serve as
collateral for the loan, as described below. The term of the ESOP loan will be
20 years and the trustee will repay the loan principally from the Company's or
the Bank's contributions to the ESOP. Additionally, any dividends that may be
paid on unallocated stock held by the ESOP will also be used to repay the ESOP
loan. Subject to receipt of any necessary regulatory approvals or opinions, the
Bank may make additional contributions to the ESOP for repayment of the loan or
to reimburse the Company for contributions made by it. The interest rate for the
loan is expected to be at or near the prime rate.

                                      112
<PAGE>
 
  Shares of Common Stock purchased by the ESOP with the loan proceeds will
initially be pledged as collateral for the loan and will be held in a suspense
account until released for allocation among participants as the loan is repaid.
The trustee will release the pledged shares annually from the suspense account
in an amount proportional to the repayment of the ESOP loan for each plan year.
The released shares will then be allocated to the accounts of ESOP participants
based on each participant's compensation relative to all participants'
compensation.  Participants will vest in their ESOP account at a rate of 20%
annually commencing after the completion of 2 years of service, with 100%
vesting upon the completion of 6 years of service.   Participants will also
become fully vested in their accounts if their service terminates due to death,
retirement, disability, or upon the occurrence of a change in control.  The ESOP
may reallocate forfeitures among remaining participants, in the same proportion
as contributions.  Benefits under the ESOP will become payable upon death,
retirement, or separation from service.  The annual contributions to the ESOP
are not fixed, so benefits payable under the ESOP cannot be estimated.

  In connection with the establishment of the ESOP, the Board of Directors will
appoint a Committee of the Board of Directors and officers of the Bank to
administer the ESOP (the "ESOP Committee").  The Bank anticipates that this
Committee will appoint an unrelated trustee for the ESOP and the 401(k) Plan
Employer Stock Fund prior to the Conversion.  The ESOP Committee may instruct
the trustee regarding investment of funds contributed to the ESOP and the 401(k)
Plan Employee Stock Fund.  The ESOP trustee, subject to its fiduciary duties,
must vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees.  Subject to its fiduciary duties
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the trustee will vote unallocated shares and allocated shares for which
participants provide no instructions in a manner calculated to most accurately
reflect the instructions it has received from participants regarding the
allocated stock for which it has received instructions.

  Supplemental Executive Retirement Plan.  The Bank also maintains a non-
qualified deferral compensation plan, known as the Richmond County Savings Bank
Supplemental Executive Retirement Plan (the "SERP").  The SERP provides certain
employees with supplemental retirement income from the Bank when such amounts
cannot be paid from the tax-qualified Retirement Plan or 401(k) Plan.
Participants in the SERP receive a benefit equal to the amount they would have
received under the Retirement Plan and the 401(k) Plan, but for reductions in
such benefits imposed by operation of Sections 401(a)(17), 401(m), 401(k)(3),
402(g) and 415 of the Code.  The Bank will amend the SERP to provide
participants with supplemental benefits intended to make up for reductions
imposed on the ESOP by operation of Sections 401(a), 401(m) and/or 415 of the
Code.  The BRP is an unfunded plan, providing participants only with a
contractual right to obtain the benefits provided thereunder from the general
assets of the Bank.  Currently, only Mr. Manzulli is eligible to participate in
the SERP.

  Management Supplemental Executive Retirement Plan.  The Bank intends to
implement a non-qualified Supplemental Executive Retirement Plan ("MSERP") to
provide certain officers and highly compensated employees with additional
retirement benefits.  The MSERP benefit is intended to make up benefits lost
under the ESOP allocation procedures to participants who retire prior to the
complete repayment of the ESOP loan.  At the retirement of a participant, the
benefits under the MSERP are determined by first: (i) projecting the number of
shares that would have been allocated to the participant under the ESOP if they
had been employed throughout the period of the ESOP loan (measured from the
participant's first date of ESOP participation); and (ii) reducing the number
determined by (i) above by the number of shares actually allocated to the
Participant's account under the ESOP; and second, by multiplying the number of
shares that represent the difference between such figures by the average fair
market value of the Common Stock over the preceding five years.  Benefits under
the MSERP vest in 20% annual increments over a five year period commencing as of
the date of a Participant's participation in the MSERP.  The vested portion of
the MSERP 

                                      113
<PAGE>
 
Participant's benefits are payable upon the retirement of the Participant upon
or after the attainment of age 65 or in accordance with the requirements of
early retirement under the Retirement Plan.

  The Bank will amend the existing irrevocable grantor's trust ("grantor's
trust") established in connection with the SERP to hold the assets of the MSERP.
This trust would be funded with contributions from the Bank for the purpose of
providing the benefits promised under the terms of the MSERP.  The grantor's
trust may hold a variety of assets including the Common Stock, other securities,
insurance contracts and cash.  The MSERP participants have only the rights of
unsecured creditors with respect to the trust's assets, and will not recognize
income with respect to benefits provided by the MSERP until such benefits are
received by the participants.  The assets of the grantor's trust are considered
part of the general assets of the Bank and are subject to the claims of the
Bank's creditors in the event of the Bank's insolvency.  Earnings on the trust's
assets are taxable to the Bank.

  Stock Option Plan.  Following the Conversion, the Board of Directors of the
Company intends to adopt  a stock-based benefit plan which would provide for the
granting of options to purchase Common Stock to certain individuals.  Currently,
the Company anticipates granting stock options under a single stock-based
incentive plan which will combine the features of the Stock Program and the
Stock Option Plan (the "Master Stock-based Benefit Plan") covering full-time
employees and outside directors of the Company and its affiliates.  However, it
is possible that the Company may establish  separate option plans solely for
outside directors.  At a meeting of stockholders of the Company following the
Conversion, which under applicable NYBB regulations may not be held earlier than
six months after the completion of the Conversion, the Board of Directors
intends to present the Stock Option Plan, or the Master Stock-based Benefit Plan
of which it is a part,  to stockholders for approval.  The Company anticipates
reserving an amount equal to 10% of the shares of Common Stock issued in the
Conversion, including shares issued to the Foundation (or 2,297,700 shares based
upon the issuance of 22,977,000 shares), for issuance under the Stock Option
Plan, or the Master Stock-based Benefit Plan of which it is a part. If the
Company implements an option plan within one year following completion of the
Conversion, NYBB regulations provide that no individual officer or employee of
the Bank may receive more than 25% of the options granted under the plan and
non-employee directors may not receive more than 5% individually, or 30% in the
aggregate, of the options granted under the plan.  NYBB and FDIC regulations
also provide that the exercise price of any options granted under any such plan
must equal or exceed the market price of the Common Stock as of the date of
grant.

  The Company intends to design the stock option benefits provided under the
Stock Option Plan to attract and retain qualified personnel in key positions,
provide officers and key employees with a proprietary interest in the Company as
an incentive to contribute to the success of the Company and reward key
employees for outstanding performance.  The Company may condition the granting
or vesting of stock options on the achievement of individual or Company-wide
performance goals, including the achievement by the Company or the Bank of
specified levels of net income, asset growth, return on equity or other specific
financial performance goals.  The Company anticipates that the Stock Option Plan
will provide for the grant of:  (i) options for employees to purchase the
Company's Common Stock intended to qualify as incentive stock options under
Section 422 of the Code ("Incentive Stock Options"); (ii) options for all
participants that do not qualify as incentive stock options ("Non-Statutory
Stock Options"); and (iii) Limited Rights (discussed below) which participants
may exercise only upon a change in control of the Bank or the Company.  Unless
sooner terminated, the Stock Option Plan will be in effect for a period of ten
years from the earlier of adoption by the Board of Directors or approval by the
Company's stockholders.  The Company intends to grant options with Limited
Rights at an exercise price equal to the fair market value of the underlying
Common Stock on the date of grant.  Subject to any applicable NYBB and FDIC
regulations, upon exercise of "Limited Rights" in the event of a change in
control, the employee will be entitled to receive a lump sum cash payment equal
to the difference between the exercise price of the related option and the fair
market value of the shares of common stock subject to the option on the date of
exercise of the right in lieu 

                                      114
<PAGE>
 
of purchasing the stock underlying the option. The Company anticipates that all
options granted contemporaneously with stockholder approval of the Stock Option
Plan will qualify as Incentive Stock Options to the extent permitted under
Section 422 of the Code.

  A committee of the Board of Directors will administer the Stock Option Plan
and will determine which officers and employees may receive options and Limited
Rights, whether such options will qualify as Incentive Stock Options, the number
of shares subject to each option, the exercise price of each option, the manner
of exercise of the options and the time when such options become exercisable.

  If the Company adopts the Stock Option Plan  in the form described above, an
employee will realize taxable income upon grant or exercise of any Incentive
Stock Option, provided that the employee does not dispose of the shares received
through the exercise of such option for at least one year after the date the
employee receives the stock in connection with the option exercise and two years
after the date of grant of the option (a "disqualifying disposition").  The
Company may not take a compensation expense deduction with respect to the grant
or exercise of Incentive Stock Options, unless the employee disposes of the
shares in a disqualifying disposition.  In the case of a Non-Statutory Stock
Option and in the case of a disqualifying disposition of an Incentive Stock
Option, an employee will be deemed to receive ordinary income upon exercise of
the stock option in an amount equal to the amount by which the fair market value
of the Common Stock on the date of exercise exceeds the exercise price of the
option.  The amount of taxable income realized by an optionee upon the exercise
of a Non-Statutory Stock Option or due to a disqualifying disposition of shares
acquired through the exercise of an Incentive Stock Option are a deductible
expense for tax purposes by the Company.  Upon the exercise of a Limited Right,
the option holder realizes taxable income equal to the amount paid to him or her
upon exercise of the right and the Company receives a deduction equal to that
same amount.

  Stock options under an option plan adopted by the Company would become vested
and exercisable in the manner specified by the committee responsible for
administering the plan, subject to applicable NYBB and FDIC regulations.  The
Company anticipates options granted in connection with the Stock Option Plan
will remain exercisable for at least three months following the date on which
the employee ceases to perform services for the Bank or the Company, except that
in the event of death or disability, in which cases options accelerate and
become fully vested and remain exercisable for up to one year thereafter, or
such longer period as determined by the Company.  However, any Incentive Stock
Options exercised more than three months following the date the employee ceases
to perform services as an employee, other than termination due to death or
disability, would be treated for tax purposes as a Non-Statutory Stock Option.
The Company also anticipates that in the event of retirement, if the optionee
continues to perform services as a Director, Director Emeritus or consultant on
behalf of the Bank, the Company or an affiliate, unvested options would continue
to vest in accordance with their original vesting schedule until the optionee
ceases to serve as a Director, Director Emeritus or consultant.  If the  Stock
Option Plan is adopted in the form described above, the Company, if requested by
the optionee, could elect, in exchange for vested options, to pay the optionee,
or beneficiary in the event of death, the amount by which the fair market value
of the Common Stock exceeds the exercise price of the options on the date of the
employee's termination of employment.

  All options granted to outside directors under an option plan must, by law, be
Non-Statutory Stock Options and would vest and become exercisable in a manner
specified by the committee, subject to applicable NYBB and FDIC regulations, and
would expire upon the earlier of ten years following the date of grant or one
year following the date the optionee ceases to be a Director, Director Emeritus
or consultant.  In the event of the death or disability of a participant, all
previously granted options would immediately vest and become fully exercisable.

                                      115
<PAGE>
 
  The Company also intends that, subject to any applicable NYBB or FDIC
regulations, the Stock Option Plan  will provide for accelerated vesting of
previously granted options in the event of a change in control of the Company or
the Bank.  A change in control would be defined in the plan document and would
generally occur when a person or group of persons acting in concert acquires
beneficial ownership of 20% or more of any class of equity security of the
Company or the Bank or in the event of a tender or exchange offer, merger or
other form of business combination, sale of all or substantially all of the
assets of the Company or the Bank or contested election of directors which
resulted in the replacement of a majority of the Board of Directors by persons
not nominated by the directors in office prior to the contested election.

  Stock Program.  Following the Conversion, the Company intends to establish the
Stock Program which would provide for the grant of awards of Common Stock to
officers, directors and employees of the Company and its affiliates including
the Bank as a method of providing officers, employees and non-employee directors
of the Bank and Company with a proprietary interest in the Company in a manner
designed to encourage such persons to remain with the Bank.  The benefits under
the Stock Program may be provided for under either a separate plan for officers
and employees and a separate plan for outside directors or under the Master
Stock-based Benefit Plan which would combine the features of the Stock Program
with the Stock Option Plan.  The Company intends to present the Stock Program or
the plan of which they are a part, for stockholder approval at a meeting of
stockholders, which pursuant to applicable NYBB regulations,  may be held no
earlier than six months after the completion of the Conversion.

  The Bank or Company expects to contribute funds to the Stock Program to enable
such plan or a trust established for such plan, to acquire, in the aggregate, an
amount equal to 4% of the shares of Common Stock issued in the Conversion,
including shares issued to the Foundation (or 919,080 shares based upon the
issuance of 22,977,000 shares).  The Company will acquire these shares through
open market purchases, if permitted, or from authorized but unissued shares.
Although no specific award determinations have been made, the Company
anticipates that it will provide stock awards to the directors and employees of
the Company or Bank or their affiliates to the extent permitted by applicable
regulations.  Shares of Common Stock granted pursuant to the Stock Program will
be awarded at no cost to the recipients.  NYBB regulations provide that, to the
extent the Company implements the Stock Program within one year after the
Conversion, no individual employee may receive more than 25% of the shares of
any plan and non-employee directors may not receive more than 5% of any plan
individually or 30% in the aggregate for all directors.

  A committee of the Board of Directors will administer the Stock Program or the
plan of which they are a part.  Stock awards will not be transferable or
assignable.  The Board intends to appoint an independent fiduciary to serve as
trustee of a trust established pursuant to the Stock Program.  The Company may
make allocations and grants to officers and employees under the Stock Program in
the form of non performance-based grants and/or performance-based grants.  The
Company may make the granting or vesting of stock awards under the Stock Program
conditioned upon the achievement of individual or Company-wide performance
goals, including the Company's or Bank's achievement of specified levels of net
income, return on assets, return on equity or other specified financial
performance goals and will be subject to applicable NYBB and FDIC regulations.

  In the event of death, awards of Common Stock  will become 100% vested.  In
the event of disability, grants would be 100% vested upon termination of
employment of an officer or employee, or upon termination of service as a
director.  In the event of retirement, if the participant continues to perform
services as a Director, Director Emeritus or consultant on behalf of the Bank,
the Company or an affiliate or, in the case of a retiring Director, Director
Emeritus, or as a consulting director, unvested grants will continue to vest in
accordance with their original vesting schedule until the recipient ceases to
perform such services at which time any unvested grants would lapse.

                                      116
<PAGE>
 
  The Company intends that, subject to any applicable NYBB or FDIC regulations,
the Stock Program described above would provide for accelerated vesting of
shares granted under the Stock Program in the event of a change in control of
the Bank or Company.  A change in control, which will be defined in the plan
document, generally occurs when a person or group of persons acting in concert
acquires beneficial ownership of 20% or more of a class of equity securities of
the Company or the Bank or in the event of a tender or exchange offer, merger or
other form of business combination, sale of all or substantially all of the
assets of the Company or the Bank or contested election of directors which
results in the replacement of a majority of the Board of Directors by persons
not nominated by the directors in office prior to the contested election.

  When shares become vested in accordance with the stock programs described
above, the participants will recognize taxable income equal to the fair market
value of the Common Stock at that time.  The Company may take a deduction equal
to that amount for the year in which it becomes taxable to the individual.  When
shares become vested and are actually distributed in accordance with the Stock
Program, the participants also receive amounts equal to any accrued dividends
with respect thereto.  Prior to vesting, recipients of grants may direct the
voting of the shares awarded to them.  Shares not subject to grants and shares
allocated subject to the achievement of performance goals will be voted by the
trustee of the Stock Program, or the plan of which they are a part, in
accordance to the directions provided by individuals with respect to shares
subject to grants.  Vested shares will be distributed to recipients as soon as
practicable following the day on which they are vested.

  In the event that additional authorized but unissued shares are acquired by
the Stock Program after the Conversion, the interests of existing shareholders
would be diluted.  See "Pro Forma Data."

TRANSACTIONS WITH CERTAIN RELATED PERSONS

     The Bank's policies do not permit the Bank to make loans to any of its
Trustees.  Two of the Bank's Trustees have loans with the Bank that predate
their becoming Trustees.  Federal regulations require that all loans or
extensions of credit to executive officers and directors must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with the general public and
must not involve more than the normal risk of repayment or present other
unfavorable features.  In addition, loans made to a director or executive
officer in excess of the greater of $25,000 or 5% of the Bank's capital and
surplus (up to a maximum of $500,000) must be approved in advance by a majority
of the disinterested members of the Board of Trustees.

     The Bank currently makes loans to its executive officers on the same terms
and conditions offered to the general public.  The Bank's policy provides that
all loans made by the Bank to its executive officers be made in the ordinary
course of business, on substantially the same terms, including collateral, as
those prevailing at the time for comparable transactions, with other persons and
may not involve more than the normal risk of collectability or present other
unfavorable features.  In addition, the law firm of Lahr, Dillon, Manzulli,
Kelley & Penett, P.C. has a mortgage loan with the Bank.  Such loan was made by
the Bank in the ordinary course of business, with no favorable terms and did
not involve more than the normal risk of collectability or present unfavorable
features.  During fiscal 1997, the law firm of Lahr, Dillon, Manzulli, Kelley &
Penett, P.C. provided legal representation to the Bank for which it was paid
approximately $139,000 for legal fees and related services.  Mr. Manzulli and
Mr. Kelley are partners with the firm.

     The Company intends that all transactions between the Company and its
executive officers, directors, holders of 10% or more of the shares of any class
of its Common Stock and affiliates thereof, will contain terms no less favorable
to the Company than could have been obtained by it in arms-length negotiations
with unaffiliated persons and will be approved by a majority of independent
outside directors of the Company not having any interest in the transaction.

                                      117
<PAGE>

SUBSCRIPTIONS BY EXECUTIVE OFFICERS, DIRECTORS AND TRUSTEES

     The following table sets forth the number of shares of Common Stock that
the executive officers, Trustees and Directors, and their associates, propose to
purchase, assuming shares of Common Stock are issued at the minimum and maximum
of the Estimated Price Range (including shares issued to the Foundation) and
that sufficient shares will be available to satisfy their subscriptions.  The
table also sets forth the total expected beneficial ownership of Common Stock as
to all Trustees, Directors and executive officers as a group.
<TABLE>
<CAPTION>
 
                                                               At the Minimum                           At the Maximum
                                                              of the Estimated                      of the Estimated Price
                                                               Price Range(1)                              Range(1)
                                                       ----------------------------------    -----------------------------------
                                                           Number          As a Percent           Number          As a Percent
                                                            of               of Shares              of             of Shares
                 Name                 Amount               Shares             Offered             Shares            Offered
-----------------------------   -----------------    ----------------   -----------------    -----------------   ----------------
                             
<S>                                  <C>                 <C>                   <C>             <C>                    <C>
Anthony E. Burke                     $ 250,000             25,000              0.15                25,000             0.11
Godfrey H. Carstens, Jr.               250,000             25,000              0.15                25,000             0.11
Robert S. Farrell                      150,000             15,000              0.09                15,000             0.07
William C. Frederick, M.D.             250,000             25,000              0.15                25,000             0.11
James L. Kelley (2)                    500,000             50,000              0.29                50,000             0.22
Michael F. Manzulli (2)                500,000             50,000              0.29                50,000             0.22
T. Ronald Quinlan, Jr.                 100,000             10,000              0.06                10,000             0.04
Maurice K. Shaw                        200,000             20,000              0.12                20,000             0.09
John M. McKenna                        100,000             10,000              0.06                10,000             0.04
Thomas R. Cangemi                      250,000             25,000              0.15                25,000             0.11
Stephen G.C. Campbell                   75,000              7,500              0.04                 5,000             0.03
Peter J. Esposito                       75,000              7,500              0.04                 7,500             0.03
Charles F. Hermann, III                125,000             12,500              0.07                12,500             0.05
Andrew M. Sisock                       100,000             10,000              0.06                10,000             0.04
Nelson C. Sundback                     100,000             10,000              0.06                10,000             0.04
Robert J. O'Rourke                      75,000              7,500              0.04                 7,500             0.03
                                     ---------            -------              ----               -------             ----
                                                                                                                
All Directors and Executive Officers                                                                            
as a group (17 persons)..........    $3,100,00            310,000              1.83%              310,000             1.35%
                                     =========            =======              ====               =======             ====
</TABLE> 
----------------------
(1)       Includes proposed subscriptions, if any, by associates.  Does not
          include orders by the ESOP.  Intended purchases by the ESOP are
          expected to be 8.0% of the shares issued in the Conversion, including
          shares issued to the Foundation.  Also does not include Common Stock
          sold, Common Stock which may be awarded under the Stock Program to be
          adopted equal to 4% of the Common Stock issued in the Conversion,
          including shares issued to the Foundation, and Common Stock which may
          be purchased pursuant to options which may be granted under the Stock
          Option Plan equal to 10% of the number of shares of Common Stock
          issued in the Conversion, including shares issued to the Foundation.

(2)       Includes proposed subscriptions for $250,000 for a retirement plan 
          trust, the trustees of which include Messrs. Kelley and Manzulli.

                                      118
<PAGE>
 
                                 THE CONVERSION

     THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK HAS APPROVED THE PLAN
OF CONVERSION SUBJECT TO THE APPROVAL OF THE BANK'S ELIGIBLE ACCOUNT HOLDERS AND
THE SATISFACTION OF CERTAIN OTHER CONDITIONS.  HOWEVER, SUCH APPROVAL DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE
SUPERINTENDENT.

GENERAL

     On July 31, 1997, the Bank's Board of Trustees adopted the Plan of
Conversion pursuant to which the Bank will be converted from a New York State
chartered mutual savings bank to a New York State chartered stock savings bank.
It is currently intended that all of the capital stock of the Bank will be held
by the Company, which is incorporated under Delaware law.  The Plan has been
approved by the Superintendent and the Bank has received a notice of intent not
to object to the Plan from the FDIC, subject to, among other things, approval of
the Plan by the Bank's Eligible Account Holders.  A special meeting of Eligible
Account Holders has been called for this purpose to be held on _______, 1997.

     The Company expects to receive approval from the OTS to become a savings
and loan holding company and to acquire all of the common stock of the Bank to
be issued in the Conversion.  The Company plans to retain 50% of the net
proceeds from the sale of the Common Stock and to use the remaining 50% to
purchase all of the common stock of the Bank to be issued in the Conversion.
The Conversion will be effected only upon completion of the sale of all of the
shares of Common Stock of the Company or all of the common stock of the Bank, if
the holding company form of organization is not utilized, to be issued in the
Conversion.

     The Plan provides that the Board of Trustees of the Bank, at any time prior
to the issuance of the Common Stock and for any reason, may decide not to use
the holding company form of organization in implementing the Conversion.  Such
reasons may include possible delays resulting from overlapping regulatory
processing, or policies or conditions, which could adversely affect the Bank's
or the Company's ability to consummate the Conversion and transact its business
after the Conversion as contemplated herein and in accordance with the Bank's
operating policies.  In the event that such a decision is made, the Bank will
withdraw the Company's registration statement from the SEC and will take all
steps necessary to complete the Conversion without the Company, including filing
any necessary documents with the Superintendent.  In such event, and provided
there is no regulatory action, directive or other consideration upon which basis
the Bank determines not to complete the Conversion, if permitted by the
Superintendent, the Bank will issue and sell the common stock of the Bank and
subscribers will be notified of the elimination of the Company and resolicited
(i.e., be permitted to affirm their orders, in which case they will need to
affirmatively reconfirm their subscriptions prior to the expiration of the
resolicitation offering or their funds will be promptly refunded with interest,
or be permitted to modify or rescind their subscriptions) and notified of the
time period within which the subscriber must affirmatively notify the Bank of
his intention to affirm, modify or rescind his subscription.  The following
description of the Plan assumes that a holding company form of organization will
be used in the Conversion.  In the event that a holding company form of
organization is not used, all other pertinent terms of the Plan as described
below will apply to the conversion of the Bank from the mutual to stock form of
organization and the sale of the Bank's common stock.

     The Plan provides generally that (i) the Bank will convert from a mutual
savings bank to a capital stock savings bank and (ii) the Company will offer
Common Stock for sale in the Subscription Offering to Eligible Account Holders,
Employee Plans, including the ESOP, and Supplemental Eligible Account Holders.
Concurrently, shares will be offered in the Community Offering to certain
members of the general 

                                      119
<PAGE>
 
public, subject to the prior rights of holders of subscription rights. It is
anticipated that all shares not subscribed for in the Subscription and Community
Offerings will be offered for sale by the Company to the general public in a
Syndicated Community Offering. The Bank and Company have the right to accept or
reject, in whole or in part, any orders to purchase shares of the Common Stock
received in the Community Offering or Syndicated Community Offering.

     The aggregate price of the shares of Common Stock to be sold in the
Conversion will be determined based upon an independent appraisal prepared by
Keller & Company, Inc. of the estimated pro forma market value of the Common
Stock giving effect to the Conversion.  All shares of Common Stock to be issued
and sold in the Conversion will be sold at the same price.  Keller's independent
appraisal will be updated and the final price of the shares will be determined
at the completion of the Subscription and Community Offerings, if all shares are
subscribed for, or at the completion of the Syndicated Community Offering.  The
independent appraisal has been performed by Keller, a consulting firm
experienced in the valuation and appraisal of savings institutions.  See "-
Stock Pricing" for a determination of the estimated pro forma market value of
the Common Stock.

     The following is a brief summary of material aspects of the Conversion.
The summary is qualified in its entirety by reference to the provisions of the
Plan.  A copy of the Plan is available upon written request from the Bank and is
available for inspection at each branch office of the Bank and at the office of
the Superintendent.  The Plan is also filed as an Exhibit to the Registration
Statement of which this Prospectus is a part, copies of which may be obtained
from the SEC.  See "Additional Information."

ESTABLISHMENT OF CHARITABLE FOUNDATION

     General.  In furtherance of the Bank's commitment to its local community,
the Plan of Conversion provides for the establishment of a charitable foundation
in connection with the Conversion.  The Plan provides that the Bank and the
Company will establish the Foundation, which will be incorporated under Delaware
law as a non-stock corporation, and will fund the Foundation with Common Stock
of the Company, as further described below.  The Company and the Bank believe
that the funding of the Foundation with Common Stock of the Company is a means
of establishing a common bond between the Bank and its community and thereby
enables the Bank's community to share in the potential growth and success of the
Company over the long term.  By further enhancing the Bank's visibility and
reputation in its local community, the Bank believes that the Foundation will
enhance the long-term value of the Bank's community banking franchise.  The
Foundation will be dedicated to charitable purposes within the Bank's local
community, including community development activities.

     Purpose of the Foundation.  The purpose of the Foundation is to provide
funding to support charitable causes and community development activities.  In
recent years, the Bank has emphasized community lending and community
development activities within the Bank's local community.  The Bank received a
satisfactory CRA rating in its last CRA examination.  The Foundation is being
formed as a complement to the Bank's existing community activities, not as a
replacement for such activities.  The Bank intends to continue to emphasize
community lending and community development activities following the Conversion.
However, such activities are not the Bank's sole corporate purpose.  The
Foundation, conversely, will be completely dedicated to community activities and
the promotion of charitable causes, and may be able to support such activities
in ways that are not presently available to the Bank.  Since the Bank has a
Satisfactory record of serving its community under the CRA and already engages
in community development activities, the Bank believes that the Foundation will
enable the Company and the Bank to assist their local community in areas beyond
community development and lending.  The Bank believes the establishment of the
Foundation will enhance its current activities under the CRA.  In this regard,
the Board of Trustees believes the establishment of a charitable foundation is
consistent with the Bank's commitment 

                                      120
<PAGE>
 
to community service. The Board further believes that the funding of the
Foundation with Common Stock of the Company is a means of enabling the Bank's
community to share in the potential growth and success of the Company long after
completion of the Conversion. The Foundation will accomplish that goal by
providing for continued ties between the Foundation and Bank, thereby forming a
partnership with the Bank's community. The establishment of the Foundation will
also enable the Company and the Bank to develop a unified charitable donation
strategy and will centralize the responsibility for administration and
allocation of corporate charitable funds. Charitable foundations have been
formed by other financial institutions for this purpose, among others. The Bank,
however, does not expect the contribution to the Foundation to take the place of
the Bank's traditional community lending and charitable activities.

     Structure of the Foundation. The Foundation will be incorporated under
Delaware law as a non-stock corporation. Pursuant to the Foundation's Bylaws,
the Foundation's Board of Directors initially will be comprised of seven
members, all of whom are existing Trustees of the Bank. In the future, the Board
of Directors of the Foundation may be expanded to include certain members of the
community. A Nominating Committee of the Board, which is to be comprised of a
minimum of three members of the board, will nominate individuals eligible for
election to the board of directors. The members of the Foundation, who are
comprised of its Board members, will elect the Directors at the annual meeting
of the Foundation from those nominated by the Nominating Committee. Directors
will be divided into three classes with each class appointed for three-year
terms. The certificate of incorporation of the Foundation provides that the
corporation is organized exclusively for charitable purposes, including
community development, as set forth in Section 501(c)(3) of the Code. The
Foundation's certificate of incorporation further provides that no part of the
net earnings of the Foundation will inure to the benefit of, or be distributable
to, its directors, officers or members.

     The authority for the affairs of the Foundation will be vested in the Board
of Directors of the Foundation.  The Directors of the Foundation will be
responsible for establishing the policies of the Foundation with respect to
grants or donations by the Foundation, consistent with the purposes for which
the Foundation was established.  Although no formal policy governing Foundation
grants exists at this time, the Foundation's Board of Directors will adopt such
a policy upon establishment of the Foundation.  As directors of a nonprofit
corporation, directors of the Foundation will at all times be bound by their
fiduciary duty to advance the Foundation's charitable goals, to protect the
assets of the Foundation and to act in a manner consistent with the charitable
purpose for which the Foundation is established. The Directors of the Foundation
will also be responsible for directing the activities of the Foundation,
including the management of the Common Stock of the Company held by the
Foundation.

     The Foundation's place of business will be located at the Company's
administrative offices and initially the Foundation is expected to have no
employees but will utilize the members of the staff of the Company or the Bank.
The Board of Directors of the Foundation will appoint such officers as may be
necessary to manage the operations of the Foundation.

     The Company intends to capitalize the Foundation with Common Stock of the
Company in an amount equal to 8.0% of the total amount of Common Stock to be
sold in connection with the Conversion.  At the minimum, midpoint and maximum of
the Estimated Price Range, the contribution to the Foundation would equal
1,258,000, 1,480,000 and 1,702,000 shares, which would have a market value of
$12.6 million, $14.8 million, and $17.0 million, respectively, assuming the
Purchase Price of $10.00 per share.  The Company and the Bank determined to fund
the Foundation with Common Stock rather than cash because it desired to form a
bond with its community in a manner that would allow the community to share in
the potential growth and success of the Company and the Bank over the long term.
The funding of the Foundation with stock also provides the Foundation with a
potentially larger endowment than if the Company contributed cash to the
Foundation since, as a shareholder, the Foundation will share in the potential
growth 

                                      121
<PAGE>
 
and success of the Company. As such, the contribution of stock to the Foundation
has the potential to provide a self-sustaining funding mechanism which reduces
the amount of cash that the Company, if it were not making the stock donation,
would have to contribute to the Foundation in future years in order to maintain
a level amount of charitable grants and donations.

     The Foundation will receive working capital from any dividends that may be
paid on the Company's Common Stock in the future, and subject to applicable
federal and state laws, loans collateralized by the Common Stock or from the
proceeds of the sale of any of the Common Stock in the open market from time to
time as may be permitted to provide the Foundation with additional liquidity. As
a private foundation under Section 501(c)(3) of the Code, the Foundation will be
required to distribute annually in grants or donations, a minimum of 5% of the
average fair market value of its net investment assets. One of the conditions
imposed on the gift of Common Stock by the Company is that the amount of Common
Stock that may be sold by the Foundation in any one year shall not exceed 5% of
the average market value of the assets held by the Foundation, except where the
Board of Directors of the Foundation determines that the failure to sell an
amount of common stock greater than such amount would result in a long-term
reduction of the value of the Foundation's assets and as such would jeopardize
the Foundation's capacity to carry out its charitable purposes. Upon completion
of the Conversion and the contribution of shares to the Foundation immediately
following the Conversion, the Company would have 16,983,000, 19,980,000 and
22,977,000 shares issued and outstanding at the minimum, midpoint and maximum of
the Estimated Price Range. Because the Company will have an increased number of
shares outstanding, the voting and ownership interests of shareholders in the
Company's common stock would be diluted by 7.4%, as compared to their interests
in the Company if the Foundation was not established. For additional discussion
of the dilutive effect, see "Pro Forma Data."

     Tax Considerations.  The Company and the Bank have been advised by their
independent tax advisors that an organization created for the above purposes
would qualify as a Section 501(c)(3) exempt organization under the Code, and
would likely be classified as a private foundation.  The Foundation will submit
a request to the IRS to be recognized as an exempt organization.  As long as the
Foundation files its application for tax-exempt status within 15 months from the
date of its organization, and provided the IRS approves the application, the
effective date of the Foundation's status as a Section 501(c)(3) organization
will be the date of its organization.

     Under Delaware law, the Company is authorized by statute to make charitable
contributions and case law has recognized the benefits of such contributions to
a Delaware corporation.  In this regard, Delaware case law provides that a
charitable gift must be within reasonable limits as to amount and purpose to be
valid.  Under the Code, the Company may deduct up to 10% of its taxable income
in any one year and any contributions made by the Company in excess of the
deductible amount may be carried forward and deducted in the Company's five
succeeding taxable years, subject, in each such year, to the 10% of taxable
income limitation.  The Company and the Bank believe that the Conversion
presents a unique opportunity to establish and fund a charitable foundation
given the substantial amount of additional capital being raised in the
Conversion.  In making such a determination, the Company and the Bank considered
the dilutive impact of the contribution of Common Stock to the Foundation on the
amount of Common Stock available to be offered for sale in the Conversion.
Based on such consideration, the Company and Bank believe that the contribution
to the Foundation in excess of the 10% annual limitation is justified given the
Bank's capital position and its earnings, the substantial additional capital
being raised in the Conversion and the potential benefits of the Foundation to
the Bank's community. In this regard, assuming the sale of the Common Stock at
the midpoint of the Estimated Price Range, the Company would have pro forma
consolidated capital of $285.8 million or 24.26% of pro forma consolidated
assets and the Bank's pro forma leverage and risk-based capital ratios would be
15.9% and 30.7%, respectively. See "Regulatory Capital Compliance,"
"Capitalization," and "Comparison of Valuation and Pro Forma Information with No
Foundation." Thus, the amount of the


                                      122
<PAGE>
 
contribution will not adversely impact the financial condition of the Company
and the Bank and the Company and the Bank therefore believe that the amount of
the charitable contribution is reasonable given the Company's and the Bank's pro
forma capital positions. As such, the Company and the Bank believe that the
contribution does not raise safety and soundness concerns.

     The Company and the Bank have received an opinion of their independent tax
advisors that the Company's contribution of its own stock to the Foundation
would not constitute an act of self-dealing, and that the Company will be
entitled to a deduction in the amount of the fair market value of the stock at
the time of the contribution, subject to a limitation based on 10% of the
Company's annual taxable income. As discussed above, the Company, however, would
be able to carry forward any unused portion of the deduction for five years
following the contribution. If the Foundation would have been established in
fiscal 1997, the Company would have received a charitable contribution deduction
of approximately $2.1 million (based on the Bank's pre-tax income for fiscal
1997, an assumed tax rate of 47% and a contribution of Common Stock equal to
$17.0 million). The Company is permitted under the Code to carry over the excess
contribution over the five year period following the contribution to the
Foundation. Assuming the close of the Offerings at the midpoint of the Estimated
Price Range, the Company estimates that all of the deduction should be
deductible over the six-year period. Neither the Company nor the Bank expect to
make any further contributions to the Foundation within the first five years
following the initial contribution. After that time, the Company and the Bank
may consider future contributions to the Foundation. Any such decisions would be
based on an assessment of, among other factors, the financial condition of the
Company and the Bank at that time, the interests of shareholders and depositors
of the Company and the Bank, and the financial condition and operations of the
Foundation.

     Although the Company and the Bank have received an opinion of their
independent tax advisors that the Company is entitled to a deduction for the
charitable contribution, there can be no assurances that the IRS will recognize
the Foundation as a Section 501(c)(3) exempt organization or that the deduction
will be permitted.  In such event, the Company's tax benefit related to the
contribution to the Foundation would be expensed without tax benefit, resulting
in a reduction in earnings in the year in which the IRS makes such a
determination.  See "Risk Factors - Establishment of Charitable Foundation."

     As a private foundation, earnings and gains, if any, from the sale of
Common Stock or other assets are exempt from federal and state corporate
taxation.  However, investment income, such as interest, dividends and capital
gains, will be subject to a federal excise tax of 2.0%.  The Foundation will be
required to make an annual filing with the IRS within four and one-half months
after the close of the Foundation's fiscal year to maintain its tax-exempt
status.  The Foundation will be required to publish a notice that the annual
information return will be available for public inspection for a period of 180
days after the date of such public notice.  The information return for a private
foundation must include, among other things, an itemized list of all grants made
or approved, showing the amount of each grant, the recipient, any relationship
between a grant recipient and the Foundation's managers and a concise statement
of the purpose of each grant.  The Foundation will also be required to file an
annual report with the Charities Bureau of the Office of the Attorney General of
the State of New York.

PURPOSES OF CONVERSION

     The Bank, as a New York State chartered mutual savings bank, does not have
stockholders and has no authority to issue capital stock.  By converting to the
capital stock form of organization, the Bank will be structured in the form used
by commercial banks, most business entities and a growing number of savings
institutions.  The Conversion will be important to the future growth and
performance of the Bank by providing a larger capital base on which the Bank may
operate, enhanced future access to capital markets, 

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enhanced ability to diversify into other financial services related activities
and enhanced ability to render services to the public.

     The holding company form of organization would provide additional
flexibility to diversify the Bank's business activities through existing or
newly formed subsidiaries, or through acquisitions of or mergers with both
mutual and stock financial institutions, as well as other companies.  Although
there are no current arrangements, understandings or agreements regarding any
such opportunities, the Company will be in a position after the Conversion,
subject to regulatory limitations and the Company's financial position, to take
advantage of any such opportunities that may arise.  While there are benefits
associated with the holding company form of organization, such form of
organization may involve additional costs associated with its maintenance and
regulation as a savings and loan company, such as additional administrative
expenses, taxes and regulatory filings or examination fees.

     The potential impact of Conversion upon the Bank's capital base is
significant. At June 30, 1997, the Bank had Tier I Leverage capital of $99.1
million, or 10.02% of total assets. Assuming that $155.4 million of net proceeds
are realized from the sale of Common Stock (see "Pro Forma Data" for the basis
of this assumption) and assuming that 50% of the net proceeds are used by the
Company to purchase the capital stock of the Bank, the Bank's Tier I Leverage
capital would increase to $168.1 million, resulting in a pro forma leverage
capital ratio of 15.89% giving effect to the Conversion. In the event that the
holding company form of organization is not utilized and all the net proceeds,
at the midpoint of the Estimated Price Range, are retained by the Bank, the
Bank's core capital would increase to $254.5 million, resulting in a pro forma
leverage capital ratio of 24.06% at June 30, 1997. The investment of the net
proceeds from the sale of the Common Stock will provide the Bank with additional
income to further increase its capital position.

     After completion of the Conversion, the unissued Common Stock and preferred
stock authorized by the Company's Certificate of Incorporation will permit the
Company, subject to market conditions and applicable regulatory approvals, to
raise additional equity capital through further sales of securities, and to
issue securities in connection with possible acquisitions.  At the present time,
the Company has no plans with respect to additional offerings of securities,
other than the issuance of additional shares upon exercise of stock options
under the Stock Option Plan or the possible issuance of authorized but unissued
shares to the Stock Program. Following the Conversion, the Company will also be
able to use stock-based benefit plans to attract and retain executive and other
personnel for itself and its subsidiaries. See "Management of the Bank -
Executive Compensation."

EFFECTS OF CONVERSION

     General.  Each depositor in a mutual savings bank has both a deposit
account in the institution and a pro rata ownership interest in the net worth of
the institution based upon the balance in his or her account, which interest may
only be realized in the event of a liquidation of the institution.  However,
this ownership interest is tied to the depositor's account and has no tangible
market value separate from such deposit account.  Any depositor who opens a
deposit account obtains a pro rata ownership interest in the net worth of the
institution without any additional payment beyond the amount of the deposit.  A
depositor who reduces or closes his account receives a portion or all of the
balance in the account but nothing for his ownership interest in the net worth
of the institution, which is lost to the extent that the balance in the account
is reduced.

     Consequently, mutual savings bank depositors normally have no way to
realize the value of their ownership interest, which may have realizable value
only in the unlikely event that the mutual savings bank is liquidated.  In such
event, the depositors of record at that time, as owners, would have a claim to
share pro 

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<PAGE>
 
rata in any residual surplus and reserves after other claims, including claims
of depositors to the amounts of their deposits, are paid.

     When a mutual savings bank converts to stock form, depositors lose all
rights to the net worth of the mutual savings bank, except to the extent
depositors have rights to claim a pro rata share of funds representing the
liquidation account established in connection with the Conversion.
Additionally, permanent nonwithdrawable capital stock is created and offered to
depositors which represents the ownership of the institution's net worth,
subject to certain claims of Eligible Account Holders with respect to amounts
representing the liquidation account.  THE COMMON STOCK IS SEPARATE AND APART
FROM DEPOSIT ACCOUNTS AND CANNOT BE AND IS NOT INSURED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.  Certificates are issued to evidence ownership of the
permanent stock.  The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit account the seller may hold in the institution.

     No assets of the Company or the Bank will be distributed in connection with
the Conversion other than pursuant to the payment of expenses incurred in
connection therewith.

     Continuity.  While the Conversion is being accomplished, the normal
business of the Bank of accepting deposits and making loans will continue
without interruption.  The Bank will continue to be subject to regulation by the
Superintendent and the FDIC.  After Conversion, the Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.

     The Trustees of the Bank at the time of Conversion will serve as Directors
of the Bank after the Conversion.  The Directors of the Company will consist of
the same individuals who will serve on the Board of Directors of the Bank.  All
officers of the Bank at the time of Conversion will retain their positions after
the Conversion.

     Effect on Deposit Accounts.  Under the Plan, each depositor in the Bank at
the time of Conversion will automatically continue as a depositor after the
Conversion, and each deposit account will remain the same with respect to
deposit balance, interest rate and other terms.  Each such account will be
insured by the FDIC to the same extent as before the Conversion.  Depositors
will continue to hold their existing passbooks and other evidences of their
accounts.

     Effect on Loans.  No loan outstanding from the Bank will be affected by the
Conversion, and the amount, interest rate, maturity and security for each loan
will remain as it was contractually fixed prior to the Conversion.

     Effect on Voting Rights of Depositors.  In its current mutual form, voting
rights and control of the Bank are vested exclusively in the Board of Trustees.
After the Conversion, direction of the Bank will be under the control of the
Board of Directors of the Bank.  The Company, as the holder of all of the
outstanding common stock of the Bank, will have exclusive voting rights with
respect to any matters concerning the Bank requiring stockholder approval,
including the election of Directors of the Bank.

     After the Conversion, subject to the rights of the holders of preferred
stock that may be issued in the future, the holders of the Common Stock will
have exclusive voting rights with respect to any matters concerning the Company.
Each holder of Common Stock will, subject to the restrictions and limitations
set forth in the Company's Certificate of Incorporation discussed below, be
entitled to vote on any matters to be considered by the Company's stockholders,
including the election of directors of the Company.

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<PAGE>
 
     Tax Effects.  The Bank has received an opinion of counsel with regard to
federal income taxation which indicates that the adoption and implementation of
the Plan of Conversion set forth herein will not be taxable for Federal income
tax purposes to the Bank or its Eligible Account Holders or the Company, subject
to the limitations and qualifications in such opinion.  The Bank has also
received an opinion from Ernst & Young LLP that, with respect to New York State
banking and franchise taxes, sales and use taxes, stock transfer taxes and real
property transfer gains taxes, the Conversion will not result in a tax
liability, and, with respect to New York State real estate transfer gains taxes,
a position may be taken that the Conversion is tax free.  The opinion of Ernst &
Young LLP does provide that the Company will be required to pay a New York State
license fee as a foreign corporation equal to 1/20% of the apportioned par value
of the Common Stock issued by the Company, subject to the limitations and
qualifications contained in such opinions.  See "- Tax Aspects."

     Effect on Liquidation Rights.  If a mutual savings bank were to liquidate,
all claims of creditors (including those of depositors, to the extent of deposit
balances) would be paid first.  Thereafter, if there were any assets remaining,
depositors would have a claim to receive such remaining assets, pro rata, based
upon the deposit balances in their deposit accounts immediately prior to
liquidation.  In the unlikely event that the Bank were to liquidate after
Conversion, all claims of creditors (including those of depositors, to the
extent of their deposit balances) would also be paid first, followed by
distribution of the "liquidation account," if any, to certain depositors (as
described in "- Liquidation Rights," below), with any assets remaining
thereafter distributed to the Company as the holder of the Bank's capital stock.

STOCK PRICING

     The Plan of Conversion requires that the purchase price of the Common Stock
must be based on the appraised pro forma market value of the Common Stock, as
determined on the basis of an independent appraisal.  The Bank and the Company
have retained Keller to make such appraisal.  For its services in making such
appraisal, Keller will receive a fee of $31,000, including fees related to the
preparation of a business plan for the Company and Bank, and will be reimbursed
for certain of its expenses in an amount not to exceed $1,000.  The Bank and the
Company have agreed to indemnify Keller and its employees and affiliates against
certain losses (including any losses in connection with claims under the federal
securities laws) arising out of its services as the independent appraiser,
except where Keller's liability results from its negligence or willful
misconduct.

     An appraisal has been made by Keller in reliance upon the information
contained in this Prospectus, including the Consolidated Financial Statements.
Keller also considered the following factors, among others: the present and
projected operating results and financial condition of the Company and the Bank,
including liquidity, capitalization, asset composition, funding mix, amount of
intangible assets owned, and level of interest rate risk; the economic,
demographic and competitive aspects of the Bank's existing marketing area; the
quality and depth of the Bank's management; certain historical, financial and
other information relating to the Bank; a comparative evaluation of the
operating and financial statistics of the Bank with those of other savings
institutions; the aggregate size of the offering of the Common Stock; the impact
of Conversion on the Bank's net worth and earnings potential; the proposed
dividend policy of the Company and the Bank; the trading market for securities
of comparable institutions and general conditions in the market for such
securities; and recent regulatory matters.  In particular, the appraisal
considered the Bank's financial condition and projected and historical operating
results, including income and expense trends, asset size, loan portfolio
composition, non-performing loans and assets, interest rate sensitivity
position, capital position, and yields on assets and costs of liabilities in
comparison to other publicly-traded thrifts with assets greater than or equal to
$200 million and less than or equal to $2.0 billion located in the State of New
York, the states contiguous to New York plus the States of Delaware and
Maryland. The Board of Trustees of the Bank and Board of Directors of the
Company have

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<PAGE>
 
reviewed the appraisal of Keller in determining the reasonableness and adequacy
of such appraisal consistent with NYBB and FDIC regulations and have reviewed
the methodology and reasonableness of assumptions utilized by Keller in the
preparation of such appraisal and established the Estimated Price in a manner
consistent with this appraisal.

     On the basis of the foregoing, Keller has advised the Company and the Bank
that, in its opinion dated as of September 12, 1997, the estimated pro forma
market value of the Common Stock being sold in connection with the Conversion
ranged from a minimum of $157.3 million to a maximum of $212.8 million (the
"Valuation Price Range") with a midpoint of $185.0 million.  The Board of
Trustees established the Estimated Price Range of $157.3 million to $212.8
million within the Valuation Price Range based on the issuance of  15,725,000 to
21,275,000 shares at the Purchase Price of $10.00 per share.  The Estimated
Price Range may be amended with the approval of the Superintendent and FDIC, if
required, if necessitated by subsequent developments in the financial condition
of the Company or the Bank or market conditions generally.

     SUCH APPRAISAL, HOWEVER, IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING SUCH SHARES OF
COMMON STOCK.  KELLER DID NOT INDEPENDENTLY VERIFY THE CONSOLIDATED FINANCIAL
STATEMENTS AND OTHER INFORMATION PROVIDED BY THE BANK, NOR DID KELLER VALUE
INDEPENDENTLY THE ASSETS OR LIABILITIES OF THE BANK.  THE APPRAISAL CONSIDERS
THE BANK AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS AN INDICATION OF THE
LIQUIDATION VALUE OF THE BANK.  MOREOVER, BECAUSE SUCH APPRAISAL IS NECESSARILY
BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE
SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS
PURCHASING SUCH SHARES IN THE CONVERSION WILL THEREAFTER BE ABLE TO SELL SUCH
SHARES AT PRICES AT OR ABOVE THE PURCHASE PRICE OR IN THE RANGE OF THE FOREGOING
VALUATION OF THE PRO FORMA MARKET VALUE THEREOF.  The appraisal of Keller may be
inspected by any Eligible Account Holder or Supplemental Eligible Account Holder
at the Bank's main office located at 1214 Castleton Avenue, Staten Island, New
York, during regular business hours of the Bank.  Copies of the appraisal may
also be requested by Eligible Account Holders or Supplemental Eligible Account
Holders; provided, however, that such Eligible Account Holders or Supplemental
Eligible Account Holders shall be responsible for all costs associated with the
copying and transmittal of such appraisal.

     Following commencement of the Subscription and Community Offerings, the
maximum of the Estimated Price Range may be increased up to 15% and the number
of shares of Common Stock being sold in the Conversion may be increased to
24,466,250 shares due to regulatory considerations, or changes in the market and
general financial and economic conditions, without the resolicitation of
subscribers.  See "- Limitations on Common Stock Purchases" as to the method of
distribution and allocation of additional shares that may be issued in the event
of an increase in the Estimated Price Range to fill unfilled orders in the
Subscription and Community Offerings.

     No sale of shares of Common Stock may be consummated unless, prior to such
consummation, Keller confirms to the Bank, Company, Superintendent and FDIC
that, to the best of its knowledge, nothing of a material nature has occurred
which, taking into account all relevant factors, would cause Keller to conclude
that the value of the Common Stock at the price so determined is incompatible
with its estimate of the pro forma market value of the Common Stock at the
conclusion of the Subscription and Community Offerings.

     If the pro forma market value of the Common Stock is either more than 15%
above the maximum of the Estimated Price Range or less than the minimum of the
Estimated Price Range, the Bank and the Company, after consulting with the
Superintendent and FDIC, may terminate the Plan and return all funds promptly
with interest at the Bank's passbook rate of interest on payments made by check,
bank draft or 

                                      127
<PAGE>
 
money order, extend or hold a new Subscription and Community Offering, establish
a new Estimated Price Range, commence a resolicitation of subscribers or take
such other actions as permitted by the Superintendent and FDIC in order to
complete the Conversion. In the event that a resolicitation is commenced, unless
an affirmative response is received within a reasonable period of time, all
funds will be promptly returned to investors as described above. A
resolicitation following the conclusion of the Subscription and Community
Offerings would not exceed 45 days or, if following the Syndicated Community
Offering, would not exceed 60 days, unless such resolicitation period is further
extended by the Superintendent or FDIC for periods of up to 60 days not to
extend beyond _______________, 1999.

     If all shares of Common Stock are not sold through the Subscription and
Community Offerings, then the Bank and the Company expect to offer the remaining
shares in a Syndicated Community Offering which would occur as soon as
practicable following the close of the Subscription and Community Offerings but
may commence the Syndicated Community Offering during the Subscription and
Community Offerings subject to prior rights of subscribers.  All shares of
Common Stock will be sold at the same price per share in the Syndicated
Community Offering as in the Subscription and Community Offerings.  See "--
Syndicated Community Offering."

     No sale of shares of Common Stock may be consummated unless, prior to such
consummation, Keller confirms to the Bank, Company, Superintendent and FDIC
that, to the best of its knowledge, nothing of a material nature has occurred
which, taking into account all relevant factors, including those which would be
involved in a cancellation of the Syndicated Community Offering, would cause
Keller to conclude that the aggregate value of the Common Stock at the Purchase
Price is incompatible with its estimate of the pro forma market value of the
Common Stock of the Company at the time of the Syndicated Community Offering.
Any change which would result in an aggregate purchase price which is below or
more than 15% above the Estimated Price Range would be subject to Superintendent
and FDIC approval.  If such confirmation is not received, the Bank may extend
the Conversion, extend, reopen or commence new Subscription and Community
Offerings or Syndicated Community Offering, establish a new Estimated Price
Range and commence a resolicitation of all subscribers with the approval of the
Superintendent and FDIC or take such other actions as permitted by the
Superintendent and FDIC in order to complete the Conversion, or terminate the
Plan and cancel the Subscription and Community Offerings and/or the Syndicated
Community Offering.  In the event market or financial conditions change so as to
cause the aggregate purchase price of the shares to be below the minimum of the
Estimated Price Range or more than 15% above the maximum of such range, and the
Company and the Bank determine to continue the Conversion, subscribers will be
resolicited (i.e., be permitted to continue their orders, in which case they
will need to affirmatively reconfirm their subscriptions prior to the expiration
of the resolicitation offering or their subscription funds will be promptly
refunded with interest at the Bank's passbook rate of interest, or be permitted
to decrease or cancel their subscriptions).  Any change in the Estimated Price
Range must be approved by the Superintendent and FDIC.  A resolicitation, if
any, following the conclusion of the Subscription and Community Offerings would
not exceed 45 days, or if following the Syndicated Community Offering, 60 days,
unless further extended by the Superintendent for periods up to 60 days not to
extend beyond _______________, 1999.  If such resolicitation is not effected,
the Bank will return all funds promptly with interest at the Bank's passbook
rate of interest on payments made by check, bank draft or money order.

     Copies of the appraisal report of Keller including any amendments thereto,
and the detailed memorandum of the appraiser setting forth the method and
assumptions for such appraisal are available for inspection at the main office
of the Bank and the other locations specified under "Additional Information."

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<PAGE>
 
NUMBER OF SHARES TO BE ISSUED

     Depending upon market or financial conditions following the commencement of
the Subscription and Community Offerings, the total number of shares to be sold
in the Conversion may be increased or decreased without a resolicitation of
subscribers, provided that the product of the total number of shares times the
price per share is not below the minimum of the Estimated Price Range or more
than 15% above the maximum of the Estimated Price Range.  Based on a fixed
purchase price of $10.00 per share and Keller's estimate of the pro forma market
value of the Common Stock ranging from a minimum of  $157.3 million to a
maximum, as increased by 15%, of $244.7 million, the number of shares of Common
Stock expected to be issued is between a minimum of 15,725,000 shares and a
maximum, as adjusted by 15%, of 24,466,250 shares.  The actual number of shares
issued between this range will depend on a number of factors and shall be
determined by the Bank and Company subject to Superintendent and FDIC approval,
if necessary.

     In the event market or financial conditions change so as to cause the
aggregate purchase price of the shares to be below the minimum of the Estimated
Price Range or more than 15% above the maximum of the Estimated Price Range, if
the Plan is not terminated by the Company and the Bank after consultation with
the Superintendent and FDIC, purchasers will be resolicited (i.e., permitted to
continue their orders, in which case they will need to affirmatively reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their subscription funds will be promptly refunded, or be permitted to modify or
rescind their subscriptions).  Any change in the Estimated Price Range must be
approved by the Superintendent and FDIC.  If the number of shares issued in the
Conversion is increased due to an increase of up to 15% in the Estimated Price
Range to reflect changes in market or financial conditions, persons who
subscribed for the maximum number of shares will not be given the opportunity to
subscribe for an adjusted maximum number of shares.  See "- Limitations on
Common Stock Purchases."

     An increase in the number of shares to be issued in the Conversion as a
result of an increase in the estimated pro forma market value would decrease
both a subscriber's ownership interest and the Company's pro forma net earnings
and stockholders' equity on a per share basis while increasing pro forma net
earnings and stockholders' equity on an aggregate basis.  A decrease in the
number of shares to be issued in the Conversion would increase both a
subscriber's ownership interest and the Company's pro forma net earnings and
stockholders' equity on a per share basis while decreasing pro forma net
earnings and stockholder's equity on an aggregate basis.  For a presentation of
the effects of such changes, see "Pro Forma Data."

     The number of shares to be issued and outstanding as a result of the sale
of Common Stock in the Conversion will be increased by a number of shares equal
to 8.0% of the Common Stock issued in the Conversion to fund the Foundation.
Assuming the sale of shares in the Offerings at the maximum of the Estimated
Price Range, the Company will issue 1,702,000 shares of its Common Stock from
authorized but unissued shares to the Foundation immediately following the
completion of the Conversion. In that event, the Company will have total shares
of Common Stock outstanding of 22,977,000 shares. Of that amount, the Foundation
will own 7.4%. Funding the Foundation with authorized but unissued shares will
have the effect of diluting the ownership and voting interests of persons
purchasing shares in the Conversion by 7.4% since a greater number of shares
will be outstanding upon completion of the Conversion than would be if the
Foundation were not established. See "Pro Forma Data."

SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS

     In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock have been granted under the Plan of Conversion to the
following persons in the following order of descending priority: (1) holders of
deposit accounts with the Bank who had a balance of $100 or more as of June 30,
1996; (2) the Employee Plans, including the ESOP; (3) holders of deposit
accounts with a balance 

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<PAGE>
 
of $100 or more as of September 30, 1997. All subscriptions received will be
subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering
and to the maximum and minimum purchase limitations set forth in the Plan of
Conversion and as described below under "- Limitations on Common Stock
Purchases."

     Priority 1:  Eligible Account Holders.  Each Eligible Account Holder will
receive, without payment therefor, first priority, nontransferable subscription
rights to subscribe for in the Subscription Offering up to the amount permitted
to be purchased in the Community Offering, currently $250,000 of Common Stock,
subject to the overall maximum purchase limitation.  See "- Limitations on
Common Stock Purchases."  Subscription rights received by officers and trustees
of the Bank and their associates based on increased deposits in the Bank in the
one-year period preceding June 30, 1996 will be subordinated to all other
subscription rights of Eligible Account Holders.

     In the event that Eligible Account Holders exercise subscription rights for
a number of shares of Common Stock in excess of the total number of such shares
eligible for subscription, the shares of Common Stock will be allocated so as to
permit each subscribing Eligible Account Holder to purchase a number of shares
sufficient to make his total allocation equal to the lesser of 100 shares or the
number of shares subscribed for.  Thereafter, unallocated shares will be
allocated among the remaining subscribing Eligible Account Holders whose
subscriptions remain unfilled in the proportion that the amounts of their
respective eligible deposits bear to the total amount of eligible deposits of
all remaining Eligible Account Holders whose subscriptions remain unfilled.

     To ensure proper allocation of stock, each Eligible Account Holder must
list on his or her stock order form all accounts in which such Eligible Account
Holder has an ownership interest.  Failure to list an account could result in
less shares being allocated than if all accounts had been disclosed.

     Priority 2:  Employee Plans.  To the extent that there are sufficient
shares remaining after satisfaction of the subscriptions by Eligible Account
Holders, the Employee Plans, including the ESOP, will receive, without payment
therefor, second priority, nontransferable subscription rights to purchase, in
the aggregate, up to 10% of Common Stock issued in the Conversion, including any
increase in the number of shares of Common Stock to be issued in the Conversion
after the date hereof as a result of an increase of up to 15% in the maximum of
the Estimated Price Range.  The ESOP intends to purchase 8.0% of the shares to
be issued in connection with the Conversion, including shares issued to the
Foundation, or 1,358,640 shares and 1,838,160 shares, based on the issuance of
16,983,000 shares and 22,977,000 shares, respectively.  Subscriptions by the
ESOP will not be aggregated with shares of Common Stock purchased directly by or
which are otherwise attributable to any other participants in the Subscription
and Community Offerings, including subscriptions of any of the Bank's trustees,
officers, employees or associates thereof.  See "Management of the Bank -
Benefit Plans - ESOP."

     Priority 3:  Supplemental Eligible Account Holders.  To the extent there
are sufficient shares remaining after the satisfaction of subscriptions by
Eligible Account Holders and the Employee Plans, each Supplemental Eligible
Account Holder will receive, without payment therefor, as third priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the amount permitted to be purchased in the Community Offering,
currently $250,000 of Common Stock, subject to the overall maximum purchase
limitation.  See "- Limitations on Common Stock Purchases."

     In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of shares of Common Stock in excess of the
total number of shares eligible for subscription after the satisfaction of
subscriptions by Eligible Account Holders and the Employee Plans, the shares of
Common Stock will be allocated so as to permit each subscribing Supplemental
Eligible Account Holder, to the extent 

                                      130
<PAGE>
 
possible, to purchase a number of shares sufficient to make his total allocation
equal to the lesser of 100 shares or the number of shares subscribed for.
Thereafter, unallocated shares will be allocated among the remaining subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled in the
proportion that the amounts of their respective eligible deposits bear to the
total amount of eligible deposits of all remaining Supplemental Eligible Account
Holders whose subscriptions remain unfilled.

     To ensure proper allocation of stock, each Supplemental Eligible Account
Holder must list on his or her stock order form all accounts in which such
Supplemental Eligible Account Holder has an ownership interest.  Failure to list
an account could result in less shares being allocated than if all accounts had
been disclosed.  The subscription rights received by Eligible Account Holders
will be applied in partial satisfaction of the subscription rights to be
received as a Supplemental Eligible Account Holder.

     Expiration Date for the Subscription Offering.  The Subscription Offering
will expire on the Expiration Date ( _________________, 1997) at ____, New York
time, unless extended for up to 45 days by the Bank and Company or such
additional periods with the approval of the Superintendent and FDIC, if
required.  Subscription rights which have not been exercised prior to the
Expiration Date will become void.  The Bank will not execute orders until all
shares of Common Stock have been subscribed for or otherwise sold.  If all
shares have not been subscribed for or sold within 45 days after the Expiration
Date, unless such period is extended with the consent of the Superintendent and
FDIC, all funds delivered to the Bank pursuant to the Subscription Offering will
be returned promptly to the subscribers with interest and all withdrawal
authorizations will be canceled.  If an extension beyond the 45 day period
following the Expiration Date is granted, the Bank will notify subscribers of
the extension of time and of any rights of subscribers to modify or rescind
their subscriptions and have their funds returned promptly with interest, and of
the time period within which subscribers must affirmatively notify the Bank of
their intention to confirm, modify, or rescind their subscription.  If an
affirmative response to any resolicitation is not received by the Company from a
subscriber, such order will be rescinded and all subscription funds will be
promptly returned with interest.  Such extensions may not go beyond
_______________, 1999.

     The Plan of Conversion provides that the Company complete the sale of the
Common Stock within 45 days after the close of the Subscription Offering.  In
the event that the Company is unable to complete the sale of Common Stock and
effect the conversion within the 45-day time period, one or more extensions,
with each such extension up to 60 days, may be granted but such extensions may
not go beyond __________, 1999 unless waived by the Superintendent and FDIC, if
necessary.  If an extension is granted, each subscriber will have the right to
affirm, increase, decrease or rescind the subscription at any time prior to 20
days before the end of the extension period or at any time prior to the date of
the commencement of the Syndicated Community Offering.  No assurance can be
given that an extension would be granted if requested.  If an extension is
granted, the Company will notify subscribers of such extension and of any rights
of subscribers to modify or rescind their subscriptions.

COMMUNITY OFFERING

     To the extent that shares remain available for purchase after satisfaction
of all subscriptions of Eligible Account Holders, the ESOP and Supplemental
Eligible Account Holders, the Bank has determined to offer shares pursuant to
the Plan to certain members of the general public.  The Plan provides that with
regard to shares offered in the Community Offering, the Bank and Company may
establish relative preferences, priorities and allocations of shares among
persons, including institutional investors, subscribing for shares.  The Bank
and the Company have made no decisions on such preference at this time and will
make such determination upon a review of subscriptions received in connection
with the Community Offering.  Such persons, together with associates of and
persons acting in concert with such persons, may purchase up to $250,000 of
Common Stock, subject to the maximum overall purchase limitation and 

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<PAGE>
 
exclusive of shares issued pursuant to an increase in the Estimated Price Range
by up to 15%. See "- Limitations on Common Stock Purchases." This amount may be
increased to up to a maximum of 5% of the Common Stock issued or decreased to
less than $250,000 at the sole discretion of the Company and the Bank. THE
OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN THE COMMUNITY OFFERING
CATEGORY IS SUBJECT TO THE RIGHT OF THE BANK AND THE COMPANY, IN ITS SOLE
DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS, IN WHOLE OR IN PART, EITHER AT
THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING THE
EXPIRATION DATE.

     Subject to the foregoing, if the amount of stock remaining is insufficient
to fill the orders of preferred subscribers after completion of the Subscription
and Community Offerings and the filling of institutional investor orders, such
stock will be allocated first to each preferred subscriber whose order is
accepted by the Bank, in an amount equal to the lesser of 100 shares or the
number of shares subscribed for by each such preferred subscriber, if possible.
Thereafter, unallocated shares will be allocated among the preferred subscribers
whose order remains unsatisfied on a 100 shares per order basis until all such
orders have been filled or the remaining shares have been allocated.  If there
are any shares remaining, shares will be allocated to other persons of the
general public who purchase in the Community Offering applying the same
allocation described above for preferred subscribers.

RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES

     The Company and the Bank will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the Plan reside.  The Plan provides that the
Bank and the Company are not required to offer stock in the Subscription
Offering to any person who resides in a foreign country.

MARKETING AND UNDERWRITING ARRANGEMENTS

     The Bank and the Company have engaged Sandler O'Neill as a consultant and
financial advisor in connection with the offering of the Common Stock, and
Sandler O'Neill has agreed to assist the Bank and the Company in its
solicitation of subscriptions and purchase orders for shares of Common Stock in
the Offerings.  Sandler O'Neill will receive a fee equal to 1.75% of the
aggregate Purchase Price of all shares sold in the Offerings, excluding in each
case shares purchased by trustees, directors, officers and employees of the Bank
or Company and any immediate family member thereof and the Employee Plans,
including the ESOP, for which Sandler O'Neill will not receive a fee.  In the
event that a selected dealers agreement is entered into in connection with a
Syndicated Community Offering, the Company and Bank will pay a fee (to be
negotiated at such time under such agreement) to such selected dealers, any
sponsoring dealers fees, and a management fee to Sandler O'Neill of 1.5% for
shares sold by a NASD member firm pursuant to a selected dealers agreement;
provided, however, that the aggregate fees payable to Sandler O'Neill for Common
Stock sold by them pursuant to such a selected dealers agreement shall not
exceed 1.75% of the aggregate Purchase Price and provided, further, however,
that the aggregate fees payable to Sandler O'Neill and the selected dealers will
not exceed 7% of the aggregate purchase price of the Common Stock sold by
selected dealers.  Fees to Sandler O'Neill and to any other broker-dealer may be
deemed to be underwriting fees, and  Sandler O'Neill and such broker-dealers may
be deemed to be underwriters.  Sandler O'Neill will also be reimbursed for its
reasonable out-of-pocket expenses, including legal fees, in an amount not to
exceed $200,000.  Notwithstanding the foregoing, in the event the Offerings are
not consummated or Sandler O'Neill ceases, under certain circumstances after the
subscription solicitation activities are commenced, to provide assistance to the
Company, Sandler O'Neill will  be reimbursed for its reasonable out-of-pocket
expenses as described above.  The Company and the Bank have agreed to indemnify
Sandler O'Neill for reasonable costs and expenses in connection with certain
claims or liabilities, including certain liabilities under the Securities Act.
Sandler O'Neill has received advances towards its marketing and financial
advisory service fees totaling 

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<PAGE>
 
$50,000. Total marketing fees to Sandler O'Neill are expected to be $2.5 million
and $3.3 million at the minimum and the maximum of the Estimated Price Range,
respectively. See "Pro Forma Data" for the assumptions used to arrive at these
estimates.

     Sandler O'Neill will also perform proxy solicitation services, conversion
agent services and records management services for the Bank in the Conversion
and will receive a fee for these services of $65,000, plus reimbursement of
reasonable out-of-pocket expenses.

     Directors, Trustees and executive officers of the Company and Bank may
participate in the solicitation of offers to purchase Common Stock. Questions of
prospective purchasers will be directed to executive officers or registered
representatives.  Other employees of the Bank may participate in the Offering in
ministerial capacities or providing clerical work in effecting a sales
transaction.  Such other employees have been instructed not to solicit offers to
purchase Common Stock or provide advice regarding the purchase of Common Stock.
The Company will rely on Rule 3a4-1 under the Exchange Act, and sales of Common
Stock will be conducted within the requirements of Rule 3a4-1, so as to permit
officers, Trustees, directors and employees to participate in the sale of Common
Stock.  No officer, Trustee, director or employee of the Company or the Bank
will be compensated in connection with his participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.

     Sandler O'Neill has not prepared any report or opinion constituting
recommendations or advice to the Bank or the Company.  In addition, Sandler
O'Neill has expressed no opinion as to the prices at which the Common Stock to
be issued in the Offerings may trade.  Furthermore, Sandler O'Neill has not
verified the accuracy or completeness of the information contained in the
Prospectus.

PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERINGS

     To ensure that each purchaser receives a prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date.  Execution of the stock
order form and certification form will confirm receipt or delivery in accordance
with Rule 15c2-8.  Stock order and certification forms will only be distributed
with a prospectus.

     To purchase shares in the Subscription and Community Offerings, an executed
stock order form and certification form with the required payment for each share
subscribed for, or with appropriate authorization for withdrawal from the Bank's
deposit account (which may be given by completing the appropriate blanks in the
stock order form), must be received by the Bank at any of its offices by _____,
New York time, on the Expiration Date.  Stock order forms which are not received
by such time or are executed defectively or are received without full payment
(or appropriate withdrawal instructions) are not required to be accepted.  In
addition, the Bank and Company are not obligated to accept orders submitted on
photocopied or facsimilied stock order forms and will not accept stock order
forms unaccompanied by an executed certification form.  Notwithstanding the
foregoing, the Company and Bank shall have the right, each in their sole
discretion, to permit institutional investors to submit irrevocable orders
together with a legally binding commitment for payment and to thereafter pay for
the shares of Common Stock for which they subscribe in the Community Offering at
any time prior to 48 hours before the completion of the Conversion.  The Company
and the Bank have the right to waive or permit the correction of incomplete or
improperly executed forms, but do not represent that they will do so.  Once
received, an executed stock order form may not be modified, amended or rescinded
without the consent of the Bank unless the Conversion has not been completed
within 45 days after the end of the Subscription and Community Offerings, unless
such period has been extended.

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<PAGE>
 
     In order to ensure that Eligible Account Holders and Supplemental Eligible
Account Holders are properly identified as to their stock purchase priorities,
depositors as of the Eligibility Record Date (June 30, 1996) and/or the
Supplemental Eligibility Record Date (September 30, 1997) must list all accounts
on the stock order form giving all names in each account and the account number.

     Payment for subscriptions may be made (i) in cash if delivered in person at
any branch office of the Bank, (ii) by check, bank draft or money order, or
(iii) by authorization of withdrawal from deposit accounts maintained with the
Bank.  No wire transfers will be accepted.  Interest will be paid on payments
made by cash, check, bank draft or money order at the Bank's passbook rate of
interest from the date payment is received until the completion or termination
of the Conversion.  If payment is made by authorization of withdrawal from
deposit accounts, the funds authorized to be withdrawn from a deposit account
will continue to accrue interest at the contractual rates until completion or
termination of the Conversion, but a hold will be placed on such funds, thereby
making them unavailable to the depositor until completion or termination of the
Conversion.

     If a subscriber authorizes the Bank to withdraw the amount of the purchase
price from his deposit account, the Bank will do so as of the effective date of
the Conversion.  The Bank will waive any applicable penalties for early
withdrawal from certificate accounts.  If the remaining balance in a certificate
account is reduced below the applicable minimum balance requirement at the time
that the funds actually are transferred under the authorization, the certificate
will be canceled at the time of the withdrawal, without penalty, and the
remaining balance will earn interest at the Bank's passbook rate.

     If the ESOP subscribes for shares during the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes, but rather, may pay for such shares of Common Stock subscribed for
at the Purchase Price upon consummation of the Subscription and Community
Offering, if all shares are sold, or upon consummation of the Syndicated
Community Offering if shares remain to be sold in such offering; provided, that
there is in force from the time of its subscription until such time, a loan
commitment from an unrelated financial institution or the Company to lend to the
ESOP, at such time, the aggregate Purchase Price of the shares for which it
subscribed.

     Owners of self-directed IRAs and other Qualified Plan accounts, such as
Keogh accounts, may use the assets of such IRAs and other Qualified Plan
accounts, to purchase shares of Common Stock in the Subscription and Community
Offerings, provided that such IRAs or other Qualified Plan accounts are not
maintained at the Bank.  Persons with self-directed IRAs or Qualified Plan
accounts maintained at the Bank must have their accounts transferred to an
unaffiliated institution or broker to purchase shares of Common Stock in the
Subscription and Community Offerings.  In addition, the provisions of ERISA and
IRS regulations require that officers, directors and ten percent shareholders
who use self-directed IRA or Qualified Plan account funds to purchase shares of
Common Stock in the Subscription and Community Offerings, make such purchases
for the exclusive benefit of the IRAs or Qualified Plan accounts.

     Certificates representing shares of Common Stock purchased will be mailed
to purchasers at the address specified in properly completed stock order forms,
as soon as practicable following consummation of the sale of all shares of
Common Stock.  Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES

     Prior to the completion of the Conversion, the NYBB regulations prohibit
any person with subscription rights, including the Eligible Account Holders, the
ESOP and Supplemental Eligible Account Holders, from transferring or entering
into any agreement or understanding to transfer the legal or beneficial

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<PAGE>
 
ownership of the subscription rights issued under the Plan or the shares of
Common Stock to be issued upon their exercise.  Such rights may be exercised
only by the person to whom they are granted and only for his or her account.
Each person exercising such subscription rights will be required to certify that
he or she is purchasing shares solely for his or her own account and that he or
she has no agreement or understanding regarding the sale or transfer of such
shares.  The regulations also prohibit any person from offering or making an
announcement of an offer or intent to make an offer to purchase such
subscription rights or shares of Common Stock prior to the completion of the
Conversion.

     THE BANK AND THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE
REMEDIES (INCLUDING FORFEITURE) IN THE EVENT THEY BECOME AWARE OF THE TRANSFER
OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.

SYNDICATED COMMUNITY OFFERING

     As a final step in the Conversion, the Plan provides that, if feasible, all
shares of Common Stock not purchased in the Subscription and Community
Offerings, if any, will be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
to be formed and managed by Sandler O'Neill acting as agent of the Company to
assist the Company and the Bank in the sale of the Common Stock.  THE COMPANY
AND THE BANK HAVE THE RIGHT TO REJECT ORDERS IN WHOLE OR IN PART IN THEIR SOLE
DISCRETION IN THE SYNDICATED COMMUNITY OFFERING.  Neither Sandler O'Neill nor
any registered broker-dealer shall have any obligation to take or purchase any
shares of the Common Stock in the Syndicated Community Offering, however,
Sandler O'Neill has agreed to use its best efforts in the sale of shares in the
Syndicated Community Offering.

     The price at which Common Stock is sold in the Syndicated Community
Offering will be determined as described above under "- Stock Pricing."  Subject
to the overall maximum purchase limitation, no person, together with any
associate or group of persons acting in concert, will be permitted to subscribe
in the Syndicated Community Offering for more than $250,000 of Common Stock;
provided, however, that shares of Common Stock purchased in the Community
Offering by any persons, together with associates of or persons acting in
concert with such persons, will be aggregated with purchases in the Syndicated
Community Offering and be subject to an overall maximum purchase limitation of
1.0% of the shares offered, exclusive of an increase in shares issued pursuant
to an increase in the Estimated Price Range by up to 15%.

     Payments made in the form of a check, bank draft, money order or in cash
will earn interest at the Bank's passbook rate of interest from the date such
payment is actually received by the Bank until completion or termination of the
Conversion.

     In addition to the foregoing, if a syndicate of broker-dealers ("selected
dealers") is formed to assist in the Syndicated Community Offering, a purchaser
may pay for his shares with funds held by or deposited with a selected dealer.
If an order form is executed and forwarded to the selected dealer or if the
selected dealer is authorized to execute the order form on behalf of a
purchaser, the selected dealer is required to forward the order form and funds
to the Bank for deposit in a segregated account on or before noon of the
business day following receipt of the order form or execution of the order form
by the selected dealer.  Alternatively, selected dealers may solicit indications
of interest from their customers to place orders for shares.  Such selected
dealers shall subsequently contact their customers who indicated an interest and
seek their confirmation as to their intent to purchase.  Those indicating an
intent to purchase shall execute order forms and forward them to their selected
dealer or authorize the selected dealer to execute such forms.  The selected
dealer will acknowledge receipt of the order to its customer in writing on the
following business day and will debit such customer's account on the third
business day after the customer has confirmed his intent to purchase (the "debit
date") and on or before noon of the next business day following the debit date
will 

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<PAGE>
 
send order forms and funds to the Bank for deposit in a segregated account.
Although purchasers' funds are not required to be in their accounts with
selected dealers until the debit date in the event that such alternative
procedure is employed once a confirmation of an intent to purchase has been
received by the selected dealer, the purchaser has no right to rescind his
order.

     Certificates representing shares of Common Stock purchased, together with
any refund due, will be mailed to purchasers at the address specified in the
order form, as soon as practicable following consummation of the sale of the
Common Stock.  Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.

     The Syndicated Community Offering will terminate no more than 45 days
following the  Expiration Date, unless extended by the Company with the approval
of the Superintendent and FDIC.  Such extensions may not be beyond
_______________, 1999.  See "- Stock Pricing" above for a discussion of rights
of subscribers, if any, in the event an extension is granted.

LIMITATIONS ON COMMON STOCK PURCHASES

     The Plan includes the following limitations on the number of shares of
Common Stock which may be purchased during the Conversion:

     (1)  No less than 25 shares;

     (2)  Each Eligible Account Holder may subscribe for and purchase in the
          Subscription Offering up to the amount permitted to be purchased in
          the Community Offering, currently $250,000 of Common Stock, subject to
          the overall maximum purchase limitation described in (7) below;

     (3)  The Employee Plans, including the ESOP, are permitted to purchase, in
          the aggregate, up to 10% of the shares of Common Stock issued in the
          Conversion, including shares issued in the event of an increase in the
          Estimated Price Range of 15%, and the ESOP intends to purchase 8.0% of
          the shares of Common Stock issued in connection with the Conversion,
          including shares issued to the Foundation;

     (4)  Each Supplemental Eligible Account Holder may subscribe for and
          purchase in the Subscription Offering up to the greater of the amount
          permitted to be purchased in the Community Offering, currently
          $250,000 of Common Stock, subject to the overall maximum purchase
          limitation described in (7) below;

     (5)  Persons purchasing shares of Common Stock in the Community Offering,
          together with associates of and groups of persons acting in concert
          with such persons, may purchase in the Community Offering up to
          $250,000 of Common Stock, subject to the overall maximum purchase
          limitation described in (7) below;

     (6)  Persons purchasing shares of Common Stock in the Syndicated Community
          Offering, together with associates of and persons acting in concert
          with such persons, may purchase in the Syndicated Community Offering
          up to $250,000 of Common Stock subject to the overall maximum purchase
          limitation described in (7) below and, provided further, that shares
          of Common Stock purchased in the Community Offering by any persons,
          together with associates of and persons acting in concert with such
          persons, will be aggregated with 

                                      136
<PAGE>
 
          purchases in the Syndicated Community Offering in applying the
          $250,000 purchase limitation;

     (7)  Eligible Account Holders and Supplemental Eligible Account Holders may
          purchase stock in the Community Offering and Syndicated Community
          Offering, subject to the purchase limitations described in (5) and (6)
          above, provided that, except for the ESOP, the overall maximum number
          of shares of Common Stock subscribed for or purchased in all
          categories of the Conversion by any person, together with associates
          of and groups of persons acting in concert with such persons, shall
          not exceed 1.0% of the shares of Common Stock offered in the
          Conversion and exclusive of an increase in the total number of shares
          issued due to an increase in the Estimated Price Range of up to 15%;
          and

     (8)  No more than 25% of the total number of shares issued in the
          Conversion may be purchased by Trustees, Directors and officers of the
          Bank or Company and their associates in the aggregate, excluding
          purchases by the ESOP.

     Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of depositors of
the Bank or subscribers for Common Stock, both the individual amount permitted
to be subscribed for and the overall maximum purchase limitation may be
increased to up to a maximum of 5% of the Common Stock to be issued at the sole
discretion of the Company and the Bank.  If such amount is increased,
subscribers for the maximum amount will be, and certain other large subscribers
in the sole discretion of the Bank may be, given the opportunity to increase
their subscriptions up to the then applicable limit.

     The overall maximum purchase limitation may not be reduced to less than
1.0%, and the individual amount permitted to be subscribed for may not be
reduced by the Bank to less than .10% without the further approval of members or
resolicitation of subscribers.  An Eligible Account Holder or Supplemental
Eligible Account Holder may not purchase individually in the Subscription
Offering the overall maximum purchase limit of 1.0% of the shares offered, but
may make such purchase, together with associates of and persons acting in
concert with such person, by also purchasing in other available categories of
the Conversion, subject to availability of shares and the maximum overall
purchase limit for purchases in the Conversion.

     The term "associate" of a person is defined to mean:  (i) any corporation
(other than the Bank or a majority-owned subsidiary of the Bank) of which such
person is an officer, partner or 10% stockholder; (ii) any trust or other estate
in which such person has a substantial beneficial interest or serves as a
trustee or in a similar fiduciary capacity; provided, however, such term shall
not include any employee stock benefit plan of the Bank in which such person has
a substantial beneficial interest or serves as a trustee or in a similar
fiduciary capacity; and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
trustee or officer of the Bank.  Trustees are not treated as associates of each
other solely because of their Board membership.  For a further discussion of
limitations on purchases of a converting institution's stock at the time of
Conversion and subsequent to Conversion, see "Management of the Bank -
Subscriptions by Executive Officers, Directors and Trustees," "- Certain
Restrictions on Purchase or Transfer of Shares After Conversion" and
"Restrictions on Acquisition of the Company and the Bank."

LIQUIDATION RIGHTS

     In the unlikely event of a complete liquidation of the Bank in its present
mutual form, each depositor would have a claim to receive their pro rata share
of any assets of the Bank remaining after payment of claims of all creditors
(including the claims of all depositors to the withdrawal value of their
accounts).  To 

                                      137
<PAGE>
 
the extent there are remaining assets, a depositor would have a claim to receive
a pro rata share of any such remaining assets in the same proportion as the
value of such depositor's deposit accounts to the total value of all deposit
accounts in the Bank at the time of liquidation. After the Conversion, each
depositor, in the event of a complete liquidation, would have a claim as a
creditor of the same general priority as the claims of all other general
creditors of the Bank. However, except as described below, their claim would be
solely in the amount of the balance in their deposit account plus accrued
interest. Such depositor would not have an interest in the value or assets of
the Bank above that amount.

     The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders in an amount equal to the surplus and reserves of the Bank as of
the date of its latest balance sheet contained in the final Prospectus used in
connection with the Conversion.  Such liquidation account will not be reflected
as an asset or liability on the Company's or the Bank's financial statements
subsequent to the Conversion.  Eligible Account Holders, if they were to
continue to maintain their deposit account at the Bank, would, on a complete
liquidation of the Bank, have a claim to an interest in the liquidation account
after payment of all creditors prior to any payment to the stockholders of the
Bank.  Each Eligible Account Holder would have an initial interest in such
liquidation account for each deposit account, demand account, NOW account, money
market deposit account, and certificate of deposit account, with a balance of
$100 or more held in the Bank on June 30, 1996 ("Deposit Account").  Each
Eligible Account Holder will have a claim to a pro rata interest in the total
liquidation account for each of his Deposit Accounts based on the proportion
that the balance of each such Deposit Account on the June 30, 1996 eligibility
record date bore to the balance of all Deposit Accounts in the Bank on such
date.

     If, however, at the close of business on the last day of any period for
which the Bank or Company has prepared audited financial statements subsequent
to the effective date of the Conversion ("annual closing date"), the amount in
any Deposit Account is less than the amount in such Deposit Account on any other
annual closing date, then such person's interest in the liquidation account
relating to such Deposit Account would be reduced from time to time by the
proportion of any such reduction, and such interest will cease to exist if such
Deposit Account is withdrawn or closed.  For purposes of the liquidation
account, time deposit accounts shall be deemed to be closed upon maturity
regardless of any renewal thereof.  In addition, no interest in the liquidation
account would ever be increased despite any subsequent increase in the related
Deposit Account.  Any assets remaining after the above liquidation rights of
Eligible Account Holders are satisfied would be distributed to the Company as
the sole stockholder of the Bank.

TAX ASPECTS

     Consummation of the Conversion is expressly conditioned upon the receipt by
the Bank of either a favorable ruling from the IRS or an opinion of counsel with
respect to federal income taxation, and an opinion of its independent auditors
with respect to certain New York state taxation, to the effect that the
Conversion will not be a taxable transaction to the Company, the Bank, Eligible
Account Holders or Supplemental Eligible Account Holders, except as noted below.
The federal and New York tax consequences will remain unchanged in the event
that a holding company form of organization is not utilized.

     No private ruling has been requested from the IRS with respect to the
proposed Conversion.  Instead, the Bank has received an opinion of its counsel,
Muldoon, Murphy & Faucette, which has been filed with the SEC as an exhibit to
the Company's Registration Statement to the effect that for federal income tax
purposes, among other matters: (i) the Bank's change in form from mutual to
stock ownership will constitute a reorganization under section 368(a)(1)(F) of
the Code and neither the Bank nor the Company will recognize any gain or loss as
a result of the Conversion; (ii) no gain or loss will be recognized to the Bank
or the Company upon the purchase of the Bank's capital stock by the Company or
to the Company upon the 

                                      138
<PAGE>
 
purchase of its Common Stock in the Conversion; (iii) no gain or loss will be
recognized by Eligible Account Holders or Supplemental Eligible Account Holders
upon the issuance to them of deposit accounts in the Bank in its stock form plus
their interests in the liquidation account in exchange for their deposit
accounts in the Bank; (iv) the tax basis of the depositors' deposit accounts in
the Bank immediately after the Conversion will be the same as the basis of their
deposit accounts immediately prior to the Conversion; (v) the tax basis of each
Eligible Account Holder's interest in the liquidation account will be zero; (vi)
no gain or loss will be recognized by Eligible Account Holders or Supplemental
Eligible Account Holders upon the distribution to them of nontransferable
subscription rights to purchase shares of the Common Stock, provided that the
amount to be paid for the Common Stock is equal to the fair market value of such
stock; and (vii) the tax basis to the stockholders of the Common Stock of the
Company purchased in the Conversion will be the amount paid therefor and the
holding period for the shares of Common Stock purchased by such persons will
begin on the date on which their subscription rights are exercised. Ernst &
Young LLP has opined, subject to the limitations and qualifications in its
opinion, that: the Conversion will not be a taxable transaction for the purposes
of the New York State banking franchise taxes, sales and use taxes, stock
transfer taxes, and real property transfer gains taxes; a position may be taken
that the Conversion will likely not be a taxable transaction for purposes of the
New York State real estate transfer taxes; and the Company, as a foreign
corporation, will be subject to a license fee at a rate of 1/20% of the
apportioned par value of the Common Stock issued. Certain portions of both the
federal and the state and local tax opinions are based upon the opinion of
Keller that subscription rights issued in connection with the Conversion will
have no value.

     In the opinion of Keller, which opinion is not binding on the IRS, the
subscription rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration, and afford the recipients the right only to purchase the Common Stock
at a price equal to its estimated fair market value, which will be the same
price as the Purchase Price for the unsubscribed shares of Common Stock.  If the
subscription rights granted to Eligible Account Holders or Supplemental Eligible
Account Holders are deemed to have an ascertainable value, such recipients could
be taxed either on the receipt or exercise of such subscription rights.

     Unlike private rulings, an opinion of counsel is not binding on the IRS and
the IRS could disagree with conclusions reached therein.  In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.

CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER CONVERSION

     All shares of Common Stock purchased in connection with the Conversion by a
Director, Trustee or an executive officer of the Bank or Company will be subject
to a restriction that the shares not be sold for a period of one year following
the Conversion, except in the event of the death of such Director, Trustee or
executive officer.  Each certificate for such restricted shares will bear a
legend giving notice of this restriction on transfer, and instructions will be
issued to the effect that any transfer within such time period of any
certificate or record ownership of such shares other than as provided above is a
violation of such restriction.  Any shares of Common Stock issued at a later
date as a stock dividend, stock split, or otherwise, with respect to such
restricted stock will be subject to the restriction that they may not be sold
for a period of one year following the Conversion.  The Directors, Trustees and
executive officers of the Bank or Company will also be subject to the insider
trading rules promulgated pursuant to the Exchange Act.

     Purchases of outstanding shares of Common Stock of the Company by Trustees,
Directors, executive officers (or any person who was an executive officer or
Trustee of the Bank after adoption of the Plan of Conversion) and their
associates during the three-year period following Conversion may be made only
through a broker or dealer registered with the SEC, except with the prior
written approval of the 

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Superintendent. This restriction does not apply, however, to the purchase of
Common Stock pursuant to the Stock Program or Stock Option Plan.

INTERPRETATION, AMENDMENT AND TERMINATION

     All interpretations of the Plan by the Board of the Bank will be final,
subject to the authority of the Superintendent and FDIC.  The Plan provides
that, if deemed necessary or desirable by the Board of Trustees of the Bank, the
Plan may be substantively amended prior to the solicitation of proxies from
Eligible Account Holders by a vote of the Board of Trustees; amendment of the
Plan thereafter requires the approval of the Superintendent and FDIC.  The Plan
will terminate if the sale of all shares of stock being offered pursuant to the
Plan is not completed prior to 24 months after the date of the approval of the
Plan by the Superintendent unless a longer time period is permitted by governing
laws and regulations.  The Plan may be terminated by a vote of the Board of
Trustees of the Bank at any time prior to the Special Meeting, and thereafter by
such a vote with the approval of the Superintendent and FDIC.


            RESTRICTIONS ON ACQUISITION OF THE COMPANY AND THE BANK


GENERAL

     The Bank's Plan of Conversion provides for the Conversion of the Bank from
the mutual to the stock form of organization and in connection therewith, a
Restated Organization Certificate and Bylaws to be adopted by Eligible Account
Holders of the Bank.  The Plan also provides for the concurrent formation of a
holding company.  See "The Conversion - General."  Certain provisions in the
Company's Certificate of Incorporation and Bylaws and in its management
remuneration provided for in the Conversion, together with provisions of
Delaware corporate law, may have anti-takeover effects.  In addition, the Bank's
Restated Organization Certificate and Bylaws and management remuneration
provided for in the Conversion may have anti-takeover effects as described
below.  Finally, regulatory restrictions may make it difficult for persons or
companies to acquire control of either the Company or the Bank.

RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS

     A number of provisions of the Company's Certificate of Incorporation and
Bylaws deal with matters of corporate governance and certain rights of
stockholders.  The following discussion is a general summary of certain
provisions of the Company's Certificate of Incorporation and Bylaws and certain
other statutory and regulatory provisions relating to stock ownership and
transfers, the Board of Directors and business combinations, which might be
deemed to have a potential "anti-takeover" effect.  These provisions may have
the effect of discouraging a future takeover attempt which is not approved by
the Board of Directors but which individual Company stockholders may deem to be
in their best interests or in which stockholders may receive a substantial
premium for their shares over then current market prices.  As a result,
stockholders who might desire to participate in such a transaction may not have
an opportunity to do so.  Such provisions will also render the removal of the
current Board of Directors or management of the Company more difficult.  The
following description of certain of the provisions of the Certificate of
Incorporation and Bylaws of the Company is necessarily general and reference
should be made in each case to such Certificate of Incorporation and Bylaws,
which are incorporated herein by reference.  See "Additional Information" as to
how to obtain a copy of these documents.

     Limitation on Voting Rights.  The Certificate of Incorporation of the
Company provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or 

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indirectly, by a person who beneficially owns in excess of 10% of the then
outstanding shares of Common Stock (the "Limit") be entitled or permitted to any
vote in respect of the shares held in excess of the Limit. Beneficial ownership
is determined pursuant to Rule 13d-3 of the General Rules and Regulations
promulgated pursuant to the Exchange Act, and includes shares beneficially owned
by such person or any of his affiliates (as defined in the Certificate of
Incorporation), shares which such person or his affiliates have the right to
acquire pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options or otherwise
and shares as to which such person and his affiliates have sole or shared voting
or investment power, but shall not include shares that are subject to a publicly
solicited revocable proxy and that are not otherwise deemed to be beneficially
owned by such person and his affiliates. No Director or officer (or any
affiliate thereof) of the Company shall, solely by reason of any or all of such
Directors or officers acting in their capacities as such, be deemed to
beneficially own any shares beneficially owned by any other Director or officer
(or affiliate thereof) nor will the ESOP or any similar plan of the Company or
the Bank or any trustee with respect thereto (solely by reason of such trustee's
capacity) be deemed to beneficially own any shares held under any such plan. The
Certificate of Incorporation of the Company further provides that the provisions
limiting voting rights may only be amended upon the vote of the holders of at
least 80% of the voting power of all then outstanding shares of capital stock
entitled to vote thereon (after giving effect to the provision limiting voting
rights).

     Board of Directors.  The Board of Directors of the Company is divided into
three classes, each of which shall contain approximately one-third of the whole
number of the members of the Board.  Each class shall serve a staggered term,
with approximately one-third of the total number of Directors being elected each
year.  The Company's Certificate of Incorporation and Bylaws provide that the
size of the Board shall be determined by a majority of the Whole Board of
Directors.  The Certificate of Incorporation and the Bylaws provide that any
vacancy occurring in the Board, including a vacancy created by an increase in
the number of Directors or resulting from death, resignation, retirement,
disqualification, removal from office or other cause, shall be filled for the
remainder of the unexpired term exclusively by a majority vote of the Directors
then in office.  The classified Board is intended to provide for continuity of
the Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors of the
Company.  Directors may be removed by the shareholders only for cause by the
affirmative vote of the holders of at least 80% of the voting power of all then
outstanding shares of capital stock entitled to vote thereon.

     In the absence of these provisions, the vote of the holders of a majority
of the shares could remove the entire Board, with or without cause, and replace
it with persons of such holders choice.

     Cumulative Voting, Special Meetings and Action by Written Consent.  The
Certificate of Incorporation does not provide for cumulative voting for any
purpose.  Moreover, special meetings of stockholders of the Company may be
called only by a resolution adopted by a majority of the Whole Board of
Directors of the Company.  The Certificate of Incorporation also provides that
any action required or permitted to be taken by the stockholders of the Company
may be taken only at an annual or special meeting and prohibits stockholder
action by written consent in lieu of a meeting.

     Authorized Shares.  The Certificate of Incorporation authorizes the
issuance of 75 million  shares of Common Stock and 5  million shares of
preferred stock.  The shares of Common Stock and preferred stock were authorized
in an amount greater than that to be issued in the Conversion to provide the
Company's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits and employee stock options.  However, these additional authorized shares
may also be used by the Board of Directors consistent with its fiduciary duty to
deter future attempts to gain control of the Company.  The Board of Directors
also has sole authority to determine the terms of any one or more series of
preferred stock, including voting rights, conversion rates, and liquidation
preferences.  

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<PAGE>
 
As a result of the ability to fix voting rights for a series of preferred stock,
the Board has the power to the extent consistent with its fiduciary duty to
issue a series of preferred stock to persons friendly to management in order to
attempt to block a post-tender offer merger or other transaction by which a
third party seeks control, and thereby assist management to retain its position.
The Company's Board currently has no plans for the issuance of additional
shares, other than the issuance of shares in the Conversion, including shares
contributed to the Foundation, and the issuance of additional shares upon
exercise of stock options.

     Stockholder Vote Required to Approve Business Combinations with Interested
Stockholders.  The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Company's outstanding shares of voting stock
entitled to vote thereon to approve certain "Business Combinations" with an
"Interested Stockholder," each as defined therein, and related transactions.
Under Delaware law, absent this provision, business combinations, including
mergers, consolidations and sales of all or substantially all of the assets of a
corporation must, subject to certain exceptions, be approved by the vote of the
holders of only a majority of the outstanding shares of Common Stock of the
Company and any other affected class of stock.  Under the Certificate of
Incorporation, the approval of the holders of at least 80% of the shares of
capital stock entitled to vote thereon is required for any business combination
involving an Interested Stockholder (as defined below) except (i) in cases where
the proposed transaction has been approved by a majority of those members of the
Company's Board of Directors who are unaffiliated with the Interested
Stockholder and were Directors prior to the time when the Interested Stockholder
became an Interested Stockholder or (ii) if the proposed transaction meets
certain conditions set forth therein which are designed to afford the
stockholders a fair price in consideration for their shares.  In each such case,
where stockholder approval is required, the approval of only a majority of the
outstanding shares of voting stock is sufficient.  The term "Interested
Stockholder" is defined to include, among others, any individual, a group acting
in concert, corporation, partnership, association or other entity (other than
the Company or its subsidiary) who or which is the beneficial owner, directly or
indirectly, of 10% or more of the outstanding shares of voting stock of the
Company.  This provision of the Certificate of Incorporation applies to any
"Business Combination," which is defined to include: (i) any merger or
consolidation of the Company or any of its subsidiaries with any Interested
Stockholder or Affiliate (as defined in the Certificate of Incorporation) of an
Interested Stockholder or any corporation which is, or after such merger or
consolidation would be, an Affiliate of an Interested Stockholder; (ii) any
sale, lease, exchange, mortgage, pledge, transfer, or other disposition to or
with any Interested Stockholder or Affiliate of 25% or more of the assets of the
Company or combined assets of the Company and its subsidiary; (iii) the issuance
or transfer to any Interested Stockholder or its Affiliate by the Company (or
any subsidiary) of any securities of the Company (or any subsidiary) in exchange
for any cash, securities or other property the value of which equals or exceeds
25% of the fair market value of the Common Stock of the Company; (iv) the
adoption of any plan for the liquidation or dissolution of the Company proposed
by or on behalf of any Interested Stockholder or Affiliate thereof; and (v) any
reclassification of securities, recapitalization, merger or consolidation of the
Company with any of its subsidiaries which has the effect of increasing the
proportionate share of Common Stock or any class of equity or convertible
securities of the Company or subsidiary owned directly or indirectly, by an
Interested Stockholder or Affiliate thereof.  The Trustees and executive
officers of the Bank are purchasing in the aggregate approximately 1.4% of the
shares of the Common Stock based on the maximum of the Estimated Price Range,
including shares issued to the Foundation.  In addition, the ESOP intends to
purchase 8.0% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation.  Additionally, the Company expects to
acquire 4% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation, on behalf of the Stock Program and
expects to grant options to issue an amount equal to 10% of the Common Stock
issued in connection with the Conversion, including shares issued to the
Foundation, under the Stock Option Plan to directors and executive officers.  As
a result, Directors, executive officers and employees have the potential to
control the voting of approximately 21.2% of the Company's Common Stock on a
fully diluted basis at the maximum of the 

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<PAGE>
 
Estimated Price Range, thereby enabling them to prevent the approval of the
transactions requiring the approval of at least 80% of the Company's outstanding
shares of voting stock described herein above.

     Evaluation of Offers.  The Certificate of Incorporation of the Company
further provides that the Board of Directors of the Company, when evaluating any
offer of another "Person" (as defined therein), to (i) make a tender or exchange
offer for any equity security of the Company, (ii) merge or consolidate the
Company with another corporation or entity or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the Company,
may, in connection with the exercise of its judgment in determining what is in
the best interest of the Company and the stockholders of the Company, give due
consideration to all relevant factors, including, without limitation, those
factors that directors of any subsidiary (including the Bank) may consider in
evaluating any action that may result in a change or potential change of control
of such subsidiary, and the social and economic effects of acceptance of such
offer on: the Company's present and future customers and employees and those of
its subsidiaries (including the Bank); the communities in which the Company and
the Bank operate or are located; the ability of the Company to fulfill its
corporate objectives as a bank holding company; and the ability of the Bank to
fulfill the objectives of a stock savings bank under applicable statutes and
regulations.  By having these standards in the Certificate of Incorporation of
the Company, the Board of Directors may be in a stronger position to oppose such
a transaction if the Board concludes that the transaction would not be in the
best interest of the Company, even if the price offered is significantly greater
than the then market price of any equity security of the Company.

     Amendment of Certificate of Incorporation and Bylaws.  Amendments to the
Company's Certificate of Incorporation must be approved by a majority vote of
its Board of Directors and also by a majority of the outstanding shares of its
voting stock, provided, however, that an affirmative vote of the holders of at
least 80% of the outstanding voting stock entitled to vote (after giving effect
to the provision limiting voting rights) is required to amend or repeal certain
provisions of the Certificate of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
Directors, Director and officer indemnification by the Company and amendment of
the Company's Bylaws and Certificate of Incorporation.  The Company's Bylaws may
be amended by a majority of the Whole Board of Directors, or by a vote of the
holders of at least 80% (after giving effect to the provision limiting voting
rights) of the total votes eligible to be voted at a duly constituted meeting of
stockholders.

     Certain Bylaw Provisions.  The Bylaws of the Company also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at an annual stockholder meeting to give at
least 90 days' advance notice to the Secretary of the Company.  The notice
provision requires a stockholder who desires to raise new business to provide
certain information to the Company concerning the nature of the new business,
the stockholder and the stockholder's interest in the business matter.
Similarly, a stockholder wishing to nominate any person for election as a
Director must provide the Company with certain information concerning the
nominee and the proposing stockholder.

ANTI-TAKEOVER EFFECTS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
AND MANAGEMENT REMUNERATION ADOPTED IN CONVERSION

     The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors.  Certain
provisions of the Stock Option Plan and Stock Program provide for accelerated
benefits to participants in the event of a change in control of the Company or
the Bank or a tender or exchange offer for their stock.  See "Management of the
Bank - Benefit Plans - Stock Option Plan," and "- Benefit Plans - Stock
Program."  The Company and the Bank have also entered into agreements with key

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officers and intends to establish the Severance Compensation Plan which will
provide such officers and eligible employees with additional payments and
benefits on the officer's termination in connection with a change in control of
the Company or the Bank.  See "Management of the Bank - Employment Agreements,"
"- Change in Control Agreements" and "- Employee Severance Compensation Plan."
The foregoing provisions and limitations may make it more difficult for
companies or persons to acquire control of the Bank.  Additionally, the
provisions could deter offers to acquire the outstanding shares of the Company
which might be viewed by stockholders to be in their best interests.

     The Company's Board of Directors believes that the provisions of the
Certificate of Incorporation and Bylaws are in the best interest of the Company
and its stockholders.  An unsolicited non-negotiated takeover proposal can
seriously disrupt the business and management of a corporation and cause it
great expense.  Accordingly, the Board of Directors believes it is in the best
interests of the Company and its stockholders to encourage potential acquirors
to negotiate directly with management and that these provisions will encourage
such negotiations and discourage non-negotiated takeover attempts.

DELAWARE CORPORATE LAW

     The State of Delaware has a statute designed to provide Delaware
corporations with additional protection against hostile takeovers.  The takeover
statute, which is codified in Section 203 of the Delaware General Corporate Law
("Section 203"), is intended to discourage certain takeover practices by
impeding the ability of a hostile acquiror to engage in certain transactions
with the target company.

     In general, Section 203 provides that a "Person" (as defined therein) who
owns 15% or more of the outstanding voting stock of a Delaware corporation (an
"Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became an Interested Stockholder.  The
term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.

     The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the board of directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, excluding, for purposes of
determining the number of shares outstanding, shares owned by the corporation's
directors who are also officers and certain employee stock plans; (iii) any
business combination with an Interested Stockholder that is approved by the
board of directors and by a two-thirds vote of the outstanding voting stock not
owned by the Interested Stockholder; and (iv) certain business combinations that
are proposed after the corporation had received other acquisition proposals and
which are approved or not opposed by a majority of certain continuing members of
the board of directors.  A corporation may exempt itself from the requirements
of the statute by adopting an amendment to its certificate of incorporation or
bylaws electing not to be governed by Section 203.  At the present time, the
Board of Directors does not intend to propose any such amendment.

RESTRICTIONS IN THE BANK'S RESTATED ORGANIZATION CERTIFICATE AND NEW BYLAWS

     Although the Board of Trustees of the Bank is not aware of any effort that
might be made to obtain control of the Bank after Conversion, the Board of
Trustees believes that it is appropriate to adopt certain provisions permitted
by General Regulations of the NYBB to protect the interests of the converted
Bank and its stockholders from any hostile takeover.  Such provisions may,
indirectly, inhibit a change in control of the Company, as the Bank's sole
stockholder.  See "Risk Factors - Certain Anti-Takeover Provisions."

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<PAGE>
 
     The Bank's Restated Organization Certificate will contain a provision
whereby the acquisition of beneficial ownership of more than 10% of the issued
and outstanding shares of any class of equity securities of the Bank by any
person (i.e., any individual, corporation, group acting in concert, trust,
partnership, joint stock company or similar organization), either directly or
through an affiliate thereof, will be prohibited for a period of three years
following the date of completion of the Conversion.  Any stock in excess of 10%
acquired in violation of the charter provision will not be counted as
outstanding for voting purposes.  This limitation shall not apply to any
transaction in which the Bank forms a holding company without a change in the
respective beneficial ownership interests of its stockholders other than
pursuant to the exercise of any dissenter or appraisal rights.  In the event
that holders of revocable proxies for more than 10% of the shares of the Common
Stock of the Company seek, among other things, to elect one-third or more of the
Company's Board of Directors, to cause the Company's stockholders to approve the
acquisition or corporate reorganization of the Company or to exert a continuing
influence on a material aspect of the business operations of the Company, which
actions could indirectly result in a change in control of the Bank, the Board of
Directors of the Bank will be able to assert this provision of the Bank's
Restated Organization Certificate against such holders.  Although the Board of
Directors of the Bank is not currently able to determine when and if it would
assert this provision of the Bank's Restated Organization Certificate, the Board
of Directors, in exercising its fiduciary duty, may assert this provision if it
were deemed to be in the best interests of the Bank, the Company and its
stockholders.  It is unclear, however, whether this provision, if asserted,
would be successful against such persons in a proxy contest which could result
in a change in control of the Bank indirectly through a change in control of the
Company.

     In addition, stockholders will not be permitted to call a special meeting
of stockholders or to cumulate their votes in the election of Directors.
Furthermore, the Bank's Restated Organization Certificate and Bylaws provide for
the election of three classes of directors to staggered terms.  The staggered
terms of the Board of Directors could have an anti-takeover effect by making it
more difficult for a majority of shares to force an immediate change in the
Board of Directors since only one-third of the Board is elected each year.  The
purpose of these provisions is to assure stability and continuity of management
of the Bank in the years immediately following the Conversion.

     Finally, the Restated Organization Certificate provides for the issuance of
shares of preferred stock on such terms, including conversion and voting rights,
as may be determined by the Bank's Board of Directors without stockholder
approval.  Although the Bank has no arrangements, understandings or plans at the
present time for the issuance or use of the shares of undesignated preferred
stock (the "Preferred Stock") proposed to be authorized, the Board of Trustees
believes that the availability of such shares will provide the Bank with
increased flexibility in structuring possible future financings and acquisitions
and in meeting other corporate needs which may arise.  In the event of a
proposed merger, tender offer or other attempt to gain control of the Bank of
which management does not approve, it might be possible for the Board of
Directors to authorize the issuance of one or more series of Preferred Stock
with rights and preferences which could impede the completion of such a
transaction.  An effect of the possible issuance of such Preferred Stock,
therefore, may be to deter a future takeover attempt.  The Board of Trustees
does not intend to issue any Preferred Stock except on terms which the Board
deems to be in the best interest of the Bank and its then existing stockholders.

REGULATORY RESTRICTIONS

     New York State Banking Board Conversion Regulations.  NYBB regulations
prohibit any person, prior to the completion of the Conversion, from
transferring, or from entering into any agreement or understanding to transfer,
to the account of another, legal or beneficial ownership of the subscription
rights issued under the Plan or the Common Stock to be issued upon their
exercise.  NYBB regulations also prohibit any person, prior to the completion of
the Conversion, from offering, or making an announcement of an offer 

                                      145
<PAGE>
 
or intent to make an offer, to purchase such subscription rights or Common
Stock. See "The Conversion - Restrictions on Transfer of Subscription Rights and
Shares."

     For one year following the Conversion, NYBB regulations prohibit any person
from acquiring or making an offer to acquire more than 10% of the stock of any
converted savings institution, except with the prior approval of the
Superintendent.

     OTS Regulations.  In addition, any proposal to acquire 10% of any class of
equity security of the Company generally would be subject to approval by the OTS
under the Change in Bank Control Act (the "CBCA") and the HOLA. The OTS requires
all persons seeking control of a savings institution, either directly or
indirectly through its holding company, to obtain regulatory approval prior to
offering to obtain control. Federal law generally provides that no "person,"
acting directly or indirectly or through or in concert with one or more other
persons, may acquire directly or indirectly "control," as that term is defined
in OTS regulations, of an OTS-regulated savings and loan holding company without
giving at least 60 days' written notice to the OTS and providing the OTS an
opportunity to disapprove the proposed acquisition. Such acquisitions of control
may be disapproved if it is determined, among other things, that (i) the
acquisition would substantially less competition; (ii) the financial condition
of the acquiring person might jeopardize the financial stability of the savings
institution or prejudice the interests of its depositors; or (iii) the
competency, experience or integrity of the acquiring person or the proposed
management personnel indicates that it would not be in the interest of the
depositors or the public to permit the acquisition of control by such person.
Such change in control restrictions on the acquisition of holding company stock
are not limited to a set time period but will apply for as long as the
regulations are in effect. Persons holding revocable or irrevocable proxies may
be deemed to be beneficial owners of such securities under OTS regulations and
therefore prohibited from voting all or the portion of such proxies in excess of
the 10% aggregate beneficial ownership limit. Such regulatory restrictions may
prevent or inhibit proxy contests for control of the Company or the Bank which
have not received prior regulatory approval. Acquisitions of control of a
savings bank are subject to the approval of the FDIC under the CBCA. However,
transactions involving the company for which OTS approval must be sought under
HOLA are exempted from this requirement.

     New York State Bank Holding Company Regulation.  Under New York Banking
Law, the prior approval of the NYBD is required before:  (1) any action is taken
that causes any company to become a bank holding company; (2) any action is
taken that causes any banking institution to become or to be merged or
consolidated with a subsidiary of a bank holding company; (3) any bank holding
company acquires direct or indirect ownership or control of more than 5% of the
voting stock of a banking institution; (4) any bank holding company or
subsidiary thereof acquires all or substantially all of the assets of a banking
institution; or (5) any action is taken that causes any bank holding company to
merge or consolidate with another bank holding company.  See "Regulation and
Supervision - Holding Company Regulation - New York State Holding Company
Regulation."  Accordingly, the prior approval of the NYBB would be required
before any bank holding company, as defined in the banking law, could acquire 5%
of more of the common stock of the company.

     New York State Change in Control Regulation.  Prior approval of the NYBB is
also required before any action is taken that causes any company to acquire
direct or indirect control of a banking institution.  Control is presumed to
exist if any company directly or indirectly owns, controls or holds with power
to vote 10% or more of the voting stock of a banking institution or of any
company that owns, controls or holds with power to vote 10% or more of the
voting stock of a banking institution.  Accordingly, prior approval of the NYBB
would be required before any company could acquire 10% or more of the Common
Stock of the Company.

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<PAGE>
 
     Federal Reserve Board Regulations.  In the event the Bank does not qualify
to be a QTL and does not elect to be treated as a "savings association" under
Section 10 of HOLA, attempts to acquire control of the Bank become subject to
regulations of the Federal Reserve Board under the CBCA.


                          DESCRIPTION OF CAPITAL STOCK
                                 OF THE COMPANY

GENERAL

     The Company is authorized to issue 75 million shares of Common Stock having
a par value of $.01 per share and 5  million shares of preferred stock having a
par value of $.01 per share (the "Preferred Stock").  Based on the sale of
Common Stock in connection with the Conversion and issuance of authorized but
unissued Common Stock in an amount equal to 8% of the Common Stock sold in the
Conversion to the Foundation, the Company currently expects to issue up to
26,423,550 shares of Common Stock (based on the maximum of the Estimated Price
Range, as adjusted by 15%) and no shares of Preferred Stock in the Conversion.
Except for shares issued in connection with the Conversion, the Company
presently does not have plans to issue Common Stock.  Each share of the
Company's Common Stock will have the same relative rights as, and will be
identical in all respects with, each other share of Common Stock.  Upon payment
of the Actual Purchase Price for the Common Stock, in accordance with the Plan
of Conversion, all such stock will be duly authorized, fully paid and
nonassessable.

     The Common Stock of the Company will represent nonwithdrawable capital,
will not be an account of an insurable type, and will not be insured by the
FDIC.

COMMON STOCK

     Dividends.  The Company can pay dividends out of statutory surplus or from
certain net profits if, as and when declared by its Board of Directors.  The
payment of dividends by the Company is subject to limitations which are imposed
by law and applicable regulation.  See "Dividend Policy" and "Regulation and
Supervision."  The holders of Common Stock of the Company will be entitled to
receive and share equally in such dividends as may be declared by the Board of
Directors of the Company out of funds legally available therefor.  If the
Company issues Preferred Stock, the holders thereof may have a priority over the
holders of the Common Stock with respect to dividends.

     Voting Rights.  Upon the Conversion, the holders of Common Stock of the
Company will possess exclusive voting rights in the Company.  They will elect
the Company's Board of Directors and act on such other matters as are required
to be presented to them under Delaware law or as are otherwise presented to them
by the Board of Directors.  Except as discussed in "Restrictions on Acquisition
of the Company and the Bank," each holder of Common Stock will be entitled to
one vote per share.  Stockholders will not have any right to cumulate votes in
the election of Directors.  If the Company issues Preferred Stock, holders of
the Preferred Stock may also possess voting rights.  Certain matters require an
80% stockholder vote (after giving effect to the provision limiting voting
rights).  See "Restrictions on Acquisition of the Company and the Bank."

     As a New York State mutual savings bank, corporate powers and control of
the Bank are vested in its Board of Trustees, who elect the officers of the Bank
and who fill any vacancies on the Board of Trustees as it exists upon
Conversion.  Subsequent to Conversion, voting rights will be vested exclusively
in the owners of the shares of capital stock of the Bank, which will be the
Company, and voted at the direction of 

                                      147
<PAGE>
 
the Company's Board of Directors. Consequently, the holders of the Common Stock
will not have direct control of the Bank.

     Liquidation.  In the event of any liquidation, dissolution or winding up of
the Bank, the Company, as holder of the Bank's capital stock would be entitled
to receive, after payment or provision for payment of all debts and liabilities
of the Bank (including all deposit accounts and accrued interest thereon) and
after distribution of the balance in the special liquidation account to Eligible
Account Holders (see "The Conversion - Liquidation Rights"), all assets of the
Bank available for distribution.  In the event of liquidation, dissolution or
winding up of the Company, the holders of its Common Stock would be entitled to
receive, after payment or provision for payment of all of its debts and
liabilities, all of the assets of the Company available for distribution.  If
Preferred Stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of liquidation or dissolution.

     Preemptive Rights; Redemption.  Holders of the Common Stock of the Company
will not be entitled to preemptive rights with respect to any shares which may
be issued.  The Common Stock is not subject to redemption.

     Indemnification and Limit on Liability.  The Company's Certificate of
Incorporation contains provisions which limit the liability of directors,
officers and employees of the Company and indemnify such individuals.  Such
provisions provide that each person who was or is made a party or is threatened
to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director or officer of the Company shall
be indemnified and held harmless by the Company to the fullest extent authorized
by the Delaware General Corporation Law against all expense, liability and loss
reasonably incurred.  Under certain circumstances, the right to indemnification
shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition.  In addition,
a Director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages except for liability for any breach of the
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of the law, under Section 174 of the
Delaware General Corporation, or for any transaction from which the Director
derived an improper personal benefit.

PREFERRED STOCK

     None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion.  Such stock may be issued with such designations,
powers, preferences and rights as the Board of Directors may from time to time
determine.  The Board of Directors can, without stockholder approval, issue
Preferred Stock with voting, dividend, liquidation and conversion rights which
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.  The Company presently does not have plans to issue Preferred Stock.

                                      148
<PAGE>
 
                    DESCRIPTION OF CAPITAL STOCK OF THE BANK

GENERAL

     In the event the holding company form of organization is not utilized in
connection with the Conversion, the Bank may offer shares of its common stock in
connection with the Conversion.  The following is a discussion of the capital
stock of the Bank.

     The Restated Organization Certificate of the Bank, to be effective upon the
Conversion, authorizes the issuance of capital stock consisting of 75 million
shares of common stock, par value $0.01 per share, and 5 million shares of
preferred stock, par value $0.01 per share, which preferred stock may be issued
in series and classes having such rights, preferences, privileges and
restrictions as the Board of Directors may determine.  Each share of common
stock of the Bank will have the same relative rights as, and will be identical
in all respects with, each other share of common stock.  After the Conversion,
the Board of Directors will be authorized to approve the issuance of common
stock up to the amount authorized by the Restated Organization Certificate
without the approval of the Bank's stockholders.  Assuming that the holding
company form of organization is utilized, all of the issued and outstanding
common stock of the Bank will be held by the Company as the Bank's sole
stockholder.  THE CAPITAL STOCK OF THE BANK WILL REPRESENT NON-WITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY
THE FDIC.

COMMON STOCK

     Dividends.  The holders of the Bank's common stock will be entitled to
receive and to share equally in such dividends as may be declared by the Board
of Directors of the Bank out of funds legally available therefor.  See "Dividend
Policy" for certain restrictions on the payment of dividends and "Federal and
State Taxation - Federal Taxation" for a discussion of the consequences of the
payment of cash dividends from income appropriated to bad debt reserves.

     Voting Rights.  Immediately after the Conversion, the holders of the Bank's
common stock will possess exclusive voting rights in the Bank.  Each holder of
shares of common stock will be entitled to one vote for each share held.
Shareholders shall not be entitled to cumulate their votes for the election of
directors.  See "Restrictions on Acquisition of the Company and the Bank - Anti-
Takeover Effects of the Company's Certificate of Incorporation and Bylaws and
Management Remuneration Adopted in Conversion."

     Liquidation.  In the event of any liquidation, dissolution, or winding up
of the Bank, the holders of common stock will be entitled to receive, after
payment of all debts and liabilities of the Bank (including all deposit accounts
and accrued interest thereon), and distribution of the balance in the special
liquidation account to Eligible Account Holders, all assets of the Bank
available for distribution in cash or in kind.  If additional preferred stock is
issued subsequent to the Conversion, the holders thereof may also have priority
over the holders of common stock in the event of liquidation or dissolution.

     Preemptive Rights; Redemption.  Holders of the common stock of the Bank
will not be entitled to preemptive rights with respect to any shares of the Bank
which may be issued.  Upon receipt by the Bank of the full specified purchase
price therefor, the common stock will be fully paid and non-assessable.


                          TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the Common Stock is [Transfer Agent].

                                      149
<PAGE>
 
                                    EXPERTS

     The consolidated financial statements of the Bank and its subsidiaries as
of June 30, 1997 and 1996, and for each of the years in the three-year period
ended June 30, 1997, have been included herein in reliance upon the report of
Ernst & Young LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.  Such report includes an explanatory paragraph relating to changes in
accounting principles.

     William M. Mercer, Incorporated has consented to the publication herein of
the summary of its opinion relating to compensation matters.

     Keller & Company, Inc. has consented to the publication herein of the
summary of its report to the Bank and Company setting forth its opinion as to
the estimated pro forma market value of the Common Stock upon Conversion and its
opinion with respect to subscription rights.


                             LEGAL AND TAX OPINIONS

     The legality of the Common Stock and the federal income tax consequences of
the Conversion will be passed upon for the Bank and Company by Muldoon, Murphy &
Faucette, Washington, D.C., special counsel to the Bank and Company.  The
federal income tax consequences of Richmond County Savings Foundation will be
passed upon for the Bank and the Company by Ernst & Young LLP, independent
certified public accountants.  Muldoon, Murphy & Faucette will rely as to
certain matters of Delaware law on the opinion of Morris, Nichols, Arsht &
Tunnell.  New York State and New York City income tax consequences will be
passed upon by Ernst & Young LLP.  Certain legal matters will be passed upon for
Sandler O'Neill by Thacher Proffitt & Wood, New York, N.Y.

                             ADDITIONAL INFORMATION

     The Company has filed with the SEC a registration statement under the
Securities Act with respect to the Common Stock offered hereby.  As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the registration statement.  Such information,
including the Conversion Valuation Appraisal Report, which is an exhibit to the
Registration Statement, can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of such material can be obtained from the SEC at prescribed rates.
In addition, the SEC maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC, including the Company.  The
Conversion Valuation Appraisal Report may also be inspected by Eligible Account
Holders and Supplemental Eligible Account Holders at the offices of the Bank
during normal business hours.  This Prospectus contains a description of the
material terms and features of all material contracts, reports or exhibits to
the registration statement required to be described; however, the statements
contained in this Prospectus as to the contents of any contract or other
document filed as an exhibit to the registration statement are, of necessity,
brief descriptions thereof and are not necessarily complete; each such statement
is qualified by reference to such contract or document.

     The Bank has filed an application for approval of conversion with the
Superintendent and the FDIC.  Pursuant to the rules and regulations of the
Superintendent, this Prospectus omits certain information 

                                      150
<PAGE>
 
contained in that application. The application may be examined at the principal
office of the Superintendent, Two Rector Street, New York, New York 10006.

     The Company has filed with the Office of Thrift Supervision an Application
to Form a Holding Company.  This Prospectus omits certain information contained
in such Application.  Such Application may be inspected at the offices of the
OTS, 1700 G Street, N.W., Washington, D.C.  20552.

     In connection with the Conversion, the Company will register its Common
Stock with the SEC under Section [12(g)] of the Exchange Act, and, upon such
registration, the Company and the holders of its stock will become subject to
the proxy solicitation rules, reporting requirements and restrictions on stock
purchases and sales by Directors, officers and greater than 10% stockholders,
the annual and periodic reporting and certain other requirements of the Exchange
Act.  Under the Plan, the Company has undertaken that it will not terminate such
registration for a period of at least three years following the Conversion.  In
the event that the Bank amends the Plan to eliminate the concurrent formation of
the Company as part of the Conversion, the Bank will register its stock with the
Federal Deposit Insurance Corporation under Section [12(g)] of the Exchange Act
and, upon such registration, the Bank and the holders of its stock will become
subject to the same obligations and restrictions.

     A copy of the Certificate of Incorporation and the Bylaws of the Company
and the Restated Organization Certificate and Bylaws of the Bank are available
without charge from the Bank.  The Bank's principal office is located at 1214
Castleton Avenue, Staten Island, New York and its telephone number is (718) 448-
2800.

                                      151
<PAGE>
 
                         Richmond County Savings Bank

                       Consolidated Financial Statements



                                   Contents

<TABLE>
<CAPTION>
 
<S>                                                                          <C>
Report of Independent Auditors.............................................. F-2
 
Consolidated Statements of Financial 
   Condition as of June 30, 1997 and 1996................................... F-3
Consolidated Statements of Income for the 
   Years Ended June 30, 1997, 1996 and 1995.................................  35
Consolidated Statements of Changes in Net Worth for the 
   Years Ended June 30, 1997, 1996 and 1995................................. F-4
Consolidated Statements of Cash Flows for the 
   Years Ended June 30, 1997, 1996 and 1995................................. F-5 to F-6
Notes to Consolidated Financial Statements.................................. F-7 to F-26
</TABLE>

All schedules are omitted because they are not required or applicable, or the 
required information is shown in the financial statements or notes thereto.

The financial statements of Richmond County Financial Corp. have been omitted 
because Richmond County Financial Corp. has not yet issued any stock, has no 
assets and no liabilities, and has not conducted any business other than of an 
organizational nature.

                                      F-1
<PAGE>
                [LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]


                         Report of Independent Auditors

The Board of Trustees
Richmond County Savings Bank

We have audited the accompanying consolidated statements of financial condition
of Richmond County Savings Bank (the "Bank") as of June 30, 1997 and 1996, and
the related consolidated statements of income, changes in net worth and cash
flows for each of the three years in the period ended June 30, 1997. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Bank at 
June 30, 1997 and 1996, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended June 30, 1997 in
conformity with generally accepted accounting principles.

As discussed in Note 9 to the financial statements, the Bank adopted, as of 
July 1, 1994, Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions."


                                           /s/ Ernst & Young LLP

August 22, 1997

                                      F-2
 
<PAGE>
                         Richmond County Savings Bank

                Consolidated Statements of Financial Condition


<TABLE>
<CAPTION>
                                                                 June 30  
                                                            1997         1996
                                                       ------------------------
                                                             (In Thousands)
<S>                                                       <C>          <C> 
Assets
Cash and due from banks                                   $ 26,543     $ 29,272 
Federal funds sold                                           6,000       20,000
Receivable from broker                                          --        7,531
Securities held to maturity:
 Investment securities (market value: 1997--$205,362;
  1996--$306,609)                                          205,201      307,700
 
 Mortgage-backed and mortgage related securities
  (market value: 1997--$186,593; 1996--$80,631)            185,122       80,284
 
Securities available for sale:
 Investment securities                                      19,706       21,659
 Mortgage-backed and mortgage related securities            27,398        1,394
Loans receivable:
 Real estate mortgage loans                                471,601      394,957
 Other loans                                                30,127       29,109
 Less allowance for loan losses                             (5,470)      (4,796)
                                                       ------------------------
Total loans receivable, net                                496,258      419,270
 
Banking premises and equipment, net                         12,058       11,568
Accrued interest receivable                                  8,268        9,212
Other real estate owned                                        662          612
Net deferred tax assets                                      2,942        2,978
Other assets                                                 3,212        3,003
                                                       ------------------------
Total assets                                              $993,370     $914,483
                                                       ========================
 
Liabilities and net worth
Liabilities:
 Deposits                                                 $884,531     $817,928
 Escrow accounts                                             1,287        1,288
 Accrued and other liabilities                               6,687        5,366
                                                       ------------------------
 
Total liabilities                                          892,505      824,582
 
Net worth                                                  100,865       89,901
                                                       ------------------------
Total liabilities and net worth                           $993,370     $914,483
                                                       ========================
</TABLE>

See accompanying notes.

                                      F-3
<PAGE>
 
                         Richmond County Savings Bank

                Consolidated Statements of Changes in Net Worth


<TABLE>
<CAPTION>
                                                                     Net Unrealized
                                                                        Gain on
                                                                       Securities
                                     Surplus          Undivided         Available
                                      Fund             Profits          for Sale          Total
                                  -----------------------------------------------------------------
                                                           (In Thousands)

<S>                                  <C>               <C>                <C>            <C>
Balance--June 30, 1994               $15,538           $58,012            $ --           $ 73,550
Unrealized net gain, net of
 applicable income taxes,
 upon adoption of SFAS 115                --                --              64                 64
Change in unrealized holding
 gains and losses, net of
 applicable income taxes                  --                --               3                  3
Net income for the year ended
 June 30, 1995                           755             6,795              --              7,550
                                  -----------------------------------------------------------------
Balance--June 30, 1995                16,293            64,807              67             81,167
Change in unrealized holding
 gains and losses, net of
 applicable income taxes                  --                --               4                  4
Net income for the year ended
 June 30, 1996                            --             8,730              --              8,730
                                  -----------------------------------------------------------------
Balance--June 30, 1996                16,293            73,537              71             89,901
Change in unrealized holding
 gains and losses, net of
 applicable income taxes                  --                --             239                239
Net income for the year ended
 June 30, 1997                            --            10,725              --             10,725
                                  -----------------------------------------------------------------
Balance--June 30, 1997               $16,293           $84,262            $310           $100,865  
                                  =================================================================
</TABLE>

See accompanying notes.

                                                                             F-4
<PAGE>
 
                         Richmond County Savings Bank

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                    Year ended June 30
                                                                1997        1996       1995
                                                           ----------------------------------
                                                                      (In Thousands)
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities              
Net income                                                   $  10,725   $   8,730   $  7,550
Adjustments to reconcile net income to net cash   
 provided by operating activities:                
  Depreciation of bank premises and equipment                      928         750        549
  Amortization of deposit premium                                  313         313        313
  Amortization of deferred fees                                   (479)       (580)      (570)
  Amortization of investment premiums/discounts                  1,039       2,769      4,753
  Provision for loan losses                                      1,080       1,600        600
  Earned discounts on loans purchased                             (158)       (158)      (158)
  Net realized losses (gains) on sales of         
  securities and loans                                             107         (42)        12
  Decrease (increase) in receivable from broker                  7,531      (7,531)        --
  Decrease (increase) in net deferred tax assets                    36        (450)    (1,251)
  Decrease (increase) in accrued interest receivable               944        (575)       455
  Increase in accrued and other liabilities                      1,321       1,013      2,396
  (Increase) decrease in other assets                             (782)      8,387     (8,238)
                                                           ---------------------------------- 
Net cash provided by operating activities                       22,605      14,226      6,411
Cash flows from investing activities              
Increase in loans receivable, net                              (78,523)    (37,920)   (37,819)
Loan sales to FHLMC, FNMA and SONYMA                             2,004       9,972      1,609
Loan purchases                                                    (910)         --         --
Investment securities held to maturity:           
 Maturities and redemptions                                    127,005     107,658    125,877
 Purchases                                                     (17,611)   (150,256)   (90,365)
Investment securities available for sale:         
 Sales and redemptions                                          11,938          10      2,132
 Purchases                                                     (17,678)     (1,064)    (2,273)
Mortgage-backed and mortgage related securities   
 held to maturity:                                
  Maturities                                                     3,609          --         --
  Principal collected                                           25,315      21,305      9,757
  Purchases                                                   (133,668)    (15,197)   (29,218)
Mortgage-backed and mortgage related securities   
 available for sale:                              
  Sales and redemptions                                             --       5,940         --
  Principal collected                                              479         410        505
  Purchases                                                    (26,478)         --         --
Net additions to banking premises and equipment                 (1,418)     (1,897)    (2,095)
                                                           ---------------------------------- 
Net cash used in investing activities                         (105,936)    (61,039)   (21,890)
</TABLE>

                                                                             F-5
<PAGE>
 
                         Richmond County Savings Bank

               Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>

                                                           Year ended June 30
                                                       1997       1996       1995
                                                   --------------------------------
                                                             (In Thousands)
<S>                                                  <C>        <C>        <C>
Cash flows from financing activities
(Decrease) increase in escrow accounts               $     (1)   $  (881)   $   591
Net increase in deposits                               66,603     53,866     15,425
                                                   --------------------------------
Net cash provided by financing activities              66,602     52,985     16,016
                                                   --------------------------------
Net (decrease) increase in cash and cash        
 equivalents                                          (16,729)     6,172        537
Cash and cash equivalents at beginning of year         49,272     43,100     42,563
                                                   --------------------------------
Cash and cash equivalents at end of year             $ 32,543    $49,272    $43,100
                                                   ================================
 
Income taxes paid                                    $  8,733    $ 7,080    $ 6,423
                                                   ================================
Interest paid on deposits                            $ 27,707    $26,254    $22,426
                                                   ================================
</TABLE>

See accompanying notes.

                                                                             F-6
<PAGE>
 
                         Richmond County Savings Bank

                  Notes to Consolidated Financial Statements

                                 June 30, 1997

1. General

Richmond County Savings Bank (the "Bank") is a New York State chartered mutual
savings bank. The Bank operates twelve branches in the borough of Staten Island
and one branch in the borough of Brooklyn, in the City of New York. The Bank
originates secured residential and commercial real estate loans (primarily
residential) and provides other financial services to customers primarily within
this region. The Bank's primary revenues are derived from these banking
activities and its portfolios of investment and mortgage- backed and mortgage
related securities. The Bank is subject to regulation by the Federal Deposit
Insurance Corporation and the New York State Banking Department.

2. Summary of Significant Accounting Policies

The following is a description of the significant accounting principles followed
by the Bank and its wholly-owned subsidiaries. The policies conform to generally
accepted accounting principles and to general practice within the banking
industry:

   Basis of Presentation: The consolidated financial statements of the Bank
   include the accounts of the Bank and its wholly-owned subsidiaries, RCSB
   Corporation and Richmond Enterprises, Inc. All significant intercompany
   balances and transactions between the Bank and its subsidiaries have been
   eliminated. Certain prior year balances have been reclassified to conform
   with current year presentation.

   Use of Estimates: 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 revenues and expenses during the reporting
   period. Actual results could differ from the estimates.

   Securities Held to Maturity: Investment securities and mortgage-backed and
   mortgage related securities for which the Bank has the positive intent and
   ability to hold to maturity are stated at cost, adjusted for amortization of
   premiums and discounts which are recognized as adjustments to interest income
   over the life of the security so as to provide a level yield.

   Securities Available for Sale: Investment securities and mortgage-backed and
   mortgage related securities not classified as trading nor as held to maturity
   are classified as available for sale and are carried at fair value.
   Unrealized gains or losses on securities available for sale are included as a
   separate component of net worth, net of applicable income taxes. Gains and

                                                                             F-7
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

   losses on the disposition of securities available for sale are recognized
   using the specific identification method.

   Loans Receivable: Loans receivable are stated at unpaid principal balances,
   less unearned discounts and net deferred origination and commitment fees.
   Loan origination and commitment fees and certain direct costs incurred in
   connection with loan originations are deferred and amortized to income over
   the life of the related loans as an adjustment to yield. Loans held for sale
   are stated at the lower of cost or market value.

   The Bank does not accrue interest on loans which are more than ninety days
   delinquent as to principal or interest unless, in the opinion of management,
   collection is probable, with the exception of single-family-home loans
   secured by real estate, where accrual is discontinued after six months. Any
   accrued but unpaid interest previously recorded on these loans is reversed
   against current period interest income. Effective July 1, 1997, the Bank
   revised this policy such that it does not accrue interest on any loans,
   including single-family loans secured by real estate, which are more than
   ninety days delinquent as to principal or interest unless, in the opinion of
   management, collection is probable. The effect of this change in policy was
   immaterial.

   Effective July 1, 1995, the Bank adopted SFAS No. 114, "Accounting by
   Creditors for Impairment of a Loan" as amended by SFAS No. 118, "Accounting
   by Creditors for Impairment of a Loan--Income Recognition and Disclosures."
   The impact of adoption on the Bank's financial position and results of
   operations was immaterial.

   Allowance for Loan Losses: The allowance for loan losses is based on
   management's periodic review and evaluation of the loan portfolio and the
   potential for loss in light of the current composition of the loan portfolio,
   current and prospective economic conditions, and other relevant factors.

   Assessing the adequacy of the allowance for loan losses is inherently
   subjective as it requires making material estimates, including the amount and
   timing of future cash flows expected to be received on impaired loans, that
   may be susceptible to significant change. In the opinion of management, the
   allowance, when taken as a whole, is adequate to absorb estimated loan losses
   inherent in the Bank's entire portfolio.

                                                                             F-8
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

   Other Real Estate Owned: Other real estate owned, consisting of properties
   acquired through foreclosure, is carried at the lower of carrying amount or
   fair value less cost to sell.

   Banking Premises and Equipment: Banking premises and equipment are recorded
   at cost. Depreciation and amortization are provided for in amounts sufficient
   to relate the cost of depreciable assets to operations over their estimated
   service lives (3 to 20 years) on a straight-line basis. Leasehold
   improvements are amortized over the lives of the respective leases or the
   service lives of the improvements, whichever is shorter.

   Expenditures for improvements and major renewals are capitalized, while the
   cost of ordinary maintenance, repairs and minor improvements is charged to
   operations.

   Mortgage Servicing Rights: Effective July 1, 1996, the Bank adopted SFAS No.
   122, "Accounting for Mortgage Servicing Rights" as superseded by SFAS No.
   125, "Accounting for Transfers and Servicing of Financial Assets and
   Extinguishments of Liabilities." The impact of adoption on the Bank's
   financial position and results of operations was immaterial.

   Income Taxes: The Bank uses the liability method to account for income taxes.
   Under this method, deferred tax assets and liabilities are determined based
   on differences between financial reporting and tax bases of assets and
   liabilities and are measured at currently enacted income tax rates applicable
   to the period in which they are expected to be realized or settled. As
   changes in tax laws or rates are enacted, deferred tax assets and liabilities
   are adjusted through the provision for income taxes.

   Statutory Transfers to Surplus: In accordance with the provisions of New York
   State Banking Law and Banking Board regulations, 10% of net income (excluding
   that of subsidiaries) is credited to surplus until such time as total net
   worth is at least equal to 10% of the amount due to depositors.

   Consolidated Statement of Cash Flows: For purposes of the consolidated
   statement of cash flows, the Bank defines cash and cash equivalents as cash
   and due from banks, federal funds sold and time deposits with original
   maturities of three months or less.

                                                                             F-9
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

3. Securities Held to Maturity

The amortized cost of investment securities, net of premiums and discounts, and
mortgage-backed and mortgage related securities held to maturity and their
related estimated fair values at June 30, 1997 and 1996 are summarized as
follows:

<TABLE>
<CAPTION>
                                                                      1997
                                               ------------------------------------------------
                                                              Gross        Gross
                                                 Amortized  Unrealized  Unrealized   Estimated
                                                   Cost       Gains       Losses     Fair Value
                                               ------------------------------------------------
                                                                 (In Thousands)
<S>                                              <C>        <C>         <C>          <C>
Investment securities:
 U.S. Government and agencies                     $ 92,215      $  394     $  (272)    $ 92,337
 Corporate and other debt obligations              112,986         443        (404)     113,025
                                               ------------------------------------------------
                                                  $205,201      $  837     $  (676)    $205,362
                                               ================================================
Mortgage-backed and mortgage related
 securities:
 Federal Home Loan Mortgage Corporation
  Pass-Through Certificates                       $ 82,237      $1,534     $  (187)    $ 83,584
 Private Issuer Pass-Through Certificates            3,276           5          --        3,281
 Federal Home Loan Mortgage Corporation
  Real Estate Mortgage Investment Conduits          32,248         130         (42)      32,336
 Private Issuer Real Estate Mortgage
  Investment Conduits                               67,361         179        (148)      67,392
                                               ------------------------------------------------
                                                  $185,122      $1,848     $  (377)    $186,593
                                               ================================================

<CAPTION>
                                                                       1996
                                               ------------------------------------------------
                                                              Gross        Gross
                                                 Amortized  Unrealized  Unrealized   Estimated
                                                   Cost       Gains       Losses     Fair Value
                                               ------------------------------------------------
                                                                 (In Thousands)
<S>                                              <C>        <C>         <C>          <C>
Investment securities:
 U.S. Government and agencies                     $149,565      $  385     $  (977)    $148,973
 Corporate and other debt obligations              158,135         570      (1,069)     157,636
                                               ------------------------------------------------
                                                  $307,700      $  955     $(2,046)    $306,609
                                               ================================================
Mortgage-backed and mortgage related
 securities:
 Federal Home Loan Mortgage Corporation
  Pass-Through Certificates                       $ 80,284      $  993     $  (646)    $ 80,631
                                               ================================================
</TABLE>

                                                                            F-10
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)




3. Securities Held to Maturity (continued)

The amortized cost and estimated fair value of investment and mortgage-backed
and mortgage related securities held-to-maturity by contractual maturity at June
30, 1997 are as follows:

<TABLE>
<CAPTION>
                                                        Mortgage-Backed and Mortgage
                            Investment Securities            Related Securities
                          -------------------------   ---------------------------------
                            Amortized  Estimated        Amortized         Estimated
                              Cost     Fair Value          Cost           Fair Value
                          -------------------------------------------------------------
<S>                         <C>        <C>              <C>               <C>
                                                  (In Thousands)
Year ended June 30:
 1998                        $ 85,115    $ 85,365            $  2,197          $  2,198
 1999-2002                    116,333     116,255              32,871            32,792
 2003-2008                      2,693       2,679                  --                --
 2009 and thereafter            1,060       1,063             150,054           151,603
                          -------------------------------------------------------------
                             $205,201    $205,362            $185,122          $186,593
                          =============================================================
</TABLE>

Proceeds from maturities and redemptions of securities held to maturity for the
years ended June 30, 1997, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>
                                   1997          1996          1995    
                                 ------------------------------------     
                                             (In Thousands)  
<S>                              <C>           <C>           <C>       
Proceeds                         $130,614      $107,658      $125,877  
Gross gains                             5             9             1  
Gross losses                          129             1             1   
</TABLE>

On November 15, 1995, the Financial Accounting Standards Board issued a Special
Report, "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities." In accordance with provisions in
that Special Report, the Bank chose to reclassify securities from held-to-
maturity to available for sale. At the date of the transfer, the amortized cost
of those securities was $25,981,369 and the unrealized gain on those securities
was $94,287, net of tax, which was included in net worth.

                                                                            F-11
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)




4. Securities Available for Sale

The amortized cost of investment securities, net of premiums and discounts, and
mortgage-backed and mortgage related securities available for sale and their
related estimated fair values at June 30, 1997 and 1996 are summarized as
follows:

<TABLE>
<CAPTION>
                                                              1997
                                       ------------------------------------------------
                                                      Gross        Gross
                                         Amortized  Unrealized  Unrealized   Estimated
                                           Cost       Gains       Losses     Fair Value
                                       ------------------------------------------------
<S>                                      <C>        <C>         <C>          <C>
                                                         (In Thousands)
Marketable equity securities:
 Preferred                                 $14,027        $132        $ (1)     $14,158
 Common                                      3,578         305         (69)       3,814
 Mutual funds                                1,629         105          --        1,734
                                       ------------------------------------------------
                                           $19,234        $542        $(70)     $19,706
                                       ================================================
 
Mortgage-backed and mortgage related
 securities:
  Government National Mortgage
   Association Pass-Through
   Certificates                            $11,710        $151        $(37)     $11,824
  Federal Home Loan Mortgage
   Corporation Real Estate Mortgage
   Investment Conduits                       4,693          --          (7)       4,686
  Private Issuer Real Estate Mortgage
   Investment Conduits                      10,881          19         (12)      10,888
                                       ------------------------------------------------
                                           $27,284        $170        $(56)     $27,398
                                       ================================================
</TABLE>

                                                                            F-12
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)




4. Securities Available for Sale (continued)

<TABLE>
<CAPTION>
                                                                 1996                            
                                          ------------------------------------------------       
                                                         Gross        Gross                      
                                            Amortized  Unrealized  Unrealized   Estimated        
                                              Cost       Gains       Losses     Fair Value       
                                          ------------------------------------------------       
   <S>                                      <C>        <C>         <C>          <C>              
                                                            (In Thousands)                       
   Marketable equity securities:                                                                 
    Preferred                                 $    27        $  -        $ (2)     $    25       
    Common                                        109          81         (34)         156       
    Mutual funds                                1,521           7          (2)       1,526       
                                          ------------------------------------------------       
                                                1,657          88         (38)       1,707       
   Debt securities:                                                                              
    U.S. Government and agencies               19,967          44         (59)      19,952       
                                          ------------------------------------------------                             
                                              $21,624        $132        $(97)     $21,659       
                                          ================================================       
   Mortgage-backed and mortgage related                                                          
    securities:                                                                                  
     Government National Mortgage                                                                
      Association Pass-Through                                                                   
      Certificates                            $ 1,292        $102        $  -      $ 1,394       
                                          ================================================       
</TABLE>

The amortized cost and estimated fair value of mortgage-backed and mortgage
related securities by contractual maturity at June 30, 1997 are as follows:

<TABLE>
<CAPTION>
                                             Amortized       Estimated         
                                               Cost          Fair Value        
                                           ----------------------------        
                                                   (In Thousands)              
   <S>                                     <C>               <C>               
   Years ended June 30:                                                        
    1998                                       $     -          $     -        
    1999-2002                                        1                1        
    2003-2008                                       34               35        
    2009 and thereafter                         27,249           27,362        
                                           ----------------------------        
                                               $27,284          $27,398        
                                           ============================        
</TABLE>

Proceeds from sales and redemptions of securities available for sale for the
years ended June 30, 1997, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>
                                         1997          1996         1995   
                                      ------------------------------------ 
                                                   (In Thousands)          
   <S>                                  <C>            <C>          <C>    
   Proceeds                             $11,938        $5,950       $2,132 
   Gross gains                               40            19            - 
   Gross losses                              24             -           20  
</TABLE>

                                                                            F-13
<PAGE>

                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)
 
5. Loans Receivable

Loans receivable at June 30, 1997 and 1996 consist of the following:

<TABLE>
<CAPTION>
                                                              1997       1996
                                                          ---------------------
                                                               (In Thousands)
 
<S>                                                         <C>        <C>
One-to-four family mortgage loans                           $394,588   $325,139
Multi-family mortgage loans                                    2,705      1,238
Commercial real estate mortgage loans                         40,713     39,892
Construction and development loans, principally                                 
 residential                                                  18,343     12,812 
Home equity loans                                             16,729     18,054
                                                          ---------------------
                                                             473,078    397,135
Less unearned discounts and net deferred
 origination and commitment fees                              (1,477)    (2,178)
                                                          ---------------------
Total real estate mortgage loans                             471,601    394,957
 
Consumer and student loans                                    23,589     22,932
Commercial loans                                               6,662      6,300
                                                          --------------------- 
                                                              30,251     29,232
Less unearned discounts and net deferred
origination and commitment fees                                 (124)      (123)
                                                          ---------------------
Total other loans                                             30,127     29,109
Less allowance for loan losses                                (5,470)    (4,796)
                                                          ---------------------
Total loans receivable, net                                 $496,258   $419,270
                                                          =====================
</TABLE>

Included in real estate mortgage loans are $1,345,843 and $1,851,300 of
mortgages serviced by third parties as of June 30, 1997 and 1996, respectively,
and $0 and $1,155,282 of loans held for sale as of June 30, 1997 and 1996,
respectively.

The Bank sells real estate mortgage loans to the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA"), and
the State of New York Mortgage Association ("SONYMA"). These loans are then
serviced by the Bank under agreements which specify a servicing fee based on a
percentage of the outstanding principal balances. The FHLMC, FNMA, and SONYMA
loan servicing portfolios totaled $40,672,907, $570,309, and $8,875,350 at June
30, 1997 and $41,801,765, $576,210, and $7,157,689 at June 30, 1996,
respectively, and are not included in the consolidated financial statements.

                                                                            F-14
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


5. Loans Receivable (continued)

Real estate mortgage loans on nonaccrual status totaled $2,673,574, $2,756,510,
and $2,291,417 at June 30, 1997, 1996, and 1995, respectively. If interest on
the nonaccrual loans had been accrued, such income would have been $276,092,
$225,506, and $113,664, respectively.

A summary of the changes in the allowance for loan losses for the years ended
June 30, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
                                            1997       1996       1995
                                         --------------------------------
                                                   (In Thousands)
 
<S>                                        <C>        <C>        <C>    
Balance at beginning of year               $4,796     $3,275     $3,106 
 Provision charged to operations            1,080      1,600        600 
 Charge offs, net of recoveries              (406)       (79)      (431)
                                         --------------------------------
Balance at end of year                     $5,470     $4,796     $3,275 
                                         ================================
</TABLE>

6. Banking Premises and Equipment

Banking premises and equipment at June 30, 1997 and 1996 consist of the
following:

<TABLE>
<CAPTION>
                                                        1997       1996
                                                    -----------------------
 
                                                         (In Thousands)
 
<S>                                                   <C>        <C>
Land                                                   $ 2,850    $ 2,850
Banking houses and improvements                          6,742      6,140
Leasehold improvements                                   2,847      2,635
Furniture, fixtures and equipment                        3,835      3,517
Automobiles                                                 40         51
                                                    -----------------------
 
                                                        16,314     15,193
Less accumulated depreciation and amortization          (4,256)    (3,625)
                                                    -----------------------
                                                       $12,058    $11,568
                                                    =======================
</TABLE>

                                                                            F-15
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


7. Deposits

At June 30, 1997 and 1996, deposits consist of the following:

<TABLE>
<CAPTION>
                                           Average               Average
                                 1997       Rate       996        Rate
                             ---------------------------------------------
                                           (In Thousands)
 
<S>                            <C>          <C>      <C>           <C>     
Certificates of deposit        $298,066     5.37%    $253,927       5.16%
Savings                         437,694     2.78      436,669       2.78 
Money market demand accounts     37,782     3.45       33,988       3.45 
Noninterest-bearing demand                                               
 deposits                        92,959       --       78,113         --
                                                                         
NOW accounts                     18,030     2.26       15,231       2.24  
                             ------------           ------------       
                               $884,531              $817,928          
                             ============           ============        
</TABLE>

Contractual maturities of certificates of deposit accounts at June 30, 1997 are
as follows:

<TABLE>
<CAPTION>
                                             Certificates
                                              of $100,000     All Other        Total
                                                or More     Certificates    Certificates
                                           ----------------------------------------------
                                                            (In Thousands)
Year ending June 30:
<S>                                          <C>            <C>            <C>
 1998                                              $17,551       $191,526        $209,077
 1999                                                5,837         53,741          59,578
 2000                                                  200          6,529           6,729
 2001                                                  792          4,237           5,029
 2002 and thereafter                                 3,061         14,592          17,653
                                           ----------------------------------------------
                                                   $27,441       $270,625        $298,066
                                           ==============================================
</TABLE>

                                                                            F-16
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

8. Income Taxes

Significant components of the Bank's deferred tax assets and liabilities as of
June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
                                                         1997      1996 
                                                      -------------------

                                                         (In Thousands)
<S>                                                     <C>       <C> 
Deferred tax assets:                                                    
 Allowance for loan losses                              $2,576    $2,259
 Deferred loan fees                                        338       604
 Book over tax amortization                                262       213
 Non-accrual interest income                               370       257
 Postretirement benefits                                 1,660     1,547
 Capital loss carryforward                                  --        14
                                                      -------------------
Gross deferred tax assets                                5,206     4,894
                                                                        
Deferred tax liabilities:                                               
 Tax bad debt reserves                                   1,159     1,159
 Tax over book depreciation                                426       369
 Prepaid pension expense                                   402       277
 Discount accretion                                          1        47
 Securities available for sale                             276        64
                                                      -------------------
Gross deferred tax liabilities                           2,264     1,916
                                                      -------------------
                                                                        
Net deferred tax assets                                 $2,942    $2,978
                                                      ===================
</TABLE>

In view of the Bank's current and projected future earnings trend, management
believes that it is more likely than not that the entire net deferred tax assets
will be utilized. Accordingly, no valuation allowance was deemed necessary for
the net deferred tax assets for the years ended June 30, 1997 and 1996.

                                                                            F-17
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

8. Income Taxes (continued)

Significant components of the provision (benefit) for income taxes attributable
to continuing operations for the years ended June 30, 1997, 1996 and 1995 are as
follows:

<TABLE>
<CAPTION>
                                          1997       1996       1995        
                                       --------------------------------   
                                                (In Thousands)
<S>                                      <C>        <C>        <C> 
Current:                                                                  
 Federal                                 $6,278     $4,526     $4,815     
 State and local                          3,361      2,732      2,191     
                                       --------------------------------   
                                          9,639      7,258      7,006     
Deferred:                                                                 
 Federal                                   (106)      (275)       (54)    
 State and local                            (70)      (180)       (33)    
                                       --------------------------------   
                                           (176)      (455)       (87)    
                                       --------------------------------   
                                         $9,463     $6,803     $6,919     
                                       ================================  
</TABLE>

The table below presents a reconciliation between the reported tax provision and
the tax provision for the years ended June 30, 1997, 1996 and 1995 computed by
applying the statutory federal income tax rate (35% for the years ended June 30,
1997, 1996, and 1995) to income before provision for income taxes.

<TABLE>
<CAPTION>
                                                    1997    1996     1995
                                                 -------------------------------
                                                        (In Thousands)

<S>                                                <C>       <C>        <C>
Federal income tax provision at statutory rates    $7,066    $5,437     $5,525
Increase (reduction) in tax resulting from: 
 State and local income taxes, net of       
  federal income tax effect                         2,139     1,659      1,402
                                            
 Other                                                258      (293)        (8)
                                                 -------------------------------
                                                   $9,463    $6,803     $6,919
                                                 ===============================
</TABLE>

For federal income tax purposes, prior to 1996, if certain definitional tests
and other conditions were met, the Bank was allowed a special bad debt deduction
in determining its taxable income. The deduction was based on either specified
experience formulas or a percentage of taxable income. Federal tax legislation
enacted during 1996 repealed the special bad debt deduction provisions. As a
result, a large thrift institution such as the Bank is required to use the
specific charge-off method in computing its federal bad debt deduction for tax
years beginning after December 31, 1995. However, New York State enacted
legislation which, among other things, would permit a large thrift institution
such as the Bank to continue to use the bad debt reserve method for both New
York State and New York City tax purposes.

                                                                            F-18
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

8. Income Taxes (continued)

The 1996 Federal tax legislation also provided that a large thrift institution
such as the Bank is required to recapture the excess of its tax bad debt
reserves at December 31, 1995 over the balance of such reserves as of December
31, 1987 (the "base year"), whether the additions were made under the percentage
of taxable income method or the experience method. The Bank will be required to
recapture its excess bad debt reserves, for which deferred taxes have been
recognized, over a six-year period on a straight-line basis beginning in
calendar year 1998. The base year reserve will remain subject to recapture in
the case of certain excess distributions to and redemptions of shareholders or
if the Bank ceases to be a bank. The New York State legislation provides that
the recapture of excess bad debt reserves is not required for either New York
State or New York City tax purposes.

At June 30, 1997, the base year bad debt reserve for federal income tax purposes
was approximately $9.6 million, for which deferred taxes are not required to be
recognized. Bad debt reserves maintained for New York State and New York City
tax purposes as of June 30, 1997, for which deferred taxes are not required to
be recognized, amounted to approximately $34 million. Accordingly, deferred tax
liabilities of approximately $7.2 million have not been recognized as of June
30, 1997.

9. Employee Benefit Plans

Defined Benefit Plan

The Bank, through its participation in the RSI Retirement Trust, contributes to
a pension plan covering substantially all of its employees. The pension plan
benefit formula is based upon years of service and average compensation over the
final years of service. The Bank's policy is to make quarterly contributions to
the plan equal to the amount necessary to satisfy the funding requirements of
ERISA. Plan assets are principally invested in pooled investment funds in the
RSI Retirement Trust, which is a registered investment company.

                                                                            F-19
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

9. Employee Benefit Plans (continued)

The following table sets forth the funded status of the Bank's defined benefit
plan for the years ended June 30, 1997 and 1996 in accordance with Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions":

<TABLE>
<CAPTION>
                                                           1997         1996 
                                                       ------------------------
                                                            (In Thousands)
<S>                                                      <C>          <C>    
Actuarial present value of:                                                  
 Vested benefit obligation                                $ 6,640     $ 6,120
 Nonvested benefits                                           266         735
                                                       ------------------------
Accumulated benefit obligation                            $ 6,906     $ 6,855
                                                       ========================
                                                                             
                                                                             
Plan assets at fair value                                 $10,852     $ 9,766
Projected benefit obligation                               (8,569)     (8,379)
                                                       ------------------------
Plan assets in excess of projected benefit obligation       2,283       1,387
Unrecognized (gain)                                        (1,619)       (687)
Unrecognized transition (asset)                               (76)       (111)
Unrecognized past service liability                           (25)        (27)
                                                       ------------------------
Prepaid pension asset included in other assets            $   563     $   562
                                                       ========================
</TABLE>

The expected long-term rate of return on plan assets for plan years 1997 and
1996 was 8.00%. The rate of increase in future compensation levels was 6.00% and
5.50% for plan years 1997 and 1996, respectively. The weighted average discount
rate was 8.00% and 7.50% for plan years 1997 and 1996, respectively.

Pension expense for the years ended June 30, 1997, 1996 and 1995 includes the
following components:
<TABLE>
<CAPTION>
                                             1997      1996      1995   
                                          ----------------------------- 
                                                  (In Thousands)
                                                                        
<S>                                         <C>       <C>       <C>     
Service cost                                $ 478     $ 453     $ 362   
Interest cost                                 671       614       584   
Actual return on plan assets                 (854)     (773)     (616)  
Net amortization and deferrals                (94)      (38)      (38)  
                                          ----------------------------- 
Net pension expense                         $ 201     $ 256     $ 292   
                                          =============================  
</TABLE>


                                                                            F-20
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


9. Employee Benefit Plans (continued)

Defined Contribution Plan

The Bank also provides a 401(k) Savings Plan open to salaried employees meeting
certain eligibility requirements. Participants contribute 2% to 9% of pre-tax
compensation. The Bank makes matching contributions in an amount equal to 50% of
an employee's contributions, up to 6%. Participants may invest in any or all of
six investment funds, which are managed by the 401(k) Plan's trustee, RSI
Retirement Trust.

Postretirement Benefit Plan

The Bank provides postretirement medical and life insurance benefits for
eligible retired employees.

Effective July 1, 1994, the Bank adopted SFAS No. 106, "Employer's Accounting
for Postretirement Benefits Other Than Pensions." The Bank uses actuarial-basis
accrual accounting for all employer provided postretirement benefits other than
pensions. This requires the recognition of a transition obligation for the
difference between the accumulated postretirement benefit obligation ("APBO")
and the liability currently recognized on the statement of financial condition.
Upon adoption of SFAS No. 106, the Bank immediately recognized its entire net
transition obligation by recording a charge of $2,489,000 ($1,315,950 on an
after-tax basis) as the cumulative effect of this change in accounting
principle.

The following table sets forth the funded status and amounts recognized in the
Bank's consolidated statements of financial condition at June 30, 1997 and 1996:

<TABLE>
<CAPTION>
                                                         1997      1996
                                                     ----------------------
                                                         (In Thousands)
<S>                                                    <C>       <C>
Accumulated postretirement benefit obligation:
 Retirees                                              $(1,025)   $  (894)
 Fully eligible active plan participants                  (300)      (207)
 Other active plan participants                         (1,471)    (1,545)
 Unrecognized net actuarial gain                          (498)      (434)
                                                     ----------------------
Accrued postretirement benefit cost included in
 accrued and other liabilities                         $(3,294)   $(3,080)
                                                     ======================
</TABLE>

                                                                            F-21
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


9. Employee Benefit Plans (continued)

The Bank's postretirement benefits expense for the years ended June 30, 1997,
1996 and 1995 consisted of the following:

<TABLE>
<CAPTION>
                                              1997    1996   1995
                                           -------------------------
                                                (In Thousands)
<S>                                          <C>     <C>     <C>
Interest cost on accumulated
 postretirement benefit obligations          $ 201   $ 190   $ 205
 
Service cost attributable to service
 during the year                               120     120     140
 
Amortization of actuarial gain                 (20)    (16)     --
                                             -----   -----   -----   
                                             $ 301   $ 294   $ 345
                                           =========================
</TABLE>

The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e. health care cost trend rate) is 12.5% for the initial
year and is assumed to decrease gradually to 6% in 2003 with 1.0% annual
decreases thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the assumed
health care cost trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation at June 30, 1997 by $327,000
(11.7%). The increase in the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1997 would be $44,000
(12.1%).

The weighted-average discount rate at June 30, 1997 and 1996 was 8%. The rate of
increase in future compensation levels at June 30, 1997 and 1996 was 5.5%.

10. Commitments and Contingencies

Lease Commitments

The Bank conducts a portion of its banking operations in leased facilities under
noncancellable operating leases expiring at various periods through 2002. These
leases contain renewal options and certain of the leases provide for increases
based upon various escalation clauses. Rent expense was $353,642, $339,656, and
$324,152 for the years ended June 30, 1997, 1996, and 1995, respectively.

                                                                            F-22
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


10. Commitments and Contingencies (continued)

The future minimum lease payments under such operating leases are as follows:

<TABLE>
<CAPTION>
                                                          Amount
                                                   ------------------
                                                      (In Thousands)
<S>                                                  <C>
Years ended June 30:
 1998                                                    $  362
 1999                                                       366
 2000                                                       362
 2001                                                       357
 2002 and thereafter                                      2,603
                                                   ------------------
                                                         $4,050
                                                   ==================
</TABLE>

Litigation

The Bank is a defendant in legal actions arising in the ordinary course of
business. Management believes that these actions are without merit or that the
ultimate liability, if any, resulting from such actions will not materially
affect the Bank's consolidated financial position.

Loan Commitments

There were outstanding commitments to make loans (primarily fixed rate
residential) at June 30, 1997 and 1996 of $49,373,635 and $54,522,128,
respectively. Loan commitments have credit risk essentially the same as that
involved in extending loans to customers and are subject to the Bank's normal
credit policy. These commitments are not reflected in the accompanying
consolidated statements of financial condition. Management expects that all loan
originations will be funded from existing liquidity and normal monthly cash
flow.

Lines of Credit

At June 30, 1997 and 1996, the Bank had available lines of credits with other
financial institutions aggregating $10,000,000 and $20,000,000 respectively. As
of June 30, 1997 and 1996, no amounts were outstanding under these lines of
credit.

                                                                            F-23
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


11. Regulatory Requirements

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.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth below) of
total and Tier I capital to risk-weighted assets, and Tier I capital to average
assets (all as defined in the regulations). Management believes, as of June 30,
1997, that the Bank meets all capital adequacy requirements to which it is
subject.

Based on its regulatory capital ratios at June 30, 1997, the Bank is categorized
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, and Tier I leverage ratios as set forth in
the table. The Bank's actual capital amounts and ratios are also presented in
the table (in thousands).

<TABLE>
<CAPTION>
                                                                                        To Be Well Capitalized Under
                                                          For Capital Adequacy             Prompt Corrective Action
                                       Actual                  Purposes                         Provisions
                                -------------------   ------------------------------   ------------------------------ 
                                   Amount   Ratio       Amount           Ratio           Amount            Ratio
                                -------------------------------------------------------------------------------------
                                                                    (In Thousands)
<S>                               <C>       <C>         <C>             <C>             <C>               <C>
As of June 30, 1997:
 Total Capital                                                          greater than                     greater than
  (to Risk Weighed Assets)        $103,910  19.71%      $42,181              8.00%      $52,726                 10.00%
 Tier I Capital                                                         greater than                     greater than
  (to Risk Weighed Assets)        $ 99,063  18.79%      $21,090              4.00%      $31,635                  6.00%
 Tier I Capital                                                         greater than                     greater than
  (to Average Assets)             $ 99,063  10.02%      $39,562              4.00%      $49,452                  5.00%
As of June 30, 1996:                                                                                 
 Total Capital                                                          greater than                     greater than
  (to Risk Weighed Assets)        $ 92,194  19.20%      $38,414              8.00%      $48,017                 10.00%
 Tier I Capital                                                         greater than                     greater than
  (to Risk Weighed Assets)        $ 88,029  18.33%      $19,207              4.00%      $28,810                  6.00%
 Tier I Capital                                                         greater than                     greater than
  (to Average Assets)             $ 88,029   9.65%      $36,483              4.00%      $45,604                  5.00%
</TABLE>

                                                                            F-24
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


12. Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that
value. Quoted market prices, when available, are used as the measure of fair
value. In cases where quoted market prices are not available, fair values are
based on present value estimates or other valuation techniques. These derived
fair values are significantly affected by assumptions used, principally the
timing of future cash flows and the discount rate.

Because assumptions are inherently subjective in nature, the estimated fair
values cannot be substantiated by comparison to independent market quotes and in
many cases, the estimated fair values would not necessarily be realized in an
immediate sale or settlement of the instrument. The disclosure requirements of
SFAS No. 107 exclude certain financial instruments and all nonfinancial
instruments. Accordingly, the aggregate fair value amounts presented do not
represent management's estimation of the underlying value of the Bank.

The carrying values and estimated fair values of the Bank's material financial
instruments as of June 30, 1997 and 1996 are summarized as follows:

<TABLE>
<CAPTION>
                                                  1997                        1996
                                      --------------------------   -------------------------
                                        Carrying Value    Fair      Carrying Value    Fair
                                                         Value                       Value
                                      --------------------------   -------------------------
                                                           (In Thousands)
<S>                                     <C>             <C>         <C>             <C> 
Financial assets
Cash and due from banks                    $ 26,543     $ 26,543      $ 29,272      $ 29,272
Federal funds sold                            6,000        6,000        20,000        20,000
Receivable from broker                           --           --         7,531         7,531
Securities held to maturity:                                                       
 Investment securities                      205,201      205,362       307,700       306,609
 Mortgage-backed and mortgage related                                              
  securities                                185,122      186,593        80,284        80,631
Securities available for sale:                                                     
 Investment securities                       19,706       19,706        21,659        21,659
 Mortgage-backed and mortgage related                                              
  securities                                 27,398       27,398         1,394         1,394
Real estate mortgage loans receivable       471,601      472,868       394,957       401,330
Other loans receivable                       30,127       30,089        29,109        29,322
Financial liabilities                                                              
Deposits                                    884,531      838,358       817,928       770,139
</TABLE>

                                                                            F-25
<PAGE>
 
                         Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)


12. Fair Value of Financial Instruments (continued)

The following methods and assumptions were used by the Bank in estimating the
fair values of financial instruments:

 Cash and Due from Banks, Federal Funds Sold and Receivable from Broker:
 Carrying amounts approximate fair value since these instruments are either
 payable on demand or have short-term maturities.

 Securities Held to Maturity and Securities Available for Sale: The estimated
 fair values of securities held to maturity and securities available for sale
 are based on independent dealer quotations and quoted market prices.

 Real Estate Mortgage Loans and Other Loans Receivable: The estimated fair
 values of real estate mortgage loans and other loans receivable are based on
 discounted cash flow calculations that apply interest rates currently being
 offered by the Bank for loans with similar remaining maturities to a schedule
 of aggregated expected monthly maturities.

 Deposits: The estimated fair values of deposits are based on discounted cash
 flow calculations that apply interest rates currently being offered by the Bank
 for deposits with similar remaining maturities to a schedule of aggregated
 expected monthly maturities.

13. Subsequent Events

On July 31, 1997, the Board of Trustees of the Bank unanimously adopted a plan
of Conversion (the "Plan of Conversion") whereby the Bank would convert from a
New York State chartered mutual bank to a New York State chartered stock
institution and offer shares of common stock in a subscription and community
offering. As part of the conversion, newly authorized shares of a new stock
holding company will be offered to the Bank's depositors and employee benefit
plans in accordance with applicable state and federal regulations. The amount
and pricing of the proposed stock offering will be based upon an independent
appraisal of the Bank.

The Plan of Conversion must be approved by eligible depositors as of June 30,
1996 as well as the New York State Banking Department. In addition, the FDIC
must issue a Letter of Non-objection with respect to the Plan of Conversion.

                                                                            F-26
<PAGE>

================================================================================
         No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by Richmond County Financial Corp., Richmond County Savings Bank or
Sandler O'Neill & Partners, L.P. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
to any person in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction. Neither the delivery of this Prospectus
nor any sale hereunder shall under any circumstances create any implication that
there has been no change in the affairs of Richmond County Financial Corp. or
Richmond County Savings Bank since any of the dates as of which information is
furnished herein or since the date hereof.
                                                                                
                        ------------------------------

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----
Summary of the Conversion and the Offerings...................................
Selected Consolidated Financial and Other                                       
  Data of the Bank............................................................
Risk Factors..................................................................
Richmond County Financial Corp................................................
Richmond County Savings Bank..................................................
Richmond County Savings Foundation............................................
Regulatory Capital Compliance.................................................
Use of Proceeds...............................................................
Dividend Policy...............................................................
Market for the Common Stock...................................................
Capitalization................................................................
Pro Forma Data................................................................
Consolidated Statements of Income.............................................
Management's Discussion and...................................................
  Analysis of Financial Condition
  and Results of Operations...................................................
Business of the Bank..........................................................
Federal and State Taxation....................................................
Regulation and Supervision....................................................
Management of the Company.....................................................
Management of the Bank........................................................
The Conversion................................................................
Restrictions on Acquisition of the
   Company and the Bank.......................................................
Description of Capital Stock of the Company...................................
Transfer Agent and Registrar..................................................
Experts.......................................................................
Legal and Tax Opinions........................................................
Additional Information........................................................
Index to Financial Statements.................................................

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

         Until            , 1997 or 25 days after commencement of the
               -----------                                           
Syndicated Community Offering, if any, whichever is later, all                  
dealers effecting transactions in the registered securities, may be required to
deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

                               21,275,000 Shares
                                                            
                                                            
                                                            
                                                            
                                    [LOGO]
                                                            
                                                            
                                                            
                        RICHMOND COUNTY FINANCIAL CORP.
                                                            
                         (Proposed Holding Company for
                         Richmond County Savings Bank)
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                 COMMON STOCK
                          (par value $0.01 per share)
                                                            
                                                            
                                                            
                                  ----------
                                                            
                                  PROSPECTUS

                                  ----------
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                       Sandler O'Neill & Partners, L.P.
                                                            
                                                            
                                                            
                                                            
                                                            
                           _______________ ___, 1997
                                                            
                                                            
                                                            
================================================================================
                                                            
<PAGE>
 

                                    PART II
                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.  Other Expenses of Issuance and Distribution.
<TABLE> 

          <S>                                                                <C> 
          SEC filing fee(1)..........................................        $   80,072
          NYBD filing fee............................................             5,000
          OTS filing fee.............................................             2,000
          NASD filing fee............................................             5,000
          Nasdaq National Market fee(1)..............................            50,000
          Printing, postage and mailing..............................           740,000
          Legal fees and expenses (including underwriter's             
           counsel...................................................           850,000
          Accounting fees and expenses...............................           400,000
          Appraisers' fees and expenses (including                     
           business plan)............................................            67,000
          Marketing fees, selling commissions, and                     
           underwriter's expenses....................................         2,905,000
          Proxy solicitation fees and expenses.......................            35,000
          Conversion agent fees and expenses.........................            65,000
          Transfer agent fees and expenses...........................            20,000
          Certificate printing.......................................            15,000
          Telephone, temporary help and other equipment..............           400,000
          Blue Sky fees and expenses.................................            10,000
          Miscellaneous..............................................            75,000
                                                                             ----------
          TOTAL                                                              $5,679,072
                                                                             ==========   
</TABLE> 

--------------------
(1)  Actual expenses based upon the registration of 26,423,550 shares at $10.00 
     per share. All other expenses are estimated.

Item 14.  Indemnification of Directors and Officers.

In accordance with the General Corporation Law of the State of Delaware (being 
Chapter I of Title 8 of the Delaware Code), Articles 10 and 11 of the 
Registrant's Certificate of Incorporation provide as follows:

TENTH:

A.   Each person who was or is made a party or is threatened to be made a party 
to or is otherwise involved in any action, suit or proceeding, whether civil 
criminal, administrative or investigative (hereinafter a "proceeding"), by 
reason of the fact that he or she is or was a Director or an Officer of the 
Corporation or is or was serving at the request of the Corporation as a 
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an 
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such 
proceeding is alleged action in an official capacity as a Director, Officer, 
employee or agent, or in any other capacity while serving as a Director, 
Officer, employee or agent, shall be indemnified and held harmless by the 
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.


<PAGE>
 
B. The right to indemnification conferred in Section A of this Article TENTH 
shall include the right to be paid by the Corporation the expenses incurred in 
defending any such proceeding in advance of its final disposition (hereinafter 
an "advancement of expenses"); provided, however, that, if the Delaware General 
Corporation Law requires, an advancement of expenses incurred by an indemnitee 
in his or her capacity as a Director or Officer (and not in any other capacity 
in which service was or is rendered by such indemnitee, including, without 
limitation, services to an employee benefit plan) shall be made only upon 
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall 
ultimately be determined by final judicial decision from which there is no 
further right to appeal (hereinafter a "final adjudication") that such 
indemnitee is not entitled to be indemnified for such expenses under this 
Section or otherwise. The rights to indemnification and to the advancement of 
expenses conferred in Sections A and B of this Article TENTH shall be contract 
rights and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the 
indemnitee's heirs, executors and administrators.

C. If a claim under Section A or B of this Article TENTH is not paid in full by 
the Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in 
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount 
of the claim. If successful in whole or in part in any such suit, or in a suit 
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the 
expenses of prosecuting or defending such suit. In (i) any suit brought by the 
indemnitee to enforce a right to indemnification hereunder (but not in a suit 
brought by the indemnitee to enforce a right to an advancement of expenses) it 
shall be a defense that, and (ii) in any suit by the Corporation to recover an 
advancement of expenses pursuant to the terms of an undertaking the Corporation 
shall be entitled to recover such expenses upon a final adjudication that, the 
indemnitee has not met any applicable standard for indemnification set forth in 
the Delaware General Corporation Law. Neither the failure of the Corporation 
(including its Board of Directors, independent legal counsel, or its 
stockholders) to have made a determination prior to the commencement of such 
suit that indemnification of the indemnitee is proper in the circumstances 
because the indemnitee has met the applicable standard of conduct set forth in 
the Delaware General Corporation Law, nor an actual determination by the 
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of 
conduct, shall create a presumption that the indemnitee has not met the 
applicable standard of conduct or, in the case of such a suit brought by the 
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to 
enforce a right to indemnification or to an advancement of expenses hereunder, 
or by the Corporation to recover an advancement of expenses pursuant to the 
terms of an undertaking, the burden of proving that the indemnitee is not 
entitled to be indemnified, or to such advancement of expenses under this 
Article TENTH, or otherwise shall be on the Corporation.

D. The rights to indemnification and to the advancement of expenses conferred in
this Article TENTH shall not be exclusive of any other right which any person 
may have or hereafter acquire under any statue, the Corporation's Certificate of
Incorporation, Bylaws, agreement, vote of stockholders of Disinterested 
Directors or otherwise.

E. The Corporation may maintain insurance, at its expense, to protect itself and
any Director, Officer, employee or agent of the Corporation or subsidiary or 
Affiliate or another corporation, partnership, joint venture, trust or other 
enterprise against any expense, liability or loss, whether or not the 
Corporation would have the power to indemnify such person against such expense, 
liability or loss under the Delaware General Corporation Law.

F. The Corporation may, to the extent authorized from time to time by the Board 
of Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation to the fullest extent of the 
provisions of the Article TENTH with respect to the indemnification and 
advancement of expenses of Directors and Officers of the Corporation.

ELEVENTH:

A Director of this Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a 
Director, except for liability: (i) for any breach of the Director's duty of 
loyalty to the
<PAGE>
 
Corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under 
Section 174 of the Delaware General Corporation Law; or (iv) for any transaction
from which the Director derived an improper personal benefit. If the Delaware 
General Corporation Law is amended to authorize corporate action further 
eliminating or limiting the personal liability of Directors, then the liability 
of a Director of the Corporation shall be eliminated or limited to the fullest 
extent permitted by the Delaware General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of a Director of 
the Corporation existing at the time of such repeal or modification. 

Item 15.  Recent Sales of Unregistered Securities

None.
<PAGE>
 
Item 16. Exhibits and Financial Statement Schedules

The exhibits and financial statement schedules filed as a part of this 
Registration Statement are as follows:

(a) List of Exhibits (filed herewith unless otherwise noted)

 1.1  Engagement Letter between Richmond County Savings Bank and Sandler O'Neill
      & Partners, L.P.
 1.2  Draft Form of Agency Agreement*
 2.1  Plan of Conversion (including the Restated Organization Certificate and 
      Stock Bylaws of Richmond County Savings Bank)
 3.1  Certificate of Incorporation of Richmond County Financial Corp.
 3.2  Bylaws of Richmond County Financial Corp.
 3.3  Restated Organization Certificate and Stock Bylaws of Richmond County 
      Savings Bank (See Exhibit 2.1 hereto)
 4.0  Draft Stock Certificate of Richmond County Financial Corp.
 5.0  Draft Opinion of Muldoon, Murphy & Faucette re: legality
 5.1  Draft Opinion of Morris, Nichols, Arsht & Tunnell re: legality
 8.0  Draft Opinion of Muldoon, Murphy & Faucette re: Federal Tax Matters
 8.1  Draft Opinion of Ernst & Young re: State Tax Matters
10.1  Form of Richmond County Savings Bank Employee Stock Ownership Plan and 
      Trust
10.2  Draft ESOP Loan Commitment Letter and ESOP Loan Documents
10.3  Form of Proposed Employment Agreement between Richmond County Savings Bank
      and certain executive officers
10.4  Form of Proposed Employment Agreement between Richmond County Financial 
      Corp. and certain executive officers
10.5  Form of Proposed Change in Control Agreement between Richmond County 
      Savings Bank and certain executive officers
10.6  Form of Proposed Richmond County Savings Bank Employee Severance 
      Compensation Plan
10.7  Form of Proposed Management Supplemental Executive Retirement Plan
23.1  Consent of Ernst & Young LLP
23.2  Consent of Muldoon, Murphy & Faucette
23.3  Consent of Morris, Nichols, Arsht & Tunnell
23.4  Consent and Subscription Rights Opinion of Keller & Company, Inc.
23.5  Consent of William M. Mercer, Incorporated
24.1  Powers of Attorney
27.0  Financial Data Schedule
99.1  Appraisal Report of Keller & Company, Inc. (P)
99.2  Draft of Richmond County Savings Foundation Gift Instrument*

------------------------
* To be filed by amendment
(P) Filed pursuant to Rule 202 of Regulation S-T.
<PAGE>
 
(b)  Financial Statement Schedules

All schedules have been omitted as not applicable or not required under the 
rules of Regulation S-X.

Item 17. Undertakings.

     The undersigned Registrant hereby undertakes:

     (1)  To file, during any period in which offers or sales are being made, a 
          post-effective amendment to this Registration Statement:

          (i)    To include any Prospectus required by Section 10(a)(3) of the
                 Securities Act of 1933;

          (ii)   To reflect in the Prospectus any facts or events arising after
                 the effective date of the Registration Statement (or the most
                 recent post-effective amendment thereof) which, individually or
                 in the aggregate, represent a fundamental change in the
                 information set forth in the Registration Statement;

          (iii)  To include any material information with respect to the plan of
                 distribution not previously disclosed in the Registration
                 Statement or any material change to such information in the
                 Registration Statement;

     (2)  That, for the purpose of determining any liability under the
          Securities Act of 1933, each such post-effective amendment shall be
          deemed to be a new Registration Statement relating to the securities
          offered therein, and the offering of such securities at that time
          shall be deemed to be the initial bona fide offering thereof.

     (3)  To remove from registration by means of a post-effective amendment any
          of the securities being registered which remain unsold at the
          termination of the Offering.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the 
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant 
has been advised that in the opinion of the Securities and Exchange Commission 
such indemnification is against public policy as expressed in the Act and is, 
therefore, unenforceable. In the event that a claim for indemnification against 
such liabilities (other than the payment by the Registrant of expenses incurred 
or paid by a director, officer or controlling person of the Registrant in the 
successful defense of any action, suit or proceeding) is asserted by such 
director, officer or controlling person in connection with the securities being 
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate 
jurisdiction the question whether such indemnification by it is against public 
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
 
CONFORMED

                                  SIGNATURES

       Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Borough of Staten
Island, State of New York, on October 2, 1997.

Richmond County Financial Corp.


By:    /s/ Michael F. Manzulli
       -------------------------------
       Michael F. Manzulli
       Chairman of the Board and Chief
       Executive Officer 

       Pursuant to the requirements of the Securities Act of 1933, this 
Registration Statement has been signed by the following persons in the 
capacities and on the dates indicated.

<TABLE> 
<CAPTION> 

            Name                             Title                                     Date
            ----                             -----                                     ----

<S>                                          <C>                                  <C> 
/s/ Michael F. Manzulli                      Chairman of the Board and            October 2, 1997
------------------------------               Chief Executive Officer                  
Michael F. Manzulli                          (principal executive                    
                                             officer)                                 
                                                                                      
/s/ Andrew M. Sisock                         Vice President and Accounting        October 2, 1997
------------------------------               Officer (principal accounting                 
Andrew M. Sisock                             and financial officer)                                 
                                                                                      
                                                                                      
/s/ Anthony E. Burke                         Director                             October 2, 1997    
------------------------------                                                        
Anthony E. Burke                                                                     
                                                                                      
                                                                                      
/s/ Godfrey H. Carstens, Jr.                 Director                             October 2, 1997    
------------------------------                                                        
Godfrey H. Carstens, Jr.                                                              
                                                                                      
                                                                                      
/s/ Robert S. Farrell                        Director                             October 2, 1997    
------------------------------                                                        
Robert S. Farrell                                                                     
                                                                                      
                                                                                      
/s/ William C. Frederick, M.D.               Director                             October 2, 1997    
------------------------------                                                        
William C. Frederick, M.D.                                                            
                                                                                      
                                                                                      
/s/ James L. Kelley                          Director                             October 2, 1997    
------------------------------                                                        
James L. Kelley                                                                       
                                                                                      
                                                                                      
/s/ T. Ronald Quinlan, Jr.                   Director                             October 2, 1997    
------------------------------                                                        
T. Ronald Quinlan, Jr.                                                                
                                                                                      
                                                                                      
/s/ Maurice K. Shaw                          Director                             October 2, 1997     
------------------------------
Maurice K. Shaw
</TABLE>
[{"type": "S-1", "sequence": "1", "description": "FORM S-1", "secsgml_size_bytes": 885670}]
{"company-data": {"conformed-name": "RICHMOND COUNTRY FINANCIAL CORP", "cik": "0001046685", "assigned-sic": "", "state-of-incorporation": "DE", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-37009", "film-number": "97689791"}, "business-address": {"street1": "1214 CASTLETON AVENUE", "city": "STATEN ISLAND", "state": "NY", "zip": "10310"}, "mail-address": {"street2": "1214 CASTLETON AVENUE", "city": "STATEN ISLAND", "state": "NY", "zip": "10310"}}
As filed with the Securities and Exchange Commission on October 2, 1997
                                                    Registration No. 333-_______

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM S-1
                            REGISTRATION STATEMENT
                       UNDER THE SECURITIES ACT OF 1933
                        RICHMOND COUNTY FINANCIAL CORP.

                         RICHMOND COUNTY SAVINGS BANK
                              401(k) SAVINGS PLAN

            (exact name of registrant as specified in its charter)

DELAWARE                                 6036                Being applied for
(state or other jurisdiction of    (Primary Standard           (IRS Employer 
incorporation or organization)        Industrial            Identification No.)
                                  Classification Code
                                        Number)

                             1214 Castleton Avenue
                         Staten Island, New York 10310
                                (718) 448-2800
              (Address, including zip code, and telephone number,
       including area code, of registrant's principal executive offices)

                              Michael F. Manzulli
                     President and Chief Executive Officer
                         Richmond County Savings Bank
                         Staten Island, New York 10310
                                (718) 448-2800
           (Name, address, including zip code, and telephone number,
                  including area code, of agent for service)

                                  Copies to:
                         Douglas P. Faucette, Esquire
                        Lawrence M.F. Spaccasi, Esquire
                             Marc P. Levy, Esquire
                           Geoffrey W. Ryan, Esquire
                          Muldoon, Murphy & Faucette
                          5101 Wisconsin Avenue, N.W.
                            Washington, D.C. 20016
                                (202) 362-0840

     Approximate date of commencement of proposed sale to public: As soon as 
practicable after this Registration Statement becomes effective.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 
1933, check the following box. [X]

     If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier 
effective registration statement for the same offering. [_]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) 
under the Securities Act, check the following box and list the Securities Act 
registration number of the earlier effective registration statement for the same
offering. [_]

     If delivery of the prospectus is expected to be made pursuant to Rule 434, 
please check the following box. [_]

================================================================================
                        Calculation of Registration Fee
--------------------------------------------------------------------------------
Proposed Maximum     Proposed Maximum      Amount of
  Title of each Class of         Amount to       Offering Price     Aggregate Offering    Registration 
Securities to be Registered    be Registered       Per Share             Price(2)             Fee
-------------------------------------------------------------------------------------------------------
Common Stock              26,423,550         $10.00            $264,235,500          $80,072
     $.01 par value(1)             Shares
-------------------------------------------------------------------------------------------------------
      Participation                286,347         --------             --------              (3)
        Interests                  Shares
=======================================================================================================
(1) Includes shares of Common Stock to be issued to the Richmond County Savings 
    Foundation, a private foundation.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) The securities of Richmond County Financial Corp. to be purchased by
    Richmond County Savings Bank 401(k) Savings Plan are included in the amount
    shown for Common Stock. Accordingly, no separate fee is required for the
    participation interests. In accordance with Rule 457(h) of the Securities
    Act, as amended, the registration fee has been calculated on the basis of
    the number of shares of Common Stock that may be purchased with the current
    assets of such Plan.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES 
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE 
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
[To be used in connection with sales to Participants in the RICHMOND COUNTY
SAVINGS BANK 401(k) Savings Plan]

PROSPECTUS SUPPLEMENT
---------------------

                        RICHMOND COUNTY FINANCIAL CORP.

                         RICHMOND COUNTY SAVINGS BANK
                        286,347 Participation Interests
                         RICHMOND COUNTY SAVINGS BANK 
                              401(k) SAVINGS PLAN

        This Prospectus Supplement relates to the offer and sale to participants
(the "Participants") in The Richmond County Savings Bank 401(k) Savings Plan in
RSI Retirement Trust (the "Plan") of participation interests and shares of
common stock, par value $.01 per share of Richmond County Financial Corp. (the
"Common Stock"), as set forth herein.

        In connection with the proposed conversion of Richmond County Savings
Bank (the "Bank") from a mutual savings bank to a stock savings bank (the
"Conversion") the Plan has been amended to permit the investment of Plan assets
in Common Stock of Richmond County Financial Corp. (the "Holding Company"). The
amended Plan will permit Participants to direct the trustee of the Plan (the
"Trustee") to invest in Common Stock with amounts in the Plan attributable to
such Participants. Such investments in Common Stock would be made by means of
the Richmond County Financial Corp. Stock Fund (the "Employer Stock Fund").
Based upon the value of the Plan assets at June 30, 1997, 286,347 shares of
Common Stock could be purchased with Plan assets (assuming a purchase price of
$10.00 per share). This Prospectus Supplement relates to the initial election of
Participants to direct that all or a portion of their accounts be invested in
the Employer Stock Fund in connection with the Conversion and also to elections
by Participants to direct that all or a portion of their accounts be invested in
the Employer Stock Fund after the Conversion.

        The Prospectus dated ____________________, 1997 of the Holding Company
(the "Prospectus"), which is attached to this Prospectus Supplement, includes
detailed information with respect to the Conversion, the Common Stock and the
financial condition, results of operations and business of the Bank. This
Prospectus Supplement, which provides detailed information with respect to the
Plan, should be read only in conjunction with the Prospectus and should be
retained for future reference.

        FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS."

     THE DATE OF THIS PROSPECTUS SUPPLEMENT IS ____________________, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK,
THE NEW YORK STATE BANKING DEPARTMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER STATE OR FEDERAL AGENCY OR ANY STATE SECURITIES
COMMISSION, NOR HAS SUCH COMMISSION OR OTHER AGENCY OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

        THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT FEDERALLY INSURED OR GUARANTEED, NOR ARE THE SHARES OF
COMMON STOCK GUARANTEED BY THE COMPANY OR THE BANK. THE ENTIRE AMOUNT OF A
PURCHASER'S PRINCIPAL IS SUBJECT TO LOSS.

        No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Bank or the Plan.  This
Prospectus Supplement does not constitute an offer to sell or solicitation of
an offer to buy any securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.  Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Bank or the Plan since the date hereof, or
that the information herein contained or incorporated by reference is correct
as of any time subsequent to the date hereof.
TABLE OF CONTENTS

THE OFFERING ....................................................  1
     Securities Offered..........................................  1
     Election to Purchase Common Stock in the Conversion.........  1
     Value of Participation Interests............................  1
     Method of Directing Transfer................................  2
     Time for Directing Transfer.................................  2
     Irrevocability of Transfer Direction........................  2
     Direction to Purchase Common Stock After the Conversion.....  2
     Purchase Price of Common Stock..............................  3
     Nature of a Participant's Interest in the Common Stock......  3
     Voting and Tender Rights of Common Stock....................  3

DESCRIPTION OF THE PLAN..........................................  4
     Introduction................................................  4
     Eligibility and Participation...............................  5
     Contributions Under the Plan................................  5
     Limitations on Contributions................................  6
     Investment of Contributions.................................  8
     Benefits Under the Plan..................................... 11
     Withdrawals and Distributions From the Plan................. 11
     Administration of the Plan.................................. 12
     Reports to Plan Participants................................ 13
     Plan Administrator.......................................... 13
     Amendment and Termination................................... 13
     Merger, Consolidation or Transfer........................... 14
     Federal Income Tax Consequences............................. 14
     ERISA and Other Qualification............................... 16
     Restrictions on Resale...................................... 16
     SEC Reporting and Short-Swing Profit Liability.............. 17

EXPERTS.......................................................... 18

LEGAL OPINIONS................................................... 18
THE OFFERING

SECURITIES OFFERED

        The securities offered hereby are participation interests in the Plan.
Up to 286,347 shares (assuming the actual purchase price is $10.00 per share) of
Common Stock may be acquired by the Plan to be held in the Employer Stock Fund.
The Holding Company is the issuer of the Common Stock. Only salaried employees
of the Bank (hereinafter referred to as the "Employer") may participate in the
Plan. The Common Stock to be issued hereby is conditioned on the consummation of
the Conversion. A Participant's investment in units in the Employer Stock Fund
in the Conversion is subject to the priority set forth in the Plan of
Conversion.

        Information with regard to the Plan is contained in this Prospectus
Supplement and information with regard to the Conversion and the financial
condition, results of operations and business of the Bank is contained in the
attached Prospectus.  The address of the principal executive office of the Bank
is 1214 Castleton Avenue, Staten Island, New York 10310.  The Bank's telephone
number is (718) 448-2800.

ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION

        In connection with the Bank's Conversion, the Plan has been amended to
permit each Participant to direct that all or part of the funds which represent
his or her beneficial interest in the assets of the Plan may be transferred to
an investment fund that will invest in Common Stock (the Employer Stock Fund)
and, to the extent shares are available to use such funds to purchase Common
Stock issued in connection with the Conversion, and to purchase Common Stock in
the open market.  If there is not enough Common Stock in the Conversion to fill
all subscriptions, the Common Stock would be apportioned and the Plan may not
be able to purchase all of the Common Stock requested by the Participants. In
such case, the Trustee will purchase shares in the open market after the
Conversion to fulfill Participants' requests.  Such purchases may be at prices
higher than the purchase price in the Conversion.  The ability of each
Participant to  invest in the Employer Stock Fund  in the Conversion pursuant
to directions to transfer all or a portion of their beneficial assets in the
Plan will be based on such Participant's status as an Eligible Account Holder
or Supplemental Eligible Account Holder pursuant to the Plan of Conversion, the
subscription priorities set forth in the Plan of Conversion and the
availability of Common Stock.  The Trustee of the Plan will follow the
Participants' directions.  Funds not transferred to the Employer Stock Fund
will remain in the other investment funds of the Plan as directed by the
Participant on the attached Enrollment and Investment Application.

VALUE OF PARTICIPATION INTERESTS

        The market value of the assets of the Plan, as of June 30, 1997, was
$2,863,477 and each Participant was informed of the value of his or her
beneficial interest in the Plan. This value

                                       1
represented the past contributions to the Plan by the Employers and the
Participants and any earnings or losses thereon, less previous withdrawals.

METHOD OF DIRECTING TRANSFER

        The last page of this Prospectus Supplement is a form to direct a
transfer to the Employer Stock Fund (the "Investment Form"). If a Participant
wishes to transfer all or part (in multiples of not less than 1%) of his or her
beneficial interest in the assets of the Plan to the Employer Stock Fund being
established in connection with the Conversion, he or she should indicate that
decision in part 2 of the Investment Form. If a Participant does not wish to
make such an election, he or she does not need to take any action.

TIME FOR DIRECTING TRANSFER

        The deadline for submitting a direction to transfer amounts to the
Employer Stock Fund which will purchase Common Stock issued in connection with
the Conversion is ten days prior to the Expiration Date of the Offering. The
Investment Form should be returned to the Bank's Human Resources Department by
_:__ p.m. on such date.

IRREVOCABILITY OF TRANSFER DIRECTION

        A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in connection with
the Conversion shall be irrevocable. Participants, however, will be able to
direct the investment of their accounts ("Accounts") after the Conversion under
the Plan as explained below.

DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION

        After the Conversion, a Participant shall be able to direct that a
certain percentage (in multiples of not less than 1%) of the net value of such
Participant's interests in the trust find established for the Plan (the "Trust
Fund") be transferred to the Employer Stock Fund and invested in Common Stock,
or to the other investment funds available under the Plan. Alternatively, a
Participant may direct that a certain percentage of such Participant's interest
in the Employer Stock Fund be transferred to the Trust Fund to be invested in
accordance with the terms of the Plan. Participants will be permitted to direct
that future contributions made to the Plan by or on their behalf will be
invested in Common Stock. Following the initial election, the allocation of a
Participant's interest in the Employer Stock Fund may be changed once each
calendar quarter in any plan year by filing a written notice with the plan
administrator at least ten days before the effective date of the change. Special
restrictions apply to transfers directed by those Participants who are officers,
directors and principal shareholders of the Bank who are subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "1934 Act").

                                       2
PURCHASE PRICE OF COMMON STOCK

        The funds transferred to the Employer Stock Fund for the purchase of
Common Stock in connection with the Conversion will be used by the Trustee to
purchase shares of Common Stock. The price to be paid by the Trust Fund for such
shares of Common Stock will be the same price as is paid by all persons who
purchase shares of Common Stock in the Conversion.

        Common Stock purchased by the Trustee after the Conversion will be
acquired in open market transactions. The prices paid by the Trustee for shares
of Common Stock will not exceed "adequate consideration" as defined in Section
3(18) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Transaction fees associated with purchase, sale or transfer of the
Common Stock after the Conversion will be paid by ______.

NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK

        The Common Stock will be held in the name of the Trustee for the Plan,
as trustee. Each Participant has an allocable interest in the investment funds
of the Plan but not in any particular assets of the Plan. Accordingly, a
specific number of shares of Common Stock will not be directly attributable to
the account of any Participant. Earnings, e.g., gains and losses, are allocated
to the Account of a Participant based on units in the Employer Stock Fund held
by the Participants. Therefore, earnings with respect to a Participant's Account
should not be affected by the investment designations (including investments in
Common Stock) of other Participants.

VOTING AND TENDER RIGHTS OF COMMON STOCK

        The Trustee generally will exercise voting and tender rights
attributable to all Common Stock held by the Trust Fund as directed by
Participants with interests in the Employer Stock Fund. With respect to each
matter as to which holders of Common Stock have a right to vote, each
Participant will be allocated a number of voting instruction rights reflecting
such Participant's proportionate interest in the Employer Stock Fund. The number
of shares of Common Stock held in the Employer Stock Fund that are voted in the
affirmative and negative on each matter shall be proportionate to the number of
voting instruction rights exercised in the affirmative and negative,
respectively. In the event of a tender offer for Common Stock, the Plan provides
that each Participant will be allotted a number of tender instruction rights
reflecting such Participant's proportionate interest in the Employer Stock Fund.
The percentage of shares of Common Stock held in the Employer Stock Fund that
will be tendered will be the same as the percentage of the total number of
tender instruction rights that are exercised in favor of tendering. The
remaining shares of Common Stock held in the Employer Stock Fund will not be
tendered. The Plan makes provision for Participants to exercise their voting
instruction rights and tender instruction rights on a confidential basis.

                                       3
DESCRIPTION OF THE PLAN

I.      INTRODUCTION

        The Plan was established effective January 1, 1992 as Richmond County
Savings Bank 401(k) Savings Plan in the Retirement System for Savings
Institutions (the "Plan").   The Plan is a cash or deferred arrangement
established in accordance with the requirements under Section 401(a) and
Section 401(k) of the Internal Revenue Code of 1986 (the "Code").  The Plan
will be submitted to the Internal Revenue Service (the "IRS") in a timely
manner for a determination that the Plan, as amended and restated, is qualified
under Section 401(a) of the Code, and that its related trust(s) are qualified
under Section 501(a) of the Code.

        The Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code.  The Bank
will adopt any amendments to the Plan that may be necessary to ensure the
qualified status of the Plan under the Code and applicable Treasury Regulations.

        Employee Retirement Income Security Act. The Plan is an "individual
        ---------------------------------------
account plan" other than a "money purchase pension plan" within the meaning of
ERISA. As such, the Plan is subject to all of the provisions of Title I
(Protection of Employee Benefit Rights) and Title II (Amendments to the Internal
Revenue Code Relating to Retirement Plans) of ERISA, except the funding
requirements contained in Part 3 of Title I of ERISA which by their terms do not
apply to an individual account plan (other than a money purchase pension plan).
The Plan is not subject to Title IV (Plan Termination Insurance) of ERISA.
Neither the funding requirements contained in Part 3 of Title I of ERISA nor the
plan termination insurance provisions contained in Title IV of ERISA will be
extended to Participants (as defined below) or beneficiaries under the Plan.

        APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL
RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE BANK. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON WITHDRAWALS
MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59-1/2, REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS EMPLOYMENT WITH THE BANK OR AFTER
TERMINATION OF EMPLOYMENT.

        Reference to Full Text of Plan. The following statements are summaries
        ------------------------------
of certain provisions of the Plan. They are not complete and are qualified in
their entirety by the full text of the Plan. Copies of the Plan are available to
all employees by filing a request with the Plan Administrator, Dorothy
Episcopia, Richmond County Savings Bank, 207 Taylor Street, Staten Island, New
York 10310. The Plan Administrator's telephone number is (718) 448-2800. Each
employee is urged to read carefully the full text of the Plan.

                                       4
II.     ELIGIBILITY AND PARTICIPATION

        Any salaried employee of the Employer is eligible to participate in the
Plan as soon as the employee reaches age 21 and completes one year of service
with the Employer. In order to commence participation, an employee must submit
an enrollment form at least 10 days in advance of the date he desires to enter
the Plan. Employees compensated on an hourly, daily, commission, fee or retainer
basis, leased employees (within the meaning of Section 414(n) of the Code) and
employees covered by a collective bargaining agreement which does not expressly
provide for their coverage under the Plan, are not eligible to participate in
the Plan.

        As of June 30, 1997, there were approximately 201 employees eligible to
participate in the Plan, and 192 employees had elected to participate in the
Plan.

III.    CONTRIBUTIONS UNDER THE PLAN

        401(k) Plan Contributions. Subject to certain limitations on
        -------------------------
contributions, each Participant in the Plan is permitted to elect to reduce such
Participant's Compensation (as defined below) pursuant to a "Compensation
Reduction Agreement" by an amount not less than 2% and not more than 9% and have
that amount contributed to the Plan on such Participant's behalf. Such amounts
are credited to the Participant's "Basic Contribution Account." See "Section IV
Limitations on Contributions" below. For purposes of the Plan, "Compensation"
means the base compensation receivable by an Employee from the Employer for the
calendar year prior to any reductions pursuant to the Compensation Reduction
Agreement. Compensation includes salary, Basic Contributions, wages, overtime
and wage continuation payments to an employee who is absent due to an illness or
disability of a short-term nature. "Compensation" does not include commissions,
expense allowances, severance pay, fees, bonuses, incentive payments,
contributions other than Basic Contributions made to the Plan and contributions
made by the Employer to any other pension, insurance welfare or other employee
benefit plan. As of January 1, 1997, the annual compensation of each Participant
taken into account under the Plan is limited to $160,000 (adjusted for increases
in the cost of living as permitted by the Code). Generally, a Participant may
elect to modify the amount contributed to the Plan under such participant's
Compensation Reduction Agreement not more often than once in any calendar
quarter by providing notice to the Plan Administrator at least 10 days before
commencement of the first day of the payroll period for which the modification
is to become effective. However, special restrictions apply to persons subject
to Section 16 of the 1934 Act. Basic Contributions are transferred by the 
Employer to the Trustee of the Plan.

        Notwithstanding the preceding, a Participant who receives a hardship
distribution under the terms of the Plan may not be eligible to make additional
contributions under a Compensation Reduction Agreement or have matching
contributions made on his behalf for a period of twelve (12) months after the
receipt of the hardship distribution.

                                       5
Employer Contributions. The Employer contributes to the Plan for each
        ----------------------
Plan Year 50% of the Participant's Basic Contributions, up to a 6% of the
Participant's Compensation for the Plan Year. Such amounts are credited to the
Participant's "Matching Contribution Account." After the Conversion, at the
discretion of the Bank, the Employer contributions may be credited to the
Participant's Account in Richmond County Savings Bank Employee Stock Ownership
Plan. At its discretion, the Employer may make an additional contribution to the
Plan as of the end of the Plan Year in an amount determined by the Employer for
the purpose of ensuring that the Plan complies with Section 401(k) of the Code.
Such amounts are credited to Participants' "Special Contribution Accounts" based
on each Participant's compensation. Special Contributions may be made only to
the accounts of non-highly compensated employees.

IV.     LIMITATIONS ON CONTRIBUTIONS

        Limitations on Annual Additions and Benefits. Pursuant to the
        --------------------------------------------
requirements of the Code, the Plan provides that the amount of contributions
allocated to each Participant's Basic Contribution Account and Matching
Contribution Account during any Plan Year may not exceed the lesser of 25% of
the Participant's (s)415 Compensation for the Plan Year or $30,000 (adjusted for
increases in the cost of living as permitted by the Code). A Participant's
(s)415 Compensation is a Participant's Compensation, excluding any Employer
contribution to the Plan or to any other plan of deferred compensation or any
distributions from a plan of deferred compensation. In addition, annual
additions shall be limited to the extent necessary to prevent the limitations
set forth in the Code for all of the qualified defined benefit plans and defined
contribution plans maintained by the Bank from being exceeded. To the extent
that these limitations would be exceeded by reason of excess annual additions
with respect to a Participant, such excess will be disposed of as follows:

        (i) Any excess amount in the Participant's Account will be used to
reduce the Employer's contributions for such Participant in the next Limitation
Year, and each succeeding Limitation Year if necessary;

        (ii) If, an excess amount still exists, and the Participant is not
                                                                       ---
covered by the Plan at the end of the Limitation Year, the excess amount will be
held unallocated in a suspense account which will then be applied to reduce
future Employer contributions for all remaining Participants in the next
Limitation Year, and each succeeding Limitation Year if necessary;

        (iii) If a suspense account is in existence at any time during the
Limitation Year, it will not participate in the allocation of investment gains
and losses.

        Limitation on 401(k) Plan Contributions.  The annual amount of deferred
        ---------------------------------------
Compensation under a Compensation Reduction Agreement of a Participant (when
aggregated with any elective deferrals of the Participant under a simplified
employee pension plan or a tax-deferred annuity) may not exceed $7,000 adjusted
for increases in the cost of living as permitted by the Code (the limitation
for 1997 is $9,500).  Contributions in excess of this limitation ("excess
deferrals") will be included in the Participant's gross income for federal
income tax purposes in the year they are 

                                       6
made. In addition, any such excess deferral will again be subject to federal
income tax when distributed by the Plan to the Participant, unless the excess
deferral (together with any income allocable thereto) is distributed to the
Participant not later than the first April 15th following the close of the
taxable year in which the excess deferral is made. Any income on the excess
deferral that is distributed not later than such date shall be treated, for
federal income tax purposes, as earned and received by the Participant in the
taxable year in which the excess deferral is made.

        Limitation on Plan Contributions for Highly Compensated Employees.
        -----------------------------------------------------------------
Sections 401(k) and 401(m) of the Code limit the amount of Deferred Compensation
that may be made to the Plan in any Plan Year on behalf of Highly Compensated
Employees (defined below) in relation to the amount of Deferred Compensation
made by or on behalf of all other employees eligible to participate in the Plan.
Specifically, the actual deferral percentage (i.e., the average of the ratios,
calculated separately for each eligible employee in each group, by dividing the
amount of Deferred Compensation credited to the Basic Contribution Account of
such eligible employee by such eligible employee's compensation for the Plan
Year) of the Highly Compensated Employees may not exceed the greater of (i) 125%
of the actual deferral percentage of all other eligible employees, or (ii) the
lesser of (x) 200% of the actual deferral percentage of all other eligible
employees, or (y) the actual deferral percentage of all other eligible employees
plus two percentage points. In addition, the actual contribution percentage for
such Plan Years (i.e., the average of the ratios calculated separately for each
eligible employee in each group, by dividing the amount of voluntary employee
and employer matching contributions credited to the Matching Contribution
Account and Special Contribution Account of such eligible employee by such
eligible employee's compensation for the Plan Year) of the Highly Compensated
Employees may not exceed the greater of (i) 125% of the actual contribution
percentage of all other eligible employees, or (ii) the lesser of (x) 200% of
the actual contribution percentage of all other eligible employees, or (y) the
actual contribution percentage of all other eligible employees plus two
percentage points.

        In general, a Highly Compensated Employee includes any employee who, (1)
was a five percent owner of the Employer at any time during the year or
preceding year; or (2) had compensation for the preceding year in excess of
$80,000 and, if the Employer so such year. The dollar amounts in the foregoing
sentence are for 1997. Such amounts are adjusted annually to reflect increases
in the cost of living.

        In addition, the compensation of an employee who is a family member of a
5% owner, or one of the ten most highly compensated employees during the
relevant period is aggregated with that of the Highly Compensated Employee. All
such family members are treated as a single employee with respect to the
application of the limitations on Highly Compensated Employees.

        In order to prevent the disqualification of the Plan, any amount
contributed by Highly Compensated Employees that exceed the average deferral
limitation in any Plan Year ("excess contributions"), together with any income
allocable thereto, must be distributed to such Highly Compensated Employees
before the close of the following Plan Year. However, the Employer 

                                       7
will be subject to a 10% excise tax on any excess contributions unless such
excess contributions, together with any income allocable thereto, either are
recharacterized or are distributed before the close of the first 2-1/2 months
following the Plan Year to which such excess contributions relate.

        Top-Heavy Plan Requirements. If for any Plan Year the Plan is a 
        ---------------------------
Top-Heavy Plan (as defined below), then (i) the Bank may be required to make
certain minimum contributions to the Plan on behalf of non-key employees (as
defined below), and (ii) certain additional restrictions would apply with
respect to the combination of annual additions to the Plan and projected annual
benefits under any defined benefit plan maintained by the Bank.

        In general, the Plan will be regarded as a "Top-Heavy Plan" for any Plan
Year if, as of the last day of the preceding Plan Year, the aggregate balance
of the Accounts of Participants who are Key Employees exceeds 60% of the
aggregate balance of the Accounts of all Participants.  Key Employees generally
include any employee who, at any time during the Plan Year or any of the four
preceding Plan Years, is (1) an officer of the Bank having annual compensation
in excess of $60,000 who is in an administrative or policy-making capacity, (2)
one of the ten employees having annual compensation in excess of $30,000 and
owning, directly or indirectly, the largest interests in the Bank, (3) a 5%
owner of the Bank, (i.e., owns directly or indirectly more than 5% of the stock
of the Bank, or stock possessing more than 5% of the total combined voting
power of all stock of the Bank) or (4) a 1% owner of the Bank having annual
compensation in excess of $150,000.  The dollar amounts in the foregoing
sentence are for 1997.

V.      INVESTMENT OF CONTRIBUTIONS

        All amounts credited to Participants' Accounts under the Plan are held
in the Plan Trust (the "Trust") which is administered by the Trustee appointed
by the Bank's Board of Trustees.

        Prior to [insert date of Prospectus here], the Accounts of a Participant
held in the Trust have been invested by the Trustee at the direction of the
Participant in the following funds:

        a.      Core Equity Fund;
        b.      Emerging Growth Equity Fund;
        c.      Value Equity Fund;
        d.      Actively Managed Bond Fund;
        e.      Intermediate - Term Bond Fund;
        f.      Short-Term Investment Fund; and
        g.      International Fund.

        The Plan, as amended effective _______, 1997, now provides that in
addition to the Funds specified above, a Participant who is employed by the Bank
may direct the Trustee to invest all or a portion of his Basic Contribution
Account and Rollover Account in the Employer Stock Fund.

                                       8
Participants in the Plan may direct the Trustee to invest all or a
portion of his Basic Contribution Account, Matching Contribution Account,
Rollover Account and Special Contribution Account in the Employer Stock Fund.

        Once in any calendar quarter a Participant may elect (in increments of
1%), to have both past and future contributions and additions to the
Participant's Basic Contribution Account and Rollover Account invested either in
the Employer Stock Fund or among such other Funds. Participants may also elect
to have past contributions to their Matching Contribution Accounts invested in
either the Employer Stock Fund or among such other Funds. Participants Matching
Contribution Accounts may be invested in Employer Stock under the proposed terms
of The Richmond County Savings Bank Employee Stock Ownership Plan being
implemented by the Bank. These elections will be effective on the effective date
of the Participant's written notice to the plan administrator, provided such
notice is filed with the administrator at least 10 days before it is to become
effective. Any amounts credited to a Participant's Account for which investment
directions are not given will be invested in the Short-Term Investment Fund in
accordance with the terms of the Plan. Because investment allocations only are
required to be made in increments of 1%, Participants can invest their Accounts
in each of the 8 available investment funds. Diversification with respect to the
investment of a Participant's Account may be achieved through the 8 investment
options available to Participants and the opportunity for Participants to make
investment designations up to four times each year.

        A Participant who receives a loan from the Plan has a separate account
established under the Plan. The amount of the loan is obtained from the 
Investment Accounts in which the Borrower's accounts are invested on a pro-rata
basis according to the terms of the Plan. The balance of a Participant's loan
account represents the unpaid principal and interest (if any) of such
participant's loan from the Plan. Repayments of principal and payments of
interest on loans are invested by the Trustee in the same manner as if the
repayment were a contribution.

        The Participants interest in the Employer Stock Fund consists of units
whose value is related to a pro rata portion of the net asset value ("NAV") of
the Employer Stock Fund. The NAV is determined daily and all realized and
unrealized gains, dividends, and expenses are used to calculate the NAV. For
purposes of such valuation, all assets of the Trust are valued at their fair
market value.

                                       9
A.      Previous Funds.
                --------------
        Prior to _________________________, contributions under the Plan were
invested in the seven Funds specified above.  The annual percentage return on
these funds for the prior three years was:

                                                1996    1995    1994
                                                --------------------

        a.      Core Equity Fund                21.53%  40.17%  1.31%

        b.      Emerging Growth Equity Fund     27.09   42.83   3.53

        c.      Value Equity Fund               25.90   33.96  (1.14)

        d.      Actively Managed Bond Fund       3.15   17.70  (4.21)

        e.      Intermediate-Term Bond Fund      4.02   13.99  (2.54)

        f.      Short-Term Investment Fund       4.70    5.39   3.40

        g.      International Equity Fund       10.86   12.46   0.77

        B.      The Employer Stock Fund.
                -----------------------

        The Employer Stock Fund will consist of investments in Common Stock made
on and after the effective date of the Conversion. Each Participant's
proportionate undivided beneficial interest in the Employer Stock Fund is
measured by units. Each day a unit value will be calculated by determining the
market value of the Common Stock actually held and adding to that any cash held
by the Trustee. This total will be divided by the number of units outstanding to
determine the unit value of the Employer Stock Fund.

        On the occasion of the payment of a cash dividend, the unit value will
be determined before the dividend is distributed. The Trustee may use the
dividend to purchase additional shares of Common Stock, thereby increasing the
total value of the Employer Stock Fund, and the value of each unit. The Board of
Directors of the Holding Company may consider a policy of paying cash dividends
on the Common Stock in the future; however, no decision as to the amount or
timing of cash dividends, if any, has been made. The Trustee will, to the extent
practicable, use all amounts held by it in the Employer Stock Fund to purchase
shares of Common Stock of the Bank. It is expected that all purchases will be
made at prevailing market prices. Under certain circumstances, the Trustee may
be required to limit the daily volume of shares purchased. Pending investment in
Common Stock, assets held in the Employer Stock Fund will be placed in bank
deposits and other short-term investments.

        Any brokerage commissions, transfer fees and other expenses incurred in
the sale and purchase of Common Stock for the Employer Stock Fund will be paid
out of a cash account managed by the trustee. Therefore, although Participants'
accounts will not be directly adjusted for such fees, the market value of their
accounts will be reduced.

                                       10
As of the date of this Prospectus Supplement, none of the shares of
Common Stock have been issued or are outstanding and there is no established
market for the Common Stock. Accordingly, there is no record of the historical
performance of the Employer Stock Fund. Performance will be dependent upon a
number of factors, including the financial condition and profitability of the
Holding Company and the Bank and market conditions for the Common Stock
generally. See "Market for the Common Stock" in the Prospectus.

        INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN SPECIAL RISKS
IN INVESTMENTS IN COMMON STOCK OF THE COMPANY. FOR A DISCUSSION OF THESE RISK
FACTORS, SEE "RISK FACTORS" IN THE PROSPECTUS.

VI.     BENEFITS UNDER THE PLAN

        Vesting. A Participant, at all times, has a fully vested, nonforfeitable
        -------
interest in his Basic Contribution Account and the earnings thereon under the
Plan. A Participant vests in his Matching Contribution Account under the Plan
according to the following schedule:

         Period of Service           Vested Percentage
         -----------------           -----------------
                        
         less than 2 years                    0%
         2 years                             20       
         3 years                             40
         4 years                             60       
         5 years                             80
         6 years or more                    100                   
                                           
For purposes of vesting, years of service from age 18 are counted.

VII.    WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN

        Withdrawals Prior to Termination of Employment.  Subject to the hardship
        ----------------------------------------------
distribution rules under the Plan, a Participant may withdraw all or a portion
of his (i) Basic Contribution Account, (ii) Rollover Contribution Account and
(iii) the vested interest in his Matching Contribution Account.  The hardship
distribution requirements ensure that Participants have a true financial need
before a withdrawal may be made.

        A Participant may make a withdrawal from his Basic Contribution Account,
Rollover Contribution Account, and Matching Contribution Account after he turns
59-1/2. A Participant after attaining age 59-1/2 may withdraw contributions to
his Basic Contribution Account, contributions to his Rollover Contribution
Account or the vested portion of his Matching Contribution Account at any time.
However, such withdrawals may not be made more often than two times during any
Plan Year.

                                       11
Distribution Upon Retirement, Disability or Termination of Employment. 
        ---------------------------------------------------------------------
Payment of benefits to a Participant who retires, incurs a disability, or
otherwise terminates employment generally shall be made in a lump sum cash
payment as soon as administratively feasible after such termination of
employment if the vested value of the Participant's Account is $3,500 or less. 
If the vested portion of the Participant's Account balance is greater than
$3,500, the Participant may request a distribution (subject to the minimum
distribution rules) in a lump sum payment:  (a) as soon as administratively
possible after termination, (b) as of any Valuation Date up to 13 months after
termination or (c) as of the date the Participant attains normal retirement
age.  At the request of the Participant, the distribution may include an in
kind distribution of Common Stock of the Holding Company equal to the number of
shares that can be purchased with the Participant's balance in the Employer
Stock Fund.  Benefit payments ordinarily shall be made not later than 60 days
following the end of the Plan Year in which occurs the latest of the
Participant's:  (i) termination of employment; (ii) the attainment of age 65 or
(iii) 10th anniversary of commencement of participation in the Plan; but in no
event later than the April 1 following the calendar year in which the
Participant attains age 70-1/2.  However, if the vested portion of the
Participant's Account balances exceeds $3,500, no distribution shall be made
from the Plan prior to the Participant's attaining age 65 unless the
Participant elects to receive an earlier distribution. 

        Distribution upon Death. A Participant who dies prior to the benefit
        -----------------------
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse shall have his benefits paid to the surviving spouse
in a lump sum as soon as administratively possible following the date of his
death, unless the Participant elected prior to his death or the beneficiary so
elects within 90 days of the Participant's death, to receive such distribution
in a lump sum payment as of any Valuation Date which occurs within one year of
the Participant's death. With respect to an unmarried Participant, and in the
case of a married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary of a deceased Participant
shall be made in the form of a lump-sum payment in cash or in Common Stock in
the same manner described above as to a Participant with a surviving spouse.

        Nonalienation of Benefits.  Except with respect to federal income tax
        -------------------------
withholding and as provided with respect to a qualified domestic relations
order (as defined in the Code), benefits payable under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any kind,
either voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights
to benefits payable under the Plan shall be void.

ADMINISTRATION OF THE PLAN

        The Trustee with respect to the Plan is the named fiduciary of the Plan
for purposes of Section 402 of ERISA.

                                       12
Trustees. The Trustee is appointed by the Board of Trustees of the Bank
        --------
to serve at its pleasure. The current Trustee of the Plan is the RSI Retirement
Trust. However, an additional Trustee is being appointed to hold funds invested
in the Employer Stock Fund.

        The Trustee receives, holds and invests the contributions to the Plan in
trust and distributes them to Participants and beneficiaries in accordance with
the terms of the Plan and the directions of the Plan Administrator.  The
Trustee is responsible for investment of the assets of the Trust.

REPORTS TO PLAN PARTICIPANTS

        The Administrator (as defined below) will furnish to each Participant a
statement at least quarterly showing (i) the balance in the Participant's
Account as of the end of that period, (ii) the amount of contributions
allocated to such participant's Account for that period, and (iii) the
adjustments to such participant's Account to reflect earnings or losses (if
any).

PLAN ADMINISTRATOR

        Pursuant to the terms of the Plan, the Plan is administered by one or
more persons who are appointed by and who serve at the pleasure of the Bank (the
"Administrator"). Currently, the Administrator is Dorothy Episcopia, Vice
President and Human Resources Officer of the Bank. The address and telephone
number of the Administrator is c/o 207 Taylor Street, Staten Island, New York
10310; (718) 448-2800. The Administrator is responsible for the administration
of the Plan, interpretation of the provisions of the Plan, prescribing
procedures for filing applications for benefits, preparation and distribution of
information explaining the Plan, maintenance of Plan records, books of account
and all other data necessary for the proper administration of the Plan, and
preparation and filing of all returns and reports relating to the Plan which are
required to be filed with the U.S. Department of Labor and the IRS, and for all
disclosures required to be made to Participants, Beneficiaries and others under
Sections 104 and 105 of ERISA.

AMENDMENT AND TERMINATION

        It is the intention of the Bank to continue the Plan indefinitely. 
Nevertheless, the Bank may terminate the Plan at any time.  If the Plan is
terminated in whole or in part, then regardless of other provisions in the
Plan, each employee affected by such termination shall have a fully vested
interest in his Accounts.  The Bank reserves the right to make, from time to
time, any amendment or amendments to the Plan which do not cause any part of
the Trust to be used for, or diverted to, any purpose other than the exclusive
benefit of Participants or their beneficiaries; provided, however, that the
Bank may make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with ERISA.

                                       13
MERGER, CONSOLIDATION OR TRANSFER

        In the event of the merger or consolidation of the Plan with another
plan, or the transfer of the Trust assets to another plan, the Plan requires
that each Participant would (if either the Plan or the other plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan had then terminated).

FEDERAL INCOME TAX CONSEQUENCES

        The following is only a brief summary of certain federal income tax
aspects of the Plan which are of general application under the Code and is not
intended to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan. The
summary is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the consequences under applicable state and local income tax laws may
not be the same as under the federal income tax laws. PARTICIPANTS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY DISTRIBUTION FROM THE PLAN AND
TRANSACTIONS INVOLVING THE PLAN.

        The Plan will be submitted to the IRS in a timely manner for a
determination that it is qualified under Section 401(a) and 401(k) of the Code,
and that the related Trust is exempt from tax under Section 501(a) of the Code.
A plan that is "qualified" under these sections of the Code is afforded special
tax treatment which include the following: (1) The sponsoring employer is
allowed an immediate tax deduction for the amount contributed to the Plan each
year; (2) Participants pay no current income tax on amounts contributed by the
employer on their behalf; and (3) earnings of the plan are tax-deferred thereby
permitting the tax-free accumulation of income and gains on investments. The
Plan will be administered to comply in operation with the requirements of the
Code as of the applicable effective date of any change in the law. The Bank
expects to timely adopt any amendments to the Plan that may be necessary to
maintain the qualified status of the Plan under the Code. Following such an
amendment, the Bank will submit the Plan to the IRS for a determination that the
Plan, as amended, continues to qualify under Sections 401(a) and 501(a) of the
Code and that it continues to satisfy the requirements for a qualified cash or
deferred arrangement under Section 401(k) of the Code. Should the Plan receive
from the IRS an adverse determination letter regarding its tax exempt status,
all participants would generally recognize income equal to their vested interest
in the Plan, the participants would not be permitted to transfer amounts
distributed from the Plan to an IRA or to another qualified retirement plan, and
the Bank may be denied certain deductions taken with respect to the Plan.

        Lump Sum Distribution. A distribution from the Plan to a Participant or
        ---------------------
the beneficiary of a Participant will qualify as a Lump Sum Distribution if it
is made: (i) within one taxable year of the Participant or beneficiary; (ii) on
account of the Participant's death, disability or separation 

                                       14
from service, or after the Participant attains age 59-1/2; and (iii) consists of
the balance to the credit of the Participant under this Plan and all other
profit sharing plans, if any, maintained by the Bank. The portion of any Lump
Sum Distribution that is required to be included in the Participant's or
beneficiary's taxable income for federal income tax purposes (the "total taxable
amount") consists of the entire amount of such Lump Sum Distribution less the
amount of after-tax contributions, if any, made by the Participant to any other
profit sharing plans maintained by the Bank which is included in such
distribution.

        Averaging Rules.  The portion of the total taxable amount of a Lump Sum
        ---------------
Distribution that is attributable to participation after 1973 in this Plan or
in any other profit-sharing plan maintained by the Bank (the "ordinary income
portion") will be taxable generally as ordinary income for federal income tax
purposes.  However, a Participant who has completed at least five years of
participation in this Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's
participation in this Plan or any other profit-sharing plan maintained by the
Employers), may elect to have the ordinary income portion of such Lump Sum
Distribution taxed according to a special averaging rule ("five-year
averaging").  The election of the special averaging rules may apply only to one
Lump Sum Distribution received by the Participant or beneficiary, provided such
amount is received on or after the Participant turns 59-1/2 and the recipient
elects to have any other Lump Sum Distribution from a qualified plan received
in the same taxable year taxed under the special averaging rule.  Under a
special grandfather rule, individuals who turned 50 by 1986 may elect to have
their Lump Sum Distribution taxed under either the five-year averaging rule or
under the prior law ten-year averaging rule.  Such individuals also may elect
to have that portion of the Lump Sum Distribution attributable to the
participant's pre-1974 participation in the Plan taxed at a flat 20% rate as
gain from the sale of a capital asset.

        Common Stock Included in Lump Sum Distribution. If a Lump Sum
        ----------------------------------------------
Distribution includes Common Stock, the distribution generally will be taxed in
the manner described above, except that the total taxable amount will be reduced
by the amount of any net unrealized appreciation with respect to such Common
Stock, i.e., the excess of the value of such Common Stock at the time of the
distribution over its cost or other basis of the securities to the Trust. The
tax basis of such Common Stock to the Participant or beneficiary for purposes of
computing gain or loss on its subsequent sale will be the value of the Common
Stock at the time of distribution less the amount of net unrealized
appreciation. Any gain on a subsequent sale or other taxable disposition of such
Common Stock, to the extent of the amount of net unrealized appreciation at the
time of distribution, will be considered long-term capital gain regardless of
the holding period of such Common Stock. Any gain on a subsequent sale or other
taxable disposition of the Common Stock in excess of the amount of net
unrealized appreciation at the time of distribution will be considered either
short-term capital gain or long-term capital gain depending upon the length of
the holding period of the Common Stock. The recipient of a distribution may
elect to include the amount of any net unrealized appreciation in the total
taxable amount of such distribution to the extent allowed by the regulations to
be issued by the IRS.

                                       15
Distributions: Rollovers and Direct Transfers to Another Qualified Plan
        -----------------------------------------------------------------------
or to an IRA. Pursuant to a change in the law, effective January 1, 1993,
------------
virtually all distributions from the Plan may be rolled over to another
qualified Plan or to an IRA without regard to whether the distribution is a Lump
Sum Distribution or a Partial Distribution. Effective January 1, 1993,
Participants have the right to elect to have the Trustee transfer all or any
portion of an "eligible rollover distribution" directly to another plan
qualified under Section 401(a) of the Code or to an IRA. If the Participant does
not elect to have an "eligible rollover distribution" transferred directly to
another qualified plan or to an IRA, the distribution will be subject to an
mandatory federal withholding tax equal to 20% of the taxable distribution. An
"eligible rollover distribution" means any amount distributed from the Plan
except: (1) a distribution that is (a) one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the Participant or the joint lines of the Participant and his or
her designated beneficiary, or (b) for a specified period of ten years or more;
(2) any amount that is required to be distributed under the minimum distribution
rules; and (3) any other distributions excepted under applicable federal law.
The tax law change described above did not modify the special tax treatment of
Lump Sum Distributions, that are not rolled over or transferred i.e., forward
averaging, capital gains tax treatment and the nonrecognition of net unrealized
appreciation, discussed earlier.

ERISA AND OTHER QUALIFICATION

        As noted above, the Plan is subject to certain provisions of the
Employee Retirement Income Security Act of 1974, as amended, and will be 
submitted to the IRS for a determination that it is qualified under
Section 401(a) of the Code.

        THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT
INTENDED TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.

RESTRICTIONS ON RESALE

        Any person receiving a distribution of shares of Common Stock under the
Plan who is an "affiliate" of the Bank as the term "affiliate" is used in Rules
144 and 405 under the Securities Act of 1933, as amended (the "Securities Act")
(e.g., directors, officers and substantial shareholders of the Bank) may reoffer
or resell such shares only pursuant to a registration statement filed under the
Securities Act assuming the availability thereof, pursuant to Rule 144 or some
other exemption of the registration requirements of the Securities Act Any
person who may be an "affiliate" of the Bank may wish to consult with counsel
before transferring any Common Stock owned by him. In addition, Participants are
advised to consult with counsel as to the applicability of Section 16 of the
1934 Act which may restrict the sale of Common Stock where acquired under the
Plan, or other sales of Common Stock.

                                       16
Persons who are not deemed to be "affiliates" of the Bank at the time of
resale will be free to resell any shares of Common Stock to them under the
Plan, either publicly or privately, without regard to the Registration and
Prospectus delivery requirements of the Securities Act or compliance with the
restrictions and conditions contained in the exemptive rules thereunder.  An
"affiliate" of the Bank is someone who directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control,
with the Bank.  Normally, a director, principal officer or major shareholder of
a corporation may be deemed to be an "affiliate" of that corporation.  A person
who may be deemed an "affiliate" of the Bank at the time of a proposed resale
will be permitted to make public resales of the Bank's Common Stock only
pursuant to a "reoffer" Prospectus or in accordance with the restrictions and
conditions contained in Rule 144 under the Securities Act or some other
exemption from registration, and will not be permitted to use this Prospectus
in connection with any such resale.  In general, the amount of the Bank's
Common Stock which any such affiliate may publicly resell pursuant to Rule 144
in any three-month period may not exceed the greater of one percent of the
Bank's Common Stock then outstanding or the average weekly trading volume
reported on the National Association of Securities Dealers Automated Quotation
System during the four calendar weeks prior to the sale.  Such sales may be
made only through brokers without solicitation and only at a time when the Bank
is current in filing the reports required of it under the 1934 Act.  

SEC REPORTING AND SHORT-SWING PROFIT LIABILITY

        Section 16 of the 1934 Act imposes reporting and liability requirements
on officers, directors and persons beneficially owning more than ten percent of
public companies such as the Holding Company. Section 16(a) of the 1934 Act
requires the filing of reports of beneficial ownership. Within ten days of
becoming a person subject to the reporting requirements of Section 16(a), a Form
3 reporting initial beneficial ownership must be filed with the Securities and
Exchange Commission. Certain changes in beneficial ownership, such as purchases,
sales, gifts and participation in savings and retirement plans must be reported
periodically, either on a Form 4 within ten days after the end of the month in
which a change occurs, or annually on a Form 5 within 45 days after the close of
the Bank's fiscal year. Participation in the Employer Stock Fund of the Plan by
officers, directors and persons beneficially owning more than ten percent of
Common Stock of the Holding Company must be reported to the SEC annually on a
Form 5 by such individuals. At ____________, 1997, _____% of the Plan assets
were allocated to executive officers.

        In addition to the reporting requirements described above, Section 16(b)
of the 1934 Act provides for the recovery by the Holding Company of profits
realized by any officer, director or any person beneficially owning more than
ten percent of the Holding Company's Common Stock ("Section 16(b) Persons")
resulting from the purchase and sale or sale and purchase of the Holding
Company's Common Stock within any six-month period.

        The SEC has adopted rules that provide exemption from the profit
recovery provisions of Section 16(b) for participant-directed employer security
transactions within an employee benefit plan, such as the Plan, provided certain
requirements are met. These requirements generally 

                                       17
involve restrictions upon the timing of elections to acquire or dispose of
employer securities for the accounts of Section 16(b) Persons.

        Except for distributions of Common Stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, Section 16(b) Persons are required to hold shares of Common Stock
distributed from the Plan for six months following such distribution.  

                                    EXPERTS

        The financial statements and schedule of Richmond County Savings Bank
401(k) Savings Plan as of December 31, 1996 and 1995 and for the years then
ended have been included herein in reliance upon the report of Ernst & Young
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

                                LEGAL OPINIONS

        The validity of the issuance of the Common Stock will be passed upon by
Muldoon, Murphy & Faucette, Washington, D.C., which firm acted as special
counsel for the Bank in connection with the Bank's Conversion from a mutual
savings bank to a stock based organization.

                                       18
RICHMOND COUNTY SAVINGS BANK
                  401(K) SAVINGS PLAN IN RSI RETIREMENT TRUST
                                Investment Form

Name of Plan Participant:                                  
                          -----------------------------------

Social Security Number:                                    
                          -----------------------------------

        1.      INSTRUCTIONS. In connection with the proposed Conversion of
                ------------        
Richmond County Savings Bank from a mutual savings bank to a stock based
organization (the "Conversion"), Richmond County Savings Bank 401(k) Savings
Plan in RSI Retirement Trust ("Plan") has been amended to permit participants to
direct their current account balances for their Basic Contribution Account,
Company Contribution Account and Rollover Account into a new fund: the Employer
Stock Fund. The percentage of a participant's account transferred at the
direction of the participant into the Employer Stock Fund will be used to
purchase shares of common stock of Richmond County Financial Corp. (the "Common
Stock").

        To direct a transfer of all or a part of the funds credited to your
accounts to the Employer Stock Fund, you should complete and file this form with
the Human Resources Department, no later than 10 days prior to the expiration
date of the Offering (__________________, 1997.) A representative for the Plan
Administrator will retain a copy of this form and return a copy to you. If you
need any assistance in completing this form, please contact Dorothy Episcopia at
(718) 448-2800, extension 291 . If you do not complete and return this form to
the Plan Administrator by ______________, the funds credited to your accounts
under the Plan will continue to be invested in accordance with your prior
investment direction, or in accordance with the terms of the Plan if no
investment direction has been provided.

2.  INVESTMENT DIRECTIONS. I hereby authorize the Plan Administrator to direct
the Trustee to invest the following percentage (in multiples of not less than
_%) of my Basic Contribution Account, Company Contribution Account and Rollover
Account in the Employer Stock Fund:

      a.      Core Equity Fund ____%
      b.      Emerging Growth Fund ____%
      c.      Value Equity Fund ____%
      d.      Actively Managed Bond Fund ____%
      e.      Intermediate - Term Investment Fund ____%
      f.      Short-Term Investment Fund ____%
      g.      International Equity Fund ____%

NOTE: The total percentage of directed investments, above, may not exceed 100%.

3.    STATUS. Enter information below for all accounts you had at the
Eligibility Record Date (June 30, 1996) and the Supplemental Eligibility Record
Date (September 30, 1997).

        ============================================================
          Account Title
        (Names on Account)      Account Number          Date Opened
        ------------------------------------------------------------

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

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

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

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

        ============================================================

If additional space is needed, please use the back of this form.

                                       19
4.  ACKNOWLEDGMENT OF PARTICIPANT.  I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan.  I acknowledge
that I have received a copy of the Prospectus and the Prospectus Supplement.

-----------------------------           -----------------
Signature of Participant                Date
-------------------------------------------------------------------------------

ACKNOWLEDGMENT OF RECEIPT BY ADMINISTRATOR. This Investment Form was received by
the Plan Administrator and will become effective on the date noted below.

-----------------------------           -----------------
By:______________                       Date

        THE PARTICIPATION INTERESTS REPRESENTED BY COMMON STOCK OFFERED HEREBY
ARE NOT DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE BANK INSURANCE FUND OR THE
SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE COMPANY OR BANK.
THE COMMON STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF
THE PRINCIPAL INVESTED.

                                       20
Financial Statements
                          and Supplemental Schedules

                         Richmond County Savings Bank
                              401(k) Savings Plan
                            in RSI Retirement Trust

                    Years ended December 31, 1996 and 1995
                      with Report of Independent Auditors
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                             Financial Statements
                          and Supplemental Schedules

                    Years ended December 31, 1996 and 1995

                                   Contents
Report of Independent Auditors.......................................... F-1
 
Financial Statements
 
Statement of Net Assets Available for Plan Benefits
 with Fund Information.................................................. F-2
Statement of Changes in Net Assets Available for Plan Benefits
 with Fund Information.................................................. F-3
Notes to Financial Statements........................................... F-5
 
Supplemental Schedules
 
Assets Held for Investment.............................................. F-13
Reportable Transactions................................................. F-14
A schedule of party-in-interest transactions has not been presented because
there were no party-in-interest transactions which are prohibited by ERISA
Section 406 and for which there are no statutory or administrative
exemptions.
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]

                        Report of Independent Auditors

The Board of Trustees
Richmond County Savings Bank

We have audited the accompanying statements of net assets available for Plan
benefits with fund information of the Richmond County Savings Bank 401(k)
Savings Plan in RSI Retirement Trust (the "Plan") as of December 31, 1996 and
1995, and the related statements of changes in net assets available for Plan
benefits with fund information for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the net assets available for Plan benefits at December
31, 1996 and 1995, and the changes in its net assets available for Plan benefits
for the years then ended in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment as of December 31, 1996 and reportable transactions for the
year then ended are presented for purposes of complying with the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974, and are not a required part of the
financial statements. The Fund Information in the statement of net assets
available for Plan benefits with fund information and the statement of changes
in net assets available for Plan benefits with fund information is presented for
purposes of additional analysis rather than to present the net assets available
for Plan benefits with fund information and changes in net assets available for
Plan benefits of each fund. The supplemental schedules and Fund Information have
been subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.

                                            /s/ Ernst & Young LLP

July 14, 1997

                                                                             F-1
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

   Statement of Net Assets Available for Plan Benefits with Fund Information
Emerging                                       Actively                 
                        Core       Growth     Value   Short-Term  Intermediate-  Managed   International               
                       Equity      Equity     Equity  Investment    Term Bond      Bond       Equity      
                        Fund        Fund       Fund      Fund         Fund         Fund        Fund      Loans      Total 
                      ------------------------------------------------------------------------------------------------------
December 31, 1996:
 Investments, at fair
  value (Note 4)      $1,018,580  $453,008   $366,136   $312,458   $146,299      $149,890   $13,282      $    --  $2,459,653
 Loans receivable from
  participants                --        --         --         --         --            --        --       79,839      79,839
                      ------------------------------------------------------------------------------------------------------   
Net assets available
 for Plan benefits    $1,018,580  $453,008   $366,136   $312,458   $146,299      $149,890   $13,282      $79,839  $2,539,492
                      ====================================================================================================== 
December 31, 1995:
 Investments, at fair
  value (Note 4)      $  651,533  $284,997   $238,678   $304,269   $ 67,040      $139,201   $    --      $    --  $1,685,718
 Loans receivable from
  participants                --        --         --         --         --            --        --       47,360      47,360     
                      ------------------------------------------------------------------------------------------------------   
Net assets available
 for Plan benefits    $  651,533  $284,997   $238,678   $304,269   $ 67,040      $139,201   $    --      $47,360  $1,733,078
                      ======================================================================================================
See accompanying notes.

F-2
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

   Statement of Changes in Net Assets Available for Plan Benefits with Fund
                                  Information

                         Year ended December 31, 1996
Emerging                                       Actively                 
                              Core       Growth     Value    Short-Term  Intermediate-  Managed   International               
                             Equity      Equity     Equity   Investment    Term Bond      Bond       Equity      
                              Fund        Fund       Fund      Fund         Fund         Fund        Fund      Loans      Total 
                          --------------------------------------------------------------------------------------------------------
Additions                                       
Employee contributions    $  154,864  $ 80,434    $ 63,749  $ 38,066      $ 15,517    $ 29,269     $ 1,751     $    --  $  383,650
Employee rollover                                                                                                       
 contributions                    --        --          --    17,718            --          --          --          --      17,718
Employer contributions        56,449    29,255      22,704    14,597         5,792      10,720         598          --     140,115
Interest on loans                 --        --          --        --            --          --          --       5,501       5,501
Net realized and                                                                                                         
 unrealized appreciation                                                                                                
 in fair value of                                                                                                        
 investments                 168,055    85,663      72,808    12,804         3,557       4,523         446          --     347,856
                          --------------------------------------------------------------------------------------------------------  
Total additions              379,368   195,352     159,261    83,185        24,866      44,512       2,795       5,501     894,840

Benefits distributed         (24,658)  (13,881)    (11,640)   (7,512)      (10,117)    (20,618)         --          --     (88,426)
Transfers between funds       12,337   (13,460)    (20,163)  (67,484)       64,510     (13,205)     10,487      26,978          --
                          -------------------------------------------------------------------------------------------------------- 
Increase in net assets
 available for Plan
 benefits                    367,047   168,011     127,458     8,189        79,259      10,689      13,282      32,479     806,414
Net assets available for                                                        
 Plan benefits,
 beginning of year           651,533   284,997     238,678   304,269        67,040     139,201          --      47,360   1,733,078
                          -------------------------------------------------------------------------------------------------------- 
Net assets available for
 Plan benefits, end of
 year                     $1,018,580  $453,008    $366,136  $312,458      $146,299    $149,890     $13,282     $79,839  $2,539,492 
                          ========================================================================================================
See accompanying notes.

F-3
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

   Statement of Changes in Net Assets Available for Plan Benefits with Fund 
Information

                         Year ended December 31, 1995
Core            Emerging         Value         Short-Term    Intermediate- 
                                Equity        Growth Equity      Equity        Investment      Term Bond   
                                 Fund             Fund            Fund            Fund          Fund      
                            --------------------------------------------------------------------------------
Additions                                
Employee contributions          $105,639      $   49,404         $  46,108     $   39,893      $ 14,204   
Employee rollover                        
   contributions                       -             531               531          3,185             -   
Employer contributions            47,951          22,299            20,855         18,351         6,540   
Interest on loans                      -               -                 -              -             -   
Net realized and                                                              
   unrealized appreciation                                                    
   in fair value of                                                           
   investments                   167,454          76,917            55,294         12,540         7,146   
                            --------------------------------------------------------------------------------
Total additions                  321,044         149,151           122,788         73,969        27,890   
                                                                             
Benefits distributed             (23,106)        (11,770)          (10,481)       (11,497)       (2,118)  
Transfers between funds            4,346         (28,258)          (26,448)        58,075        (5,398)  
                            --------------------------------------------------------------------------------
                                                                             
Increase in net assets                                                       
   available for Plan                                                        
   benefits                      302,284         109,123            85,859        120,547        20,374   
Net assets available for                                                     
   Plan benefits,                                                            
   beginning of year             349,249         175,874           152,819        183,722        46,666   
                            --------------------------------------------------------------------------------
Net assets available for                                                                             
   Plan benefits, end of                                                     
   year                         $651,533      $  284,997         $ 238,678     $  304,269      $ 67,040   
                            ================================================================================
Actively        International  
                                Managed            Equity
                               Bond Fund            Fund        Loans         Total
                            -------------------------------------------------------------
Additions
Employee contributions         $  28,210       $  -           $     -        $  283,458
Employee rollover                                                    
   contributions                       -          -                 -             4,247
Employer contributions            13,001          -                 -           128,997
Interest on loans                      -          -             3,237             3,237
Net realized and                                                       
   unrealized appreciation                                             
   in fair value of                                                    
   investments                    18,268          -                 -           337,619
                            -------------------------------------------------------------
Total additions                   59,479          -             3,237           757,558
                                                                       
Benefits distributed              (4,296)         -            (1,335)          (64,603)
Transfers between funds           (9,744)         -             7,427                 -
                            -------------------------------------------------------------
                                                                       
Increase in net assets                                                 
   available for Plan                                                  
   benefits                       45,439          -             9,329           692,955
Net assets available for                                               
   Plan benefits,                                                      
   beginning of year              93,762          -            38,031         1,040,123
                            -------------------------------------------------------------
Net assets available for                                                                       
   Plan benefits, end of                                               
   year                        $ 139,201       $  -           $47,360        $1,733,078
                            =============================================================
See accompanying notes.

F-4
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                         Notes to Financial Statements

                               December 31, 1996

                                                                         
1. Description of the Plan

The following brief description of the Richmond County Savings Bank 401(k)
Savings Plan in RSI Retirement Trust (the "Plan") provides only general
information. Participants should refer to the Plan document for more complete
information.

General

The Plan is a defined contribution plan covering all eligible employees of
Richmond County Savings Bank (the "Bank"). The Plan was created on January 1,
1992, as subsequently amended through August 30, 1995, and is administered by
RSI Retirement Trust (the "Trust"). The Trust is a multiple employer trust,
subject to the requirements of the Employee Retirement Income Security Act of
1974 ("ERISA"), that provides retirement benefits for the employees of savings
banks and their allied organizations. The assets of all participating member
organizations are held in this common trust and are collectively invested and
reinvested by the Trust in its capacity as Trustee.

Eligibility

Any full time, salaried employee who reaches the age of 21 who is not covered by
a collective bargaining agreement shall be eligible to participate as of the
first day of any payroll period of any calendar month following one year of
employment.

Contributions

Employee contributions are made in accordance with salary deduction agreements
pursuant to Internal Revenue Code Section 401(k). Subject to certain limitations
set forth in the Plan document, the amount of contributions authorized by
eligible employees prior to August 30, 1995 shall not be less than 2% nor
greater than 6% of an employee's base salary (limited to $9,240). Effective
August 30, 1995, eligible employees may contribute up to 9% of their base salary
(limited to $9,500). The Bank makes matching contributions in an amount equal to
50% of an employee's contributions up to 6%.

                                                                             F-5
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)

1. Description of the Plan (continued)

New employees joining the Bank may be eligible to deposit any distributions from
a previous employer's tax-qualified defined contribution plan as set forth in
the Plan document and continue to defer income taxes on that distribution. These
rollover contributions can be made even if the employee is not yet eligible to
join the Plan.

Prior to May 24, 1995, participants in the Plan could invest their voluntary
contributions, rollover contributions and the Bank's matching contributions in
multiples of 25% in accordance with any one of the available investment options.
Those who first elect to participate or, if applicable, make a rollover
contribution on or after May 24, 1995 may direct that their contributions be
made to specific investment accounts in multiples of 1%. Investment direction
changes and transfers among the various Plan investment options are limited to
once each calendar quarter, but any participant in the Plan on May 24, 1995 may
redirect his investment one additional time if it is done within 60 days of May
24, 1995. The Plan utilizes the following RSI Retirement Trust investment funds:

   Core Equity Fund--The Core Equity Fund is an equity based securities fund.
   Investments are made primarily in common stocks of a broadly diversified
   group of large, high quality, competitively strong companies that in the view
   of the investment manager exhibit sustainable growth and dividend earnings.
   It offers investors the potential for long-term capital appreciation, with
   income as a secondary goal. The Core Equity Fund is managed by Retirement
   System Investors, Inc.

   Emerging Growth Equity Fund--The Emerging Growth Equity Fund is an aggressive
   growth equity fund that seeks capital appreciation by investing in rapidly
   growing emerging companies that, in the view of the investment manager, have
   higher than average potential for earnings growth. The Emerging Growth Equity
   Fund is managed by The Putnam Advisory Company, Inc. and Friess Associates,
   Inc.

                                                                             F-6
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)

1. Description of the Plan (continued)

   Value Equity Fund--The Value Equity Fund is a growth and income equity based
   securities fund that seeks capital appreciation over the longer term. It
   invests in financially strong companies with medium to large market
   capitalizations. (In the view of the investment manager, these companies are
   currently out of favor with investors but have had good earnings growth
   records in the past and offer prospects for significant earnings and dividend
   growth. In the view of the investment manager, these stocks are currently
   undervalued and selling below their potential value.) The Value Equity Fund
   is managed by Retirement System Investors, Inc.

   Intermediate-Term Bond Fund--The Intermediate-Term Bond Fund invests in a
   high quality, diversified portfolio of debt securities that mature within ten
   years, or have expected average lives of ten years or less. At least 65% of
   the investments in this fund are in U.S. Government or U.S. Government Agency
   issues which have the highest credit rating. At the time of purchase, at
   least 75% of the holdings must have a quality rating of "AA" or better, with
   a minimum quality rating of "A" for other holdings. This investment fund's
   goal is to achieve income and price appreciation. The Intermediate-Term Bond
   Fund is managed by Retirement System Investors, Inc.

   Actively Managed Bond Fund--The Actively Managed Bond Fund invests in high
   quality fixed-income securities (bonds and other debt securities), with
   maturities that could range from three months to 30 years. The fund's
   investment managers frequently adjust the maturity structure of the portfolio
   to respond to perceived changes in the relative attractiveness of the
   fixed-income market. At the time of purchase, at least 75% of the investments
   in this fund must have a rating of "AA" or better, with a minimum rating of
   "A" for other holdings, and at least 65% of the investments must be in U.S.
   Government or U.S. Government Agency issues. The fund seeks to achieve both
   income and price appreciation. The Actively Managed Bond Fund is managed by
   Retirement System Investors, Inc.

   Short-Term Investment Fund--The Short-Term Investment Fund invests in high
   quality cash equivalent types of securities normally maturing in one year or
   less. While the fund may invest in U.S. Government instruments with
   maturities up to two years, the maximum average maturity of the fund's
   holdings will not exceed one year. This investment fund offers substantial
   liquidity and capital preservation. The Short-Term Investment Fund is managed
   by Retirement System Investors, Inc.

                                                                             F-7
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)

1. Description of the Plan (continued)

   International Equity Fund--The International Equity Fund seeks capital
   appreciation and income by investing in stocks of companies headquartered in
   foreign countries. Each selection is based on companies whose current prices,
   in the view of the investment manager, do not reflect the true earnings
   potential and, therefore, are selling at "undervalued" prices. Investments in
   foreign markets with unacceptable political or economic risks are avoided.
   Holdings are concentrated in the larger markets of Europe, Australia and the
   Far East. In addition, the portfolio manager will invest in emerging markets,
   as opportunities arise. The International Equity Fund is managed by Morgan
   Grenfell Investment Services Limited.

Loans/Hardship Withdrawals

Upon application of any participant, the Bank may direct the Trustee of the Plan
to make a loan from the participant's employee contribution account, vested
matching contribution account and rollover contribution account. All loans are
limited to the lesser of 50% of the participant's accounts or $50,000 and bear
interest at a fixed rate of prime plus 1% (rounded to the nearest 1/4% of 1%)
determined at the time of borrowing and fixed for the life of the loan. Further
restrictions on the principal amount and term of loans do exist and are
discussed in the Plan document.

In addition, participants may obtain withdrawals based on immediate financial
needs as outlined in the Plan document.

Participant's Accounts

Separate accounts are maintained for each participant to accumulate values
resulting from Bank, employee and rollover contributions. Participant's accounts
are credited with contributions made on their behalf in accordance with employee
salary deduction arrangements, the Bank's matching contributions and Plan
earnings. Plan earnings and losses are allocated based on account balances and
investment options which the participant chooses.

                                                                             F-8
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Vesting

Participants are fully vested in their accrued benefits in all accounts other
than their employer matching accounts at all times and such accrued benefits are
nonforfeitable at all times. Employer matching contributions become vested and
nonforfeitable as follows:
Number of Years of Service as Defined            % Vested and 
                   in the Plan Document                    Nonforfeitable
          -------------------------------------     ---------------------------
Less than 2 years                                     0%
          2 years but less than 3 years                        20
          3 years but less than 4 years                        40
          4 years but less than 5 years                        60
          5 years but less than 6 years                        80
          6 or more years                                     100
For participants hired prior to January 1, 1994, their vesting period commences
on date of enrollment in the Plan, regardless of prior periods of service at the
Bank. For employees hired on or subsequent to January 1, 1994, their vesting
period begins upon date of hire, provided the employee has attained the age of
18.

A participant, upon leaving the Bank prior to achieving two years of employment,
forfeits the value of all matching contributions and earnings on those
contributions made by the employer. The forfeited amount is deducted from the
amount due from the Bank for the employer contribution in the following quarter.

Payment of Benefits

Upon retirement, a participant may elect to receive their vested account balance
either in a lump-sum amount or in monthly, quarterly, semi-annual or annual
installments.

                                                                             F-9
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Administrative Expenses

All administrative expenses of the Plan are paid by the Bank, except expenses
directly related to the managing of each fund (such as investment management
fees, commissions and other transaction costs) which are charged against the
assets of the total applicable fund to which such expenses directly relate.

2. Summary of Accounting Policies

Basis of Accounting and Presentation

The financial statements have been prepared on the accrual basis of accounting.

Valuation

Investments consist of unit shares of funds offered by RSI Retirement Trust, a
registered investment company. Valuation of these shares by the Trust is based
on the underlying value of the net assets of each fund.

Except for debt securities with remaining maturities of 60 days or less which
are valued at book value, investments within each fund for which markets are
available are valued at their last available quote.

Investment transactions within each fund are recorded on a trade date basis.
Dividend income is recognized on the ex-dividend date or when the dividend
information is known; interest income, including, where applicable, amortization
of discount and premium on investments and zero coupon bonds, is recognized on
the accrual basis.

                                                                            F-10
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)

2. Summary of Accounting Policies (continued)

Risks and Uncertainties

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
The Plan sponsor believes that the estimates utilized in preparing its financial
statements are reasonable and prudent. Actual results could differ from these
estimates.

3. Plan Termination

Although it has not expressed any intent to do so, the Bank has the right under
the Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of a Plan termination,
participants become 100% vested in all matching contributions.

4. Investments

Investments in the Plan as of December 31, 1996 and 1995 are:
1996                        1995
                                   --------------------------  ---------------------------
                                       Units     Fair Value        Units      Fair Value
                                   --------------------------  ---------------------------
Core Equity Fund                   16,866     $1,018,580       13,111      $  651,533
   Emerging Growth Equity Fund         6,701        453,008        5,358         284,997
   Value Equity Fund                   8,349        366,136        6,852         238,678
   Short-Term Investment Fund         15,256        312,458       15,555         304,269
   Intermediate-Term Bond Fund         4,876        146,299        2,324          67,040
   Actively Managed Bond Fund          4,719        149,890        4,520         139,201
   International Equity Fund             289         13,282            -               -
                                               --------------               ---------------
   Total                                         $2,459,653                   $1,685,718
                                               ==============               ===============
Net realized and unrealized appreciation on the above investment funds was
$347,856 and $337,619 for the years ended December 31, 1996 and 1995,
respectively.

                                                                            F-11
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                   Notes to Financial Statements (continued)

5. Income Tax Status

The Plan obtained its latest determination letter on December 13, 1995, in which
the Internal Revenue Service stated that the Plan, as amended through March 10,
1994, was in compliance with the applicable requirements of the Internal Revenue
Code. Management is not aware of any cause of action, series of events or
amendments that might adversely affect the qualified status of the Plan.

                                                                            F-12
Supplemental Schedules
                         Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                          Assets Held for Investment

                               December 31, 1996
Number of Units     Fair
                                                   Held           Value           Cost
                                             -----------------------------------------------
Units in RSI Retirement Trust Series
   Pooled Investment Funds:
     Core Equity Fund                             16,866        $1,018,580     $  689,045
     Emerging Growth Equity Fund                   6,701           453,008        284,354
     Value Equity Fund                             8,349           366,136        250,047
     Short-Term Investment Fund                   15,256           312,458        285,966
     Intermediate-Term Bond Fund                   4,876           146,299        136,599
     Actively Managed Bond Fund                    4,719           149,890        130,182
     International Equity Fund                       289            13,282         12,836
                                                              ------------------------------
                                                                 2,459,653      1,789,029

   Loans to participants                                            79,839         79,839
                                                              ------------------------------
Total                                                           $2,539,492     $1,868,868
                                                              ==============================
F-13
Richmond County Savings Bank
                  401(k) Savings Plan in RSI Retirement Trust

                            Reportable Transactions

                         Year ended December 31, 1996
Purchases                         Sales
                              -------------------------     ------------------------------
                               Number of      Purchase        Number of 
                              Transactions    Price           Transactions      Proceeds
                              ------------   ----------     ---------------    -----------
Core Equity Fund                   89        $289,050            41            $  82,037
Emerging Growth Equity Fund        85         139,906            40               57,816
Value Equity Fund                  83         102,283            38               47,940
Short-Term Investment Fund         82         101,068            33              103,563
Intermediate-Term Bond Fund        83          95,022            33               19,427
F-14
[To be used in connection with the Syndicated Community Offering only]

SYNDICATED PROSPECTUS SUPPLEMENT

                        RICHMOND COUNTY FINANCIAL CORP.

          (PROPOSED HOLDING COMPANY FOR RICHMOND COUNTY SAVINGS BANK)

                       __________ SHARES OF COMMON STOCK

     Richmond County Financial Corp. (the "Company"), a Delaware corporation, is
offering for sale in a syndicated community offering (the "Syndicated Community
Offering") __________ shares, at a per share price of $_____, of its common
stock, $0.01 par value (the "Common Stock"), to be issued upon the conversion of
Richmond County Savings Bank, Staten Island, New York (the "Bank") from a New
York chartered mutual savings bank to a New York chartered stock savings bank
and the issuance of the Bank's outstanding capital stock to the Company pursuant
to a plan of conversion (the "Plan of Conversion").  The remaining __________
shares of the Common Stock have been subscribed for in subscription and
community offerings (the "Subscription and Community Offerings") by the Bank's
holders of deposit accounts with the Bank with a balance of $100 or more as of
June 30, 1996, by the Richmond County Savings Bank Employee Stock Ownership
Plan, a tax-qualified employee benefit plan, and related trust (the "ESOP"), by
holders of deposit accounts with a balance of $100 or more as of September 30,
1997, and then by certain members of the general public.  See "The Conversion -
General."  Contained herein is the Prospectus in the form used in the
Subscription and Community Offerings.  The purchase price for all shares
purchased in the Syndicated Community Offering will be the same as the price
paid by subscribers in the Subscription and Community Offerings (the "Purchase
Price").  The Purchase Price of $10.00 per share is the amount to be paid for
each share at the time a purchase order is submitted.  See the cover page of the
Prospectus and the table below for information as to the method by which the
range within which the number of shares offered may vary and the method of
subscribing for shares of the Common Stock.  For a discussion of certain factors
that should be considered by each prospective investor, see "Risk Factors" on
pages ___ through ___.

     Funds submitted to the Bank with purchase orders will earn interest at the
Bank's passbook rate of interest from the date of receipt until completion or
termination of the Conversion.  The Syndicated Community Offering will expire no
later than _______________, 1998, unless extended by the Bank and the Company
with the approval of the Superintendent of Banks of the State of New York and
the Federal Deposit Insurance Corporation, if necessary.  Such extensions may
not go beyond _______________, 1999.  If an extension of time has been granted,
all subscribers will be notified of such extension, and of their rights to
confirm their subscriptions, or to modify or rescind their subscriptions and
have their funds returned promptly with interest, and of the time period within
which the subscriber must notify the Bank of his intention to confirm, modify or
rescind his subscription.  If an affirmative response to any resolicitation is
not received by the Bank and the Company from subscribers, such orders will be
rescinded and all funds will be returned promptly with interest.  The minimum
number of shares which may be purchased is 25 shares.  Except for the
ESOP, which may purchase up to 8% of the total number of shares of Common Stock
issued in the Conversion, no person, together with associates of and persons
acting in concert with such person, may purchase in the Community Offering and
the Syndicated Community Offering more than $250,000 of the aggregate value of
Common Stock offered in the Conversion. See "Plan of Conversion - Limitations on
Common Stock Purchases." The Company reserves the right, in its absolute
discretion, to accept or reject, in whole or in part, any or all subscriptions
in the Syndicated Community Offering.

     The Company and the Bank have engaged Sandler O'Neill & Partners, L.P.
("Sandler O'Neill") to assist them in the sale of the Common Stock in the
Syndicated Community Offering.  It is anticipated that Sandler O'Neill will use
the services of other registered broker-dealers ("Selected Dealers") and that
fees to Sandler O'Neill and such Selected Dealers will be an amount not to
exceed 7.0% of the aggregate Purchase Price of the shares sold in the Syndicated
Community Offering.  Neither Sandler O'Neill nor any Selected Dealer shall have
any obligation to take or purchase any shares of Common Stock in the Syndicated
Community Offering.

     [The Company has applied to the National Association of Securities Dealers
("NASD") to have its Common Stock quoted on the Nasdaq National Market under the
symbol "____."]  Prior to this Offering, there has not been a public market for
the Common Stock, and there can be no assurance that an active and liquid
trading market for the Common Stock will develop.  The absence or discontinuance
of a market may have an adverse impact on both the price and liquidity of the
stock.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK, THE
NEW YORK STATE BANKING BOARD, THE NEW YORK STATE BANKING DEPARTMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION, OR ANY OTHER
AGENCY, NOR HAS SUCH COMMISSION, BOARD, DEPARTMENT, CORPORATION OR ANY STATE
SECURITIES COMMISSION OR OTHER AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSIT ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE COMPANY OR THE BANK.  THE COMMON
STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL INVESTED.

                                       2
Estimated                           Estimated Net Pro-
                                                 Underwriting        Estimated Net     ceeds of Subscrip-
                                                  Commissions         Proceeds of        tion, Community
                               Syndicated          and Other          Syndicated         and Syndicated
                               Community           Fees and            Community            Community
                             Offering Price       Expenses(1)          Offering          Offerings(2)(3)
=======================================================================================================
Minimum Per Share                $10.00            $                  $                  $
-------------------------------------------------------------------------------------------------------
Midpoint Per Share               $10.00            $                  $                  $
-------------------------------------------------------------------------------------------------------
Maximum Per Share                $10.00            $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Minimum(5)                 $                 $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Midpoint                   $                 $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Maximum(5)                 $                 $                  $                  $
-------------------------------------------------------------------------------------------------------
Total Maximum,
 As Adjusted(6)                  $                 $                  $                  $
=======================================================================================================
-----------------
(1) Consists of a pro rata allocation of estimated expenses of the Bank and the
    Company in connection with the Conversion (other than estimated fees to be
    paid to Sandler O'Neill for services in connection with the Subscription and
    Community Offerings) and estimated compensation of Sandler O'Neill and
    Selected Dealers in connection with the sale of the remaining shares in the
    Syndicated Community Offering which fees are estimated to be $__________ and
    $__________ at the minimum and the maximum of the estimated price range and
    may be deemed to be underwriting fees.  The information under "Pro Forma
    Data" in the Prospectus was based on the assumptions stated therein, which
    may differ from the estimates used for this table.  See "The Conversion -
    Marketing and Underwriting Arrangements" for a more detailed discussion of
    fee arrangements.

(2) The Company applied to retain up to 50% of the net proceeds.  The balance of
    the net proceeds will be transferred to the Bank in exchange for all of the
    capital stock of the Bank to be issued in connection with the Conversion.

(3) The net proceeds of the Subscription and Community Offerings (based upon the
    sale of the __________ shares subscribed for at a price of $10.00 per share
    and after allocation of a pro rata portion of the estimated expenses
    relating to the Conversion) are estimated to be $__________.

(4) Based on an estimated price range of $__________ to $__________ at $_____
    per share (the "Estimated Price Range).  The Total Minimum reflects the sale
    of __________ shares at a per share price of $10.00, leaving a total of
    __________ shares to be sold in the Syndicated Community Offering.

(5) Gives effect to an increase in the number of shares which could occur due to
    an increase in the Estimated Price Range of up to 15% to reflect changes in
    market and financial conditions following commencement of the offerings.
    See "The Conversion - Stock Pricing."  For a discussion of the distribution
    and allocation of the additional shares, see "The Conversion - Subscription
    Rights and Limitations on Common Stock Purchases."

                       SANDLER O'NEILL & PARTNERS, L.P.

                       _________________________________

       The date of this Prospectus Supplement is _______________, 1997.

                                       3
PROSPECTUS

                        RICHMOND COUNTY FINANCIAL CORP.
          (Proposed Holding Company for Richmond County Savings Bank)
                       21,275,000 Shares of Common Stock

     Richmond County Financial Corp. (the "Company"), a Delaware corporation, is
offering up to 21,275,000 shares of its common stock, par value $.01 per share
(the "Common Stock"), in connection with the conversion of Richmond County
Savings Bank (the "Bank") from a New York State chartered mutual savings bank to
a New York State chartered stock savings bank and the issuance of the Bank's
capital stock to the Company pursuant to the Bank's plan of conversion (the
"Plan" or "Plan of Conversion"). The simultaneous conversion of the Bank to
stock form, the issuance of the Bank's capital stock to the Company and the
offer and sale of the Common Stock by the Company are herein referred to as the
"Conversion." In certain circumstances, the Company may increase the amount of
Common Stock offered hereby up to 24,466,250 shares. See Footnote 4 to the table
below.

                                                   (continued on following page)
                             _____________________

     FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" ON PAGES 13 THROUGH 22.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK,
THE NEW YORK STATE BANKING BOARD, THE NEW YORK STATE BANKING DEPARTMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION, OR ANY
OTHER AGENCY, NOR HAS SUCH COMMISSION, BOARD, DEPARTMENT, CORPORATION OR ANY
STATE SECURITIES COMMISSION OR OTHER AGENCY PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

     THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSIT ACCOUNTS AND ARE
NOT INSURED OR GUARANTEED BY THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE COMPANY OR THE BANK.  THE COMMON
STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL INVESTED.
Estimated Underwriting 
                                                           Commissions and Other Fees
                                Subscription Price (1)     and Expenses(2)                Estimated Net Proceeds(3)
Minimum Per Share                   $      10.00             $     0.33                   $       9.67
                                                                                          
Midpoint Per Share                  $      10.00             $     0.31                   $       9.69
                                                                                          
Maximum Per Share                   $      10.00             $     0.29                   $       9.71
                                                                                          
Total Minimum(1)                    $157,250,000             $5,216,600                   $152,033,400
                                                                                          
Total Midpoint(1)                   $185,000,000             $5,660,300                   $179,339,700
                                                                                          
Total Maximum (1)                   $212,750,000             $6,103,900                   $206,646,100

Total Maximum as adjusted(4)        $244,662,500             $6,614,200                   $238,048,300
-------------------------------------------------------------------------------------------------------------------
(1) Determined in accordance with an independent appraisal prepared by Keller &
    Company, Inc. ("Keller") dated September 12, 1997, which states that the
    estimated pro forma market value of the Common Stock being offered for sale
    in the Conversion ranged from $157,250,000 to $212,750,000 with a midpoint
    of $185,000,000 taking into account the contribution to the Richmond County
    Savings Foundation (the "Foundation") of an amount of Common Stock equal to
    8% of the Common Stock sold in the Conversion (the "Valuation Range").  The
    independent appraisal of Keller is based upon estimates and projections that
    are subject to change and the valuation must not be construed as a
    recommendation as to the advisability of purchasing the Common Stock nor an
    assurance that a purchaser of Common Stock will thereafter be able to sell
    the Common Stock at prices within the Valuation Range.  Based on the
    Valuation Range, the Board of Directors of the Company and the Board of
    Trustees of the Bank established an estimated price range of the Common
    Stock being offered for sale in the Conversion within the Valuation Range of
    $157.3 million to $212.8 million (the "Estimated Price Range") or between
    15,725,000 and 21,275,000 shares of Common Stock issued at the $10.00  per
    share price (the "Purchase Price") to be paid for each share of Common Stock
    subscribed for or purchased in the Offering.  See "The Conversion - Stock
    Pricing."
(2) Consists of the estimated costs to the Bank and the Company arising from the
    Conversion, including estimated fixed expenses of approximately $2.8
    million, and marketing fees to be paid to Sandler O'Neill & Partners, L.P.
    ("Sandler O'Neill") estimated to be between $2.5 million and $3.3 million at
    the minimum and maximum of the Estimated Price Range, respectively.  See
    "The Conversion - Marketing and Underwriting Arrangements."  The actual fees
    and expenses may vary from the estimates.  See "Pro Forma Data" for the
    assumptions used to arrive at these estimates.
(3) Actual net proceeds may vary substantially from estimated amounts depending
    upon the number of shares sold in the offerings and other factors.  Includes
    the purchase of shares of Common Stock by the Richmond County Savings Bank
    Employee Stock Ownership Plan and related trust (the "ESOP") which is
    intended to be funded by a loan to the ESOP from the Company or from a third
    party, which will be deducted from the Company's stockholders' equity.  See
    "Use of Proceeds" and "Pro Forma Data."
(4) As adjusted to reflect the sale of up to an additional 15% of the Common
    Stock which may be offered at the Purchase Price, without resolicitation of
    subscribers or any right of cancellation, due to regulatory considerations,
    changes in market or general financial and economic conditions.  See "Pro
    Forma Data" and "The Conversion - Stock Pricing."  For a discussion of the
    distribution and allocation of the additional shares, if any, see "The
    Conversion - Subscription Offering and Subscription Rights," "- Community
    Offering" and  "- Limitations on Common Stock Purchases."

                            _______________________

                        SANDLER O'NEILL & PARTNERS, L.P.
                            _______________________

             The date of this Prospectus is _______________, 1997.
(continued from previous page)

   NON-TRANSFERABLE RIGHTS TO SUBSCRIBE FOR THE COMMON STOCK IN A SUBSCRIPTION
OFFERING (THE "SUBSCRIPTION OFFERING") HAVE BEEN GRANTED IN THE FOLLOWING ORDER
OF PRIORITY TO:  1) THE BANK'S ELIGIBLE ACCOUNT HOLDERS (DEFINED AS HOLDERS OF
DEPOSIT ACCOUNTS TOTALLING $100 OR MORE AS OF JUNE 30, 1996); (2) THE COMPANY'S
AND BANK'S TAX-QUALIFIED EMPLOYEE BENEFIT PLANS (COLLECTIVELY, THE "EMPLOYEE
PLANS"), INCLUDING THE ESOP WHICH INTENDS TO SUBSCRIBE FOR UP TO 8% OF THE
COMMON STOCK ISSUED IN CONNECTION WITH THE CONVERSION (INCLUDING SHARES ISSUED
TO THE RICHMOND COUNTY SAVINGS FOUNDATION); AND (3) THE BANK'S SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS (DEFINED AS HOLDERS OF DEPOSIT ACCOUNTS TOTALLING $100
OR MORE AS OF SEPTEMBER 30, 1997).   SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE.
PERSONS FOUND TO BE TRANSFERRING SUBSCRIPTION RIGHTS WILL BE SUBJECT TO
FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED
BY THE NEW YORK BANKING DEPARTMENT (THE "NYBD").  Concurrently, and subject to
the prior rights of holders of subscription rights, the Company is offering the
shares of Common Stock not subscribed for in the Subscription Offering for sale
in a community offering to certain members of the general public (the "Community
Offering").  Shares not subscribed for in the Subscription and Community
Offerings will be offered to certain members of the general public in a
syndicated community offering (the "Syndicated Community Offering") (the
Subscription Offering, Community Offering and the Syndicated Community Offering
are referred to collectively as the "Offerings").

   Except for the ESOP, no Eligible Account Holder or Supplemental Eligible
Account Holder may, in their respective capacities as such, purchase in the
Subscription Offering more than $250,000 of Common Stock; no person, together
with associates and persons acting in concert with such person, may purchase in
the Community Offering and Syndicated Community Offering more than $250,000 of
Common Stock; and no person, together with associates of and persons acting in
concert with such person, may purchase in the aggregate more than the overall
maximum purchase limitation of 1.0% of the total number of shares of Common
Stock offered in the Conversion; provided, however, such purchase limitations
may be increased and the amount that may be subscribed for may be increased or
decreased at the sole discretion of the Bank and Company without further
approval of subscribers or the Bank's depositors.  The minimum purchase is 25
shares.  See "The Conversion - Subscription Offering and Subscription Rights,"
"- Community Offering" and "- Limitations on Common Stock Purchases."

   Pursuant to the Plan, the Company intends to establish the Richmond County
Savings Foundation (the "Foundation"), a charitable foundation, in connection
with the Conversion.  The Plan provides that the Bank and the Company will
create and fund the Foundation with shares of Common Stock contributed by the
Company from authorized but unissued shares, in an amount equal to 8% of the
number of shares of Common Stock sold in the Conversion.  The Foundation will be
dedicated to charitable purposes within the Bank's local community.  For a
discussion of the Foundation and its effects on the Conversion, see "Risk
Factors - Effects of the Establishment of the  Foundation," "Pro Forma Data,"
and "The Conversion - Establishment of Charitable Foundation."

   The Bank has engaged Sandler O'Neill to consult with and advise the Company
and the Bank in the Offerings and Sandler O'Neill has agreed to use its best
efforts to assist the Company with the solicitation of subscriptions and
purchase orders for shares of Common Stock in the Offerings.  Sandler O'Neill is
not obligated to take or purchase any shares of Common Stock in the Offerings.
The Bank and the Company will pay a fee to Sandler O'Neill which will be based
on the aggregate Purchase Price of the Common Stock sold in the Offerings.  The
Company and the Bank have agreed to indemnify Sandler O'Neill against certain
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act").  See "The Conversion - Marketing and Underwriting
Arrangements."

   THE SUBSCRIPTION AND COMMUNITY OFFERINGS WILL TERMINATE AT  __________, NEW
YORK TIME, ON __________, 1997 (THE "EXPIRATION DATE") UNLESS EXTENDED BY THE
BANK AND THE COMPANY, WITH THE APPROVAL OF THE SUPERINTENDENT OF BANKS OF THE
STATE OF NEW YORK (THE "SUPERINTENDENT") AND THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC"), IF NECESSARY.  Orders submitted are irrevocable until
the completion of the Conversion; provided, that if the Conversion is not
completed within 45 days after the close of the Subscription and Community
Offerings, unless such period has been extended with the consent of the
Superintendent and FDIC, if necessary, all subscribers will have their funds
returned promptly with interest, and all withdrawal authorizations will be
cancelled.  Such extensions may not go beyond _________, 1999.  See "The
Conversion - Procedure for Purchasing Shares in Subscription and Community
Offerings."

   The Company has applied to the [NATIONAL ASSOCIATION OF SECURITIES DEALERS,
INC. ("NASD")]  to have its Common Stock quoted on the [NASDAQ NATIONAL MARKET]
("Nasdaq") under the symbol "____."  Prior to this offering there has not been a
public market for the Common Stock, and there can be no assurance that an active
and liquid trading market for the Common Stock will develop, or that resales of
the Common Stock can be made at or above the Purchase Price.  To the extent an
active and liquid trading market does not develop, the liquidity and market
value of the Common Stock may be adversely affected.  See "Risk Factors -
Absence of Market for Common Stock" and "Market for the Common Stock."

                                       2
[MAP OUTLINING THE LOCATIONS OF THE BANKING OFFICES
                 OF RICHMOND COUNTY SAVINGS BANK APPEARS HERE]

                                       3
SUMMARY OF THE CONVERSION AND THE OFFERINGS
 
     The following summary of the Conversion and the Offerings is qualified in
its entirety by the more detailed information appearing elsewhere in this
Prospectus.
Risk Factors..............   A purchase of the Common Stock involves a
                             substantial degree of risk. Eligible Account
                             Holders, Supplemental Eligible Account Holders and
                             other prospective investors should carefully
                             consider the matters set forth under "Risk
                             Factors." THE SHARES OF COMMON STOCK OFFERED HEREBY
                             ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
                             OTHER GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY
                             THE COMPANY OR THE BANK.

Richmond County
 Financial Corp...........   Richmond County Financial Corp. is a Delaware
                             corporation organized at the direction of the Bank
                             to become a savings and loan holding company and
                             own all of the Bank's capital stock to be issued
                             upon its conversion from mutual form to stock form.
                             To date, the Company has not engaged in any
                             business. Its executive office is located at 1214
                             Castleton Avenue, Staten Island, New York 10310 and
                             its telephone number is (718) 448-2800.

Richmond County
 Savings Bank.............   The Bank is a New York State chartered mutual
                             savings bank. At June 30, 1997, the Bank had total
                             assets of $993.4 million, total deposits of $884.5
                             million and net worth of $100.9 million and
                             operated thirteen full service offices. The Bank is
                             located at 1214 Castleton Avenue, Staten Island,
                             New York 10310 and its telephone number is (718)
                             448-2800.

                             The Bank's current operating strategy consists
                             primarily of:

                             . investing primarily in one- to four-family, and
                               to a lesser extent, commercial real estate,
                               construction and development, commercial and
                               other loans and in investment-grade securities;

                             . attempting to increase its position as a lender
                               to businesses operating in its primary market
                               area, as well as other areas of the New York City
                               metropolitan area by offering its commercial loan
                               and deposit products to small and medium-sized
                               businesses;

                             . increasing the yield and duration of its
                               securities investments by emphasizing the
                               purchase of government agency and privately
                               issued mortgage-backed and mortgage-related
                               securities with estimated average lives of three
                               to five years and de-emphasizing its investment
                               in U.S. Treasury obligations, and corporate and
                               other debt securities;

                             . maintaining a low cost of funds by attracting and
                               retaining core deposits by providing enhanced
                               service;

                             . attempting to attract new deposit customers by
                               competitively pricing certificate of deposit
                               products and offering a greater variety of
                               duration of such deposits;

                             . developing wholesale borrowing sources such as
                               FHLB advances, reverse repurchase agreements, and
                               brokered certificates of deposit as another means
                               of funding asset growth; and

                             . managing its interest rate risk by originating or
                               purchasing adjustable rate loans and generally
                               selling fixed-rate loans with maturities of more
                               than 15 years.
4
The Conversion and
 Reasons for Conversion....  The Board of Trustees of the Bank has adopted a
                             Plan of Conversion pursuant to which the Bank
                             intends to convert to a New York State-chartered
                             stock savings bank and issue all of its stock to
                             the Company. The Company is offering shares of its
                             Common Stock in the Offerings in connection with
                             the Bank's Conversion. Management believes the
                             Conversion offers a number of advantages,
                             including: (i) providing a larger capital base on
                             which to operate; (ii) providing enhanced future
                             access to capital markets; (iii) providing enhanced
                             ability to diversify into other financial services
                             related activities; and (iv) providing enhanced
                             ability to increase its presence in the communities
                             it serves and to geographically expand its
                             operations and market area through marketing and
                             business development, the acquisition or
                             establishment of branch offices or the acquisition
                             of other financial institutions. The Conversion and
                             the Offerings are subject to approval by the
                             Superintendent and non-objection by the FDIC, and
                             approval of Eligible Account Holders at a special
                             meeting to be held on __________, 1997 (the
                             "Special Meeting"). The Superintendent issued an
                             approval letter on _______, 1997 and the FDIC
                             issued a notice of intent not to object to the
                             Conversion on _______, 1997. See "The Conversion--
                             General."
 
The Richmond County
 Savings Foundation....      The Bank's Plan of Conversion provides for the
                             establishment of a charitable foundation in
                             connection with the Conversion. The Foundation,
                             which will be incorporated under Delaware law as a
                             non-stock corporation, will be funded with a
                             contribution by the Company equal to 8% of the
                             Common Stock sold in the Conversion. The authority
                             for the affairs of the Foundation will be vested in
                             the Board of Directors of the Foundation, which
                             will initially be comprised of the members of the
                             Bank's Board of Trustees. See "The Conversion -
                             Establishment of Charitable Foundation."
 
Terms of the Offering...     The shares of Common Stock to be sold in connection
                             with the Conversion are being offered at a fixed
                             price of $10.00 per share in the Subscription
                             Offering pursuant to subscription rights in the
                             following order of priority to: (i) holders of
                             deposit accounts with a balance of $100 or more on
                             June 30, 1996 ("Eligible Account Holders"); (ii)
                             the Bank's Employee Plans, including the ESOP; and
                             (iii) depositors whose accounts in the Bank totaled
                             $100 or more on September 30, 1997 ("Supplemental
                             Eligible Account Holders"). Concurrently, and
                             subject to the prior rights of holders of
                             subscription rights, any shares of Common Stock not
                             subscribed for in the Subscription Offering are
                             being offered in the Community Offering at $10.00
                             per share to certain members of the general public.
                             Subscription rights will expire if not exercised by
                             _______, New York Time, on __________, 1997, unless
                             extended by the Bank and the Company. See "The
                             Conversion -Subscription Offering and Subscription
                             Rights" and " -Community Offering."
5
Procedure for Ordering 
 Shares and Prospectus    
 Delivery..............      Forms to order Common Stock offered in the
                             Subscription Offering and the Community Offering
                             will only be distributed with or be preceded by a
                             Prospectus. Any person receiving a stock order and
                             certification form who desires to subscribe for
                             shares must do so prior to the Expiration Date by
                             delivering to the Bank a properly executed stock
                             order and certification form together with full
                             payment. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT
                             BE REVOKED OR MODIFIED WITHOUT THE CONSENT OF THE
                             COMPANY AND BANK. To ensure that each purchaser
                             receives a prospectus at least 48 hours prior to
                             the Expiration Date in accordance with Rule 15c2-8
                             of the Securities Exchange Act of 1934, as amended
                             (the "Exchange Act"), no prospectus will be mailed
                             any later than five days prior to the Expiration
                             Date or hand delivered any later than two days
                             prior to such date. The Bank is not obligated to
                             accept subscriptions not submitted on an original
                             stock order form. See "The Conversion - Procedure
                             for Purchasing Shares in Subscription and Community
                             Offerings."
 
 
Form of Payment for 
 Shares................      Payment for subscriptions may be made: (i) in cash
                             (if delivered in person); (ii) by check or money
                             order; or (iii) by authorization of withdrawal from
                             deposit accounts maintained at the Bank. Orders for
                             Common Stock submitted by subscribers in the
                             Subscription Offering which aggregate $50,000 or
                             more must be paid by official bank or certified
                             check or by withdrawal authorization from a deposit
                             account of the Bank. No wire transfers will be
                             accepted. See "Conversion - Procedure for
                             Purchasing Shares in Subscription and Community
                             Offerings."
 
Nontransferability of
 Subscription Rights...      The subscription rights of Eligible Account
                             Holders, Supplemental Eligible Account Holders and
                             the Employee Plans, including the ESOP, are
                             nontransferable. See "The Conversion -Restrictions
                             on Transfer of Subscription Rights and Shares."
 
Purchase Limitations...      No Eligible Account Holder or Supplemental Eligible
                             Account Holder may purchase in the Subscription
                             Offering more than $250,000 of Common Stock. No
                             person, together with associates and persons acting
                             in concert with such person, may purchase in the
                             Community Offering and the Syndicated Community
                             Offering more than $250,000 of Common Stock. No
                             person, together with associates or persons acting
                             in concert with such person, may purchase in the
                             aggregate more than 1% of the Common Stock offered
                             (the "overall maximum purchase limitation").
                             However, the Employee Plans, including the ESOP,
                             may purchase up to 10% of the Common Stock issued,
                             including shares issued to the Foundation. It is
                             anticipated that the ESOP will subscribe to
                             purchase 8% of the Common Stock issued, including
                             shares issued to the Foundation. The minimum
                             purchase is 25 shares of Common Stock. At any time
                             during the Conversion and without approval of the
                             Bank's depositors or a resolicitation of
                             subscribers, the Bank and the Company may, in their
                             sole discretion, decrease the maximum purchase
                             limitation below $250,000 of Common Stock; however,
                             such amount may not be reduced to less than 0.10%
                             of the Common Stock offered. Additionally, at any
                             time during the Conversion, the Bank and the
                             Company may, in their sole discretion, increase the
                             maximum purchase limitation in the Subscription and
                             Community Offerings to an amount in excess of
                             $250,000 up to a maximum of 5% of the shares to be
                             issued in the Conversion. Similarly, the 1.0%
                             overall maximum purchase limitation may be
                             increased up to 5% of the total shares of Common
                             Stock offered in the Conversion.
6
Securities Offered       
 and Purchase Price.....     The Company is offering between 15,725,000 and
                             21,275,000 shares of Common Stock at a Purchase
                             Price of $10.00 per share. The maximum of the
                             Estimated Price Range may be increased by up to 15%
                             and the maximum number of shares of Common Stock to
                             be issued may be increased up to 24,466,250 shares
                             due to regulatory considerations and changes in
                             market or general financial or economic conditions.
                             See "The Conversion -Stock Pricing" and "-Number of
                             Shares to be Issued."
 
Appraisal..............      The Purchase Price per share has been fixed at
                             $10.00. The total number of shares to be issued in
                             the Conversion is based upon an independent
                             appraisal prepared by Keller, dated as of September
                             12, 1997, which states that the estimated pro forma
                             market value of the Common Stock ranged from
                             $157,250,000 to $212,750,000. The final aggregate
                             value will be determined at the time of closing of
                             the Offerings and is subject to change due to
                             changing market conditions and other factors. See
                             "The Conversion - Stock Pricing."
 
Use of Proceeds.........     The Company will use 50% of the net proceeds of the
                             Offerings to purchase all of the outstanding common
                             stock of the Bank to be issued in the Conversion. A
                             portion of net proceeds retained by the Company
                             will be used for general business activity,
                             including a loan by the Company directly to the
                             ESOP to enable the ESOP to purchase up to 8% of the
                             Common Stock issued in the Conversion, including
                             shares issued to the Foundation. The Company
                             intends to initially invest the remaining net
                             proceeds primarily in mortgage-backed and mortgage
                             related securities and investment grade debt and
                             equity securities. The Bank intends to utilize net
                             proceeds for general business purposes, including
                             investments in loans and securities as well as for
                             the possible expansion of its facilities and
                             operations through marketing, business development,
                             or acquisitions of other financial institutions,
                             branch offices or other financial services
                             companies, although the Company and the Bank have
                             no current arrangements, understandings or
                             agreements regarding any such transactions, other
                             than a lease on a public accommodation office to be
                             opened on Staten Island in 1998 and plans to open
                             new branch offices on Staten Island in 1998. See
                             "Use of Proceeds."
 
Dividend Policy.........     Upon Conversion, the Board of Directors of the
                             Company will have the authority to declare
                             dividends on the Common Stock, subject to statutory
                             and regulatory requirements. In the future, the
                             Board of Directors of the Company may consider a
                             policy of paying cash dividends on the Common
                             Stock. However, no decision has been made with
                             respect to such dividends, if any. See "Dividend
                             Policy."
7
Benefits of the Conversion 
 to Management..........     Among the benefits to the Bank and the Company
                             anticipated from the Conversion is the ability to
                             attract and retain personnel through the use of
                             stock options and other stock related benefit
                             programs. Subsequent to the Conversion, the Company
                             intends to adopt a Stock Program (as defined
                             herein) and Stock Option Plan (as defined herein)
                             for the benefit of directors, officers and
                             employees. If such benefit plans are adopted within
                             one year after the Conversion, such plans will be
                             subject to stockholders' approval at a meeting of
                             stockholders which may not be held earlier than six
                             months after the Conversion. The Company intends to
                             adopt a stock benefit plan which would provide for
                             the granting of Common Stock to officers, directors
                             and employees of the Bank and Company in an amount
                             equal to 4% of the Common Stock issued in the
                             Conversion, including shares issued to the
                             Foundation (the "Stock Program"). The Company also
                             intends to adopt a stock option plan which would
                             provide the Company with the ability to grant
                             options to officers, directors and employees of the
                             Bank and Company to purchase Common Stock equal to
                             10% of the number of shares of Common Stock issued
                             in the Conversion, including shares issued to the
                             Foundation (the "Stock Option Plan"). Additionally,
                             certain officers of the Company and the Bank will
                             be provided with employment agreements or change in
                             control agreements which provide such officers with
                             employment rights and/or payments upon their
                             termination of service following a change in
                             control. For a further description of the Stock
                             Program and Stock Option Plan, see "Risk Factors -
                             Stock Based Benefits to Management, Employment
                             Contracts and Change in Control Payments" and
                             "Management of the Bank- Benefit Plans." See
                             "Management of the Bank- Subscriptions of Executive
                             Officers, Directors and Trustees," "The Conversion -
                             Establishment of Charitable Foundation" and
                             "Restrictions on Acquisition of the Company and the
                             Bank -Restrictions in the Company's Certificate of
                             Incorporation and Bylaws."
 
Voting Control of Officers   
 and Directors............   Trustees, Directors and executive officers of the
                             Bank and the Company expect to purchase
                             approximately 1.8% or 1.4% of shares of Common
                             Stock outstanding, based upon the minimum and the
                             maximum of the Estimated Price Range including
                             shares issued to the Foundation, respectively.
                             Additionally, assuming the implementation of the
                             ESOP, Stock Program and Stock Option Plan,
                             directors, executive officers and employees have
                             the potential to control the voting of
                             approximately 21.7% or 21.2% of the Common Stock at
                             the minimum and the maximum of the Estimated Price
                             Range, including shares issued to the Foundation,
                             respectively. Additionally, the Foundation will
                             hold Common Stock in an amount equal to 8% of the
                             Common Stock sold in the Conversion, which such
                             shares of Common Stock may be voted as directed by
                             the Board of Directors of the Foundation, who are
                             also Directors or officers of the Company and the
                             Bank. See "The Conversion -Establishment of
                             Charitable Foundation," "Management of the Bank-
                             Subscriptions of Executive Officers, Directors and
                             Trustees," and "Restrictions on Acquisition of the
                             Company and the Bank -Restrictions in the Company's
                             Certificate of Incorporation and Bylaws."
 
Expiration Date for the      
 Subscription Offering....   The Expiration Date for the Subscription Offering
                             is ________ New York Time on _______________, 1997
                             unless extended by the Bank and the Company. See
                             "The Conversion -Subscription Offering and
                             Subscription Rights."
 
Expiration Date for the      
 Community Offering......    The Expiration Date for the Community Offering is
                             _______ New York Time on ____________, 1997, unless
                             extended by the Bank and the Company. See "The
                             Conversion - Community Offering."
8
Market for Stock..........   As a mutual institution, the Bank has never issued
                             capital stock and, consequently, there is no
                             existing market for the Common Stock. The Company
                             has applied to have its Common Stock quoted on the
                             [NASDAQ NATIONAL MARKET] under the symbol "____"
                             subject to the completion of the Conversion and
                             compliance with certain conditions, including the
                             presence of at least three registered and active
                             market makers. See "Market for the Common Stock."
 
No Board Recommendations..   The Bank's Board of Trustees and the Company's
                             Board of Directors are not making any
                             recommendations to depositors or other potential
                             investors regarding whether such persons should
                             purchase the Common Stock. An investment in the
                             Common Stock must be made pursuant to each
                             investor's evaluation of his or her best interests.
 
Conversion Center.........   If you have any questions regarding Conversion,
                             call the Conversion Center at (___) ________.
9
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE BANK

   Set forth below are selected consolidated financial and other data of the
Bank.  These financial data are derived in part from, and should be read in
conjunction with, the Consolidated Financial Statements of the Bank and Notes
thereto presented elsewhere in this Prospectus.
At June 30,
                                       ----------------------------------------------------
                                         1997       1996       1995       1994       1993
                                       --------   --------   --------   --------   --------
SELECTED FINANCIAL CONDITION DATA:                      (In thousands)
Total assets.......................    $993,370   $914,483   $851,751   $825,663   $779,728
Loans receivable, net(1)...........     496,258    419,270    392,409    355,850    355,281
Debt and equity securities(2):                                         
  Available for sale...............      19,706     21,659        607          -          -
  Held-to-maturity.................     205,201    307,700    287,879    328,779    331,840
Mortgage-backed and mortgage                                           
  related securities, net(2):                                          
  Available for sale...............      27,398      1,394      1,683          -          -
  Held-to-maturity.................     185,122     80,284     92,404     74,961     44,422
Intangible Assets(3)...............       1,527      1,802      2,115      2,428      2,715
Deposits...........................     884,531    817,928    764,062    748,638    713,906
Net worth..........................     100,865     89,901     81,166     73,550     63,407
For the Year Ended June 30,
                                       ----------------------------------------------------
                                         1997       1996       1995       1994       1993
                                       --------   --------   --------   --------   --------
SELECTED OPERATING DATA:                                     (In thousands)
Interest income....................    $ 65,781   $ 59,063   $ 54,321   $ 51,608   $ 53,003
Interest expense...................      27,707     26,254     22,456     20,207     22,280
                                       --------   --------   --------   --------   --------
 Net interest income                                                   
    before provision for                                               
    loan losses....................      38,074     32,809     31,865     31,401     30,723
Provision for loan losses..........       1,080      1,600        600        859      2,331
                                       --------   --------   --------   --------   --------
 Net interest income after                                             
    provision for loan losses......      36,994     31,209     31,265     30,542     28,392
                                       --------   --------   --------   --------   --------
Non-interest income................       2,861      2,827      2,659      2,961      3,153
Non-interest expense...............      19,667     18,503     18,139     17,287     16,555
                                       --------   --------   --------   --------   --------
Income before income taxes                                             
 and cumulative effect of                                              
 changes in accounting                                                 
 principles........................      20,188     15,533     15,785     16,216     14,990
Provision for income taxes.........       9,463      6,803      6,919      7,305      7,300
                                       --------   --------   --------   --------   --------
Cumulative effect of changes                                           
   in accounting principles(4).....          --         --     (1,316)     1,232         --
                                       --------   --------   --------   --------   --------
Net income.........................    $ 10,725   $  8,730   $  7,550   $ 10,143   $  7,690
                                       ========   ========   ========   ========   ========
10
At or For the Year Ended
                                                             June 30,
                                         ---------------------------------------------------
                                           1997       1996      1995       1994       1993
                                         -------    -------    -------    -------    -------
                                                       (dollars in thousands)
SELECTED FINANCIAL RATIOS AND
OTHER DATA(5):
PERFORMANCE RATIOS:
Return on average assets..............      1.13%      0.99%      0.91%      1.27%      1.11%
Return on average net worth...........     11.25      10.25       9.80      14.97      13.00
Average net worth to
    average assets....................     10.07       9.70       9.29       8.50       8.52
Net worth to total assets
   at end of period...................     10.15       9.83       9.53       8.91       8.13
Net interest rate spread(6)...........      3.68       3.53       3.66       3.85       3.99
Net interest margin(7)................      4.24       4.01       4.06       4.16       4.31
Average interest-earning assets
   to average interest-bearing
   liabilities........................    118.32     115.19     113.96     111.64     110.32
Total non-interest expense
   to average assets(8)...............      1.99       2.07       2.15       2.13       2.34
Efficiency ratio(9)...................     46.08      51.04      51.63      49.40      47.95
Net interest income to
   operating expenses.................    193.59     177.32     175.67     181.65     185.58
REGULATORY CAPITAL RATIOS(10):
Leverage capital......................     10.02%      9.70%      9.25%      8.60%      7.77%
Total risk-based capital..............     19.71      19.22      18.33      16.23      15.28
Tier I capital........................     18.79      18.33      17.92      15.71      14.52
ASSET QUALITY RATIOS AND DATA:
Total non-performing loans(11)........   $ 3,877    $ 3,820    $ 2,995    $ 5,389    $ 5,375
Real estate owned, net................       662        612        335        441      2,336
Total non-performing assets(12).......     4,539      4,432      3,330      5,830      7,711
Non-performing loans as a
   percent of loans, net(11)..........      0.78%      0.91%      0.76%      1.51%      1.51%
Non-performing assets as a percent
  of total assets(12).................      0.46       0.48       0.39       0.71       0.99
Allowance for loan losses
  as a percent of loans, net(1).......      1.10       1.14       0.83       0.87       0.77
Allowance for possible loan
losses as a percent of total
  non-performing loans(1)(11).........    141.09     125.55     109.35      57.64      50.88
OTHER DATA:
Number of full service customer
 facilities...........................        13         13         13         13         13
(footnotes on next page)

                                       11
___________________
(1)   Loans, net, consist of gross loans receivable excluding the allowance for
      loan losses.  The allowance for loan losses at June 30, 1997, 1996, 1995,
      1994 and 1993 was $5.5 million, $4.8 million, $3.3 million, $3.1 million
      and $2.7 million, respectively.  Loans, net, at June 30, 1996, includes
      $1.2 million of loans held for sale.
(2)   The Bank adopted Statement of Financial Accounting Standards ("SFAS") No.
      115 ("SFAS No. 115"), "Accounting for Certain Investments in Debt and
      Equity Securities," as of July 1, 1994, and reclassified securities having
      a market value of $26 million from its held-to-maturity portfolio to its
      available-for-sale portfolio in November 1995 pursuant to a Financial
      Accounting Standards Board ("FASB")  interpretation of SFAS No. 115.
(3)   Represents premium on core deposits acquired which amounted to $3.2
      million and which is being amortized on a straight line basis over a ten
      year period.
(4)   Cumulative effect of changes in accounting principles reflects a charge,
      net of tax, of $1.3 million for the year ended June 30, 1995, resulting
      from the adoption of SFAS No. 106 ("SFAS No. 106"), "Employer's Accounting
      For Post-Retirement Benefits Other than Pensions," and a credit to
      earnings of $1.2 million for the year ended June 30, 1994, resulting from
      the adoption of SFAS No. 109 ("SFAS No. 109"), "Accounting for Income
      Taxes."  See "Management's Discussion and Analysis of Financial Condition
      and Results of Operations - Cumulative Effect of Changes in Accounting
      Principles."
(5)   Asset Quality Ratios and Regulatory Capital Ratios are end of period
      ratios.  With the exception of end of period ratios, all ratios are based
      on average monthly balances during the indicated periods and are
      annualized where appropriate.
(6)   The net interest rate spread represents the difference between the
      weighted average yield on average interest-earning assets and the weighted
      average cost of average interest-bearing liabilities.
(7)   The net interest margin represents net interest income as a percent of
      average interest-earning assets.
(8)   Total non-interest expense excludes the effect of amortization of goodwill
      and the one-time special assessment of $493,000 to recapitalize the
      Savings Association Insurance Fund (the "SAIF").  See "Regulation and
      Supervision - Insurance of Deposit Accounts."  Including the effects of
      the amortization of goodwill and of the SAIF special assessment, total
      non-interest expense to average assets for the year ended June 30, 1997
      would be 2.08%.
(9)   The efficiency ratio represents the ratio of non-interest expense,
      excluding the effect of amortization of goodwill and the one-time special
      assessment of $493,000 to recapitalize the SAIF, divided by the sum of net
      interest income and non-interest income. Including the effects of the
      amortization of goodwill and the SAIF special assessment, the efficiency
      ratio for the year ended June 30, 1997 would be 48.04%.
(10)  For definitions and further information relating to the Bank's regulatory
      capital requirements, see "Regulation and Supervision - FDIC Regulations -
      Capital Requirements."  See "Regulatory Capital Compliance" for the Bank's
      pro forma capital levels as a result of the Offerings.
(11)  It was the Bank's policy to generally cease accruing interest on all
      commercial real estate, construction and commercial loans 90 days or more
      past due, on all consumer loans which were 120 days or more past due, and
      on all one- to four-family residential mortgage loans which were 180 days
      or more past due. Effective July 1, 1997, the Bank revised this policy
      such that it does not accrue interest on any loans, including one- to
      four-family loans secured by real estate, which are more than ninety days
      delinquent as to principal and interest unless, in the opinion of
      management, collection is probable.  See "Business of the Bank -
      Delinquent Loans, Real Estate Owned and Classified Assets." Assuming the
      revised policy was in effect, the Bank's total non-performing loans would
      have been $3.9 million, $3.8 million, $3.0 million, $5.4 million and $5.4
      million  at June 30, 1997, 1996, 1995, 1994 and 1993, respectively.
(12)  Non-performing assets consist of non-performing loans and real estate
      owned, net ("REO").  The Bank had no troubled debt restructurings at any
      of the dates presented.

                                       12
RISK FACTORS

     The following risk factors, in addition to those discussed elsewhere in
this Prospectus, should be considered by investors in deciding whether to
purchase the Common Stock offered hereby.

SENSITIVITY TO INCREASES IN INTEREST RATES

     The Bank's profitability is dependent to a large extent upon its net
interest income, which is the difference between its interest income on
interest-earning assets, such as loans and securities, and its interest expense
on interest-bearing liabilities, such as its deposits and borrowed funds.
Accordingly, the Bank's results of operations and financial condition are
largely dependent on movements in market interest rates and its ability to
manage its assets and liabilities in response to such movements.

     While the Bank emphasizes investment in adjustable rate or shorter term
loans, the Bank currently originates and sells fixed-rate one- to four-family
mortgage loans with terms in excess of fifteen years. However, from time to
time, the Bank may retain such loans in its portfolio depending on its interest
rate risk position. At June 30, 1997, 72.5% of the Bank's gross loans had
adjustable interest rates and its fixed-rate mortgage loan portfolio had an
average weighted maturity of 17.25 years. At such date, $39.0 million, or 8.9%,
of the Bank's securities had adjustable interest rates and its securities
portfolio had a weighted average maturity of 3.3 years. At June 30, 1997, the
Bank had $209.1 million of certificates of deposit with maturities of one year
or less and $27.4 million of certificates of deposit over $100,000 ("jumbo
certificates of deposit"). Such jumbo certificates of deposit tend to be less
stable sources of funding as compared to money market, savings, retail checking/
negotiable order of withdrawal ("NOW") accounts and commercial checking accounts
(collectively, "core deposits") and, at June 30, 1997, represented 3.5% of the
Bank's interest-bearing liabilities. As a result, the ratio of the Bank's
interest-earning assets repricing or maturing within one year or less as
compared to its interest-bearing liabilities maturing or repricing in one year
or less ("one year gap position") was positive 3.5%. Therefore, the yield on
interest-earning assets of the Bank may adjust to changes in interest rates
faster than the cost of the Bank's interest-bearing liabilities and the Bank's
net income may be adversely affected during periods of declining interest rates.

     Significant increases in the level of market interest rates also may
adversely affect the fair value of the Bank's securities and other interest-
earning assets. At June 30, 1997, $398.4 million, or 91.1%, of the Bank's
securities had fixed interest rates. Generally, the value of fixed-rate 
interest-earning assets fluctuates inversely with changes in interest rates. As
a result, increases in interest rates could result in decreases in the market
value of fixed-rate interest-earning assets which could adversely affect the
Bank's results of operations if sold. In the case of interest-earning assets
classified as available-for-sale, such increases in interest rates could
adversely affect the Bank's net worth.

     Increases in market interest rates also can affect the type (fixed-rate or
adjustable-rate) and amount of loans originated by the Bank and the average life
of loans and securities, which can adversely impact the yields earned on the
Bank's loan and securities portfolio. In periods of decreasing interest rates,
the average life of loans held by the Bank may be shortened to the extent
increased prepayment activity occurs during such periods which, in turn, may
result in the Bank investing funds from such prepayments in lower yielding
assets. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Management of Interest Rate Risk." In addition,
increases in interest rates would result in interest rates on the Bank's
adjustable-rate loans increasing, thereby resulting in increased loan payment
amounts by the borrowers which, in turn, may result in higher delinquencies on
such loans.

POTENTIAL LOW RETURN ON EQUITY FOLLOWING THE CONVERSION

     At June 30, 1997, the Bank's ratio of net worth to assets was 10.2%. The
Company's equity position will be significantly increased as a result of the
Conversion. On a pro forma basis as of June 30, 1997, assuming the sale of
Common Stock at the midpoint of the Estimated Price Range, the Company's ratio
of

                                       13
equity to assets would exceed 22.8%. The Company's ability to deploy this new
capital through investments in interest-bearing assets, such as loans and
securities, which bear rates of return comparable to its current investments,
will be significantly affected by industry competition for such investments. The
Company currently anticipates that it will take time to prudently deploy such
capital. As a result, the Company's return on equity initially is expected to be
below its historical return on equity and may be below peer group institutions
after the Conversion.

INCREASED LENDING RISKS ASSOCIATED WITH COMMERCIAL REAL ESTATE, MULTI-FAMILY,
CONSTRUCTION AND DEVELOPMENT AND COMMERCIAL LENDING

     At June 30, 1997, the Bank's commercial real estate, multi-family,
construction and development and commercial loan portfolios totaled $68.4
million, or 13.6% of total loans and 7.2% of total interest-earning assets. At
that date, commercial real estate loans totaled $40.7 million, or 8.1% of total
loans, construction and development loans totaled $18.3 million, or 3.6% of
total loans, commercial loans totaled $6.7 million, or 1.3% of total loans, and
multi-family loans totaled $2.7 million, or 0.5% of total loans. Additionally at
such date, the Bank had $21.3 million of outstanding commitments to fund such
loans.

     Although the Bank's level of commercial real estate, multi-family,
construction and development and commercial lending has historically been
relatively modest in comparison to its one- to four-family residential lending,
the Bank is attempting to increase its emphasis on such types of loans.
Commercial real estate and multi-family loans are generally viewed as exposing
the lender to a greater risk of loss than one- to four-family residential loans,
as their repayment is dependent, in large part, on sufficient income from the
property to cover operating expenses and debt service and such loans generally
involve larger loan balances. Economic events and government regulations, which
are outside the control of the borrower or lender, could impact the value of the
security for the loan or the future cash flow of the affected properties.
Additionally, although commercial real estate and multi-family values have
stabilized in recent periods, the decline in real estate and multi-family values
experienced in the Bank's primary market area in the late 1980s and early 1990s
was more pronounced with respect to commercial real estate and multi-family
properties than one- to four-family residential properties. Construction and
development financing is also generally considered to involve a higher degree of
credit risk than long-term financing on improved, owner-occupied real estate as
the risk of loss on such loans is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction compared
to the estimated cost (including interest) of construction. If the estimate of
value proves to be inaccurate, the property securing the loan, when completed,
may have a value which is insufficient to assure full repayment of the loan.

     The Bank also makes secured and unsecured commercial loans. Unsecured
commercial loans are generally considered to involve a higher degree of risk
than secured commercial loans and real estate lending, due to the absence of
collateral securing the loan. Secured commercial loans are generally secured by
real estate, equipment, leases, inventory and accounts receivable. As of June
30, 1997, approximately 53.3% of the Bank's commercial loans were secured by
real estate and 8.0% were secured by other forms of collateral. Accordingly, the
value of the collateral securing the Bank's commercial loans may not be as easy
to ascertain as compared to real property, and such collateral may depreciate
over time and may not be as readily saleable as compared to real property. Both
secured and unsecured commercial loans are often substantially dependent upon
the success of the borrower's business. Accordingly, commercial loans involve a
greater degree of risk than a one- to four-family mortgage loan and other types
of mortgage loans. See "Business of the Bank -- Lending Activities."

     In the event the Bank were to further increase its investment in commercial
real estate, multi-family, construction and development and commercial lending,
the Bank may make additional or increased provisions for loan losses which would
adversely affect the Bank's net income.

                                       14
EFFECTS OF THE ESTABLISHMENT OF THE FOUNDATION

     Pursuant to the Plan, the Bank and the Company intend to voluntarily
establish the Foundation in connection with the Conversion. The Foundation will
be incorporated under Delaware law as a non-stock corporation and will be funded
with shares of Common Stock contributed by the Company. The contribution of
Common Stock to the Foundation will be dilutive to the ownership and voting
interests of stockholders and will have an adverse impact on the reported
earnings of the Company in fiscal 1998, the fiscal year in which the Foundation
will be funded.

     Dilution of Stockholders' Interests. The Company proposes to fund the
Foundation with Common Stock of the Company in an amount equal to 8% of the
Common Stock to be sold in the Conversion. At the minimum, midpoint and maximum
of the Estimated Price Range, the contribution to the Foundation would equal
1,258,000, 1,480,000 and 1,702,000 shares, with a value of $12.6 million, $14.8
million and $17.0 million, respectively, based on the Purchase Price of $10.00
per share. Assuming the sale of Common Stock at the maximum of the Estimated
Price Range, upon completion of the Conversion and establishment of the
Foundation, the Company will have 22,977,000 shares issued and outstanding of
which the Foundation will own 1,702,000 shares, or 7.4%. AS A RESULT, PERSONS
PURCHASING SHARES OF COMMON STOCK IN THE CONVERSION WILL HAVE THEIR OWNERSHIP
AND VOTING INTERESTS IN THE COMPANY DILUTED BY 7.4%, AS COMPARED TO COMPLETING
THE CONVERSION WITHOUT THE FOUNDATION. SEE "PRO FORMA DATA."

     Impact on Earnings. The contribution of Common Stock to the Foundation will
have an adverse impact on the Company's and the Bank's earnings in the year in
which the contribution is made. The Company will recognize the full expense in
the amount of the contribution of Common Stock to the Foundation in the quarter
in which it occurs, which is expected to be the first quarter of 1998. The
amount of the contribution will range from $12.6 million to $17.0 million, based
on the minimum and maximum of the Estimated Price Range. The contribution
expense will be partially offset by the tax benefit related to the expense. The
Company and the Bank have been advised by their independent tax advisors that
the contribution to the Foundation will be tax deductible, subject to an annual
limitation based on 10% of the Company's annual taxable income. Assuming a
contribution of $17.0 million in Common Stock (based on the maximum of the
Estimated Price Range), the Company estimates a net tax effected expense of
$9.4 million (based upon a 45% tax rate). If the Foundation had been established
at June 30, 1997, the Bank would have reported net income of $1.7 million for
the year ended June 30, 1997 rather than reporting net income of $10.7 million
for the year ended June 30, 1997. Management cannot predict earnings for fiscal
1998, but expects that the establishment and funding of the Foundation will have
an adverse impact on the Company's earnings for the quarter in which the
Foundation is funded. In addition to the contribution to the Foundation, the
Bank expects in the future to continue making ordinary charitable contributions
within its community but the Company and the Bank do not currently anticipate
making additional contributions to the Foundation within the first five years
following the initial contribution.

     Tax Considerations. The Company and the Bank have been advised by their
independent tax advisors that an organization created for the above purposes
would qualify as a Section 501(c)(3) exempt organization under the Internal
Revenue Code of 1986, as amended (the "Code"), and would be classified as a
private foundation. The Foundation will submit a request to the Internal Revenue
Service (the "IRS") to be recognized as an exempt organization. The Company and
the Bank have received an opinion of their independent tax advisors that the
Foundation would qualify as a Section 501(c)(3) exempt organization under the
Code. The independent tax advisors' opinion further provides that there is
substantial authority for the position that the Company's contribution of its
own stock to the Foundation would not constitute an act of self-dealing, and
that the Company would be entitled to a deduction in the amount of the fair
market value of the stock at the time of the contribution less the nominal par
value that the Foundation is required to pay to the Company for such stock,
subject to an annual limitation based on 10% of the Company's annual taxable
income. The Company, however, would be able to carry forward any unused portion
of the deduction

                                       15
for five years following the contribution. Thus, while the Company would have
received a charitable contribution deduction of approximately $2.1 million in
1997 (based upon the sale of stock at the maximum of the Estimated Price Range,
a contribution of $17.0 million of Common Stock and the Bank's pre-tax income
for 1997), the Company is permitted under the Code to carryover the excess
contribution in the five following years. Assuming the sale of Common Stock at
the midpoint of the Estimated Price Range, the Company estimates that
substantially all of the deduction should be deductible over the six-year
period. Although the Company and the Bank have received an opinion of
their independent tax advisors that the Company will be entitled to the
deduction for the charitable contribution, there can be no assurances that the
IRS will recognize the Foundation as a Section 501(c)(3) exempt organization or
that the deduction will be permitted. In such event, the Company's tax benefit
related to the Foundation would have to be fully expensed, resulting in a
further reduction in earnings in the year in which the IRS makes such a
determination.

     Comparison of Valuation and Other Factors Assuming the Foundation is Not
Established as Part of the Conversion. The establishment of the Foundation was
taken into account by Keller in determining the estimated pro forma market value
of the Common Stock of the Company. The aggregate price of the shares of Common
Stock being offered in the Subscription and Community Offerings is based upon
the independent appraisal conducted by Keller of the estimated pro forma market
value of the Common Stock of the Company. The pro forma aggregate price of the
Common Stock being offered for sale in the Conversion is currently estimated to
be between $157.3 million and $212.8 million, with a midpoint of $185.0 million.
The pro forma price to book ratio and the pro forma price to earnings ratio, at
and for the year ended June 30, 1997, are 76.10% and 13.16x, respectively, at
the midpoint of the Estimated Price Range. In the event that the Conversion did
not include the Foundation, Keller has estimated that the estimated pro forma
market value of the Common Stock would be $217.2 million at the midpoint based
on a pro forma price to book ratio and the pro forma price to earnings ratio at
76.00% and 13.56x, respectively. The amount of Common Stock being offered for
sale in the Conversion at the midpoint of the Estimated Price Range is
approximately $32.2 million less than the estimated amount of Common Stock that
would be offered in the Conversion without the Foundation based on the estimate
provided by Keller. Accordingly, certain account holders of the Bank who
subscribe to purchase Common Stock in the Subscription Offering would receive
fewer shares depending on the size of a depositor's stock order and the amount
of his or her qualifying deposits in the Bank and the overall level of
subscriptions. See "Comparison of Valuation and Pro Forma Information with No
Foundation." This estimate by Keller was prepared solely for purposes of
providing Eligible Account Holders and subscribers with information with which
to make an informed decision on the Conversion.

     The decrease in the amount of Common Stock being offered as a result of the
contribution of Common Stock to the Foundation will not have a significant
effect on the Company or the Bank's capital position. The Bank's regulatory
capital is significantly in excess of its regulatory capital requirements and
will further exceed such requirements following the Conversion. The Bank's
leverage and risk-based capital ratios at June 30, 1997 were 10.02% and 19.71%,
respectively. Assuming the sale of shares at the midpoint of the Estimated Price
Range, the Bank's pro forma leverage and risk-based capital ratios at June 30,
1997 would be 15.9% and 30.7%, respectively. On a consolidated basis, the
Company's pro forma stockholders' equity would be $262.9 million, or
approximately 22.47% of pro forma consolidated assets, assuming the sale of
shares at the midpoint of the Estimated Price Range and pro forma stockholders'
equity per share and pro forma net earnings per share would be $13.14 and $0.77,
respectively. If the Foundation was not being established in the Conversion,
based on the Keller estimate, the Company's pro forma stockholders' equity would
be approximately $285.8 million, or approximately 24.26% of pro forma
consolidated assets at the midpoint of the estimate, and pro forma stockholder's
equity per share and pro forma net earnings per share would be $13.16 and $0.74,
respectively. See "Comparison of Valuation and Pro Forma Information with No
Foundation."

     Potential Anti-Takeover Effect. Upon completion of the Conversion, the
Foundation will own 7.4% of the total shares of the Company's Common Stock
outstanding. Such shares will be owned solely by the

                                       16
Foundation and the Foundation's Board of Directors will exercise sole voting
power over such shares. As the Foundation's Board of Directors will be comprised
initially of the members of the Board of Trustees of the Bank, management of the
Company and the Bank may benefit to the extent that the Board of Directors of
the Foundation determines to vote the shares of Common Stock held by the
Foundation in favor of proposals supported by the Company and the Bank.
Furthermore, in such an event, when the Foundation's shares are combined with
shares purchased directly by officers and directors of the Company, shares held
by the Stock Program trust, and shares held by the ESOP trust, the aggregate of
such shares could exceed 20% of the Company's outstanding Common Stock, which
could enable management to defeat stockholder proposals requiring 80% approval.
Consequently, such potential voting control might preclude takeover attempts
that certain stockholders deem to be in their best interest, and might tend to
perpetuate management. However, since the ESOP shares are allocated to all
eligible employees of the Bank, and any unallocated shares will be voted by an
independent trustee, and because the Stock Program must first be approved by
stockholders no sooner than six months following completion of the Conversion,
and awards under such proposed plans may be granted to employees other than
executive officers and trustees, management of the Company does not expect to
have voting control of all shares covered by the ESOP and other stock-based
benefit plans. See " - Certain Anti-Takeover Provisions - Voting Control of
Officers and Trustees." Moreover, as the Foundation sells its shares of Common
Stock over time, its ownership interest and voting power in the Company is
expected to decrease.

     Potential Challenges. The establishment and funding of a charitable
foundation as part of a conversion of a mutual savings institution to stock form
is innovative and has, to the Bank's knowledge, been done in a limited number of
instances. As such, the Foundation is subject to the Superintendent's approval
of the Conversion and the FDIC's nonobjection to the Conversion and may also be
subject to potential challenges notwithstanding that the Board of Directors of
the Company and the Board of Trustees of the Bank have carefully considered the
various factors involved in the establishment of the Foundation in reaching
their determination to establish the Foundation as part of the Conversion. See
"The Conversion - Establishment of Charitable Foundation - Purpose of the
Foundation." If challenges were to be instituted seeking to require the Bank to
eliminate establishment of the Foundation in connection with the Conversion, no
assurances can be made that the resolution of such challenges would not result
in a delay in the consummation of the Conversion or that any objecting persons
would not be ultimately successful in obtaining such removal or other relief
against the Company or the Bank. Additionally, if the Company and the Bank are
forced to eliminate the Foundation, the Company may be required to resolicit
subscribers in the Offerings.

HIGHLY COMPETITIVE INDUSTRY AND GEOGRAPHIC AREA

     The Bank faces significant competition in its primary market area both in
attracting deposits and in originating loans. The Bank had a lending market
share of approximately 7.2% in the Borough of Staten Island for 1996. The Bank's
share of deposits in the Borough of Staten Island amounted to approximately
14.2% in June of 1996, according to a survey by a nationally-recognized bank
consulting firm. While the Bank's primary market area generally consists of the
Borough of Staten Island and the area surrounding its branch office in the
Borough of Brooklyn, the Bank may, in the future, expand its market area to
include other areas of the New York City metropolitan area. The New York City
metropolitan area is a highly competitive market for financial services. The
Bank faces direct competition from a significant number of financial
institutions operating in its market area, many with a state-wide or regional
presence, and, in some cases, a national presence. This competition arises from
commercial banks, savings banks, mortgage banking companies, credit unions and
other providers of financial services, many of which are significantly larger
than the Bank and, therefore, have greater financial and marketing resources
than those of the Bank. There are eleven depository institutions with retail
operations located in the Borough of Staten Island. See "Business of the Bank -
Market Area."

                                       17
WEAKNESS IN LOCAL ECONOMY

     During the late 1980s to the early 1990s, the New York City metropolitan
area experienced reduced employment as a result of layoffs in the financial
services industry, corporate relocations and the general decline of the local,
regional and national economies. Additionally, during that period the area
experienced a general weakening of real estate values and a decline in home
sales and construction. While Staten Island's significant concentration of
government employees somewhat mitigated the impact of the recession, the
financial services industry historically also has been a significant source of
employment in the Bank's primary market area. As a result, loan delinquencies
increased and the underlying values of properties securing non-performing loans
made by lending institutions generally declined resulting in substantial losses
to some institutions. In 1993, however, the economy of the Bank's primary market
area began to stabilize as demonstrated by improved employment and economic
indicators. Since such time, residential real estate values in the Bank's
primary market have stabilized and recently have begun to improve. However,
commercial real estate values, which previously experienced the greatest
declines during the late 1980s and early 1990s, have only recently begun to
stabilize and have not improved as much as residential real estate and generally
remain below the values experienced in the late 1980s.

     Although the current national and local economic conditions have
significantly improved since the early 1990s, there can be no assurances that
conditions in the local economy, national economy, or real estate market in
general will not deteriorate and adversely affect the financial condition and
results of operations of the Bank. Based on information available to management
at this time, management believes the current allowance for loan losses is
adequate. Although management of the Bank believes that the current allowance
for loan losses is adequate in light of current economic conditions, many
factors may require additions to the allowance for loan losses in future periods
above those reasonably anticipated. Future adjustments to the allowance also may
be necessary if economic or other conditions differ substantially from those
underlying the assumptions used in making such estimates. See "Business of the
Bank--Allowance for Loan Losses."

CERTAIN ANTI-TAKEOVER PROVISIONS

     Provisions in the Company's and the Bank's Governing Instruments. Certain
provisions of the Company's Certificate of Incorporation and Bylaws,
particularly a provision limiting voting rights, and the Bank's Restated
Organization Certificate (the "Restated Organization Certificate") and Bylaws,
as well as certain federal and state regulations, assist the Company in
maintaining its status as an independent publicly owned corporation. These
provisions provide for, among other things, supermajority voting, staggered
boards of directors, noncumulative voting for directors, limits on the calling
of special meetings of shareholders, limits on the ability to vote Common Stock
in excess of 10% of outstanding shares, and certain uniform price provisions for
certain business combinations. The New York State Banking Board ("NYBB")
regulations prohibit, for a period of one year following the date of conversion,
offers to acquire or the acquisition of beneficial ownership of more than 10% of
the outstanding stock of the Bank. The Bank's Restated Organization Certificate
also prohibits, for three years, the acquisition, directly or indirectly, of the
beneficial ownership of more than 10% of the Bank's equity securities. Any
person, or group acting in concert, violating this restriction may not vote the
Bank's or Company's securities in excess of 10%. These provisions in the Bank's
and the Company's governing instruments may discourage potential proxy contests
and other potential takeover attempts, particularly those which have not been
negotiated with the Board of Directors, and thus, generally may serve to
perpetuate current management. See "Restrictions on Acquisitions of the Company
and the Bank."

     Voting Control of Officers and Trustees. Trustees, directors and executive
officers of the Bank and the Company expect to purchase approximately 1.8% or
1.4% of the shares of Common Stock to be issued in the Conversion, based upon
the minimum and the maximum of the Estimated Price Range, respectively,
exclusive of shares that may be attributable to directors and officers through
the Stock Program, the Stock Option Plan and the ESOP, which may give directors,
trustees, executive officers and employees the potential

                                       18
to control the voting of an additional 20.0% of the Company's Common Stock on a
fully diluted basis at the maximum of the Estimated Price Range. In addition,
the Foundation will be funded with a contribution by the Company equal to 8% of
the Common Stock sold in the Conversion, may be voted as determined by the
Directors of the Foundation who are also Directors and officers of the Company
and Bank. Management's potential voting control could, together with additional
stockholder support, defeat stockholder proposals requiring 80% approval of
stockholders. As a result, this potential voting control may preclude takeover
attempts that certain stockholders deem to be in their best interest and may
tend to perpetuate existing management. See "Restrictions on Acquisition of the
Company and the Bank - Restrictions in the Company's Certificate of
Incorporation and Bylaws" and "The Conversion - Establishment of Charitable
Foundation."

ABSENCE OF MARKET FOR COMMON STOCK

     The Company, as a newly organized company, has never issued capital stock,
and consequently, there is no established market for its Common Stock at this
time. The Company has applied to have its Common Stock quoted on the [NASDAQ
NATIONAL MARKET] under the symbol "____." A public trading market having the
desirable characteristics of depth, liquidity and orderliness depends upon the
existence of willing buyers and sellers at any given time, the presence of which
is dependent upon the individual decisions of buyers and sellers over which
neither the Company nor any market maker has control. Accordingly, there can be
no assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, will continue, nor is there any assurance that
purchasers of the Common Stock will be able to sell their shares at or above the
Purchase Price. In the event a liquid market for the Common Stock does not
develop or market makers for the Common Stock discontinue their activities, such
occurrences may have an adverse impact on the liquidity of the Common Stock and
the market value of the Common Stock.

STOCK-BASED BENEFITS TO MANAGEMENT, EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL
PAYMENTS

     Stock Program. The Company intends to adopt the Stock Program which would
provide stock grants of Common Stock to non-employee trustees and directors and
selected officers and employees of the Company and Bank and intends to seek
stockholder approval of such plan at a meeting of stockholders following the
Conversion, which may be held no earlier than six months after completion of the
Conversion. The Company expects to fund Stock Program with Common Stock in an
amount equal to 4% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation, or 679,320 shares and 919,080 shares
at the minimum and maximum of the Estimated Price Range, respectively. These
shares will be provided to the Stock Program either through open market
purchases by a trust established for the Stock Program or from authorized but
unissued Common Stock. See "- Possible Dilutive Effect of Stock Program and
Stock Option Plan."

     Although no specific award determinations have been made, the Company
anticipates that it will provide awards under the Stock Program to the trustees,
directors and selected officers and employees of the Company and Bank to the
extent permitted by applicable regulations. Current NYBB and FDIC regulations
provide that, to the extent any non-tax qualified stock or stock option plan is
implemented within one year after conversion, no individual may receive more
than 25% of the shares of any such stock-based benefit plan and non-employee
directors or trustees may not receive more than 5% individually, or 30% in the
aggregate, of the shares awarded under any such plan. The shares granted under
the Stock Program will be awarded at no cost to the recipients. Under the terms
of the Stock Program, an independent trustee will vote unallocated shares in the
same proportion as it receives instructions from recipients with respect to
allocated shares which have not been earned and distributed. Recipients will
vote allocated shares. The plan trustee will not vote allocated shares which
have not been distributed if it does not receive instructions from the
recipient. The specific terms of the Stock Program intended to be adopted and
the amounts of awards thereunder have not yet been determined by the Board of
Directors, and any such determination will include consideration of various
factors, including but not limited to, the financial condition of the Company,
current and past performance of plan participants and tax and securities law and
regulation requirements. The stock-

                                       19
based benefits provided under the Stock Program and Stock Option Plan, discussed
below, may be provided under separate plans established for officers and
employees and non-employee trustees and directors or such benefits may be
provided for under a single master stock-based benefit plan adopted by the
Company which would incorporate the benefits and features of the separate plans
(the "Master Stock-Based Benefit Plan"). Additionally, the granting or vesting
of awards under such benefit plans may be conditioned upon the achievement of
individual or company-wide performance goals, including the achievement by the
Company or Bank of specified levels of net income or returns on equity or
assets. The implementation of the Stock Program will likely result in increased
compensation expenses to the Company and may have a dilutive effect on existing
stockholders. See "Management of the Bank - Benefit Plans - Stock Program" and
"- Possible Dilutive Effect of Stock Program and Stock Option Plan."

     Stock Option Plan. The Company also intends to adopt a stock-based benefit
plan which would provide options to purchase Common Stock ("Stock Options") to
officers, employees and non-employee trustees and directors of the Company and
Bank and intends to seek stockholder approval of such plan at a meeting of
stockholders following the Conversion, which may be held no earlier than six
months after completion of the Conversion. Although no specific determinations
have been made, the Company expects that non-employee directors and selected
officers and employees of the Company and Bank will be granted options to
purchase Common Stock in an amount equal to 10% of the Common Stock issued in
connection with the Conversion, including shares issued to the Foundation (or
1,698,300 shares and 2,297,700 shares at the minimum and maximum of the
Estimated Price Range, respectively). It is currently intended that the exercise
price of all Stock Options will be at least equal to the fair market value of
the underlying Common Stock on the date of grant. Stock Options will permit such
trustees, directors, officers and employees to benefit from any increase in the
market value of the shares in excess of the exercise price at the time of
exercise. The specific terms of the Stock Option Plan intended to be adopted and
amounts and awards thereunder have not yet been determined by the Board and any
such determination will include consideration of various factors, including but
not limited to, the financial condition of the Company, current and past
performance of award recipients and tax and securities law and regulation
requirements. The Stock Options discussed above may be provided under a single
stock option plan, may be granted under Stock Option Plan for officers and
employees and non-employee directors or may be provided for under the Master
Stock-Based Benefit Plan which would incorporate the features and benefits of
the Stock Option Plan and the Stock Program, and benefits awarded thereunder may
be conditioned upon the achievement of individual or company-wide performance
goals, including the achievement by the Company or Bank of specified levels of
net income or returns on equity or assets. The implementation of such Stock
Option Plan may have a dilutive effect upon existing stockholders of the Company
to the extent option exercises are satisfied with authorized but unissued shares
and will likely result in increased compensation expenses to the Company. See "-
Possible Dilutive Effect of Stock Program and Stock Option" and "Management of
the Bank - Benefit Plans - Stock Option Plan."

     Change In Control Provisions. The Company and the Bank intend to enter into
employment or change in control agreements with certain officers of the Bank and
Company which will provide for benefits and cash payments in the event of their
termination following a change in control of the Company or Bank. These
provisions may have the effect of increasing the cost of acquiring the Company
or Bank, thereby discouraging future attempts to take over the Company or the
Bank. Additionally, the Bank intends to adopt an employee severance compensation
plan, which similarly provides a cash payment and benefits to eligible employees
upon such employees' termination following a change in control of the Company or
Bank, which also may have the effect of increasing the cost of acquiring the
Company or Bank. Based on current salaries, cash payments to be paid in the
event of a change in control pursuant to the terms of the employment agreements,
change in control agreements and the employee severance compensation plan would
be approximately $___ million. However, the actual amount to be paid in the
event of a change in control of the Bank or the Company cannot be estimated at
this time because the actual amount is based on the average salary of the
employee and other factors existing at the time of the change in control. See
"Restrictions on Acquisition of the Company and the Bank- Restrictions in the
Company's Certificate of Incorporation and

                                       20
Bylaws," "Management of the Bank - Employment Agreements," "- Change in Control
Agreements," "- Employee Severance Compensation Plan," "- Benefit Plans - Stock
Option Plan" and "- Benefit Plans - Stock Program."

POSSIBLE DILUTIVE EFFECT OF STOCK PROGRAM AND STOCK OPTION PLAN

     Following the Conversion, the Stock Program will acquire an amount of
shares equal to 4% of the shares of Common Stock issued in the Conversion,
either through open market purchases or the issuance of authorized but unissued
shares of Common Stock from the Company. If the Stock Program is funded by the
issuance of authorized but unissued shares, the voting interests of existing
shareholders will be diluted by 3.8%. Also following the Conversion, the Company
intends to implement the Stock Option Plan which will provide trustees,
directors and selected employees of the Company and the Bank with Stock Options
to purchase authorized but unissued shares in an amount equal to 10% of the
Common Stock issued in the Conversion. If all of the Stock Options intended to
be granted were to be exercised using authorized but unissued Common Stock and
if the Stock Program were funded with authorized but unissued shares, the voting
interests of existing stockholders would be diluted by 12.3%.

POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS

     The Bank has received an opinion of Keller that subscription rights granted
to Eligible Account Holders have no value. However, this opinion is not binding
on the IRS. If the subscription rights granted to Eligible Account Holders or
Supplemental Eligible Account Holders are deemed to have an ascertainable value,
such recipients could be taxed upon receipt or exercise of such subscription
rights. Additionally, the Bank could recognize a gain for tax purposes on such
distribution. Whether subscription rights are considered to have ascertainable
value is an inherently factual determination. See "The Conversion - Effects of
Conversion" and "- Tax Aspects."

POSSIBLE INCREASE IN ESTIMATED PRICE RANGE AND NUMBER OF SHARES ISSUED

     The number of shares to be sold in the Conversion may be increased as a
result of an increase in the Estimated Price Range of up to 15% to reflect
changes in market and financial conditions following the commencement of the
Subscription and Community Offerings. In the event that the Estimated Price
Range is so increased, it is expected that the Company will sell up to
24,466,250 shares of Common Stock at the Purchase Price for an aggregate
purchase price of up to $244,662,500 which, when aggregated with the shares
contributed to the Foundation will result in the issuance of up to 26,423,500
shares. An increase in the number of shares issued will decrease a subscriber's
pro forma net earnings per share and stockholders' equity per share and will
increase the Company's pro forma consolidated stockholders' equity and net
earnings. Such an increase will also increase the Purchase Price as a percentage
of pro forma stockholders' equity per share and net earnings per share.

ROLE OF THE CONVERSION AGENT

     The Bank has engaged Sandler O'Neill as a conversion agent and Sandler
O'Neill has agreed to assist the Bank and the Company in its solicitation of
subscriptions and purchase orders for Common Stock in the Offerings. Sandler
O'Neill has not prepared any report or opinion constituting recommendations or
advice to the Bank. In addition, Sandler O'Neill has expressed no opinion as to
the prices at which Common Stock to be issued in the Offerings may trade.
Furthermore, Sandler O'Neill has not verified the accuracy or completeness of
the information contained in the Prospectus or the Proxy Statement. See "The
Conversion - Plan of Distribution," "- Marketing and Underwriting Arrangements."

                                       21
POTENTIAL DELAYS OF CONSUMMATION OF THE CONVERSION

     Orders submitted in the Subscription Offering, Community Offering and/or
Syndicated Community Offering are irrevocable. The Company and the Bank expect
to complete the Conversion within the time periods indicated in this Prospectus.
Nevertheless, it is possible that several factors, including, but not limited
to, a delay in receiving regulatory approval of the final updated appraisal
prepared by Keller, a delay in processing orders in the event the Offerings are
oversubscribed or a delay caused by regulatory or legal challenges to the
establishment and funding of the Foundation or other actions taken in connection
with the Conversion could significantly delay the completion of the Conversion.
Subscribers will have no access to subscription funds and/or shares of Common
Stock until the Conversion is completed or terminated. In the event the
Conversion is terminated, subscribers will be refunded their subscription funds,
together with interest at a rate equal to the Bank's interest rate paid on
passbook accounts, or will have their withdrawal authorization terminated. See
"The Conversion."

                        RICHMOND COUNTY FINANCIAL CORP.

     Richmond County Financial Corp. is a Delaware Corporation recently
organized at the direction of the Board of Trustees of the Bank for the purpose
of acquiring all of the capital stock of the Bank to be issued in the
Conversion. The Company expects to receive approval from the Office of Thrift
Supervision ("OTS") to become a savings and loan holding company and, upon
completion of the Conversion, will be subject to regulation by the OTS. See "The
Conversion - General" and "Regulation and Supervision - Holding Company
Regulation." Upon consummation of the Conversion, the Company will have no
significant assets other than all of the shares of the Bank's capital stock
acquired in the Conversion and an amount equal to 50% of the net proceeds of the
Conversion, including the loan to the ESOP, and will have no significant
liabilities. The Company intends to use a portion of the net proceeds it retains
to loan to the ESOP funds to enable the ESOP to purchase up to 8% of the stock
issued in connection with the Conversion, including shares issued to the
Foundation. The remaining net proceeds will be used for general business
activities, including the funding of the Stock Program and Stock Option Plan.
Initially, net proceeds are expected to be invested by the Company in primarily
mortgage-backed and mortgage-related securities and investment-grade debt and
equity securities. See "Use of Proceeds."

     Concurrent with the organization of the Company, the Company has hired a
President and Chief Operating Officer and a Chief Financial Officer and
Secretary, both of whom were not previously employed by the Bank but have
significant experience in the financial services industry. The management of the
Holding Company is set forth under "Management of the Company." Initially, the
Company will neither own nor lease any property, but will instead use the
premises, equipment and furniture of the Bank. At the present time, the Company
does not intend to employ any persons other than the current officers of the
Company but will utilize the support staff of the Bank from time to time.
Additional employees will be hired as appropriate to the extent the Company
expands its business in the future.

     Management believes that the holding company structure will provide the
Company additional flexibility to diversify its business activities and to
expand its geographical presence through existing or newly formed subsidiaries
(which subsidiaries could be financial institutions), or through acquisitions of
or mergers with other financial institutions and financial services related
companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities (other than a lease on a public
accommodation office to be opened on Staten Island in 1998 and plans to open
new branch offices on Staten Island in 1998), the Company will be in a
position after the Conversion, subject to regulatory limitations and the
Company's financial position, to take advantage of any such acquisition and
expansion opportunities that may arise. The initial activities of the Company
are anticipated to be funded by the proceeds to be retained by the Company,
income thereon and through dividends from the Bank.

                                       22
The Company's executive office is located at the administrative offices of
the Bank, 1214 Castleton Avenue, Staten Island, New York 10310. Its telephone
number is (718) 448-2800.

                         RICHMOND COUNTY SAVINGS BANK

     The Bank was organized in 1886 as a New York State chartered mutual savings
bank. The Bank has long standing ties to Staten Island with over 111 years of
continuous service to the residents and businesses of Staten Island and has
served the area around its office in Brooklyn for over 20 years. The Bank's
deposit accounts are insured to the maximum allowable amount by the Bank
Insurance Fund ("BIF") and SAIF as administered by the FDIC. Including the
Bank's principal office, which is located in the Borough of Staten Island, the
Bank services its customers from twelve full service banking facilities located
in the Borough of Staten Island, and one full service banking facility located
in the Borough of Brooklyn. The Bank intends to open one public accommodation
office in Staten Island during 1998 and also is considering opening two new 
full-service branches. With the exception of the lease on the new public
accommodation office, there are no current arrangements, understandings or
agreements, written or oral, regarding such new offices, and no assurances can
be made that such offices will be opened. At June 30, 1997, the Bank had total
assets of $993.4 million, total deposits of $884.5 million, net worth of $100.9
million and had a leverage capital ratio of 10.02% and a total risk-based
capital ratio of 19.71%. See "Regulation and Supervision--FDIC Regulations--
Capital Requirements."

     The Bank is a community-oriented savings institution whose businesses
primarily consist of accepting deposits from customers in its primary market
area consisting of Staten Island and the area around its branch office in
Brooklyn and investing those funds in mortgage loans secured by one- to four-
family residences and commercial properties and construction and development and
commercial loans, home equity, student and consumer loans and in mortgage-backed
and mortgage related securities and debt and equity securities. The Bank's
primary market area consists of the Borough of Staten Island and the area around
its branch office in the Borough of Brooklyn. See "Business of the Bank -
Lending Activities."

     As of June, 1996, based on a survey by a nationally-recognized bank
consulting firm, the Bank had 14.2% of total deposits in Staten Island, and for
1996, the Bank had a lending market share of approximately 7.2% on Staten
Island, placing the Bank among the leaders in both loans originated and deposits
in Staten Island. The Bank's operating strategy emphasizes customer service,
security and convenience, and the Bank attributes the loyalty of its customer
base to its commitment to maintaining customer satisfaction. The Bank attempts
to set itself apart from its larger competitors by providing the type of
personalized service not generally available from larger banks while offering a
greater variety of products and services than is typically available from
smaller, local depository institutions.

     At June 30, 1997, the Bank's gross loan portfolio totaled $503.3 million,
or 50.7% of total assets, of which $394.6 million were one- to four-family
loans, $2.7 million were multi-family loans, $40.7 million were commercial real
estate loans, $18.3 million were construction and development loans, $6.7
million were commercial loans, $16.7 million were home equity loans and $23.6
million were student and consumer loans. The Bank originates one- to four-family
loans generally secured by properties located in the Bank's primary market area.
See "Business of the Bank - Lending Activities."

     The Bank's securities investment activities primarily consist of
investments in mortgage-backed and mortgage related securities and various
investment-grade debt and equity securities. At June 30, 1997, the Bank's
securities portfolio totaled $437.4 million, or 44.0% of total assets, of which
$47.1 million was categorized as available-for-sale and $390.3 million was
classified as held-to-maturity. At June 30, 1997, the Bank's mortgage-backed and
mortgage related securities portfolio totaled $212.5 million, or 21.4% of total
assets, of which $27.4 million was classified as available-for-sale and $185.1
million was classified as held-to-maturity, and consisted of mortgage-backed
securities, guaranteed or issued by Governmental-sponsored and federal agencies
such as the Government National Mortgage Association ("GNMA"), Fannie

                                       23
Mae ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") and
collateralized mortgaged obligations ("CMOs") issued by FNMA, FHLMC and private
issuers. At June 30, 1997, the Bank's debt securities portfolio totaled $205.2
million, or 20.7% of total assets all of which were classified as held to
maturity. The Bank's debt securities generally consist of United States
Government securities, obligations of FNMA, FHLMC and the Federal Home Loan Bank
(the "FHLB"), obligations of corporate issuers, public utility bonds and bonds
issued by New York State. At June 30, 1997, the Bank's equity securities
portfolio totaled $19.7 million, or 2.0% of total assets, all of which was
classified as available-for-sale. The Bank's equity securities portfolio at such
date consisted primarily of preferred stock. See "Business of the Bank -
Securities Investment Activities."

     At June 30, 1997, the Bank's deposit accounts totaled $884.5 million, or
99.1% of total liabilities, of which $586.5 million, or 65.7%, were comprised of
core deposits. In addition to core deposits, the Bank had $298.1 million of
certificate accounts, or 33.7% of total liabilities, of which $209.1 million
were certificates of deposit with maturities of one year or less and $27.4
million were jumbo certificates of deposit.

     The Bank's executive office is located at 1214 Castleton Avenue, Staten
Island, New York 10310. Its telephone number is (718) 448-2800.

                      RICHMOND COUNTY SAVINGS FOUNDATION

     In furtherance of the Bank's commitment to the communities it serves, the
Bank's Plan of Conversion provides for the establishment of a charitable
foundation in connection with the Conversion. The Plan provides that the Bank
and the Company will create the Richmond County Savings Foundation, which will
be incorporated under Delaware law as a non-stock corporation. The Foundation
will be funded with shares of Common Stock contributed by the Company, as
further described below. The Company and the Bank believe that the funding of
the Foundation with Common Stock of the Company is a means of establishing a
common bond between the Bank and its community and thereby enables the Bank's
community to share in the potential growth and success of the Company over the
long term. While the Bank has made charitable contributions in the past, the
Bank has not previously formed a charitable foundation nor has it made
contributions to charitable organizations of the magnitude of the contribution
that will be made to the Foundation in the Conversion. By further enhancing the
Bank's visibility and reputation in its local community, the Bank believes that
the Foundation will enhance the long-term value of the Bank's community banking
franchise. See "The Conversion - Establishment of Charitable Foundation -
Structure of the Foundation."

     The members of the Foundation will be the Board of Directors of the
Foundation. The authority for the affairs of the Foundation will be vested in
the Board of Directors of the Foundation, which will initially be comprised of
the Board of Trustees of the Bank, who will receive no fees for serving on the
Foundation's Board of Directors. The Board of Directors of the Foundation may be
expanded in the future to include certain members of the community. The
Directors of the Foundation will be responsible for establishing the policies of
the Foundation with respect to grants or donations by the Foundation, consistent
with the purposes for which the Foundation was established. Although no formal
policy governing Foundation grants exists at this time, the Foundation's Board
of Directors will adopt such a policy upon establishment of the Foundation. The
Directors of the Foundation will be responsible for directing the activities of
the Foundation, including the management of the Common Stock held by the
Foundation.

     The Company proposes to fund the Foundation by contributing to the
Foundation immediately following the Conversion a number of shares of authorized
but unissued Common Stock equal to 8% of the Common Stock sold in the Offerings,
or 1,258,000, 1,480,000 and 1,702,000 shares at the minimum, midpoint and
maximum, respectively, of the Estimated Price Range. Such contribution, once

                                       24
made, will not be recoverable by the Company or the Bank. Assuming the sale of
shares at the maximum of the Estimated Price Range and the issuance of shares to
the Foundation, the Company will have 22,977,000 shares issued and outstanding,
of which the Foundation will own 1,702,000 shares, or 7.4%. DUE TO THE ISSUANCE
OF ADDITIONAL SHARES OF COMMON STOCK TO THE FOUNDATION, PERSONS PURCHASING
SHARES IN THE CONVERSION WILL HAVE THEIR OWNERSHIP AND VOTING INTERESTS IN THE
COMPANY DILUTED BY 7.4%. SEE "PRO FORMA DATA." The establishment of the
Foundation was taken into account in determining the estimated pro forma market
value of the Common Stock. In the event the Conversion did not include the
Foundation, Keller has estimated that the pro forma market value of the Common
Stock would be $217.2 million at the midpoint of the Estimated Price Range
rather than $199.8 million. See "Risk Factors - Effects of the Establishment of
the Foundation - Comparison of Valuation and Other Factors Assuming the
Foundation is Not Established as Part of the Conversion" and "Pro Forma Data."

     As a result of the establishment of the Foundation, the Company will
recognize an expense of the full amount of the contribution, offset in part by a
corresponding tax benefit, during the quarter in which the contribution is made,
which is expected to be the first quarter of 1998. Such expense will reduce
earnings and have a material impact on the Company's earnings for the fiscal
year in which it is made. While management cannot predict earnings for fiscal
1998, it expects that the establishment and funding of the Foundation will have
an adverse impact on the Company's earnings for the year in which it is made.
Assuming a contribution of $17.0 million in Common Stock in fiscal 1998, based
on the maximum of the Estimated Price Range and assuming a tax rate of 45%, the
Company estimates a net tax effected expense of $9.4 million. If the Foundation
had been established at June 30, 1997, the Bank would have recorded net income
of $1.7 million, rather than recording net income of $10.7 million for the year
ended June 30, 1997, based on an assumed tax rate of 47%. In addition to the
contribution of Common Stock by the Company to the Foundation, the Bank expects
in the future to continue making ordinary charitable contributions within its
community. The Bank does not anticipate making future charitable contributions
to the Foundation during the first five years following the initial contribution
to the Foundation. For further discussion of the Foundation and its impact on
purchasers in the Conversion, see "Risk Factors - Effects of the Establishment
of the Foundation," "Pro Forma Data" and "The Conversion - Effects of the
Establishment of the Foundation."

     The establishment and funding of a charitable foundation as part of a
conversion of a mutual savings institution to stock form is innovative and has
only been done in a limited number of instances. As such, the establishment of
the Foundation in connection with the Conversion and the Superintendent's
approval and FDIC's non-objection to the Plan of Conversion may be subject to
potential challenges which could result in delays in the Conversion. See "Risk
Factors - Effects of the Establishment of the Foundation - Potential
Challenges."

                                       25
REGULATORY CAPITAL COMPLIANCE

     At June 30, 1997, the Bank exceeded each of its regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the
FDIC capital standards as of June 30, 1997, on an historical and pro forma basis
assuming that the indicated number of shares were sold as of such date and
receipt by the Bank of 50% of the net proceeds. For purposes of the table below,
the amount expected to be borrowed by the ESOP and the cost of its shares
expected to be acquired by the Stock Program are deducted from pro forma
regulatory capital.
Pro Forma at June 30, 1997 
                                                                Based Upon the Sale at $10.00 Per Share
                                                          --------------------------------------------------
                                                             15,725,000 Shares         18,500,000 Shares 
                                     Historical at            (Minimum of the           (Midpoint of the 
                                     June 30, 1997         Estimated Price Range)    Estimated Price Range)
                                ----------------------    -----------------------    -----------------------
                                              Percent                    Percent                    Percent     
                                                 of                         of                         of       
                                  Amount     Assets(2)      Amount      Assets(2)      Amount      Assets(2)
                                ----------   ---------    ----------    ---------    ----------    ---------
                                                      (Dollars in thousands)
GAAP(3) Capital                   $100,865     10.15%       $159,333      15.15%       $169,889      15.99%     
                                  ========     =====        ========      =====        ========      =====
Leverage Capital:                                                                                               
   Capital Level(4)               $ 99,063     10.02%       $157,531      15.04%       $168,067      15.89%     
   Requirement(5)                   39,561      4.00          41,900       4.00          42,323       4.00      
                                  --------     -----        --------      -----        --------      -----      
   Excess                         $ 59,502      6.02%       $115,631      11.04%       $125,764      11.89%     
                                  ========     =====        ========      =====        ========      =====
Tier I Capital:                                                                                                 
   Capital Level(4)               $ 99,063     18.79%       $157,531      28.22%       $168,087      29.81%     
   Requirement                      21,090      4.00          22,330       4.00          22,554       4.00      
                                  --------     -----        --------      -----        --------      -----      
   Excess                         $ 77,973     14.79%       $135,201      24.22%       $145,533      25.81%     
                                  ========     =====        ========      =====        ========      =====
Risk-Based Capital:                                                                                             
   Capital Level(4)(6)            $103,910     19.71%       $162,378      29.09%       $172,934      30.67%     
   Requirement                      42,181      8.00          44,660       8.00          45,107       8.00      
                                  --------     -----        --------      -----        --------      -----      
   Excess                         $ 61,729     11.71%       $117,718      21.09%       $127,827      22.67%     
                                  ========     =====        ========      =====        ========      =====
Pro Forma at June 30, 1997 
                                        Based Upon the Sale at $10.00 Per Share
                                   -------------------------------------------------
                                     21,275,000 Shares          24,466,250 Shares
                                      (Maximum of the          (15% Above Maximum
                                         Estimated              of the Estimated      
                                        Price Range)             Price Range)(1) 
                                   ----------------------    -----------------------
                                                 Percent                   Percent
                                                   of                         of 
                                     Amount     Assets(2)      Amount      Assets(2)
                                   ----------   ---------    ----------    --------- 
                                                      (Dollars in thousands)
GAAP(3) Capital                    $180,445      16.82%      $192,535       17.74% 
                                   ========      =====       ========       =====  
Leverage Capital:                                                                
   Capital Level(4)                $178,643      16.72%      $190,733       17.65% 
   Requirement(5)                    42,745       4.00         43,228        4.00 
                                   --------      -----       --------       -----  
   Excess                          $135,898      12.72%      $147,505       13.65% 
                                   ========      =====       ========       =====  
Tier I Capital:                                                                  
   Capital Level(4)                $178,643      31.37%      $190,733       33.12% 
   Requirement                       22,777       4.00         23,034        4.00 
                                   --------      -----       --------       -----  
   Excess                          $155,866      27.37%      $167,699       29.12% 
                                   ========      =====       ========       =====  
Risk-Based Capital:                                                              
   Capital Level(4)(6)             $183,490      32.22%      $195,580       33.96% 
   Requirement                       45,555       8.00         46,067        8.00 
                                   --------      -----       --------       -----  
   Excess                          $137,935      24.22%      $149,513       25.96% 
                                   ========      =====       ========       =====
(1)    As adjusted to give effect to an increase in the number of shares which
       could occur due to an increase in the Estimated Price Range of up to 15%
       as a result of regulatory considerations or changes in market or general
       financial or economic conditions following the commencement of the
       Subscription and Community Offering.
(2)    Leverage capital levels are shown as a percentage of average assets.
       Risk-based capital levels are calculated on the basis of a percentage of
       risk-weighted assets.
(3)    GAAP defined as Generally Accepted Accounting Principles.
(4)    Pro forma capital levels assume  receipt by the Bank of 50% of the net
       proceeds from the shares of Common Stock sold at the minimum, midpoint
       and maximum of the Estimated Price Range.  These levels also assume
       funding by the Bank of the Stock Program equal to 4% of the Common Stock
       issued and repayment of the Company's loan to the ESOP to enable the ESOP
       to purchase 8% of the Common Stock issued, plus the Common Stock issued
       to the Foundation, valued at the minimum, midpoint and maximum of the
       Estimated Price Range.  See "Management of the Bank - Benefit Plans" for
       a discussion of the Stock Program and ESOP.  With respect to the Stock
       Program, such amounts are assumed to be $5.7 million, $6.7 million, $7.7
       million and $8.8 million at the minimum, midpoint, maximum and maximum,
       as adjusted, of the Estimated Price Range, respectively.  With respect to
       the ESOP loan, such amounts are assumed to be $13.6 million, $16.0
       million, $18.4 million and $21.1 million, at the minimum, midpoint,
       maximum, and maximum, as adjusted, of the Estimated Price Range
       respectively.
(5)    The current leverage capital requirement for savings banks is 3% of total
       adjusted assets for savings banks that receive the highest supervisory
       rating for safety and soundness and that are not experiencing or
       anticipating significant growth.   The current leverage capital ratio
       applicable to all other savings banks is 4% to 5%.  See "Regulation and
       Supervision - FDIC Regulations - Capital Requirements."  The Company will
       not be subject to regulatory capital requirements.
(6)    Assumes net proceeds are invested in assets that carry a risk-weighting
       equal to the actual risk weighting of the Bank's assets as of June 30,
       1997.

                                       26
USE OF PROCEEDS

     Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently anticipated
that the net proceeds from the sale of the Common Stock will be between $152.0
million and $206.6 million (or $238.0 million if the Estimated Price Range is
increased by 15%). See "Pro Forma Data" and "The Conversion - Stock Pricing" as
to the assumptions used to arrive at such amounts. The Company will be unable to
utilize any of the net proceeds of the Offerings until the consummation of the
Conversion.

     The Company will purchase all of the outstanding capital stock of the Bank
to be issued upon Conversion in exchange for 50% of the net proceeds of the
Offerings. Based on net proceeds of $152.0 million to $206.6 million, the
Company expects to utilize between $76.0 million and $103.3 million of net
proceeds to purchase the common stock of the Bank. Such portion of net proceeds
received by the Bank from the Company will be added to the Bank's general funds
which the Bank currently intends to utilize for general corporate purposes,
including investment in loans and securities. The Bank may also use such funds
for the expansion of its facilities, and to expand its operations in its primary
market area and other areas within the New York City metropolitan area through
marketing and business development, acquisitions of other financial
institutions, branch offices or other financial services companies. To the
extent that the Stock Program or Stock Option Plan, which the Company or the
Bank intend to adopt subsequent to the Conversion, are not funded with
authorized but unissued common stock of the Company, the Company or Bank may use
net proceeds from the Conversion to fund the purchase of stock to be awarded
under such plans. See "Risk Factors - Stock-Based Benefits to Management,
Employment Contracts and Change in Control Payments" and "Management of the 
Bank - Benefit Plans - Stock Option Plan" and " - Stock Program."

     The Company intends to use a portion of the net proceeds it retains (i.e.,
50% of the net proceeds, which based on net proceeds of $152.0 million to $206.6
million will be between $76.0 million and $103.3 million) to make a loan
directly to the ESOP to enable the ESOP to purchase in the Conversion, or in the
open market to the extent Common Stock is not available to fill the ESOP's
subscription, 8% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation. Based upon the sale of 15,725,000
shares or 21,275,000 shares at the minimum and maximum of the Estimated Price
Range, and the issuance of shares to the Foundation, the amount of the loan to
the ESOP would be $13.6 million or $18.4 million, respectively (or $21.1 million
if the Estimated Price Range is increased by 15%), with a term of 20 years at
the prevailing prime rate of interest, which currently is 8.50%. The Company and
Bank may alternatively choose to fund the ESOP's stock purchases through a loan
by a third party financial institution. See "Management of the Bank - Benefit
Plans - ESOP." The remaining net proceeds retained by the Company will initially
be invested in mortgage-backed and mortgage related securities and investment-
grade debt and equity securities.

     The net proceeds retained by the Company may also be used to support the
future geographic and operational expansion through increased marketing and
business development efforts, branch acquisitions, the establishment of branch
offices and the acquisition of savings associations and commercial banks or
their assets, including those located within the Bank's market area or
diversification into other banking related businesses. The Company and the Bank
have no current arrangements, understandings or agreements regarding any such
transactions other than the lease on a public accommodation office on Staten
Island to be opened in 1998 and plans to open new branch offices on Staten
Island in 1998. The Company, upon the Conversion, will be a unitary savings and
loan holding company, which under existing laws would not be restricted as to
the types of business activities in which it may engage. See "Regulation and
Supervision - Holding Company Regulation" for a description of certain
regulations applicable to the Company .

                                       27
Upon completion of the Conversion, the Board of Directors of the Company
will have the authority to adopt stock repurchase plans, subject to statutory
and regulatory requirements. Unless approved by the Superintendent, the Company,
pursuant to NYBB regulations, may not repurchase any Common Stock in the first
year after conversion and, during the next two following years, may only
repurchase up to 5% of its outstanding capital stock during each twelve-month
period. Further, the Company may not repurchase any of its Common Stock if the
repurchases would cause the Bank to become "undercapitalized" within the meaning
of the FDIC prompt corrective action regulation. See "Regulation and 
Supervision - Prompt Corrective Regulatory Action." In addition, the FDIC
prohibits an insured mutual state savings bank which has converted from the
mutual to stock form of ownership from repurchasing its capital stock within one
year following the date of its conversion to stock form, except that stock
repurchases of no greater than 5% of a bank's outstanding capital stock may be
repurchased during this one-year period where compelling and valid business
reasons are established to the satisfaction of the FDIC.

     Based upon facts and circumstances following the Conversion and subject to
applicable regulatory requirements, the Board of Directors may determine to
repurchase stock in the future. Such facts and circumstances may include but not
be limited to: (i) market and economic factors such as the price at which the
stock is trading in the market, the volume of trading, the attractiveness of
other investment alternatives in terms of the rate of return and risk involved
in the investment, the ability to increase the book value and/or earnings per
share of the remaining outstanding shares, and the opportunity to improve the
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans; and (iii) any other circumstances in which
repurchases would be in the best interests of the Company and its shareholders.
In the event the Company determines to repurchase stock, such repurchases may be
made at market prices which may be in excess of the Purchase Price in the
Conversion and in excess of the per share book value. To the extent that the
Company repurchases stock at market prices in excess of the per share book
value, such repurchases may have a dilutive effect upon the interests of
existing stockholders. Any stock repurchases will be subject to the
determination of the Board of Directors that both the Company and the Bank will
be capitalized in excess of all applicable regulatory requirements after any
such repurchases and that such capital will be adequate, taking into account,
among other things, the level of non-performing and other risk assets, the
Company's and the Bank's current and projected results of operations and
asset/liability structure, the economic environment, tax and other
considerations. See "The Conversion - Certain Restrictions on Purchase or
Transfer of Shares After Conversion."

                                DIVIDEND POLICY

     Upon Conversion, the Board of Directors of the Company will have the
authority to declare dividends on the Common Stock, subject to statutory and
regulatory requirements. Following the Conversion, the Board of Directors
intends to consider a policy of paying cash dividends on the Common Stock.
However, no decision has been made as to the amount or timing of such dividends,
if any.

     The Bank will not be permitted to pay dividends on its common stock or
repurchase shares of its common stock if its stockholder's equity would be
reduced below the amount required for the liquidation account. See "The
Conversion - Liquidation Rights." Under New York State Banking Law, dividends
may be declared and paid only out of the net profits of the Bank. The approval
of the Superintendent is required if the total of all dividends declared in any
calendar year will exceed net profits for that year plus the retained net
profits of the preceding two years, less any required transfer to surplus or a
fund for the retirement of any preferred stock. In addition, no dividends may be
declared, credited or paid if the effect thereof would cause the Bank's capital
to be reduced below the amount required by the Superintendent or the FDIC. See
"Regulation and Supervision." As of June 30, 1997, the Bank had $59.5 million
available for the payment of dividends without prior approval of the
Superintendent. Subsequent to the Conversion, the availability

                                       28
of the Bank's funds for the payment of dividends may be limited by the
liquidation account. See "The Conversion - Liquidation Rights." Dividends or any
repurchase by the Bank of its stock in excess of the Bank's current and
accumulated earnings could result in the realization by the Bank of taxable
income. See "Federal and State Taxation - Federal Taxation."

     Unlike the Bank, the Company is not subject to the restrictions imposed by
the New York State Banking Law on the payment of dividends to its stockholders,
although the source of such dividends will be, in part, dependent upon dividends
from the Bank in addition to the net proceeds retained by the Company and
earnings thereon. The Company is subject, however, to the requirements of
Delaware law, which generally limit dividends to an amount equal to the excess
of the net assets of the Company (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.

                          MARKET FOR THE COMMON STOCK

     The Company was recently formed and has never issued capital stock. The
Bank, as a mutual institution, has never issued capital stock. The Company has
applied to have its Common Stock quoted on the [NASDAQ NATIONAL MARKET] under
the symbol "____" subject to the completion of the Conversion and compliance
with certain conditions including the presence of at least three registered and
active market makers. The Company will seek to encourage and assist at least
three market makers to make a market in its Common Stock. Making a market
involves maintaining bid and ask quotations and being able, as principal, to
effect transactions in reasonable quantities at those quoted prices, subject to
various securities laws and other regulatory requirements. Sandler O'Neill has
advised the Company that it intends to make a market in the Common Stock
following the completion of the Conversion, but it is under no obligation to do
so. There can be no assurance that the Common Stock will be able to meet the
applicable listing criteria in order to maintain its quotation on the [NASDAQ
NATIONAL MARKET] or that an active and liquid trading market will develop or, if
developed, will be maintained. A public market having the desirable
characteristics of depth, liquidity and orderliness, however, depends upon the
presence in the marketplace of both willing buyers and sellers of Common Stock
at any given time, which is not within the control of the Company. No assurance
can be given that an investor will be able to resell the Common Stock at or
above the Purchase Price of the Common Stock after the Conversion. See "Risk
Factors - Absence of Market for Common Stock."

                                       29
CAPITALIZATION

     The following table presents the historical capitalization of the Bank at
June 30, 1997, and the pro forma consolidated capitalization of the Company
after giving effect to the Conversion, including the issuance of shares to the
Foundation, based upon the sale of the number of shares indicated in the table
and the other assumptions set forth under "Pro Forma Data."
Company Pro Forma Based Upon Sale at $10.00 Per Share
                                             ------------------------------------------------------------------------------------
                                                                                                                    24,466,250
                                                                 15,725,000       18,500,000      21,275,000          Shares
                                                                   Shares           Shares          Shares          (15% above
                                                                 (Minimum of     (Midpoint of    (Maximum of        Maximum of
                                                 Bank             Estimated        Estimated       Estimated         Estimated
                                              Historical         Price Range)     Price Range)    Price Range)    Price Range)(1)
                                             -------------       -------------   -------------   -------------   ----------------
                                                                          (In thousands)
Total deposits(2).........................     $   884,531         $   884,531     $   884,531     $   884,531     $   884,531
                                               ===========         ===========     ===========     ===========     ===========
Stockholders' equity:
  Preferred Stock, $.01 par value,
    5,000,000 shares authorized;
    none to be issued.....................     $        --         $        --     $        --     $        --     $        --
  Common Stock, $.01 par value,
    75,000,000 shares authorized;
    shares to be issued as reflected......              --                 170             200             230             264
  Additional paid-in capital(3)...........              --             151,863         179,139         206,416         237,784
  Net worth(4)............................         100,555             100,555         100,555         100,555         100,555
Less:
   Expense of contributions to
      Foundation..........................              --              12,580          14,800          17,020          19,573
Plus:
   Tax effect of contribution
      to Foundation(5)....................              --              (6,919)         (8,140)         (9,361)        (10,765)

   Net unrealized gain on securities
      available-for-sale, net of taxes....             310                 310             310             310             310

Less:
   Common Stock acquired by the
     ESOP(6)..............................              --             (13,586)        (15,984)        (18,381)        (21,139)

   Common Stock acquired by the
     Stock Program(7).....................              --              (6,793)         (7,992)         (9,190)        (10,569)
                                               -----------         -----------     -----------     -----------     -----------
Total stockholders' equity................     $   100,865         $   238,180     $   262,888     $   287,599     $   316,013
                                               ===========         ===========     ===========     ===========     ===========
____________________

(1)    As adjusted to give effect to an increase in the number of shares which
       could occur due to an increase in the Estimated Price Range of up to 15%
       as a result of regulatory considerations or changes in market or general
       financial and economic conditions following the commencement of the
       Subscription and Community Offerings.
(2)    Does not reflect withdrawals from deposit accounts for the purchase of
       Common Stock in the Conversion.  Such withdrawals would reduce pro forma
       deposits by the amount of such withdrawals.
(3)    Reflects the issuance of shares sold in the Offerings and the issuance of
       additional shares of Common Stock to the Foundation at a value of $10.00
       per share.  No effect has been given to the issuance of additional shares
       of Common Stock pursuant to the Company's Stock Option Plan intended to
       be adopted by the Company and presented for approval of stockholders at a
       meeting of stockholders following the Conversion.  The Stock Option Plan
       would provide the grant of Stock Options to purchase an amount of Common
       Stock equal to 10% of the shares of Common Stock issued in the
       Conversion.  See "Management of the Bank - Benefit Plans - Stock Option
       Plan."  Additional paid-in capital has been adjusted to reflect the
       issuance of additional shares of Common Stock to the Foundation at the
       Purchase Price.
(4)    The net worth of the Bank will be substantially restricted after the
       Conversion.  See "The Conversion - Liquidation Rights."
(5)    Represents the tax effect of the contribution of Common Stock to the
       Foundation based on a 45% tax rate.  The realization of the deferred tax
       benefit is limited annually to 10% of the Company's annual taxable
       income, subject to the ability of the Company to carry forward any unused
       portion of the deduction for five years following the year in which the
       contribution is made.
(6)    Assumes that 8% of the shares issued in connection with the Conversion,
       including shares issued to the Foundation, will be purchased by the ESOP
       and the funds used to acquire the ESOP shares will be borrowed from the
       Company.  The Common Stock acquired by the ESOP is reflected as a
       reduction of stockholders' equity.  See "Management of the Bank - Benefit
       Plans - ESOP" and "- Benefit Plans -Stock Program."
(7)    Assumes that, subsequent to the Conversion, an amount equal to 4% of the
       shares of Common Stock sold in the Conversion and issued to the
       Foundation is purchased by the Stock Program through open market
       purchases.  The Common Stock purchased by the Stock Program is reflected
       as a reduction of stockholder's equity.  See "Risk Factors - Possible
       Dilutive Effect of Stock Program and Stock Option Plan," Footnote 2 to
       the tables under "Pro Forma Data" and "Management of the Bank - Benefit
       Plans - Stock Program."

                                       30
PRO FORMA DATA

     The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $152.0 million and $206.6 million based upon
the following assumptions: (i) $3.0 million will be sold to executive officers,
Trustees, Directors and employees of the Bank and Company, the ESOP will
purchase 8% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation, and the remaining shares will be sold
in the Subscription and Community Offerings; (ii) Sandler O'Neill will receive a
fee equal to 1.75% of the aggregate Purchase Price of the shares sold in the
Subscription Offering and Community Offering, except that no fee will be paid
with respect to shares purchased by the Employee Plans, including the ESOP,
officers, employees, Trustees and Directors of the Bank and Company and members
of their immediate families; (iii) the Company will issue to the Foundation an
amount of Common Stock equal to 8% of the Common Stock sold in the Conversion
from authorized but unissued shares; and (iv) Conversion expenses, excluding the
marketing fees paid to Sandler O'Neill, will be approximately $2.8 million.
Actual Conversion expenses may vary from those estimated.

     Pro forma consolidated net income of the Company for the year ended June
30, 1997 has been calculated as if the Common Stock had been sold at the
beginning of the respective periods and the net proceeds had been invested at
5.45% (the one year U.S. Treasury bill rate as of June 30, 1997). The tables do
not reflect the effect of withdrawals from deposit accounts for the purchase of
Common Stock. The pro forma after-tax yield for the Company and the Bank is
assumed to be 3.0% for the year ended June 30, 1997 (based on an assumed tax
rate of 45.0%). Historical and pro forma per share amounts have been calculated
by dividing historical and pro forma amounts by the indicated number of shares
of Common Stock, as adjusted to give effect to the purchase of shares by the
ESOP and the effect of the issuance of shares to the Foundation. No effect has
been given in the pro forma stockholders' equity calculations for the assumed
earnings on the net proceeds. As discussed under "Use of Proceeds," the Company
will retain 50% of the net Conversion proceeds.

     The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company. The pro forma stockholders' equity is not intended to represent the
fair market value of the Common Stock and may be greater than amounts that would
be available for distribution to stockholders in the event of liquidation.

     The following tables summarize historical data of the Bank and pro forma
data of the Company at or for the year ended June 30, 1997, based on the
assumptions set forth above and in the table and should not be used as a basis
for projections of market value of the Common Stock following the Conversion.
The tables below give effect to the Stock Program, which is expected to be
adopted by the Company following the Conversion and presented to stockholders
for approval at a meeting of stockholders. See Footnote 2 to the tables and
"Management of the Bank - Benefit Plans - Stock Program." No effect has been
given in the tables to the possible issuance of additional shares reserved for
future issuance pursuant to the Stock Option Plan to be adopted by the Board of
Directors of the Company and presented to stockholders for approval at a meeting
of stockholders, nor does book value as presented give any effect to the
liquidation account to be established for the benefit of Eligible Account
Holders or, in the event of liquidation of the Bank, to the tax effect of the
bad debt reserve and other factors. See Footnote 3 to the tables below, "The
Conversion - Liquidation Rights" and "Management of the Bank - Benefit Plans -
Stock Option Plan." THE FOLLOWING TABLE GIVES EFFECT TO THE ISSUANCE OF
AUTHORIZED BUT UNISSUED SHARES OF THE COMPANY'S COMMON STOCK TO THE FOUNDATION
CONCURRENTLY WITH THE COMPLETION OF THE CONVERSION. THE VALUATION RANGE, AS SET
FORTH HEREIN AND IN THE TABLE BELOW, TAKES INTO ACCOUNT THE DILUTIVE IMPACT OF
THE ISSUANCE OF SHARES TO THE FOUNDATION.

                                       31
At or For the Year Ended June 30, 1997
                                     ----------------------------------------------------------------------------------------------
                                         15,725,000               18,500,000                  21,275,000             24,466,250
                                       Shares Sold at           Shares Sold at              Shares Sold at         Shares Sold at
                                      $10.00 Per Share         $10.00 Per Share            $10.00 Per Share       $10.00 Per Share
                                         (Minimum                 (Midpoint                   (Maximum           (15% above Maximum
                                     of Estimated Price        of Estimated Price        of Estimated Price      of Estimated Price
                                           Range)                    Range)                    Range)                  Range)(7)
                                     ----------------------------------------------------------------------------------------------
                                                            (In Thousands, Except Per Share Amounts)
Gross proceeds.......................      $   157,250               $   185,000               $   212,750              $   244,662
Plus:  Shares acquired by
 Richmond County Savings
 Foundation (equal to 8% of
 stock issued in Conversion).........           12,580                    14,800                    17,020                   19,573
                                           -----------               -----------               -----------              -----------
Pro forma market capitalization......      $   169,830               $   199,800               $   229,770              $   264,235
                                           ===========               ===========               ===========              ===========
Gross proceeds.......................      $   157,250               $   185,000               $   212,750              $   244,662
Less:  Offering expenses and
          commissions................           (5,216)                   (5,660)                   (6,103)                  (6,614)

                                           -----------               -----------               -----------              -----------
Estimated net proceeds...............          152,034                   179,340                   206,647                  238,048
Less:  Common Stock purchased                  
         by ESOP.....................          (13,586)                  (15,984)                  (18,381)                 (21,138)

       Common Stock purchased
         by Stock Program............           (6,793)                   (7,992)                   (9,190)                 (10,569)

                                           -----------               -----------               -----------              -----------
   Estimated net proceeds,
    as adjusted......................      $   131,655               $   155,364               $   179,076              $   206,341
                                           ===========               ===========               ===========              ===========
Net income(1):
   Historical........................      $    10,725               $    10,725               $    10,725              $    10,725
   Pro forma income on net
    proceeds, as adjusted............            3,916                     4,627                     5,337                    6,155
   Pro forma ESOP
    adjustment(2)....................             (373)                     (439)                     (505)                    (581)
   Pro forma Stock Program
    adjustment(3)....................             (747)                     (879)                   (1,011)                  (1,162)
                                           -----------               -----------               -----------              -----------
         Pro forma net income........      $    13,521               $    14,034               $    14,546              $    15,137
                                           ===========               ===========               ===========              ===========
Per share net income(1):
   Historical........................      $      0.63               $      0.58               $      0.50              $      0.43
   Pro forma income on net
    proceeds, as adjusted............             0.25                      0.25                      0.25                     0.25
   Pro forma ESOP
    adjustment(2)....................            (0.02)                    (0.02)                    (0.02)                   (0.02)
   Pro forma Stock Program
    adjustment(3)....................            (0.04)                    (0.04)                    (0.04)                   (0.04)
                                           -----------               -----------               -----------              -----------
         Pro forma net
          income per share...........      $      0.82               $      0.77               $      0.69              $      0.62
                                           ===========               ===========               ===========              ===========
Stockholders' equity:
   Historical........................      $   100,865               $   100,865               $   100,865              $   100,865
   Estimated net proceeds............          152,033                   179,339                   206,646                  238,048
   Plus:  Tax benefit of
    Foundation.......................            5,661                     6,660                     7,659                    8,807
   Less:  Common Stock acquired 
          by ESOP(2).................          (13,586)                  (15,984)                  (18,381)                 (21,138)
          Common Stock acquired 
          by Stock Program(3)........           (6,793)                   (7,992)                   (9,190)                 (10,569)
                                           -----------               -----------               -----------              -----------
       Pro forma stockholders'
          equity(3)(4)(5)............      $   238,180               $   262,888               $   287,599              $   316,013
                                           ===========               ===========               ===========              ===========
Stockholders' equity per
 share(6):
   Historical........................      $      5.93               $      5.04               $      4.39              $      3.81
   Estimated net proceeds............             8.95                      8.97                      8.99                     9.00
   Plus:  Tax benefit of
    Foundation........................            0.33                      0.33                      0.33                     0.33
   Less:  Common Stock acquired 
          by ESOP(2)..................           (0.80)                    (0.80)                    (0.80)                   (0.80)

          Common Stock acquired
           by Stock Program(3)........           (0.40)                    (0.40)                    (0.40)                   (0.40)
                                           -----------               -----------               -----------              -----------
   Pro forma
        stockholders' equity
          per share(3)(4)(5).........      $     14.01               $     13.14               $     12.51              $     11.94
                                           ===========               ===========               ===========              ===========
Offering price as a percentage
   of pro forma stockholders'
    equity per share.................            71.38%                    76.10%                    79.94%                   83.75%

Offering price to pro forma
 net earnings per share(7)...........            11.61x                    13.16x                    14.60x                   16.13x
(See footnotes on next page)

                                       32
____________________
(1)  Does not give effect to the non-recurring expense that will be recognized
     in fiscal 1998 as a result of the establishment of the Foundation. The
     Company will recognize an after-tax expense for the amount of the
     contribution to the Foundation which is expected to be $6.7 million, $7.8
     million, $9.0 million and $10.3 million at the minimum, midpoint, maximum
     and maximum as adjusted, of the Estimated Price Range, respectively.
     Assuming the contribution to the Foundation was expensed during the year
     ended June 30, 1997, pro forma net earnings per share would be $0.40,
     $0.31, $0.24 and $0.18, at the minimum, midpoint, maximum and maximum as
     adjusted, respectively. Per share net income data is based on 16,983,000,
     19,980,000, 22,977,000 and 26,423,500 shares outstanding which represents
     shares sold in the Conversion, shares contributed to the Foundation and
     shares to be allocated or distributed under the ESOP and Stock Program for
     the period presented.
(2)  It is assumed that 8% of the shares of Common Stock issued in connection
     with the Conversion, including shares issued to the Foundation, will be
     purchased by the ESOP.  For purposes of this table, the funds used to
     acquire such shares are assumed to have been borrowed by the ESOP from the
     Company.  The amount to be borrowed is reflected as a reduction of
     stockholders' equity.  The Bank intends to make annual contributions to the
     ESOP in an amount at least equal to the principal and interest requirement
     of the debt.  The Bank's total annual payment of the ESOP debt is based
     upon twenty equal annual installments of principal, with an assumed
     interest rate at 8.5%.  The pro forma net earnings assumes:  (i) that the
     Bank's contribution to the ESOP is equivalent to the debt service
     requirement for the year ended June 30, 1997, and was made at the end of
     the period; (ii) that 1,358,640, 1,598,400, 1,831,150 and 2,113,884 shares
     at the minimum, midpoint, maximum and 15% above the maximum of the range,
     respectively, were committed to be released during the year ended June 30,
     1997 at an average fair value of $10.00 per share in accordance with
     Statement of Position ("SOP") 93-6; and (iii) only the ESOP shares
     committed to be released were considered outstanding for purposes of the
     net earnings per share calculations.  See "Management of the Bank - Benefit
     Plans - ESOP."
(3)  Gives effect to the Stock Program expected to be adopted by the Company
     following the Conversion and presented for approval at a meeting of
     stockholders.  If the Stock Program  is approved by stockholders, the Stock
     Program intends to acquire an amount of Common Stock equal to 4% of the
     shares of Common Stock issued in connection with the Conversion, including
     shares issued to the Foundation, or 679,320, 799,200, 919,080 and 1,056,942
     shares of Common Stock at the minimum, midpoint, maximum and 15% above the
     maximum of the Estimated Price Range, respectively, either through open
     market purchases, if permissible, or from authorized but unissued shares of
     Common Stock or treasury stock of the Company, if any.  In calculating the
     pro forma effect of the Stock Program, it is assumed that the shares were
     acquired by the Stock Program at the beginning of the period presented in
     open market purchases at the Purchase Price and that 20% of the amount
     contributed was an amortized expense during such period.  The issuance of
     authorized but unissued shares of the Company's Common Stock to the Stock
     Program instead of open market purchases would dilute the voting interests
     of existing stockholders by approximately 3.8% and pro forma net earnings
     per share would be $0.84, $0.74, $0.67 and $0.61 at the minimum, midpoint,
     maximum and 15% above the maximum of the range, respectively and pro forma
     stockholders' equity per share would be $13.87, $13.04, $12.42 and $11.88
     at the minimum, midpoint, maximum and 15% above the maximum of the range,
     respectively.  There can be no assurance that the actual purchase price of
     the shares granted under the Stock Program will be equal to the Purchase
     Price.  See "Management of the Bank - Benefit Plans - Stock Program."
(4)  No effect has been given to the issuance of additional shares of Common
     Stock pursuant to the Stock Option Plan expected to be adopted by the
     Company following the Conversion.  The Company expects to present the Stock
     Option Plan for approval at a meeting of stockholders.  If the Stock Option
     Plan  is approved by stockholders, an amount equal to 10% of the Common
     Stock issued in connection with the Conversion, including shares issued to
     the Foundation, or 1,698,300, 1,998,000, 2,297,700 and 2,642,355 shares at
     the minimum, midpoint, maximum and 15% above the maximum of the Estimated
     Price Range, respectively, will be reserved for future issuance upon the
     exercise of options to be granted under the Stock Option Plan.  The
     issuance of Common Stock pursuant to the exercise of Stock Options under
     the Stock Option Plan will result in the dilution of existing stockholders'
     interests.  Assuming all options were exercised at the end of the period at
     an exercise price of $10.00  per share, the pro forma net earnings per
     share would be $0.81, $0.72, $0.65 and $0.59, respectively, and the pro
     forma stockholders' equity per share would be $13.66, $12.87, $12.29 and
     $11.78, respectively.  See "Management of the Bank - Benefit Plans - Stock
     Option Plan."
(5)  The net worth of the Bank will continue to be substantially restricted
     after the Conversion.  See "Dividend Policy," "The Conversion - Liquidation
     Rights" and "Regulation and Supervision - New York State Law."
(6)  Stockholders' equity per share data is based upon 16,983,000, 19,980,000,
     22,977,000 and 26,423,500 shares outstanding representing shares sold in
     the conversion, shares contributed to the Foundation and shares purchased
     by the ESOP and Stock Program.
(7)  As adjusted to give effect to an increase in the number of shares which
     could occur due to an increase in the Estimated Price Range of up to 15% as
     a result of regulatory considerations or changes in market or general
     financial and economic conditions following the commencement of the
     Subscription and Community Offerings.

                                       33
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH NO FOUNDATION

     In the event that the Foundation was not being established as part of the
Conversion, Keller has estimated that the pro forma aggregate market
capitalization of the Company would be approximately $217.2 million, at the
midpoint, which is approximately $17.4 million greater than the pro forma
aggregate market capitalization of the Company if the Foundation is included.
The pro forma price to book ratio and pro forma price to earnings ratio would be
the same under both the current appraisal and the estimate of the value of the
Company without the Foundation. Further, assuming the midpoint of the Estimated
Price Range, pro forma consolidated net earnings would be $14.0 million with the
Foundation and $14.8 million without the Foundation, assuming the midpoint of
the Estimated Price Range. In this regard, pro forma stockholders' equity per
share and pro forma net income per share would be $13.16 and $0.74,
respectively, at the midpoint of the estimate, assuming no Foundation, and
$13.14 and $0.77, respectively, with the Foundation. There is no assurance that
in the event the Foundation was not formed that the appraisal prepared at that
time would have concluded that the pro forma market value of the Company would
be the same as that estimated herein. Any appraisal prepared at that time would
be based on the facts and circumstances existing at that time, including, among
other things, market and economic conditions.

     For comparative purposes only, set forth below are certain pricing ratios
and financial data and ratios, at the minimum, midpoint, maximum and maximum, as
adjusted, of the Estimated Price Range, assuming the Conversion was completed at
June 30, 1997.
At the Minimum              At the Midpoint
                                                     ------------------------    ------------------------
                                                        With           No           With           No
                                                     Foundation    Foundation    Foundation    Foundation
                                                     ----------    ----------    ----------    ----------
                                                                (Dollars in thousands)
Estimated offering amount.........................   $  157,250    $  184,620    $  185,000    $  217,200
Pro forma market capitalization...................      169,830       184,620       199,800       217,200
Total assets......................................    1,130,685     1,150,161     1,155,394     1,178,307
Total liabilities.................................      892,505       892,505       892,505       892,505
Pro forma stockholders' equity....................      238,180       257,656       262,888       285,802
Pro forma consolidated net earnings...............       13,521        14,176        14,034        14,805
Pro forma stockholders' equity per share..........        14.01         13.96         13.14         13.16
Pro forma consolidated net earnings per share.....         0.82          0.83          0.77          0.74
Pro Forma Pricing Ratios:
   Offering price as a percentage of pro forma
     stockholders' equity per share...............        71.38%        71.65%        76.10%        76.00%
   Offering price to pro forma net earnings
     per share....................................        11.61x        12.03x        13.16x        13.56x
   Offering price to assets.......................        14.85%        16.05%        17.07%        18.43%
Pro Forma Financial Ratios:
   Return on assets (annualized)..................         1.18%         1.23%         1.20%         1.26%
   Return on stockholders' equity (annualized)....         5.68          5.50          5.34          5.18
   Stockholders' equity to assets.................        20.83         22.40         22.42         24.26
At the Maximum,
                                                         At the Maximum                as Adjusted
                                                     ------------------------    ------------------------
                                                        With           No           With           No
                                                     Foundation    Foundation    Foundation    Foundation
                                                     ----------    ----------    ----------    ----------
                                                                (Dollars in thousands)
Estimated offering amount.........................   $  212,750    $  249,780    $  244,662    $  287,247
Pro forma market capitalization...................      229,770       249,780       264,235       287,247
Total assets......................................    1,180,103     1,206,452     1,208,518     1,238,820
Total liabilities.................................      892,505       892,505       892,505       892,505
Pro forma stockholders' equity....................      287,599       313,947       316,013       346,315
Pro forma consolidated net earnings...............       14,546        15,434        15,137        16,157
Pro forma stockholders' equity per share..........        12.51         12.57         11.94         12.06
Pro forma consolidated net earnings per share.....         0.69          0.67          0.62          0.61
Pro Forma Pricing Ratios:
   Offering price as a percentage of pro
      forma stockholders' equity per share........       79.94%        79.56%        83.75%        82.94%
   Offering price to pro forma
      net earnings per share......................        14.60x        14.95x        16.13x        16.43x
   Offering price to assets.......................        19.19%        20.70%        21.52%        23.19%
Pro Forma Financial Ratios:
   Return on assets (annualized)..................         1.22%         1.28%         1.23%         1.30%
   Return on stockholders' equity (annualized)....         5.06          4.92          4.79          4.67
   Stockholders' equity to assets.................        24.02         26.02         25.73         27.96
34
RICHMOND COUNTY SAVINGS BANK AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

     The following Consolidated Statements of Income of the Bank for each of the
years in the three-year period ended June 30, 1997 have been audited by Ernst &
Young LLP, independent certified public accountants, whose report thereon
appears elsewhere in this Prospectus. Such report includes an explanatory
paragraph relating to changes in accounting principles. These statements should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Prospectus.
For the Year
                                                          Ended June 30,
                                                  -----------------------------
                                                   1997       1996       1995
                                                  -------    -------    -------
                                                          (In thousands)
Interest income:                                           
  Loans.................................          $38,068    $33,807    $31,492
  Debt and equity securities............           16,754     17,873     16,673
  Mortgage-backed and mortgage                       
    related securities..................            9,588      5,402      5,076
  Federal funds sold....................              961      1,570        879
  Other.................................              410        411        201
                                                  -------    -------    -------
   Total interest income................           65,781     59,063     54,321
                                                  -------    -------    -------
Interest expense........................           27,707     26,254     22,456
                                                  -------    -------    -------
Net interest income.....................           38,074     32,809     31,865
Provision for loan losses...............            1,080      1,600        600
                                                  -------    -------    -------
Net interest income after provision                
  for loan losses.......................           36,994     31,209     31,265
                                                  -------    -------    -------
Non-interest income:                                       
  Fee income............................            2,962      2,717      2,550
  Net (loss) gain on sales of securities               
    and loans...........................             (107)        42        (12)
  Other.................................                6         68        121
                                                  -------    -------    -------
   Total non-interest income............            2,861      2,827      2,659
                                                  -------    -------    -------
Non-interest expense:                                      
  Salaries and employee benefits........            9,850      9,261      8,753
  Occupancy costs.......................            3,063      3,029      2,660
  Computer service fees.................            2,166      1,873      1,190
  Advertising...........................              817        634        487
  Amortization of deposit premium.......              313        313        313
  FDIC insurance premiums...............              624        251      1,679
  Other.................................            2,834      3,142      3,057
                                                  -------    -------    -------
    Total non-interest expense..........           19,667     18,503     18,139
Income before income taxes..............           20,188     15,533     15,785
Provision for income taxes..............            9,463      6,803      6,919
                                                  -------    -------    -------
Income before cumulative effect of      
  change in accounting principle........           10,725      8,730      8,866
                                                  -------    -------    -------
Cumulative effect of change in          
  accounting principle..................               --         --     (1,316)
                                                  -------    -------    -------
Net income..............................          $10,725    $ 8,730    $ 7,550
                                                  =======    =======    =======
(See accompanying notes to the consolidated financial statements)

                                       35
MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

     The Company has only recently been formed and, accordingly, has no results
of operations. The Bank's results of operations are dependent primarily on net
interest income, which is the difference between the income earned on its loan
and securities portfolios and its cost of funds, consisting of the interest paid
on deposits. The Bank's non-interest expense principally consists of
compensation and benefits, occupancy costs, federal deposit insurance premiums
and other expenses. Results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in interest
rates, government policies and actions of regulatory authorities. See
"Regulation and Supervision" for a discussion of the regulatory changes
resulting from the recapitalization of the SAIF and the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") and the impact of such
changes on the Bank. Future changes in applicable law, regulations or government
policies may materially impact the Bank.

MANAGEMENT STRATEGY

     The Bank's operating strategy emphasizes customer service and convenience,
and the Bank attributes the loyalty of its customer base to its commitment to
maintaining customer satisfaction. The Bank attempts to set itself apart from
its larger competitors by providing the type of personalized service not
generally available from larger banks while offering a greater variety of
products and services than is typically available from smaller, local depository
institutions.

     The Bank's historical operating strategy has concentrated on maintaining
profitability and asset quality by primarily investing in one- to four-family
mortgage loans and in U.S. Government and agency debt securities, as well as
debt and equity securities of corporate issuers. In the last few years, the Bank
began to pursue a strategy, in conjunction with its traditional thrift lending
and securities investment strategy, of focusing on small and medium-sized retail
businesses as both lending and deposit customers by emphasizing the origination
of commercial real estate, construction and commercial loans, as well as
increasing the marketing of its business checking accounts and other business-
related services. In this regard, during 1996 and 1997, the Bank hired
additional lending personnel who have commercial real estate and commercial
lending experience in the Bank's primary market area. In addition, the Bank is
increasing the merchant services it provides, such as merchant credit card
processing, letters of credit, sweep accounts and increased night depository
services. The Bank intends to continue this strategy, maintaining its
traditional focus of investing in residential mortgage loans and soliciting
deposits from individuals in its primary market area, while strengthening the
Bank's position as a provider of loans and financial services to the local
business community.

     The Bank's current operating strategy consists primarily of: (i) investing
primarily in one- to four-family, and to a lesser extent, commercial real
estate, construction and development, commercial and other loans and in
investment-grade securities; (ii) attempting to increase its position as a
lender to businesses operating in its primary market area, as well as other
areas within the New York City metropolitan area by offering its commercial loan
and deposit products to small and medium-sized businesses; (iii) increasing the
yield and duration of its securities investments by emphasizing the purchase of
government agency and privately issued mortgage-backed and mortgage-related
securities with estimated average lives of three to five years and de-
emphasizing its investment in U.S. Treasury obligations, corporate and other
debt securities; (iv) maintaining a low cost of funds by attracting and
retaining core deposits by providing enhanced service; (v) attempting to attract
new deposit customers by competitively pricing certificate of deposit products
and offering a greater variety of durations of such deposits; (vi) developing
wholesale 

                                       36
borrowing sources such as FHLB advances, reverse repurchase agreements, and
brokered certificates of deposit as another means of funding asset growth; and
(vii) managing its interest rate risk by originating or purchasing adjustable
rate loans and generally selling fixed-rate loans with maturities of more than
15 years.

MANAGEMENT OF INTEREST RATE RISK

     The principal objective of the Bank's interest rate risk management is to
evaluate the interest rate risk inherent in certain balance sheet accounts,
determine the level of risk appropriate given the Bank's business strategy,
operating environment, capital and liquidity requirements and performance
objectives, and manage the risk consistent with the Board of Trustees' approved
guidelines. Through such management, the Bank seeks to reduce the vulnerability
of its operations to changes in interest rates. The Bank's Board of Trustees
reviews the Bank's interest rate risk position at least quarterly. The Bank's
Asset/Liability Committee is comprised of the Bank's senior management under the
direction of the Board of Trustees, with senior management responsible for
reviewing with the Board of Trustees its activities and strategies, the effect
of those strategies on the Bank's net interest margin, the market value of the
portfolio and the effect that changes in the interest rates will have on the
Bank's portfolio and the Bank's exposure limits. In addition, the Bank has
established an Interest Rate Risk Management Committee, a subcommittee of the
Asset/Liability Committee, which is charged with developing an interest rate
forecast for the Bank, establishing and maintaining a measurement system and
providing management reports, and formulating and recommending strategies to the
Asset/Liability Committee. The Interest Rate Risk Management Committee meets at
least monthly, and reports monthly to the Asset/Liability Committee and the
Board of Trustees. See "Risk Factors - Sensitivity to Increases in Interest
Rates."

     In recent years, the Bank has utilized the following strategies to manage
interest rate risk: (1) emphasizing the origination and retention of fixed-rate
mortgage loans having terms to maturity of not more than fifteen years,
adjustable-rate loans and consumer loans consisting primarily of home equity
loans and lines of credit; (2) selling substantially all fixed-rate mortgage
loans with terms of more than fifteen years without recourse and on a servicing
retained basis; and (3) investing in short term and, to a lesser extent,
adjustable rate securities which may generally bear lower yields as compared to
longer term investments, but which better position the Bank for increases in
market interest rates. The Bank currently does not participate in hedging
programs, interest rate swaps or other activities involving the use of off-
balance sheet derivative financial instruments.

     The Bank has recently begun to emphasize its investment in mortgage-backed
and mortgage related securities with estimated average lives of three to five
years and to de-emphasize its investment in U.S. Treasury securities, corporate
and other debt securities. As a result, at June 30, 1997, mortgage-backed and
mortgage related securities and debt securities totaled 48.6% and 46.9%, of
total securities, respectively, as compared to 19.9% and 79.7%, respectively, at
June 30, 1996. The weighted average maturity of the Bank's securities portfolio
increased to 3.3 years at June 30, 1997 from 2.4 years at June 30, 1996. This
strategy has been accomplished by primarily reinvesting maturing U.S. Treasury
obligations and other debt securities in mortgage-backed and mortgage related
securities, primarily government agency and privately issued CMOs. While this
strategy has, in part, resulted in the increase in the average yield of the
Bank's securities portfolio, it has also resulted in an increase in the weighted
average duration of such portfolio which could increase the Bank's exposure to
interest rate risk in a period of rising interest rates. In pursuing this
strategy, the Bank considered the relative stability of its core deposits.

     Gap Analysis. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest rate
sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset
or liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference 

                                       37
between the amount of interest-earning assets maturing or repricing within a
specific time period and the amount of interest-bearing liabilities maturing or
repricing within that same time period. A gap is considered positive when the
amount of interest rate sensitive assets exceeds the amount of interest rate
sensitive liabilities. A gap is considered negative when the amount of interest
rate sensitive liabilities exceeds the amount of interest rate sensitive assets.
At June 30, 1997, the Bank's one-year gap position, the difference between the
amount of interest-earning assets maturing or repricing within one year and
interest-bearing liabilities maturing or repricing within one year, was positive
3.5%. Accordingly, in a period of increasing interest rates, it is expected that
the Bank may be better situated to invest in higher yield interest-bearing
assets which may result in yields on its interest-earning assets increasing
faster than the cost of its interest-bearing liabilities. Conversely, during a
period of declining interest rates, it is expected that the overall yield on the
Bank's interest-earning assets may decline more quickly than the costs of
interest-bearing liabilities, which would adversely affect net interest income.

     The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1997, which are anticipated
by the Bank, based upon certain assumptions, to reprice or mature in each of the
future time periods shown (the "GAP Table"). Except as stated below, the amount
of assets and liabilities shown which reprice or mature during a particular
period were determined in accordance with the earlier of term to repricing or
the contractual maturity of the asset or liability. The table sets forth an
approximation of the projected repricing of assets and liabilities at June 30,
1997, on the basis of contractual maturities, anticipated prepayments, and
scheduled rate adjustments within a three month period and subsequent selected
time intervals. For loans on residential properties, adjustable-rate loans, and
fixed-rate loans, prepayment rates were assumed to range from 6% to 18%
annually. Mortgage-backed securities were assumed to prepay at rates between 8%
and 30% annually. Savings and NOW accounts were assumed to decay at 10%, 5%, 5%,
40%, 20%, 20% and 0%, and money market savings accounts were assumed to decay at
25%, 15%, 10%, 50%, 0%, 0% and 0%, for the periods of three months or less,
three to six months, six to 12 months, one to three years, three to five years,
five to ten years and more than ten years, respectively. These assumptions are
generally based on the FDIC's deposit decay guidelines and the Bank's historical
experience. Prepayment and deposit decay rates can have a significant impact on
the Bank's estimated gap. While the Bank believes such assumptions to be
reasonable, there can be no assurance that assumed prepayment rates and decay
rates will approximate actual future loan prepayment and deposit withdrawal
activity. See "Business of the Bank - Lending Activities," "- Securities
Investment Activities" and "- Sources of Funds."

                                       38
At June 30, 1997
                                                 -------------------------------------------------------------------
                                                      3             More than           More than       More than 1
                                                    Months         3 Months to         6 Months to        Year to
                                                   or Less           6 Months            1 Year           3 Years
                                                 -----------     ---------------     -------------     -------------
                                                                     (Dollars in thousands)
INTEREST-EARNING ASSETS(1):
Debt and equity securities(2)................    $ 22,785            $ 22,603          $ 45,406          $ 92,916
Mortgage-backed and mortgage related
    securities(2)............................      21,302              18,873            31,361            41,014
Real estate loans, net(3)(4).................      43,899              40,268            58,485           156,927
Commercial loans.............................       5,338                  17                50               200
Consumer and student loans(4)................      16,556                 281               560             2,312
Other interest-earning assets................      12,847                  --                --                --
                                                 --------            --------          --------          --------
     Total interest-earning assets...........     122,727              82,042           135,862           293,369
                                                 --------            --------          --------          --------
INTEREST-BEARING LIABILITIES:
Money market savings accounts................      11,078               6,903             5,341            14,460
NOW accounts.................................       1,803                 901               901             7,212
Savings accounts.............................      43,680              21,840            21,840           174,722
Certificates of deposit......................      58,434              77,726            72,917            66,307
                                                 --------            --------          --------          --------
     Total interest-bearing liabilities......     114,995             107,370           100,999           262,701
                                                 --------            --------          --------          --------
Interest sensitivity gap(5)..................    $  7,732            $(25,328)         $ 34,863          $ 30,668
                                                 ========            ========          ========          ========
Cumulative interest sensitivity gap..........    $  7,732            $(17,596)         $ 17,267          $ 47,935
                                                 ========            ========          ========          ========
Cumulative interest sensitivity gap as a
 percentage of total assets..................        0.78%              (2.55)%            3.51%             3.09%
Cumulative interest sensitivity gap as a
 percentage of total interest-earning
 assets......................................        0.81               (1.85)             1.82              5.05
Cumulative net interest-earning assets
 as a percentage of cumulative
 interest-bearing liabilities................      106.72               92.09            105.34            108.18
At June 30, 1997
                                                  -----------------------------------------------------------
                                                  More than         More than
                                                  3 Years to        5 Years to        More than
                                                   5 Years           10 Years          10 Years       Total
                                                  ----------        ----------        ---------      --------
                                                                     (Dollars in thousands)
INTEREST-EARNING ASSETS(1):
Debt and equity securities(2).................    $ 24,416          $ 15,422         $  1,359        $224,907
Mortgage-backed and mortgage related
  securities(2)...............................      31,069            32,220           36,681         212,520
Real estate loans, net(3)(4)..................      74,576            78,272           16,372         468,799
Commercial loans..............................         239               819               --           6,663
Consumer and student loans(4).................       1,469             2,410               --          23,588
Other interest-earning assets.................          --                --               --          12,847
                                                  --------          --------         --------        --------
     Total interest-earning assets............     131,769           129,143           54,412         949,324
                                                  --------          --------         --------        --------
INTEREST-BEARING LIABILITIES:
Money market savings accounts.................          --                --               --          37,782
NOW accounts..................................       3,606             3,606               --          18,029
Savings accounts..............................      87,361            87,361               --         436,804
Certificates of deposit.......................      18,815             3,867               --         298,066
                                                  --------          --------         --------        --------
     Total interest-bearing liabilities.......     109,782            94,834               --         790,681
                                                  --------          --------         --------        --------
Interest sensitivity gap(5)...................    $ 21,987          $ 34,309         $ 54,412        $158,643
                                                  ========          ========         ========        ========
Cumulative interest sensitivity gap...........    $ 69,922          $104,231         $158,643
                                                  ========          ========         ========
Cumulative interest sensitivity gap as a
  percentage of total assets..................        2.21%             3.45%            5.48%
Cumulative interest sensitivity gap as a
  percentage of total interest-earning
  assets......................................        7.37             10.98            16.71
Cumulative net interest-earning assets as a
  percentage of cumulative interest-bearing
  liabilities.................................      110.05            113.18           120.06
--------------------
(1)    Interest-earning assets are included in the period in which the balances
       are expected to be redeployed and/or repriced as a result of anticipated
       prepayments, scheduled rate adjustments, and contractual maturities.
(2)    Debt and equity and mortgage-backed and mortgage related securities are
       shown excluding the market value adjustment of $587,000 before tax, from
       the implementation of SFAS No.  115.  Equity securities primarily consist
       of callable preferred stock, the maturities of which have been assumed to
       be the date on which they are initially callable.
(3)    For purposes of the gap analysis, the allowance for loan losses and non-
       performing loans have been excluded.
(4)    Loans held for sale are included in the 3 months or less category.
(5)    Interest sensitivity gap represents the difference between net interest-
       earning assets and interest-bearing liabilities.

                                       39
Certain shortcomings are inherent in the method of analysis presented in
the GAP Table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable-rate loans, have
features which restrict changes in interest rates both on a short-term basis and
over the life of the asset. Further, in the event of changes in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the table. Finally, the ability of many borrowers
to service their adjustable-rate loans may decrease in the event of an interest
rate increase.

     Net Portfolio Value. The Bank's interest rate sensitivity is also monitored
by management through the use of a Net Portfolio Value Model which generates
estimates of the change in the Bank's net portfolio value ("NPV") over a range
of interest rate scenarios. NPV is the present value of expected cash flows from
assets, liabilities, and off-balance sheet contracts. The NPV ratio, under any
interest rate scenario, is defined as the NPV in that scenario divided by the
market value of assets in the same scenario. The model assumes estimated loan
prepayment rates, reinvestment rates and deposit decay rates similar to the
assumptions utilized for the GAP Table. The Sensitivity Measure is the decline
in the NPV ratio, in basis points, caused by a 2% increase or decrease in rates,
whichever produces a larger decline. The higher an institution's Sensitivity
Ratio, the greater its exposure to interest rate risk is considered to be. The
following NPV Table sets forth the Bank's NPV as of June 30, 1997.
Change in                                         NPV as % of Portfolio
  Interest Rates            Net Portfolio Value          Value of Assets
 In Basis Points     ------------------------------------------------------
   (Rate Shock)       Amount     $ Change   % Change   NPV Ratio   % Change
----------------     --------    --------   --------   ---------   --------
                                  (Dollars in thousands)
400                  $ 96,204   $(54,195)    (36.03)%   10.59%     (31.90)%
300                   109,236    (41,163)    (27.37)    11.75      (24.44)
200                   123,369    (27,030)    (17.97)    12.95      (16.72)
100                   137,445    (12,954)     (8.61)    14.09       (9.39)
Static                150,399         --         --     15.55          --
(100)                 160,080      9,681       6.44     15.76        1.35
(200)                 167,712     17,313      11.51     16.24        4.44
(300)                 174,964     24,565      16.33     16.68        7.27
(400)                 228,947     78,548      52.23     20.57       32.28
As of June 30, 1997, the Bank's NPV was $150.4 million, or 15.55% of the
market value of assets. Following a 200 basis point increase in interest rates,
the Bank's "post shock" NPV was $123.4 million, or 12.95% of the market value of
assets. The change in the NPV ratio or the Bank's Sensitivity Measure was
negative 2.60%.

     As is the case with the GAP Table, certain shortcomings are inherent in the
methodology used in the above interest rate risk measurements. Modeling changes
in NPV require the making of certain assumptions which may or may not reflect
the manner in which actual yields and costs respond to changes in market
interest rates. In this regard, the NPV Table presented assumes that the
composition of the Bank's interest sensitive assets and liabilities existing at
the beginning of a period remains constant over the period being measured and
also assumes that a particular change in interest rates is reflected uniformly
across the yield curve regardless of the duration to maturity or repricing of
specific assets and liabilities. Also, the model does not take into account the
Bank's business or strategic plans. Accordingly, although the NPV Table 

                                       40
provides an indication of the Bank's interest rate risk exposure at a particular
point in time, such measurements are not intended to and do not provide a
precise forecast of the effect of changes in market interest rates on the Bank's
net interest income and will differ from actual results.

ANALYSIS OF NET INTEREST INCOME

     Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest income
depends on the relative amounts of interest-earning assets and interest-bearing
liabilities and the interest rate earned or paid on them.

                                       41
Average Balance Sheet. The following table sets forth certain information
relating to the Bank at June 30, 1997 and for the years ended June 30, 1997,
1996 and 1995. The average yields and costs are derived by dividing income or
expense by the average balance of interest-earning assets or interest-bearing
liabilities, respectively, for the periods shown and reflect annualized yields
and costs. Average balances are derived from average monthly balances. The
yields and costs include fees which are considered adjustments to yields.
For the Year Ended June 30,
                                                                           --------------------------------
                                                     At June 30, 1997                    1997
                                                   ---------------------   --------------------------------
                                                                 Average                            Average
                                                                 Yield/     Average                 Yield/
                                                    Balance       Cost      Balance     Interest     Cost
                                                   ----------   --------   ----------   --------   --------
                                                                           (Dollars in thousands)
ASSETS:                                           
  Interest-earning assets(1):                     
    Debt and equity securities....................   $224,907      6.33%     $271,721    $16,754      6.17%
    Mortgage-backed and mortgage related          
      securities, net.............................    212,520      7.22       142,330      9,588      6.74
    Real estate loans, net(2)(3)..................    466,557      7.89       436,887     35,165      8.05
    Commercial loans, net(2)......................      6,482      9.66         6,358        617      9.70
    Consumer and student loans....................     23,219      9.51        23,145      2,286      9.88
    Other interest-earning assets.................     12,847      5.60        17,505      1,371      7.83 
                                                     --------                --------   --------
        Total interest-earning assets.............    946,532      7.35       897,946     65,781      7.33
                                                                 ------                 --------   -------
  Non-interest-earning assets.....................     46,838                  48,554
                                                     --------                --------
        Total assets..............................   $993,370                $946,500
                                                     ========                ========
LIABILITIES AND NET WORTH:                        
  Interest-bearing liabilities:                   
    Money market savings accounts.................   $ 37,782      3.45%     $ 37,552      1,308      3.48%
    Savings accounts..............................    437,694      2.78       432,162     11,813      2.73
    NOW accounts..................................     18,030      2.26        15,652        370      2.36
    Certificates of deposit.......................    298,066      5.37       273,546     14,206      5.19
                                                     --------                --------   --------
        Total interest-bearing liabilities........    791,572      3.78       758,912     27,697      3.65
                                                                 ------                 --------    ------
  Non-interest-bearing liabilities................    100,933                  92,254
                                                     --------                --------
        Total liabilities.........................    892,505                 851,166
  Total net worth.................................    100,865                  95,334
                                                     --------                --------
        Total liabilities and net worth...........   $993,370                $946,500
                                                     ========                ========
  Net interest income/interest rate spread(4).....                 3.57%                 $38,084      3.68%
                                                                 ======                  =======    ======
  Net interest margin as a percentage of          
    interest-earning assets(5)....................                                                    4.24%
                                                                                                    ======
  Ratio of interest-earning assets to             
    interest-bearing liabilities..................               119.58%                            118.32%
                                                                 ======                             ======
For the Year Ended June 30,
                                                            ---------------------------------------------------------------
                                                                        1996                             1995
                                                            -----------------------------    ------------------------------
                                                                                   Average                          Average
                                                            Average                Yield/    Average                Yield/
                                                            Balance    Interest     Cost     Balance    Interest     Cost
                                                            -------    ---------  --------   --------   --------   --------
                                                               (Dollars in thousands)
ASSETS:                                                     
  Interest-earning assets(1):                             
    Debt and equity securities....................         $304,133    $17,873      5.88%   $301,204    $16,673      5.54%
    Mortgage-backed and mortgage related                    
      securities, net.............................           84,270      5,402      6.41      89,535      5,076      5.67
    Real estate loans, net(2)(3)..................          374,055     30,902      8.26     352,417     28,843      8.18 
    Commercial loans, net(2)......................            5,915        620     10.48       5,114        486      9.50 
    Consumer and student loans....................           22,396      2,285     10.20      20,670      2,163     10.46
    Other interest-earning assets.................           33,667      1,981      5.88      17,059      1,080      6.33  
                                                           --------    -------              --------    -------
        Total interest-earning assets.............          824,436     59,063      7.16     785,999     54,321      6.91  
                                                                       -------     -----                -------    ------
  Non-interest-earning assets.....................           53,852                           42,826
                                                           --------                         --------
        Total assets..............................         $878,288                         $828,825
                                                           ========                         ========
LIABILITIES AND NET WORTH:                                  
  Interest-bearing liabilities:                           
    Money market savings accounts.................         $ 28,430        987      3.47%   $ 25,058    $   735      2.93%     
    Savings accounts..............................          430,500     11,841      2.75     462,720     12,647      2.73
    NOW accounts..................................           14,602        354      2.42      13,724        365      2.66
    Certificates of deposit.......................          242,197     12,826      5.30     188,212      8,656      4.60
                                                           --------    -------              --------    -------
        Total interest-bearing liabilities........          715,729     26,008      3.63     689,714     22,403      3.25 
                                                                       -------    ------                -------     -----
  Non-interest-bearing liabilities................           77,372                           62,109
                                                           --------                         --------
        Total liabilities.........................          793,101                          751,823 
  Total net worth.................................           85,187                           77,002
                                                           --------                         --------
                                                               
        Total liabilities and net worth...........         $878,288                         $828,825
                                                           ========                         ========
  Net interest income/interest rate spread(4).....                     $33,055      3.53%               $31,918      3.66%      
                                                                       =======    ======                =======    ======
                                                             
  Net interest margin as a percentage of                  
    interest-earning assets(5)....................                                  4.01%                            4.06%
                                                                                  ======                           ======
                                                                        
  Ratio of interest-earning assets to                     
    interest-bearing liabilities..................                                115.19%                          113.96%
                                                                                  ======                           ======
--------------------
(1)   Includes related assets available-for-sale and unamortized discounts and
      premiums.
(2)   Amount is net of deferred loan fees, deferred mortgage interest,
      unamortized discounts net and allowance for loan losses and includes loans
      held for sale and non-performing loans.
(3)   Real estate loans, net includes one- to four-family, multi-family,
      commercial real estate, construction and development and home equity
      loans.
(4)   Net interest rate spread represents the difference between the yield on
      interest-earning assets and the cost of interest-bearing liabilities.
(5)   Net interest margin represents net interest income divided by average
      interest-earning assets.

                                       42
Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning assets
and interest-bearing liabilities have affected the Bank's interest income and
interest expense during the periods indicated. Information is provided in each
category with respect to: (i) changes attributable to changes in volume (changes
in volume multiplied by prior rate); (ii) changes attributable to changes in
rate (changes in rate multiplied by prior volume); and (iii) the net change. The
changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.
Year Ended                                 Year Ended
                                                    June 30, 1997                              June 30, 1996
                                                     Compared to                                Compared to
                                                     Year Ended                                 Year Ended
                                                    June 30, 1996                              June 30, 1995
                                            --------------------------------          ---------------------------------
                                              Increase (Decrease)                       Increase (Decrease)
                                                    Due to                                    Due to
                                            -----------------------                   -----------------------
                                             Volume           Rate      Net            Volume           Rate       Net
                                            --------         ------    -----          --------         ------     ----- 
                                                                             (In thousands)
INTEREST-EARNING ASSETS(1):
  Debt and equity securities                  $(1,971)       $  852    $(1,119)        $  164           $1,036   $1,200
  Mortgage-backed and mortgage
    related securities, net                     3,895           291      4,186           (311)             637      326
  Real estate loans, net                        5,068          (805)     4,263          1,776              283    2,059
  Commercial loans                                 43           (46)        (3)            81               53      134
  Consumer and student loans                       74           (73)         1            177              (55)     122
  Other interest-earning assets                (1,137)          527       (610)           983              (82)     901
                                              -------        ------    -------         ------           ------   ------
       Total interest-earning assets            5,972           746      6,718          2,870            1,872    4,742
                                              -------        ------    -------         ------           ------   ------
INTEREST-BEARING LIABILITIES:
  Money market savings accounts                   318             3        321            107              145      252
  Savings accounts                                 50           (78)       (28)          (897)              91     (806)
  NOW accounts                                     25            (9)        16             23              (34)     (11)
  Certificates of deposit                       1,648          (268)     1,380          2,725            1,445    4,170
       Total interest-bearing liabilities       2,041          (352)     1,689          1,958            1,647    3,605
                                              -------        ------    -------         ------           ------   ------
Net change in net interest income             $ 3,931        $1,098    $ 5,029         $  912           $  225   $1,137
                                              =======        ======    =======         ======           ======   ======
-----------------------
(1) Includes assets available-for-sale.

                                       43
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND JUNE 30, 1996

     Total assets increased by $78.9 million, or 8.6%, from $914.5 million at
June 30, 1996 to $993.4 million at June 30, 1997. The growth in assets is
primarily attributable to a $77.0 million, or 18.4%, increase in loans
receivable, net, and a $26.4 million, or 6.4%, increase in the securities
portfolio. The increase in loans receivable, net, from $419.3 million at June
30, 1996 to $496.3 million at June 30, 1997, was primarily due to increased
originations of one- to four-family loans. Originations of one- to four-family
loans increased from $53.9 million in fiscal 1996 to $100.5 million in fiscal
1997 due to the introduction of the Bank's use of mortgage brokers, increased
marketing of its loan products and the expansion of its loan products. The
increase in loans was funded primarily through deposit inflows, primarily in
certificate of deposit accounts which increased by $44.1 million, or 17.4%, and
a $14.8 million, or 19.0%, increase in non-interest bearing checking accounts.

     During 1996, the Bank began to restructure its securities portfolio in an
attempt to increase the yield and the duration on such portfolio while
continuing to monitor its interest rate risk position. The Bank began to
reinvest funds from its maturing U.S. Treasury obligations and corporate debt
into private and government agency mortgage-backed and mortgage related
securities with estimated average lives of three to five years. As a result, at
June 30, 1997, debt and equity securities totaled $224.9 million, a decrease of
$104.5 million, or 31.7%, compared to $329.4 million at June 30, 1996, while
mortgage-backed and mortgage related securities increased by $130.8 million, or
160.2%, from $81.7 million at June 30, 1996 to $212.5 million at June 30, 1997.
Substantially all of the increase in mortgage-backed and mortgage related
securities was due to the purchase of CMOs.

     Total deposits at June 30, 1997 were $884.5 million, an increase of $66.6
million, or 8.1%, compared to $817.9 million at June 30, 1996. The increase was
primarily due to an increase of $44.1 million, or 17.4%, in certificates of
deposit from $253.9 million at June 30, 1996 to $298.1 million at June 30, 1997.
The increase in certificates of deposit was primarily attributable to
competitive pricing and increased marketing of such deposit products. The growth
in deposits was also attributable to an increase in non-interest bearing
checking accounts and money market accounts which increased by $18.7 million, or
16.7%, due to the Bank's increased marketing efforts on business deposit
accounts. The Bank's core deposit accounts, which totalled $564.0 million at
June 30, 1996, increased by $22.5 million during the year ended June 30, 1997.

     Net worth increased by $11.0 million, or 12.2%, from $89.9 million at June
30, 1996 to $100.9 million at June 30, 1997, resulting in the Bank's ratio of
net worth to total assets increasing from 9.8% at June 30, 1996 to 10.2% at June
30, 1997.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1997 AND JUNE 30,
1996.

     General. Net income for the year ended June 30, 1997 increased by $2.0
million, or 22.8%, from $8.7 million for the year ended June 30, 1996 to $10.7
million for the year ended June 30, 1997. The increase was due primarily to an
increase in net interest income which resulted from an increase in the average
balance of interest-earning assets and a higher weighted average yield on its
securities portfolio, offset, in part, by increases in non-interest expenses,
including the one-time SAIF special assessment and increased compensation and
advertising costs.

     Interest Income. Interest income amounted to $65.8 million for the year
ended June 30, 1997, representing an increase of $6.7 million from the year
ended June 30, 1996. The increase was the result of a $73.5 million increase in
average interest-earning assets and a 17 basis point increase in the yield on

                                       44
interest-earning assets. The increase in average interest-earning assets was
primarily due to an increase in one- to four-family loans due to the
introduction of the Bank's use of mortgage brokers and increased marketing
efforts. The increase in the average interest rate on interest-earning assets,
which increased from 7.16% to 7.33%, was primarily due to the reallocation of
interest-earning assets from lower-yielding U.S. Government securities to 
higher-yielding mortgage-backed and mortgage related securities. This was
partially offset by a 21 basis point decline in the yield on real estate loans,
net, due primarily to a repricing of adjustable rate loans in a lower interest
rate environment. Interest income on mortgage-backed and mortgage related
securities increased $4.2 million, or 77.0%, from $5.4 million for the year
ended June 30, 1996 to $9.6 million at June 30, 1997. This increase was
primarily due to an increase in the average balance of mortgage-backed and
mortgage related securities of $58.1 million, which resulted from the
restructuring of the securities portfolio and the investment of excess funds not
utilized for loan demand in mortgage-backed and mortgage related securities. The
yield on the mortgage-backed and mortgage related securities portfolio increased
by 33 basis points due to the higher rate environment for new purchases and the
repricing of adjustable-rate securities purchased in prior periods. Interest
income on debt and equity securities decreased $1.1 million, or 6.3%, due to
management's restructuring of its securities portfolio resulting in a $32.4
million decrease in the average balance of such securities offset in part by the
increased yield on such securities. See "--Management of Interest Rate Risk."

     Interest income on loans increased $4.3 million, from $33.8 million for the
year ended June 30, 1996 to $38.1 million at June 30, 1997. The increase in
interest income on loans was a result of growth in the average balance of one-to
four- family loans outstanding partially offset by a 24 basis point decrease in
the average yield on loans, which occurred due to a repricing of adjustable rate
loans in a lower interest rate environment. The increase in the average balance
of loans was primarily due to an increase in residential one- to four-family
loans, resulting primarily from the investment of funds resulting from the
growth in deposits.

     Interest Expense. Interest expense increased $1.4 million, or 5.3%, from
$26.3 million for the year ended June 30, 1996 to $27.7 million for the year
ended June 30, 1997. This increase reflects a $43.2 million increase in the
average balance of interest-bearing liabilities. The increase in average
interest-bearing liabilities was primarily attributable to an increase in the
average balance of certificates of deposits and money market savings accounts,
which increased as a result of the Bank's strategy of attracting more
certificates of deposits through additional certificate of deposit products,
competitive pricing of such products, and related marketing of commercial
deposit accounts. The average cost of the Bank's interest-bearing liabilities
remained relatively stable at 3.65% for the year ended June 30, 1997 as compared
to 3.63% for the year ended June 30, 1996.

     Provision for Loan Losses. The Bank's provision for loan losses was $1.1
million for the year ended June 30, 1997 compared to $1.6 million for the year
ended June 30, 1996. The 1997 provision was based on management's evaluation of
its loan portfolio and real estate market conditions. In particular, management
considered the continued growth in the portfolio, as well as the decrease in its
non-performing loans. The Bank's non-performing loans as a percentage of total
loans improved from 0.91% at June 30, 1996 to 0.78% at June 30, 1997. At June
30, 1997, the Bank's allowance for loan losses as a percentage of total non-
performing loans was 141.1%, compared to 125.5% at June 30, 1996. At June 30,
1997, the Bank's allowance for loan losses as a percentage of loans receivable,
net, was 1.10%, as compared to 1.14% at June 30, 1996. To the extent the Bank
increases its investment in commercial real estate, commercial and other loans
which entail higher risk than one- to four-family loans, the Bank may determine
to increase its allowance for loan losses through additional loan loss
provisions which may adversely affect net income. See "Risk Factors -Increased
Lending Risks Associated with Commercial Real Estate, Multi-Family, 

                                       45
Construction and Development and Commercial Lending" and "Business of the Bank -
Delinquent Loans, Real Estate Owned and Classified Assets" and "- Allowance for
Loan Losses."

     Non-Interest Income. Non-interest income is composed of fee income and
profits from the sale of securities and loans. Total non-interest income for the
year ended June 30, 1997 increased $34,000, or 1.2%, to $2.9 million for the
year ended June 30, 1997. Fee income increased $245,000, or 9.0%, from $2.7
million for the year ended June 30, 1996 to $3.0 million for the year ended June
30, 1997 due to an increase in the Bank's deposit accounts. Net gains/losses on
sales of securities and loans changed from a net gain of $42,000 for the year
ended June 30, 1996 to a net loss of $107,000 for the year ended June 30, 1997,
primarily as a result of the Bank's sale of lower-yielding U.S. Treasury and
corporate obligations.

     Non-Interest Expense. Non-interest expense increased by $1.2 million, or
6.5%, from $18.5 million for the year ended June 30, 1996 to $19.7 million for
the year ended June 30, 1997, primarily due to the one-time special SAIF
assessment and an increase in compensation and employee benefits. Compensation
and employee benefits increased by $589,000, or 6.4%, from $9.3 million for the
year ended June 30, 1996 to $9.9 million for the year ended June 30, 1997,
primarily as a result of the retention of new personnel in various areas of the
Bank's operations and normal salary increases. Deposit insurance premiums
increased $373,000, or 148.6%, from $251,000 for the year ended June 30, 1996 to
$624,000 for the year ended June 30, 1997, due to the increase in average
deposits from $715.7 million for the year ended June 30, 1996 to $758.9 million
for the year ended June 30, 1997. In addition, the Bank paid a one-time special
assessment to the SAIF of $493,000 in October 1996 based on the amount of SAIF-
insured deposits the Bank maintains. Advertising and promotion expense increased
$183,000, or 28.9%, from $634,000 for the year ended June 30, 1996 to $817,000
for the year ended June 30, 1997, primarily as a result of the Bank's special
anniversary promotion throughout October 1996 and additional marketing of the
Bank's loan and deposit products. The Bank expects that compensation and
employee benefits expense may increase after the Conversion, primarily as a
result of the adoption of various employee benefit plans and compensation
adjustments contemplated in connection with the Conversion. See "Management of
the Bank--Benefit Plans." In addition, the Bank expects non-interest expense to
increase in future periods as a result of the Bank's intention to open a public
accommodation office during 1998. The Bank is also considering opening two new
full-service branches in 1998, although no assurances can be made in this
regard. If the Bank were to open two new branches, non-interest expenses would
be expected to increase further in future periods. See "Business of the Bank--
Properties."

     Income Taxes. Total income tax expense was $9.5 million for the year ended
June 30, 1997 compared to $6.8 million for the year ended June 30, 1996. The
increase was due primarily to an increase in pre-tax income for 1997. The
effective tax rate was 47.0% for the year ended June 30, 1997 as compared to
43.9% for the year ended June 30, 1996.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30,
1995.

     General. Net income for the year ended June 30, 1996 was $8.7 million,
compared to $7.6 million for the year ended June 30, 1995. The increase was the
result of a $1.3 million charge in fiscal 1995, due to a change in accounting
principles from the Bank's adoption of SFAS No. 106. Excluding the effect of
SFAS No. 106, net income decreased from $8.9 million for the year ended June 30,
1995 to $8.7 million for the year ended June 30, 1996, due in part to higher 
non-interest expenses and a higher provision for loan losses, partially offset
by a decrease in FDIC insurance premiums and an increase in net interest income.

                                       46
Interest Income. Total income from interest-earning assets increased from
$54.3 million for the year ended June 30, 1995 to $59.1 million for the year
ended June 30, 1996, primarily due to an increase of $38.4 million in the
average balance of interest-earning assets and a 25 basis point increase in the
yield on interest-earning assets. The average balance of interest-earning assets
increased due in part to a $21.6 million, or 6.1%, increase in the average
balance of real estate loans. As a result, interest income on the Bank's real
estate loan portfolio increased $2.1 million, or 7.3% , from $28.8 million for
the year ended June 30, 1995 to $30.9 million for the year ended June 30, 1996
due to the increase in the average balance of such loans and an increase in the
average yield from 8.18% for fiscal 1995 to 8.26% for fiscal 1996. Interest
income on consumer and student loans also increased from $2.2 million for the
year ended June 30, 1995 to $2.3 million for the year ended June 30, 1996, as a
result of an increase of $1.7 million in the average balance of such loans which
was offset, in part, by a decrease in the average yield of such loans from
10.50% for fiscal 1995 to 10.21% for fiscal 1996.

     Interest income from debt and equity securities increased $1.2 million, or
7.2%, from $16.7 million for the year ended June 30, 1995 to $17.9 million for
the year ended June 30, 1996, as a result of the increase in the average balance
of such securities as well as a 29 basis point increase in the average yield on
such securities. Interest income on mortgage-backed and mortgage-related
securities also increased by $326,000, or 6.4%, from $5.1 million for the year
ended June 30, 1995 to $5.4 million for the year ended June 30, 1996, due to a
74 basis point increase in the average yield on such securities, which was
partially offset by a $5.3 million decrease in the average balance of such
securities.

     Interest Expense. Interest expense for the year ended June 30, 1996 was
$26.3 million, as compared to $22.5 million for the year ended June 30, 1995, an
increase of $3.8 million, or 17.0%. The increase is primarily due to a $26.0
million increase in average interest-bearing deposits and a 38 basis point
increase in the average cost of interest-bearing deposits. The increase in
average interest-bearing deposits was primarily attributable to an increase in
the average balance of certificates of deposits due to competitive pricing and
increased marketing of such deposit products. As a result, the average rate paid
on certificate accounts increased from 4.58% for fiscal 1995 to 5.29% for fiscal
1996.

     Provision for Loan Losses. The Bank's provision for loan losses was $1.6
million for the year ended June 30, 1996 as compared with $600,000 for the year
ended June 30, 1995. The increase in the provision was due primarily to
management's assessment of its loan portfolio, the growth in the portfolio and
the level of non-performing loans. In particular, non-performing loans increased
from $2.8 million at June 30, 1995 to $3.6 million at June 30, 1996. The
increase in non-performing loans was attributable to a $447,000 increase in non-
performing commercial real estate loans. At June 30, 1995, the Bank's allowance
for loan losses to total non-performing loans and total loans was 109.3% and
0.83%, respectively, as compared to 125.5% and 1.14%, respectively, at June 30,
1996. See "Risk Factors - Increased Lending Risks Associated with Commercial
Real Estate, Multi-Family, Construction and Development and Commercial Lending"
and "Business of the Bank - Delinquent Loans, Real Estate Owned and Classified
Assets" and "- Allowance for Loan Losses."

     Non-Interest Income. Non-interest income increased by $168,000, or 6.3%,
from $2.7 million for the year ended June 30, 1995 to $2.8 million for the year
ended June 30, 1996. The increase was primarily due to the increase in fee
income of $167,000, or 6.5%, from $2.6 million for the year ended June 30, 1995
to $2.7 million for the year ended June 30, 1996, which increase is primarily
attributable to the increase in deposits.

     Non-Interest Expense. Non-interest expense increased slightly by $364,000,
or 2.0%, from $18.1 million for the year ended June 30, 1995 to $18.5 million
for the year ended June 30, 1996. This increase

                                       47
is primarily a result of an increase in non-interest expenses of $768,000, or
20.8%, from $4.8 million for the year ended June 30, 1995 to $5.7 million for
the year ended June 30, 1996, as a result of an increase in compensation and
employee benefits of $508,000, from $8.8 million for 1995 to $9.3 million for
1996, as a result of normal salary increases. Non-interest expense was also
impacted by a $369,000, or 13.9%, increase in occupancy costs from $2.7 million
for the year ended June 30, 1995 to $3.0 million for the year ended June 30,
1996, due to the Bank instituting a repair and renovation program for the branch
offices, as well as a $683,000, or 57.4%, increase in computer service fees from
$1.2 million for the year ended June 30, 1995 to $1.9 million for the year ended
June 30, 1996, as a result of the installation of a new computer network and
equipment at all branch locations and the change in payment method for check
processing charges. These items were offset by a reduction in FDIC deposit
insurance premiums, from $1.7 million for the year ended June 30, 1995 to
$251,000 for the year ended June 30, 1996 due to a reduction in the assessment
rate imposed by the FDIC. See "Regulation and Supervision - Insurance of Deposit
Accounts."

     Income Taxes. The provision for income taxes decreased by $116,000, or
1.7%, from $6.9 million for the year ended June 30, 1995 to $6.8 million for the
year ended June 30, 1996, primarily as a result of the decrease in income before
income taxes. The effective tax rate was 43.9% for the year ended June 30, 1996
as compared to 43.8% for the prior year.

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

     In December 1990, the FASB issued SFAS No. 106. SFAS No. 106 focuses
principally on post-retirement health care benefits and significantly changed
the previous practice of accounting for post-retirement benefits on a cash basis
to requiring accrual during the years that the employee renders the necessary
service, of the expected cost of providing those benefits to an employee and the
employee's beneficiaries and covered dependents. SFAS No. 106 became effective
for fiscal years beginning after December 15, 1992, and adoption was required on
a prospective basis. The Bank adopted SFAS No. 106 effective July 1, 1994, which
resulted in a charge, net of tax, of $1.3 million.

LIQUIDITY AND CAPITAL RESOURCES

     The Bank's primary sources of funds are deposits, proceeds from the
principal and interest payments on loans, mortgage-backed and mortgage related
and debt and equity securities, and to a significantly lesser extent, proceeds
from the sale of fixed-rate mortgage loans to the secondary market. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit outflows, mortgage prepayments and mortgage loan sales
are greatly influenced by general interest rates, economic conditions and
competition.

     The primary investing activities of the Bank are the origination of
primarily residential one-to four-family and, to a lesser extent, commercial
real estate, construction and development, multi-family and other loans and the
purchase of mortgage-backed and mortgage related and debt and equity securities.
During the years ended June 30, 1997, 1996, and 1995, the Bank's loan
originations totaled $137.2 million, $94.3 million and $78.9 million,
respectively. Purchases of mortgage-backed, mortgage related and debt and equity
securities totaled $195.4 million, $166.5 million, and $121.9 million for the
years ended June 30, 1997, 1996, and 1995, respectively. These activities were
funded primarily by deposit growth, principal repayments on loans, mortgage-
backed and mortgage related securities and debt and equity securities. Loan
sales provided additional liquidity to the Bank, totaling $2.0 million, $10.0
million and $1.6 million for the years ended June 30, 1997, 1996 and 1995,
respectively. The Bank experienced a net increase in total deposits of $66.6
million, $53.9 million and $15.4 million for the years ended June 30, 1997,
1996, and 1995, respectively. Deposit flows are affected by the level of
interest rates, the interest rates and products offered by the local
competitors, the Bank and other factors.

                                       48
The Bank closely monitors its liquidity position on a daily basis. Excess
short-term liquidity is invested in overnight federal funds sold. On a longer-
term basis, the Bank maintains a strategy of investing in various lending
products as described in greater detail under "Business of the Bank--Lending
Activities." In the event the Bank should require funds beyond its ability to
generate them internally, additional sources of funds are available through the
Bank's $10.0 million line of credit and through reverse repurchase agreements.
In addition, the Bank has applied to become a member of the FHLB system, which
upon membership will provide the Bank with access to FHLB advances. See
"Business of the Bank--Sources of Funds--Borrowed Funds." At June 30, 1997, the
Bank had no outstanding borrowings.

     Loan commitments totaled $49.4 million at June 30, 1997, comprised of $20.2
million in one- to four-family loan commitments and $2.6 million in commercial
real estate loan commitments, $11.5 million in construction loan commitments,
$7.2 million in commercial loan commitments and $7.9 million in home equity loan
commitments. Management of the Bank anticipates that it will have sufficient
funds available to meet its current loan commitments. Certificates of deposit
which are scheduled to mature in one year or less from June 30, 1997 totaled
$209.1 million. Based upon past experience and the Bank's current pricing
strategy, management believes that a significant portion of such deposits will
remain with the Bank.

     At June 30, 1997, the Bank exceeded all of its regulatory capital
requirements with a leverage capital level of $99.1 million, or 10.02% of
adjusted assets, which is above the required level of $39.6 million, or 4.0% of
adjusted assets and risk-based capital of $103.9 million, or 19.71% of adjusted
assets, which is above the required level of $42.2 million, or 8.0%. See
"Regulatory Capital Compliance."

     The Bank's most liquid assets are cash and interest-bearing demand
accounts. The levels of these assets are dependent on the Bank's operating,
financing, lending and investing activities during any given period. At June 30,
1997, cash and interest-bearing demand accounts totaled $26.5 million, or 2.7%
of total assets.

IMPACT OF INFLATION AND CHANGING PRICES

     The Consolidated 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 dollar amounts
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
cost of the Bank's operations. Unlike industrial companies, nearly all of the
assets and liabilities of the Bank are monetary in nature. As a result, interest
rates have a greater impact on the Bank's 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.

IMPACT OF NEW ACCOUNTING STANDARDS

     In November 1993, the AICPA issued SOP 93-6 ("SOP 93-6"), "Employers'
Accounting for Employee Stock Ownership Plans," which is effective for years
beginning after December 15, 1993. SOP 93-6 requires the application of its
guidance for shares acquired by ESOPs after December 31, 1992 but not yet
committed to be released as of the beginning of the year SOP 93-6 is adopted.
SOP 93-6 changes the measure of compensation expense recorded by employers for
leveraged ESOPs from the cost of ESOP shares to the fair value of ESOP shares.
The Company has adopted an ESOP in connection with the Conversion, which is
expected to purchase 8% of the Common Stock sold in the Conversion. Under SOP 
93-6, the Company will recognize compensation cost equal to the fair value of
the ESOP shares during the periods in which they become committed to be
released. To the extent that the fair value of the Company's ESOP shares differ
from the cost of such shares, this differential will be charged or credited to
equity.

                                       49
Employers with internally leveraged ESOPs such as the Company will not report
the loan receivable from the ESOP as an asset and will not report the ESOP debt
from the employer as a liability. However, the effects of SOP 93-6 on future
operating results cannot be determined at this time.

     In November 1995, the FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation" ("SFAS No. 123"). This statement establishes financial accounting
standards for stock-based employee compensation plans. SFAS No. 123 permits the
Bank to choose either a new fair value based method or the current Accounting
Principles Board ("APB") Opinion 25 intrinsic value based method of accounting
for its stock-based compensation arrangements. SFAS No. 123 requires pro forma
disclosures of net earnings and earnings per share computed as if the fair value
based method had been applied in financial statements of companies that continue
to follow current practice in accounting for such arrangements under APB Opinion
25. SFAS No. 123 applies to all stock-based employee compensation plans in which
an employer grants shares of its stock or other equity instruments to employees
except for employee stock ownership plans. SFAS No. 123 also applies to plans in
which the employer incurs liabilities to employees in amounts based on the price
of the employer's stock, (e.g., stock option plans, stock purchase plans,
restricted stock plans, and stock appreciation rights). The statement also
specifies the accounting for transactions in which a company issues stock
options or other equity instruments for services provided by nonemployees or to
acquire goods or services from outside suppliers or vendors. The recognition
provisions of SFAS No. 123 for companies choosing to adopt the new fair value
based method of accounting for stock-based compensation arrangements may be
adopted immediately and will apply to all transactions entered into in fiscal
years that begin after December 15, 1995, however disclosure of the pro forma
net earnings and earnings per share, as if the fair value method of accounting
for stock-based compensation had been elected, is required for all awards
granted in fiscal years beginning after December 31, 1994. Any effect that this
statement will have on the Bank will be applicable upon the consummation of the
Conversion.

     In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No.
125"). This Statement provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components approach,
after a transfer of financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has incurred and derecognizes
financial assets it no longer controls and liabilities that have been
extinguished. The financial-components approach focuses on the assets and
liabilities that exist after the transfer. Many of these assets and liabilities
are components of financial assets that existed prior to the transfer. If a
transfer does not meet the criteria for a sale, the transfer is accounted for as
a secured borrowing with pledge of collateral. The Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and should be applied prospectively. Earlier
or retroactive application of this Statement is not permitted. Management has
determined that this Statement will not have a material impact on the Company's
consolidated financial statements.

     In February 1997, the FASB released SFAS No. 128, "Earnings Per Share"
("SFAS No. 128"). SFAS No. 128 establishes standards for computing and
presenting earnings per share ("EPS") and applies to entities with publicly held
common stock or potential common stock. SFAS No. 128 simplifies the standards
for computing earnings per share previously found in APB Opinion No. 15,
Earnings Per Share, and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
numerator and denominator of the diluted EPS computation. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if

                                       50
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion No. 15. SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted.

     In March 1997, the FASB issued SFAS No. 129, "Disclosure of Information
About Capital Structure" ("SFAS No. 129). SFAS No. 129 continues the existing
requirements to disclose the pertinent rights and privileges of all securities
other than ordinary common stock but expands the number of companies subject to
portions of its requirements. Specifically, the Statement requires all entities
to provide the capital structure disclosures previously required by APB Opinion
No. 15. Companies that were exempt from the provisions of APB Opinion No. 15
will now need to make those disclosures.

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general purpose financial statements. SFAS No. 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from net worth
and additional paid-in capital in the equity section of a statement of financial
position. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. Management is in the process of
determining the impact, if any, this statement will have on the Bank.

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires disclosures for
each segment that are similar to those required under current standards with the
addition of quarterly disclosure requirements and a finer partitioning of
geographic disclosures. It requires limited segment data on a quarterly basis.
It also requires geographic data by country, as opposed to broader geographic
regions as permitted under current standards. SFAS No. 131 is effective for
fiscal year beginning after December 15, 1997 with earlier application
permitted.

                            BUSINESS OF THE COMPANY

GENERAL

     The Company was incorporated in September 1997 at the direction of the
Board of Trustees of the Bank for the purpose of becoming a holding company to
own all of the outstanding capital stock of the Bank. Upon consummation of the
Conversion, it is anticipated that the Bank will become a wholly-owned
subsidiary of the Company. Upon the consummation of the Conversion, the Company
will be a savings and loan holding company regulated by the OTS. See "Regulation
and Supervision - Holding Company Regulation."

     The Company is currently not an operating company. Following the
Conversion, in addition to directing, planning and coordinating the business
activities of the Bank, the Company will initially invest net proceeds it
retains primarily in mortgage-backed and mortgage related securities and
investment-grade debt and equity securities. In addition, the Company intends to
fund the loan to the ESOP to enable the 

                                       51
ESOP to subscribe for 8% of the Common Stock issued in connection with the
Conversion, including shares issued to the Foundation; however, a third party
lender may be utilized to lend funds to the ESOP. See "Use of Proceeds." In the
future, the Company may expand its operations in the Bank's primary market area
or other areas surrounding the New York City metropolitan area by marketing and
business development, acquiring or organizing other operating subsidiaries,
including other financial institutions and financial services companies. Other
than a lease on a public accommodation office to be opened on Staten Island in
1998 and plans to open new branch offices on Staten Island in 1998, there are no
current agreements or understandings for an expansion of the Company's
operations. Initially, the Company will neither own nor lease any property from
any third party, but will instead use the premises, equipment and furniture of
the Bank.

     Concurrent with the organization of the Company, a new President and Chief
Operating Officer and a new Chief Financial Officer and Secretary have been
retained by the Company, both of whom were not previously employed by the Bank
but have significant experience in the financial services industry. See
"Management of the Company." At the present time, the Company does not intend to
employ any persons other than its current officers and certain officers of the
Bank, who will not be separately provided cash compensation by the Company. The
Company may utilize the support staff of the Bank from time to time, if needed.
Additional employees will be hired as appropriate to the extent the Company
expands its business in the future.

                                       52
BUSINESS OF THE BANK

GENERAL

     The Bank is a community-oriented mutual savings bank which was originally
chartered by the State of New York in 1886. The Bank's principal business
consists of the acceptance of retail deposits from the general public in the
areas surrounding its branch offices and the investment of those deposits,
together with funds generated from operations and borrowings, primarily in one-
to four-family residential mortgage loans and, to a lesser extent, commercial
real estate loans and in mortgage-backed and mortgage related securities and
various debt and equity securities. The Bank also invests in construction and
development, commercial, home equity and consumer and student loans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Management Strategy." The Bank's revenues are derived principally
from the interest on its mortgage, consumer and commercial loans and securities.
The Bank's primary sources of funds are deposits, principal and interest
payments on loans and securities, and proceeds from the sale of loans and
securities.

MARKET AREA

     The Bank has been, and intends to continue to be, a community-oriented
financial institution offering a variety of financial services to meet the needs
of the communities it serves. The Bank currently operates twelve full service
banking offices in the Borough of Staten Island, and one full service banking
office in the Borough of Brooklyn. Additionally, the Bank intends to open a
public accommodation office in 1998 and is considering opening two new full-
service branches. With the exception of the lease on the new public
accommodation office, there are no current arrangements, understandings or
agreements, written or oral, regarding such offices, and no assurances can be
made that such offices will be opened.

     The Bank's primary deposit gathering area is currently concentrated around
the areas where its full service banking offices are located in Staten Island
and Brooklyn  which the Bank generally considers to be its primary market area.
The Bank's primary lending area has also historically been concentrated in
Staten Island  and, to a lesser extent, in the  area around its office in
Brooklyn.  As of June 1996, based on a survey by a nationally-recognized bank
consulting firm, the Bank had 14.2% of total deposits in Staten Island, and for
1996, the Bank had a lending market share of approximately 7.2% in Staten
Island, placing the Bank among the leaders in both loans originated and deposits
in Staten Island.  The Bank and Company may, in the future, consider expanding
the market area served by the Bank and Company to other areas in the New York
City metropolitan area including northern New Jersey, Connecticut and upstate
New York.

     The economy of the New York City metropolitan area has historically
benefitted from having a large number of corporate headquarters and a diversity
of financial service entities.  Additionally, Staten Island has historically
benefitted from steady residential growth and an expanding base of industrial,
service and high technology businesses.  During the late 1980s and early 1990s,
however, due in part to the effects of a prolonged period of weakness in the
national economy, the decline in the regional economy, layoffs in the financial
services industry and corporate relocations, the New York City metropolitan area
experienced reduced levels of employment.  These conditions, in conjunction with
a surplus of available commercial and residential property, resulted in an
overall decline in the underlying values of properties located in the area
during the late 1980s and early 1990s.  Staten Island, due to its location and
its relatively large population of government employees, was somewhat insulated
from the economic decline of the late 1980s and early 1990s.  Since 1993, the
prices and values of real estate have stabilized and, in certain areas, the
prices and values of real estate  have increased.  In the last several years,
the New York City metropolitan area has benefitted from the resurgence and
growth in employment and profitability experienced by national securities 

                                       53
and investment banking firms, many of which are domiciled in the Borough of 
Manhattan, as well as the growth and profitability of other financial services 
companies, such as money center banks. However, there can be no assurances that
such decline could not reoccur. See "Risk Factors - Weakness in Local Economy."

COMPETITION

     The Bank faces significant competition both in making loans and in
attracting deposits.  The New York City metropolitan area has a high density of
financial institutions, many of which are branches of significantly larger
institutions 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 savings banks, commercial banks, savings and
loan associations, mortgage banking companies, credit unions and insurance
companies and other financial service companies.  Its most direct competition
for deposits has historically come from savings and loan associations, savings
banks, commercial banks and credit unions.  The Bank faces additional
competition for deposits from non-depository competitors such as the mutual fund
industry, securities and brokerage firms and insurance companies.  There are
eleven depository institutions with operations in the Borough of Staten Island.
Competition may also increase as a result of the lifting of restrictions on the
interstate operations of financial institutions.

LENDING ACTIVITIES

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

                                       54
The following table sets forth the composition of the Bank's loan
portfolio, including loans held for sale, in dollar amounts and in percentages
of the respective portfolios at the dates indicated.
At June 30,
                                             -----------------------------------------------------------------------
                                                         1997                    1996                   1995
                                             --------------------------  ---------------------  --------------------
                                                              Percent                Percent                Percent  
                                                  Amount      of Total    Amount     of Total    Amount     of Total 
                                             --------------------------  ---------------------  --------------------
                                                                       (Dollars in thousands)
Real estate loans:
   One- to four-family..........................  $394,588       78.4%   $325,139       76.3%   $303,734       76.2% 
   Multi-family.................................     2,705        0.5       1,238        0.3         811        0.2  
   Commercial real estate.......................    40,713        8.1      39,892        9.3      40,037       10.1  
   Construction and development.................    18,343        3.7      12,812        3.0      10,487        2.6  
   Home equity..................................    16,729        3.3      18,054        4.2      16,518        4.1  
Commercial......................................     6,662        1.3       6,300        1.5       5,039        1.3  
Consumer and student............................    23,589        4.7      22,932        5.4      21,795        5.5 
                                                   -------      -----     -------      -----     -------      ----- 
      Gross loans...............................   503,329      100.0%    426,367      100.0%    398,421      100.0% 
                                                                =====                  =====                  =====  
Less:
   Unamortized discounts, net...................      (788)                  (947)                (1,105)
   Deferred loan fees...........................      (813)                (1,354)                (1,632)
   Allowance for possible loan losses...........    (5,470)                (4,796)                (3,275)
                                                  --------               --------               --------
      Total loans, net..........................   496,258                419,270                392,409
Less:
   Loans held for sale, net:
      One- to four-family.......................        --                  1,155                     --
                                                  --------               --------               --------
        Loans receivable held for
          investment, net.......................  $496,258               $418,115               $392,409
                                                  ========               ========               ========
At June 30,
                                                             -------------------------------------------
                                                                    1994                   1993
                                                             ---------------------  --------------------
                                                                          Percent                Percent
                                                              Amount     of Total    Amount     of Total
                                                             ---------------------  --------------------
                                                                       (Dollars in thousands)
Real estate loans:
   One- to four-family......................................  $273,063       75.5%   $274,136       76.0%
   Multi-family.............................................       920        0.3         936        0.2
   Commercial real estate...................................    39,220       10.8      35,949       10.0
   Construction and development.............................     6,677        1.9       6,011        1.7
   Home equity..............................................    16,775        4.6      20,430        5.7
Commercial..................................................     5,426        1.5       4,282        1.2
Consumer and student........................................    19,663        5.4      18,957        5.2
                                                               -------      -----     -------      -----
      Gross loans...........................................   361,744      100.0%    360,701      100.0%
                                                                            =====                  =====
Less:
   Unamortized discounts, net...............................    (1,263)                (1,420)
   Deferred loan fees.......................................    (1,525)                (1,265)
   Allowance for possible loan losses.......................    (3,106)                (2,735)
                                                               -------                -------
      Total loans, net......................................   355,850                355,281
Less:
   Loans held for sale, net:
   One- to four-family......................................        --                     --
                                                              --------               --------
      Loans receivable held for
        investment, net.....................................  $355,850               $355,281
                                                              ========               ========
55
Loan Originations. The Bank originates both adjustable-rate and fixed-rate 
one- to four-family loans, commercial real estate loans, home equity loans,
construction and development loans, commercial loans, consumer loans and student
loans. The Bank's one- to four-family mortgage lending activities are conducted
primarily through the utilization of mortgage brokers and by the Bank's loan
personnel generally operating in the Bank's loan center. Although the Bank has
authorized the use of approximately 100 mortgage brokers in connection with one-
to four-family loan originations, the Bank primarily utilizes the services of
seven mortgage brokers operating primarily on Staten Island and in Brooklyn.
During fiscal 1997, the Bank originated $73.9 million of one- to four-family
loans through mortgage brokers and $26.6 million of such loans through Bank
personnel. Recently, the Bank began offering through brokers its fully processed
loan program, which is a zero point loan that is originated and processed by the
broker. The Bank pays mortgage brokers a processing fee for a fully processed
loan. All loans are underwritten by the Bank pursuant to the Bank's loan
underwriting policies and procedures.

  Recently, the Bank has placed increased emphasis on the origination of
commercial real estate, construction and development and commercial loans as
part of its efforts to broaden the services it provides to the Staten Island
business community.  In this regard, the Bank has recently hired  commercial
lending personnel with experience in the Bank's primary market area and may add
additional personnel as needed.  In addition, the Bank has increased its
marketing efforts with respect to commercial real estate, construction and
development and commercial lending by making its existing business customers
aware of the expanded products and services available to businesses.  See "Risk
Factors--Increased Lending Risks Associated With Commercial Real Estate, Multi-
Family, Construction and Development and Commercial Lending."  The Bank's
ability to originate loans is dependent upon  customer demand, demand for fixed-
rate or adjustable-rate loans and expected future levels of interest rates.

  Generally, all loans are originated for investment with the exception of
longer-term fixed-rate one- to four-family mortgage loans. It is currently the
general policy of the Bank to sell substantially all of the one- to four-family
fixed-rate mortgage loans with maturities over fifteen years that it originates
and to retain all adjustable-rate one- to four-family mortgage loans which it
originates. However, from time to time, the Bank may retain fixed-rate mortgage
loans with terms over fifteen years depending on the asset quality and the
interest rate risk position of the Bank. The one- to four-family loan products
currently originated for sale by the Bank include a variety of mortgage loans
which conform to the underwriting standards specified by FNMA and FHLMC
("conforming loans"). Loans which do not conform to FNMA or FHLMC standards due
to loan amounts ("jumbo loans") are originated for the portfolio. With the
exception of customary provision relating to breaches of representations and
warranties, sales of loans are made without recourse to the Bank in the event of
default by the borrower. The Bank generally retains the servicing rights on the
mortgage loans sold to FHLMC.

  At June 30, 1997, the Bank was servicing its portfolio of $503.3 million of
loans receivable and  $50.1 million of loans for others, primarily consisting of
conforming fixed-rate loans sold by the Bank.  Loan servicing includes
collecting and remitting loan payments, accounting for principal and interest,
contacting delinquent mortgagors, supervising foreclosures and property
dispositions in the event of unremedied defaults, making certain insurance and
tax payments on behalf of the borrowers, and generally administering the loans.

  During the fiscal years ended June 30, 1997 and June 30, 1996, the Bank
originated $100.5 million and $54.0  million of fixed-rate and adjustable-rate
one- to four-family loans, respectively, of which $98.5 million and $43.9
million, respectively, were retained by the Bank.  The fixed-rate loans retained
by the Bank consisted primarily of loans with terms of 15 years or less.  The
Bank recognizes, at the time of sale, the cash gain or loss on the sale of the
loans based on the difference between the net cash proceeds received and the
carrying value of the loans sold.  At June 30, 1997, the Bank had no mortgage
loans held for sale.  The Bank has, in the past, from time to time, purchased
participations in loans, primarily one- to four-family mortgage loans, and had
$1.3 million of participations in loans at June 30, 1997.

                                       56
The following tables set forth the Bank's loan originations, purchases, sales
and principal repayments for the periods indicated.
For the Year Ended June 30,
                                                           -----------------------------------
                                                              1997         1996        1995
                                                           ----------  -----------  ----------
                                                                    (In thousands)
Gross loans(1):
Balance outstanding at beginning of period................... $426,367    $398,421   $361,744
                                                              --------    --------   --------
   Loans originated:
      One- to four-family....................................  100,487      53,957     53,355
      Multi-family...........................................    1,616         540         --
      Commercial real estate.................................    4,454       6,408      5,805
      Construction and development...........................   13,444       9,080      7,520
      Home equity............................................    5,824       6,049      2,581
      Commercial.............................................    3,636      11,280      2,449
      Consumer and student...................................    7,790       7,011      7,143
                                                              --------    --------   --------
         Total loans originated..............................  137,251      94,325     78,853
   Loans purchased...........................................      910          --         --
                                                              --------    --------   --------
         Total loans originated and purchased................  138,161      94,325     78,853
                                                              --------    --------   --------

Less:
   Principal repayments......................................   58,485      55,799     39,803
   Sales of loans............................................    2,004       9,972      1,609
   Transfers to real estate owned............................      673         608        764
   Principal charged off.....................................       37          --         --
                                                              --------    --------   --------
         Total loans.........................................  503,329     426,367    398,421
Less:
   Loans held for sale, net..................................       --       1,155         --
                                                              --------    --------   --------
   Loans receivable held for investment at
   end of period............................................. $503,329    $425,212   $398,421
                                                              ========    ========   ========
____________________
(1) Gross loans includes loans receivable held for investment and loans held for
    sale.

                                       57
Loan Maturity.  The following table shows the contractual maturity of the
Bank's loan portfolio at June 30, 1997.  The table does not include prepayments
or scheduled principal amortization.  Prepayments and scheduled principal
amortization on mortgage loans totalled $58.5 million, $55.8 million and $39.8
million for the years ended June 30, 1997, 1996 and 1995, respectively.
At June 30, 1997
                                                                -------------------------------------------------------------------
                                                                                           Real Estate Loans
                                                                -------------------------------------------------------------------
                                                                   One- to                               Construction
                                                                    Four-       Multi-    Commercial         and            Home
                                                                    Family      Family    Real Estate     Development       Equity
                                                                -----------  ----------  -------------  ---------------  ----------
                                                                                            (In thousands)
Amounts due:
   Within one year.............................................  $    227      $   --       $   315         $17,273       $    --
                                                                 --------      ------       -------         -------       -------
   After one year:
       More than one year to three years.......................     1,749          --           345           1,070            --
       More than three years to five years.....................     4,458          --         1,178              --            28
       More than five years to 10 years........................    24,039         310        12,962              --           805
       More than 10 years to 20 years..........................    74,312       2,395        23,897              --        12,955
       More than 20 years......................................   289,803          --         2,016              --         2,941
                                                                  -------       -----        ------           -----       -------
       Total due after June 30, 1998...........................   394,361       2,705        40,398           1,070        16,729
                                                                  -------       -----        ------           -----       -------
       Total amount due........................................  $394,588      $2,705       $40,713         $18,343       $16,729
                                                                 ========      ======       =======         =======       =======
At June 30, 1997
                                                                              -----------------------------------
                                                                                           Consumer      Total
                                                                                             and         Loans
                                                                               Commercial   Student    Receivable
                                                                              -----------  ---------   ----------
                                                                                          (In thousands)
Amounts due:
   Within one year...........................................................   $ 4,878     $ 1,745     $ 24,438
   After one year:                                                              -------     -------     --------
       More than one year to three years.....................................       793       5,615        9,572
       More than three years to five years...................................       720       2,248        8,632
       More than five years to 10 years......................................        --       6,670       44,786
       More than 10 years to 20 years........................................       271       7,219      121,049
       More than 20 years....................................................        --          92      294,852
                                                                                -------     -------     --------
       Total due after June 30, 1998.........................................     1,784      21,844      478,891
                                                                                -------     -------     --------

       Total amount due......................................................   $ 6,662     $23,589     $503,329
Less:                                                                           =======     =======     --------
          Unamortized discounts, net.............................................................            788
          Deferred loan fees, net................................................................            813
          Allowance for possible loan losses.....................................................          5,470
                                                                                                        --------
Loans receivable held for investment, net........................................................       $496,258
                                                                                                        ========
58
The following table sets forth at June 30, 1997, the dollar amount of gross
loans receivable contractually due after June 30, 1998, and whether such loans
have fixed interest rates or adjustable interest rates.
Due After June 30, 1998
                                                -----------------------------------
                                                 Fixed       Adjustable    Total
                                                ---------   -----------  ----------
                                                        (In thousands)
Real estate loans:

 One- to four-family..........................   $115,301      $279,060   $394,361

 Multi-family.................................        214         2,491      2,705

 Commercial real estate.......................      3,189        37,209     40,398

 Construction and development.................         --         1,070      1,070

 Home equity..................................      8,021         8,708     16,729
                                                 --------      --------   --------
  Total real estate loans.....................    126,725       328,538    455,263

Commercial loans..............................         --         1,784      1,784

Consumer and student loans....................      9,297        12,547     21,844
                                                 --------      --------   --------
  Total loans receivable......................   $136,022      $342,869   $478,891
                                                 ========      ========   ========
One- to Four-Family Loans.  The Bank currently offers both fixed-rate and
adjustable-rate mortgage loans secured by one- to four-family residences located
in the Bank's primary market area, primarily with maturities up to thirty years.
One- to four-family mortgage loan originations are obtained through the use of
mortgage brokers,  the Bank's  loan center, existing or past customers,
advertising, and referrals from real estate brokers and attorneys.

  At June 30, 1997, the Bank's one- to four-family loans totalled $394.6
million, or 78.4%, of gross loans.  Of the one- to four-family loans outstanding
at that date, 29% were fixed-rate mortgage loans and 71% were adjustable-rate
mortgage loans.  The Bank offers fixed-rate mortgage loans with terms of fifteen
and thirty years.  The Bank sells substantially all fixed-rate residential
mortgage loans it originates with terms in excess of fifteen years, except for
non-conforming loans, to FHLMC, and retains the servicing on all loans sold,
although the Bank may retain fixed-rate mortgage loans with terms of in excess
of fifteen years, depending on the asset quality and the interest rate risk
position of the Bank.  The Bank generally retains for its portfolio shorter-
term, fixed rate loans with maturities of fifteen years or less and all
adjustable-rate one- to four-family loans.

  The Bank currently offers a number of adjustable-rate mortgage loans with
terms of up to thirty years and interest rates which adjust annually from the
outset of the loan or which adjust annually after a one, three, five or seven
year initial fixed period.  Forty-year terms are available on certain
adjustable-rate loans.  The interest rates for the Bank's adjustable-rate
mortgage loans are indexed to the one or three year U.S. Treasury Securities
Index.  Interest rate adjustments on loans are limited to a 2% periodic
adjustment cap (2.5% on five-year adjustable-rate loans) and a maximum
adjustment of 6% over the life of the loan.  Certain

                                       59
of the Bank's adjustable-rate mortgage loans can be converted to a fixed-rate
loan with interest rates based upon the then-current market rates plus a varying
margin.

  The volume and type of adjustable-rate mortgage loans originated by the Bank
have been affected by such market factors as the level of interest rates,
competition, consumer preferences and the availability of funds.  The
origination of adjustable-rate residential mortgage loans, as opposed to fixed-
rate residential mortgage loans, helps reduce the Bank's exposure to increases
in interest rates.  However, adjustable-rate loans generally pose credit risks
not inherent in fixed-rate loans, primarily because as interest rates rise, the
underlying payments of the borrower rise, thereby increasing the potential for
default.  Periodic and lifetime caps on interest rate increases help to reduce
the risks associated with adjustable-rate loans but also limit the interest rate
sensitivity thereof.

  One- to four-family residential mortgage loans are generally underwritten
according to FNMA or FHLMC guidelines.  The Bank currently originates one- to
four-family residential mortgage loans in amounts up to 80% of the lower of the
appraised value or the selling price of the property securing the loan and up to
97% of the appraised value or selling price if private mortgage insurance is
obtained.   Mortgage loans originated by the Bank include due-on-sale clauses
which provide the Bank with the contractual right to deem the loan immediately
due and payable in the event the borrower transfers ownership of the property
without the Bank's consent.  Due-on-sale clauses are an important means of
adjusting the yields on the Bank's fixed-rate mortgage loan portfolio and the
Bank has generally exercised its rights under these clauses.

  In an effort to provide financing for low and moderate income home buyers, the
Bank participates in residential mortgage programs and products sponsored by the
State of New York Mortgage Association ("SONYMA").  The SONYMA mortgage programs
provide low and moderate income households with fixed-rate loans which are
generally below prevailing fixed-rate mortgages and which allow below market
down payments.  At June 30, 1997, $8.9 million, or 1.8% of total loans, were
sponsored by SONYMA.

  Commercial Real Estate Lending. The Bank originates commercial real estate
loans that are generally secured by properties used for business purposes or a
combination of residential and retail purposes which are located in the Bank's
primary market area. All mixed-use properties are classified as commercial real
estate. At June 30, 1997, the Bank's commercial real estate loan portfolio
totalled approximately $40.7 million or 8.1% of total loans. The Bank's
underwriting procedures provide that commercial real estate loans generally may
be made in amounts up to 75% of the lower of the appraised value or sales price
of the property, subject to the Bank's current regulatory loans-to-one-borrower
limit. These loans may be made with terms up to twenty years and are generally
offered at interest rates which adjust every one, three or five years, utilizing
the corresponding U.S. Treasury Securities Index as a base. The Bank also offers
fixed rate commercial real estate loans with a ten year term. In reaching its
decision on whether to make a commercial real estate loan, the Bank considers
the net operating income of the property and the borrower's expertise, credit
history and profitability. In addition, the Bank considers the business
activities and present and past uses of the properties in evaluating potential
environmental issues and, where such consideration indicates a need, a more
detailed investigation by a qualified environmental expert is conducted. The
Bank has generally required that the properties securing commercial real estate
loans have debt service coverage ratios (the ratio of earnings before debt
service to debt service) of at least 1.2x. Exceptions to this ratio are
considered on an individual basis and must be approved by the appropriate
lending authority. Generally, all commercial real estate loans made to
corporations, partnerships and other business entities require personal
guarantees by the principals; however, exceptions may be made for existing
customers of the Bank, with approval of the Board of Trustees. The largest
commercial real estate loan in the Bank's portfolio at June 30, 1997, was a $2.8
million loan secured by a nursing home located on Staten Island.

                                       60
Loans secured by commercial real estate properties generally involve larger
principal amounts and a greater degree of risk than one- to four-family
residential mortgage loans. Because payments on loans secured by commercial real
estate properties are often dependent on successful operation or management of
the properties, repayment of such loans may be affected by adverse conditions in
the real estate market or the economy.  The Bank seeks to minimize these risks
through its underwriting standards, which require such loans to be qualified on
the basis of the property's income and debt service coverage ratio. See "Risk
Factors--Increased Lending Risks Associated With Commercial Real Estate, Multi-
Family, Construction and Development and Commercial Lending."  As part of the
operating strategy, the Bank intends to continue to emphasize its commercial
real estate lending activities in its primary market area depending on the
demand for such loans and commercial real estate market conditions.

  Construction and Development Lending. The Bank originates construction and
development loans for the development of commercial and residential property
located in its primary market area, and may originate construction and
development loans outside its primary market area to existing customers. At June
30, 1997, the Bank had $26.9 million of construction loans most of which were
committed to the construction of one- to four-family properties; $18.3 million
of these loans were outstanding at that date. The Bank originates loans for the
acquisition of commercial and residential property located in its primary market
area only if such acquisition loan is part of an overall development loan.
Construction loans are offered primarily to experienced local developers
operating in the Bank's primary market area and, to a lesser extent, to
individuals for the construction of their residence. The majority of the Bank's
construction loans are originated primarily to finance the construction of one-
to four-family, owner-occupied residential real estate, and commercial real
estate properties located in the Bank's primary market area. Construction loans
are generally offered with terms up to two years. Construction loans may be made
in amounts up to 70% of the estimated cost of construction, or up to 80% in the
case of loans to individuals for the construction of their residence. With
respect to construction loans, the Bank generally requires borrowers with whom
the Bank does not have experience to secure permanent financing commitments from
generally recognized lenders for an amount equal to or greater than the amount
of the loan. In some cases, the Bank may itself provide permanent financing.
Loan proceeds are disbursed periodically in increments as construction
progresses and as inspections by the Bank's lending officers warrant.

  The Bank originates land loans to local developers for the purpose of holding
or developing the land for sale.  At June 30, 1997, the Bank had $1.3 million of
land loans.  Such loans are secured by a lien on the property, are limited to
65% of the appraised value of the secured property on raw land and up to 75% on
developed building lots, and have a term of up to two years, with a floating
interest rate based on the prime rate (which is the prime rate as published in
The Wall Street Journal and The New York Times).  The principal of the loan is
reduced as lots are sold and released.  The Bank's land loans are generally
secured by property in its primary market area; however, the Bank may originate
land loans outside its primary market area to existing customers.  In addition,
the Bank generally originates such loans to developers with whom it has
established relationships and obtains personal guarantees.

  Construction and development financing is generally considered to involve a
higher degree of credit risk than long-term financing on improved, owner-
occupied real estate.  Risk of loss on a construction loan is dependent largely
upon the accuracy of the initial estimate of the property's value at completion
of construction or development compared to the estimated cost (including
interest) of construction and other assumptions, including the estimated time to
sell residential properties.  If the estimate of value proves to be inaccurate,
the Bank may be confronted with a project, when completed, having a value which
is insufficient to assure full repayment.  See "Risk Factors--Increased Lending
Risks Associated with Commercial Real Estate, Multi-Family, Construction and
Development and Commercial Lending."  The largest construction loan in the
Bank's portfolio at June 30, 1997 was a $840,000 loan for the construction of a
one-family residential unit in the Borough of Staten Island.

                                       61
Home Equity Lending.   The Bank offers fixed-rate, fixed-term home equity
loans and lines of credit and adjustable-rate home equity loans in its primary
market area.  At June 30, 1997, the Bank's home equity loans and lines of credit
totalled $16.7 million, or 3.3%, of the Bank's gross loans.  Fixed-rate, fixed-
term home equity loans and lines of credit are offered in amounts up to 75% (80%
if the Bank holds the first mortgage) of the appraised value of the property
(including the first mortgage) with a maximum loan amount of  $250,000.  Fixed-
rate, fixed-term home equity loans and lines of credit are offered with terms up
to ten years, with interest-only payments during the first five years and
repayment of principal and interest during the final five years.  Adjustable-
rate home equity loans are offered in amounts up to 75% (80% if the Bank holds
the first mortgage) of the appraised value of the property (including the first
mortgage) with terms of up to twenty years with a maximum amount of $75,000.
Adjustable-rate loans are indexed to the  prime rate (which is the prime rate as
published in the Wall Street Journal and the New York Times).

  Commercial Lending.  The Bank also originates commercial loans to small and
medium sized businesses operating in the Bank's primary market area.  At June
30, 1997, the Bank had $6.7 million of commercial loans which amounted to 1.3%
of the Bank's total loans receivable.  Although such loans are  sometimes
secured by equipment, leases, inventory and accounts receivable, in the case of
the Bank, the majority of its commercial loans are secured by real estate.  Term
loans are generally offered with adjustable rates of interest and terms of up to
five years.  Secured commercial loans will be made in an amount up to 90% of the
value of the property securing the loan.  All term loans fully amortize during
the term of such loan.  Business lines of credit have terms of up to five years
if secured and two years if unsecured.  Secured lines of credit will be made in
amounts up to 90% of the value of the property securing the line.  Business
lines of credit adjust on a daily basis and are indexed to the prime rate.

  The Bank also issues both secured and unsecured letters of credit to business
customers of the Bank.  Secured letters of credit will be issued in amounts up
to 100% of the value of the collateral securing the letter of credit.
Acceptable collateral includes an assigned deposit account with the Bank, real
estate or marketable securities.  Letters of credit have a maximum term of two
years.

  In making commercial loans, the Bank considers primarily the financial
resources of the borrower, the borrower's ability to repay the loan out of net
operating income, the Bank's lending history with the borrower and the value of
any collateral.  Generally, if the borrower is a corporation, partnership or
other business entity, personal guarantees by the principals are required.
However, personal guarantees may not be required on such loans depending on the
creditworthiness of the borrower and other mitigating circumstances.  The Bank's
largest commercial loan at June 30, 1997 was $1.7 million.  At such date, the
Bank had $2.2 million of unadvanced commercial lines of credit.

  Unlike mortgage loans, which generally are made on the basis of the borrower's
ability to make repayment from his or her employment or other income, and which
are secured by real property whose value tends to be more easily ascertainable,
commercial loans are of higher risk and typically are made on the basis of the
borrower's ability to make repayment from the cash flow of the borrower's
business.  As a result, the availability of funds for the repayment of
commercial loans may be substantially dependent on the success of the business
itself.  Further, any collateral securing such loans may depreciate over time,
may be difficult to appraise and may fluctuate in value based on the success of
the business.  See "Risk Factors--Increased Lending Risks Associated with
Commercial Real Estate, Multi-Family, Construction and Development and
Commercial Lending."

  Consumer and Student Lending.  The Bank's portfolio of consumer and student
loans primarily consists of student loans, unsecured personal loans and
overdraft lines of credit.  As of June 30, 1997, consumer and student loans
amounted to $23.6 million, or 4.7% of the Bank's total loan portfolio, of which

                                       62
$14.9 million were student loans.  The Bank offers student loans through the
Federal Family Education Loan Program, a federal program governed by the New
York State Higher Education Services Corporation ("NYSHESC").  The Bank offers
both subsidized and unsubsidized Federal Stafford Loans and Federal Parent
Loans.  NYSHESC is responsible for the final approval of and guarantees all
student loans made by the Bank.  The terms and rates of the loans are set by
NYSHESC.  The Bank is permitted to charge an origination fee, currently 3.0% of
the loan amount, which fee is subject to change by the NYSHESC.

  Consumer loans may entail a greater degree of credit risk than do residential
mortgage loans, particularly in the case of consumer loans that are unsecured.
Consumer loan collections on these loans are dependent on the borrower's
continuing financial stability and, therefore, are more likely to be adversely
affected by job loss, divorce, illness or personal bankruptcy.  Finally, the
application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans in the event of a default.

  Loan Approval Procedures and Authority.  The Board of Trustees establishes the
lending policies and loan approval limits of the Bank.  The Board of Trustees
has established the Residential/Commercial/Construction Lending Committee which
is comprised of five members of the Board of Trustees.  The Committee discusses
and approves all loans and lines of credit in amounts greater than management
has authority to approve, within the Committee's designated authority as
established from time to time by the Board of Trustees.  Loans which exceed the
Committee's authority are approved or denied by the Board of Trustees.

  The Board of Trustees has authorized the following persons to approve loans up
to the amounts indicated: residential mortgage loans of up to $500,000 and home
equity loans of up to $250,000 can be approved by two members of the
Residential/Commercial/Construction Committee, plus the senior retail loan
officer and another loan officer; secured or unsecured commercial loans of up to
$25,000 can be approved by either the senior commercial loan officer, the
commercial loan officer or a vice president within the Business division;
secured or unsecured commercial loans up to $100,000 can be approved by any two
of the senior commercial loan officer, the commercial loan officer or a vice
president with the Business division; secured or unsecured commercial loans up
to $500,000 can be approved by two members of the
Residential/Commercial/Construction Committee and any two of the senior
commercial loan officer, the commercial loan officer or a vice president within
the business division; and commercial real estate and construction and
development loans up to $500,000 can be approved by two members of the
Residential/Commercial/Construction Committee and any two of the senior
commercial loan officer, the commercial loan officer, a vice president or
assistant secretary in the Business division.  Any loans above the authorized
limits must be approved by the respective committee, if in an amount of up to
$500,000 ($100,000 for unsecured commercial loans), or by the Board of Trustees.
Individual loans to one borrower may not exceed $4.0 million and aggregate loans
to one borrower may not exceed $5.0 million, without Board approval.  Total
aggregate loans are also subject to the Bank's regulatory loans-to-one-borrower
limit, which at June 30, 1997 was $10 million.  See "Regulation and Supervision-
-New York State Law."

  With respect to all loans originated by the Bank, upon receipt of a completed
loan application from a prospective borrower, a credit report is ordered and
certain other information is verified by an independent credit agency.  If
necessary, additional financial information may be required.  An appraisal of
real estate intended to secure a proposed loan generally is required to be
performed by appraisers approved by the Bank.  For proposed mortgage loans, the
Board annually approves independent appraisers used by the Bank and approves the
Bank's appraisal policy.  The Bank's policy is to obtain title and hazard
insurance on all mortgage loans and the Bank may require borrowers to make
payments to a mortgage escrow account for the payment of property taxes.  Any
exceptions to the Bank's underwriting policies must be noted on an underwriting
analysis sheet and presented to the Senior Loan Officer for approval.

                                       63
DELINQUENT LOANS, REAL ESTATE OWNED AND CLASSIFIED ASSETS

  Management and the Board of Trustees perform a monthly review of all
delinquent loans.  The procedures taken by the Bank with respect to
delinquencies vary depending on the nature of the loan and period of
delinquency.  The Bank generally requires that delinquent mortgage loans be
reviewed and that a delinquency notice be mailed no later than the thirtieth day
of delinquency and a late charge is assessed after fifteen days.  The Bank's
policies provide that telephone contact will be attempted to ascertain the
reasons for delinquency and the prospects of repayment.  When contact is made
with the borrower at any time prior to foreclosure, the Bank will attempt to
obtain full payment or work out a repayment schedule with the borrower to avoid
foreclosure. Mortgage loans which are more than 45 days delinquent are referred
to the Bank's attorneys for collection.  If the loan becomes 75 days delinquent,
the Bank's attorneys are instructed to commence foreclosure proceedings.

  It  was the Bank's  policy to discontinue accruing interest on all commercial
real estate, construction and commercial loans which were past due 90 days, on
all consumer loans which were past due 120 days, and on all one- to four-family
residential mortgage loans which were past due 180 days, or when in the opinion
of management such suspension was warranted.  Effective July 1, 1997, the Bank
revised this policy such that it does not accrue interest on any loans,
including one- to four-family loans secured by real estate, which are more than
90 days delinquent unless, in the opinion of management, collection is probable.
Property acquired by the Bank as a result of foreclosure on a mortgage loan is
classified as "real estate owned" and is recorded at the lower of the unpaid
principal balance or fair value less costs to sell at the date of acquisition
and thereafter.  For loans in excess of $25,000, fair value must be
substantiated by an appraisal of the property and, thereafter, appraisal of the
property on an as-needed basis.  At June 30, 1997, the Bank had $4.5 million of
nonperforming assets (defined as non-accruing loans and REO).

  At June 30, 1997, the Bank's real estate owned, net, consisting of foreclosed
assets totalled $662,000,  which at such date was comprised of seven one- to
four-family properties.  Bank personnel generally conduct periodic external
inspections on all properties securing loans in foreclosure and generally
conducts external appraisals on all properties prior to taking ownership of the
property.  Based upon such inspections and appraisals, the Bank will charge off
any loan principal it deems appropriate at such time.  Bank personnel conduct
monthly reviews of its foreclosed real estate and periodically adjust its
valuation allowance for possible declines in the value of real estate owned.
The Bank had no allowance for possible losses on real estate owned at June 30,
1997. The Bank is currently offering for sale all real estate owned as a result
of foreclosure through brokers and through its own personnel.  The Bank's
policies generally permit the financing of the sale of its foreclosed real
estate on substantially the same terms applicable to its other real estate
mortgage loans.

  Federal regulations and the Bank's Classification of Assets Policy require
that the Bank utilize an internal asset classification system as a means of
reporting problem and potential problem assets.  The Bank currently classifies
problem and potential problem assets 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 include those characterized by the distinct
possibility that the insured institution will sustain some loss if the
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 of currently 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 currently expose the insured institution to a sufficient degree of risk to
warrant classification in one of the aforementioned categories but possess
weaknesses are required to be designated "Special Mention."

                                       64
When an insured institution classifies one or more assets, or portions
thereof, as Substandard or Doubtful, it is required to establish a general
valuation allowance for possible loan losses in an amount deemed prudent by
management unless the loss of principal appears to be remote.  General valuation
allowances represent loss allowances which have been established to recognize
the inherent risk associated with lending activities, but which, unlike specific
allowances, have not been allocated to particular problem assets.  When an
insured institution classifies one or more assets, or portions thereof, as Loss,
it is required either to establish a specific allowance for losses equal to 100%
of the amount of the assets so classified or to charge off such amount.

  A savings institution's determination as to the classification of its assets
and the amount of its valuation allowances is subject to review by the FDIC and
NYBD, which can order the establishment of additional general or specific loss
allowances.  The FDIC, in conjunction with the other federal banking agencies,
recently adopted an interagency policy statement on the allowance for loan and
lease losses.  The policy statement provides guidance for financial institutions
on both the responsibilities of management for the assessment and establishment
of adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines.  Generally, the policy
statement recommends that institutions have effective systems and controls to
identify, monitor and address asset quality problems; that management has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
While the Bank believes that it has established an adequate allowance for
possible loan losses, there can be no assurance that regulators, in reviewing
the Bank's loan portfolio, will not request the Bank to materially increase at
that time its allowance for possible loan losses, thereby negatively affecting
the Bank's financial condition and earnings at that time.  Although management
believes that adequate specific and general loan loss allowances have been
established, actual losses are dependent upon future events and, as such,
further additions to the level of specific and general loan loss allowances may
become necessary.

  All residential real estate loans with loan balances in excess of $500,000 are
reviewed annually.  Commercial real estate and construction loans with a balance
in excess of $400,000 are also reviewed annually.  Additionally, loans with
balances of $1.0 million or more will be reviewed semi-annually, if conditions
warrant.  Loan reviews are performed by the Loan Reviewer, a person not directly
involved in the lending or loan administration process.  Each loan reviewed is
submitted to the Loan Review Committee, composed of the Loan Reviewer, Senior
Real Estate and Commercial Loan Officer, the foreclosure officer and certain
members of the Board of Trustees.  Meetings are held on a quarterly or on an as-
needed basis.  Upon review, the Committee will classify the loan and comment as
to any corrective action needed.  The Senior Real Estate Loan Officer will
report to the Board of Trustees the findings of the Loan Review Committee on an
on-going basis.  A report summarizing the results of loan reviews is submitted
to the Board on a quarterly basis, or as meetings occur.

  At June 30, 1997, the Bank had $3.4 million of assets designated by the Bank
as Substandard, consisting of seventeen loans, no assets classified by the Bank
as Doubtful, and no assets classified by the Bank as Loss, respectively. At June
30, 1997, the Bank had $903,000 of assets designated by the Bank as Special
Mention, consisting of twelve loans which were designated Special Mention due to
past loan delinquencies.

                                       65
The following table sets forth delinquencies in the Bank's loan portfolio as
of the dates indicated:
At June 30, 1997
                                   ---------------------------------------------------
                                            60-89 Days              90 Days or More
                                   --------------------------   ----------------------
                                                    Principal                Principal
                                       Number        Balance      Number      Balance
                                      of Loans       of Loans    of Loans     of Loans
                                   -------------  ------------  ----------  -----------
                                                   (Dollars in thousands)
One- to four-family...........              3      $  338           20      $2,306
Multi-family..................             --          --           --          --
Commercial real estate........              1       1,102            6         876
Construction and development..              1         100            3         341
Home equity...................             --          --            1          30
Commercial loans..............              1          18           --          --
Consumer and student loans....             67         213           89         324
                                           --      ------          ---      ------
    Total.....................             73      $1,771          119      $3,877
                                           ==      ======          ===      ======
Delinquent loans to
  total loans(1)..............                       0.35%                    0.77%
                                                   ======                   ======
At June 30, 1996                                 At June 30, 1995
                                --------------------------------------------------  -----------------------------------------------
                                      60-89 Days                90 Days or More            60-89 Days            90 Days or More
                                --------------------------  ----------------------  -----------------------  ----------------------
                                                Principal                Principal                Principal              Principal
                                   Number        Balance      Number      Balance      Number      Balance      Number    Balance
                                  of Loans      of Loans     of Loans    of Loans     of Loans    of Loans     of Loans   of Loans
                                -----------  -------------  ----------  ----------  -----------  ----------  ----------- ----------
                                                                           (Dollars in thousands)
One- to four-family..............     7         $  901        16         $1,837            2      $  276          18      $1,736
Multi-family.....................    --             --        --             --           --          --          --          --
Commercial real estate...........    --             --         4            939           --          --           4         593
Construction and development.....     1            385         7            687            2       1,202           3         423
Home equity......................    --             --         4             94            2          87           2          43
Commercial loans.................     1            118        --             --            1          30          --          --
Consumer and student loans.......    25             71        77            263           34          88          64         200
                                   ----         ------      ----         ------         ----      ------        ----      ------
Total............................    34         $1,475       108         $3,820           41      $1,683          91      $2,995
                                   ====         ======      ====         ======         ====      ======        ====      ======
Delinquent loans to total                                
 loans(1)........................                 0.35%                    0.91%                    0.42%                   0.76%
                                                  ====                     ====                     ====                    ====
-----------------------------------
(1) Total loans includes loans receivable held-for-investment, less deferred
    loan fees, deferred mortgage interest and unamortized discounts, net.

                                       66
Non-Performing Assets.  The following table sets forth information regarding
the Bank's nonperforming assets.
At June 30,
                                                                       -------------------------------------------------
                                                                         1997      1996       1995      1994      1993
                                                                       --------  --------  ---------  --------  --------
                                                                                      (Dollars in thousands)
Non-accrual loans:

  One- to four-family................................................     $1,676    $1,695    $1,590    $1,862    $1,554
  Multi-family.......................................................          -         -         -         -         -
  Commercial real estate.............................................        876       939       593     1,747     1,702
  Construction and development.......................................        120       120       108       215       538
  Commercial.........................................................          -         -         -         -       100
  Consumer and student...............................................          -         -         -        52         -
                                                                          ------    ------    ------    ------    ------
    Total non-accrual loans..........................................      2,672     2,754     2,291     3,876     3,894
Loans contractually past due 90 days
  or more and still accruing interest(1).............................      1,205     1,066       704     1,513     1,481
                                                                          ------    ------    ------    ------    ------
    Total non-performing loans.......................................      3,877     3,820     2,995     5,389     5,375
Real estate owned....................................................        662       612       335       441     2,336
                                                                          ------    ------    ------    ------    ------
    Total non-performing assets......................................     $4,539    $4,432    $3,330    $5,830    $7,711
                                                                          ======    ======    ======    ======    ======

Allowance for possible
  loan losses as a percent of loans(2)...............................       1.10%     1.14%     0.83%     0.87%     0.77%

Allowance for possible
  loan losses as a percent
  of total non-performing loans(3)...................................     141.09    125.55    109.35     57.64     50.88

Non-performing loans
  as a percent of loans(2)(3)........................................       0.78      0.91      0.76      1.51      1.51

Non-performing assets
  as a percent of total assets(3)....................................       0.46      0.48      0.39      0.71      0.99
--------------------
(1) Includes consumer and student loans.
(2) Loans include loans receivable held for investment, net, excluding the
    allowance for possible loan losses.
(3) It was the Bank's policy to generally cease accruing interest on all
    commercial real estate, construction and commercial loans 90 days or more
    past due, on all consumer loans which were 120 days or more past due, and on
    all one- to four-family residential mortgage loans which were 180 days or
    more past due. Effective July 1, 1997, the Bank revised this policy such
    that it does not accrue interest on any loans, including one- to four-family
    loans secured by real estate, which are more than ninety days delinquent as
    to principal and interest unless, in the opinion of management, collection
    is probable.  See "Business of the Bank - Delinquent Loans, Real Estate
    Owned and Classified Assets."

                                       67
Non-accrual loans totalled $2.7 million as of June 30, 1997, and included
twenty one- to four-family loans, with an aggregate balance of $1.7 million and
eight commercial real estate loans and construction loans with an aggregate
balance of $996,000.  Non-accrual loans do not include student loans delinquent
90 days or more as the Bank does not classify such loans as non-accrual because
delinquent principal and interest on guaranteed student loans is guaranteed by
the U.S. government.

ALLOWANCE FOR LOAN LOSSES

   The allowance for possible loan losses is maintained through provisions for
possible loan losses based on management's on-going evaluation of the risks
inherent in its loan portfolio in consideration of the trends in its loan
portfolio, the national and regional economies and the real estate market in the
Bank's primary lending area. The allowance for possible loan losses is
maintained at an amount management considers adequate to cover estimated losses
in its loan portfolio which are deemed probable and estimable based on
information currently known to management. The Bank's loan loss allowance
determinations also incorporate factors and analyses which consider the
potential principal loss associated with the loan, costs of acquiring the
property securing the loan through foreclosure or deed in lieu thereof, the
periods of time involved with the acquisition and sale of such property, and
costs and expenses associated with maintaining and holding the property until
sale and the costs associated with the Bank's inability to utilize funds for
other income producing activities during the estimated holding period of the
property.

   As of June 30, 1997, the Bank's allowance for possible loan losses was $5.5
million, or 1.1%, of total loans and 141.1% of non-performing loans as compared
to $4.8 million, or 1.1% of total loans and 125.5% of non-performing loans as of
June 30, 1996.  The Bank had total non-performing loans of $3.9 million and $3.8
million at June 30, 1997 and June 30, 1996, respectively, and non-performing
loans to total loans of 0.78% and 0.91%, respectively.  The Bank will continue
to monitor and modify its allowance for possible loan losses as conditions
dictate.  The Board of Trustees reviews the adequacy of the allowance for
possible loan losses quarterly.  While management believes that, based on
information currently available, the Bank's allowance for possible loan losses
is sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that the Bank's level of allowance for loan losses will
be sufficient to cover future loan losses incurred by the Bank or that future
adjustments to the allowance for loan losses will not be necessary if economic
and other conditions differ substantially from the economic and other conditions
used by management to determine the current level of the allowance for loan
losses.  Management may in the future increase its level of loan loss allowance
as a percentage of total loans and non-performing loans in the event it
increases the level of multi-family, commercial real estate, construction and
development or other lending as a percentage of its total loan portfolio.  In
addition, the FDIC and NYBD as an integral part of their examination process
periodically review the Bank's allowance for loan losses.  Such agencies may
require the Bank to make additional provisions for estimated loan losses based
upon judgments different from those of management.

                                       68
The following table sets forth activity in the Bank's allowance for loan
losses for the periods set forth in the table.
At or For the Year Ended June 30,
                                                 ----------------------------------------------
                                                    1997     1996     1995     1994     1993
                                                 ---------  -------  -------  -------  --------
                                                                  (In thousands)
Balance at beginning of period....................  $4,796    $3,275   $3,106   $2,735   $2,843
Provision for loan losses.........................   1,080     1,600      600      859    2,331
Charge-offs:
   Real estate loans..............................     174       166      384      565    2,255
   Commercial real estate.........................      15        --        6      118       17
   Consumer and student loans.....................     286       186      150      133      242
                                                    ------    ------   ------   ------   ------
        Total charge-offs.........................     475       352      540      816    2,514
Recoveries:
   Real estate loans..............................      45        97       48      241       23
   Commercial real estate.........................      --       122       --       --       --
   Consumer and student loans.....................      24        54       61       87       52
                                                    ------    ------   ------   ------   ------
        Total recoveries..........................      69       273      109      328       75
Net charge-offs (recoveries)......................     406        79      431      488    2,439
                                                    ------    ------   ------   ------   ------
Balance at end of period..........................  $5,470    $4,796   $3,275   $3,106   $2,735
                                                    ======    ======   ======   ======   ======
69
The following tables set forth the Bank's percent of allowance for loan losses
to total allowance and the percent of loans to total loans in each of the
categories listed at the dates indicated.
At June 30,
                             -------------------------------------------------------------------------------------------------------
                                           1997                            1996                                1995
                             ---------------------------------  --------------------------------   ---------------------------------
                                                   Percent of                         Percent of                         Percent of
                                      Percent of   Loans in              Percent of   Loans in              Percent of   Loans in
                                      Allowance      Each                Allowance      Each                Allowance      Each
                                      to Total    Category to            to Total    Category to            to Total    Category to
                             Amount   Allowance   Total Loans   Amount   Allowance   Total Loans   Amount   Allowance   Total Loans
                             ------   ----------  ------------  ------   ----------  -----------   ------   ----------  ------------
                                                                 (Dollars in thousands)
Real estate(1).............. $2,619      48%            94%     $2,173      45%           93%      $2,084      64%           93%
Commercial..................    355       6              1         380       8             2          472      14             1
Consumer and student........    321       6              5         315       7             5          295       9             6
Unallocated.................  2,175      40              -       1,928      40             -          424      13             -
                             ------     -----        -----      ------     -----       -----       ------     -----       -----
Total allowance for
 possible loan losses....... $5,470     100.0%       100.0%     $4,796     100.0%      100.0%      $3,275     100.0%      100.0%
                             ======     =====        =====      ======     =====       =====       ======     =====       =====
At June 30,
                             --------------------------------------------------------------------
                                        1994                              1993
                             --------------------------------------------------------------------
                                                   Percent of                         Percent of
                                      Percent of   Loans in               Percent of   Loans in
                                      Allowance      Each                 Allowance      Each
                                      to Total    Category to             to Total    Category to
                             Amount   Allowance   Total Loans    Amount   Allowance   Total Loans
                             ------   ----------  -----------   --------  ----------  -----------
                                                    (Dollars in thousands)
Real estate(1).............. $1,892      61%           93%        $1,814     66%           94%
Commercial..................    427      14             2            542     20             1
Consumer and student........    255       8             5            238      9             5
Unallocated.................    532      17             -            141      5             -
                             ------     -----       -----         ------    -----       -----
Total allowance for
 possible loan losses....... $3,106     100.0%      100.0%        $2,735    100.0%      100.0%
                             ======     =====       =====         ======    =====       =====
____________________
(1)  Real estate includes one- to four-family, commercial real estate,
     construction and development and home equity loans.

                                       70
SECURITIES INVESTMENT ACTIVITIES

  The Board of Trustees sets the securities investment policy of the Bank.  The
Bank considers the ability of an investment to provide earnings consistent with
factors of quality, maturity, marketability and risk diversification.  While the
Board of Trustees has final authority and responsibility for the securities
investment portfolio, the Bank has established a Management Investment Committee
comprised of eight officers including the Investment Officer to supervise the
Bank's securities investment program.  The Chief Executive Officer is an ex-
officio member thereof.  The Management Investment Committee reports to the
Asset/Liability Committee.  The  Management Investment Committee meets monthly
and evaluates all investment activities for safety and soundness, adherence to
the Bank's investment policy, and assurance that authority levels are
maintained.  The Bank's Investment Officer is responsible for making securities
investment portfolio decisions in accordance with the Bank's policies.  While
the Investment Officer has the authority to conduct trades within specific
guidelines established by the Bank's investment policy, all transactions are
reviewed by the Asset/Liability  Committee on an ongoing  basis and reported to
the Board of Trustees on a monthly basis.

  The Bank's current policies generally permit securities investments in various
types of assets, including  U.S. Government and agency securities, investment-
grade corporate debt obligations, various types of mortgage-backed and mortgage-
related securities, including CMOs, insured certificates of deposits and
corporate equities.  In addition, the Bank's policies permit investments in
short-term commercial paper and various municipal and other bonds and
obligations.  The Bank's current securities investment strategy is to
deemphasize its investment in U.S. government obligations, corporate debt and
municipal bonds and to emphasize the purchase of mortgage-backed and mortgage
related securities and equities in order to increase its overall investment
securities yield while remaining in short- and medium-term investments for
purposes of interest rate risk management.

  The Bank currently does not participate in hedging programs, interest rate
swaps, or other activities involving use of off-balance sheet derivative
financial instruments.  Similarly, the Bank does not invest in mortgage-related
securities which are deemed to be "high risk" by the federal banking regulators
or purchase bonds which are not rated investment grade.

  At June 30, 1997, the Bank had $437.4 million in securities, consisting
primarily of U.S. Government and agency obligations, mortgage-backed and
mortgage related securities, municipal, public utility and corporate obligations
and preferred and common stocks.  SFAS No. 115 requires the Bank to designate
its securities as held-to-maturity, available for sale or trading depending on
the Bank's intent regarding its investments.  The Bank does not currently
maintain a trading portfolio of securities.  In accordance with the Special
Report of the FASB regarding SFAS No. 115, in   November, 1995, the Bank
reclassified $26 million of securities from held to maturity to available-for-
sale.  See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Comparison of Financial Condition at June 30, 1997 and
June 30, 1996."  As of June 30, 1997, $47.1 million of the Bank's securities
portfolio, or 4.7% of total assets was classified as available-for-sale, with an
average life of the portfolio of 5.3 years.  At such date, $390.3 million of the
Bank's securities portfolio, or 39.3% of total assets, was classified as held-
to-maturity, with a market value of $391.9 million and an average life of the
portfolio of 3.0 years.

  Mortgage-Backed and Mortgage Related Securities.  The Bank purchases mortgage-
backed and mortgage related securities in order to:  (i) generate positive
interest rate spreads with minimal administrative expense and (ii) improve its
credit risk as a result of the guarantees provided by FHLMC, FNMA, and GNMA.
The Bank has primarily invested in mortgage-backed securities issued or
sponsored by FNMA, FHLMC and GNMA and private issuers.  The Bank also invests in
mortgage related securities, primarily CMOs, issued or sponsored by FNMA and
FHLMC as well as private issuers.  At June 30, 1997, mortgage-

                                       71
backed and mortgage related securities totalled $212.5 million, or 21.4% of
total assets and 22.5% of total interest earning assets of which $27.4 million
was classified as available-for-sale and $185.1 million was classified as held-
to-maturity as compared to $81.7 million, or 9.9% of total interest earning
assets at June 30, 1996. The increase in such securities reflects management's
recent revision to its securities investment strategy whereby it has decreased
its emphasis on debt securities by investing funds from maturing debt securities
into mortgage-backed and mortgage-related securities. At June 30, 1997, 18.4% of
the mortgage-backed and mortgage related securities were adjustable-rate and
81.6% were fixed-rate. The mortgage-backed and mortgage related securities
portfolio had coupon rates ranging from 5% to 11% and had a weighted average
yield of 7.22% at June 30, 1997. The estimated fair value of the Bank's 
mortgage-backed securities available-for-sale at June 30, 1997, was $27.4 
million, which is $114,000 greater than the amortized cost of $27.3 million.

  Mortgage-backed securities are created by the pooling of mortgages and
issuance of a security with an interest rate which is less than the interest
rate on the underlying mortgage.  Mortgage-backed securities typically represent
a participation interest in a pool of single-family or multi-family mortgages,
although the Bank focuses its investments on mortgage-backed securities backed
by single-family mortgages.  The issuers of such securities (generally U.S.
Government agencies and government sponsored enterprises, including FNMA, FHLMC
and GNMA) pool and resell the participation interests in the form of securities
to investors such as the Bank and guarantee the payment of principal and
interest to investors.  Mortgage-backed securities generally yield less than the
loans that underlie such securities because of the cost of payment guarantees
and credit enhancements.  In addition, mortgage-backed securities are usually
more liquid than individual mortgage loans and may be used to collateralize
certain liabilities and obligations of the Bank.  Investments in mortgage-backed
securities involve a risk that actual prepayments will be greater than estimated
prepayments over the life of the security, which may require adjustments to the
amortization of any premium or accretion of any discount relating to such
instruments thereby impacting  the net yield on such securities.  There is also
reinvestment risk associated with the cash flows from such securities or in the
event such securities are redeemed by the issuer.  In addition, the market value
of such securities may be adversely affected by changes in interest rates.  The
Bank estimates prepayments for its mortgage-backed securities at purchase to
ensure that prepayment assumptions are reasonable considering the underlying
collateral for the mortgage-backed securities at issue and current mortgage
interest rates and to determine the yield and estimated maturity of its
mortgage-backed security portfolio.  Of the Bank's $212.5 million mortgage-
backed securities portfolio at June 30, 1997, $35.1 million with a weighted
average yield of 6.03% had contractual maturities within five years and $177.4
million with a weighted average yield of 7.46% had contractual maturities over
five years.  However, the actual maturity of a mortgage-backed security may be
less than its stated maturity due to prepayments of the underlying mortgages.
Prepayments that are faster than anticipated may shorten the estimated life of
the security and may result in a loss of any premiums paid and thereby reduce
the net yield on such securities.  Although prepayments of underlying mortgages
depend on many factors, the difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates generally is the
most significant determinant of the rate of prepayments.  During periods of
declining mortgage interest rates, refinancing generally increases and
accelerates the prepayment of the underlying mortgages and the related security.
Under such circumstances, the Bank may be subject to reinvestment risk because,
to the extent that the Bank's mortgage-backed securities prepay faster than
anticipated, the Bank may not be able to reinvest the proceeds of such
repayments and prepayments at a comparable rate.

  CMOs are a type of debt security issued by a special purpose entity that
aggregates pools of mortgages and mortgage-backed securities and creates
different classes of CMO securities with varying maturities and amortization
schedules as well as a residual interest with each class possessing different
risk characteristics.  The cash flows from the underlying collateral is
generally divided into "tranches" or classes whereby tranches have descending
priorities with respect to the distribution of principal and interest 

                                       72
repayment of the underlying mortgages and mortgage-backed securities as opposed
to pass through mortgage-backed securities where cash flows are distributed pro
rata to all security holders. In contrast to mortgage-backed securities from
which cash flow is received (and hence, prepayment risk is shared) pro rata by
all securities holders, the cash flow from the mortgages or mortgage-backed
securities underlying CMOs is paid in accordance with a predetermined priority
to investors holding various tranches of such securities or obligations. A
particular tranche of CMOs may therefore carry prepayment risk that differs from
that of both the underlying collateral and other tranches. Accordingly, CMOs
attempt to moderate reinvestment risk associated with conventional mortgage-
backed securities resulting from unexpected prepayment activity. Investments in
CMOs involve a risk that actual prepayments will differ from those estimated in
pricing the security, which may result in adjustments to the net yield on such
securities. Additionally, the market value of such securities may be adversely
affected by changes in the market interest rates. Management believes these
securities may represent attractive alternatives relative to other investments
due to the wide variety of maturity, repayment and interest rate options
available.

  At June 30, 1997, the Bank's CMO portfolio totalled $115.2 million, or 11.6%,
of total assets and 12.2% of total interest earning assets, consisting of $78.3
million of CMOs issued by private issuers such as PNC Mortgage Corporation,
Prudential Home Mortgage Securities, Inc., and GE Capital Mortgage Services,
Inc. and $36.9 million issued by government sponsored agencies such as FNMA and
FHLMC.  Prior to purchasing CMOs, each CMO is tested for Federal Financial
Institutions Examination Counsel ("FFIEC") qualification as it is the policy of
the Bank to limit its privately issued CMOs to non-high risk securities rated
"AAA" by two rating agencies with an average life of ten years or less.  The
Bank also limits the amount of such investments to 15% of the Bank's assets and
5% of the Bank's assets for any individual issuer of privately issued CMOs.  For
government sponsored CMOs, the Bank's policy limits such investments to non-high
risk securities that have an average life of ten years or less.  The Bank also
limits the amount of such investments to $10 million per transaction.  The Bank
monitors the credit rating of its CMOs on a regular basis.  The current
securities investment policy of the Bank prohibits the purchase of higher risk
CMOs, which are defined as those securities exhibiting significantly greater
volatility of estimated average life and price relative to interest rates than
do standard 30-year fixed rate securities.  At June 30, 1997, $15.6 million of
the Bank's CMO portfolio was classified as available-for-sale and $99.6 million
was classified as held-to-maturity with a market value of $99.7 million.  At
such date, the Bank's CMO portfolio had an average estimated life of 2.8 years
and an average weighted yield of 7.33%.

  Debt and Equity Securities.  The Bank's investment in debt securities
generally consists of investments in U.S. Treasury securities and debt
securities issued by government sponsored agencies such as FNMA, FHLB and FHLMC.
The Bank also invests in debt securities issued by industrial and financial
companies and obligations of municipalities and public utilities.  During 1997,
the Bank revised its investment strategy whereby it has decreased its emphasis
on investment in debt securities and has emphasized its investment in mortgage-
backed and mortgage-related securities.  The Bank's current policy is to allow
such securities to mature.

  U.S. Government and Agency Obligations.  At June 30, 1997, the Bank's U.S.
  --------------------------------------                                    
Government securities portfolio totalled $52.8 million, all of which were
classified as held-to-maturity.  Such portfolio primarily consists of short- to
medium-term (maturities of one to five years) securities.  At June 30, 1997, the
Bank's agency securities portfolio totalled $39.5 million, all of which was
classified as held-to-maturity and consisted of agency callable debentures.  The
Bank's callable agency debentures generally are callable on either a quarterly
or semi-annual basis following a holding period of three to six  months.  The
current policy of the Bank limits the purchase of agency debt obligations to a
maturity of ten years or less and limits such purchases to $10 million per
transaction.

                                       73
Corporate Bonds.  The Bank's corporate bond portfolio, which at June 30, 1997
  ---------------                                                              
totalled $68.5 million, all of which is classified as held-to-maturity, was
composed primarily of short- and medium-term, fixed-rate investment grade
corporate issues.  At June 30, 1997, the portfolio had an average life of
approximately 1.1 years and an average coupon rate of 7.0%.  The Bank's policy
limits investments in corporate bonds to bonds rated "A" or higher and to a
total investment of 25% of the Bank's assets, with a 1% limitation of a single
issuer.

  Public Utility Bonds.  The Bank's public utility bond portfolio, which at June
  --------------------                                                          
30, 1997 totalled $36.5 million, all of which are classified as held-to-
maturity, generally consists of bonds issued by electric and gas utilities and
telephone companies.  All of the Bank's public utility bonds are rated "A" or
higher.  The Bank's policies limit investments in gas and electric utility bonds
and telephone company bonds to 10% of total assets, each, and limit investment
in obligations of any one issuer to 1% of assets.  At June 30, 1997, the average
life of the portfolio was approximately 1.9 years and the portfolio had an
average coupon rate of 6.50%.

  Municipal Bonds.  The Bank's municipal bond portfolio, which at June 30, 1997
  ---------------                                                              
was comprised of bonds issued by New York State agencies which totalled $1.1
million, had an estimated fair value of $1.2 million.  All of such securities
were classified as held-to-maturity and were comprised of revenue bonds.  All of
the Bank's municipal bonds are currently rated "A" or better.  At such date the
average life of the portfolio was approximately 11.3 years and the portfolio had
an average coupon rate of 6.10%.  Interest earned on municipal bonds is exempt
from federal, state and local income taxes.

  Equity Securities.  At June 30, 1997, the Bank's equity securities portfolio
  -----------------                                                           
totalled $19.7 million all of which were classified as available-for-sale.  Such
portfolio consisted of a $1.7 million investment in mutual funds, and $14.1
million in preferred stock issued by corporate issuers and $3.8 million of
common stock.  The Bank benefits from its investment in common and preferred
stocks due to a tax deduction the Bank receives with regard to dividends paid by
corporate issuers on equity securities held by other corporate entities such as
the Bank.  Accordingly, on  a tax equivalent basis, the yield on the Bank's
equity portfolio was 8.54%.  The Bank's policy limit for its common and
preferred stock investments is 5% of its total assets with a 0.5% limitation on
the purchase of any single issuer, with the exception of government agency
preferred stock, which limit is 5% per issuer.  The Bank's current policies
permit the purchase of preferred stock rated "AA" or better.  The substantial
majority of the Bank's preferred stock is redeemable by issuers after five
years.  The Bank has retained an independent third party to advise it on its
common stock portfolio.  The independent third party does not have discretionary
authority to purchase or sell common stock on behalf of the Bank.  See
"Regulation and Supervision--FDIC Regulations."

                                       74
The following table sets forth the composition of the Bank's debt and equity
and mortgage-backed and mortgage related securities portfolios in dollar amounts
and in percentages at the dates indicated:
At June 30,
                                                      --------------------------------------------------------------------
                                                                1997                  1996                   1995
                                                      -----------------------  ---------------------  --------------------
                                                                     Percent                Percent                Percent
                                                          Amount    of Total     Amount    of Total     Amount    of Total
                                                       ----------  ----------  ---------  ----------  ---------  ---------
                                                                        (Dollars in thousands)
Debt securities:
   Corporate bonds.....................................  $ 68,483      15.66%   $110,714      26.94%   $108,334      28.32%
   U.S. Government obligations.........................    52,757      12.06     120,045      29.21     152,783      39.94
   Agency securities...................................    39,457       9.02      49,472      12.03          --         --
   Public Utilities....................................    36,489       8.34      39,257       9.55      13,237       3.46
   Municipal bonds.....................................     1,149       0.26       1,188       0.28       1,199       0.31
   Other debt obligations(1)...........................     6,866       1.57       6,976       1.70      12,326       3.22
                                                          -------      -----     -------      -----     -------      -----
       Total debt securities...........................   205,201      46.91     327,652      79.71     287,879      75.25
                                                          -------      -----     -------      -----     -------      -----
Equity securities:
   Preferred stock.....................................    14,158       3.24          24       0.01          34       0.01
   Common stock........................................     3,814       0.87         156       0.04         149       0.04
   Mutual funds........................................     1,734       0.40       1,527       0.37         424       0.11
                                                          -------      -----     -------      -----     -------      -----
       Total equity securities.........................    19,706       4.51       1,707       0.42         607       0.16
                                                          -------      -----     -------      -----     -------      -----
Mortgage-backed and mortgage
  related securities:
   FHLMC...............................................    82,237      18.80      80,284      19.53      92,404      24.15
   GNMA................................................    11,824       2.70       1,394       0.34       1,683       0.44
   Private issuer......................................     3,276       0.75          --         --          --         --
   Agency CMOs.........................................    36,934       8.44          --         --          --         --
   Private issuer CMOs.................................    78,249      17.89          --         --          --         --
                                                          -------      -----     -------      -----     -------      -----
       Total mortgage-backed and mortgage
       related securities..............................   212,520      48.58      81,678      19.87      94,087      24.59
                                                          -------      -----     -------      -----     -------      -----
                Total securities.......................  $437,427     100.00%   $411,037     100.00%   $382,573     100.00%
                                                         ========     ======    ========     ======    ========     ======

Debt and equity securities
  available-for-sale...................................  $ 19,706       4.51%   $ 21,659       5.27%   $    607       0.16%
Debt and equity securities held-to-maturity............   205,201      46.91     307,700      74.86     287,879      75.25
                                                          -------      -----     -------      -----     -------      -----
         Total debt and equity securities..............   224,907      51.42     329,359      80.13     288,486      75.41
                                                          -------      -----     -------      -----     -------      -----
Mortgage-backed and mortgage related
  securities available-for-sale........................    27,398       6.26       1,394       0.34       1,683       0.44
Mortgage-backed and mortgage related
  securities held-to-maturity..........................   185,122      42.32      80,284      19.53      92,404      24.15
                                                          -------      -----     -------      -----     -------      -----
  Total mortgage-backed and mortgage
   related securities..................................   212,520      48.58      81,678      19.87      94,087      24.59
                                                          -------      -----     -------      -----     -------      -----
         Total securities..............................  $437,427     100.00%   $411,037     100.00%   $382,573     100.00%
                                                         ========     ======    ========     ======    ========     ======
------------------
(1)  Consists of railroad, foreign and other bonds.

                                       75
The following table sets forth the Bank's securities activities for the
periods indicated:
For the Year
                                                          Ended June 30,
                                            ----------------------------------------
                                                   1997        1996       1995
                                            --------------  ----------  ------------
                                                          (In thousands)
BEGINNING BALANCE.............................   $411,037    $382,573   $403,740
                                                 --------    --------   --------
Debt and equity securities purchased - held-
  to-maturity.................................     17,611     150,256     90,365
Debt and equity securities purchased -
  available-for-sale..........................     17,678       1,064      2,273

Mortgage-backed and mortgage related
  securities purchased -
   held-to-maturity...........................    133,668      15,197     29,218
Mortgage-backed and mortgage related
securities purchased -
 available-for-sale...........................     26,478          --         --

LESS:
Sale of debt and equity securities -
 available-for-sale...........................     11,938          10      2,132
Sale of mortgage-banked and mortgage related 
  securities - available-for-sale.............         --       5,940         --
Principal repayments on mortgage - backed
 and mortgage related securities - held-to-
  maturity....................................     25,315      21,305      9,757
Principal repayments on mortgage-backed
 and mortgage relates securities - available-
  for-sale..................................          479         410        505
Maturities of debt securities.................    127,005     107,658    125,877
Maturities of mortgage-backed and
 mortgage related securities..................      3,609          --         --
Realized (gains) losses received on sales
 of mortgage-backed and mortgage related
 securities...................................         --         (19)        --
Realized and unrealized (gains) losses
 on debt and equity securities................        110          (9)       125
Accretion of discount/Amortization of
 (premium)....................................      1,039       2,769      4,753
Change in net unrealized (gains) losses
 on available-for-sale securities.............       (450)        (11)      (126)
                                                 --------    --------   --------
ENDING BALANCE................................   $437,427    $411,037   $382,573
                                                 ========    ========   ========
76
The following table sets forth certain information regarding the amortized
cost and market values of the Bank's debt and equity and mortgage-backed and
mortgage related securities, at the dates indicated:
At June 30,
                                                -----------------------------------------------------------------------------
                                                         1997                        1996                        1995
                                                ---------------------       ---------------------       ---------------------
                                                Amortized     Market        Amortized     Market        Amortized     Market
                                                  Cost        Value            Cost       Value           Cost        Value
                                                ---------    --------       ----------   --------       ---------   ---------
                                                                                (In thousands)
Debt securities held-to-maturity:
 U.S. Government obligations...................  $ 52,757    $ 52,815        $100,093    $ 99,897        $152,783    $152,590
 Agency securities.............................    39,457      39,522          49,472      49,076              --          --
 Municipal bonds...............................     1,149       1,198           1,188       1,212           1,199       1,226
 Corporate obligations.........................   104,972     104,930         149,970     149,431         121,571     121,709
 Other debt obligations........................     6,866       6,897           6,977       6,993          12,326      12,229
                                                 --------    --------        --------    --------        --------    -------
  Total debt securities held-to-
   maturity....................................   205,201     205,362         307,700     306,609         287,879     287,754
                                                 --------    --------        --------    --------        --------    -------
Debt securities available-for-sale:
 U.S. Government obligations...................        --          --          19,967      19,952              --         --
                                                 --------    --------        --------    --------        --------    -------
 Total debt securities available-for sale......        --          --          19,967      19,952              --         --
                                                 --------    --------        --------    --------        --------    -------
Equity securities available-for-sale:
 Mutual funds..................................     1,629       1,734           1,521       1,527             457        424
 Preferred stock...............................    14,027      14,158              27          24              36         34
 Common stock..................................     3,578       3,814             109         156             109        149
                                                 --------    --------        --------    --------        --------    -------
  Total equity securities
    available-for-sale.........................    19,234      19,706           1,657       1,707             602        607
                                                 --------    --------        --------    --------        --------    -------
Mortgage-backed and mortgage related
 securities:
 Held-to-maturity:
  FHLMC........................................    82,237      83,584          80,284      80,631          92,404     92,589
  Private issuer...............................     3,276       3,281              --          --              --         --
  Agency CMOs..................................    32,248      32,336              --          --              --         --
  Private Issuer CMOs..........................    67,361      67,392              --          --              --         --
                                                 --------    --------        --------    --------        --------    -------
Total mortgage-backed and mortgage
 related securities held-to-maturity...........   185,122     186,593          80,284      80,631          92,404     92,589
                                                 --------    --------        --------    --------        --------    -------
 Available-for-sale:
  GNMA.........................................    11,710      11,824           1,292       1,394           1,562      1,683
  Agency CMOs..................................     4,693       4,686
  Private issuer CMOs..........................    10,881      10,888              --          --              --         --
                                                 --------    --------        --------    --------        --------    -------
   Total mortgage-backed and mortgage related
    securities available-for-sale..............    27,284      27,398           1,292       1,394           1,562      1,683
                                                 --------    --------        --------    --------        --------    -------
Net unrealized (losses) gains
    on available-for-sale securities...........       586          --             137          --             126         --
                                                 --------    --------        --------    --------        --------    -------
Total securities...............................  $437,427    $439,059        $411,037    $410,293        $382,573   $382,632
                                                 ========    ========        ========    ========        ========   ========
77
The table below sets forth certain information regarding the carrying value,
weighted average yields and contractual maturities of the Bank's securities
portfolio as of June 30, 1997.
At June 30, 1997
                                  --------------------------------------------------------------------------------------------
                                                            More than One          More than Five
                                    One Year or Less       Year to Five Years    Years to Ten Years      More than Ten Years
                                  --------------------    -------------------    -------------------     --------------------
                                              Weighted               Weighted               Weighted                Weighted
                                   Carrying    Average    Carrying    Average    Carrying    Average     Carrying   Average
                                    Value       Yield      Value       Yield      Value       Yield       Value      Yield
                                  ---------   --------    --------   --------    --------   --------     --------   ---------
                                                                      (Dollars in thousands)
Held-to-maturity:
 Debt securities:
  Municipal bonds................ $    --         --%   $    100       6.20%     $  290       6.50%    $    759       5.94%
  U.S. Government obligations....  21,374       6.50      31,383       6.03          --         --           --         --
  Agency securities..............      --         --      38,459       6.42         998       7.09           --         --
  Public utilities...............  16,346       6.37      18,438       6.56       1,105       6.48          600       7.32
  Corporate obligations..........  42,802       6.40      25,681       6.08          --         --           --         --
  Other debt obligations.........   4,594       5.70       2,272       7.16          --         --           --         --
                                    -----                  -----                  -----                   -----
   Total debt securities held-
     to-maturity.................  85,116       6.38     116,333       6.27       2,393       6.74        1,359       6.55
                                   ------                -------                  -----                   -----
Mortgage-backed and mortgage
 related securities:
 FHLMC...........................   2,197       6.05      32,871       6.03          --         --       47,169       7.78
 Private issuer..................      --         --          --         --          --         --        3,276       7.27
 Agency CMOs.....................      --         --          --         --          --         --       32,248       7.62
 Private issuer CMOs.............      --         --          --         --          --         --       67,361       7.22
                                    -----                  -----                   ----                  ------
  Total mortgage-backed and
    mortgage related securities
    held-to-maturity.............   2,197       6.05      32,871       6.03          --         --      150,054       7.48
                                    -----                 ------                  -----                 -------
 Total securities
  held-to-maturity...............  87,313       6.37     149,204       6.22       2,393       6.74      151,413       7.47
                                   ------                -------                  -----                 -------
Available-for-sale:
 Mortgage-backed and mortgage
  related securities:
  GNMA...........................      --         --          --         --          36       8.34       11,788       7.35
  Agency CMOs....................      --         --          --         --          --         --        4,686       7.33
  Private issuer CMOs............      --         --          --         --          --         --       10,888       7.19
                                  -------               --------                 ------                  ------
   Total mortgage-backed and
    mortgage related securities
    available-for-sale...........      --         --          --         --          36       8.34       27,362       7.28
 Equity securities:
  Mutual Funds...................      --         --          --         --          --         --           --         --
  Preferred stock................      --         --          --         --          --         --           --         --
  Common stock...................      --         --          --         --          --         --           --         --
                                  -------               --------                 ------                --------
   Total equity securities.......      --         --          --         --          --         --           --         --
                                  -------               --------                 ------                --------
   Total securities available-
    for-sale.....................      --         --          --         --          36       8.34       27,362       7.28
                                  -------               --------                 ------                --------
Total Securities................. $87,313       6.37    $149,204       6.22      $2,429       6.76     $178,775       7.44
                                  =======               ========                 ======                ========
At June 30, 1997
                                     --------------------
                                           Total
                                     --------------------
                                                Weighted
                                     Carrying   Average
                                      Value      Yield
                                     --------   --------
                                   (Dollars in thousands)
Held-to-maturity:
 Debt securities:
  Municipal bonds................    $  1,149      6.10%
  U.S. Government obligations....      52,757      6.22
  Agency securities..............      39,457      6.43
  Public utilities...............      36,489      6.48
  Corporate obligations..........      68,483      6.28
  Other debt obligations.........       6,866      6.18
                                        -----
   Total debt securities held-
     to-maturity.................     205,201      6.32
                                      -------
Mortgage-backed and mortgage
 related securities:
 FHLMC...........................      82,237      7.03
 Private issuer..................       3,276      7.27
 Agency CMOs.....................      32,248      7.62
 Private issuer CMOs.............      67,361      7.22
                                       ------
  Total mortgage-backed and
    mortgage related securities
    held-to-maturity.............     185,122      7.21
                                      -------
 Total securities
  held-to-maturity...............     390,323      6.74
                                      -------
Available-for-sale:
 Mortgage-backed and mortgage
  related securities:
  GNMA...........................      11,824      7.35
  Agency CMOs....................       4,686      7.33
  Private issuer CMOs............      10,888      7.19
                                       ------
   Total mortgage-backed and
    mortgage related securities
    available-for-sale...........      27,398      7.28
                                       ------
 Equity securities:
  Mutual Funds...................       1,734      3.95
  Preferred stock................      14,158      6.20
  Common stock...................       3,814      1.63
                                        -----
   Total equity securities.......      19,706      5.12
                                       ------
   Total securities available-
    for-sale.....................      47,104      6.38
                                       ------
Total Securities.................    $437,426      6.70
                                     ========
78
SOURCES OF FUNDS

  General.  Deposits, repayments and prepayments of loans and securities,
proceeds from sales of loans and securities, and proceeds from maturing
securities and cash flows from operations are the primary sources of the Bank's
funds for use in lending, investing and for other general purposes.  To a lesser
extent, the Bank utilizes borrowed funds to fund its operations.  The Bank has
applied for membership in the FHLB system, which, if approved, will provide
another source of borrowed funds.

  Deposits.  The Bank offers a variety of deposit accounts with a range of
interest rates and terms.  The Bank's deposit accounts consist of savings,
retail checking/NOW accounts, commercial checking accounts, money market
accounts, club accounts and certificates of deposit accounts.  The Bank offers
jumbo certificate of deposit accounts and also offers Individual Retirement
Accounts ("IRAs") and other qualified plan accounts.  While jumbo certificate
accounts are accepted by the Bank, and may be subject to preferential rates, the
Bank does not actively solicit such deposits as such deposits are more difficult
to retain than core deposits.

  At June 30, 1997, the Bank's deposits totalled $884.5 million, of which 89.5%
were interest-bearing deposits. For the year ended June 30, 1997, the average
balance of core deposits totalled $563.8 million, or 67.3% of total average
deposits. At June 30, 1997, the Bank had a total of $298.1 million in
certificates of deposit, of which $209.1 million had maturities of one year or
less. For the year ended June 30, 1996, the average balance of core deposits
represented approximately 69.0% of total deposits and certificate accounts
represented 31.0%, as compared to core deposits representing 67.3% of total
deposits and certificate accounts representing 32.7% of deposits for the year
ended June 30, 1997. See "Risk Factors - Sensitivity to Increases in Interest
Rates." Although the Bank has a significant portion of its deposits in savings
accounts, management monitors activity on the Bank's savings accounts and, based
on historical experience and the Bank's current pricing strategy, believes it
will continue to retain a large portion of such accounts. The Bank is not
limited with respect to the rates it may offer on deposit products.

  The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition.  The Bank's deposits are obtained predominantly from the areas in
which its branch offices are located.  The Bank relies primarily on customer
service and long-standing relationships with customers to attract and retain
these deposits; however, market interest rates and rates offered by competing
financial institutions affect the Bank's ability to attract and retain deposits.
The Bank uses traditional means of advertising its deposit products, including
television and print media and generally does not solicit deposits from outside
its market area.  While the Bank has historically not accepted brokered
deposits, the Bank is currently in the process of establishing relationships
with deposit brokers and may, in the future, utilize brokered deposits as a
funding source, depending on market conditions.

                                       79
The following table presents the deposit activity of the Bank for the periods
indicated.
For the Year Ended June 30,
                                             ------------------------------
                                              1997        1996       1995
                                             -------     -------    -------
(In thousands)
Net deposits (withdrawals)................   $38,896     $27,612    $(7,032)
Interest credited on deposit accounts.....    27,707      26,254     22,456
                                             -------     -------    -------
Total increase in deposit accounts........   $66,603     $53,866    $15,424
                                             =======     =======    =======
At June 30, 1997, the Bank had outstanding $27.4 million in certificate of
deposit accounts in amounts of $100,000 or more, maturing as follows:
Weighted
        Maturity Period                Amount             Average Rate
-----------------------------------  -----------        ----------------
(Dollars in thousands)
Three months or less................  $ 5,528                 5.06%
Over three through six months.......    5,727                 5.37
Over six through 12 months..........    6,296                 5.31
Over 12 months......................    9,890                 5.99
                                       ------
Total...............................  $27,441                 5.53
                                       ======
80
The following table sets forth the distribution of the Bank's average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits presented.  Averages for the periods presented utilize
average month-end balances.
For the Year Ended June 30,
                                  --------------------------------------------------------------------------------------------------
                                                1997                               1996                              1995
                                  ---------------------------------  --------------------------------  -----------------------------
                                               Percent                           Percent                           Percent
                                              of Total   Weighted               of Total   Weighted               of Total  Weighted
                                   Average     Average    Average    Average     Average    Average    Average     Average   Average
                                   Balance    Deposits     Rate      Balance    Deposits     Rate      Balance    Deposits     Rate
                                  ---------  ----------  ---------  ---------  ----------  ---------  ---------  ---------  -------
                                                                       (Dollars in thousands)
Money market accounts............  $ 37,552       4.48%      3.48%   $ 28,430       3.64%      3.47%   $ 25,058       3.37%    2.93%
Savings accounts.................   432,162      51.61       2.74     430,500      55.09       2.75     462,720      62.15     2.74
NOW accounts.....................    15,652       1.87       2.36      14,602       1.87       2.42      13,724       1.84     2.66
Non-interest-bearing accounts....    78,483       9.37         --      65,670       8.40         --      54,864       7.37      --
                                  ---------     ------               --------     ------               --------     ------
  Total..........................   563,849      67.33       2.40     539,202      69.00       2.44     556,366      74.73     2.48
                                  ---------     ------               --------     ------               --------     ------

Certificates of deposit:
  Less than six months...........    30,437       3.64       4.38      30,360       3.89       4.55      33,593       4.51     3.52
  Over six through 12 months.....    46,188       5.52       4.90      39,924       5.11       4.91      35,013       4.70     3.94
  Over 12 through 24 months......   121,109      14.46       5.33     100,840      12.91       5.49      56,846       7.63     5.10
  Over 24 months.................    52,787       6.30       5.75      54,496       6.97       5.66      52,649       7.07     5.30
  Certificates over $100,000.....    23,025       2.75       5.32      16,577       2.12       5.39      10,111       1.36     4.73

    Total certificates of deposit   273,546      32.67                242,197      31.00                188,212      25.27         
                                   --------     ------               --------     ------               --------     ------
       Total average deposits....  $837,395     100.00%              $781,399     100.00%              $744,578     100.00%
                                   ========     ======               ========     ======               ========     ======
81
The following table presents, by various rate categories, the amount of
certificate of deposit accounts outstanding at the dates indicated.
Period to Maturity from June 30, 1997                            At June 30,
                          ---------------------------------------------------------------------    --------------------------
                          Less than    One to    Two to      Three to    Four to    Five years 
                          One Year   Two years Three years  Four years  Five years   or more        1997       1996      1995
                          ---------- --------- ----------- ----------- ------------ -----------    ------    -------   ------
                                                                       (In thousands)
Certificates of deposit:
0 to 4.00%.............  $  3,231       $    29     $   --     $   --     $   109     $   --     $  3,369     $  2,972   $  2,085
4.01 to 5.00%..........    68,377         7,118         39         --          --         --       75,534      155,120     78,134
5.01 to 6.00%..........   134,924        51,941      4,919      4,186       6,105      3,250      205,325       63,573     87,760
6.01 to 7.00%..........     2,545           490      1,771        285       3,845        617        9,553       28,167     58,495
7.01 to 8.00%..........        --            --         --        558       3,727         --        4,285        4,095         --
Over 8.00%.............        --            --         --         --          --         --           --           --         --  
                         --------       -------     ------     ------     -------     ------     --------     --------   --------
    Total..............  $209,077       $59,578     $6,729     $5,029     $13,786     $3,867     $298,066     $253,927   $226,474
                         ========       =======     ======     ======     =======     ======     ========     ========   ========
82
Borrowed Funds.  The Bank has historically not utilized borrowings as a source
of funding and has primarily depended on retail deposits to provide funding.  At
June 30, 1997, the Bank had no borrowed funds.  However, the Bank currently
maintains a $10.0 million line of credit with a regional financial institution
and has the ability to obtain funding through the use of reverse repurchase
agreements entered into with a nationally recognized investment banking firm.
The reverse purchase agreements  would generally be short-term and
collateralized by U.S. Treasury obligations or other liquid securities.  In
order to provide the Bank with an additional source of funding, the Bank has
recently applied to become a member of the FHLB, and anticipates receiving
approval by the end of October 1997.  The Bank, upon approval of its
application, may utilize advances from the FHLB from time-to-time as an
alternative to retail deposits to fund its operations in the future.  FHLB
advances may also be used to acquire certain other assets as may be deemed
appropriate for investment purposes.  These advances would  be collateralized
primarily by certain of the Bank's mortgage loans and mortgage-backed
securities.  See "Regulation and Supervision--Federal Home Loan Bank System."
Such advances are made pursuant to several different credit programs, each of
which has its own interest rate and range of maturities.  The maximum amount
that the FHLB will advance to member institutions fluctuates from time-to-time
in accordance with the policies of the OTS and the FHLB.

OTHER ACTIVITIES

  In addition to its traditional lending and deposit products, the Bank also
offers certain merchant banking services.  These include providing credit card
deposit accounts to local merchants. The Bank receives a processing fee from the
customer for each credit card transaction processed.  The Bank also receives
monthly income from terminal and printer sales and rentals.  For the year ended
June 30, 1997, $65,000, or 2.2% of total fee income, was attributable to credit
card processing fees.  In addition, the Bank has endorsed and promotes a credit
card through a national affinity credit card bank.  Under the program, the
affinity credit card bank receives and underwrites all credit card applications.
The Bank receives royalty payments based on new accounts and renewal accounts,
as well as a portion of finance charges assessed.  For the year ended June 30,
1997, the Bank received $42,000, or 1.4% of total fee income, through the
affinity credit card program.

SUBSIDIARY ACTIVITIES

  RCSB Corp.  RCSB Corp. ("RCSB"), a wholly-owned subsidiary of the Bank
incorporated in the State of New York in 1976, was formed to purchase three
branch buildings from the Bank, which are leased back to the Bank and which is
currently the only business activity conducted by RCSB.  The assets of RCSB
totalled $812,000 at June 30, 1997.

  Richmond Enterprises, Inc.  Richmond Enterprises, Inc., a wholly-owned
subsidiary of the Bank incorporated in the State of New York in 1983, previously
was a partner in a joint-venture real estate development project with a local
developer.  The development was completed in 1986, and Richmond Enterprises,
Inc. has been inactive since that date.  Its total assets as of June 30, 1997
were $4,000.

                                       83
Properties

  The Bank currently conducts its business through thirteen full service banking
offices.  The following table sets forth the Bank's offices as of June 30, 1997.
The table does not include the public accommodation office the Bank intends to
open in 1998, nor does it include the two full service branch office facilities
the Bank is considering establishing.  With the exception of the lease for the
public accommodation office, there are no current agreements, understandings or
arrangements, oral or written, with respect to such offices, and no assurances
can be given that such offices will be opened.
Original                        Net Book Value    
                                                Year                           of Property or         Total 
                                  Leased       Leased            Date of         Leasehold          Deposits at 
                                    or           or               Lease       Improvements at         Branch 
           Location               Owned       Acquired          Expiration     June 30, 1997          Office
-----------------------------    -------     -----------       -------------  ----------------     -------------
Administrative/Home Office:                                    (DOLLARS IN THOUSANDS)
West New Brighton Office (1):     Owned          1916              --             $ 563                 $ 57,019
1214 Castleton Avenue
Staten Island, NY  10310

BRANCH OFFICES:

Port Richmond Office (2):         Leased         1976            2001               118                   63,329
282 Port Richmond Avenue
Staten Island, NY 10302

Great Kills Office:               Owned          1975              --               677                   91,016
3879 Amboy Road
Staten Island, NY 10308

Annadale Office (2):              Leased         1976            2001               368                   64,678
820 Annadale Road
Staten Island, NY 10312

Bull's Head Office (2):           Leased         1976            2001               328                   61,792
1460 Richmond Avenue                             
Staten Island, NY 10314                          

Dongan Hills Office:              Owned          1974              --               537                   72,010
1833 Hylan Boulevard                             
Staten Island, NY 10305                          

New Springville Office:           Leased         1976            2005               333                  116,118
2555 Richmond Avenue                             
Staten Island, NY 10134                          

Woodrow Plaza Office:             Leased         1983            2013               191                   54,052
645-100 Rossville Avenue                         
Staten Island, NY 10309                          

Tottenville Office:               Owned          1988              --               274                   25,728
179 Main Street
Staten Island, NY 10307
84
Net Book Value
                                                        Original                        of Property or
                                                          Year                            Leasehold               Total
                                 Leased                  Leased          Date of         Improvements           Deposits at
                                    or                    or              Lease              at                   Branch
Location                          Owned                 Acquired        Expiration       June 30, 1997             Office
--------------------------      ---------             -----------       ----------       -------------          -----------
Westerleigh Office:               Owned                   1992              --             $   404                $ 57,067
832 Jewett Avenue
Staten Island, NY 10314

Eltingville Office (3):           Owned                   1992              --               1,340                  77,011
4523 Amboy Road
Staten Island, NY 10312

Grasmere Office:                  Leased                  1992            2005                 121                  51,268
1100 Hylan Boulevard
Staten Island, NY 10305

Brooklyn Office:                  Leased                  1977            1997                 346(4)               93,443
132 Avenue U
Brooklyn, NY 11223

PUBLIC ACCOMMODATION OFFICE:
Brooklyn Public Accommodation     Leased                  1980            1999                  --                      --
Office
81 Avenue U
Brooklyn, NY 11223
 
---------------------------
(1)  Certain portions of the Bank's administrative operations are located at
     properties not included in the table.
(2)  Property is owned by RCSB Corp.
(3)  Eltingville office includes the Bank's lending center.
(4)  Together with Brooklyn Public Accommodation Office.

LEGAL PROCEEDINGS

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

PERSONNEL

     As of June 30, 1997, the Bank had 249 full-time employees and 113 part-time
employees.  The employees are not represented by a collective bargaining unit
and the Bank considers its relationship with its employees to be good.  See
"Management of the Bank - Benefit Plans" for a description of certain
compensation and benefit programs offered to the Bank's employees.

                                       85
FEDERAL AND STATE TAXATION

FEDERAL TAXATION

     General.  The Company and the Bank will report their income on a
consolidated basis, using a calendar year and 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 treatment
of its reserve for bad debts discussed below.  The following discussion of tax
matters is intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Bank or the Company.  The Bank
had been audited by the IRS for the year ended December 31, 1992 resulting in a
refund of $27,000. The Bank was also audited by the State of New York for the
three-year period ended December 31, 1993, resulting in an assessment of tax
plus interest in the amount of $4,000.

     Bad Debt Reserves.    The Small Business Job Protection Act of 1996 (the
"1996 Act"), which was enacted on August 20, 1996, made significant changes to
provisions of the Code relating to a savings institution's use of bad debt
reserves for federal income tax purposes and requires such institutions to
recapture (i.e. take into income) certain portions of their accumulated bad debt
reserves.  The effect of the 1996 Act on the Bank is discussed below.  Prior to
the enactment of the 1996 Act, the Bank was permitted to establish tax reserves
for bad debts and to make annual additions thereto, which additions, within
specified formula limits, were deducted in arriving at the Bank's taxable
income.  The Bank's deduction with respect to "qualifying loans," which are
generally loans secured by certain interests in real property, could be computed
using an amount based on a six-year moving average of the Bank's actual loss
experience (the "Experience Method"), or a percentage equal to 8% of the Bank's
taxable income (the "PTI Method"), computed without regard to this deduction and
with additional modifications and reduced by the amount of any permitted
addition to the non-qualifying reserve.    The Bank's deduction with respect to
non-qualifying loans was required to be computed under the Experience Method.

     The 1996 Act.  Under the 1996 Act, for its current and future taxable
years, the Bank is not permitted to make additions to its tax bad debt reserves.
In addition, the Bank is required to recapture (i.e. take into income) over a
six year period the excess of the balance of its tax bad debt reserves as of
December 31, 1995 over the balance of such reserves as of December 31, 1987.  As
of December 31, 1995, $2.5 million of the Bank's bad debt reserve was subject to
recapture for which deferred taxes have been provided.

     Distributions.  Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of December 31, 1987) to the extent thereof, and an
amount based on the amount distributed (but not in excess of the amount of such
reserves) will be included in the Bank's income.  The term "Non-dividend
distributions" is defined as 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 cause this pre-1988 reserve to be 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, if, after the
Conversion, the Bank makes a non-dividend distribution to the Company,
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 Supervision" and "Dividend Policy" for limits on the payment of
dividends by the Bank.  

                                       86
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 on alternative
minimum taxable income ("AMTI") at a rate of 20%.  Only 90% of AMTI can be
offset by net operating loss carryforwards.  The adjustment to AMTI based on
book income will be an amount equal to 75% of the amount by which a
corporation's adjusted current earnings exceeds its AMTI (determined without
regard to this adjustment and prior to reduction for net operating losses).
Certain payments of AMTI may be used as credits against regular tax liabilities
in future years.  For tax years prior to the 1996 tax year, the excess of the
bad debt reserve deduction using the percentage of taxable income method over
the deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI.  In addition,
for taxable years beginning after December 31, 1986 and before January 1, 1996,
an environmental tax of .12% of the excess of AMTI (with certain modifications)
over $2 million, is imposed on corporations, including the Bank, whether or not
an Alternative Minimum Tax ("AMT") is paid.  The Bank has not been subject to
the AMT, and no such amounts have been accrued for carryover.

     Dividends Received Deduction and Other Matters.  The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations.  The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
except that if the Company and the Bank own more than 20% of the stock of a
corporation distributing a dividend, then 80% of any dividends received may be
excluded.

STATE AND LOCAL TAXATION

     New York State and New York City Taxation.  The Bank is subject to the New
York State Franchise Tax on Banking Corporations in an annual amount equal to
the greater of (i) 9% of the Bank's "entire net income" allocable to New York
State during the taxable year, or (ii) the applicable alternative minimum tax.
The alternative minimum tax is generally the greatest of (a) .01% of the average
value of the taxable assets allocable to New York State with certain
modifications, (b) 3% of the Bank's "alternative entire net income" allocable to
New York State or (c) $250.  Entire net income is similar to federal taxable
income, subject to certain modifications (including that net operating losses
cannot be carried back or carried forward) and alternative entire net income is
equal to entire net income without certain adjustments.  The Bank is also
subject to New York City Corporation Tax which is imposed using SMTI or
alternative taxable income method.  For purposes of computing its entire net
income, the Bank is permitted a deduction for an addition to the reserve for
losses on qualifying real property loans.  For New York State and City purposes,
the applicable percentage to calculate bad debt deduction under the percentage
of taxable income method is 32%.  The New York State and New York City tax laws
were recently amended to prevent the recapture of tax bad debt reserves that
would otherwise occur as a result of the enactment of the 1996 Act for both New
York State and City tax purposes.  See "- Federal Taxation - Bad Debt Reserves."
However, the New York bad debt reserve is subject to recapture for "non-dividend
distributions" in a manner similar to the recapture of the federal bad debt
reserves for such distributions.  See "- Federal Taxation - Distributions".
Also, the New York bad debt reserve is subject to recapture in the event that
the Bank fails to satisfy certain definitional tests relating to its assets and
the nature of its business.  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.

     A Temporary Metropolitan Transportation Business Tax Surcharge on banking
corporations doing business in the metropolitan district has been applied since
1982.  The Bank does all of its business within this District and is subject to
this surcharge.  For the tax year ended December 31, 1997, the surcharge rate is
17% of the New York State Franchise Tax liability.

                                       87
Delaware State Taxation.  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 with and pay an annual franchise tax to the
State of Delaware.

                           REGULATION AND SUPERVISION

GENERAL

     The Bank is a New York State chartered mutual savings bank and its deposit
accounts are insured up to applicable limits by the FDIC under the BIF.  The
Bank is subject to extensive regulation by the Superintendent, the NYBB, the
NYBD, as its chartering agency, and by the FDIC, as the deposit insurer.  The
Bank must file reports with the NYBD and the FDIC concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as establishing branches and mergers
with, or acquisitions of, other depository institutions.  There are periodic
examinations by the NYBD and the FDIC to assess the Bank's compliance with
various regulatory requirements and financial condition.  This regulation and
supervision establishes a framework of activities in which a savings bank can
engage and is intended primarily for the protection of the insurance fund and
depositors.  The regulatory structure also gives the regulatory authorities
extensive 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 regulation, whether by the NYBD,
the FDIC or through legislation, could have a material adverse impact on the
Company and the Bank and their operations and stockholders.  The Holding Company
will also be required to file certain reports with, and otherwise comply with
the rules and regulations, of the OTS, the NYBD and of the Securities and
Exchange Commission ("SEC") under the federal securities laws.  Certain of the
regulatory requirements applicable to the Bank and to the Holding Company are
referred to below or elsewhere herein.

NEW YORK STATE LAW
 
     The Bank derives its lending, investment and other authority primarily from
the applicable provisions of New York State Banking Law and the regulations of
the NYBB, as limited by FDIC regulations.  See "- Investment Activities."  Under
these laws and regulations, savings banks, including the Bank, may invest in
real estate mortgages, consumer and commercial loans, certain types of debt
securities, including certain corporate debt securities and obligations of
federal, state and local governments and agencies, certain types of corporate
equity securities and certain other assets.  Under the statutory authority for
investing in equity securities, a savings bank may directly invest up to 7.5% of
its assets in certain corporate stock and may also invest up to 7.5% of its
assets in certain mutual fund securities.  Investment in the stock of a single
corporation is limited to the lesser of 2% of the outstanding stock of such
corporation or 1% of the savings bank's assets, except as set forth below.  Such
equity securities must meet certain tests of financial performance.  A savings
bank's lending powers are not subject to percentage of asset limitations,
although there are limits applicable to single borrowers.  A savings bank may
also, pursuant to the "leeway" authority, make investments not otherwise
permitted under the New York State Banking Law.  This authority permits
investments  not otherwise authorized of up to 1% of the savings bank's assets
in any single investment, subject to certain restrictions and to an aggregate
limit for all such investments of up to 5% of assets.  Additionally, in lieu of
investing in such securities in accordance with and reliance upon the specific
investment authority set forth in the New York State Banking Law, savings banks
are authorized to elect to invest under a "prudent person" standard in a wider
range of debt and equity securities as compared to the types of investments
permissible under such specific investment authority.  However, in the event a
savings bank elects to utilize the "prudent person" standard, it will be unable
to avail itself of the other provisions 

                                       88
of the New York State Banking Law and regulations which set forth specific
investment authority. A New York State chartered stock savings bank may also
exercise trust powers upon approval of the New York State Banking Board.

     New York State chartered savings banks may also invest in subsidiaries
under their service corporation investment power.  A savings bank may use this
power to invest in corporations that engage in various activities authorized for
savings banks, plus any additional activities which may be authorized by the
NYBD.  Investment by a savings bank in the stock, capital notes and debentures
of its service corporations is limited to 3% of the bank's assets, and such
investments, together with the bank's loans to its service corporations, may not
exceed 10% of the savings bank's assets.

     The exercise by an FDIC-insured savings bank of the lending and investment
powers of a savings bank under the New York State Banking Law is limited by FDIC
regulations and other federal law and regulations.  In particular, the
applicable provisions of New York State Banking Law and regulations governing
the investment authority and activities of an FDIC insured state-chartered
savings bank have been effectively limited by the Federal Deposit Insurance
Corporation Improvement Act of 1991 and the FDIC regulations issued pursuant
thereto.  See "- Investment Activities."
 
     With certain limited exceptions, a New York State chartered savings bank
may not make loans or extend credit for commercial, corporate or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's net worth.  The Bank currently
complies with all applicable loans-to-one-borrower limitations.

     Under New York State Banking Law, a New York State chartered stock savings
bank may declare and pay dividends out of its net profits, unless there is an
impairment of capital, but approval of the Superintendent is required if the
total of all dividends declared in a calendar year would exceed the total of its
net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.

     Under the New York State Banking Law, the Superintendent may issue an order
to a New York State chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts.  Upon a finding by the NYBB that any
director, trustee or officer of any banking organization has violated any law,
or has continued unauthorized or unsafe practices in conducting the business of
the banking organization after having been notified by the Superintendent to
discontinue such practices, such director, trustee or officer may be removed
from office by the NYBB after notice and an opportunity to be heard.  The Bank
does not know of any past or current practice, condition or violation that might
lead to any proceeding by the Superintendent or the NYBB against the Bank or any
of its Trustees or officers.  The Superintendent also may take possession of a
banking organization under specified statutory criteria.

                                       89
FDIC REGULATIONS

     Capital Requirements.  The FDIC has adopted risk-based capital guidelines
to which the Bank is subject.  The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations.  The Bank is required
to maintain certain levels of regulatory capital in relation to regulatory risk-
weighted assets.  The ratio of such regulatory capital to regulatory risk-
weighted assets is referred to as the Bank's "risk-based capital ratio."  Risk-
based capital ratios are determined by allocating assets and specified off-
balance sheet items to four risk-weighted categories ranging from 0% to 100%,
with higher levels of capital being required for the categories perceived as
representing greater risk.

     These guidelines divide a savings bank's capital into two tiers.  The first
tier ("Tier I") includes common equity, retained earnings, certain non-
cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions.  Savings banks are required to maintain a total risk-based
capital ratio of 8%, of which at least 4% must be Tier I capital.

     In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio (Tier I capital to adjusted total assets as specified in
the regulations).  These regulations provide for a minimum Tier I leverage ratio
of 3% for banks that meet certain specified criteria, including that they have
the highest examination rating and are not experiencing or anticipating
significant growth.  All other banks are required to maintain a Tier I leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points.  The
FDIC may, however, set higher leverage and risk-based capital requirements on
individual institutions when particular circumstances warrant.  Savings banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.

     The following is a summary of the Bank's regulatory capital at June 30,
1997:

          GAAP Capital to Total Assets             10.15%
          Total Capital to Risk-Weighted Assets    19.71%
          Tier I Leverage Ratio                    10.02%

     In August 1995, the FDIC, along with the other federal banking agencies,
adopted a regulation providing that the agencies will take account of the
exposure of a bank's capital and economic value to changes in interest rate risk
in assessing a bank's capital adequacy.  According to the agencies, applicable
considerations include the quality of the bank's interest rate risk management
process, the overall financial condition of the bank and the level of other
risks at the bank for which capital is needed.  Institutions with significant
interest rate risk may be required to hold additional capital.  The agencies
also have issued a joint policy statement providing guidance on interest rate
risk management, including a discussion of the critical factors affecting the
agencies' evaluation of interest rate risk in connection with capital adequacy.
The agencies have determined not to proceed with a previously issued proposal to
develop a supervisory framework for measuring interest rate risk and an explicit
capital component for interest rate risk.

     Standards for Safety and Soundness.  Federal law requires each federal
banking agency to prescribe for depository institutions under its jurisdiction
standards relating to, among other things, internal controls; information
systems and audit systems; loan documentation; credit underwriting; interest
rate risk exposure; 

                                       90
asset growth; compensation; fees and benefits; and such other operational and
managerial standards as the agency deems appropriate. The federal banking
agencies adopted final regulations and Interagency Guidelines Establishing
Standards for Safety and Soundness (the "Guidelines") to implement these safety
and soundness standards. The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at insured depository institutions before capital becomes impaired. The
Guidelines address internal controls and information systems; internal audit
system; credit underwriting; loan documentation; interest rate risk exposure;
asset growth; asset quality; earnings and compensation; fees and benefits. If
the appropriate federal banking agency determines that an institution fails to
meet any standard prescribed by the Guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve compliance
with the standard, as required by the Federal Deposit Insurance Act, as amended,
("FDI Act"). The final regulation establishes deadlines for the submission and
review of such safety and soundness compliance plans.

     Real Estate Lending Standards.  The FDIC and the other federal banking
agencies have adopted regulations that prescribe standards for extensions of
credit that (i) are secured by real estate or (ii) are made for the purpose of
financing the construction or improvements on real estate.  The FDIC regulations
require each institution 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 institution and the nature and scope of its real
estate lending activities.  The standards also must be consistent with
accompanying FDIC guidelines, which include loan-to-value limitations for the
different types of real estate loans.  Institutions 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 standard are justified.

     Dividend Limitations.  The FDIC has authority to use its enforcement powers
to prohibit a savings bank from paying dividends if, in its opinion, the payment
of dividends would constitute an unsafe or unsound practice.  Federal law
prohibits the payment of dividends by a bank that will result in the bank
failing to meet applicable capital requirements on a pro forma basis.
Additionally, the Bank, as a subsidiary of a savings and loan holding company,
will be required to provide the OTS with 30 days prior written notice before
declaring any dividend.  The Plan of Conversion also restricts the Bank's
payment of dividends in the event the dividend would impair the liquidation
account established in connection with the Conversion.  The Bank is also subject
to dividend declaration restrictions imposed by New York law.  See "- New York
State Law" and  "Dividend Policy."

INVESTMENT ACTIVITIES

     Since the enactment of FDICIA, all state-chartered financial institutions,
including savings banks and their subsidiaries, have generally been limited to
activities as principal and equity investments of the type and in the amount
authorized for national banks, notwithstanding state law.  FDICIA and the FDIC
regulations thereunder permit certain exceptions to these limitations.  For
example, certain state chartered banks, such as the Bank, may, with FDIC
approval, continue to exercise state authority to invest in common or preferred
stocks listed on a national securities exchange or the Nasdaq National Market
and in the shares of an investment company registered under the Investment
Company Act of 1940, as amended.  Such banks may also continue to sell savings
bank life insurance.  In addition, the FDIC is authorized to permit such
institutions to engage in state authorized activities or investments that do not
meet this standard (other than non-subsidiary equity investments) for
institutions that meet all applicable capital requirements if it is determined
that such activities or investments do not pose a significant risk to the BIF.
The FDIC has recently proposed revisions to its regulations governing the
procedures for institutions seeking approval to engage in such activities or
investments.  These proposed revisions would, among other things, streamline
certain application procedures for healthy banks and impose certain quantitative
and qualitative restrictions 

                                       91
on a bank's dealings with its subsidiaries engaged in activities not permitted
for national bank subsidiaries. All non-subsidiary equity investments, unless
otherwise authorized or approved by the FDIC, must have been divested by
December 19, 1996, pursuant to a FDIC-approved divestiture plan unless such
investments were grandfathered by the FDIC. The Bank received grandfathering
authority from the FDIC in February, 1993 to invest in listed stocks and/or
registered shares subject to the maximum permissible investment of 100% of Tier
1 capital, as specified by the FDIC's regulations, or the maximum amount
permitted by New York State Banking Law, whichever is less. Such grandfathering
authority is subject to termination upon the FDIC's determination that such
investments pose a safety and soundness risk to the Bank or in the event the
Bank converts its charter or undergoes a change in control. As of June 30, 1997,
the Bank had $8.6 million of securities which were subject to such
grandfathering authority.

PROMPT CORRECTIVE REGULATORY ACTION

     Federal law requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements.  For these purposes, the law establishes five
capital tiers:  well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.

     The FDIC has adopted regulations to implement the prompt corrective action
legislation.  Among other things, the regulations define the relevant capital
measures for the five capital categories.  An institution is deemed to be "well
capitalized" if it has a total risk-based capital ratio of 10% or greater, a
Tier I risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or
greater, and is not subject to a regulatory order, agreement or directive to
meet and maintain a specific capital level for any capital measure.  An
institution is deemed to be "adequately capitalized" if it has a total risk-
based capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4% or
greater, and generally a leverage ratio of 4% or greater.  An institution is
deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a
leverage ratio of less than 4%.  An institution is deemed to be "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%, a
Tier I risk-based capital ratio of less than 3%, or a leverage ratio of less
than 3%.  An institution is deemed to be "critically undercapitalized" if it has
a ratio of tangible equity (as defined in the regulations) to total assets that
is equal to or less than 2%.

     "Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan.  A bank's compliance with such plan is required to be
guaranteed by any company that controls the undercapitalized institutions in an
amount equal to the lesser of 5.0% of the Bank's total assets when deemed
undercapitalized or the amount necessary to achieve the status of adequately
capitalized.  If an "undercapitalized" bank fails to submit an acceptable plan,
it is treated as if it is "significantly undercapitalized."  "Significantly
undercapitalized" banks are subject to one or more of a number of additional
restrictions, including but not limited to an order by the FDIC to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cease receipt of deposits from correspondent banks or dismiss
directors or officers, and restrictions on interest rates paid on deposits,
compensation of executive officers and capital distributions by the parent
holding company.  "Critically undercapitalized" institutions also may not,
beginning 60 days after becoming "critically undercapitalized," make any payment
of principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into any material transaction outside the
ordinary course of business.  In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator.
Generally, subject to a narrow exception, the appointment of a receiver or
conservator is required for a "critically undercapitalized" institution within
270 days after it obtains such status.

                                       92
TRANSACTIONS WITH AFFILIATES

     Under current federal law, transactions between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act.  An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary.  In a holding company context, at a minimum, the parent holding
company of a savings bank and any companies which are controlled by such parent
holding company are affiliates of the savings bank.  The FRB has proposed
regulations that would treat as an affiliate any subsidiary of a savings bank
that engages in activities not permissible for the parent savings bank to engage
in directly.  Generally, Section 23A limits the extent to which the savings bank
or its subsidiaries may engage in "covered transactions" with any one affiliate
to an amount equal to 10% of such savings bank's capital stock and surplus, and
contains an aggregate limit on all such transactions with all affiliates to an
amount equal to 20% of such capital stock and surplus.  The term "covered
transaction" includes the making of loans or other extensions of credit to an
affiliate; the purchase of assets from an affiliate, the purchase of, or an
investment in, the securities of an affiliate; the acceptance of securities of
an affiliate as collateral for a loan or extension of credit to any person; or
issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate.  Section 23A also establishes specific collateral requirements for
loans or extensions of credit to, or guarantees, acceptances on letters of
credit issued on behalf of an affiliate.  Section 23B requires that covered
transactions and a broad list of other specified transactions be on terms
substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with nonaffiliates.

     Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders.  Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers, and shareholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the board of directors of the savings bank.  Any "interested"
director may not participate in the voting.  The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000.  Further, pursuant to Section 22(h), loans to
directors, executive officers and principal shareholders must be made on terms
substantially the same as offered in comparable transactions to other persons
except for extensions of credit made pursuant to a benefit or compensation
program that is widely available to the institution's employees and does not
give preference to insiders over other employees.  Section 22(g) of the Federal
Reserve Act places additional limitations on loans to executive officers.

ENFORCEMENT

     The FDIC has extensive enforcement authority over insured savings banks,
including the Bank.  This enforcement authority includes, among other things,
the ability to assess civil money penalties, to issue cease and desist orders
and to remove directors and officers.  In general, these enforcement actions may
be initiated in response to violations of laws and regulations and to unsafe or
unsound practices.

     The FDIC has authority under federal law to appoint a conservator or
receiver for an insured savings bank under certain circumstances.  The FDIC is
required, with certain exceptions, to appoint a receiver or conservator for an
insured state savings bank if that savings bank was "critically
undercapitalized" on average during the calendar quarter beginning 270 days
after the date on which the savings bank became "critically undercapitalized."
For this purpose, "critically undercapitalized" means having a ratio of tangible
capital to 

                                       93
total assets of less than 2%. See "- Prompt Corrective Regulatory Action." The
FDIC may also appoint a conservator or receiver for a state savings bank on the
basis of the institution's financial condition or upon the occurrence of certain
events, including: (i) insolvency (whereby the assets of the savings bank are
less than its liabilities to depositors and others); (ii) substantial
dissipation of assets or earnings through violations of law or unsafe or unsound
practices; (iii) existence of an unsafe or unsound condition to transact
business; (iv) likelihood that the savings bank will be unable to meet the
demands of its depositors or to pay its obligations in the normal course of
business; and (v) insufficient capital, or the incurring or likely incurring of
losses that will deplete substantially all of the institution's capital with no
reasonable prospect of replenishment of capital without federal assistance.

INSURANCE OF DEPOSIT ACCOUNTS

     The FDIC has adopted a risk-based insurance assessment system.  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, consisting of (1) well capitalized, (2)
adequately capitalized or (3) undercapitalized, and one of three supervisory
subcategories within each capital group.  The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and additional information
which 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.  Assessment rates for BIF and SAIF deposits currently
range from 0 basis points to 27 basis points.  The FDIC is authorized to raise
the assessment rates in certain circumstances including to maintain or achieve
the designated reserve ratio of 1.25%, which requirement the BIF and the SAIF
currently meet.  The FDIC has exercised its authority to raise rates in the past
and may raise insurance premiums in the future.  If such action is taken by the
FDIC, it could have an adverse effect on the earnings of the Bank.  In addition,
recent legislation requires BIF-insured institutions like the Bank to assist in
the payment of Financing Corporation bonds.

     Under the FDI Act, insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
Division.  The management of the Bank does not know of any practice, condition
or violation that might lead to termination of deposit insurance.

FEDERAL RESERVE SYSTEM

     The Federal Reserve Board regulations require depository institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts).  The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows:  for that portion of transaction accounts
aggregating $49.3 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3%; and for accounts greater than $49.3
million, the reserve requirement is $1.5 million plus 10% (subject to adjustment
by the Federal Reserve Board between 8% and 14%) against that portion of total
transaction accounts in excess of $49.3 million.  The first $4.4 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements.  The Bank is in compliance
with the foregoing 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 Federal Reserve Board,
the effect of this reserve requirement is to reduce the Bank's interest-earning
assets.  FHLB System members are also authorized to borrow from the Federal
Reserve "discount window," but Federal 

                                       94
Reserve Board regulations require institutions to exhaust all FHLB sources
before borrowing from a Federal Reserve Bank.

COMMUNITY REINVESTMENT ACT

     Federal Regulation.  Under the Community Reinvestment Act, as amended
("CRA"), as implemented by FDIC regulations, a savings bank 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 FDIC, in connection with its examination of a savings institution,
to assess the institution'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 institution.  The FIRREA amended the CRA to require, effective July 1,
1990, public disclosure of an institution's CRA rating and require the FDIC to
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system which replaced the five-tiered numerical
rating system.  The Bank's latest CRA rating, received from the FDIC was
"Satisfactory."

     New York State Regulation.  The Bank is also subject to provisions of the
New York State Banking Law which impose continuing and affirmative obligations
upon banking institutions organized in New York State to serve the credit needs
of its local community ("NYCRA"), which are substantially similar to those
imposed by the CRA.  Pursuant to the NYCRA, a bank must file an annual NYCRA
report and copies of all federal CRA reports with the NYBD.  The NYCRA requires
the NYBD to make an annual written assessment of a bank's compliance with the
NYCRA, utilizing a four-tiered rating system, and make such assessment available
to the public.  The NYCRA also requires the Superintendent to consider a bank's
NYCRA rating when reviewing a bank's application to engage in certain
transactions, including mergers, asset purchases and the establishment of branch
offices or automated teller machines, and provides that such assessment may
serve as a basis for the denial of any such application.  The Bank's latest
NYCRA rating received from the NYBD was "Satisfactory."

FEDERAL HOME LOAN BANK SYSTEM

     The Bank has applied to become a member of the FHLB System, which consists
of 12 regional FHLBs.  The Bank expects to receive approval of its application
in October 1997.  The FHLB provides a central credit facility primarily for
member institutions.  The Bank, as a member of the FHLB, will be required to
acquire and hold shares of capital stock in the FHLB in an amount at least equal
to 1% of the aggregate principal amount of its unpaid residential mortgage loans
and similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB, whichever is greater.  FHLB advances must be secured
by specified types of collateral and all long-term advances may only be obtained
for the purpose of providing funds for residential housing finance.

     The FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs.  These
requirements could reduce the amount of dividends that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their members.  If dividends were reduced, the Bank's net interest
income will likely also be reduced.  Further, there can be no assurance that the
impact of recent or future legislation on the FHLBs will not also cause a
decrease in the value of the FHLB stock that will be held by the Bank.

                                       95
HOLDING COMPANY REGULATION

     Federal law allows a state savings bank that qualifies as a "qualified
thrift lender" ("QTL"), discussed below, to elect to be treated as a savings
association for purposes of the savings and loan holding company provisions of
the Home Owners' Loan Act, as amended ("HOLA").  Such election would result in
its holding company being regulated as a savings and loan holding company by the
OTS rather than as a bank holding company by the Federal Reserve Board.  The
Bank has made such election and has applied to the OTS to become a savings and
loan holding company.  Assuming the application is approved, the Company will be
regulated as a non-diversified unitary savings and loan holding company within
the meaning of the HOLA.  As such, the Company will be required to register with
the OTS and will be subject to OTS regulations, examinations, supervision and
reporting requirements.  In addition, the OTS has enforcement authority over the
Company and its non-savings institution subsidiaries.  Among other things, this
authority permits the OTS to restrict or prohibit activities that are determined
to be a serious risk to the subsidiary savings institution.  Additionally, the
Bank will be required to notify the OTS at least 30 days before declaring any
dividend to the Company.

     As a unitary savings and loan holding company, the Company generally will
not be restricted under existing laws as to the types of business activities in
which it may engage.  Upon any non-supervisory acquisition by the Company of
another savings association as a separate subsidiary, the Company would become a
multiple savings and loan holding company and would be subject to extensive
limitations on the types of business activities in which it could engage.  The
HOLA limits the activities of a multiple savings and loan holding company and
its non-insured institution subsidiaries primarily to activities permissible for
bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, as
amended ("BHC Act"), subject to the prior approval of the OTS, and to other
activities authorized by OTS regulation.  Multiple savings and loan holding
companies are prohibited from acquiring or retaining, with certain exceptions,
more than 5% of a non-subsidiary holding company, or a non-subsidiary company
engaged in activities other than those permitted by the HOLA.  Recently proposed
legislation would treat all savings and loan holding companies as bank holding
companies and would limit the activities of such companies to those permissible
for bank holding companies.

     The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than 5% of
the voting stock of another savings institution or holding company thereof or
from acquiring such an institution or company by merger, consolidation or
purchase of its assets, without prior written approval of the OTS.  In
evaluating applications by holding companies to acquire savings institutions,
the OTS must consider the financial and managerial resources and future
prospects of the company and institution involved, the effect of the acquisition
on the risk to the insurance funds, the convenience and needs of the community
and competitive factors.

     The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions in
more than one state, except:  (i) interstate supervisory acquisitions by savings
and loan holding companies, and (ii) the acquisition of a savings institution in
another state if the laws of the state of the target savings institution
specifically permit such acquisitions.  The states vary in the extent to which
they permit interstate savings and loan holding company acquisitions.

     In order to elect and continue to be regulated as a savings and loan
holding company by the OTS (rather than as a bank holding company by the Federal
Reserve Board), the Bank must continue to qualify as a QTL.  In order to qualify
as a QTL, the Bank must maintain compliance with a Qualified Thrift Lender Test
("QTL Test").  Under the QTL Test, a savings institution is required to maintain
at least 65% of its "portfolio assets" (total assets less: (i) specified liquid
assets up to 20% of total assets; (ii) intangibles, 

                                       96
including goodwill; and (iii) the value of property used to conduct business) in
certain "qualified thrift investments" (primarily residential mortgages and
related investments, including certain mortgage-backed and related securities)
in at least 9 months out of each 12 month period. A holding company of a savings
institution that fails the QTL test must either convert to a bank holding
company and thereby become subject to the regulation and supervision of the
Federal Reserve Board or operate under certain restrictions. As of June 30,
1997, the Bank maintained in excess of 79.9% its portfolio assets in qualified
thrift investments. The Bank also met the QTL test in each of the prior 12
months and, therefore, met the QTL test. Recent legislative amendments have
broadened the scope of "qualified thrift investments" that go toward meeting the
QTL test to fully include credit card loans, student loans and small business
loans. 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.

     New York State Holding Company Regulation.  In addition to the federal
holding company regulations, a bank holding company organized or doing business
in New York State may be also subject to regulation under the New York State
Banking Law.  The term "bank holding company," for the purposes of the New York
State Banking Law, is defined generally to include any person, company or trust
that directly or indirectly either controls the election of a majority of the
directors or owns, controls or holds with power to vote more than 10% of the
voting stock of a bank holding company or, if the company is a banking
institution, another banking institution, or 10% or more of the voting stock of
each of two or more banking institutions, including commercial banks and state
savings banks and savings and loan associations organized in stock form.  In
general, a holding company controlling, directly or indirectly, only one banking
institution will not be deemed to be a bank holding company for the purposes of
the New York State Banking Law.  Under New York State Banking Law, the prior
approval of the NYBD is required before:  (1) any action is taken that causes
any company to become a bank holding company; (2) any action is taken that
causes any banking institution to become or to be merged or consolidated with a
subsidiary of a bank holding company; (3) any bank holding company acquires
direct or indirect ownership or control of more than 5% of the voting stock of a
banking institution; (4) any bank holding company or subsidiary thereof acquires
all or substantially all of the assets of a banking institution; or (5) any
action is taken that causes any bank holding company to merge or consolidate
with another bank holding company.  Additionally, certain restrictions apply to
New York State bank holding companies regarding the acquisition of banking
institutions which have been chartered five years or less and are located in
smaller communities.  Officers, directors and employees of New York State  bank
holding companies are subject to limitations regarding their affiliation with
securities underwriting or brokerage firms and other bank holding companies and
limitations regarding loans obtained from its subsidiaries.  Although the
Company will not be a bank holding company for purposes of New York State law
upon the Effective Date of the Conversion, any future acquisition of ownership,
control, or the power to vote 10% or more of the voting stock of another banking
institution or bank holding company would cause it to become such.

INTERSTATE BANKING AND BRANCHING

     The Company, as a savings and loan holding company, will be limited under
HOLA with respect to its acquisition of a savings association located in a state
other than New York.  In general, a savings and loan holding company may not
acquire an additional savings association subsidiary that is located in a state
other than the home state of its first savings association subsidiary unless
such an interstate acquisition is permitted by the statutes of such other state.
Many states permit such interstate acquisitions if the statutes of the home
state of the acquiring savings and loan holding company satisfy various
reciprocity conditions.  New York is one of a number of states that permit,
subject to the reciprocity conditions of the New York Banking Law, out-of-state
bank and savings and loan holding companies to acquire New York savings
associations.

                                       97
In contrast, bank holding companies are generally authorized to acquire
banking subsidiaries in more than one state irrespective of any state law
restrictions on such acquisitions.  The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("Interstate Banking Act"), which was enacted
on September 29, 1994, permits approval under the BHC Act of the acquisition of
a bank located outside of the holding company's home state regardless of whether
the acquisition is permitted under the law of the state of the acquired bank.
The Federal Reserve Board may not approve an acquisition under the BHC Act that
would result in the acquiring holding company controlling more than 10% of the
deposits in the United States or more than 30% of the deposits in any particular
state.

     In the past, branching across state lines was not generally available to a
state bank such as the Bank.  Out-of-state branches of savings banks are
authorized under the New York Banking Law, but similar authority does not exist
generally under the laws of most other states.  The Interstate Banking Act
permitted, beginning June 1, 1997, the responsible federal banking agencies to
approve merger transactions between banks located in different states,
regardless of whether the merger would be prohibited under the law of the two
states.  The Interstate Banking Act also permitted a state to "opt in" to the
provisions of the Interstate Banking Act prior to June 1, 1997, and permits a
state to "opt out" of the provisions of the Interstate Banking Act by adopting
appropriate legislation before that date.  Accordingly, the Interstate Banking
Act, beginning no later than June 1, 1997, permitted a bank, such as the Bank,
to acquire branches in a state other than New York unless the other state has
opted out of the Interstate Banking Act.  The Interstate Banking Act also
authorizes de novo branching into another state if the host state enacts a law
           -- ----                                                            
expressly permitting out of state banks to establish such branches within its
borders.

     The Interstate Banking Act may facilitate the further consolidation of the
banking industry.  The effect of the Interstate Banking Act on the Bank, if any,
is likely to occur as banking institutions, state legislators, and bank
regulators respond to the new federal regulatory structure.  The states will
have to establish appropriate corporate law, tax and regulatory structures to
adjust to the growth of new interstate banks.

FEDERAL SECURITIES LAWS

     The Company has filed with the SEC a registration statement under the
Securities Act for the registration of the Common Stock to be issued pursuant to
the Conversion.  Upon completion of the Conversion, the Company's Common Stock
will be registered with the SEC under the Exchange Act.  The Company will then
be subject to the information, proxy solicitation, insider trading restrictions
and other requirements under the Exchange Act.

     The registration under the Securities Act of shares of the Common Stock to
be issued in the Conversion does not cover the resale of such shares.  Shares of
the Common Stock purchased by persons who are not affiliates of the Company may
be resold without registration.  Shares purchased by an affiliate of the Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the
other conditions of Rule 144 (including those that require the affiliate's sale
to be aggregated with those of certain other persons) would be able to sell in
the public market, without registration, a number of shares not to exceed, in
any three-month period, the greater of (i) 1% of the outstanding shares of the
Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks.  Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.

                                       98
MANAGEMENT OF THE COMPANY

DIRECTORS OF THE COMPANY

     The Board of Directors of the Company is divided into three classes, each
of which contains one-third of the Board.  The directors shall be elected by the
stockholders of the Company for staggered three year terms, or until their
successors are elected and qualified.  One class of directors, consisting of
Messrs. James L. Kelley, T. Ronald Quinlan, Jr. and Anthony E. Burke, has a term
of office expiring at the first annual meeting of stockholders, a second class,
consisting of Messrs. William C. Frederick and Maurice K. Shaw, has a term
expiring at the second annual meeting of stockholders and a third class,
consisting of Messrs. Michael F. Manzulli, Godfrey H. Carstens, Jr. and Robert
S. Farrell, has a term of office expiring at the third annual meeting of
stockholders.  The biographical information of each Director, except Messrs.
Manzulli and Burke, is set forth under "Management of the Bank - Trustees of the
Bank."

EXECUTIVE OFFICERS OF THE COMPANY

     The following individuals are executive officers of the Company and hold
the offices set forth below opposite their names.

                                                   Position(s) Held
Name                            Age(1)             With the Company  
----                            ----               ----------------
Michael F. Manzulli                56    Chairman of the Board and Chief
                                         Executive Officer

Anthony E. Burke                   50    President and Chief Operating Officer

Thomas R. Cangemi                  29    Chief Financial Officer and Secretary

Andrew M. Sisock                   43    Vice President and Accounting Officer
________________
(1)  As of June 30, 1997.

     The executive officers of the Company are elected annually and hold office
until their respective successors have been elected and qualified or until
death, resignation, retirement or removal by the Board of Directors.

                                       99
BIOGRAPHICAL INFORMATION

     Michael F. Manzulli is Chairman of the Board of Directors and Chief
Executive Officer of the Company and Trustee, President and Chief Executive
Officer of the Bank.  Mr. Manzulli has served as a Trustee of the Bank since
1990, and was named President and Chief Executive Officer in June of 1992.  Mr.
Manzulli is the managing partner of the law firm of Lahr, Dillon, Manzulli,
Kelley & Penett, P.C., where he practiced law prior to becoming President and
Chief Executive Officer.  Mr. Manzulli is also the Chairman of the Staten Island
Partnership, Inc., and serves on the Board of Directors of the Staten Island
Economic Development Corp., St. Elizabeth Ann Nursing Home, the Staten Island
Historical Society and Notre Dame Academy.  He is also a member of the Advisory
Board of the Salvation Army - Staten Island.  Mr. Manzulli holds a B.S. from
Niagara University and a Bachelor of Law degree from St. John's University
School of Law.

     Anthony E. Burke is a Director of the Company and, effective October __,
1997, will commence his duties as President and Chief Operating Officer of the
Company. Prior to joining the Company, Mr. Burke was a partner for thirteen
years with the financial services industry group of Ernst & Young LLP, where he
worked for twenty-five years. Mr. Burke has represented community banks
(including the Bank), international banks, mortgage banks and real estate
ventures, and also has extensive experience in the mergers and acquisitions
area. Mr. Burke is a C.P.A., and is a member of the American Institute of
Certified Public Accountants. He has a B.S. in economics from St. John's
University and an M.B.A. in accounting and finance from the Columbia University
Graduate School of Business.

     Thomas R. Cangemi has been appointed the Chief Financial Officer and
Secretary of the Company and will commence his duties effective October __,
1997. From December 1996 until joining the Company, Mr. Cangemi was Senior Vice
President, Chief Financial Officer and Corporate Secretary of a New York-based
commercial bank. From January 1996 until December 1996, he was Director of
Corporate SEC Reporting for Sensormatic Electronics Corporation, Boca Raton,
Florida. Prior to January 1996, Mr. Cangemi was Vice President and Chief
Financial Officer of a publicly-held savings and loan holding company and its
subsidiary federal savings bank located in the New York area. Before 1993, Mr.
Cangemi was a member of the SEC Professional Practice Group of a national
accounting firm. Mr. Cangemi holds a B.B.A. from the School of Professional
Accountancy at Dowling College, and is a C.P.A. and a member of the American
Institute of Certified Public Accountants.

     Andrew M. Sisock joined the Bank in 1975, and served as Vice President and
Comptroller until 1993, when he was named Senior Vice President and Financial
Comptroller; he was appointed Senior Vice President and Senior Financial Officer
in 1996. Mr. Sisock is also the Vice President and Accounting Officer of the
Company and a Director and Treasurer of both RCSB Corp. and Richmond
Enterprises, Inc. His primary areas of responsibility are overseeing financial
and regulatory reporting, investment policy, interest rate risk policy and
internal controls. Mr. Sisock has a B.S. in Business Administration from
Pennsylvania State University and an M.B.A. in Finance from St. John's
University. Mr. Sisock is a graduate of the National School of Finance and
Management at Fairfield University.

                                      100
MANAGEMENT OF THE BANK

TRUSTEES OF THE BANK

     The Directors of the Company are also Trustees of the Bank, with the
exception of Mr. Burke. Upon consummation of the Conversion, the current
Trustees of the Bank will become Directors of the stock chartered Bank. The
following table sets forth certain information regarding the Board of Trustees
of the Bank.
POSITION(S) HELD           TERM
           NAME                AGE(1)           WITH THE BANK             EXPIRES
           ----                ---              ----------------          -------
Godfrey H. Carstens, Jr.         69      Trustee                             2000

Robert S. Farrell                71      Trustee                             2000

William C. Frederick, M.D.       69      Trustee                             1999

James L. Kelley                  55      Trustee                             1998

Michael F. Manzulli              56      President, Chief Executive          2000
                                         Office and Trustee
T. Ronald Quinlan, Jr.           70      Trustee                             1998

Maurice K. Shaw                  58      Trustee                             1999
----------------------
(1)     As of June 30, 1997.

EXECUTIVE OFFICERS OF THE BANK WHO ARE NOT TRUSTEES

     The following table sets forth certain information regarding the executive
officers of the Bank with the exception of Mr. Manzulli whose background is
discussed under "Management of the Company - Biographical Information."
Position(s) Held
            Name                Age(1)                     With the Bank
            ----                ---                       ----------------
John M. McKenna                  61      Executive Vice President

Stephen G.C. Campbell            54      Senior Vice President and Senior Auditor

Peter J. Esposito                54      Senior Vice President - Commercial Lending
                                         
Charles F. Hermann, III          54      Senior Vice President - Special Services

Andrew M. Sisock                 43      Senior Vice President and Senior Financial Officer
                                         
Nelson C. Sundback               55      Senior Vice President - Information Systems/Operations
                                         
Robert J. O'Rourke               60      Vice President - Lending

John J. Amodio                   55      Director of Commercial Banking Services
--------------------------
(1)     As of June 30, 1997.

                                      101
The executive officers of the Bank are elected annually and will hold
office in the converted Bank until the annual meeting of the Board of Directors
of the Bank held immediately after the first annual meeting of stockholders of
the Bank subsequent to Conversion, and until their successors are elected and
qualified or until death, resignation, retirement or removal by the Board of
Directors.  Officers are re-elected by the Board of Directors annually.

BIOGRAPHICAL INFORMATION

TRUSTEES OF THE BANK

Godfrey H. Carstens, Jr. has served as a Trustee of the Bank since 1973. He is
the owner and president of Carstens Electrical Supply Co., an electrical supply
company located in Staten Island, New York. He is also a member of the Board of
Trustees of Staten Island University Hospital, and of the West Brighton Civic
Association.

Robert S. Farrell has served as a Trustee of the Bank since 1973.  He has been
president of H.S. Farrell, Inc., a lumber, millwork and building materials
supply company located in Staten Island, New York, since 1986, and has held
other positions with the firm for over fifty years.  He is also a member of the
Board of the Northfield Local Development Corp., and of the Port Richmond Board
of Trade.

William C. Frederick, M.D. has served as a Trustee of the Bank since 1980.  Dr.
Frederick is a surgeon in Staten Island and is affiliated with St. Vincent's
Hospital, Staten Island University Hospital and Bayley Seton Hospital.

James L. Kelley has served as a Trustee of the Bank since January 1997.  Mr.
Kelley is a partner of the law firm of Lahr, Dillon, Manzulli, Kelley & Penett,
P.C., which serves as general counsel to the Bank.  Mr. Kelly holds a B.S. from
St. Peter's College, New Jersey, and a Bachelor of Law degree from St. John's
University School of Law.

T. Ronald Quinlan, Jr. has served as a Trustee since 1978.  Mr. Quinlan retired
in 1993 as owner and President of Quinlan Fuel Service, a fuel oil company
located in Staten Island, New York.  He is a member of the West Brighton and
Lighthouse Civic Associations.

Maurice K. Shaw has served as a Trustee since 1979.  He is Senior Vice President
in charge of corporate affairs of Brooklyn Union Gas Co., where he has been
employed since 1960.  Mr. Shaw is a member of the Board of Directors of the
Staten Island Partnership, Inc., the Staten Island Economic Development Corp.
and the Staten Island Chamber of Commerce.

                                      102
EXECUTIVE OFFICERS OF THE BANK WHO ARE NOT TRUSTEES

John M. McKenna joined the Bank in 1992 as Executive Vice President.  Mr.
McKenna also serves as a Director and President of RCSB Corp. and Richmond
Enterprises, Inc.  Mr. McKenna's primary responsibilities include overseeing the
general operations of the Bank, including finance, information systems, deposits
and facilities.  Mr. McKenna has a B.S. from the City University of New York.

Stephen G.C. Campbell joined the Bank in 1980 as assistant vice president and
branch manager and has served in numerous managerial positions.  He served as
Senior Vice President and Senior Loan Officer from December 1991 until May of
1997, when he was named Senior Vice President and Senior Auditor.  He is
responsible for the administration and management of the Auditing Department.
Mr. Campbell attended Pace College and Rutgers University and is a graduate of
the National School of Finance and Management at Fairfield University.

Peter J. Esposito joined the Bank in 1975 as Real Estate Appraiser and
Inspector.  From 1975 to 1979, he served as Assistant Secretary and Senior Real
Estate Appraiser.  He was named Assistant Vice President of the Mortgage and
Servicing Department in 1985, and was promoted to the position of Vice President
in Charge of Commercial Real Estate and Construction Lending in 1992.  In 1996,
he was appointed Senior Vice President of the aforementioned department, and was
simultaneously named head of the Business Services Division.  Mr. Esposito holds
a professional designation as Senior Residential Appraiser with the Appraisal
Institute, formerly the Society of Real Estate Appraisers.  He is a graduate of
the Realtor's Institute, Ithaca College.  Mr. Esposito is also a licensed
insurance broker and possesses related experience in the construction and real
estate development fields.  He currently serves on the Boards of Trustees of
both the South Shore Rotary and the Staten Island chapter of the Leukemia
Society and is involved with numerous charitable organizations.

Charles F. Hermann, III joined the Bank in 1968 and has served the Bank in
various positions.  He was appointed Senior Vice President in December 1985 and
currently serves as Senior Vice President - Special Services.  He is responsible
for the management of the Insurance and Security Departments of the Bank.  Mr.
Hermann is also a Vice President and Director of RCSB Corp. and Richmond
Enterprises, Inc.  He is a graduate of the American Institute of Banking and
attended St. John's University.

Nelson C. Sundback joined the Bank in 1968 and has served in numerous managerial
positions.  He was named Senior Vice President -- Information Systems/Operations
in November 1993.  His primary areas of responsibility include the management
and supervision of the Bank's Operations, Pension, Insurance, ATM and Network
Computer Departments.  Mr. Sundback is also Secretary of RCSB Corp. and Richmond
Enterprises, Inc.  Mr. Sundback attended St. John's University and the College
of Staten Island.  Mr. Sundback is a graduate of the National School of Finance
and Management at Fairfield University and the American Institute of Banking.

                                      103
John J. Amodio joined the Bank in April 1997 as Director of Commercial Banking
Services.  From 1973 to 1980 Mr. Amodio was Senior Vice President, and from 1982
to 1991 was President and Chief Executive Officer of a Staten Island-based
commercial bank.  Prior to joining the Bank, he was President of Amodio &
Associates, Ltd., a management consulting organization, from 1991 to 1995, and
was President of TAM Restaurant Group, Inc., a restaurant, catering and
concessions management firm, from 1995 until 1997.  Mr. Amodio's primary
responsibility is to direct the development of the Bank's commercial banking
services.  Mr. Amodio is a former director and president of the NYS Society of
Certified Public Accountants, Staten Island Chapter, Chairman of the Board of
Meals on Wheels of Staten Island, and is the Chairman of the Staten Island
Rotary Foundation.  Mr. Amodio has a B.B.A. in Accounting from Iona College and
is a C.P.A.  He is also a graduate of the Commercial Bank Management Program at
Columbia University.

Robert J. O'Rourke joined the Bank in 1996 as Vice President -- Lending. Prior
to joining the Bank, he was President of Robert O'Rourke Inc. Real Estate, a
firm he formed in 1992 which specialized in analysis, appraisal and coordinating
assignments of metropolitan New York area properties for financing and
certiorari purposes. Mr. O'Rourke has over eighteen years of financial
institution experience, the majority as a Senior and Executive Vice President in
charge of the mortgage and real estate department of a New York-based savings
bank. He is an MAI designated member of the Appraisal Institute and a Certified
General Appraiser in New York and New Jersey. He is a licensed real estate
broker in New York and is a member of the New York and Staten Island Real Estate
Boards. Mr. O'Rourke is a member of the Friendly Sons of St. Patrick-New York
and is a board member of the Staten Island Botanical Gardens. Mr. O'Rourke is
primarily responsible for overseeing the residential mortgage and consumer
lending departments of the Bank. Mr. O'Rourke has a B.A. from Fordham University
and is a graduate of the National School of Savings Banking, Fairfield
University.

MEETINGS AND COMMITTEES OF THE BOARDS OF THE BANK AND THE COMPANY

     The Board of Trustees meets monthly and may have additional special
meetings as may be called by the President or at the written request of three
trustees. During the fiscal year ended June 30, 1997, the Board held twelve
meetings. There are currently eight committees of the Board of Trustees
consisting of the Executive/Finance Committee, the Examining/Audit Committee,
the Residential/Commercial/Construction Committee, the Loan Review Committee,
the Personnel Committee, the Insurance Committee, the By-Laws Committee and the
Buildings & Grounds Committee. Subsequent to the Conversion, the Board of
Trustees may consider and make revisions to the current structure of its
committees.

     The Board of Trustees of the Bank has established the following committees:

     The Executive/Finance Committee consists of the entire Board of Trustees.
The purpose of this Committee is to exercise the authority of the Board of
Trustees with respect to matters requiring action between meetings of the Board
of Trustees.  Any actions by this Committee requires subsequent ratification by
the Board of Trustees at the next regular meeting.  The Committee meets at least
four times per year as well as on an as needed basis.

     The Examining/Audit Committee consists of Messrs. Farrell, Frederick,
Quinlan, Shaw and DeForest (Emeritus).  The Bank's internal auditor and
compliance officer report to this committee.  The duty of this committee is to
examine the records and affairs of the Bank in conformity with the Banking Laws
of the State of New York applying to examinations and the Federal laws and
regulations relating to bank independent audit committees, and to determine the
Bank's true financial condition and its safety and soundness.  It inquires into
the policies of management for the purpose of determining whether such policies
are sound and consistent with the requirements of the law and inquires into and
reviews management's responsibility for the Bank's compliance with safety and
soundness laws and regulations, and management's responsibility for 

                                      104
the Bank's system of internal controls, and into such other matters as are
necessary to enable the Trustees to determine whether adequate protection is
afforded depositors and reviews management reports and the reports of the Bank's
independent public accountant. The committee generally meets on a bimonthly
basis and met five times in fiscal 1997.

     The Residential/Commercial/Construction Committee consists of Messrs.
Carstens, Farrell, Frederick, Quinlan and Shaw.  This committee is responsible
for reviewing and approving mortgage loans, home equity loans, commercial real
estate, construction, and commercial loans in amounts within its designated
authority.  The committee generally meets bimonthly, depending on loan volume,
and met 21 times in fiscal 1997.

     The Loan Review Committee consists of Messrs. Carstens, Farrell, Frederick,
Quinlan and Shaw.  This committee reviews the workout solutions of problem
loans, and approves the classification of assets and the establishment of
adequate valuation allowances.  This committee meets at least semi-annually and
met three times in fiscal 1997.

     The Personnel Committee consists of Messrs. Carstens, Farrell, Frederick
and Shaw.  This committee is responsible for all matters regarding compensation
and fringe benefits.  The committee meets at least semi-annually and met three
times in fiscal 1997.

     The Insurance Committee consists of Messrs. Carstens, Frederick, Kelley and
Shaw.  This committee is responsible for ensuring that adequate insurance
coverage is in place for the Bank's assets and trustees, officers and employees.
The committee meets at least semi-annually and met twice in fiscal 1997.

     The Bylaws Committee consists of Messrs. Frederick, Kelley and Quinlan, and
is responsible for reviewing and proposing revisions to the By-Laws of the Bank,
as necessary.  The committee meets on an as-needed basis and did not meet in
fiscal 1997.

     The Buildings and Grounds Committee consists of Messrs. Carstens, Farrell,
Kelley and Quinlan.  This committee is responsible for supervising the
maintenance and upkeep of the Bank's physical plant.  This committee meets on an
as-needed basis and did not meet in fiscal 1997.

     Additionally, the Bank has a number of other management committees
including the Asset/Liability Committee, the Interest Rate Risk Committee, the
Internal Control Committee, the Risk Management Committee, the Investment
Committee and the Compliance Committee.

     The Board of Directors of the Company has established the following
committees:  the Audit Committee consisting of Messrs. Farrell, Frederick,
Quinlan and Shaw; the Pricing Committee consisting of the entire Board of
Directors; and the Compensation Committee consisting of Messrs. Carstens,
Farrell, Frederick and Shaw.

COMPENSATION OF TRUSTEES

     Trustees of the Bank, except Mr. Manzulli, receive fees of $1,200 per Board
meeting attended and $650 per Committee meeting attended.

                                      105
Trustees Emeritus

     The Bank maintains a Board of Trustees Emeritus which currently consists of
three former Trustees of the Bank.  Pursuant to the Bank's bylaws, Trustees are
automatically retired on December 31 of the year they reach age 75 and any
Trustee who retires because of such age limitation is eligible to be elected as
a Trustee Emeritus.  Trustees Emeritus have no vote and receive the same meeting
fees as Trustees of the Bank.

                                      106
EXECUTIVE COMPENSATION

     Summary Compensation Table.  The following table sets forth the cash
compensation paid by the Bank as well as certain other compensation paid or
accrued for services rendered in all capacities during the fiscal year ended
June 30, 1997, to the Chief Executive Officer and the other executive officer of
the Bank who received salary and bonus in excess of $100,000 ("Named Executive
Officers").
------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Long-Term Compensation
                                                                              ------------------------------------------------------
                                        Annual  Compensation(1)                       Awards              Payouts
                                ----------------------------------------------------------------------------------------------------
                                                                   Other                      Securities
                                                                  Annual       Restricted    Underlying    LTIP       All Other
Name and Principal                                             Compensation   Stock Awards  Options/SARs  Payouts    Compensation
Positions                       Year    Salary     Bonus($)       ($)(2)         ($)(3)        (#)(4)     ($)(5)        ($)(6)
-----------------------------------------------------------------------------------------------------------------------------------
Michael F. Manzulli             1997  $324,416           -           -              -             -            -       $26,980
 President and Chief
 Executive Officer

John M. McKenna                 1997  $128,308      $6,500           -              -             -           -        $ 3,102
 Executive Vice President and
 Chief Operating Officer
_________________________                                                   
(1)   Under Annual Compensation, the column titled "Salary" includes salary
      deferred by the Named Executive Officer under the Bank's 401(k) Plan and
      the column titled "Bonus" consists of board approved discretionary bonus
      as well as attendance bonuses, loan referral bonuses and recruitment
      bonuses.
(2)   For 1997, there were no (a) perquisites over the lesser of $50,000 or 10%
      of the individual's total salary and bonus for the year; (b) payments of
      above-market preferential earnings on deferred compensation; (c) payments
      of earnings with respect to long-term incentive plans prior to settlement
      or maturation; (d) tax payment reimbursements; or (e) preferential
      discounts on stock. For 1997, the Bank had no restricted stock or stock
      related plans in existence.
(3)   Does not include awards pursuant to the Stock Program, which may be
      granted in conjunction with a meeting of shareholders of the Company,
      subject to regulatory and shareholder approval, as such awards were not
      earned, vested or granted in fiscal 1997. For a discussion of the terms of
      the Stock Program which is intended to be adopted by the Company, see 
      "-Benefit Plans - Stock Program." For 1997, the Bank had no stock plans in
      existence.
(4)   No stock options or SARs were earned or granted in 1997. For a discussion
      of the Stock Option Plan which is intended to be adopted by the Company,
      see "Benefit Plans - Stock Option Plan."
(5)   For 1997, there were no payouts or awards under any long-term incentive
      plan.
(6)   Other compensation includes other benefits such as the Bank's matching
      contribution under the Bank's 401(k) Plan, amounts contributed by the Bank
      pursuant to the Bank's Benefit Restoration Plan, and automobile allowance.

                                      107
REPORT OF INDEPENDENT COMPENSATION CONSULTANT

     Pursuant to the NYBB regulations governing the Conversion, the Bank must
obtain the opinion of an independent compensation consultant as to whether or
not the total compensation for the executive officers, directors or trustees of
the Bank, viewed as a whole and on an individual basis, is reasonable and proper
in comparison to the compensation provided to executive officers, directors or
trustees of similar publicly-traded financial institutions.  The Bank has
obtained an opinion from William M. Mercer, Incorporated, which provides that,
based upon published professional survey data of similarly situated publicly-
traded financial institutions operating in the relevant markets as of
September 28, 1997, with respect to the total cash compensation (base salary
and annual incentive) for executive officers and total compensation for trustees
of the Bank, such compensation, viewed as a whole and on an individual basis, is
reasonable and proper in comparison to the compensation provided to similarly
situated publicly-traded financial institutions, and that, with respect to the
amount of shares of Common Stock to be reserved under the ESOP, the Stock
Program and Stock Option Plan, as a whole, such amounts reserved for granting
are reasonable in comparison to similar publicly-traded financial institutions.

EMPLOYMENT AGREEMENTS

     Upon the Conversion, the Bank intends to enter into employment agreements
with Messrs. ________________ and ____ other officers of the Bank (individually,
the "Executive"), and the Company intends to enter into employment agreements
with Messrs. Manzulli, Burke and Cangemi (collectively, the "Employment
Agreements"). The Employment Agreements are intended to ensure that the Bank and
the Company will be able to maintain a stable and competent management base
after the Conversion. The continued success of the Bank and the Company depends
to a significant degree on the skills and competence of the above referenced
officers.

     The Employment Agreements provide for three-year terms for each Executive.
The terms of the Employment Agreements shall be extended on a daily basis unless
written notice of non-renewal is given by the Board of Directors. The Employment
Agreements provide that the Executive's base salary will be reviewed annually.
The base salaries which will be effective for such Employment Agreements for
Messrs. ________________ will be $_______, $_______, $_______, respectively. In
addition to the base salary, the Employment Agreements provide for, among other
things, participation in stock benefits plans and other fringe benefits
applicable to executive personnel. The agreements provide for termination by the
Bank or the Company for cause, as defined in the Employment Agreements, at any
time. In the event the Bank or the Company chooses to terminate the Executive's
employment for reasons other than for cause, or in the event of the Executive's
resignation from the Bank and the Company upon: (i) failure to re-elect the
Executive to his current offices; (ii) a material change in the Executive's
functions, duties or responsibilities; (iii) a reduction in the benefits and
perquisites being provided to the Executive under the Employment Agreement; (iv)
liquidation or dissolution of the Bank or the Company; or (v) a breach of the
agreement by the Bank or the Company, the Executive or, in the event of death,
his beneficiary would be entitled to receive an amount equal to the remaining
base salary payments due to the Executive for the remaining term of the
Employment Agreement and the contributions that would have been made on the
Executive's behalf to any employee benefit plans of the Bank and the Company
during the remaining term of the agreement. The Bank and the Company would also
continue and pay for the Executive's life, health, dental and disability
coverage for the remaining term of the Agreement. Upon any termination of the
Executive, the Executive is subject to a one year non-competition agreement.

     Under the Employment Agreements, if voluntary or involuntary termination
follows a change in control of the Bank or the Company, the Executive or, in the
event of the Executive's death, his beneficiary, would be entitled to a
severance payment equal to the greater of: (i) the payments due for the
remaining

                                      108
terms of the agreement; or (ii) three times the average of the five preceding
taxable years' annual compensation. The Bank and the Company would also continue
the Executive's life, health, and disability coverage for thirty-six months.
Notwithstanding that both the Bank and Company Employment Agreements provide for
a severance payment in the event of a change in control, the Executive would
only be entitled to receive a severance payment under one agreement.

     Payments to the Executive under the Bank's Employment Agreement will be
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank.  Payment under the Company's Employment Agreement would be made by the
Company.  All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the Employment
Agreements shall be paid by the Bank or Company, respectively, if the Executive
is successful on the merits pursuant to a legal judgment, arbitration or
settlement.  The Employment Agreements also provide that the Bank and Company
shall indemnify the Executive to the fullest extent allowable under New York and
Delaware law, respectively.  In the event of a change in control of the Bank or
the Company, the total amount of payments due under the Agreements, based solely
on cash compensation paid to the officers who will receive Employment Agreements
over the past five fiscal years and excluding any benefits under any employee
benefit plan which may be payable, would be approximately $___________.

CHANGE IN CONTROL AGREEMENTS

     Upon Conversion, the Bank intends to enter into two-year Change in Control
Agreements (the "CIC Agreements") with Messrs. ________________, none of whom
will be covered by employment contracts.  Commencing on the first anniversary
date and continuing on each anniversary thereafter, the Bank CIC Agreements may
be renewed by the Board of Directors of the Bank for an additional year.  The
Bank's CIC Agreements will provide that in the event voluntary or involuntary
termination follows a change in control of the Company or the Bank, the officer
would be entitled to receive a severance payment equal to ___  times the
officer's average annual compensation for the five most recent taxable years.
The Bank would also continue and pay for the officer's life, health and
disability coverage for  ___ months following termination.  In the event of a
change in control of the Company or the Bank, the total payments that would be
due under the CIC Agreements, based solely on the current annual compensation
paid to the officers covered by the CIC Agreements and excluding any benefits
under any employee benefit plan which may be payable, would be approximately
$___________.

EMPLOYEE SEVERANCE COMPENSATION PLAN

     The Bank's Board of Directors intends to, upon Conversion, establish the
Richmond County Savings Bank Employee Severance Compensation Plan ("Severance
Plan") which will provide eligible employees with severance pay benefits in the
event of a change in control of the Bank or the Company following Conversion.
Management personnel with Employment Agreements or CIC Agreements are not
eligible to participate in the Severance Plan.  Generally, employees are
eligible to participate in the Severance Plan if they have completed at least
one year of service with the Bank.  The Severance Plan vests in each participant
a contractual right to the benefits such participant is entitled to thereunder.
Under the Severance Plan, in the event of a change in control of the Bank or the
Company, eligible employees who are terminated from or terminate their
employment within one year (for reasons specified under the Severance Plan),
will be entitled to receive a severance payment.  If the participant, whose
employment has terminated, has completed at least one year of service, the
participant will be entitled to a cash severance payment equal to one-twelfth of
annual compensation for each year of service up to a maximum of 199% of annual
compensation.  Such payments may tend to discourage takeover attempts by
increasing costs to be incurred by the Bank in the event of a takeover.  In the
event the provisions of the Severance Plan are triggered, the total amount of
payments that would be due thereunder, based solely upon current salary levels,
would be approximately 

                                      109
$___________.  However, it is management's belief that substantially all of the
Bank's employees would be retained in their current positions in the event of a
change in control, and that any amount payable under the Severance Plan would be
considerably less than the total amount that could possibly be paid under the
Severance Plan.

BENEFIT PLANS

     Retirement Plan.  The Bank sponsors a defined benefit pension plan known as
The Retirement Plan of Richmond County Savings Bank in RSI Retirement Trust
("Retirement Plan").  The Retirement Plan is intended to satisfy the tax
qualification requirements of Section 401(a) of the Code.

     Employees generally become eligible to participate in the Retirement Plan
upon their attainment of age 21 and the completion of one year of eligibility
service.  The plan defines a year of eligibility service as a 12-month period,
coinciding with the employee's anniversary during which an employee completes
1,000 hours of service.  The Retirement Plan excludes from becoming eligible to
participate employees (i) paid on an hourly-rate or contract basis, (ii)
regularly employed outside the Bank's own offices in connection with the
operation and maintenance of building and other property acquired through
foreclosure or deed, or (iii) leased employees.
 
     The Retirement Plan provides for a normal retirement benefit to
participants upon retirement at or after the later of (i) attainment of age 65
or (ii) the fifth anniversary of initial participation in the plan. The annual
normal retirement benefit for a participant under the Retirement Plan equals the
sum of (i) 1.67% of the "Average Annual Earnings" (as defined in the plan)
multiplied by the participant's "Credited Service" (as defined by the plan) (up
to a maximum of 35 years); plus (ii) 0.23% of the participant's Average Annual
Earnings, which exceed the participant's "Covered Compensation" (as defined by
the plan) multiplied by the participant's credited service (up to maximum of 35
years); plus (iii) 1% of the participant's Average Annual Earnings, multiplied
by the participant's Credited Service which exceeds 35 years.

     A participant may also become eligible to receive an early retirement
benefit upon the completion of at least ten consecutive years of "Vested
Service" (as defined in the plan) with the Bank and (i) attainment of age 60, or
(ii) completion of 30 years of vested service, or (iii) at the time the sum of
the participant's age and Vested Service equals or exceeds 85.  Early retirement
benefits are generally calculated in the same manner as a participant's normal
retirement benefits but may be actuarially reduced if paid prior to the
participant's "Normal Retirement Date" (as defined by the plan).  Participants
generally become vested in their benefits under the Retirement Plan upon
completing at least five years of Vested Service.

     The plan generally pays benefits in the form of a straight life annuity
with respect to unmarried participants and in the form of a 50% qualified joint
and survivor annuity (with the spouse as designated beneficiary) for married
participants.  Other forms of benefit payments, including a lump sum, are
available under the Retirement Plan.

                                      110
The following table sets forth the estimated annual benefits payable under
the Retirement Plan upon a participant's retirement at age 65 for the year ended
June 30, 1997, expressed in the form of a straight life annuity, and any related
amounts payable under the Benefit Restoration Plan (see description below).
Covered compensation under the Retirement Plan basically includes the base
salary for participants, and does not consider any cash bonus amounts.  The
benefits listed in the table below for the Retirement Plan and Benefit
Restoration Plan are not subject to a deduction for social security benefits or
any other offset amount.
Years of Service                   
   Final Average  -----------------------------------------------------------
   Compensation      15        20        25         30        35        40
   -------------  --------  --------  --------   --------  --------  --------
$ 50,000     $ 13,215  $ 17,820  $ 22,025   $ 26,430  $ 30,835  $ 33,335
      100,000       27,485    36,820    45,775     54,930    64,085    69,085
      150,000       41,715    55,620    69,525     83,430    97,335   104,835
      200,000       55,965    74,620    93,275    111,930   130,585   140,585
      250,000       70,215    93,820   117,025    140,430   163,835   176,335
      300,000       84,486   112,620   140,775    188,930   197,085   212,085
      350,000       98,716   131,620   184,525    197,430   230,335   247,835
      400,000      112,985   150,830   188,275    225,930   263,335   283,585
      450,000      127,215   169,620   212,025    254,430   296,835   319,335
      500,000      141,485   188,620   236,775    282,930   330,085   355,085
      550,000      155,715   207,820   259,525    311,430   363,335   390,835
The approximate years of service, as of June 30, 1997, for the named executive
officers are as follows:
   
                                                        Years of Service
                                                        ----------------
Michael F. Manzulli                                             5

John M. McKenna                                                 5

  401(k) Plan.  The Bank also sponsors the Richmond County Savings Bank 401(k)
Savings Plan ("401(k) Plan"), a tax-qualified profit sharing and salary
reduction plan under Sections 401(a) and 401(k) of the Code.  Generally,
employees other than (i) employees compensated on an hourly, daily, commission,
fee or retainer basis or (ii) leased employees become eligible to participate in
the 401(k) Plan upon the attainment of age 21 and the completion of one year of
service (i.e., 12 months of service).  Under the 401(k) Plan, participants may
make salary reduction contributions equal to 2% to 9% of their compensation or
the 

                                      111
legally permissible limit (currently $9,500). The Bank matches 50% of the first
6% of compensation deferred by a participant.

  Participants are always 100% vested in their salary reduction contributions.
Participants become 20% vested in Bank matching contributions after the
completion of two years of service with the Bank. Participants' vested interest
in Bank matching contribution increase by 20% for each additional year of
service completed, so that after the completion of 6 years of service,
participants are 100% vested in Bank matching contributions. A participant who
terminates employment due to death, disability, or retirement immediately
becomes fully vested in the Bank's matching contributions credited to his or her
account regardless of the participant's years of service. A participant's vested
portion of his or her 401(k) Plan account is distributable from the 401(k) Plan
upon the termination of the participant's employment, death, disability or
retirement. In addition, a participant may be eligible for hardship withdrawals
and loans under the 401(k) Plan. Any distribution made to a participant prior to
the participant's attainment of age 59 1/2 is subject to a 10% excise tax in
addition to federal income taxes. The Board of Directors may at any time
discontinue the Bank's contributions to employee accounts.  For the years ended
June 30, 1997, 1996 and 1995, the Bank's matching contributions to the 401(k)
Plan were $136,000, $133,000 and $118,000, respectively.

  The 401(k) Plan permits participants to direct the investment of their 401(k)
plan account into various investment alternatives.  The investment accounts are
valued daily and participants are provided with information regarding the market
value of the participant's investments and all contributions made on his or her
behalf on at least a quarterly basis.  In connection with the Conversion, the
Bank intends to amend the 401(k) Plan to permit participants to invest in an
"Employer Stock Fund" as one of the investment alternatives.  The Employer Stock
Fund will be invested primarily in shares of Common Stock.  The trustee may
follow the voting directions of 401(k) Plan participants investing in the
Employer Stock Fund; provided that the trustee determines such voting is
consistent with its fiduciary duties.  However, the trustee is not required to
follow the voting directions of the 401(k) Plan participants with respect to
Common Stock held in the Employer Stock Fund.

  ESOP.  In connection with the Conversion, the Bank also intends to implement
an employee stock ownership plan.  An ESOP is a tax-qualified retirement plan
designed to invest primarily in employer securities.  The Bank will make
contributions to the ESOP on behalf of all ESOP participants.  The ESOP will
provide eligible employees with the opportunity to receive a Bank-funded
retirement benefit based primarily on the value of the Common Stock. The Bank
anticipates that the eligibility requirements for the ESOP will be similar to
those of the 401(k) Plan. Specifically, the Bank anticipates all full-time
salaried employees of the Bank who have completed a year of service with the
Bank will be eligible to participate in the ESOP.

  The Bank expects the ESOP to purchase 8.0% of the Common Stock issued in
connection with the Conversion, including the issuance of shares to the
Foundation. As part of the Conversion and in order to fund the ESOP's purchase
of the Common Stock issued in the Conversion, the ESOP intends to borrow funds
from the Company equal to 100% of the aggregate purchase price of the Common
Stock. Alternatively, the Company and Bank may choose to fund the ESOP's
purchase of stock through a loan from a third-party financial institution. The
Common Stock purchased by the ESOP with the loan proceeds will serve as
collateral for the loan, as described below. The term of the ESOP loan will be
20 years and the trustee will repay the loan principally from the Company's or
the Bank's contributions to the ESOP. Additionally, any dividends that may be
paid on unallocated stock held by the ESOP will also be used to repay the ESOP
loan. Subject to receipt of any necessary regulatory approvals or opinions, the
Bank may make additional contributions to the ESOP for repayment of the loan or
to reimburse the Company for contributions made by it. The interest rate for the
loan is expected to be at or near the prime rate.

                                      112
Shares of Common Stock purchased by the ESOP with the loan proceeds will
initially be pledged as collateral for the loan and will be held in a suspense
account until released for allocation among participants as the loan is repaid.
The trustee will release the pledged shares annually from the suspense account
in an amount proportional to the repayment of the ESOP loan for each plan year.
The released shares will then be allocated to the accounts of ESOP participants
based on each participant's compensation relative to all participants'
compensation.  Participants will vest in their ESOP account at a rate of 20%
annually commencing after the completion of 2 years of service, with 100%
vesting upon the completion of 6 years of service.   Participants will also
become fully vested in their accounts if their service terminates due to death,
retirement, disability, or upon the occurrence of a change in control.  The ESOP
may reallocate forfeitures among remaining participants, in the same proportion
as contributions.  Benefits under the ESOP will become payable upon death,
retirement, or separation from service.  The annual contributions to the ESOP
are not fixed, so benefits payable under the ESOP cannot be estimated.

  In connection with the establishment of the ESOP, the Board of Directors will
appoint a Committee of the Board of Directors and officers of the Bank to
administer the ESOP (the "ESOP Committee").  The Bank anticipates that this
Committee will appoint an unrelated trustee for the ESOP and the 401(k) Plan
Employer Stock Fund prior to the Conversion.  The ESOP Committee may instruct
the trustee regarding investment of funds contributed to the ESOP and the 401(k)
Plan Employee Stock Fund.  The ESOP trustee, subject to its fiduciary duties,
must vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees.  Subject to its fiduciary duties
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the trustee will vote unallocated shares and allocated shares for which
participants provide no instructions in a manner calculated to most accurately
reflect the instructions it has received from participants regarding the
allocated stock for which it has received instructions.

  Supplemental Executive Retirement Plan.  The Bank also maintains a non-
qualified deferral compensation plan, known as the Richmond County Savings Bank
Supplemental Executive Retirement Plan (the "SERP").  The SERP provides certain
employees with supplemental retirement income from the Bank when such amounts
cannot be paid from the tax-qualified Retirement Plan or 401(k) Plan.
Participants in the SERP receive a benefit equal to the amount they would have
received under the Retirement Plan and the 401(k) Plan, but for reductions in
such benefits imposed by operation of Sections 401(a)(17), 401(m), 401(k)(3),
402(g) and 415 of the Code.  The Bank will amend the SERP to provide
participants with supplemental benefits intended to make up for reductions
imposed on the ESOP by operation of Sections 401(a), 401(m) and/or 415 of the
Code.  The BRP is an unfunded plan, providing participants only with a
contractual right to obtain the benefits provided thereunder from the general
assets of the Bank.  Currently, only Mr. Manzulli is eligible to participate in
the SERP.

  Management Supplemental Executive Retirement Plan.  The Bank intends to
implement a non-qualified Supplemental Executive Retirement Plan ("MSERP") to
provide certain officers and highly compensated employees with additional
retirement benefits.  The MSERP benefit is intended to make up benefits lost
under the ESOP allocation procedures to participants who retire prior to the
complete repayment of the ESOP loan.  At the retirement of a participant, the
benefits under the MSERP are determined by first: (i) projecting the number of
shares that would have been allocated to the participant under the ESOP if they
had been employed throughout the period of the ESOP loan (measured from the
participant's first date of ESOP participation); and (ii) reducing the number
determined by (i) above by the number of shares actually allocated to the
Participant's account under the ESOP; and second, by multiplying the number of
shares that represent the difference between such figures by the average fair
market value of the Common Stock over the preceding five years.  Benefits under
the MSERP vest in 20% annual increments over a five year period commencing as of
the date of a Participant's participation in the MSERP.  The vested portion of
the MSERP 

                                      113
Participant's benefits are payable upon the retirement of the Participant upon
or after the attainment of age 65 or in accordance with the requirements of
early retirement under the Retirement Plan.

  The Bank will amend the existing irrevocable grantor's trust ("grantor's
trust") established in connection with the SERP to hold the assets of the MSERP.
This trust would be funded with contributions from the Bank for the purpose of
providing the benefits promised under the terms of the MSERP.  The grantor's
trust may hold a variety of assets including the Common Stock, other securities,
insurance contracts and cash.  The MSERP participants have only the rights of
unsecured creditors with respect to the trust's assets, and will not recognize
income with respect to benefits provided by the MSERP until such benefits are
received by the participants.  The assets of the grantor's trust are considered
part of the general assets of the Bank and are subject to the claims of the
Bank's creditors in the event of the Bank's insolvency.  Earnings on the trust's
assets are taxable to the Bank.

  Stock Option Plan.  Following the Conversion, the Board of Directors of the
Company intends to adopt  a stock-based benefit plan which would provide for the
granting of options to purchase Common Stock to certain individuals.  Currently,
the Company anticipates granting stock options under a single stock-based
incentive plan which will combine the features of the Stock Program and the
Stock Option Plan (the "Master Stock-based Benefit Plan") covering full-time
employees and outside directors of the Company and its affiliates.  However, it
is possible that the Company may establish  separate option plans solely for
outside directors.  At a meeting of stockholders of the Company following the
Conversion, which under applicable NYBB regulations may not be held earlier than
six months after the completion of the Conversion, the Board of Directors
intends to present the Stock Option Plan, or the Master Stock-based Benefit Plan
of which it is a part,  to stockholders for approval.  The Company anticipates
reserving an amount equal to 10% of the shares of Common Stock issued in the
Conversion, including shares issued to the Foundation (or 2,297,700 shares based
upon the issuance of 22,977,000 shares), for issuance under the Stock Option
Plan, or the Master Stock-based Benefit Plan of which it is a part. If the
Company implements an option plan within one year following completion of the
Conversion, NYBB regulations provide that no individual officer or employee of
the Bank may receive more than 25% of the options granted under the plan and
non-employee directors may not receive more than 5% individually, or 30% in the
aggregate, of the options granted under the plan.  NYBB and FDIC regulations
also provide that the exercise price of any options granted under any such plan
must equal or exceed the market price of the Common Stock as of the date of
grant.

  The Company intends to design the stock option benefits provided under the
Stock Option Plan to attract and retain qualified personnel in key positions,
provide officers and key employees with a proprietary interest in the Company as
an incentive to contribute to the success of the Company and reward key
employees for outstanding performance.  The Company may condition the granting
or vesting of stock options on the achievement of individual or Company-wide
performance goals, including the achievement by the Company or the Bank of
specified levels of net income, asset growth, return on equity or other specific
financial performance goals.  The Company anticipates that the Stock Option Plan
will provide for the grant of:  (i) options for employees to purchase the
Company's Common Stock intended to qualify as incentive stock options under
Section 422 of the Code ("Incentive Stock Options"); (ii) options for all
participants that do not qualify as incentive stock options ("Non-Statutory
Stock Options"); and (iii) Limited Rights (discussed below) which participants
may exercise only upon a change in control of the Bank or the Company.  Unless
sooner terminated, the Stock Option Plan will be in effect for a period of ten
years from the earlier of adoption by the Board of Directors or approval by the
Company's stockholders.  The Company intends to grant options with Limited
Rights at an exercise price equal to the fair market value of the underlying
Common Stock on the date of grant.  Subject to any applicable NYBB and FDIC
regulations, upon exercise of "Limited Rights" in the event of a change in
control, the employee will be entitled to receive a lump sum cash payment equal
to the difference between the exercise price of the related option and the fair
market value of the shares of common stock subject to the option on the date of
exercise of the right in lieu 

                                      114
of purchasing the stock underlying the option. The Company anticipates that all
options granted contemporaneously with stockholder approval of the Stock Option
Plan will qualify as Incentive Stock Options to the extent permitted under
Section 422 of the Code.

  A committee of the Board of Directors will administer the Stock Option Plan
and will determine which officers and employees may receive options and Limited
Rights, whether such options will qualify as Incentive Stock Options, the number
of shares subject to each option, the exercise price of each option, the manner
of exercise of the options and the time when such options become exercisable.

  If the Company adopts the Stock Option Plan  in the form described above, an
employee will realize taxable income upon grant or exercise of any Incentive
Stock Option, provided that the employee does not dispose of the shares received
through the exercise of such option for at least one year after the date the
employee receives the stock in connection with the option exercise and two years
after the date of grant of the option (a "disqualifying disposition").  The
Company may not take a compensation expense deduction with respect to the grant
or exercise of Incentive Stock Options, unless the employee disposes of the
shares in a disqualifying disposition.  In the case of a Non-Statutory Stock
Option and in the case of a disqualifying disposition of an Incentive Stock
Option, an employee will be deemed to receive ordinary income upon exercise of
the stock option in an amount equal to the amount by which the fair market value
of the Common Stock on the date of exercise exceeds the exercise price of the
option.  The amount of taxable income realized by an optionee upon the exercise
of a Non-Statutory Stock Option or due to a disqualifying disposition of shares
acquired through the exercise of an Incentive Stock Option are a deductible
expense for tax purposes by the Company.  Upon the exercise of a Limited Right,
the option holder realizes taxable income equal to the amount paid to him or her
upon exercise of the right and the Company receives a deduction equal to that
same amount.

  Stock options under an option plan adopted by the Company would become vested
and exercisable in the manner specified by the committee responsible for
administering the plan, subject to applicable NYBB and FDIC regulations.  The
Company anticipates options granted in connection with the Stock Option Plan
will remain exercisable for at least three months following the date on which
the employee ceases to perform services for the Bank or the Company, except that
in the event of death or disability, in which cases options accelerate and
become fully vested and remain exercisable for up to one year thereafter, or
such longer period as determined by the Company.  However, any Incentive Stock
Options exercised more than three months following the date the employee ceases
to perform services as an employee, other than termination due to death or
disability, would be treated for tax purposes as a Non-Statutory Stock Option.
The Company also anticipates that in the event of retirement, if the optionee
continues to perform services as a Director, Director Emeritus or consultant on
behalf of the Bank, the Company or an affiliate, unvested options would continue
to vest in accordance with their original vesting schedule until the optionee
ceases to serve as a Director, Director Emeritus or consultant.  If the  Stock
Option Plan is adopted in the form described above, the Company, if requested by
the optionee, could elect, in exchange for vested options, to pay the optionee,
or beneficiary in the event of death, the amount by which the fair market value
of the Common Stock exceeds the exercise price of the options on the date of the
employee's termination of employment.

  All options granted to outside directors under an option plan must, by law, be
Non-Statutory Stock Options and would vest and become exercisable in a manner
specified by the committee, subject to applicable NYBB and FDIC regulations, and
would expire upon the earlier of ten years following the date of grant or one
year following the date the optionee ceases to be a Director, Director Emeritus
or consultant.  In the event of the death or disability of a participant, all
previously granted options would immediately vest and become fully exercisable.

                                      115
The Company also intends that, subject to any applicable NYBB or FDIC
regulations, the Stock Option Plan  will provide for accelerated vesting of
previously granted options in the event of a change in control of the Company or
the Bank.  A change in control would be defined in the plan document and would
generally occur when a person or group of persons acting in concert acquires
beneficial ownership of 20% or more of any class of equity security of the
Company or the Bank or in the event of a tender or exchange offer, merger or
other form of business combination, sale of all or substantially all of the
assets of the Company or the Bank or contested election of directors which
resulted in the replacement of a majority of the Board of Directors by persons
not nominated by the directors in office prior to the contested election.

  Stock Program.  Following the Conversion, the Company intends to establish the
Stock Program which would provide for the grant of awards of Common Stock to
officers, directors and employees of the Company and its affiliates including
the Bank as a method of providing officers, employees and non-employee directors
of the Bank and Company with a proprietary interest in the Company in a manner
designed to encourage such persons to remain with the Bank.  The benefits under
the Stock Program may be provided for under either a separate plan for officers
and employees and a separate plan for outside directors or under the Master
Stock-based Benefit Plan which would combine the features of the Stock Program
with the Stock Option Plan.  The Company intends to present the Stock Program or
the plan of which they are a part, for stockholder approval at a meeting of
stockholders, which pursuant to applicable NYBB regulations,  may be held no
earlier than six months after the completion of the Conversion.

  The Bank or Company expects to contribute funds to the Stock Program to enable
such plan or a trust established for such plan, to acquire, in the aggregate, an
amount equal to 4% of the shares of Common Stock issued in the Conversion,
including shares issued to the Foundation (or 919,080 shares based upon the
issuance of 22,977,000 shares).  The Company will acquire these shares through
open market purchases, if permitted, or from authorized but unissued shares.
Although no specific award determinations have been made, the Company
anticipates that it will provide stock awards to the directors and employees of
the Company or Bank or their affiliates to the extent permitted by applicable
regulations.  Shares of Common Stock granted pursuant to the Stock Program will
be awarded at no cost to the recipients.  NYBB regulations provide that, to the
extent the Company implements the Stock Program within one year after the
Conversion, no individual employee may receive more than 25% of the shares of
any plan and non-employee directors may not receive more than 5% of any plan
individually or 30% in the aggregate for all directors.

  A committee of the Board of Directors will administer the Stock Program or the
plan of which they are a part.  Stock awards will not be transferable or
assignable.  The Board intends to appoint an independent fiduciary to serve as
trustee of a trust established pursuant to the Stock Program.  The Company may
make allocations and grants to officers and employees under the Stock Program in
the form of non performance-based grants and/or performance-based grants.  The
Company may make the granting or vesting of stock awards under the Stock Program
conditioned upon the achievement of individual or Company-wide performance
goals, including the Company's or Bank's achievement of specified levels of net
income, return on assets, return on equity or other specified financial
performance goals and will be subject to applicable NYBB and FDIC regulations.

  In the event of death, awards of Common Stock  will become 100% vested.  In
the event of disability, grants would be 100% vested upon termination of
employment of an officer or employee, or upon termination of service as a
director.  In the event of retirement, if the participant continues to perform
services as a Director, Director Emeritus or consultant on behalf of the Bank,
the Company or an affiliate or, in the case of a retiring Director, Director
Emeritus, or as a consulting director, unvested grants will continue to vest in
accordance with their original vesting schedule until the recipient ceases to
perform such services at which time any unvested grants would lapse.

                                      116
The Company intends that, subject to any applicable NYBB or FDIC regulations,
the Stock Program described above would provide for accelerated vesting of
shares granted under the Stock Program in the event of a change in control of
the Bank or Company.  A change in control, which will be defined in the plan
document, generally occurs when a person or group of persons acting in concert
acquires beneficial ownership of 20% or more of a class of equity securities of
the Company or the Bank or in the event of a tender or exchange offer, merger or
other form of business combination, sale of all or substantially all of the
assets of the Company or the Bank or contested election of directors which
results in the replacement of a majority of the Board of Directors by persons
not nominated by the directors in office prior to the contested election.

  When shares become vested in accordance with the stock programs described
above, the participants will recognize taxable income equal to the fair market
value of the Common Stock at that time.  The Company may take a deduction equal
to that amount for the year in which it becomes taxable to the individual.  When
shares become vested and are actually distributed in accordance with the Stock
Program, the participants also receive amounts equal to any accrued dividends
with respect thereto.  Prior to vesting, recipients of grants may direct the
voting of the shares awarded to them.  Shares not subject to grants and shares
allocated subject to the achievement of performance goals will be voted by the
trustee of the Stock Program, or the plan of which they are a part, in
accordance to the directions provided by individuals with respect to shares
subject to grants.  Vested shares will be distributed to recipients as soon as
practicable following the day on which they are vested.

  In the event that additional authorized but unissued shares are acquired by
the Stock Program after the Conversion, the interests of existing shareholders
would be diluted.  See "Pro Forma Data."

TRANSACTIONS WITH CERTAIN RELATED PERSONS

     The Bank's policies do not permit the Bank to make loans to any of its
Trustees.  Two of the Bank's Trustees have loans with the Bank that predate
their becoming Trustees.  Federal regulations require that all loans or
extensions of credit to executive officers and directors must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with the general public and
must not involve more than the normal risk of repayment or present other
unfavorable features.  In addition, loans made to a director or executive
officer in excess of the greater of $25,000 or 5% of the Bank's capital and
surplus (up to a maximum of $500,000) must be approved in advance by a majority
of the disinterested members of the Board of Trustees.

     The Bank currently makes loans to its executive officers on the same terms
and conditions offered to the general public.  The Bank's policy provides that
all loans made by the Bank to its executive officers be made in the ordinary
course of business, on substantially the same terms, including collateral, as
those prevailing at the time for comparable transactions, with other persons and
may not involve more than the normal risk of collectability or present other
unfavorable features.  In addition, the law firm of Lahr, Dillon, Manzulli,
Kelley & Penett, P.C. has a mortgage loan with the Bank.  Such loan was made by
the Bank in the ordinary course of business, with no favorable terms and did
not involve more than the normal risk of collectability or present unfavorable
features.  During fiscal 1997, the law firm of Lahr, Dillon, Manzulli, Kelley &
Penett, P.C. provided legal representation to the Bank for which it was paid
approximately $139,000 for legal fees and related services.  Mr. Manzulli and
Mr. Kelley are partners with the firm.

     The Company intends that all transactions between the Company and its
executive officers, directors, holders of 10% or more of the shares of any class
of its Common Stock and affiliates thereof, will contain terms no less favorable
to the Company than could have been obtained by it in arms-length negotiations
with unaffiliated persons and will be approved by a majority of independent
outside directors of the Company not having any interest in the transaction.

                                      117
SUBSCRIPTIONS BY EXECUTIVE OFFICERS, DIRECTORS AND TRUSTEES

     The following table sets forth the number of shares of Common Stock that
the executive officers, Trustees and Directors, and their associates, propose to
purchase, assuming shares of Common Stock are issued at the minimum and maximum
of the Estimated Price Range (including shares issued to the Foundation) and
that sufficient shares will be available to satisfy their subscriptions.  The
table also sets forth the total expected beneficial ownership of Common Stock as
to all Trustees, Directors and executive officers as a group.
At the Minimum                           At the Maximum
                                                              of the Estimated                      of the Estimated Price
                                                               Price Range(1)                              Range(1)
                                                       ----------------------------------    -----------------------------------
                                                           Number          As a Percent           Number          As a Percent
                                                            of               of Shares              of             of Shares
                 Name                 Amount               Shares             Offered             Shares            Offered
-----------------------------   -----------------    ----------------   -----------------    -----------------   ----------------
Anthony E. Burke                     $ 250,000             25,000              0.15                25,000             0.11
Godfrey H. Carstens, Jr.               250,000             25,000              0.15                25,000             0.11
Robert S. Farrell                      150,000             15,000              0.09                15,000             0.07
William C. Frederick, M.D.             250,000             25,000              0.15                25,000             0.11
James L. Kelley (2)                    500,000             50,000              0.29                50,000             0.22
Michael F. Manzulli (2)                500,000             50,000              0.29                50,000             0.22
T. Ronald Quinlan, Jr.                 100,000             10,000              0.06                10,000             0.04
Maurice K. Shaw                        200,000             20,000              0.12                20,000             0.09
John M. McKenna                        100,000             10,000              0.06                10,000             0.04
Thomas R. Cangemi                      250,000             25,000              0.15                25,000             0.11
Stephen G.C. Campbell                   75,000              7,500              0.04                 5,000             0.03
Peter J. Esposito                       75,000              7,500              0.04                 7,500             0.03
Charles F. Hermann, III                125,000             12,500              0.07                12,500             0.05
Andrew M. Sisock                       100,000             10,000              0.06                10,000             0.04
Nelson C. Sundback                     100,000             10,000              0.06                10,000             0.04
Robert J. O'Rourke                      75,000              7,500              0.04                 7,500             0.03
                                     ---------            -------              ----               -------             ----
                                                                                                                
All Directors and Executive Officers                                                                            
as a group (17 persons)..........    $3,100,00            310,000              1.83%              310,000             1.35%
                                     =========            =======              ====               =======             ====
----------------------
(1)       Includes proposed subscriptions, if any, by associates.  Does not
          include orders by the ESOP.  Intended purchases by the ESOP are
          expected to be 8.0% of the shares issued in the Conversion, including
          shares issued to the Foundation.  Also does not include Common Stock
          sold, Common Stock which may be awarded under the Stock Program to be
          adopted equal to 4% of the Common Stock issued in the Conversion,
          including shares issued to the Foundation, and Common Stock which may
          be purchased pursuant to options which may be granted under the Stock
          Option Plan equal to 10% of the number of shares of Common Stock
          issued in the Conversion, including shares issued to the Foundation.

(2)       Includes proposed subscriptions for $250,000 for a retirement plan 
          trust, the trustees of which include Messrs. Kelley and Manzulli.

                                      118
THE CONVERSION

     THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK HAS APPROVED THE PLAN
OF CONVERSION SUBJECT TO THE APPROVAL OF THE BANK'S ELIGIBLE ACCOUNT HOLDERS AND
THE SATISFACTION OF CERTAIN OTHER CONDITIONS.  HOWEVER, SUCH APPROVAL DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE
SUPERINTENDENT.

GENERAL

     On July 31, 1997, the Bank's Board of Trustees adopted the Plan of
Conversion pursuant to which the Bank will be converted from a New York State
chartered mutual savings bank to a New York State chartered stock savings bank.
It is currently intended that all of the capital stock of the Bank will be held
by the Company, which is incorporated under Delaware law.  The Plan has been
approved by the Superintendent and the Bank has received a notice of intent not
to object to the Plan from the FDIC, subject to, among other things, approval of
the Plan by the Bank's Eligible Account Holders.  A special meeting of Eligible
Account Holders has been called for this purpose to be held on _______, 1997.

     The Company expects to receive approval from the OTS to become a savings
and loan holding company and to acquire all of the common stock of the Bank to
be issued in the Conversion.  The Company plans to retain 50% of the net
proceeds from the sale of the Common Stock and to use the remaining 50% to
purchase all of the common stock of the Bank to be issued in the Conversion.
The Conversion will be effected only upon completion of the sale of all of the
shares of Common Stock of the Company or all of the common stock of the Bank, if
the holding company form of organization is not utilized, to be issued in the
Conversion.

     The Plan provides that the Board of Trustees of the Bank, at any time prior
to the issuance of the Common Stock and for any reason, may decide not to use
the holding company form of organization in implementing the Conversion.  Such
reasons may include possible delays resulting from overlapping regulatory
processing, or policies or conditions, which could adversely affect the Bank's
or the Company's ability to consummate the Conversion and transact its business
after the Conversion as contemplated herein and in accordance with the Bank's
operating policies.  In the event that such a decision is made, the Bank will
withdraw the Company's registration statement from the SEC and will take all
steps necessary to complete the Conversion without the Company, including filing
any necessary documents with the Superintendent.  In such event, and provided
there is no regulatory action, directive or other consideration upon which basis
the Bank determines not to complete the Conversion, if permitted by the
Superintendent, the Bank will issue and sell the common stock of the Bank and
subscribers will be notified of the elimination of the Company and resolicited
(i.e., be permitted to affirm their orders, in which case they will need to
affirmatively reconfirm their subscriptions prior to the expiration of the
resolicitation offering or their funds will be promptly refunded with interest,
or be permitted to modify or rescind their subscriptions) and notified of the
time period within which the subscriber must affirmatively notify the Bank of
his intention to affirm, modify or rescind his subscription.  The following
description of the Plan assumes that a holding company form of organization will
be used in the Conversion.  In the event that a holding company form of
organization is not used, all other pertinent terms of the Plan as described
below will apply to the conversion of the Bank from the mutual to stock form of
organization and the sale of the Bank's common stock.

     The Plan provides generally that (i) the Bank will convert from a mutual
savings bank to a capital stock savings bank and (ii) the Company will offer
Common Stock for sale in the Subscription Offering to Eligible Account Holders,
Employee Plans, including the ESOP, and Supplemental Eligible Account Holders.
Concurrently, shares will be offered in the Community Offering to certain
members of the general 

                                      119
public, subject to the prior rights of holders of subscription rights. It is
anticipated that all shares not subscribed for in the Subscription and Community
Offerings will be offered for sale by the Company to the general public in a
Syndicated Community Offering. The Bank and Company have the right to accept or
reject, in whole or in part, any orders to purchase shares of the Common Stock
received in the Community Offering or Syndicated Community Offering.

     The aggregate price of the shares of Common Stock to be sold in the
Conversion will be determined based upon an independent appraisal prepared by
Keller & Company, Inc. of the estimated pro forma market value of the Common
Stock giving effect to the Conversion.  All shares of Common Stock to be issued
and sold in the Conversion will be sold at the same price.  Keller's independent
appraisal will be updated and the final price of the shares will be determined
at the completion of the Subscription and Community Offerings, if all shares are
subscribed for, or at the completion of the Syndicated Community Offering.  The
independent appraisal has been performed by Keller, a consulting firm
experienced in the valuation and appraisal of savings institutions.  See "-
Stock Pricing" for a determination of the estimated pro forma market value of
the Common Stock.

     The following is a brief summary of material aspects of the Conversion.
The summary is qualified in its entirety by reference to the provisions of the
Plan.  A copy of the Plan is available upon written request from the Bank and is
available for inspection at each branch office of the Bank and at the office of
the Superintendent.  The Plan is also filed as an Exhibit to the Registration
Statement of which this Prospectus is a part, copies of which may be obtained
from the SEC.  See "Additional Information."

ESTABLISHMENT OF CHARITABLE FOUNDATION

     General.  In furtherance of the Bank's commitment to its local community,
the Plan of Conversion provides for the establishment of a charitable foundation
in connection with the Conversion.  The Plan provides that the Bank and the
Company will establish the Foundation, which will be incorporated under Delaware
law as a non-stock corporation, and will fund the Foundation with Common Stock
of the Company, as further described below.  The Company and the Bank believe
that the funding of the Foundation with Common Stock of the Company is a means
of establishing a common bond between the Bank and its community and thereby
enables the Bank's community to share in the potential growth and success of the
Company over the long term.  By further enhancing the Bank's visibility and
reputation in its local community, the Bank believes that the Foundation will
enhance the long-term value of the Bank's community banking franchise.  The
Foundation will be dedicated to charitable purposes within the Bank's local
community, including community development activities.

     Purpose of the Foundation.  The purpose of the Foundation is to provide
funding to support charitable causes and community development activities.  In
recent years, the Bank has emphasized community lending and community
development activities within the Bank's local community.  The Bank received a
satisfactory CRA rating in its last CRA examination.  The Foundation is being
formed as a complement to the Bank's existing community activities, not as a
replacement for such activities.  The Bank intends to continue to emphasize
community lending and community development activities following the Conversion.
However, such activities are not the Bank's sole corporate purpose.  The
Foundation, conversely, will be completely dedicated to community activities and
the promotion of charitable causes, and may be able to support such activities
in ways that are not presently available to the Bank.  Since the Bank has a
Satisfactory record of serving its community under the CRA and already engages
in community development activities, the Bank believes that the Foundation will
enable the Company and the Bank to assist their local community in areas beyond
community development and lending.  The Bank believes the establishment of the
Foundation will enhance its current activities under the CRA.  In this regard,
the Board of Trustees believes the establishment of a charitable foundation is
consistent with the Bank's commitment 

                                      120
to community service. The Board further believes that the funding of the
Foundation with Common Stock of the Company is a means of enabling the Bank's
community to share in the potential growth and success of the Company long after
completion of the Conversion. The Foundation will accomplish that goal by
providing for continued ties between the Foundation and Bank, thereby forming a
partnership with the Bank's community. The establishment of the Foundation will
also enable the Company and the Bank to develop a unified charitable donation
strategy and will centralize the responsibility for administration and
allocation of corporate charitable funds. Charitable foundations have been
formed by other financial institutions for this purpose, among others. The Bank,
however, does not expect the contribution to the Foundation to take the place of
the Bank's traditional community lending and charitable activities.

     Structure of the Foundation. The Foundation will be incorporated under
Delaware law as a non-stock corporation. Pursuant to the Foundation's Bylaws,
the Foundation's Board of Directors initially will be comprised of seven
members, all of whom are existing Trustees of the Bank. In the future, the Board
of Directors of the Foundation may be expanded to include certain members of the
community. A Nominating Committee of the Board, which is to be comprised of a
minimum of three members of the board, will nominate individuals eligible for
election to the board of directors. The members of the Foundation, who are
comprised of its Board members, will elect the Directors at the annual meeting
of the Foundation from those nominated by the Nominating Committee. Directors
will be divided into three classes with each class appointed for three-year
terms. The certificate of incorporation of the Foundation provides that the
corporation is organized exclusively for charitable purposes, including
community development, as set forth in Section 501(c)(3) of the Code. The
Foundation's certificate of incorporation further provides that no part of the
net earnings of the Foundation will inure to the benefit of, or be distributable
to, its directors, officers or members.

     The authority for the affairs of the Foundation will be vested in the Board
of Directors of the Foundation.  The Directors of the Foundation will be
responsible for establishing the policies of the Foundation with respect to
grants or donations by the Foundation, consistent with the purposes for which
the Foundation was established.  Although no formal policy governing Foundation
grants exists at this time, the Foundation's Board of Directors will adopt such
a policy upon establishment of the Foundation.  As directors of a nonprofit
corporation, directors of the Foundation will at all times be bound by their
fiduciary duty to advance the Foundation's charitable goals, to protect the
assets of the Foundation and to act in a manner consistent with the charitable
purpose for which the Foundation is established. The Directors of the Foundation
will also be responsible for directing the activities of the Foundation,
including the management of the Common Stock of the Company held by the
Foundation.

     The Foundation's place of business will be located at the Company's
administrative offices and initially the Foundation is expected to have no
employees but will utilize the members of the staff of the Company or the Bank.
The Board of Directors of the Foundation will appoint such officers as may be
necessary to manage the operations of the Foundation.

     The Company intends to capitalize the Foundation with Common Stock of the
Company in an amount equal to 8.0% of the total amount of Common Stock to be
sold in connection with the Conversion.  At the minimum, midpoint and maximum of
the Estimated Price Range, the contribution to the Foundation would equal
1,258,000, 1,480,000 and 1,702,000 shares, which would have a market value of
$12.6 million, $14.8 million, and $17.0 million, respectively, assuming the
Purchase Price of $10.00 per share.  The Company and the Bank determined to fund
the Foundation with Common Stock rather than cash because it desired to form a
bond with its community in a manner that would allow the community to share in
the potential growth and success of the Company and the Bank over the long term.
The funding of the Foundation with stock also provides the Foundation with a
potentially larger endowment than if the Company contributed cash to the
Foundation since, as a shareholder, the Foundation will share in the potential
growth 

                                      121
and success of the Company. As such, the contribution of stock to the Foundation
has the potential to provide a self-sustaining funding mechanism which reduces
the amount of cash that the Company, if it were not making the stock donation,
would have to contribute to the Foundation in future years in order to maintain
a level amount of charitable grants and donations.

     The Foundation will receive working capital from any dividends that may be
paid on the Company's Common Stock in the future, and subject to applicable
federal and state laws, loans collateralized by the Common Stock or from the
proceeds of the sale of any of the Common Stock in the open market from time to
time as may be permitted to provide the Foundation with additional liquidity. As
a private foundation under Section 501(c)(3) of the Code, the Foundation will be
required to distribute annually in grants or donations, a minimum of 5% of the
average fair market value of its net investment assets. One of the conditions
imposed on the gift of Common Stock by the Company is that the amount of Common
Stock that may be sold by the Foundation in any one year shall not exceed 5% of
the average market value of the assets held by the Foundation, except where the
Board of Directors of the Foundation determines that the failure to sell an
amount of common stock greater than such amount would result in a long-term
reduction of the value of the Foundation's assets and as such would jeopardize
the Foundation's capacity to carry out its charitable purposes. Upon completion
of the Conversion and the contribution of shares to the Foundation immediately
following the Conversion, the Company would have 16,983,000, 19,980,000 and
22,977,000 shares issued and outstanding at the minimum, midpoint and maximum of
the Estimated Price Range. Because the Company will have an increased number of
shares outstanding, the voting and ownership interests of shareholders in the
Company's common stock would be diluted by 7.4%, as compared to their interests
in the Company if the Foundation was not established. For additional discussion
of the dilutive effect, see "Pro Forma Data."

     Tax Considerations.  The Company and the Bank have been advised by their
independent tax advisors that an organization created for the above purposes
would qualify as a Section 501(c)(3) exempt organization under the Code, and
would likely be classified as a private foundation.  The Foundation will submit
a request to the IRS to be recognized as an exempt organization.  As long as the
Foundation files its application for tax-exempt status within 15 months from the
date of its organization, and provided the IRS approves the application, the
effective date of the Foundation's status as a Section 501(c)(3) organization
will be the date of its organization.

     Under Delaware law, the Company is authorized by statute to make charitable
contributions and case law has recognized the benefits of such contributions to
a Delaware corporation.  In this regard, Delaware case law provides that a
charitable gift must be within reasonable limits as to amount and purpose to be
valid.  Under the Code, the Company may deduct up to 10% of its taxable income
in any one year and any contributions made by the Company in excess of the
deductible amount may be carried forward and deducted in the Company's five
succeeding taxable years, subject, in each such year, to the 10% of taxable
income limitation.  The Company and the Bank believe that the Conversion
presents a unique opportunity to establish and fund a charitable foundation
given the substantial amount of additional capital being raised in the
Conversion.  In making such a determination, the Company and the Bank considered
the dilutive impact of the contribution of Common Stock to the Foundation on the
amount of Common Stock available to be offered for sale in the Conversion.
Based on such consideration, the Company and Bank believe that the contribution
to the Foundation in excess of the 10% annual limitation is justified given the
Bank's capital position and its earnings, the substantial additional capital
being raised in the Conversion and the potential benefits of the Foundation to
the Bank's community. In this regard, assuming the sale of the Common Stock at
the midpoint of the Estimated Price Range, the Company would have pro forma
consolidated capital of $285.8 million or 24.26% of pro forma consolidated
assets and the Bank's pro forma leverage and risk-based capital ratios would be
15.9% and 30.7%, respectively. See "Regulatory Capital Compliance,"
"Capitalization," and "Comparison of Valuation and Pro Forma Information with No
Foundation." Thus, the amount of the

                                      122
contribution will not adversely impact the financial condition of the Company
and the Bank and the Company and the Bank therefore believe that the amount of
the charitable contribution is reasonable given the Company's and the Bank's pro
forma capital positions. As such, the Company and the Bank believe that the
contribution does not raise safety and soundness concerns.

     The Company and the Bank have received an opinion of their independent tax
advisors that the Company's contribution of its own stock to the Foundation
would not constitute an act of self-dealing, and that the Company will be
entitled to a deduction in the amount of the fair market value of the stock at
the time of the contribution, subject to a limitation based on 10% of the
Company's annual taxable income. As discussed above, the Company, however, would
be able to carry forward any unused portion of the deduction for five years
following the contribution. If the Foundation would have been established in
fiscal 1997, the Company would have received a charitable contribution deduction
of approximately $2.1 million (based on the Bank's pre-tax income for fiscal
1997, an assumed tax rate of 47% and a contribution of Common Stock equal to
$17.0 million). The Company is permitted under the Code to carry over the excess
contribution over the five year period following the contribution to the
Foundation. Assuming the close of the Offerings at the midpoint of the Estimated
Price Range, the Company estimates that all of the deduction should be
deductible over the six-year period. Neither the Company nor the Bank expect to
make any further contributions to the Foundation within the first five years
following the initial contribution. After that time, the Company and the Bank
may consider future contributions to the Foundation. Any such decisions would be
based on an assessment of, among other factors, the financial condition of the
Company and the Bank at that time, the interests of shareholders and depositors
of the Company and the Bank, and the financial condition and operations of the
Foundation.

     Although the Company and the Bank have received an opinion of their
independent tax advisors that the Company is entitled to a deduction for the
charitable contribution, there can be no assurances that the IRS will recognize
the Foundation as a Section 501(c)(3) exempt organization or that the deduction
will be permitted.  In such event, the Company's tax benefit related to the
contribution to the Foundation would be expensed without tax benefit, resulting
in a reduction in earnings in the year in which the IRS makes such a
determination.  See "Risk Factors - Establishment of Charitable Foundation."

     As a private foundation, earnings and gains, if any, from the sale of
Common Stock or other assets are exempt from federal and state corporate
taxation.  However, investment income, such as interest, dividends and capital
gains, will be subject to a federal excise tax of 2.0%.  The Foundation will be
required to make an annual filing with the IRS within four and one-half months
after the close of the Foundation's fiscal year to maintain its tax-exempt
status.  The Foundation will be required to publish a notice that the annual
information return will be available for public inspection for a period of 180
days after the date of such public notice.  The information return for a private
foundation must include, among other things, an itemized list of all grants made
or approved, showing the amount of each grant, the recipient, any relationship
between a grant recipient and the Foundation's managers and a concise statement
of the purpose of each grant.  The Foundation will also be required to file an
annual report with the Charities Bureau of the Office of the Attorney General of
the State of New York.

PURPOSES OF CONVERSION

     The Bank, as a New York State chartered mutual savings bank, does not have
stockholders and has no authority to issue capital stock.  By converting to the
capital stock form of organization, the Bank will be structured in the form used
by commercial banks, most business entities and a growing number of savings
institutions.  The Conversion will be important to the future growth and
performance of the Bank by providing a larger capital base on which the Bank may
operate, enhanced future access to capital markets, 

                                      123
enhanced ability to diversify into other financial services related activities
and enhanced ability to render services to the public.

     The holding company form of organization would provide additional
flexibility to diversify the Bank's business activities through existing or
newly formed subsidiaries, or through acquisitions of or mergers with both
mutual and stock financial institutions, as well as other companies.  Although
there are no current arrangements, understandings or agreements regarding any
such opportunities, the Company will be in a position after the Conversion,
subject to regulatory limitations and the Company's financial position, to take
advantage of any such opportunities that may arise.  While there are benefits
associated with the holding company form of organization, such form of
organization may involve additional costs associated with its maintenance and
regulation as a savings and loan company, such as additional administrative
expenses, taxes and regulatory filings or examination fees.

     The potential impact of Conversion upon the Bank's capital base is
significant. At June 30, 1997, the Bank had Tier I Leverage capital of $99.1
million, or 10.02% of total assets. Assuming that $155.4 million of net proceeds
are realized from the sale of Common Stock (see "Pro Forma Data" for the basis
of this assumption) and assuming that 50% of the net proceeds are used by the
Company to purchase the capital stock of the Bank, the Bank's Tier I Leverage
capital would increase to $168.1 million, resulting in a pro forma leverage
capital ratio of 15.89% giving effect to the Conversion. In the event that the
holding company form of organization is not utilized and all the net proceeds,
at the midpoint of the Estimated Price Range, are retained by the Bank, the
Bank's core capital would increase to $254.5 million, resulting in a pro forma
leverage capital ratio of 24.06% at June 30, 1997. The investment of the net
proceeds from the sale of the Common Stock will provide the Bank with additional
income to further increase its capital position.

     After completion of the Conversion, the unissued Common Stock and preferred
stock authorized by the Company's Certificate of Incorporation will permit the
Company, subject to market conditions and applicable regulatory approvals, to
raise additional equity capital through further sales of securities, and to
issue securities in connection with possible acquisitions.  At the present time,
the Company has no plans with respect to additional offerings of securities,
other than the issuance of additional shares upon exercise of stock options
under the Stock Option Plan or the possible issuance of authorized but unissued
shares to the Stock Program. Following the Conversion, the Company will also be
able to use stock-based benefit plans to attract and retain executive and other
personnel for itself and its subsidiaries. See "Management of the Bank -
Executive Compensation."

EFFECTS OF CONVERSION

     General.  Each depositor in a mutual savings bank has both a deposit
account in the institution and a pro rata ownership interest in the net worth of
the institution based upon the balance in his or her account, which interest may
only be realized in the event of a liquidation of the institution.  However,
this ownership interest is tied to the depositor's account and has no tangible
market value separate from such deposit account.  Any depositor who opens a
deposit account obtains a pro rata ownership interest in the net worth of the
institution without any additional payment beyond the amount of the deposit.  A
depositor who reduces or closes his account receives a portion or all of the
balance in the account but nothing for his ownership interest in the net worth
of the institution, which is lost to the extent that the balance in the account
is reduced.

     Consequently, mutual savings bank depositors normally have no way to
realize the value of their ownership interest, which may have realizable value
only in the unlikely event that the mutual savings bank is liquidated.  In such
event, the depositors of record at that time, as owners, would have a claim to
share pro 

                                      124
rata in any residual surplus and reserves after other claims, including claims
of depositors to the amounts of their deposits, are paid.

     When a mutual savings bank converts to stock form, depositors lose all
rights to the net worth of the mutual savings bank, except to the extent
depositors have rights to claim a pro rata share of funds representing the
liquidation account established in connection with the Conversion.
Additionally, permanent nonwithdrawable capital stock is created and offered to
depositors which represents the ownership of the institution's net worth,
subject to certain claims of Eligible Account Holders with respect to amounts
representing the liquidation account.  THE COMMON STOCK IS SEPARATE AND APART
FROM DEPOSIT ACCOUNTS AND CANNOT BE AND IS NOT INSURED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.  Certificates are issued to evidence ownership of the
permanent stock.  The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit account the seller may hold in the institution.

     No assets of the Company or the Bank will be distributed in connection with
the Conversion other than pursuant to the payment of expenses incurred in
connection therewith.

     Continuity.  While the Conversion is being accomplished, the normal
business of the Bank of accepting deposits and making loans will continue
without interruption.  The Bank will continue to be subject to regulation by the
Superintendent and the FDIC.  After Conversion, the Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.

     The Trustees of the Bank at the time of Conversion will serve as Directors
of the Bank after the Conversion.  The Directors of the Company will consist of
the same individuals who will serve on the Board of Directors of the Bank.  All
officers of the Bank at the time of Conversion will retain their positions after
the Conversion.

     Effect on Deposit Accounts.  Under the Plan, each depositor in the Bank at
the time of Conversion will automatically continue as a depositor after the
Conversion, and each deposit account will remain the same with respect to
deposit balance, interest rate and other terms.  Each such account will be
insured by the FDIC to the same extent as before the Conversion.  Depositors
will continue to hold their existing passbooks and other evidences of their
accounts.

     Effect on Loans.  No loan outstanding from the Bank will be affected by the
Conversion, and the amount, interest rate, maturity and security for each loan
will remain as it was contractually fixed prior to the Conversion.

     Effect on Voting Rights of Depositors.  In its current mutual form, voting
rights and control of the Bank are vested exclusively in the Board of Trustees.
After the Conversion, direction of the Bank will be under the control of the
Board of Directors of the Bank.  The Company, as the holder of all of the
outstanding common stock of the Bank, will have exclusive voting rights with
respect to any matters concerning the Bank requiring stockholder approval,
including the election of Directors of the Bank.

     After the Conversion, subject to the rights of the holders of preferred
stock that may be issued in the future, the holders of the Common Stock will
have exclusive voting rights with respect to any matters concerning the Company.
Each holder of Common Stock will, subject to the restrictions and limitations
set forth in the Company's Certificate of Incorporation discussed below, be
entitled to vote on any matters to be considered by the Company's stockholders,
including the election of directors of the Company.

                                      125
Tax Effects.  The Bank has received an opinion of counsel with regard to
federal income taxation which indicates that the adoption and implementation of
the Plan of Conversion set forth herein will not be taxable for Federal income
tax purposes to the Bank or its Eligible Account Holders or the Company, subject
to the limitations and qualifications in such opinion.  The Bank has also
received an opinion from Ernst & Young LLP that, with respect to New York State
banking and franchise taxes, sales and use taxes, stock transfer taxes and real
property transfer gains taxes, the Conversion will not result in a tax
liability, and, with respect to New York State real estate transfer gains taxes,
a position may be taken that the Conversion is tax free.  The opinion of Ernst &
Young LLP does provide that the Company will be required to pay a New York State
license fee as a foreign corporation equal to 1/20% of the apportioned par value
of the Common Stock issued by the Company, subject to the limitations and
qualifications contained in such opinions.  See "- Tax Aspects."

     Effect on Liquidation Rights.  If a mutual savings bank were to liquidate,
all claims of creditors (including those of depositors, to the extent of deposit
balances) would be paid first.  Thereafter, if there were any assets remaining,
depositors would have a claim to receive such remaining assets, pro rata, based
upon the deposit balances in their deposit accounts immediately prior to
liquidation.  In the unlikely event that the Bank were to liquidate after
Conversion, all claims of creditors (including those of depositors, to the
extent of their deposit balances) would also be paid first, followed by
distribution of the "liquidation account," if any, to certain depositors (as
described in "- Liquidation Rights," below), with any assets remaining
thereafter distributed to the Company as the holder of the Bank's capital stock.

STOCK PRICING

     The Plan of Conversion requires that the purchase price of the Common Stock
must be based on the appraised pro forma market value of the Common Stock, as
determined on the basis of an independent appraisal.  The Bank and the Company
have retained Keller to make such appraisal.  For its services in making such
appraisal, Keller will receive a fee of $31,000, including fees related to the
preparation of a business plan for the Company and Bank, and will be reimbursed
for certain of its expenses in an amount not to exceed $1,000.  The Bank and the
Company have agreed to indemnify Keller and its employees and affiliates against
certain losses (including any losses in connection with claims under the federal
securities laws) arising out of its services as the independent appraiser,
except where Keller's liability results from its negligence or willful
misconduct.

     An appraisal has been made by Keller in reliance upon the information
contained in this Prospectus, including the Consolidated Financial Statements.
Keller also considered the following factors, among others: the present and
projected operating results and financial condition of the Company and the Bank,
including liquidity, capitalization, asset composition, funding mix, amount of
intangible assets owned, and level of interest rate risk; the economic,
demographic and competitive aspects of the Bank's existing marketing area; the
quality and depth of the Bank's management; certain historical, financial and
other information relating to the Bank; a comparative evaluation of the
operating and financial statistics of the Bank with those of other savings
institutions; the aggregate size of the offering of the Common Stock; the impact
of Conversion on the Bank's net worth and earnings potential; the proposed
dividend policy of the Company and the Bank; the trading market for securities
of comparable institutions and general conditions in the market for such
securities; and recent regulatory matters.  In particular, the appraisal
considered the Bank's financial condition and projected and historical operating
results, including income and expense trends, asset size, loan portfolio
composition, non-performing loans and assets, interest rate sensitivity
position, capital position, and yields on assets and costs of liabilities in
comparison to other publicly-traded thrifts with assets greater than or equal to
$200 million and less than or equal to $2.0 billion located in the State of New
York, the states contiguous to New York plus the States of Delaware and
Maryland. The Board of Trustees of the Bank and Board of Directors of the
Company have

                                      126
reviewed the appraisal of Keller in determining the reasonableness and adequacy
of such appraisal consistent with NYBB and FDIC regulations and have reviewed
the methodology and reasonableness of assumptions utilized by Keller in the
preparation of such appraisal and established the Estimated Price in a manner
consistent with this appraisal.

     On the basis of the foregoing, Keller has advised the Company and the Bank
that, in its opinion dated as of September 12, 1997, the estimated pro forma
market value of the Common Stock being sold in connection with the Conversion
ranged from a minimum of $157.3 million to a maximum of $212.8 million (the
"Valuation Price Range") with a midpoint of $185.0 million.  The Board of
Trustees established the Estimated Price Range of $157.3 million to $212.8
million within the Valuation Price Range based on the issuance of  15,725,000 to
21,275,000 shares at the Purchase Price of $10.00 per share.  The Estimated
Price Range may be amended with the approval of the Superintendent and FDIC, if
required, if necessitated by subsequent developments in the financial condition
of the Company or the Bank or market conditions generally.

     SUCH APPRAISAL, HOWEVER, IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING SUCH SHARES OF
COMMON STOCK.  KELLER DID NOT INDEPENDENTLY VERIFY THE CONSOLIDATED FINANCIAL
STATEMENTS AND OTHER INFORMATION PROVIDED BY THE BANK, NOR DID KELLER VALUE
INDEPENDENTLY THE ASSETS OR LIABILITIES OF THE BANK.  THE APPRAISAL CONSIDERS
THE BANK AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS AN INDICATION OF THE
LIQUIDATION VALUE OF THE BANK.  MOREOVER, BECAUSE SUCH APPRAISAL IS NECESSARILY
BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE
SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS
PURCHASING SUCH SHARES IN THE CONVERSION WILL THEREAFTER BE ABLE TO SELL SUCH
SHARES AT PRICES AT OR ABOVE THE PURCHASE PRICE OR IN THE RANGE OF THE FOREGOING
VALUATION OF THE PRO FORMA MARKET VALUE THEREOF.  The appraisal of Keller may be
inspected by any Eligible Account Holder or Supplemental Eligible Account Holder
at the Bank's main office located at 1214 Castleton Avenue, Staten Island, New
York, during regular business hours of the Bank.  Copies of the appraisal may
also be requested by Eligible Account Holders or Supplemental Eligible Account
Holders; provided, however, that such Eligible Account Holders or Supplemental
Eligible Account Holders shall be responsible for all costs associated with the
copying and transmittal of such appraisal.

     Following commencement of the Subscription and Community Offerings, the
maximum of the Estimated Price Range may be increased up to 15% and the number
of shares of Common Stock being sold in the Conversion may be increased to
24,466,250 shares due to regulatory considerations, or changes in the market and
general financial and economic conditions, without the resolicitation of
subscribers.  See "- Limitations on Common Stock Purchases" as to the method of
distribution and allocation of additional shares that may be issued in the event
of an increase in the Estimated Price Range to fill unfilled orders in the
Subscription and Community Offerings.

     No sale of shares of Common Stock may be consummated unless, prior to such
consummation, Keller confirms to the Bank, Company, Superintendent and FDIC
that, to the best of its knowledge, nothing of a material nature has occurred
which, taking into account all relevant factors, would cause Keller to conclude
that the value of the Common Stock at the price so determined is incompatible
with its estimate of the pro forma market value of the Common Stock at the
conclusion of the Subscription and Community Offerings.

     If the pro forma market value of the Common Stock is either more than 15%
above the maximum of the Estimated Price Range or less than the minimum of the
Estimated Price Range, the Bank and the Company, after consulting with the
Superintendent and FDIC, may terminate the Plan and return all funds promptly
with interest at the Bank's passbook rate of interest on payments made by check,
bank draft or 

                                      127
money order, extend or hold a new Subscription and Community Offering, establish
a new Estimated Price Range, commence a resolicitation of subscribers or take
such other actions as permitted by the Superintendent and FDIC in order to
complete the Conversion. In the event that a resolicitation is commenced, unless
an affirmative response is received within a reasonable period of time, all
funds will be promptly returned to investors as described above. A
resolicitation following the conclusion of the Subscription and Community
Offerings would not exceed 45 days or, if following the Syndicated Community
Offering, would not exceed 60 days, unless such resolicitation period is further
extended by the Superintendent or FDIC for periods of up to 60 days not to
extend beyond _______________, 1999.

     If all shares of Common Stock are not sold through the Subscription and
Community Offerings, then the Bank and the Company expect to offer the remaining
shares in a Syndicated Community Offering which would occur as soon as
practicable following the close of the Subscription and Community Offerings but
may commence the Syndicated Community Offering during the Subscription and
Community Offerings subject to prior rights of subscribers.  All shares of
Common Stock will be sold at the same price per share in the Syndicated
Community Offering as in the Subscription and Community Offerings.  See "--
Syndicated Community Offering."

     No sale of shares of Common Stock may be consummated unless, prior to such
consummation, Keller confirms to the Bank, Company, Superintendent and FDIC
that, to the best of its knowledge, nothing of a material nature has occurred
which, taking into account all relevant factors, including those which would be
involved in a cancellation of the Syndicated Community Offering, would cause
Keller to conclude that the aggregate value of the Common Stock at the Purchase
Price is incompatible with its estimate of the pro forma market value of the
Common Stock of the Company at the time of the Syndicated Community Offering.
Any change which would result in an aggregate purchase price which is below or
more than 15% above the Estimated Price Range would be subject to Superintendent
and FDIC approval.  If such confirmation is not received, the Bank may extend
the Conversion, extend, reopen or commence new Subscription and Community
Offerings or Syndicated Community Offering, establish a new Estimated Price
Range and commence a resolicitation of all subscribers with the approval of the
Superintendent and FDIC or take such other actions as permitted by the
Superintendent and FDIC in order to complete the Conversion, or terminate the
Plan and cancel the Subscription and Community Offerings and/or the Syndicated
Community Offering.  In the event market or financial conditions change so as to
cause the aggregate purchase price of the shares to be below the minimum of the
Estimated Price Range or more than 15% above the maximum of such range, and the
Company and the Bank determine to continue the Conversion, subscribers will be
resolicited (i.e., be permitted to continue their orders, in which case they
will need to affirmatively reconfirm their subscriptions prior to the expiration
of the resolicitation offering or their subscription funds will be promptly
refunded with interest at the Bank's passbook rate of interest, or be permitted
to decrease or cancel their subscriptions).  Any change in the Estimated Price
Range must be approved by the Superintendent and FDIC.  A resolicitation, if
any, following the conclusion of the Subscription and Community Offerings would
not exceed 45 days, or if following the Syndicated Community Offering, 60 days,
unless further extended by the Superintendent for periods up to 60 days not to
extend beyond _______________, 1999.  If such resolicitation is not effected,
the Bank will return all funds promptly with interest at the Bank's passbook
rate of interest on payments made by check, bank draft or money order.

     Copies of the appraisal report of Keller including any amendments thereto,
and the detailed memorandum of the appraiser setting forth the method and
assumptions for such appraisal are available for inspection at the main office
of the Bank and the other locations specified under "Additional Information."

                                      128
NUMBER OF SHARES TO BE ISSUED

     Depending upon market or financial conditions following the commencement of
the Subscription and Community Offerings, the total number of shares to be sold
in the Conversion may be increased or decreased without a resolicitation of
subscribers, provided that the product of the total number of shares times the
price per share is not below the minimum of the Estimated Price Range or more
than 15% above the maximum of the Estimated Price Range.  Based on a fixed
purchase price of $10.00 per share and Keller's estimate of the pro forma market
value of the Common Stock ranging from a minimum of  $157.3 million to a
maximum, as increased by 15%, of $244.7 million, the number of shares of Common
Stock expected to be issued is between a minimum of 15,725,000 shares and a
maximum, as adjusted by 15%, of 24,466,250 shares.  The actual number of shares
issued between this range will depend on a number of factors and shall be
determined by the Bank and Company subject to Superintendent and FDIC approval,
if necessary.

     In the event market or financial conditions change so as to cause the
aggregate purchase price of the shares to be below the minimum of the Estimated
Price Range or more than 15% above the maximum of the Estimated Price Range, if
the Plan is not terminated by the Company and the Bank after consultation with
the Superintendent and FDIC, purchasers will be resolicited (i.e., permitted to
continue their orders, in which case they will need to affirmatively reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their subscription funds will be promptly refunded, or be permitted to modify or
rescind their subscriptions).  Any change in the Estimated Price Range must be
approved by the Superintendent and FDIC.  If the number of shares issued in the
Conversion is increased due to an increase of up to 15% in the Estimated Price
Range to reflect changes in market or financial conditions, persons who
subscribed for the maximum number of shares will not be given the opportunity to
subscribe for an adjusted maximum number of shares.  See "- Limitations on
Common Stock Purchases."

     An increase in the number of shares to be issued in the Conversion as a
result of an increase in the estimated pro forma market value would decrease
both a subscriber's ownership interest and the Company's pro forma net earnings
and stockholders' equity on a per share basis while increasing pro forma net
earnings and stockholders' equity on an aggregate basis.  A decrease in the
number of shares to be issued in the Conversion would increase both a
subscriber's ownership interest and the Company's pro forma net earnings and
stockholders' equity on a per share basis while decreasing pro forma net
earnings and stockholder's equity on an aggregate basis.  For a presentation of
the effects of such changes, see "Pro Forma Data."

     The number of shares to be issued and outstanding as a result of the sale
of Common Stock in the Conversion will be increased by a number of shares equal
to 8.0% of the Common Stock issued in the Conversion to fund the Foundation.
Assuming the sale of shares in the Offerings at the maximum of the Estimated
Price Range, the Company will issue 1,702,000 shares of its Common Stock from
authorized but unissued shares to the Foundation immediately following the
completion of the Conversion. In that event, the Company will have total shares
of Common Stock outstanding of 22,977,000 shares. Of that amount, the Foundation
will own 7.4%. Funding the Foundation with authorized but unissued shares will
have the effect of diluting the ownership and voting interests of persons
purchasing shares in the Conversion by 7.4% since a greater number of shares
will be outstanding upon completion of the Conversion than would be if the
Foundation were not established. See "Pro Forma Data."

SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS

     In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock have been granted under the Plan of Conversion to the
following persons in the following order of descending priority: (1) holders of
deposit accounts with the Bank who had a balance of $100 or more as of June 30,
1996; (2) the Employee Plans, including the ESOP; (3) holders of deposit
accounts with a balance 

                                      129
of $100 or more as of September 30, 1997. All subscriptions received will be
subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering
and to the maximum and minimum purchase limitations set forth in the Plan of
Conversion and as described below under "- Limitations on Common Stock
Purchases."

     Priority 1:  Eligible Account Holders.  Each Eligible Account Holder will
receive, without payment therefor, first priority, nontransferable subscription
rights to subscribe for in the Subscription Offering up to the amount permitted
to be purchased in the Community Offering, currently $250,000 of Common Stock,
subject to the overall maximum purchase limitation.  See "- Limitations on
Common Stock Purchases."  Subscription rights received by officers and trustees
of the Bank and their associates based on increased deposits in the Bank in the
one-year period preceding June 30, 1996 will be subordinated to all other
subscription rights of Eligible Account Holders.

     In the event that Eligible Account Holders exercise subscription rights for
a number of shares of Common Stock in excess of the total number of such shares
eligible for subscription, the shares of Common Stock will be allocated so as to
permit each subscribing Eligible Account Holder to purchase a number of shares
sufficient to make his total allocation equal to the lesser of 100 shares or the
number of shares subscribed for.  Thereafter, unallocated shares will be
allocated among the remaining subscribing Eligible Account Holders whose
subscriptions remain unfilled in the proportion that the amounts of their
respective eligible deposits bear to the total amount of eligible deposits of
all remaining Eligible Account Holders whose subscriptions remain unfilled.

     To ensure proper allocation of stock, each Eligible Account Holder must
list on his or her stock order form all accounts in which such Eligible Account
Holder has an ownership interest.  Failure to list an account could result in
less shares being allocated than if all accounts had been disclosed.

     Priority 2:  Employee Plans.  To the extent that there are sufficient
shares remaining after satisfaction of the subscriptions by Eligible Account
Holders, the Employee Plans, including the ESOP, will receive, without payment
therefor, second priority, nontransferable subscription rights to purchase, in
the aggregate, up to 10% of Common Stock issued in the Conversion, including any
increase in the number of shares of Common Stock to be issued in the Conversion
after the date hereof as a result of an increase of up to 15% in the maximum of
the Estimated Price Range.  The ESOP intends to purchase 8.0% of the shares to
be issued in connection with the Conversion, including shares issued to the
Foundation, or 1,358,640 shares and 1,838,160 shares, based on the issuance of
16,983,000 shares and 22,977,000 shares, respectively.  Subscriptions by the
ESOP will not be aggregated with shares of Common Stock purchased directly by or
which are otherwise attributable to any other participants in the Subscription
and Community Offerings, including subscriptions of any of the Bank's trustees,
officers, employees or associates thereof.  See "Management of the Bank -
Benefit Plans - ESOP."

     Priority 3:  Supplemental Eligible Account Holders.  To the extent there
are sufficient shares remaining after the satisfaction of subscriptions by
Eligible Account Holders and the Employee Plans, each Supplemental Eligible
Account Holder will receive, without payment therefor, as third priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the amount permitted to be purchased in the Community Offering,
currently $250,000 of Common Stock, subject to the overall maximum purchase
limitation.  See "- Limitations on Common Stock Purchases."

     In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of shares of Common Stock in excess of the
total number of shares eligible for subscription after the satisfaction of
subscriptions by Eligible Account Holders and the Employee Plans, the shares of
Common Stock will be allocated so as to permit each subscribing Supplemental
Eligible Account Holder, to the extent 

                                      130
possible, to purchase a number of shares sufficient to make his total allocation
equal to the lesser of 100 shares or the number of shares subscribed for.
Thereafter, unallocated shares will be allocated among the remaining subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled in the
proportion that the amounts of their respective eligible deposits bear to the
total amount of eligible deposits of all remaining Supplemental Eligible Account
Holders whose subscriptions remain unfilled.

     To ensure proper allocation of stock, each Supplemental Eligible Account
Holder must list on his or her stock order form all accounts in which such
Supplemental Eligible Account Holder has an ownership interest.  Failure to list
an account could result in less shares being allocated than if all accounts had
been disclosed.  The subscription rights received by Eligible Account Holders
will be applied in partial satisfaction of the subscription rights to be
received as a Supplemental Eligible Account Holder.

     Expiration Date for the Subscription Offering.  The Subscription Offering
will expire on the Expiration Date ( _________________, 1997) at ____, New York
time, unless extended for up to 45 days by the Bank and Company or such
additional periods with the approval of the Superintendent and FDIC, if
required.  Subscription rights which have not been exercised prior to the
Expiration Date will become void.  The Bank will not execute orders until all
shares of Common Stock have been subscribed for or otherwise sold.  If all
shares have not been subscribed for or sold within 45 days after the Expiration
Date, unless such period is extended with the consent of the Superintendent and
FDIC, all funds delivered to the Bank pursuant to the Subscription Offering will
be returned promptly to the subscribers with interest and all withdrawal
authorizations will be canceled.  If an extension beyond the 45 day period
following the Expiration Date is granted, the Bank will notify subscribers of
the extension of time and of any rights of subscribers to modify or rescind
their subscriptions and have their funds returned promptly with interest, and of
the time period within which subscribers must affirmatively notify the Bank of
their intention to confirm, modify, or rescind their subscription.  If an
affirmative response to any resolicitation is not received by the Company from a
subscriber, such order will be rescinded and all subscription funds will be
promptly returned with interest.  Such extensions may not go beyond
_______________, 1999.

     The Plan of Conversion provides that the Company complete the sale of the
Common Stock within 45 days after the close of the Subscription Offering.  In
the event that the Company is unable to complete the sale of Common Stock and
effect the conversion within the 45-day time period, one or more extensions,
with each such extension up to 60 days, may be granted but such extensions may
not go beyond __________, 1999 unless waived by the Superintendent and FDIC, if
necessary.  If an extension is granted, each subscriber will have the right to
affirm, increase, decrease or rescind the subscription at any time prior to 20
days before the end of the extension period or at any time prior to the date of
the commencement of the Syndicated Community Offering.  No assurance can be
given that an extension would be granted if requested.  If an extension is
granted, the Company will notify subscribers of such extension and of any rights
of subscribers to modify or rescind their subscriptions.

COMMUNITY OFFERING

     To the extent that shares remain available for purchase after satisfaction
of all subscriptions of Eligible Account Holders, the ESOP and Supplemental
Eligible Account Holders, the Bank has determined to offer shares pursuant to
the Plan to certain members of the general public.  The Plan provides that with
regard to shares offered in the Community Offering, the Bank and Company may
establish relative preferences, priorities and allocations of shares among
persons, including institutional investors, subscribing for shares.  The Bank
and the Company have made no decisions on such preference at this time and will
make such determination upon a review of subscriptions received in connection
with the Community Offering.  Such persons, together with associates of and
persons acting in concert with such persons, may purchase up to $250,000 of
Common Stock, subject to the maximum overall purchase limitation and 

                                      131
exclusive of shares issued pursuant to an increase in the Estimated Price Range
by up to 15%. See "- Limitations on Common Stock Purchases." This amount may be
increased to up to a maximum of 5% of the Common Stock issued or decreased to
less than $250,000 at the sole discretion of the Company and the Bank. THE
OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN THE COMMUNITY OFFERING
CATEGORY IS SUBJECT TO THE RIGHT OF THE BANK AND THE COMPANY, IN ITS SOLE
DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS, IN WHOLE OR IN PART, EITHER AT
THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING THE
EXPIRATION DATE.

     Subject to the foregoing, if the amount of stock remaining is insufficient
to fill the orders of preferred subscribers after completion of the Subscription
and Community Offerings and the filling of institutional investor orders, such
stock will be allocated first to each preferred subscriber whose order is
accepted by the Bank, in an amount equal to the lesser of 100 shares or the
number of shares subscribed for by each such preferred subscriber, if possible.
Thereafter, unallocated shares will be allocated among the preferred subscribers
whose order remains unsatisfied on a 100 shares per order basis until all such
orders have been filled or the remaining shares have been allocated.  If there
are any shares remaining, shares will be allocated to other persons of the
general public who purchase in the Community Offering applying the same
allocation described above for preferred subscribers.

RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES

     The Company and the Bank will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the Plan reside.  The Plan provides that the
Bank and the Company are not required to offer stock in the Subscription
Offering to any person who resides in a foreign country.

MARKETING AND UNDERWRITING ARRANGEMENTS

     The Bank and the Company have engaged Sandler O'Neill as a consultant and
financial advisor in connection with the offering of the Common Stock, and
Sandler O'Neill has agreed to assist the Bank and the Company in its
solicitation of subscriptions and purchase orders for shares of Common Stock in
the Offerings.  Sandler O'Neill will receive a fee equal to 1.75% of the
aggregate Purchase Price of all shares sold in the Offerings, excluding in each
case shares purchased by trustees, directors, officers and employees of the Bank
or Company and any immediate family member thereof and the Employee Plans,
including the ESOP, for which Sandler O'Neill will not receive a fee.  In the
event that a selected dealers agreement is entered into in connection with a
Syndicated Community Offering, the Company and Bank will pay a fee (to be
negotiated at such time under such agreement) to such selected dealers, any
sponsoring dealers fees, and a management fee to Sandler O'Neill of 1.5% for
shares sold by a NASD member firm pursuant to a selected dealers agreement;
provided, however, that the aggregate fees payable to Sandler O'Neill for Common
Stock sold by them pursuant to such a selected dealers agreement shall not
exceed 1.75% of the aggregate Purchase Price and provided, further, however,
that the aggregate fees payable to Sandler O'Neill and the selected dealers will
not exceed 7% of the aggregate purchase price of the Common Stock sold by
selected dealers.  Fees to Sandler O'Neill and to any other broker-dealer may be
deemed to be underwriting fees, and  Sandler O'Neill and such broker-dealers may
be deemed to be underwriters.  Sandler O'Neill will also be reimbursed for its
reasonable out-of-pocket expenses, including legal fees, in an amount not to
exceed $200,000.  Notwithstanding the foregoing, in the event the Offerings are
not consummated or Sandler O'Neill ceases, under certain circumstances after the
subscription solicitation activities are commenced, to provide assistance to the
Company, Sandler O'Neill will  be reimbursed for its reasonable out-of-pocket
expenses as described above.  The Company and the Bank have agreed to indemnify
Sandler O'Neill for reasonable costs and expenses in connection with certain
claims or liabilities, including certain liabilities under the Securities Act.
Sandler O'Neill has received advances towards its marketing and financial
advisory service fees totaling 

                                      132
$50,000. Total marketing fees to Sandler O'Neill are expected to be $2.5 million
and $3.3 million at the minimum and the maximum of the Estimated Price Range,
respectively. See "Pro Forma Data" for the assumptions used to arrive at these
estimates.

     Sandler O'Neill will also perform proxy solicitation services, conversion
agent services and records management services for the Bank in the Conversion
and will receive a fee for these services of $65,000, plus reimbursement of
reasonable out-of-pocket expenses.

     Directors, Trustees and executive officers of the Company and Bank may
participate in the solicitation of offers to purchase Common Stock. Questions of
prospective purchasers will be directed to executive officers or registered
representatives.  Other employees of the Bank may participate in the Offering in
ministerial capacities or providing clerical work in effecting a sales
transaction.  Such other employees have been instructed not to solicit offers to
purchase Common Stock or provide advice regarding the purchase of Common Stock.
The Company will rely on Rule 3a4-1 under the Exchange Act, and sales of Common
Stock will be conducted within the requirements of Rule 3a4-1, so as to permit
officers, Trustees, directors and employees to participate in the sale of Common
Stock.  No officer, Trustee, director or employee of the Company or the Bank
will be compensated in connection with his participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.

     Sandler O'Neill has not prepared any report or opinion constituting
recommendations or advice to the Bank or the Company.  In addition, Sandler
O'Neill has expressed no opinion as to the prices at which the Common Stock to
be issued in the Offerings may trade.  Furthermore, Sandler O'Neill has not
verified the accuracy or completeness of the information contained in the
Prospectus.

PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERINGS

     To ensure that each purchaser receives a prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date.  Execution of the stock
order form and certification form will confirm receipt or delivery in accordance
with Rule 15c2-8.  Stock order and certification forms will only be distributed
with a prospectus.

     To purchase shares in the Subscription and Community Offerings, an executed
stock order form and certification form with the required payment for each share
subscribed for, or with appropriate authorization for withdrawal from the Bank's
deposit account (which may be given by completing the appropriate blanks in the
stock order form), must be received by the Bank at any of its offices by _____,
New York time, on the Expiration Date.  Stock order forms which are not received
by such time or are executed defectively or are received without full payment
(or appropriate withdrawal instructions) are not required to be accepted.  In
addition, the Bank and Company are not obligated to accept orders submitted on
photocopied or facsimilied stock order forms and will not accept stock order
forms unaccompanied by an executed certification form.  Notwithstanding the
foregoing, the Company and Bank shall have the right, each in their sole
discretion, to permit institutional investors to submit irrevocable orders
together with a legally binding commitment for payment and to thereafter pay for
the shares of Common Stock for which they subscribe in the Community Offering at
any time prior to 48 hours before the completion of the Conversion.  The Company
and the Bank have the right to waive or permit the correction of incomplete or
improperly executed forms, but do not represent that they will do so.  Once
received, an executed stock order form may not be modified, amended or rescinded
without the consent of the Bank unless the Conversion has not been completed
within 45 days after the end of the Subscription and Community Offerings, unless
such period has been extended.

                                      133
In order to ensure that Eligible Account Holders and Supplemental Eligible
Account Holders are properly identified as to their stock purchase priorities,
depositors as of the Eligibility Record Date (June 30, 1996) and/or the
Supplemental Eligibility Record Date (September 30, 1997) must list all accounts
on the stock order form giving all names in each account and the account number.

     Payment for subscriptions may be made (i) in cash if delivered in person at
any branch office of the Bank, (ii) by check, bank draft or money order, or
(iii) by authorization of withdrawal from deposit accounts maintained with the
Bank.  No wire transfers will be accepted.  Interest will be paid on payments
made by cash, check, bank draft or money order at the Bank's passbook rate of
interest from the date payment is received until the completion or termination
of the Conversion.  If payment is made by authorization of withdrawal from
deposit accounts, the funds authorized to be withdrawn from a deposit account
will continue to accrue interest at the contractual rates until completion or
termination of the Conversion, but a hold will be placed on such funds, thereby
making them unavailable to the depositor until completion or termination of the
Conversion.

     If a subscriber authorizes the Bank to withdraw the amount of the purchase
price from his deposit account, the Bank will do so as of the effective date of
the Conversion.  The Bank will waive any applicable penalties for early
withdrawal from certificate accounts.  If the remaining balance in a certificate
account is reduced below the applicable minimum balance requirement at the time
that the funds actually are transferred under the authorization, the certificate
will be canceled at the time of the withdrawal, without penalty, and the
remaining balance will earn interest at the Bank's passbook rate.

     If the ESOP subscribes for shares during the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes, but rather, may pay for such shares of Common Stock subscribed for
at the Purchase Price upon consummation of the Subscription and Community
Offering, if all shares are sold, or upon consummation of the Syndicated
Community Offering if shares remain to be sold in such offering; provided, that
there is in force from the time of its subscription until such time, a loan
commitment from an unrelated financial institution or the Company to lend to the
ESOP, at such time, the aggregate Purchase Price of the shares for which it
subscribed.

     Owners of self-directed IRAs and other Qualified Plan accounts, such as
Keogh accounts, may use the assets of such IRAs and other Qualified Plan
accounts, to purchase shares of Common Stock in the Subscription and Community
Offerings, provided that such IRAs or other Qualified Plan accounts are not
maintained at the Bank.  Persons with self-directed IRAs or Qualified Plan
accounts maintained at the Bank must have their accounts transferred to an
unaffiliated institution or broker to purchase shares of Common Stock in the
Subscription and Community Offerings.  In addition, the provisions of ERISA and
IRS regulations require that officers, directors and ten percent shareholders
who use self-directed IRA or Qualified Plan account funds to purchase shares of
Common Stock in the Subscription and Community Offerings, make such purchases
for the exclusive benefit of the IRAs or Qualified Plan accounts.

     Certificates representing shares of Common Stock purchased will be mailed
to purchasers at the address specified in properly completed stock order forms,
as soon as practicable following consummation of the sale of all shares of
Common Stock.  Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES

     Prior to the completion of the Conversion, the NYBB regulations prohibit
any person with subscription rights, including the Eligible Account Holders, the
ESOP and Supplemental Eligible Account Holders, from transferring or entering
into any agreement or understanding to transfer the legal or beneficial

                                      134
ownership of the subscription rights issued under the Plan or the shares of
Common Stock to be issued upon their exercise.  Such rights may be exercised
only by the person to whom they are granted and only for his or her account.
Each person exercising such subscription rights will be required to certify that
he or she is purchasing shares solely for his or her own account and that he or
she has no agreement or understanding regarding the sale or transfer of such
shares.  The regulations also prohibit any person from offering or making an
announcement of an offer or intent to make an offer to purchase such
subscription rights or shares of Common Stock prior to the completion of the
Conversion.

     THE BANK AND THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE
REMEDIES (INCLUDING FORFEITURE) IN THE EVENT THEY BECOME AWARE OF THE TRANSFER
OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.

SYNDICATED COMMUNITY OFFERING

     As a final step in the Conversion, the Plan provides that, if feasible, all
shares of Common Stock not purchased in the Subscription and Community
Offerings, if any, will be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
to be formed and managed by Sandler O'Neill acting as agent of the Company to
assist the Company and the Bank in the sale of the Common Stock.  THE COMPANY
AND THE BANK HAVE THE RIGHT TO REJECT ORDERS IN WHOLE OR IN PART IN THEIR SOLE
DISCRETION IN THE SYNDICATED COMMUNITY OFFERING.  Neither Sandler O'Neill nor
any registered broker-dealer shall have any obligation to take or purchase any
shares of the Common Stock in the Syndicated Community Offering, however,
Sandler O'Neill has agreed to use its best efforts in the sale of shares in the
Syndicated Community Offering.

     The price at which Common Stock is sold in the Syndicated Community
Offering will be determined as described above under "- Stock Pricing."  Subject
to the overall maximum purchase limitation, no person, together with any
associate or group of persons acting in concert, will be permitted to subscribe
in the Syndicated Community Offering for more than $250,000 of Common Stock;
provided, however, that shares of Common Stock purchased in the Community
Offering by any persons, together with associates of or persons acting in
concert with such persons, will be aggregated with purchases in the Syndicated
Community Offering and be subject to an overall maximum purchase limitation of
1.0% of the shares offered, exclusive of an increase in shares issued pursuant
to an increase in the Estimated Price Range by up to 15%.

     Payments made in the form of a check, bank draft, money order or in cash
will earn interest at the Bank's passbook rate of interest from the date such
payment is actually received by the Bank until completion or termination of the
Conversion.

     In addition to the foregoing, if a syndicate of broker-dealers ("selected
dealers") is formed to assist in the Syndicated Community Offering, a purchaser
may pay for his shares with funds held by or deposited with a selected dealer.
If an order form is executed and forwarded to the selected dealer or if the
selected dealer is authorized to execute the order form on behalf of a
purchaser, the selected dealer is required to forward the order form and funds
to the Bank for deposit in a segregated account on or before noon of the
business day following receipt of the order form or execution of the order form
by the selected dealer.  Alternatively, selected dealers may solicit indications
of interest from their customers to place orders for shares.  Such selected
dealers shall subsequently contact their customers who indicated an interest and
seek their confirmation as to their intent to purchase.  Those indicating an
intent to purchase shall execute order forms and forward them to their selected
dealer or authorize the selected dealer to execute such forms.  The selected
dealer will acknowledge receipt of the order to its customer in writing on the
following business day and will debit such customer's account on the third
business day after the customer has confirmed his intent to purchase (the "debit
date") and on or before noon of the next business day following the debit date
will 

                                      135
send order forms and funds to the Bank for deposit in a segregated account.
Although purchasers' funds are not required to be in their accounts with
selected dealers until the debit date in the event that such alternative
procedure is employed once a confirmation of an intent to purchase has been
received by the selected dealer, the purchaser has no right to rescind his
order.

     Certificates representing shares of Common Stock purchased, together with
any refund due, will be mailed to purchasers at the address specified in the
order form, as soon as practicable following consummation of the sale of the
Common Stock.  Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.

     The Syndicated Community Offering will terminate no more than 45 days
following the  Expiration Date, unless extended by the Company with the approval
of the Superintendent and FDIC.  Such extensions may not be beyond
_______________, 1999.  See "- Stock Pricing" above for a discussion of rights
of subscribers, if any, in the event an extension is granted.

LIMITATIONS ON COMMON STOCK PURCHASES

     The Plan includes the following limitations on the number of shares of
Common Stock which may be purchased during the Conversion:

     (1)  No less than 25 shares;

     (2)  Each Eligible Account Holder may subscribe for and purchase in the
          Subscription Offering up to the amount permitted to be purchased in
          the Community Offering, currently $250,000 of Common Stock, subject to
          the overall maximum purchase limitation described in (7) below;

     (3)  The Employee Plans, including the ESOP, are permitted to purchase, in
          the aggregate, up to 10% of the shares of Common Stock issued in the
          Conversion, including shares issued in the event of an increase in the
          Estimated Price Range of 15%, and the ESOP intends to purchase 8.0% of
          the shares of Common Stock issued in connection with the Conversion,
          including shares issued to the Foundation;

     (4)  Each Supplemental Eligible Account Holder may subscribe for and
          purchase in the Subscription Offering up to the greater of the amount
          permitted to be purchased in the Community Offering, currently
          $250,000 of Common Stock, subject to the overall maximum purchase
          limitation described in (7) below;

     (5)  Persons purchasing shares of Common Stock in the Community Offering,
          together with associates of and groups of persons acting in concert
          with such persons, may purchase in the Community Offering up to
          $250,000 of Common Stock, subject to the overall maximum purchase
          limitation described in (7) below;

     (6)  Persons purchasing shares of Common Stock in the Syndicated Community
          Offering, together with associates of and persons acting in concert
          with such persons, may purchase in the Syndicated Community Offering
          up to $250,000 of Common Stock subject to the overall maximum purchase
          limitation described in (7) below and, provided further, that shares
          of Common Stock purchased in the Community Offering by any persons,
          together with associates of and persons acting in concert with such
          persons, will be aggregated with 

                                      136
purchases in the Syndicated Community Offering in applying the
          $250,000 purchase limitation;

     (7)  Eligible Account Holders and Supplemental Eligible Account Holders may
          purchase stock in the Community Offering and Syndicated Community
          Offering, subject to the purchase limitations described in (5) and (6)
          above, provided that, except for the ESOP, the overall maximum number
          of shares of Common Stock subscribed for or purchased in all
          categories of the Conversion by any person, together with associates
          of and groups of persons acting in concert with such persons, shall
          not exceed 1.0% of the shares of Common Stock offered in the
          Conversion and exclusive of an increase in the total number of shares
          issued due to an increase in the Estimated Price Range of up to 15%;
          and

     (8)  No more than 25% of the total number of shares issued in the
          Conversion may be purchased by Trustees, Directors and officers of the
          Bank or Company and their associates in the aggregate, excluding
          purchases by the ESOP.

     Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of depositors of
the Bank or subscribers for Common Stock, both the individual amount permitted
to be subscribed for and the overall maximum purchase limitation may be
increased to up to a maximum of 5% of the Common Stock to be issued at the sole
discretion of the Company and the Bank.  If such amount is increased,
subscribers for the maximum amount will be, and certain other large subscribers
in the sole discretion of the Bank may be, given the opportunity to increase
their subscriptions up to the then applicable limit.

     The overall maximum purchase limitation may not be reduced to less than
1.0%, and the individual amount permitted to be subscribed for may not be
reduced by the Bank to less than .10% without the further approval of members or
resolicitation of subscribers.  An Eligible Account Holder or Supplemental
Eligible Account Holder may not purchase individually in the Subscription
Offering the overall maximum purchase limit of 1.0% of the shares offered, but
may make such purchase, together with associates of and persons acting in
concert with such person, by also purchasing in other available categories of
the Conversion, subject to availability of shares and the maximum overall
purchase limit for purchases in the Conversion.

     The term "associate" of a person is defined to mean:  (i) any corporation
(other than the Bank or a majority-owned subsidiary of the Bank) of which such
person is an officer, partner or 10% stockholder; (ii) any trust or other estate
in which such person has a substantial beneficial interest or serves as a
trustee or in a similar fiduciary capacity; provided, however, such term shall
not include any employee stock benefit plan of the Bank in which such person has
a substantial beneficial interest or serves as a trustee or in a similar
fiduciary capacity; and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
trustee or officer of the Bank.  Trustees are not treated as associates of each
other solely because of their Board membership.  For a further discussion of
limitations on purchases of a converting institution's stock at the time of
Conversion and subsequent to Conversion, see "Management of the Bank -
Subscriptions by Executive Officers, Directors and Trustees," "- Certain
Restrictions on Purchase or Transfer of Shares After Conversion" and
"Restrictions on Acquisition of the Company and the Bank."

LIQUIDATION RIGHTS

     In the unlikely event of a complete liquidation of the Bank in its present
mutual form, each depositor would have a claim to receive their pro rata share
of any assets of the Bank remaining after payment of claims of all creditors
(including the claims of all depositors to the withdrawal value of their
accounts).  To 

                                      137
the extent there are remaining assets, a depositor would have a claim to receive
a pro rata share of any such remaining assets in the same proportion as the
value of such depositor's deposit accounts to the total value of all deposit
accounts in the Bank at the time of liquidation. After the Conversion, each
depositor, in the event of a complete liquidation, would have a claim as a
creditor of the same general priority as the claims of all other general
creditors of the Bank. However, except as described below, their claim would be
solely in the amount of the balance in their deposit account plus accrued
interest. Such depositor would not have an interest in the value or assets of
the Bank above that amount.

     The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders in an amount equal to the surplus and reserves of the Bank as of
the date of its latest balance sheet contained in the final Prospectus used in
connection with the Conversion.  Such liquidation account will not be reflected
as an asset or liability on the Company's or the Bank's financial statements
subsequent to the Conversion.  Eligible Account Holders, if they were to
continue to maintain their deposit account at the Bank, would, on a complete
liquidation of the Bank, have a claim to an interest in the liquidation account
after payment of all creditors prior to any payment to the stockholders of the
Bank.  Each Eligible Account Holder would have an initial interest in such
liquidation account for each deposit account, demand account, NOW account, money
market deposit account, and certificate of deposit account, with a balance of
$100 or more held in the Bank on June 30, 1996 ("Deposit Account").  Each
Eligible Account Holder will have a claim to a pro rata interest in the total
liquidation account for each of his Deposit Accounts based on the proportion
that the balance of each such Deposit Account on the June 30, 1996 eligibility
record date bore to the balance of all Deposit Accounts in the Bank on such
date.

     If, however, at the close of business on the last day of any period for
which the Bank or Company has prepared audited financial statements subsequent
to the effective date of the Conversion ("annual closing date"), the amount in
any Deposit Account is less than the amount in such Deposit Account on any other
annual closing date, then such person's interest in the liquidation account
relating to such Deposit Account would be reduced from time to time by the
proportion of any such reduction, and such interest will cease to exist if such
Deposit Account is withdrawn or closed.  For purposes of the liquidation
account, time deposit accounts shall be deemed to be closed upon maturity
regardless of any renewal thereof.  In addition, no interest in the liquidation
account would ever be increased despite any subsequent increase in the related
Deposit Account.  Any assets remaining after the above liquidation rights of
Eligible Account Holders are satisfied would be distributed to the Company as
the sole stockholder of the Bank.

TAX ASPECTS

     Consummation of the Conversion is expressly conditioned upon the receipt by
the Bank of either a favorable ruling from the IRS or an opinion of counsel with
respect to federal income taxation, and an opinion of its independent auditors
with respect to certain New York state taxation, to the effect that the
Conversion will not be a taxable transaction to the Company, the Bank, Eligible
Account Holders or Supplemental Eligible Account Holders, except as noted below.
The federal and New York tax consequences will remain unchanged in the event
that a holding company form of organization is not utilized.

     No private ruling has been requested from the IRS with respect to the
proposed Conversion.  Instead, the Bank has received an opinion of its counsel,
Muldoon, Murphy & Faucette, which has been filed with the SEC as an exhibit to
the Company's Registration Statement to the effect that for federal income tax
purposes, among other matters: (i) the Bank's change in form from mutual to
stock ownership will constitute a reorganization under section 368(a)(1)(F) of
the Code and neither the Bank nor the Company will recognize any gain or loss as
a result of the Conversion; (ii) no gain or loss will be recognized to the Bank
or the Company upon the purchase of the Bank's capital stock by the Company or
to the Company upon the 

                                      138
purchase of its Common Stock in the Conversion; (iii) no gain or loss will be
recognized by Eligible Account Holders or Supplemental Eligible Account Holders
upon the issuance to them of deposit accounts in the Bank in its stock form plus
their interests in the liquidation account in exchange for their deposit
accounts in the Bank; (iv) the tax basis of the depositors' deposit accounts in
the Bank immediately after the Conversion will be the same as the basis of their
deposit accounts immediately prior to the Conversion; (v) the tax basis of each
Eligible Account Holder's interest in the liquidation account will be zero; (vi)
no gain or loss will be recognized by Eligible Account Holders or Supplemental
Eligible Account Holders upon the distribution to them of nontransferable
subscription rights to purchase shares of the Common Stock, provided that the
amount to be paid for the Common Stock is equal to the fair market value of such
stock; and (vii) the tax basis to the stockholders of the Common Stock of the
Company purchased in the Conversion will be the amount paid therefor and the
holding period for the shares of Common Stock purchased by such persons will
begin on the date on which their subscription rights are exercised. Ernst &
Young LLP has opined, subject to the limitations and qualifications in its
opinion, that: the Conversion will not be a taxable transaction for the purposes
of the New York State banking franchise taxes, sales and use taxes, stock
transfer taxes, and real property transfer gains taxes; a position may be taken
that the Conversion will likely not be a taxable transaction for purposes of the
New York State real estate transfer taxes; and the Company, as a foreign
corporation, will be subject to a license fee at a rate of 1/20% of the
apportioned par value of the Common Stock issued. Certain portions of both the
federal and the state and local tax opinions are based upon the opinion of
Keller that subscription rights issued in connection with the Conversion will
have no value.

     In the opinion of Keller, which opinion is not binding on the IRS, the
subscription rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration, and afford the recipients the right only to purchase the Common Stock
at a price equal to its estimated fair market value, which will be the same
price as the Purchase Price for the unsubscribed shares of Common Stock.  If the
subscription rights granted to Eligible Account Holders or Supplemental Eligible
Account Holders are deemed to have an ascertainable value, such recipients could
be taxed either on the receipt or exercise of such subscription rights.

     Unlike private rulings, an opinion of counsel is not binding on the IRS and
the IRS could disagree with conclusions reached therein.  In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.

CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER CONVERSION

     All shares of Common Stock purchased in connection with the Conversion by a
Director, Trustee or an executive officer of the Bank or Company will be subject
to a restriction that the shares not be sold for a period of one year following
the Conversion, except in the event of the death of such Director, Trustee or
executive officer.  Each certificate for such restricted shares will bear a
legend giving notice of this restriction on transfer, and instructions will be
issued to the effect that any transfer within such time period of any
certificate or record ownership of such shares other than as provided above is a
violation of such restriction.  Any shares of Common Stock issued at a later
date as a stock dividend, stock split, or otherwise, with respect to such
restricted stock will be subject to the restriction that they may not be sold
for a period of one year following the Conversion.  The Directors, Trustees and
executive officers of the Bank or Company will also be subject to the insider
trading rules promulgated pursuant to the Exchange Act.

     Purchases of outstanding shares of Common Stock of the Company by Trustees,
Directors, executive officers (or any person who was an executive officer or
Trustee of the Bank after adoption of the Plan of Conversion) and their
associates during the three-year period following Conversion may be made only
through a broker or dealer registered with the SEC, except with the prior
written approval of the 

                                      139
Superintendent. This restriction does not apply, however, to the purchase of
Common Stock pursuant to the Stock Program or Stock Option Plan.

INTERPRETATION, AMENDMENT AND TERMINATION

     All interpretations of the Plan by the Board of the Bank will be final,
subject to the authority of the Superintendent and FDIC.  The Plan provides
that, if deemed necessary or desirable by the Board of Trustees of the Bank, the
Plan may be substantively amended prior to the solicitation of proxies from
Eligible Account Holders by a vote of the Board of Trustees; amendment of the
Plan thereafter requires the approval of the Superintendent and FDIC.  The Plan
will terminate if the sale of all shares of stock being offered pursuant to the
Plan is not completed prior to 24 months after the date of the approval of the
Plan by the Superintendent unless a longer time period is permitted by governing
laws and regulations.  The Plan may be terminated by a vote of the Board of
Trustees of the Bank at any time prior to the Special Meeting, and thereafter by
such a vote with the approval of the Superintendent and FDIC.

            RESTRICTIONS ON ACQUISITION OF THE COMPANY AND THE BANK

GENERAL

     The Bank's Plan of Conversion provides for the Conversion of the Bank from
the mutual to the stock form of organization and in connection therewith, a
Restated Organization Certificate and Bylaws to be adopted by Eligible Account
Holders of the Bank.  The Plan also provides for the concurrent formation of a
holding company.  See "The Conversion - General."  Certain provisions in the
Company's Certificate of Incorporation and Bylaws and in its management
remuneration provided for in the Conversion, together with provisions of
Delaware corporate law, may have anti-takeover effects.  In addition, the Bank's
Restated Organization Certificate and Bylaws and management remuneration
provided for in the Conversion may have anti-takeover effects as described
below.  Finally, regulatory restrictions may make it difficult for persons or
companies to acquire control of either the Company or the Bank.

RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS

     A number of provisions of the Company's Certificate of Incorporation and
Bylaws deal with matters of corporate governance and certain rights of
stockholders.  The following discussion is a general summary of certain
provisions of the Company's Certificate of Incorporation and Bylaws and certain
other statutory and regulatory provisions relating to stock ownership and
transfers, the Board of Directors and business combinations, which might be
deemed to have a potential "anti-takeover" effect.  These provisions may have
the effect of discouraging a future takeover attempt which is not approved by
the Board of Directors but which individual Company stockholders may deem to be
in their best interests or in which stockholders may receive a substantial
premium for their shares over then current market prices.  As a result,
stockholders who might desire to participate in such a transaction may not have
an opportunity to do so.  Such provisions will also render the removal of the
current Board of Directors or management of the Company more difficult.  The
following description of certain of the provisions of the Certificate of
Incorporation and Bylaws of the Company is necessarily general and reference
should be made in each case to such Certificate of Incorporation and Bylaws,
which are incorporated herein by reference.  See "Additional Information" as to
how to obtain a copy of these documents.

     Limitation on Voting Rights.  The Certificate of Incorporation of the
Company provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or 

                                      140
indirectly, by a person who beneficially owns in excess of 10% of the then
outstanding shares of Common Stock (the "Limit") be entitled or permitted to any
vote in respect of the shares held in excess of the Limit. Beneficial ownership
is determined pursuant to Rule 13d-3 of the General Rules and Regulations
promulgated pursuant to the Exchange Act, and includes shares beneficially owned
by such person or any of his affiliates (as defined in the Certificate of
Incorporation), shares which such person or his affiliates have the right to
acquire pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options or otherwise
and shares as to which such person and his affiliates have sole or shared voting
or investment power, but shall not include shares that are subject to a publicly
solicited revocable proxy and that are not otherwise deemed to be beneficially
owned by such person and his affiliates. No Director or officer (or any
affiliate thereof) of the Company shall, solely by reason of any or all of such
Directors or officers acting in their capacities as such, be deemed to
beneficially own any shares beneficially owned by any other Director or officer
(or affiliate thereof) nor will the ESOP or any similar plan of the Company or
the Bank or any trustee with respect thereto (solely by reason of such trustee's
capacity) be deemed to beneficially own any shares held under any such plan. The
Certificate of Incorporation of the Company further provides that the provisions
limiting voting rights may only be amended upon the vote of the holders of at
least 80% of the voting power of all then outstanding shares of capital stock
entitled to vote thereon (after giving effect to the provision limiting voting
rights).

     Board of Directors.  The Board of Directors of the Company is divided into
three classes, each of which shall contain approximately one-third of the whole
number of the members of the Board.  Each class shall serve a staggered term,
with approximately one-third of the total number of Directors being elected each
year.  The Company's Certificate of Incorporation and Bylaws provide that the
size of the Board shall be determined by a majority of the Whole Board of
Directors.  The Certificate of Incorporation and the Bylaws provide that any
vacancy occurring in the Board, including a vacancy created by an increase in
the number of Directors or resulting from death, resignation, retirement,
disqualification, removal from office or other cause, shall be filled for the
remainder of the unexpired term exclusively by a majority vote of the Directors
then in office.  The classified Board is intended to provide for continuity of
the Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors of the
Company.  Directors may be removed by the shareholders only for cause by the
affirmative vote of the holders of at least 80% of the voting power of all then
outstanding shares of capital stock entitled to vote thereon.

     In the absence of these provisions, the vote of the holders of a majority
of the shares could remove the entire Board, with or without cause, and replace
it with persons of such holders choice.

     Cumulative Voting, Special Meetings and Action by Written Consent.  The
Certificate of Incorporation does not provide for cumulative voting for any
purpose.  Moreover, special meetings of stockholders of the Company may be
called only by a resolution adopted by a majority of the Whole Board of
Directors of the Company.  The Certificate of Incorporation also provides that
any action required or permitted to be taken by the stockholders of the Company
may be taken only at an annual or special meeting and prohibits stockholder
action by written consent in lieu of a meeting.

     Authorized Shares.  The Certificate of Incorporation authorizes the
issuance of 75 million  shares of Common Stock and 5  million shares of
preferred stock.  The shares of Common Stock and preferred stock were authorized
in an amount greater than that to be issued in the Conversion to provide the
Company's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits and employee stock options.  However, these additional authorized shares
may also be used by the Board of Directors consistent with its fiduciary duty to
deter future attempts to gain control of the Company.  The Board of Directors
also has sole authority to determine the terms of any one or more series of
preferred stock, including voting rights, conversion rates, and liquidation
preferences.  

                                      141
As a result of the ability to fix voting rights for a series of preferred stock,
the Board has the power to the extent consistent with its fiduciary duty to
issue a series of preferred stock to persons friendly to management in order to
attempt to block a post-tender offer merger or other transaction by which a
third party seeks control, and thereby assist management to retain its position.
The Company's Board currently has no plans for the issuance of additional
shares, other than the issuance of shares in the Conversion, including shares
contributed to the Foundation, and the issuance of additional shares upon
exercise of stock options.

     Stockholder Vote Required to Approve Business Combinations with Interested
Stockholders.  The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Company's outstanding shares of voting stock
entitled to vote thereon to approve certain "Business Combinations" with an
"Interested Stockholder," each as defined therein, and related transactions.
Under Delaware law, absent this provision, business combinations, including
mergers, consolidations and sales of all or substantially all of the assets of a
corporation must, subject to certain exceptions, be approved by the vote of the
holders of only a majority of the outstanding shares of Common Stock of the
Company and any other affected class of stock.  Under the Certificate of
Incorporation, the approval of the holders of at least 80% of the shares of
capital stock entitled to vote thereon is required for any business combination
involving an Interested Stockholder (as defined below) except (i) in cases where
the proposed transaction has been approved by a majority of those members of the
Company's Board of Directors who are unaffiliated with the Interested
Stockholder and were Directors prior to the time when the Interested Stockholder
became an Interested Stockholder or (ii) if the proposed transaction meets
certain conditions set forth therein which are designed to afford the
stockholders a fair price in consideration for their shares.  In each such case,
where stockholder approval is required, the approval of only a majority of the
outstanding shares of voting stock is sufficient.  The term "Interested
Stockholder" is defined to include, among others, any individual, a group acting
in concert, corporation, partnership, association or other entity (other than
the Company or its subsidiary) who or which is the beneficial owner, directly or
indirectly, of 10% or more of the outstanding shares of voting stock of the
Company.  This provision of the Certificate of Incorporation applies to any
"Business Combination," which is defined to include: (i) any merger or
consolidation of the Company or any of its subsidiaries with any Interested
Stockholder or Affiliate (as defined in the Certificate of Incorporation) of an
Interested Stockholder or any corporation which is, or after such merger or
consolidation would be, an Affiliate of an Interested Stockholder; (ii) any
sale, lease, exchange, mortgage, pledge, transfer, or other disposition to or
with any Interested Stockholder or Affiliate of 25% or more of the assets of the
Company or combined assets of the Company and its subsidiary; (iii) the issuance
or transfer to any Interested Stockholder or its Affiliate by the Company (or
any subsidiary) of any securities of the Company (or any subsidiary) in exchange
for any cash, securities or other property the value of which equals or exceeds
25% of the fair market value of the Common Stock of the Company; (iv) the
adoption of any plan for the liquidation or dissolution of the Company proposed
by or on behalf of any Interested Stockholder or Affiliate thereof; and (v) any
reclassification of securities, recapitalization, merger or consolidation of the
Company with any of its subsidiaries which has the effect of increasing the
proportionate share of Common Stock or any class of equity or convertible
securities of the Company or subsidiary owned directly or indirectly, by an
Interested Stockholder or Affiliate thereof.  The Trustees and executive
officers of the Bank are purchasing in the aggregate approximately 1.4% of the
shares of the Common Stock based on the maximum of the Estimated Price Range,
including shares issued to the Foundation.  In addition, the ESOP intends to
purchase 8.0% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation.  Additionally, the Company expects to
acquire 4% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation, on behalf of the Stock Program and
expects to grant options to issue an amount equal to 10% of the Common Stock
issued in connection with the Conversion, including shares issued to the
Foundation, under the Stock Option Plan to directors and executive officers.  As
a result, Directors, executive officers and employees have the potential to
control the voting of approximately 21.2% of the Company's Common Stock on a
fully diluted basis at the maximum of the 

                                      142
Estimated Price Range, thereby enabling them to prevent the approval of the
transactions requiring the approval of at least 80% of the Company's outstanding
shares of voting stock described herein above.

     Evaluation of Offers.  The Certificate of Incorporation of the Company
further provides that the Board of Directors of the Company, when evaluating any
offer of another "Person" (as defined therein), to (i) make a tender or exchange
offer for any equity security of the Company, (ii) merge or consolidate the
Company with another corporation or entity or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the Company,
may, in connection with the exercise of its judgment in determining what is in
the best interest of the Company and the stockholders of the Company, give due
consideration to all relevant factors, including, without limitation, those
factors that directors of any subsidiary (including the Bank) may consider in
evaluating any action that may result in a change or potential change of control
of such subsidiary, and the social and economic effects of acceptance of such
offer on: the Company's present and future customers and employees and those of
its subsidiaries (including the Bank); the communities in which the Company and
the Bank operate or are located; the ability of the Company to fulfill its
corporate objectives as a bank holding company; and the ability of the Bank to
fulfill the objectives of a stock savings bank under applicable statutes and
regulations.  By having these standards in the Certificate of Incorporation of
the Company, the Board of Directors may be in a stronger position to oppose such
a transaction if the Board concludes that the transaction would not be in the
best interest of the Company, even if the price offered is significantly greater
than the then market price of any equity security of the Company.

     Amendment of Certificate of Incorporation and Bylaws.  Amendments to the
Company's Certificate of Incorporation must be approved by a majority vote of
its Board of Directors and also by a majority of the outstanding shares of its
voting stock, provided, however, that an affirmative vote of the holders of at
least 80% of the outstanding voting stock entitled to vote (after giving effect
to the provision limiting voting rights) is required to amend or repeal certain
provisions of the Certificate of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
Directors, Director and officer indemnification by the Company and amendment of
the Company's Bylaws and Certificate of Incorporation.  The Company's Bylaws may
be amended by a majority of the Whole Board of Directors, or by a vote of the
holders of at least 80% (after giving effect to the provision limiting voting
rights) of the total votes eligible to be voted at a duly constituted meeting of
stockholders.

     Certain Bylaw Provisions.  The Bylaws of the Company also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at an annual stockholder meeting to give at
least 90 days' advance notice to the Secretary of the Company.  The notice
provision requires a stockholder who desires to raise new business to provide
certain information to the Company concerning the nature of the new business,
the stockholder and the stockholder's interest in the business matter.
Similarly, a stockholder wishing to nominate any person for election as a
Director must provide the Company with certain information concerning the
nominee and the proposing stockholder.

ANTI-TAKEOVER EFFECTS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
AND MANAGEMENT REMUNERATION ADOPTED IN CONVERSION

     The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors.  Certain
provisions of the Stock Option Plan and Stock Program provide for accelerated
benefits to participants in the event of a change in control of the Company or
the Bank or a tender or exchange offer for their stock.  See "Management of the
Bank - Benefit Plans - Stock Option Plan," and "- Benefit Plans - Stock
Program."  The Company and the Bank have also entered into agreements with key

                                      143
officers and intends to establish the Severance Compensation Plan which will
provide such officers and eligible employees with additional payments and
benefits on the officer's termination in connection with a change in control of
the Company or the Bank.  See "Management of the Bank - Employment Agreements,"
"- Change in Control Agreements" and "- Employee Severance Compensation Plan."
The foregoing provisions and limitations may make it more difficult for
companies or persons to acquire control of the Bank.  Additionally, the
provisions could deter offers to acquire the outstanding shares of the Company
which might be viewed by stockholders to be in their best interests.

     The Company's Board of Directors believes that the provisions of the
Certificate of Incorporation and Bylaws are in the best interest of the Company
and its stockholders.  An unsolicited non-negotiated takeover proposal can
seriously disrupt the business and management of a corporation and cause it
great expense.  Accordingly, the Board of Directors believes it is in the best
interests of the Company and its stockholders to encourage potential acquirors
to negotiate directly with management and that these provisions will encourage
such negotiations and discourage non-negotiated takeover attempts.

DELAWARE CORPORATE LAW

     The State of Delaware has a statute designed to provide Delaware
corporations with additional protection against hostile takeovers.  The takeover
statute, which is codified in Section 203 of the Delaware General Corporate Law
("Section 203"), is intended to discourage certain takeover practices by
impeding the ability of a hostile acquiror to engage in certain transactions
with the target company.

     In general, Section 203 provides that a "Person" (as defined therein) who
owns 15% or more of the outstanding voting stock of a Delaware corporation (an
"Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became an Interested Stockholder.  The
term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.

     The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the board of directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, excluding, for purposes of
determining the number of shares outstanding, shares owned by the corporation's
directors who are also officers and certain employee stock plans; (iii) any
business combination with an Interested Stockholder that is approved by the
board of directors and by a two-thirds vote of the outstanding voting stock not
owned by the Interested Stockholder; and (iv) certain business combinations that
are proposed after the corporation had received other acquisition proposals and
which are approved or not opposed by a majority of certain continuing members of
the board of directors.  A corporation may exempt itself from the requirements
of the statute by adopting an amendment to its certificate of incorporation or
bylaws electing not to be governed by Section 203.  At the present time, the
Board of Directors does not intend to propose any such amendment.

RESTRICTIONS IN THE BANK'S RESTATED ORGANIZATION CERTIFICATE AND NEW BYLAWS

     Although the Board of Trustees of the Bank is not aware of any effort that
might be made to obtain control of the Bank after Conversion, the Board of
Trustees believes that it is appropriate to adopt certain provisions permitted
by General Regulations of the NYBB to protect the interests of the converted
Bank and its stockholders from any hostile takeover.  Such provisions may,
indirectly, inhibit a change in control of the Company, as the Bank's sole
stockholder.  See "Risk Factors - Certain Anti-Takeover Provisions."

                                      144
The Bank's Restated Organization Certificate will contain a provision
whereby the acquisition of beneficial ownership of more than 10% of the issued
and outstanding shares of any class of equity securities of the Bank by any
person (i.e., any individual, corporation, group acting in concert, trust,
partnership, joint stock company or similar organization), either directly or
through an affiliate thereof, will be prohibited for a period of three years
following the date of completion of the Conversion.  Any stock in excess of 10%
acquired in violation of the charter provision will not be counted as
outstanding for voting purposes.  This limitation shall not apply to any
transaction in which the Bank forms a holding company without a change in the
respective beneficial ownership interests of its stockholders other than
pursuant to the exercise of any dissenter or appraisal rights.  In the event
that holders of revocable proxies for more than 10% of the shares of the Common
Stock of the Company seek, among other things, to elect one-third or more of the
Company's Board of Directors, to cause the Company's stockholders to approve the
acquisition or corporate reorganization of the Company or to exert a continuing
influence on a material aspect of the business operations of the Company, which
actions could indirectly result in a change in control of the Bank, the Board of
Directors of the Bank will be able to assert this provision of the Bank's
Restated Organization Certificate against such holders.  Although the Board of
Directors of the Bank is not currently able to determine when and if it would
assert this provision of the Bank's Restated Organization Certificate, the Board
of Directors, in exercising its fiduciary duty, may assert this provision if it
were deemed to be in the best interests of the Bank, the Company and its
stockholders.  It is unclear, however, whether this provision, if asserted,
would be successful against such persons in a proxy contest which could result
in a change in control of the Bank indirectly through a change in control of the
Company.

     In addition, stockholders will not be permitted to call a special meeting
of stockholders or to cumulate their votes in the election of Directors.
Furthermore, the Bank's Restated Organization Certificate and Bylaws provide for
the election of three classes of directors to staggered terms.  The staggered
terms of the Board of Directors could have an anti-takeover effect by making it
more difficult for a majority of shares to force an immediate change in the
Board of Directors since only one-third of the Board is elected each year.  The
purpose of these provisions is to assure stability and continuity of management
of the Bank in the years immediately following the Conversion.

     Finally, the Restated Organization Certificate provides for the issuance of
shares of preferred stock on such terms, including conversion and voting rights,
as may be determined by the Bank's Board of Directors without stockholder
approval.  Although the Bank has no arrangements, understandings or plans at the
present time for the issuance or use of the shares of undesignated preferred
stock (the "Preferred Stock") proposed to be authorized, the Board of Trustees
believes that the availability of such shares will provide the Bank with
increased flexibility in structuring possible future financings and acquisitions
and in meeting other corporate needs which may arise.  In the event of a
proposed merger, tender offer or other attempt to gain control of the Bank of
which management does not approve, it might be possible for the Board of
Directors to authorize the issuance of one or more series of Preferred Stock
with rights and preferences which could impede the completion of such a
transaction.  An effect of the possible issuance of such Preferred Stock,
therefore, may be to deter a future takeover attempt.  The Board of Trustees
does not intend to issue any Preferred Stock except on terms which the Board
deems to be in the best interest of the Bank and its then existing stockholders.

REGULATORY RESTRICTIONS

     New York State Banking Board Conversion Regulations.  NYBB regulations
prohibit any person, prior to the completion of the Conversion, from
transferring, or from entering into any agreement or understanding to transfer,
to the account of another, legal or beneficial ownership of the subscription
rights issued under the Plan or the Common Stock to be issued upon their
exercise.  NYBB regulations also prohibit any person, prior to the completion of
the Conversion, from offering, or making an announcement of an offer 

                                      145
or intent to make an offer, to purchase such subscription rights or Common
Stock. See "The Conversion - Restrictions on Transfer of Subscription Rights and
Shares."

     For one year following the Conversion, NYBB regulations prohibit any person
from acquiring or making an offer to acquire more than 10% of the stock of any
converted savings institution, except with the prior approval of the
Superintendent.

     OTS Regulations.  In addition, any proposal to acquire 10% of any class of
equity security of the Company generally would be subject to approval by the OTS
under the Change in Bank Control Act (the "CBCA") and the HOLA. The OTS requires
all persons seeking control of a savings institution, either directly or
indirectly through its holding company, to obtain regulatory approval prior to
offering to obtain control. Federal law generally provides that no "person,"
acting directly or indirectly or through or in concert with one or more other
persons, may acquire directly or indirectly "control," as that term is defined
in OTS regulations, of an OTS-regulated savings and loan holding company without
giving at least 60 days' written notice to the OTS and providing the OTS an
opportunity to disapprove the proposed acquisition. Such acquisitions of control
may be disapproved if it is determined, among other things, that (i) the
acquisition would substantially less competition; (ii) the financial condition
of the acquiring person might jeopardize the financial stability of the savings
institution or prejudice the interests of its depositors; or (iii) the
competency, experience or integrity of the acquiring person or the proposed
management personnel indicates that it would not be in the interest of the
depositors or the public to permit the acquisition of control by such person.
Such change in control restrictions on the acquisition of holding company stock
are not limited to a set time period but will apply for as long as the
regulations are in effect. Persons holding revocable or irrevocable proxies may
be deemed to be beneficial owners of such securities under OTS regulations and
therefore prohibited from voting all or the portion of such proxies in excess of
the 10% aggregate beneficial ownership limit. Such regulatory restrictions may
prevent or inhibit proxy contests for control of the Company or the Bank which
have not received prior regulatory approval. Acquisitions of control of a
savings bank are subject to the approval of the FDIC under the CBCA. However,
transactions involving the company for which OTS approval must be sought under
HOLA are exempted from this requirement.

     New York State Bank Holding Company Regulation.  Under New York Banking
Law, the prior approval of the NYBD is required before:  (1) any action is taken
that causes any company to become a bank holding company; (2) any action is
taken that causes any banking institution to become or to be merged or
consolidated with a subsidiary of a bank holding company; (3) any bank holding
company acquires direct or indirect ownership or control of more than 5% of the
voting stock of a banking institution; (4) any bank holding company or
subsidiary thereof acquires all or substantially all of the assets of a banking
institution; or (5) any action is taken that causes any bank holding company to
merge or consolidate with another bank holding company.  See "Regulation and
Supervision - Holding Company Regulation - New York State Holding Company
Regulation."  Accordingly, the prior approval of the NYBB would be required
before any bank holding company, as defined in the banking law, could acquire 5%
of more of the common stock of the company.

     New York State Change in Control Regulation.  Prior approval of the NYBB is
also required before any action is taken that causes any company to acquire
direct or indirect control of a banking institution.  Control is presumed to
exist if any company directly or indirectly owns, controls or holds with power
to vote 10% or more of the voting stock of a banking institution or of any
company that owns, controls or holds with power to vote 10% or more of the
voting stock of a banking institution.  Accordingly, prior approval of the NYBB
would be required before any company could acquire 10% or more of the Common
Stock of the Company.

                                      146
Federal Reserve Board Regulations.  In the event the Bank does not qualify
to be a QTL and does not elect to be treated as a "savings association" under
Section 10 of HOLA, attempts to acquire control of the Bank become subject to
regulations of the Federal Reserve Board under the CBCA.

                          DESCRIPTION OF CAPITAL STOCK
                                 OF THE COMPANY

GENERAL

     The Company is authorized to issue 75 million shares of Common Stock having
a par value of $.01 per share and 5  million shares of preferred stock having a
par value of $.01 per share (the "Preferred Stock").  Based on the sale of
Common Stock in connection with the Conversion and issuance of authorized but
unissued Common Stock in an amount equal to 8% of the Common Stock sold in the
Conversion to the Foundation, the Company currently expects to issue up to
26,423,550 shares of Common Stock (based on the maximum of the Estimated Price
Range, as adjusted by 15%) and no shares of Preferred Stock in the Conversion.
Except for shares issued in connection with the Conversion, the Company
presently does not have plans to issue Common Stock.  Each share of the
Company's Common Stock will have the same relative rights as, and will be
identical in all respects with, each other share of Common Stock.  Upon payment
of the Actual Purchase Price for the Common Stock, in accordance with the Plan
of Conversion, all such stock will be duly authorized, fully paid and
nonassessable.

     The Common Stock of the Company will represent nonwithdrawable capital,
will not be an account of an insurable type, and will not be insured by the
FDIC.

COMMON STOCK

     Dividends.  The Company can pay dividends out of statutory surplus or from
certain net profits if, as and when declared by its Board of Directors.  The
payment of dividends by the Company is subject to limitations which are imposed
by law and applicable regulation.  See "Dividend Policy" and "Regulation and
Supervision."  The holders of Common Stock of the Company will be entitled to
receive and share equally in such dividends as may be declared by the Board of
Directors of the Company out of funds legally available therefor.  If the
Company issues Preferred Stock, the holders thereof may have a priority over the
holders of the Common Stock with respect to dividends.

     Voting Rights.  Upon the Conversion, the holders of Common Stock of the
Company will possess exclusive voting rights in the Company.  They will elect
the Company's Board of Directors and act on such other matters as are required
to be presented to them under Delaware law or as are otherwise presented to them
by the Board of Directors.  Except as discussed in "Restrictions on Acquisition
of the Company and the Bank," each holder of Common Stock will be entitled to
one vote per share.  Stockholders will not have any right to cumulate votes in
the election of Directors.  If the Company issues Preferred Stock, holders of
the Preferred Stock may also possess voting rights.  Certain matters require an
80% stockholder vote (after giving effect to the provision limiting voting
rights).  See "Restrictions on Acquisition of the Company and the Bank."

     As a New York State mutual savings bank, corporate powers and control of
the Bank are vested in its Board of Trustees, who elect the officers of the Bank
and who fill any vacancies on the Board of Trustees as it exists upon
Conversion.  Subsequent to Conversion, voting rights will be vested exclusively
in the owners of the shares of capital stock of the Bank, which will be the
Company, and voted at the direction of 

                                      147
the Company's Board of Directors. Consequently, the holders of the Common Stock
will not have direct control of the Bank.

     Liquidation.  In the event of any liquidation, dissolution or winding up of
the Bank, the Company, as holder of the Bank's capital stock would be entitled
to receive, after payment or provision for payment of all debts and liabilities
of the Bank (including all deposit accounts and accrued interest thereon) and
after distribution of the balance in the special liquidation account to Eligible
Account Holders (see "The Conversion - Liquidation Rights"), all assets of the
Bank available for distribution.  In the event of liquidation, dissolution or
winding up of the Company, the holders of its Common Stock would be entitled to
receive, after payment or provision for payment of all of its debts and
liabilities, all of the assets of the Company available for distribution.  If
Preferred Stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of liquidation or dissolution.

     Preemptive Rights; Redemption.  Holders of the Common Stock of the Company
will not be entitled to preemptive rights with respect to any shares which may
be issued.  The Common Stock is not subject to redemption.

     Indemnification and Limit on Liability.  The Company's Certificate of
Incorporation contains provisions which limit the liability of directors,
officers and employees of the Company and indemnify such individuals.  Such
provisions provide that each person who was or is made a party or is threatened
to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director or officer of the Company shall
be indemnified and held harmless by the Company to the fullest extent authorized
by the Delaware General Corporation Law against all expense, liability and loss
reasonably incurred.  Under certain circumstances, the right to indemnification
shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition.  In addition,
a Director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages except for liability for any breach of the
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of the law, under Section 174 of the
Delaware General Corporation, or for any transaction from which the Director
derived an improper personal benefit.

PREFERRED STOCK

     None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion.  Such stock may be issued with such designations,
powers, preferences and rights as the Board of Directors may from time to time
determine.  The Board of Directors can, without stockholder approval, issue
Preferred Stock with voting, dividend, liquidation and conversion rights which
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.  The Company presently does not have plans to issue Preferred Stock.

                                      148
DESCRIPTION OF CAPITAL STOCK OF THE BANK

GENERAL

     In the event the holding company form of organization is not utilized in
connection with the Conversion, the Bank may offer shares of its common stock in
connection with the Conversion.  The following is a discussion of the capital
stock of the Bank.

     The Restated Organization Certificate of the Bank, to be effective upon the
Conversion, authorizes the issuance of capital stock consisting of 75 million
shares of common stock, par value $0.01 per share, and 5 million shares of
preferred stock, par value $0.01 per share, which preferred stock may be issued
in series and classes having such rights, preferences, privileges and
restrictions as the Board of Directors may determine.  Each share of common
stock of the Bank will have the same relative rights as, and will be identical
in all respects with, each other share of common stock.  After the Conversion,
the Board of Directors will be authorized to approve the issuance of common
stock up to the amount authorized by the Restated Organization Certificate
without the approval of the Bank's stockholders.  Assuming that the holding
company form of organization is utilized, all of the issued and outstanding
common stock of the Bank will be held by the Company as the Bank's sole
stockholder.  THE CAPITAL STOCK OF THE BANK WILL REPRESENT NON-WITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY
THE FDIC.

COMMON STOCK

     Dividends.  The holders of the Bank's common stock will be entitled to
receive and to share equally in such dividends as may be declared by the Board
of Directors of the Bank out of funds legally available therefor.  See "Dividend
Policy" for certain restrictions on the payment of dividends and "Federal and
State Taxation - Federal Taxation" for a discussion of the consequences of the
payment of cash dividends from income appropriated to bad debt reserves.

     Voting Rights.  Immediately after the Conversion, the holders of the Bank's
common stock will possess exclusive voting rights in the Bank.  Each holder of
shares of common stock will be entitled to one vote for each share held.
Shareholders shall not be entitled to cumulate their votes for the election of
directors.  See "Restrictions on Acquisition of the Company and the Bank - Anti-
Takeover Effects of the Company's Certificate of Incorporation and Bylaws and
Management Remuneration Adopted in Conversion."

     Liquidation.  In the event of any liquidation, dissolution, or winding up
of the Bank, the holders of common stock will be entitled to receive, after
payment of all debts and liabilities of the Bank (including all deposit accounts
and accrued interest thereon), and distribution of the balance in the special
liquidation account to Eligible Account Holders, all assets of the Bank
available for distribution in cash or in kind.  If additional preferred stock is
issued subsequent to the Conversion, the holders thereof may also have priority
over the holders of common stock in the event of liquidation or dissolution.

     Preemptive Rights; Redemption.  Holders of the common stock of the Bank
will not be entitled to preemptive rights with respect to any shares of the Bank
which may be issued.  Upon receipt by the Bank of the full specified purchase
price therefor, the common stock will be fully paid and non-assessable.

                          TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the Common Stock is [Transfer Agent].

                                      149
EXPERTS

     The consolidated financial statements of the Bank and its subsidiaries as
of June 30, 1997 and 1996, and for each of the years in the three-year period
ended June 30, 1997, have been included herein in reliance upon the report of
Ernst & Young LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.  Such report includes an explanatory paragraph relating to changes in
accounting principles.

     William M. Mercer, Incorporated has consented to the publication herein of
the summary of its opinion relating to compensation matters.

     Keller & Company, Inc. has consented to the publication herein of the
summary of its report to the Bank and Company setting forth its opinion as to
the estimated pro forma market value of the Common Stock upon Conversion and its
opinion with respect to subscription rights.

                             LEGAL AND TAX OPINIONS

     The legality of the Common Stock and the federal income tax consequences of
the Conversion will be passed upon for the Bank and Company by Muldoon, Murphy &
Faucette, Washington, D.C., special counsel to the Bank and Company.  The
federal income tax consequences of Richmond County Savings Foundation will be
passed upon for the Bank and the Company by Ernst & Young LLP, independent
certified public accountants.  Muldoon, Murphy & Faucette will rely as to
certain matters of Delaware law on the opinion of Morris, Nichols, Arsht &
Tunnell.  New York State and New York City income tax consequences will be
passed upon by Ernst & Young LLP.  Certain legal matters will be passed upon for
Sandler O'Neill by Thacher Proffitt & Wood, New York, N.Y.

                             ADDITIONAL INFORMATION

     The Company has filed with the SEC a registration statement under the
Securities Act with respect to the Common Stock offered hereby.  As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the registration statement.  Such information,
including the Conversion Valuation Appraisal Report, which is an exhibit to the
Registration Statement, can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of such material can be obtained from the SEC at prescribed rates.
In addition, the SEC maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC, including the Company.  The
Conversion Valuation Appraisal Report may also be inspected by Eligible Account
Holders and Supplemental Eligible Account Holders at the offices of the Bank
during normal business hours.  This Prospectus contains a description of the
material terms and features of all material contracts, reports or exhibits to
the registration statement required to be described; however, the statements
contained in this Prospectus as to the contents of any contract or other
document filed as an exhibit to the registration statement are, of necessity,
brief descriptions thereof and are not necessarily complete; each such statement
is qualified by reference to such contract or document.

     The Bank has filed an application for approval of conversion with the
Superintendent and the FDIC.  Pursuant to the rules and regulations of the
Superintendent, this Prospectus omits certain information 

                                      150
contained in that application. The application may be examined at the principal
office of the Superintendent, Two Rector Street, New York, New York 10006.

     The Company has filed with the Office of Thrift Supervision an Application
to Form a Holding Company.  This Prospectus omits certain information contained
in such Application.  Such Application may be inspected at the offices of the
OTS, 1700 G Street, N.W., Washington, D.C.  20552.

     In connection with the Conversion, the Company will register its Common
Stock with the SEC under Section [12(g)] of the Exchange Act, and, upon such
registration, the Company and the holders of its stock will become subject to
the proxy solicitation rules, reporting requirements and restrictions on stock
purchases and sales by Directors, officers and greater than 10% stockholders,
the annual and periodic reporting and certain other requirements of the Exchange
Act.  Under the Plan, the Company has undertaken that it will not terminate such
registration for a period of at least three years following the Conversion.  In
the event that the Bank amends the Plan to eliminate the concurrent formation of
the Company as part of the Conversion, the Bank will register its stock with the
Federal Deposit Insurance Corporation under Section [12(g)] of the Exchange Act
and, upon such registration, the Bank and the holders of its stock will become
subject to the same obligations and restrictions.

     A copy of the Certificate of Incorporation and the Bylaws of the Company
and the Restated Organization Certificate and Bylaws of the Bank are available
without charge from the Bank.  The Bank's principal office is located at 1214
Castleton Avenue, Staten Island, New York and its telephone number is (718) 448-
2800.

                                      151
Richmond County Savings Bank

                       Consolidated Financial Statements

                                   Contents
Report of Independent Auditors.............................................. F-2
 
Consolidated Statements of Financial 
   Condition as of June 30, 1997 and 1996................................... F-3
Consolidated Statements of Income for the 
   Years Ended June 30, 1997, 1996 and 1995.................................  35
Consolidated Statements of Changes in Net Worth for the 
   Years Ended June 30, 1997, 1996 and 1995................................. F-4
Consolidated Statements of Cash Flows for the 
   Years Ended June 30, 1997, 1996 and 1995................................. F-5 to F-6
Notes to Consolidated Financial Statements.................................. F-7 to F-26
All schedules are omitted because they are not required or applicable, or the 
required information is shown in the financial statements or notes thereto.

The financial statements of Richmond County Financial Corp. have been omitted 
because Richmond County Financial Corp. has not yet issued any stock, has no 
assets and no liabilities, and has not conducted any business other than of an 
organizational nature.

                                      F-1
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]

                         Report of Independent Auditors

The Board of Trustees
Richmond County Savings Bank

We have audited the accompanying consolidated statements of financial condition
of Richmond County Savings Bank (the "Bank") as of June 30, 1997 and 1996, and
the related consolidated statements of income, changes in net worth and cash
flows for each of the three years in the period ended June 30, 1997. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Bank at 
June 30, 1997 and 1996, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended June 30, 1997 in
conformity with generally accepted accounting principles.

As discussed in Note 9 to the financial statements, the Bank adopted, as of 
July 1, 1994, Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions."

                                           /s/ Ernst & Young LLP

August 22, 1997

                                      F-2
Richmond County Savings Bank

                Consolidated Statements of Financial Condition
June 30  
                                                            1997         1996
                                                       ------------------------
                                                             (In Thousands)
Assets
Cash and due from banks                                   $ 26,543     $ 29,272 
Federal funds sold                                           6,000       20,000
Receivable from broker                                          --        7,531
Securities held to maturity:
 Investment securities (market value: 1997--$205,362;
  1996--$306,609)                                          205,201      307,700
 
 Mortgage-backed and mortgage related securities
  (market value: 1997--$186,593; 1996--$80,631)            185,122       80,284
 
Securities available for sale:
 Investment securities                                      19,706       21,659
 Mortgage-backed and mortgage related securities            27,398        1,394
Loans receivable:
 Real estate mortgage loans                                471,601      394,957
 Other loans                                                30,127       29,109
 Less allowance for loan losses                             (5,470)      (4,796)
                                                       ------------------------
Total loans receivable, net                                496,258      419,270
 
Banking premises and equipment, net                         12,058       11,568
Accrued interest receivable                                  8,268        9,212
Other real estate owned                                        662          612
Net deferred tax assets                                      2,942        2,978
Other assets                                                 3,212        3,003
                                                       ------------------------
Total assets                                              $993,370     $914,483
                                                       ========================
 
Liabilities and net worth
Liabilities:
 Deposits                                                 $884,531     $817,928
 Escrow accounts                                             1,287        1,288
 Accrued and other liabilities                               6,687        5,366
                                                       ------------------------
 
Total liabilities                                          892,505      824,582
 
Net worth                                                  100,865       89,901
                                                       ------------------------
Total liabilities and net worth                           $993,370     $914,483
                                                       ========================
See accompanying notes.

                                      F-3
Richmond County Savings Bank

                Consolidated Statements of Changes in Net Worth
Net Unrealized
                                                                        Gain on
                                                                       Securities
                                     Surplus          Undivided         Available
                                      Fund             Profits          for Sale          Total
                                  -----------------------------------------------------------------
                                                           (In Thousands)
Balance--June 30, 1994               $15,538           $58,012            $ --           $ 73,550
Unrealized net gain, net of
 applicable income taxes,
 upon adoption of SFAS 115                --                --              64                 64
Change in unrealized holding
 gains and losses, net of
 applicable income taxes                  --                --               3                  3
Net income for the year ended
 June 30, 1995                           755             6,795              --              7,550
                                  -----------------------------------------------------------------
Balance--June 30, 1995                16,293            64,807              67             81,167
Change in unrealized holding
 gains and losses, net of
 applicable income taxes                  --                --               4                  4
Net income for the year ended
 June 30, 1996                            --             8,730              --              8,730
                                  -----------------------------------------------------------------
Balance--June 30, 1996                16,293            73,537              71             89,901
Change in unrealized holding
 gains and losses, net of
 applicable income taxes                  --                --             239                239
Net income for the year ended
 June 30, 1997                            --            10,725              --             10,725
                                  -----------------------------------------------------------------
Balance--June 30, 1997               $16,293           $84,262            $310           $100,865  
                                  =================================================================
See accompanying notes.

                                                                             F-4
Richmond County Savings Bank

                     Consolidated Statements of Cash Flows
Year ended June 30
                                                                1997        1996       1995
                                                           ----------------------------------
                                                                      (In Thousands)
Cash flows from operating activities              
Net income                                                   $  10,725   $   8,730   $  7,550
Adjustments to reconcile net income to net cash   
 provided by operating activities:                
  Depreciation of bank premises and equipment                      928         750        549
  Amortization of deposit premium                                  313         313        313
  Amortization of deferred fees                                   (479)       (580)      (570)
  Amortization of investment premiums/discounts                  1,039       2,769      4,753
  Provision for loan losses                                      1,080       1,600        600
  Earned discounts on loans purchased                             (158)       (158)      (158)
  Net realized losses (gains) on sales of         
  securities and loans                                             107         (42)        12
  Decrease (increase) in receivable from broker                  7,531      (7,531)        --
  Decrease (increase) in net deferred tax assets                    36        (450)    (1,251)
  Decrease (increase) in accrued interest receivable               944        (575)       455
  Increase in accrued and other liabilities                      1,321       1,013      2,396
  (Increase) decrease in other assets                             (782)      8,387     (8,238)
                                                           ---------------------------------- 
Net cash provided by operating activities                       22,605      14,226      6,411
Cash flows from investing activities              
Increase in loans receivable, net                              (78,523)    (37,920)   (37,819)
Loan sales to FHLMC, FNMA and SONYMA                             2,004       9,972      1,609
Loan purchases                                                    (910)         --         --
Investment securities held to maturity:           
 Maturities and redemptions                                    127,005     107,658    125,877
 Purchases                                                     (17,611)   (150,256)   (90,365)
Investment securities available for sale:         
 Sales and redemptions                                          11,938          10      2,132
 Purchases                                                     (17,678)     (1,064)    (2,273)
Mortgage-backed and mortgage related securities   
 held to maturity:                                
  Maturities                                                     3,609          --         --
  Principal collected                                           25,315      21,305      9,757
  Purchases                                                   (133,668)    (15,197)   (29,218)
Mortgage-backed and mortgage related securities   
 available for sale:                              
  Sales and redemptions                                             --       5,940         --
  Principal collected                                              479         410        505
  Purchases                                                    (26,478)         --         --
Net additions to banking premises and equipment                 (1,418)     (1,897)    (2,095)
                                                           ---------------------------------- 
Net cash used in investing activities                         (105,936)    (61,039)   (21,890)
F-5
Richmond County Savings Bank

               Consolidated Statements of Cash Flows (continued)
Year ended June 30
                                                       1997       1996       1995
                                                   --------------------------------
                                                             (In Thousands)
Cash flows from financing activities
(Decrease) increase in escrow accounts               $     (1)   $  (881)   $   591
Net increase in deposits                               66,603     53,866     15,425
                                                   --------------------------------
Net cash provided by financing activities              66,602     52,985     16,016
                                                   --------------------------------
Net (decrease) increase in cash and cash        
 equivalents                                          (16,729)     6,172        537
Cash and cash equivalents at beginning of year         49,272     43,100     42,563
                                                   --------------------------------
Cash and cash equivalents at end of year             $ 32,543    $49,272    $43,100
                                                   ================================
 
Income taxes paid                                    $  8,733    $ 7,080    $ 6,423
                                                   ================================
Interest paid on deposits                            $ 27,707    $26,254    $22,426
                                                   ================================
See accompanying notes.

                                                                             F-6
Richmond County Savings Bank

                  Notes to Consolidated Financial Statements

                                 June 30, 1997

1. General

Richmond County Savings Bank (the "Bank") is a New York State chartered mutual
savings bank. The Bank operates twelve branches in the borough of Staten Island
and one branch in the borough of Brooklyn, in the City of New York. The Bank
originates secured residential and commercial real estate loans (primarily
residential) and provides other financial services to customers primarily within
this region. The Bank's primary revenues are derived from these banking
activities and its portfolios of investment and mortgage- backed and mortgage
related securities. The Bank is subject to regulation by the Federal Deposit
Insurance Corporation and the New York State Banking Department.

2. Summary of Significant Accounting Policies

The following is a description of the significant accounting principles followed
by the Bank and its wholly-owned subsidiaries. The policies conform to generally
accepted accounting principles and to general practice within the banking
industry:

   Basis of Presentation: The consolidated financial statements of the Bank
   include the accounts of the Bank and its wholly-owned subsidiaries, RCSB
   Corporation and Richmond Enterprises, Inc. All significant intercompany
   balances and transactions between the Bank and its subsidiaries have been
   eliminated. Certain prior year balances have been reclassified to conform
   with current year presentation.

   Use of Estimates: 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 revenues and expenses during the reporting
   period. Actual results could differ from the estimates.

   Securities Held to Maturity: Investment securities and mortgage-backed and
   mortgage related securities for which the Bank has the positive intent and
   ability to hold to maturity are stated at cost, adjusted for amortization of
   premiums and discounts which are recognized as adjustments to interest income
   over the life of the security so as to provide a level yield.

   Securities Available for Sale: Investment securities and mortgage-backed and
   mortgage related securities not classified as trading nor as held to maturity
   are classified as available for sale and are carried at fair value.
   Unrealized gains or losses on securities available for sale are included as a
   separate component of net worth, net of applicable income taxes. Gains and

                                                                             F-7
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

   losses on the disposition of securities available for sale are recognized
   using the specific identification method.

   Loans Receivable: Loans receivable are stated at unpaid principal balances,
   less unearned discounts and net deferred origination and commitment fees.
   Loan origination and commitment fees and certain direct costs incurred in
   connection with loan originations are deferred and amortized to income over
   the life of the related loans as an adjustment to yield. Loans held for sale
   are stated at the lower of cost or market value.

   The Bank does not accrue interest on loans which are more than ninety days
   delinquent as to principal or interest unless, in the opinion of management,
   collection is probable, with the exception of single-family-home loans
   secured by real estate, where accrual is discontinued after six months. Any
   accrued but unpaid interest previously recorded on these loans is reversed
   against current period interest income. Effective July 1, 1997, the Bank
   revised this policy such that it does not accrue interest on any loans,
   including single-family loans secured by real estate, which are more than
   ninety days delinquent as to principal or interest unless, in the opinion of
   management, collection is probable. The effect of this change in policy was
   immaterial.

   Effective July 1, 1995, the Bank adopted SFAS No. 114, "Accounting by
   Creditors for Impairment of a Loan" as amended by SFAS No. 118, "Accounting
   by Creditors for Impairment of a Loan--Income Recognition and Disclosures."
   The impact of adoption on the Bank's financial position and results of
   operations was immaterial.

   Allowance for Loan Losses: The allowance for loan losses is based on
   management's periodic review and evaluation of the loan portfolio and the
   potential for loss in light of the current composition of the loan portfolio,
   current and prospective economic conditions, and other relevant factors.

   Assessing the adequacy of the allowance for loan losses is inherently
   subjective as it requires making material estimates, including the amount and
   timing of future cash flows expected to be received on impaired loans, that
   may be susceptible to significant change. In the opinion of management, the
   allowance, when taken as a whole, is adequate to absorb estimated loan losses
   inherent in the Bank's entire portfolio.

                                                                             F-8
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

   Other Real Estate Owned: Other real estate owned, consisting of properties
   acquired through foreclosure, is carried at the lower of carrying amount or
   fair value less cost to sell.

   Banking Premises and Equipment: Banking premises and equipment are recorded
   at cost. Depreciation and amortization are provided for in amounts sufficient
   to relate the cost of depreciable assets to operations over their estimated
   service lives (3 to 20 years) on a straight-line basis. Leasehold
   improvements are amortized over the lives of the respective leases or the
   service lives of the improvements, whichever is shorter.

   Expenditures for improvements and major renewals are capitalized, while the
   cost of ordinary maintenance, repairs and minor improvements is charged to
   operations.

   Mortgage Servicing Rights: Effective July 1, 1996, the Bank adopted SFAS No.
   122, "Accounting for Mortgage Servicing Rights" as superseded by SFAS No.
   125, "Accounting for Transfers and Servicing of Financial Assets and
   Extinguishments of Liabilities." The impact of adoption on the Bank's
   financial position and results of operations was immaterial.

   Income Taxes: The Bank uses the liability method to account for income taxes.
   Under this method, deferred tax assets and liabilities are determined based
   on differences between financial reporting and tax bases of assets and
   liabilities and are measured at currently enacted income tax rates applicable
   to the period in which they are expected to be realized or settled. As
   changes in tax laws or rates are enacted, deferred tax assets and liabilities
   are adjusted through the provision for income taxes.

   Statutory Transfers to Surplus: In accordance with the provisions of New York
   State Banking Law and Banking Board regulations, 10% of net income (excluding
   that of subsidiaries) is credited to surplus until such time as total net
   worth is at least equal to 10% of the amount due to depositors.

   Consolidated Statement of Cash Flows: For purposes of the consolidated
   statement of cash flows, the Bank defines cash and cash equivalents as cash
   and due from banks, federal funds sold and time deposits with original
   maturities of three months or less.

                                                                             F-9
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

3. Securities Held to Maturity

The amortized cost of investment securities, net of premiums and discounts, and
mortgage-backed and mortgage related securities held to maturity and their
related estimated fair values at June 30, 1997 and 1996 are summarized as
follows:
1997
                                               ------------------------------------------------
                                                              Gross        Gross
                                                 Amortized  Unrealized  Unrealized   Estimated
                                                   Cost       Gains       Losses     Fair Value
                                               ------------------------------------------------
                                                                 (In Thousands)
Investment securities:
 U.S. Government and agencies                     $ 92,215      $  394     $  (272)    $ 92,337
 Corporate and other debt obligations              112,986         443        (404)     113,025
                                               ------------------------------------------------
                                                  $205,201      $  837     $  (676)    $205,362
                                               ================================================
Mortgage-backed and mortgage related
 securities:
 Federal Home Loan Mortgage Corporation
  Pass-Through Certificates                       $ 82,237      $1,534     $  (187)    $ 83,584
 Private Issuer Pass-Through Certificates            3,276           5          --        3,281
 Federal Home Loan Mortgage Corporation
  Real Estate Mortgage Investment Conduits          32,248         130         (42)      32,336
 Private Issuer Real Estate Mortgage
  Investment Conduits                               67,361         179        (148)      67,392
                                               ------------------------------------------------
                                                  $185,122      $1,848     $  (377)    $186,593
                                               ================================================
1996
                                               ------------------------------------------------
                                                              Gross        Gross
                                                 Amortized  Unrealized  Unrealized   Estimated
                                                   Cost       Gains       Losses     Fair Value
                                               ------------------------------------------------
                                                                 (In Thousands)
Investment securities:
 U.S. Government and agencies                     $149,565      $  385     $  (977)    $148,973
 Corporate and other debt obligations              158,135         570      (1,069)     157,636
                                               ------------------------------------------------
                                                  $307,700      $  955     $(2,046)    $306,609
                                               ================================================
Mortgage-backed and mortgage related
 securities:
 Federal Home Loan Mortgage Corporation
  Pass-Through Certificates                       $ 80,284      $  993     $  (646)    $ 80,631
                                               ================================================
F-10
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

3. Securities Held to Maturity (continued)

The amortized cost and estimated fair value of investment and mortgage-backed
and mortgage related securities held-to-maturity by contractual maturity at June
30, 1997 are as follows:
Mortgage-Backed and Mortgage
                            Investment Securities            Related Securities
                          -------------------------   ---------------------------------
                            Amortized  Estimated        Amortized         Estimated
                              Cost     Fair Value          Cost           Fair Value
                          -------------------------------------------------------------
(In Thousands)
Year ended June 30:
 1998                        $ 85,115    $ 85,365            $  2,197          $  2,198
 1999-2002                    116,333     116,255              32,871            32,792
 2003-2008                      2,693       2,679                  --                --
 2009 and thereafter            1,060       1,063             150,054           151,603
                          -------------------------------------------------------------
                             $205,201    $205,362            $185,122          $186,593
                          =============================================================
Proceeds from maturities and redemptions of securities held to maturity for the
years ended June 30, 1997, 1996 and 1995 are summarized as follows:
1997          1996          1995    
                                 ------------------------------------     
                                             (In Thousands)
Proceeds                         $130,614      $107,658      $125,877  
Gross gains                             5             9             1  
Gross losses                          129             1             1
On November 15, 1995, the Financial Accounting Standards Board issued a Special
Report, "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities." In accordance with provisions in
that Special Report, the Bank chose to reclassify securities from held-to-
maturity to available for sale. At the date of the transfer, the amortized cost
of those securities was $25,981,369 and the unrealized gain on those securities
was $94,287, net of tax, which was included in net worth.

                                                                            F-11
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

4. Securities Available for Sale

The amortized cost of investment securities, net of premiums and discounts, and
mortgage-backed and mortgage related securities available for sale and their
related estimated fair values at June 30, 1997 and 1996 are summarized as
follows:
1997
                                       ------------------------------------------------
                                                      Gross        Gross
                                         Amortized  Unrealized  Unrealized   Estimated
                                           Cost       Gains       Losses     Fair Value
                                       ------------------------------------------------
(In Thousands)
Marketable equity securities:
 Preferred                                 $14,027        $132        $ (1)     $14,158
 Common                                      3,578         305         (69)       3,814
 Mutual funds                                1,629         105          --        1,734
                                       ------------------------------------------------
                                           $19,234        $542        $(70)     $19,706
                                       ================================================
 
Mortgage-backed and mortgage related
 securities:
  Government National Mortgage
   Association Pass-Through
   Certificates                            $11,710        $151        $(37)     $11,824
  Federal Home Loan Mortgage
   Corporation Real Estate Mortgage
   Investment Conduits                       4,693          --          (7)       4,686
  Private Issuer Real Estate Mortgage
   Investment Conduits                      10,881          19         (12)      10,888
                                       ------------------------------------------------
                                           $27,284        $170        $(56)     $27,398
                                       ================================================
F-12
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

4. Securities Available for Sale (continued)
1996                            
                                          ------------------------------------------------       
                                                         Gross        Gross                      
                                            Amortized  Unrealized  Unrealized   Estimated        
                                              Cost       Gains       Losses     Fair Value       
                                          ------------------------------------------------
(In Thousands)                       
   Marketable equity securities:                                                                 
    Preferred                                 $    27        $  -        $ (2)     $    25       
    Common                                        109          81         (34)         156       
    Mutual funds                                1,521           7          (2)       1,526       
                                          ------------------------------------------------       
                                                1,657          88         (38)       1,707       
   Debt securities:                                                                              
    U.S. Government and agencies               19,967          44         (59)      19,952       
                                          ------------------------------------------------                             
                                              $21,624        $132        $(97)     $21,659       
                                          ================================================       
   Mortgage-backed and mortgage related                                                          
    securities:                                                                                  
     Government National Mortgage                                                                
      Association Pass-Through                                                                   
      Certificates                            $ 1,292        $102        $  -      $ 1,394       
                                          ================================================
The amortized cost and estimated fair value of mortgage-backed and mortgage
related securities by contractual maturity at June 30, 1997 are as follows:
Amortized       Estimated         
                                               Cost          Fair Value        
                                           ----------------------------        
                                                   (In Thousands)
Years ended June 30:                                                        
    1998                                       $     -          $     -        
    1999-2002                                        1                1        
    2003-2008                                       34               35        
    2009 and thereafter                         27,249           27,362        
                                           ----------------------------        
                                               $27,284          $27,398        
                                           ============================
Proceeds from sales and redemptions of securities available for sale for the
years ended June 30, 1997, 1996 and 1995 are summarized as follows:
1997          1996         1995   
                                      ------------------------------------ 
                                                   (In Thousands)
Proceeds                             $11,938        $5,950       $2,132 
   Gross gains                               40            19            - 
   Gross losses                              24             -           20
F-13
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)
 
5. Loans Receivable

Loans receivable at June 30, 1997 and 1996 consist of the following:
1997       1996
                                                          ---------------------
                                                               (In Thousands)
One-to-four family mortgage loans                           $394,588   $325,139
Multi-family mortgage loans                                    2,705      1,238
Commercial real estate mortgage loans                         40,713     39,892
Construction and development loans, principally                                 
 residential                                                  18,343     12,812 
Home equity loans                                             16,729     18,054
                                                          ---------------------
                                                             473,078    397,135
Less unearned discounts and net deferred
 origination and commitment fees                              (1,477)    (2,178)
                                                          ---------------------
Total real estate mortgage loans                             471,601    394,957
 
Consumer and student loans                                    23,589     22,932
Commercial loans                                               6,662      6,300
                                                          --------------------- 
                                                              30,251     29,232
Less unearned discounts and net deferred
origination and commitment fees                                 (124)      (123)
                                                          ---------------------
Total other loans                                             30,127     29,109
Less allowance for loan losses                                (5,470)    (4,796)
                                                          ---------------------
Total loans receivable, net                                 $496,258   $419,270
                                                          =====================
Included in real estate mortgage loans are $1,345,843 and $1,851,300 of
mortgages serviced by third parties as of June 30, 1997 and 1996, respectively,
and $0 and $1,155,282 of loans held for sale as of June 30, 1997 and 1996,
respectively.

The Bank sells real estate mortgage loans to the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA"), and
the State of New York Mortgage Association ("SONYMA"). These loans are then
serviced by the Bank under agreements which specify a servicing fee based on a
percentage of the outstanding principal balances. The FHLMC, FNMA, and SONYMA
loan servicing portfolios totaled $40,672,907, $570,309, and $8,875,350 at June
30, 1997 and $41,801,765, $576,210, and $7,157,689 at June 30, 1996,
respectively, and are not included in the consolidated financial statements.

                                                                            F-14
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

5. Loans Receivable (continued)

Real estate mortgage loans on nonaccrual status totaled $2,673,574, $2,756,510,
and $2,291,417 at June 30, 1997, 1996, and 1995, respectively. If interest on
the nonaccrual loans had been accrued, such income would have been $276,092,
$225,506, and $113,664, respectively.

A summary of the changes in the allowance for loan losses for the years ended
June 30, 1997, 1996 and 1995 is as follows:
1997       1996       1995
                                         --------------------------------
                                                   (In Thousands)
Balance at beginning of year               $4,796     $3,275     $3,106 
 Provision charged to operations            1,080      1,600        600 
 Charge offs, net of recoveries              (406)       (79)      (431)
                                         --------------------------------
Balance at end of year                     $5,470     $4,796     $3,275 
                                         ================================
6. Banking Premises and Equipment

Banking premises and equipment at June 30, 1997 and 1996 consist of the
following:
1997       1996
                                                    -----------------------
 
                                                         (In Thousands)
Land                                                   $ 2,850    $ 2,850
Banking houses and improvements                          6,742      6,140
Leasehold improvements                                   2,847      2,635
Furniture, fixtures and equipment                        3,835      3,517
Automobiles                                                 40         51
                                                    -----------------------
 
                                                        16,314     15,193
Less accumulated depreciation and amortization          (4,256)    (3,625)
                                                    -----------------------
                                                       $12,058    $11,568
                                                    =======================
F-15
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

7. Deposits

At June 30, 1997 and 1996, deposits consist of the following:
Average               Average
                                 1997       Rate       996        Rate
                             ---------------------------------------------
                                           (In Thousands)
Certificates of deposit        $298,066     5.37%    $253,927       5.16%
Savings                         437,694     2.78      436,669       2.78 
Money market demand accounts     37,782     3.45       33,988       3.45 
Noninterest-bearing demand                                               
 deposits                        92,959       --       78,113         --
                                                                         
NOW accounts                     18,030     2.26       15,231       2.24  
                             ------------           ------------       
                               $884,531              $817,928          
                             ============           ============
Contractual maturities of certificates of deposit accounts at June 30, 1997 are
as follows:
Certificates
                                              of $100,000     All Other        Total
                                                or More     Certificates    Certificates
                                           ----------------------------------------------
                                                            (In Thousands)
Year ending June 30:
1998                                              $17,551       $191,526        $209,077
 1999                                                5,837         53,741          59,578
 2000                                                  200          6,529           6,729
 2001                                                  792          4,237           5,029
 2002 and thereafter                                 3,061         14,592          17,653
                                           ----------------------------------------------
                                                   $27,441       $270,625        $298,066
                                           ==============================================
F-16
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

8. Income Taxes

Significant components of the Bank's deferred tax assets and liabilities as of
June 30, 1997 and 1996 are as follows:
1997      1996 
                                                      -------------------

                                                         (In Thousands)
Deferred tax assets:                                                    
 Allowance for loan losses                              $2,576    $2,259
 Deferred loan fees                                        338       604
 Book over tax amortization                                262       213
 Non-accrual interest income                               370       257
 Postretirement benefits                                 1,660     1,547
 Capital loss carryforward                                  --        14
                                                      -------------------
Gross deferred tax assets                                5,206     4,894
                                                                        
Deferred tax liabilities:                                               
 Tax bad debt reserves                                   1,159     1,159
 Tax over book depreciation                                426       369
 Prepaid pension expense                                   402       277
 Discount accretion                                          1        47
 Securities available for sale                             276        64
                                                      -------------------
Gross deferred tax liabilities                           2,264     1,916
                                                      -------------------
                                                                        
Net deferred tax assets                                 $2,942    $2,978
                                                      ===================
In view of the Bank's current and projected future earnings trend, management
believes that it is more likely than not that the entire net deferred tax assets
will be utilized. Accordingly, no valuation allowance was deemed necessary for
the net deferred tax assets for the years ended June 30, 1997 and 1996.

                                                                            F-17
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

8. Income Taxes (continued)

Significant components of the provision (benefit) for income taxes attributable
to continuing operations for the years ended June 30, 1997, 1996 and 1995 are as
follows:
1997       1996       1995        
                                       --------------------------------   
                                                (In Thousands)
Current:                                                                  
 Federal                                 $6,278     $4,526     $4,815     
 State and local                          3,361      2,732      2,191     
                                       --------------------------------   
                                          9,639      7,258      7,006     
Deferred:                                                                 
 Federal                                   (106)      (275)       (54)    
 State and local                            (70)      (180)       (33)    
                                       --------------------------------   
                                           (176)      (455)       (87)    
                                       --------------------------------   
                                         $9,463     $6,803     $6,919     
                                       ================================
The table below presents a reconciliation between the reported tax provision and
the tax provision for the years ended June 30, 1997, 1996 and 1995 computed by
applying the statutory federal income tax rate (35% for the years ended June 30,
1997, 1996, and 1995) to income before provision for income taxes.
1997    1996     1995
                                                 -------------------------------
                                                        (In Thousands)
Federal income tax provision at statutory rates    $7,066    $5,437     $5,525
Increase (reduction) in tax resulting from: 
 State and local income taxes, net of       
  federal income tax effect                         2,139     1,659      1,402
                                            
 Other                                                258      (293)        (8)
                                                 -------------------------------
                                                   $9,463    $6,803     $6,919
                                                 ===============================
For federal income tax purposes, prior to 1996, if certain definitional tests
and other conditions were met, the Bank was allowed a special bad debt deduction
in determining its taxable income. The deduction was based on either specified
experience formulas or a percentage of taxable income. Federal tax legislation
enacted during 1996 repealed the special bad debt deduction provisions. As a
result, a large thrift institution such as the Bank is required to use the
specific charge-off method in computing its federal bad debt deduction for tax
years beginning after December 31, 1995. However, New York State enacted
legislation which, among other things, would permit a large thrift institution
such as the Bank to continue to use the bad debt reserve method for both New
York State and New York City tax purposes.

                                                                            F-18
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

8. Income Taxes (continued)

The 1996 Federal tax legislation also provided that a large thrift institution
such as the Bank is required to recapture the excess of its tax bad debt
reserves at December 31, 1995 over the balance of such reserves as of December
31, 1987 (the "base year"), whether the additions were made under the percentage
of taxable income method or the experience method. The Bank will be required to
recapture its excess bad debt reserves, for which deferred taxes have been
recognized, over a six-year period on a straight-line basis beginning in
calendar year 1998. The base year reserve will remain subject to recapture in
the case of certain excess distributions to and redemptions of shareholders or
if the Bank ceases to be a bank. The New York State legislation provides that
the recapture of excess bad debt reserves is not required for either New York
State or New York City tax purposes.

At June 30, 1997, the base year bad debt reserve for federal income tax purposes
was approximately $9.6 million, for which deferred taxes are not required to be
recognized. Bad debt reserves maintained for New York State and New York City
tax purposes as of June 30, 1997, for which deferred taxes are not required to
be recognized, amounted to approximately $34 million. Accordingly, deferred tax
liabilities of approximately $7.2 million have not been recognized as of June
30, 1997.

9. Employee Benefit Plans

Defined Benefit Plan

The Bank, through its participation in the RSI Retirement Trust, contributes to
a pension plan covering substantially all of its employees. The pension plan
benefit formula is based upon years of service and average compensation over the
final years of service. The Bank's policy is to make quarterly contributions to
the plan equal to the amount necessary to satisfy the funding requirements of
ERISA. Plan assets are principally invested in pooled investment funds in the
RSI Retirement Trust, which is a registered investment company.

                                                                            F-19
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

9. Employee Benefit Plans (continued)

The following table sets forth the funded status of the Bank's defined benefit
plan for the years ended June 30, 1997 and 1996 in accordance with Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions":
1997         1996 
                                                       ------------------------
                                                            (In Thousands)
Actuarial present value of:                                                  
 Vested benefit obligation                                $ 6,640     $ 6,120
 Nonvested benefits                                           266         735
                                                       ------------------------
Accumulated benefit obligation                            $ 6,906     $ 6,855
                                                       ========================
                                                                             
                                                                             
Plan assets at fair value                                 $10,852     $ 9,766
Projected benefit obligation                               (8,569)     (8,379)
                                                       ------------------------
Plan assets in excess of projected benefit obligation       2,283       1,387
Unrecognized (gain)                                        (1,619)       (687)
Unrecognized transition (asset)                               (76)       (111)
Unrecognized past service liability                           (25)        (27)
                                                       ------------------------
Prepaid pension asset included in other assets            $   563     $   562
                                                       ========================
The expected long-term rate of return on plan assets for plan years 1997 and
1996 was 8.00%. The rate of increase in future compensation levels was 6.00% and
5.50% for plan years 1997 and 1996, respectively. The weighted average discount
rate was 8.00% and 7.50% for plan years 1997 and 1996, respectively.

Pension expense for the years ended June 30, 1997, 1996 and 1995 includes the
following components:
1997      1996      1995   
                                          ----------------------------- 
                                                  (In Thousands)
Service cost                                $ 478     $ 453     $ 362   
Interest cost                                 671       614       584   
Actual return on plan assets                 (854)     (773)     (616)  
Net amortization and deferrals                (94)      (38)      (38)  
                                          ----------------------------- 
Net pension expense                         $ 201     $ 256     $ 292   
                                          =============================
F-20
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

9. Employee Benefit Plans (continued)

Defined Contribution Plan

The Bank also provides a 401(k) Savings Plan open to salaried employees meeting
certain eligibility requirements. Participants contribute 2% to 9% of pre-tax
compensation. The Bank makes matching contributions in an amount equal to 50% of
an employee's contributions, up to 6%. Participants may invest in any or all of
six investment funds, which are managed by the 401(k) Plan's trustee, RSI
Retirement Trust.

Postretirement Benefit Plan

The Bank provides postretirement medical and life insurance benefits for
eligible retired employees.

Effective July 1, 1994, the Bank adopted SFAS No. 106, "Employer's Accounting
for Postretirement Benefits Other Than Pensions." The Bank uses actuarial-basis
accrual accounting for all employer provided postretirement benefits other than
pensions. This requires the recognition of a transition obligation for the
difference between the accumulated postretirement benefit obligation ("APBO")
and the liability currently recognized on the statement of financial condition.
Upon adoption of SFAS No. 106, the Bank immediately recognized its entire net
transition obligation by recording a charge of $2,489,000 ($1,315,950 on an
after-tax basis) as the cumulative effect of this change in accounting
principle.

The following table sets forth the funded status and amounts recognized in the
Bank's consolidated statements of financial condition at June 30, 1997 and 1996:
1997      1996
                                                     ----------------------
                                                         (In Thousands)
Accumulated postretirement benefit obligation:
 Retirees                                              $(1,025)   $  (894)
 Fully eligible active plan participants                  (300)      (207)
 Other active plan participants                         (1,471)    (1,545)
 Unrecognized net actuarial gain                          (498)      (434)
                                                     ----------------------
Accrued postretirement benefit cost included in
 accrued and other liabilities                         $(3,294)   $(3,080)
                                                     ======================
F-21
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

9. Employee Benefit Plans (continued)

The Bank's postretirement benefits expense for the years ended June 30, 1997,
1996 and 1995 consisted of the following:
1997    1996   1995
                                           -------------------------
                                                (In Thousands)
Interest cost on accumulated
 postretirement benefit obligations          $ 201   $ 190   $ 205
 
Service cost attributable to service
 during the year                               120     120     140
 
Amortization of actuarial gain                 (20)    (16)     --
                                             -----   -----   -----   
                                             $ 301   $ 294   $ 345
                                           =========================
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e. health care cost trend rate) is 12.5% for the initial
year and is assumed to decrease gradually to 6% in 2003 with 1.0% annual
decreases thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the assumed
health care cost trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation at June 30, 1997 by $327,000
(11.7%). The increase in the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1997 would be $44,000
(12.1%).

The weighted-average discount rate at June 30, 1997 and 1996 was 8%. The rate of
increase in future compensation levels at June 30, 1997 and 1996 was 5.5%.

10. Commitments and Contingencies

Lease Commitments

The Bank conducts a portion of its banking operations in leased facilities under
noncancellable operating leases expiring at various periods through 2002. These
leases contain renewal options and certain of the leases provide for increases
based upon various escalation clauses. Rent expense was $353,642, $339,656, and
$324,152 for the years ended June 30, 1997, 1996, and 1995, respectively.

                                                                            F-22
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

10. Commitments and Contingencies (continued)

The future minimum lease payments under such operating leases are as follows:
Amount
                                                   ------------------
                                                      (In Thousands)
Years ended June 30:
 1998                                                    $  362
 1999                                                       366
 2000                                                       362
 2001                                                       357
 2002 and thereafter                                      2,603
                                                   ------------------
                                                         $4,050
                                                   ==================
Litigation

The Bank is a defendant in legal actions arising in the ordinary course of
business. Management believes that these actions are without merit or that the
ultimate liability, if any, resulting from such actions will not materially
affect the Bank's consolidated financial position.

Loan Commitments

There were outstanding commitments to make loans (primarily fixed rate
residential) at June 30, 1997 and 1996 of $49,373,635 and $54,522,128,
respectively. Loan commitments have credit risk essentially the same as that
involved in extending loans to customers and are subject to the Bank's normal
credit policy. These commitments are not reflected in the accompanying
consolidated statements of financial condition. Management expects that all loan
originations will be funded from existing liquidity and normal monthly cash
flow.

Lines of Credit

At June 30, 1997 and 1996, the Bank had available lines of credits with other
financial institutions aggregating $10,000,000 and $20,000,000 respectively. As
of June 30, 1997 and 1996, no amounts were outstanding under these lines of
credit.

                                                                            F-23
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

11. Regulatory Requirements

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.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth below) of
total and Tier I capital to risk-weighted assets, and Tier I capital to average
assets (all as defined in the regulations). Management believes, as of June 30,
1997, that the Bank meets all capital adequacy requirements to which it is
subject.

Based on its regulatory capital ratios at June 30, 1997, the Bank is categorized
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, and Tier I leverage ratios as set forth in
the table. The Bank's actual capital amounts and ratios are also presented in
the table (in thousands).
To Be Well Capitalized Under
                                                          For Capital Adequacy             Prompt Corrective Action
                                       Actual                  Purposes                         Provisions
                                -------------------   ------------------------------   ------------------------------ 
                                   Amount   Ratio       Amount           Ratio           Amount            Ratio
                                -------------------------------------------------------------------------------------
                                                                    (In Thousands)
As of June 30, 1997:
 Total Capital                                                          greater than                     greater than
  (to Risk Weighed Assets)        $103,910  19.71%      $42,181              8.00%      $52,726                 10.00%
 Tier I Capital                                                         greater than                     greater than
  (to Risk Weighed Assets)        $ 99,063  18.79%      $21,090              4.00%      $31,635                  6.00%
 Tier I Capital                                                         greater than                     greater than
  (to Average Assets)             $ 99,063  10.02%      $39,562              4.00%      $49,452                  5.00%
As of June 30, 1996:                                                                                 
 Total Capital                                                          greater than                     greater than
  (to Risk Weighed Assets)        $ 92,194  19.20%      $38,414              8.00%      $48,017                 10.00%
 Tier I Capital                                                         greater than                     greater than
  (to Risk Weighed Assets)        $ 88,029  18.33%      $19,207              4.00%      $28,810                  6.00%
 Tier I Capital                                                         greater than                     greater than
  (to Average Assets)             $ 88,029   9.65%      $36,483              4.00%      $45,604                  5.00%
F-24
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

12. Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that
value. Quoted market prices, when available, are used as the measure of fair
value. In cases where quoted market prices are not available, fair values are
based on present value estimates or other valuation techniques. These derived
fair values are significantly affected by assumptions used, principally the
timing of future cash flows and the discount rate.

Because assumptions are inherently subjective in nature, the estimated fair
values cannot be substantiated by comparison to independent market quotes and in
many cases, the estimated fair values would not necessarily be realized in an
immediate sale or settlement of the instrument. The disclosure requirements of
SFAS No. 107 exclude certain financial instruments and all nonfinancial
instruments. Accordingly, the aggregate fair value amounts presented do not
represent management's estimation of the underlying value of the Bank.

The carrying values and estimated fair values of the Bank's material financial
instruments as of June 30, 1997 and 1996 are summarized as follows:
1997                        1996
                                      --------------------------   -------------------------
                                        Carrying Value    Fair      Carrying Value    Fair
                                                         Value                       Value
                                      --------------------------   -------------------------
                                                           (In Thousands)
Financial assets
Cash and due from banks                    $ 26,543     $ 26,543      $ 29,272      $ 29,272
Federal funds sold                            6,000        6,000        20,000        20,000
Receivable from broker                           --           --         7,531         7,531
Securities held to maturity:                                                       
 Investment securities                      205,201      205,362       307,700       306,609
 Mortgage-backed and mortgage related                                              
  securities                                185,122      186,593        80,284        80,631
Securities available for sale:                                                     
 Investment securities                       19,706       19,706        21,659        21,659
 Mortgage-backed and mortgage related                                              
  securities                                 27,398       27,398         1,394         1,394
Real estate mortgage loans receivable       471,601      472,868       394,957       401,330
Other loans receivable                       30,127       30,089        29,109        29,322
Financial liabilities                                                              
Deposits                                    884,531      838,358       817,928       770,139
F-25
Richmond County Savings Bank

            Notes to Consolidated Financial Statements (continued)

12. Fair Value of Financial Instruments (continued)

The following methods and assumptions were used by the Bank in estimating the
fair values of financial instruments:

 Cash and Due from Banks, Federal Funds Sold and Receivable from Broker:
 Carrying amounts approximate fair value since these instruments are either
 payable on demand or have short-term maturities.

 Securities Held to Maturity and Securities Available for Sale: The estimated
 fair values of securities held to maturity and securities available for sale
 are based on independent dealer quotations and quoted market prices.

 Real Estate Mortgage Loans and Other Loans Receivable: The estimated fair
 values of real estate mortgage loans and other loans receivable are based on
 discounted cash flow calculations that apply interest rates currently being
 offered by the Bank for loans with similar remaining maturities to a schedule
 of aggregated expected monthly maturities.

 Deposits: The estimated fair values of deposits are based on discounted cash
 flow calculations that apply interest rates currently being offered by the Bank
 for deposits with similar remaining maturities to a schedule of aggregated
 expected monthly maturities.

13. Subsequent Events

On July 31, 1997, the Board of Trustees of the Bank unanimously adopted a plan
of Conversion (the "Plan of Conversion") whereby the Bank would convert from a
New York State chartered mutual bank to a New York State chartered stock
institution and offer shares of common stock in a subscription and community
offering. As part of the conversion, newly authorized shares of a new stock
holding company will be offered to the Bank's depositors and employee benefit
plans in accordance with applicable state and federal regulations. The amount
and pricing of the proposed stock offering will be based upon an independent
appraisal of the Bank.

The Plan of Conversion must be approved by eligible depositors as of June 30,
1996 as well as the New York State Banking Department. In addition, the FDIC
must issue a Letter of Non-objection with respect to the Plan of Conversion.

                                                                            F-26
================================================================================
         No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by Richmond County Financial Corp., Richmond County Savings Bank or
Sandler O'Neill & Partners, L.P. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
to any person in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction. Neither the delivery of this Prospectus
nor any sale hereunder shall under any circumstances create any implication that
there has been no change in the affairs of Richmond County Financial Corp. or
Richmond County Savings Bank since any of the dates as of which information is
furnished herein or since the date hereof.
                                                                                
                        ------------------------------

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----
Summary of the Conversion and the Offerings...................................
Selected Consolidated Financial and Other                                       
  Data of the Bank............................................................
Risk Factors..................................................................
Richmond County Financial Corp................................................
Richmond County Savings Bank..................................................
Richmond County Savings Foundation............................................
Regulatory Capital Compliance.................................................
Use of Proceeds...............................................................
Dividend Policy...............................................................
Market for the Common Stock...................................................
Capitalization................................................................
Pro Forma Data................................................................
Consolidated Statements of Income.............................................
Management's Discussion and...................................................
  Analysis of Financial Condition
  and Results of Operations...................................................
Business of the Bank..........................................................
Federal and State Taxation....................................................
Regulation and Supervision....................................................
Management of the Company.....................................................
Management of the Bank........................................................
The Conversion................................................................
Restrictions on Acquisition of the
   Company and the Bank.......................................................
Description of Capital Stock of the Company...................................
Transfer Agent and Registrar..................................................
Experts.......................................................................
Legal and Tax Opinions........................................................
Additional Information........................................................
Index to Financial Statements.................................................

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

         Until            , 1997 or 25 days after commencement of the
               -----------                                           
Syndicated Community Offering, if any, whichever is later, all                  
dealers effecting transactions in the registered securities, may be required to
deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

                               21,275,000 Shares
                                                            
                                                            
                                                            
                                                            
                                    [LOGO]
                                                            
                                                            
                                                            
                        RICHMOND COUNTY FINANCIAL CORP.
                                                            
                         (Proposed Holding Company for
                         Richmond County Savings Bank)
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                 COMMON STOCK
                          (par value $0.01 per share)
                                                            
                                                            
                                                            
                                  ----------
                                                            
                                  PROSPECTUS

                                  ----------
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                       Sandler O'Neill & Partners, L.P.
                                                            
                                                            
                                                            
                                                            
                                                            
                           _______________ ___, 1997
                                                            
                                                            
                                                            
================================================================================
PART II
                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.  Other Expenses of Issuance and Distribution.
SEC filing fee(1)..........................................        $   80,072
          NYBD filing fee............................................             5,000
          OTS filing fee.............................................             2,000
          NASD filing fee............................................             5,000
          Nasdaq National Market fee(1)..............................            50,000
          Printing, postage and mailing..............................           740,000
          Legal fees and expenses (including underwriter's             
           counsel...................................................           850,000
          Accounting fees and expenses...............................           400,000
          Appraisers' fees and expenses (including                     
           business plan)............................................            67,000
          Marketing fees, selling commissions, and                     
           underwriter's expenses....................................         2,905,000
          Proxy solicitation fees and expenses.......................            35,000
          Conversion agent fees and expenses.........................            65,000
          Transfer agent fees and expenses...........................            20,000
          Certificate printing.......................................            15,000
          Telephone, temporary help and other equipment..............           400,000
          Blue Sky fees and expenses.................................            10,000
          Miscellaneous..............................................            75,000
                                                                             ----------
          TOTAL                                                              $5,679,072
                                                                             ==========
--------------------
(1)  Actual expenses based upon the registration of 26,423,550 shares at $10.00 
     per share. All other expenses are estimated.

Item 14.  Indemnification of Directors and Officers.

In accordance with the General Corporation Law of the State of Delaware (being 
Chapter I of Title 8 of the Delaware Code), Articles 10 and 11 of the 
Registrant's Certificate of Incorporation provide as follows:

TENTH:

A.   Each person who was or is made a party or is threatened to be made a party 
to or is otherwise involved in any action, suit or proceeding, whether civil 
criminal, administrative or investigative (hereinafter a "proceeding"), by 
reason of the fact that he or she is or was a Director or an Officer of the 
Corporation or is or was serving at the request of the Corporation as a 
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an 
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such 
proceeding is alleged action in an official capacity as a Director, Officer, 
employee or agent, or in any other capacity while serving as a Director, 
Officer, employee or agent, shall be indemnified and held harmless by the 
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Article TENTH 
shall include the right to be paid by the Corporation the expenses incurred in 
defending any such proceeding in advance of its final disposition (hereinafter 
an "advancement of expenses"); provided, however, that, if the Delaware General 
Corporation Law requires, an advancement of expenses incurred by an indemnitee 
in his or her capacity as a Director or Officer (and not in any other capacity 
in which service was or is rendered by such indemnitee, including, without 
limitation, services to an employee benefit plan) shall be made only upon 
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall 
ultimately be determined by final judicial decision from which there is no 
further right to appeal (hereinafter a "final adjudication") that such 
indemnitee is not entitled to be indemnified for such expenses under this 
Section or otherwise. The rights to indemnification and to the advancement of 
expenses conferred in Sections A and B of this Article TENTH shall be contract 
rights and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the 
indemnitee's heirs, executors and administrators.

C. If a claim under Section A or B of this Article TENTH is not paid in full by 
the Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in 
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount 
of the claim. If successful in whole or in part in any such suit, or in a suit 
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the 
expenses of prosecuting or defending such suit. In (i) any suit brought by the 
indemnitee to enforce a right to indemnification hereunder (but not in a suit 
brought by the indemnitee to enforce a right to an advancement of expenses) it 
shall be a defense that, and (ii) in any suit by the Corporation to recover an 
advancement of expenses pursuant to the terms of an undertaking the Corporation 
shall be entitled to recover such expenses upon a final adjudication that, the 
indemnitee has not met any applicable standard for indemnification set forth in 
the Delaware General Corporation Law. Neither the failure of the Corporation 
(including its Board of Directors, independent legal counsel, or its 
stockholders) to have made a determination prior to the commencement of such 
suit that indemnification of the indemnitee is proper in the circumstances 
because the indemnitee has met the applicable standard of conduct set forth in 
the Delaware General Corporation Law, nor an actual determination by the 
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of 
conduct, shall create a presumption that the indemnitee has not met the 
applicable standard of conduct or, in the case of such a suit brought by the 
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to 
enforce a right to indemnification or to an advancement of expenses hereunder, 
or by the Corporation to recover an advancement of expenses pursuant to the 
terms of an undertaking, the burden of proving that the indemnitee is not 
entitled to be indemnified, or to such advancement of expenses under this 
Article TENTH, or otherwise shall be on the Corporation.

D. The rights to indemnification and to the advancement of expenses conferred in
this Article TENTH shall not be exclusive of any other right which any person 
may have or hereafter acquire under any statue, the Corporation's Certificate of
Incorporation, Bylaws, agreement, vote of stockholders of Disinterested 
Directors or otherwise.

E. The Corporation may maintain insurance, at its expense, to protect itself and
any Director, Officer, employee or agent of the Corporation or subsidiary or 
Affiliate or another corporation, partnership, joint venture, trust or other 
enterprise against any expense, liability or loss, whether or not the 
Corporation would have the power to indemnify such person against such expense, 
liability or loss under the Delaware General Corporation Law.

F. The Corporation may, to the extent authorized from time to time by the Board 
of Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation to the fullest extent of the 
provisions of the Article TENTH with respect to the indemnification and 
advancement of expenses of Directors and Officers of the Corporation.

ELEVENTH:

A Director of this Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a 
Director, except for liability: (i) for any breach of the Director's duty of 
loyalty to the
Corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under 
Section 174 of the Delaware General Corporation Law; or (iv) for any transaction
from which the Director derived an improper personal benefit. If the Delaware 
General Corporation Law is amended to authorize corporate action further 
eliminating or limiting the personal liability of Directors, then the liability 
of a Director of the Corporation shall be eliminated or limited to the fullest 
extent permitted by the Delaware General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of a Director of 
the Corporation existing at the time of such repeal or modification. 

Item 15.  Recent Sales of Unregistered Securities

None.
Item 16. Exhibits and Financial Statement Schedules

The exhibits and financial statement schedules filed as a part of this 
Registration Statement are as follows:

(a) List of Exhibits (filed herewith unless otherwise noted)

 1.1  Engagement Letter between Richmond County Savings Bank and Sandler O'Neill
      & Partners, L.P.
 1.2  Draft Form of Agency Agreement*
 2.1  Plan of Conversion (including the Restated Organization Certificate and 
      Stock Bylaws of Richmond County Savings Bank)
 3.1  Certificate of Incorporation of Richmond County Financial Corp.
 3.2  Bylaws of Richmond County Financial Corp.
 3.3  Restated Organization Certificate and Stock Bylaws of Richmond County 
      Savings Bank (See Exhibit 2.1 hereto)
 4.0  Draft Stock Certificate of Richmond County Financial Corp.
 5.0  Draft Opinion of Muldoon, Murphy & Faucette re: legality
 5.1  Draft Opinion of Morris, Nichols, Arsht & Tunnell re: legality
 8.0  Draft Opinion of Muldoon, Murphy & Faucette re: Federal Tax Matters
 8.1  Draft Opinion of Ernst & Young re: State Tax Matters
10.1  Form of Richmond County Savings Bank Employee Stock Ownership Plan and 
      Trust
10.2  Draft ESOP Loan Commitment Letter and ESOP Loan Documents
10.3  Form of Proposed Employment Agreement between Richmond County Savings Bank
      and certain executive officers
10.4  Form of Proposed Employment Agreement between Richmond County Financial 
      Corp. and certain executive officers
10.5  Form of Proposed Change in Control Agreement between Richmond County 
      Savings Bank and certain executive officers
10.6  Form of Proposed Richmond County Savings Bank Employee Severance 
      Compensation Plan
10.7  Form of Proposed Management Supplemental Executive Retirement Plan
23.1  Consent of Ernst & Young LLP
23.2  Consent of Muldoon, Murphy & Faucette
23.3  Consent of Morris, Nichols, Arsht & Tunnell
23.4  Consent and Subscription Rights Opinion of Keller & Company, Inc.
23.5  Consent of William M. Mercer, Incorporated
24.1  Powers of Attorney
27.0  Financial Data Schedule
99.1  Appraisal Report of Keller & Company, Inc. (P)
99.2  Draft of Richmond County Savings Foundation Gift Instrument*

------------------------
* To be filed by amendment
(P) Filed pursuant to Rule 202 of Regulation S-T.
(b)  Financial Statement Schedules

All schedules have been omitted as not applicable or not required under the 
rules of Regulation S-X.

Item 17. Undertakings.

     The undersigned Registrant hereby undertakes:

     (1)  To file, during any period in which offers or sales are being made, a 
          post-effective amendment to this Registration Statement:

          (i)    To include any Prospectus required by Section 10(a)(3) of the
                 Securities Act of 1933;

          (ii)   To reflect in the Prospectus any facts or events arising after
                 the effective date of the Registration Statement (or the most
                 recent post-effective amendment thereof) which, individually or
                 in the aggregate, represent a fundamental change in the
                 information set forth in the Registration Statement;

          (iii)  To include any material information with respect to the plan of
                 distribution not previously disclosed in the Registration
                 Statement or any material change to such information in the
                 Registration Statement;

     (2)  That, for the purpose of determining any liability under the
          Securities Act of 1933, each such post-effective amendment shall be
          deemed to be a new Registration Statement relating to the securities
          offered therein, and the offering of such securities at that time
          shall be deemed to be the initial bona fide offering thereof.

     (3)  To remove from registration by means of a post-effective amendment any
          of the securities being registered which remain unsold at the
          termination of the Offering.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the 
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant 
has been advised that in the opinion of the Securities and Exchange Commission 
such indemnification is against public policy as expressed in the Act and is, 
therefore, unenforceable. In the event that a claim for indemnification against 
such liabilities (other than the payment by the Registrant of expenses incurred 
or paid by a director, officer or controlling person of the Registrant in the 
successful defense of any action, suit or proceeding) is asserted by such 
director, officer or controlling person in connection with the securities being 
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate 
jurisdiction the question whether such indemnification by it is against public 
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONFORMED

                                  SIGNATURES

       Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Borough of Staten
Island, State of New York, on October 2, 1997.

Richmond County Financial Corp.

By:    /s/ Michael F. Manzulli
       -------------------------------
       Michael F. Manzulli
       Chairman of the Board and Chief
       Executive Officer 

       Pursuant to the requirements of the Securities Act of 1933, this 
Registration Statement has been signed by the following persons in the 
capacities and on the dates indicated.
Name                             Title                                     Date
            ----                             -----                                     ----
/s/ Michael F. Manzulli                      Chairman of the Board and            October 2, 1997
------------------------------               Chief Executive Officer                  
Michael F. Manzulli                          (principal executive                    
                                             officer)                                 
                                                                                      
/s/ Andrew M. Sisock                         Vice President and Accounting        October 2, 1997
------------------------------               Officer (principal accounting                 
Andrew M. Sisock                             and financial officer)                                 
                                                                                      
                                                                                      
/s/ Anthony E. Burke                         Director                             October 2, 1997    
------------------------------                                                        
Anthony E. Burke                                                                     
                                                                                      
                                                                                      
/s/ Godfrey H. Carstens, Jr.                 Director                             October 2, 1997    
------------------------------                                                        
Godfrey H. Carstens, Jr.                                                              
                                                                                      
                                                                                      
/s/ Robert S. Farrell                        Director                             October 2, 1997    
------------------------------                                                        
Robert S. Farrell                                                                     
                                                                                      
                                                                                      
/s/ William C. Frederick, M.D.               Director                             October 2, 1997    
------------------------------                                                        
William C. Frederick, M.D.                                                            
                                                                                      
                                                                                      
/s/ James L. Kelley                          Director                             October 2, 1997    
------------------------------                                                        
James L. Kelley                                                                       
                                                                                      
                                                                                      
/s/ T. Ronald Quinlan, Jr.                   Director                             October 2, 1997    
------------------------------                                                        
T. Ronald Quinlan, Jr.                                                                
                                                                                      
                                                                                      
/s/ Maurice K. Shaw                          Director                             October 2, 1997     
------------------------------
Maurice K. Shaw