SUN BANCORP INC /NJ/
424B1, 1997-03-12
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PROSPECTUS

                                     [LOGO]
                                   $25,000,000

                                Sun Capital Trust

                           9.85% Preferred Securities
                 (Liquidation Amount $25 per Preferred Security)
          fully and unconditionally guaranteed, as described herein, by

                                Sun Bancorp, Inc.

     The Preferred  Securities  offered  hereby  represent  preferred  undivided
beneficial  interests in the assets of Sun Capital Trust,  a statutory  business
trust created under the laws of the State of Delaware (the "Issuer Trust").  Sun
Bancorp,  Inc.  (the  "Company")  will  initially  be the  holder  of all of the
beneficial  interests  represented by common securities of the Issuer Trust (the
"Common Securities" and, together with the Preferred

                                                       (Continued on next page)
                               ------------------

     SEE "RISK  FACTORS"  BEGINNING  ON PAGE 11 HEREOF FOR  CERTAIN  INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.

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

     THE SECURITIES  OFFERED  HEREBY ARE NOT DEPOSITS OR OTHER  OBLIGATIONS OF A
BANK AND ARE NOT INSURED BY THE FEDERAL  DEPOSIT  INSURANCE  CORPORATION  OR ANY
OTHER INSURER OR GOVERNMENT AGENCY.

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

     THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED BY THE SECURITIES
AND  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
SECURITIES AND EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION  PASSED
UPON THE  ACCURACY OR ADEQUACY OF THIS  PROSPECTUS.  ANY  REPRESENTATION  TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================
                                                       UNDERWRITING          PROCEEDS TO
                             PRICE TO PUBLIC(1)        DISCOUNT (2)      ISSUER TRUST (3)(4)
- -----------------------------------------------------------------------------------------------
<S>                              <C>                       <C>               <C>   
Per Preferred Security....           $25.00                (4)                  $25.00
- -----------------------------------------------------------------------------------------------
Total(5)..................       $25,000,000               (4)               $25,000,000
===============================================================================================
</TABLE>
- --------------
(1)  Plus accrued  Distributions,  if any, from March 17, 1997 
(2)  The  Company  and the  Issuer  Trust  have  each  agreed to  indemnify  the
     Underwriters  against certain liabilities under the Securities Act of 1933.
     See "Underwriting."
(3)  Before deduction of expenses payable by the Company estimated at $400,000.
(4)  In view  of the  fact  that  the  proceeds  of the  sale  of the  Preferred
     Securities will be used to purchase the Junior Subordinated Debentures, the
     Company  has  agreed  to pay  to  the  Underwriters,  as  compensation  for
     arranging  the  investment  therein of such  proceeds,  $1.00 per Preferred
     Security (or $1.0 million in the aggregate). See "Underwriting."
(5)  The Company has granted the Underwriters an option,  exercisable  within 30
     days after the date of this  Prospectus,  to purchase  up to an  additional
     $3,750,000 aggregate  liquidation amount of the Preferred Securities on the
     same terms as set forth above, solely to cover over-allotments,  if any. If
     such over-allotment  option is exercised in full, the total Price to Public
     and Proceeds to Company will be $28,750,000 and  $28,750,000,  respectively
     See "Underwriting."

     The Preferred Securities are offered by the Underwriters subject to receipt
and  acceptance by them,  prior sale and the  Underwriters'  right to reject any
order in whole or in part and to  withdraw,  cancel or modify the offer  without
notice. It is expected that delivery of the Preferred Securities will be made in
book-entry  form  through the  book-entry  facilities  of The  Depository  Trust
Company on or about  March 17, 1997  against  payment  therefor  in  immediately
available funds.

                                  ADVEST, INC.

                  The date of this Prospectus is March 11, 1997
<PAGE>



(cover page continued)

Securities,  the  "Trust  Securities").  The  Issuer  Trust  exists for the sole
purpose of issuing the Trust  Securities  and investing the proceeds  thereof in
9.85%  Junior   Subordinated   Deferrable   Interest   Debentures  (the  "Junior
Subordinated   Debentures,"  and  together  with  the  Trust   Securities,   the
"Securities") to be issued by the Company.  The Junior  Subordinated  Debentures
will mature on March 31, 2027 (the "Stated Maturity").  The Preferred Securities
will have a preference under certain  circumstances  over the Common  Securities
with  respect  to  cash   distributions  and  amounts  payable  on  liquidation,
redemption  or  otherwise.   See   "Description   of  Preferred   Securities  --
Subordination of Common Securities."

        The  Preferred  Securities  will be  represented  by one or more  global
securities  registered in the name of a nominee of The Depository Trust Company,
as depositary  ("DTC").  Beneficial  interests in the global  securities will be
shown on, and transfer thereof will be effected only through, records maintained
by DTC and its participants. Except as described under "Description of Preferred
Securities,"  Preferred  Securities  in  definitive  form will not be issued and
owners of beneficial  interests in the global  securities will not be considered
holders of the  Preferred  Securities.  Application  will be made to include the
Preferred  Securities in Nasdaq's National Market.  Settlement for the Preferred
Securities will be made in immediately available funds. The Preferred Securities
will trade in DTC's  Same-Day  Funds  Settlement  System,  and secondary  market
trading  activity  for  the  Preferred   Securities  will  therefore  settle  in
immediately available funds.

     Holders  of  the   Preferred   Securities   will  be  entitled  to  receive
preferential cumulative cash distributions  accumulating from March 17, 1997 and
payable  quarterly in arrears on March 31, June 30, September 30 and December 31
of each  year  commencing  June 30,  1997,  at the  annual  rate of 9.85% of the
Liquidation Amount of $25 per Preferred Security ("Distributions").  The Company
has the right to defer payment of interest on the Junior Subordinated Debentures
at any time or from  time to time  for a period  not  exceeding  20  consecutive
quarterly  periods with respect to each  deferral  period  (each,  an "Extension
Period"),  provided  that no  Extension  Period  may  extend  beyond  the Stated
Maturity of the Junior  Subordinated  Debentures.  No interest  shall be due and
payable  during  any  Extension  Period,  except  at the end  thereof.  Upon the
termination  of any such  Extension  Period and the payment of all amounts  then
due,  the  Company  may elect to begin a new  Extension  Period  subject  to the
requirements set forth herein. If interest  payments on the Junior  Subordinated
Debentures are so deferred,  Distributions on the Preferred Securities will also
be deferred and the Company will not be permitted, subject to certain exceptions
described herein, to declare or pay any cash  distributions  with respect to the
Company's  capital stock or with respect to debt  securities of the Company that
rank  pari  passu in all  respects  with or junior  to the  Junior  Subordinated
Debentures.  During an  Extension  Period,  interest on the Junior  Subordinated
Debentures  will  continue to accrue (and the amount of  Distributions  to which
holders of the Preferred Securities are entitled will accumulate) at the rate of
9.85% per annum, compounded quarterly,  and holders of Preferred Securities will
be required  to accrue  interest  income for United  States  federal  income tax
purposes. See "Description of Junior Subordinated Debentures -- Option to Extend
Interest  Payment  Period"  and  "Certain  Federal  Income Tax  Consequences  --
Interest Income and Original Issue Discount."


        The Company has, through the Guarantee,  the Trust Agreement, the Junior
Subordinated  Debentures and the Junior Subordinated  Indenture (each as defined
herein), taken together,  fully, irrevocably and unconditionally  guaranteed all
the Issuer  Trust's  obligations  under the  Preferred  Securities  as described
below. See "Relationship Among the Preferred Securities, the Junior Subordinated
Debentures and the Guarantee -- Full and Unconditional Guarantee." The Guarantee
of  the  Company  guarantees  the  payment  of  Distributions  and  payments  on
liquidation or redemption of the Preferred Securities,  but only in each case to
the  extent  of  funds  held by the  Issuer  Trust,  as  described  herein  (the
"Guarantee").  See  "Description  of  Guarantee."  If the Company  does not make
payments on the Junior  Subordinated  Debentures  held by the Issuer Trust,  the
Issuer Trust may have  insufficient  funds to pay Distributions on the Preferred
Securities.  The  Guarantee  does not cover  payment of  Distributions  when the
Issuer Trust does not have sufficient funds to pay such  Distributions.  In such
event,  a holder  of  Preferred  Securities  may  institute  a legal  proceeding
directly  against the Company to enforce payment of such  Distributions  to such
holder.  See  "Description of Junior  Subordinated  Debentures -- Enforcement of
Certain  Rights by Holders of  Preferred  Securities."  The  obligations  of the
Company under the Guarantee and the Preferred  Securities  are  subordinate  and
junior  in  right  of  payment  to  all  Senior   Indebtedness  (as  defined  in
"Description  of  Junior  Subordinated  Debentures  --  Subordination")  of  the
Company.

                                        2


<PAGE>

     The Preferred  Securities are subject to mandatory redemption (i) in whole,
but not in part, upon repayment of the Junior Subordinated  Debentures at Stated
Maturity or, at the option of the Company,  their  earlier  redemption  in whole
upon the  occurrence of a Tax Event,  an  Investment  Company Event or a Capital
Treatment  Event  (each as defined  herein)  and (ii) in whole or in part at any
time on or after March 31, 2002  contemporaneously  with the optional redemption
by the Company of the Junior  Subordinated  Debentures in whole or in part.  The
Junior Subordinated Debentures are redeemable prior to maturity at the option of
the Company (i) on or after March 31, 2002, in whole at any time or in part from
time to time,  or (ii) in  whole,  but not in part,  at any time  within 90 days
following the occurrence and  continuation  of a Tax Event,  Investment  Company
Event or Capital  Treatment  Event, in each case at a redemption price set forth
herein,   which  includes  the  accrued  and  unpaid   interest  on  the  Junior
Subordinated  Debentures  so  redeemed  to the date  fixed for  redemption.  The
ability of the Company to exercise its rights to redeem the Junior  Subordinated
Debentures or to cause the redemption of the Preferred  Securities  prior to the
Stated  Maturity  may be subject to prior  regulatory  approval  by the Board of
Governors  of the  Federal  Reserve  System  (the  "Federal  Reserve"),  if then
required under applicable  Federal Reserve capital  guidelines or policies.  See
"Description of Junior  Subordinated  Debentures -- Redemption" and "Description
of Preferred Securities -- Liquidation Distribution Upon Dissolution."

        The holders of the outstanding  Common  Securities have the right at any
time to dissolve the Issuer Trust and,  after  satisfaction  of  liabilities  to
creditors of the Issuer Trust as provided by applicable law, to cause the Junior
Subordinated  Debentures  to be  distributed  to the  holders  of the  Preferred
Securities and Common Securities in liquidation of the Issuer Trust. The ability
of the Company to dissolve the Issuer  Trust may be subject to prior  regulatory
approval of the Federal  Reserve,  if then  required  under  applicable  Federal
Reserve capital guidelines or policies. See "Description of Preferred Securities
- -- Liquidation Distribution Upon Dissolution."

        In the event of the dissolution of the Issuer Trust,  after satisfaction
of liabilities  to creditors of the Issuer Trust as provided by applicable  law,
the  holders  of  the  Preferred  Securities  will  be  entitled  to  receive  a
Liquidation  Amount of $25 per Preferred  Security plus  accumulated  and unpaid
Distributions  thereon to the date of  payment,  subject to certain  exceptions,
which may be in the form of a distribution of such amount in Junior Subordinated
Debentures. See "Description of Preferred Securities -- Liquidation Distribution
Upon Dissolution."

        The Junior Subordinated Debentures are unsecured and subordinated to all
Senior  Indebtedness of the Company.  See  "Description  of Junior  Subordinated
Debentures -- Subordination."

        Prospective purchasers must carefully consider the information set forth
in "Certain ERISA Considerations."

        THE JUNIOR SUBORDINATED  DEBENTURES ARE DIRECT AND UNSECURED OBLIGATIONS
OF THE  COMPANY,  DO NOT  EVIDENCE  DEPOSITS  AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.

                                        3


<PAGE>






                                              MAP

        IN CONNECTION  WITH THIS OFFERING,  THE  UNDERWRITERS  MAY OVER-ALLOT OR
EFFECT  TRANSACTIONS  WHICH  STABILIZE  OR  MAINTAIN  THE  MARKET  PRICE  OF THE
PREFERRED  SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN  MARKET.  SUCH  TRANSACTIONS  MAY BE  EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING  TRANSACTIONS,  IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.


                                        4


<PAGE>
                                     SUMMARY

        The following  summary is qualified in its entirety by the more detailed
information and consolidated  financial  statements and notes thereto  appearing
elsewhere in this  Prospectus.  Unless otherwise  indicated,  all information in
this  Prospectus is based on the assumption  that the  Underwriters  (as defined
herein) will not exercise their over-allotment option.

                                   THE COMPANY

        The  Company,  a New  Jersey  corporation,  is a  bank  holding  company
headquartered  in Vineland,  New Jersey with one  subsidiary,  Sun National Bank
(the "Bank"), a national banking association.  At December 31, 1996, the Company
had total assets of $436.8  million,  total deposits of $386.0 million and total
stockholders' equity of $27.4 million. The Bank's deposits are federally insured
by the Bank Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC").  The Company's principal business is to serve as
a holding company for the Bank.

        The Company was incorporated in, and the Bank was chartered in, 1985. In
April 1995, the Company changed its name from Citizens Investments,  Inc. to its
present  name.  It is  the  Company's  strategy  to  expand  its  retail  market
throughout  southern  New  Jersey.  Since 1994,  the  Company  has  successfully
completed the  acquisition of two commercial  banks with a total of $117 million
in assets  as well as two  purchase  and  assumption  transactions  in which the
Company acquired eight branches with $122 million in deposits. See "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Overview."  In addition,  the Company  entered into an agreement to acquire four
branches,  with $73  million  in  deposits,  from  First  Union  National  Bank,
Avondale,  Pennsylvania,  and three branches with $33 million in deposits,  from
Oritani Savings Bank, SLA, Hackensack, New Jersey, (see "First Union and Oritani
Branch  Purchases").  The Company also plans to establish  two de novo  branches
during 1997.  Through its  acquisition  and expansion  program,  the Company has
significantly  increased its asset size as well as the Bank's retail network. At
December 31, 1993, the Company's total  consolidated  assets were $112.0 million
as compared to $436.8 million at December 31, 1996.

        At December 31,  1996,  the Bank  provided  community  banking  services
through eighteen branches located in southern New Jersey. The Bank offers a wide
variety of consumer  and  commercial  lending and  deposit  services.  The loans
offered by the Bank include  commercial and industrial  loans,  commercial  real
estate loans, home equity loans,  mortgage loans and installment loans. The Bank
also offers deposit and personal banking services  including  checking,  regular
savings,  money  market  deposits,  term  certificate  accounts  and  individual
retirement  accounts.   Through  an  arrangement  with  Institutional  Marketing
Strategies,  L.L.C., the Bank also offers mutual funds, securities brokerage and
investment  advisory services.  The Bank considers its primary market area to be
the New Jersey counties of Atlantic,  Burlington,  Cape May, Cumberland,  Mercer
and  Ocean.  The  Bank's  market  area  contains  a diverse  base of  customers,
including  agricultural,  manufacturing,   transportation  and  retail  consumer
businesses.

        The  executive  office of the  Company is located at 226 Landis  Avenue,
Vineland, New Jersey 08360 and its telephone number is (609) 691-7700.

Financial Summary
<TABLE>
<CAPTION>
                                                     At or for Year Ended December 31,
                                                 1996       1995       1994       1993       1992
                                                 ----       ----       ----       ----       ----
                                                     (dollars in thousands, except per share amounts and ratios)

<S>                                           <C>       <C>        <C>          <C>     <C>       
    Net income..........................      $  3,013  $   2,819  $   1,840    $ 1,128 $      813
    Net income per share (fully diluted)          1.56       1.52       1.42       0.88       0.73
    Total assets........................       436,795    369,895    217,351    112,015    104,162
    Loans receivable (net)..............       295,501    183,634    134,861     83,387     82,080
    Shareholders' equity................        27,415     24,671     20,571     12,306     11,178
    Return on average assets............          0.74%      1.03%      1.09%      1.04%      0.74%
    Return on average equity............         11.99%     12.42%     11.74%      9.61%      7.56%
    Net yield on interest-earning assets          4.57%      5.30%      5.39%      5.29%      4.96%
</TABLE>



                                        5


<PAGE>
                                SUN CAPITAL TRUST

        The Issuer Trust is a statutory business trust formed under Delaware law
pursuant to (i) a trust  agreement,  dated as of February 13, 1997,  executed by
the Company,  as  Depositor,  Bankers  Trust  Company,  as Property  Trustee and
Bankers  Trust  (Delaware),  as  Delaware  Trustee,  and  (ii) the  filing  of a
Certificate of Trust with the Delaware  Secretary of State on February 13, 1997.
Such initial trust agreement will be amended and restated in its entirety (as so
amended  and  restated,  the "Trust  Agreement"),  as of the date the  Preferred
Securities are initially issued.  Two individuals will be selected by the holder
of the Common  Securities  to act as  administrators  with respect to the Issuer
Trust  (the   "Administrators").   The  Company,  while  holder  of  the  Common
Securities,  intends to select two  individuals who are employees or officers of
or affiliated  with the Company to serve as  Administrators.  The Issuer Trust's
business and affairs are conducted by its Property  Trustee,  Delaware  Trustee,
and two  Administrators.  The Issuer Trust exists for the exclusive  purposes of
(i) issuing and selling the Preferred  Securities  and Common  Securities,  (ii)
using the proceeds from the sale of Preferred  Securities and Common  Securities
to acquire the Junior  Subordinated  Debentures  issued by the Company and (iii)
engaging in only those  other  activities  necessary,  advisable  or  incidental
thereto  (such  as  registering  the  transfer  of  the  Preferred  Securities).
Accordingly,  the Junior Subordinated  Debentures will be the sole assets of the
Issuer Trust and payments under the Junior  Subordinated  Debentures will be the
sole revenue of the Issuer Trust. All of the Common  Securities will be owned by
the Company.  The Common  Securities will rank pari passu,  and payments will be
made  thereon  pro rata,  with the  Preferred  Securities,  except that upon the
occurrence  and during the  continuance  of an Event of Default  under the Trust
Agreement resulting from an Event of Default under the Indenture,  the rights of
the  Company  as holder of the  Common  Securities  to  payment  in  respect  of
Distributions  and payments upon  liquidation,  redemption or otherwise  will be
subordinated  to the rights of the  holders  of the  Preferred  Securities.  The
Company will acquire Common  Securities  representing  an aggregate  liquidation
amount equal to 3% of the total  capital of the Issuer  Trust.  The Issuer Trust
has a term of 31 years,  but may  terminate  earlier  as  provided  in the Trust
Agreement.  The  principal  executive  office of the Issuer  Trust is 226 Landis
Avenue, Vineland, New Jersey 08360, and its telephone number is (609) 691-7700.

                                  THE OFFERING
<TABLE>
<CAPTION>


<S>                                               <C>    
Securities Offered.............................   The 9.85% Preferred Securities represent preferred
                                                  undivided beneficial interests in the Issuer Trust's
                                                  assets, which will consist solely of the Junior
                                                  Subordinated Debentures and payments thereunder.
                                                  The Trust has granted the Underwriters an option,
                                                  exercisable within 30 days after the date of this
                                                  Prospectus, to purchase up to an additional 150,000
                                                  Preferred Securities at the offering price, solely to
                                                  cover over-allotments, if any.

Offering Price.................................   $25 per Preferred Security (Liquidation
                                                  Amount $25), plus accumulated Distributions, if any,
                                                  from March 17, 1997.

Distributions..................................   The distributions payable on each Preferred Security
                                                  will be fixed at a rate per annum of 9.85% of the
                                                  stated liquidation amount per Preferred Security, will
                                                  be cumulative, will accrue from March 17, 1997, the
                                                  date of issuance of the Preferred Securities, and will
                                                  be payable quarterly in arrears on March 31, June
                                                  30, September 30 and December 31 of each year,
                                                  commencing June 30, 1997.  See "Description of
                                                  Preferred Securities -- Distributions."
</TABLE>




                                        6


<PAGE>
<TABLE>
<CAPTION>

<S>                                               <C>
Junior Subordinated Debentures.................   The Issuer Trust will invest the proceeds from the
                                                  issuance of the Preferred Securities and Common
                                                  Securities in an equivalent amount of 9.85% Junior
                                                  Subordinated Debentures of the Company.  The
                                                  Junior Subordinated Debentures will mature on March 31,
                                                  2027.  The Junior Subordinated Debentures will rank
                                                  subordinate and junior in right of payment to all
                                                  Senior Indebtedness of the Company.  In addition,
                                                  the Company's obligations under the Junior
                                                  Subordinated Debentures will be structurally
                                                  subordinated to all existing and future liabilities and
                                                  obligations of its subsidiaries.

Guarantee......................................   Under the terms of the Guarantee, the Company has
                                                  guaranteed the payment of Distributions and
                                                  payments on liquidation or redemption of the
                                                  Preferred Securities, but only in each case to the
                                                  extent of funds held by the Issuer Trust described
                                                  herein.  The Company and the Issuer Trust believe
                                                  that the obligations of the Company under the
                                                  Guarantee, the Trust Agreement, the Junior
                                                  Subordinated Debentures and the Indenture taken
                                                  together, fully, irrevocable and unconditionally
                                                  guarantee all of the Issuer Trust's obligations relating
                                                  to the Preferred Securities.  The obligations of the
                                                  Company under the Guarantee and the Preferred
                                                  Securities are subordinate and junior in right of
                                                  payment to all Senior Indebtedness.  See
                                                  "Description of Guarantee."

Right to Defer Interest........................   The Company has the right, at any time, to defer
                                                  payments of interest on the Junior Subordinated
                                                  Debentures for a period not exceeding 20
                                                  consecutive quarters; provided that no Extension
                                                  Period may extend beyond the Stated Maturity of the
                                                  Junior Subordinated Debentures.  As a consequence
                                                  of the Company's extension of the interest payment
                                                  period, quarterly Distributions on the Preferred
                                                  Securities will be deferred (though such Distribution
                                                  would continue to accrue with interest thereon
                                                  compounded quarterly, since interest will continue to
                                                  accrue and compound on the Junior Subordinated
                                                  Debentures during any such Extension Period).
                                                  During an Extension Period, the Company will be
                                                  prohibited, subject to certain exceptions described
                                                  herein, from declaring or paying any cash
                                                  distributions with respect to its capital stock or debt
                                                  securities that rank pari passu with or junior to the
                                                  Junior Subordinated Debentures.  Upon the
                                                  termination of any Extension Period and the payment
                                                  of all amounts then due, the Company may
                                                  commence a new Extension Period, subject to the
                                                  foregoing requirements.  See "Description of Junior
                                                  Subordinated Debentures -- Option to Extend Interest
                                                  Payment Period."

                                                  Should an Extension Period occur, Preferred
                                                  Security holders will continue to include interest
                                                  income (and de minimis original issue discount, if
                                                  any) for United States income tax purposes.  See
                                                  "Taxation --Interest and Original Issue Discount."
</TABLE>


                                        7


<PAGE>
<TABLE>
<CAPTION>
<S>                                               <C>
Redemption.....................................   The Preferred Securities are subject to mandatory
                                                  redemption (i) in whole, but not in part, at the Stated
                                                  Maturity upon repayment of the Junior Subordinated
                                                  Debentures, (ii) in whole, but not in part,
                                                  contemporaneously with the optional redemption at
                                                  any time by the Company of the Junior Subordinated
                                                  Debentures upon the occurrence and continuation of
                                                  a Tax Event, Investment Company Event or Capital
                                                  Treatment Event and (iii) in whole or in part at any
                                                  time on or after March 31, 2002, contemporaneously
                                                  with the optional redemption by the Company of the
                                                  Junior Subordinated Debentures in whole or in part,
                                                  in each case at the applicable Redemption Price.  See
                                                  "Description of Preferred Securities -- Redemption."


Liquidation of the Issuer Trust................   The Company has the right at any time to dissolve
                                                  the Issuer Trust and cause the Junior Subordinated
                                                  Debentures to be distributed to holders of Preferred
                                                  Securities in liquidation of the Issuer Trust, subject
                                                  to the Company having received prior approval of
                                                  the Federal Reserve to do so if then required under
                                                  applicable capital guidelines or policies of the
                                                  Federal Reserve.  See "Description of Preferred
                                                  Securities -- Liquidation Distribution Upon
                                                  Dissolution."

Voting Rights..................................   Generally, the holders of the Preferred Securities
                                                  will not have any voting rights.  See "Description of
                                                  Preferred Securities -- Voting Rights" and "Risk
                                                  Factors -- Limited Voting Rights."
                                                  The proceeds from the sale of the Preferred
                                                  Securities offered hereby will be used by the Issuer

Use of Proceeds................................   Trust to purchase the Junior Subordinated
                                                  Debentures issued by the Company.  The proceeds
                                                  received by the Company from the sale of the Junior
                                                  Subordinated Debentures will be used to repay
                                                  existing debt of the Company of approximately $6
                                                  million and contribute approximately $15 million
                                                  through investments in or advances to the Bank.
                                                  The remainder of the proceeds will be held by the
                                                  Company and may be used to meet debt service
                                                  obligations of the Company under the Junior
                                                  Subordinated Debentures and make additional
                                                  advances to or investments in the Bank.  The Bank
                                                  intends to use the capital for general corporate
                                                  purposes including the First Union and Oritani
                                                  branch acquisitions and other branch acquisitions
                                                  and/or acquisitions of other financial institutions.
                                                  The Trust Securities will qualify as Tier 1 or core
                                                  capital of the Company, subject to the 25% Capital
                                                  Limitation (as defined herein), under the risk-based
                                                  capital guidelines of the Federal Reserve.  The
                                                  portion of the Trust Securities that exceeds the 25%
                                                  Capital Limitation will qualify as Tier 2 or
                                                  supplementary capital of the Company.  See "Use of
                                                  Proceeds."
</TABLE>

                                        8


<PAGE>
<TABLE>
<CAPTION>
<S>                                               <C>
ERISA Considerations...........................   Prospective purchasers should consider the
                                                  information set forth under "Certain ERISA
                                                  Considerations."

Nasdaq National Market Symbol..................   Application has been made to have the Preferred
                                                  Securities approved for quotation on the Nasdaq
                                                  National Market. 

</TABLE>

                                  RISK FACTORS

    Prospective  investors should carefully consider the matters set forth under
"Risk Factors," beginning on page 11.


                                        9


<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

    The following  summary  information  regarding the Company should be read in
conjunction with the consolidated  financial statements of the Company and notes
beginning on page F-1.
<TABLE>
<CAPTION>
                                                         At or for the Years Ended December 31,
                                                  1996       1995       1994       1993       1992
                                                  ----       ----       ----       ----       ----

                                                    (dollars in thousands, except per share amounts and ratios)

    Selected Results of Operations
<S>                                          <C>        <C>        <C>         <C>        <C>     
      Interest income...................     $  29,270  $  20,850  $  12,194   $  8,164   $  8,629
      Net interest income...............        16,736     13,163      8,256      5,327      4,991
      Provision for loan losses.........           900        808        383          2         96
      Net interest income after
         provision for loan losses......        15,836     12,355      7,873      5,325      4,895
      Non-interest income...............         1,746      1,651        732        472        770
      Non-interest expense..............        13,207     10,047      5,991      4,198      4,354
      Net Income........................         3,013      2,819      1,840      1,128        813

     Per Share Data
      Net Income
         Primary........................          1.58       1.52       1.42       0.88       0.73
         Fully diluted..................          1.56       1.52       1.42       0.88       0.73
      Book value........................         15.25      14.34      17.14      11.52      10.48

    Selected Balance Sheet Data
      Assets............................       436,795    369,895    217,351    112,015    104,162
      Cash and investments..............       117,388    164,251     70,809     24,134     17,670
      Loans receivable (net) ...........       295,501    183,634    134,861     83,387     82,080
      Deposits..........................       385,987    335,248    196,019     99,099     91,837
      Borrowings and securities
        sold under agreements to repurchase     21,253      8,000         --         --        --
      Shareholders' equity..............        27,415     24,671     20,571     12,306     11,178

    Performance Ratios
      Return on average assets..........          0.74%      1.03%      1.09%      1.04%      0.74%
      Return on average equity..........         11.99%     12.42%     11.74%      9.61%      7.56%
      Net yield on interest-earning assets        4.57%      5.30%      5.39%      5.29%      4.96%

    Asset Quality Ratios
      Non-performing loans to total loans         0.81%      1.72%      1.82%      1.84%      1.02%
      Non-performing assets to total loans and
         other real estate owned........          1.06%      2.19%      2.56%      2.26%      1.19%
      Net charge-offs to average total loans      0.16%      0.23%      0.29%      0.02%      0.14%
      Total allowance for loan losses to
        total non-performing loans......        107.26%     64.47%     64.74%     69.10%    128.53%

    Capital Ratios
      Equity to assets..................          6.28%      6.67%      9.46%     10.99%     10.73%
      Tier 1 risk-based capital ratio...          7.44%      8.67%     14.01%     15.59%     12.80%
      Total risk-based capital ratio....          8.28%      9.64%     15.22%     16.84%     14.05%
      Leverage ratio....................          5.43%      5.74%      8.44%     10.74%      9.31%

    Ratios of Earnings to Fixed Charges(1)
      Including interest on deposits....          1.35x      1.51x      1.66x      1.62x      1.36x
      Excluding interest on deposits....          1.41x      1.52x      1.70x      1.62x      1.37x

</TABLE>
- ------------------------
(1)     The consolidated ratio of earnings to fixed charges has been computed by
        dividing  income before income  taxes,  cumulative  effect of changes in
        accounting principles and fixed charges by fixed charges.  Fixed charges
        represent all interest  expense (ratios are presented both excluding and
        including interest on deposits). There were no amortization of notes and
        debentures  expense  nor any  portion  of net rental  expense  which was
        deemed to be equivalent  to interest on debt.  Interest  expense  (other
        than on deposits)  includes  interest on notes,  federal funds purchased
        and  securities  sold under  agreements to  repurchase,  and other funds
        borrowed.

                                       10


<PAGE>



                                  RISK FACTORS

    In addition  to the other  information  in this  Prospectus,  the  following
factors  should be  considered  carefully in  evaluating  an  investment  in the
Preferred  Securities  offered by this  Prospectus.  Certain  statements in this
Prospectus and documents  incorporated  herein by reference are  forward-looking
and are  identified  by the use of  forward-looking  words  or  phrases  such as
"intended,"   "will   be   positioned,"   "expects,"   is  or  are   "expected,"
"anticipates," and "anticipated." These forward-looking  statements are based on
the  Company's  current  expectations.  To the  extent  any  of the  information
contained  in this  Prospectus  constitutes  a  "forward-looking  statement"  as
defined in Section  27A(i)(1) of the Securities  Act, the risk factors set forth
below are cautionary  statements  identifying important factors that could cause
actual results to differ materially from those in the forward-looking statement.

RISK FACTORS RELATING TO THE OFFERING

Ranking  of  Subordinated   Obligations  Under  the  Guarantee  and  the  Junior
Subordinated Debentures

    The obligations of the Company under the Guarantee issued by the Company for
the  benefit  of the  holders  of  Preferred  Securities  and under  the  Junior
Subordinated  Debentures are  subordinate  and junior in right of payment to all
Senior  Indebtedness.  At December  31,  1996,  the Senior  Indebtedness  of the
Company aggregated  approximately  $6.0 million,  which indebtedness the Company
intends to repay using proceeds from the sale of the Preferred Securities.  None
of the Junior  Subordinated  Indenture,  the  Guarantee  or the Trust  Agreement
places any  limitation  on the amount of secured or  unsecured  debt,  including
Senior  Indebtedness,  that may be incurred by the Company.  See "Description of
Guarantee -- Status of the Guarantee" and  "Description  of Junior  Subordinated
Debentures -- Subordination."

    The  ability  of the  Issuer  Trust  to  pay  amounts  due on the  Preferred
Securities is solely  dependent upon the Company's making payments on the Junior
Subordinated Debentures as and when required.

Option to Extend Interest Payment Period; Tax Consequences

     So long as no Event of  Default  (as  defined  in the  Junior  Subordinated
Indenture)   has  occurred  and  is  continuing   with  respect  to  the  Junior
Subordinated  Debentures (a "Debenture  Event of Default"),  the Company has the
right under the Junior  Subordinated  Indenture to defer the payment of interest
on the  Junior  Subordinated  Debentures  at any time or from time to time for a
period not  exceeding  20  consecutive  quarterly  periods  with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity  of the Junior  Subordinated  Debentures.  See  "Description  of Junior
Subordinated Debentures -- Debenture Events of Default." As a consequence of any
such deferral, quarterly Distributions on the Preferred Securities by the Issuer
Trust will be deferred during any such Extension Period.  Distributions to which
holders of the  Preferred  Securities  are entitled will  accumulate  additional
Distributions  thereon  during  any  Extension  Period  at the rate of 9.85% per
annum,   compounded   quarterly   from  the  relevant   payment  date  for  such
Distributions,  computed on the basis of a 360-day year of twelve  30-day months
and the  actual  days  elapsed  in a partial  month in such  period.  Additional
Distributions  payable  for each full  Distribution  period  will be computed by
dividing  the rate per annum by four.  The term  "Distribution"  as used  herein
shall  include  any such  additional  Distributions.  During any such  Extension
Period,  the Company may not (i) declare or pay any  dividends or  distributions
on, or redeem, purchase,  acquire or make a liquidation payment with respect to,
any of the  Company's  capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay,

                                       11


<PAGE>

     repurchase  or redeem any debt  securities  of the  Company  that rank pari
passu in all  respects  with or junior in  interest  to the Junior  Subordinated
Debentures  (other than (a)  repurchases,  redemptions or other  acquisitions of
shares  of  capital  stock of the  Company  in  connection  with any  employment
contract,  benefit plan or other similar  arrangement with or for the benefit of
any one or more employees,  officers,  directors or  consultants,  in connection
with a dividend reinvestment or stockholder stock purchase plan or in connection
with the  issuance of capital  stock of the Company (or  securities  convertible
into or exercisable for such capital stock) as  consideration  in an acquisition
transaction  entered into prior to the  applicable  Extension  Period,  (b) as a
result of an  exchange  or  conversion  of any class or series of the  Company's
capital  stock (or any capital  stock of a  subsidiary  of the  Company) for any
class or series of the Company's  capital stock or of any class or series of the
Company's  indebtedness for any class or series of the Company's  capital stock,
(c) the  purchase of  fractional  interests in shares of the  Company's  capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged,  (d) any declaration of a dividend in
connection with any stockholder's  rights plan, or the issuance of rights, stock
or other  property  under any  stockholder's  rights plan, or the  redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon  exercise of such  warrants,  options or other  rights is the same stock as
that on which the  dividend  is being paid or ranks pari passu with or junior to
such stock).  Prior to the termination of any such Extension Period, the Company
may further defer the payment of interest, provided that no Extension Period may
exceed 20 consecutive  quarterly periods or extend beyond the Stated Maturity of
the Junior Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid  (together with interest
thereon  at the  annual  rate of  9.85%,  compounded  quarterly,  to the  extent
permitted by  applicable  law),  the Company may elect to begin a new  Extension
Period  subject to the above  conditions.  No interest  shall be due and payable
during an Extension Period, except at the end thereof. The Company must give the
Issuer Trustees notice of its election to begin an Extension Period at least one
Business  Day  prior to the  earlier  of (i) the date the  Distributions  on the
Preferred  Securities would have been payable but for the election to begin such
Extension  Period and (ii) the date the  Property  Trustee is  required  to give
notice to holders of the  Preferred  Securities  of the record  date or the date
such Distributions are payable,  but in any event not less than one Business Day
prior to such  record  date.  The  Property  Trustee  will  give  notice  of the
Company's  election  to  begin a new  Extension  Period  to the  holders  of the
Preferred  Securities.  Subject to the foregoing,  there is no limitation on the
number of times that the Company  may elect to begin an  Extension  Period.  See
"Description  of Preferred  Securities --  Distributions"  and  "Description  of
Junior Subordinated Debentures -- Option to Extend Interest Payment Period."

    Should an Extension  Period  occur,  a holder of Preferred  Securities  will
continue to accrue income (in the form of original issue  discount  ("OID")) for
United  States  federal  income tax purposes in respect of its pro rata share of
the Junior Subordinated  Debentures held by the Issuer Trust, which will include
a holder's  pro rata share of both the stated  interest  and de minimis  OID, if
any, on the Junior Subordinated  Debentures.  As a result, a holder of Preferred
Securities  will  include  such OID in gross  income for United  States  federal
income tax purposes in advance of the receipt of cash,  and will not receive the
cash related to such income from the Issuer Trust if the holder  disposes of the
Preferred  Securities prior to the record date for the payment of Distributions.
See "Certain  Federal Income Tax  Consequences  -- Interest  Income and Original
Issue Discount" and "-- Sales of Preferred Securities."

    The  Company  has no  current  intention  of  exercising  its right to defer
payments of interest by  extending  the  interest  payment  period on the Junior
Subordinated  Debentures.  However,  should the Company  elect to exercise  such
right in the future, the market price of the Preferred Securities is likely

                                       12


<PAGE>

to be affected.  A holder that disposes of his, her or its Preferred  Securities
during an Extension Period, therefore, might not receive the same return on his,
her or  its  investment  as a  holder  that  continues  to  hold  its  Preferred
Securities.  In addition, as a result of the existence of the Company's right to
defer interest  payments,  the market price of the Preferred  Securities  (which
represent preferred undivided  beneficial  interests in the assets of the Issuer
Trust) may be more volatile than the market prices of other  securities on which
original  issue  discount  or  interest  accrues  that are not  subject  to such
deferrals.

Tax Event, Investment Company Event or Capital Treatment Event Redemption

    Upon the occurrence and during the  continuation of a Tax Event,  Investment
Company Event or Capital  Treatment  Event,  the Company has the right to redeem
the Junior Subordinated Debentures in whole, but not in part, at any time within
90 days following the occurrence of such Tax Event,  Investment Company Event or
Capital  Treatment  Event  and  thereby  cause  a  mandatory  redemption  of the
Preferred  Securities.  Any such  redemption  shall  be at a price  equal to the
liquidation  amount  of the  Preferred  Securities,  together  with  accumulated
Distributions to but excluding the date fixed for redemption. The ability of the
Company to  exercise  its rights to redeem  the Junior  Subordinated  Debentures
prior to the stated maturity may be subject to prior regulatory  approval by the
Federal  Reserve,  if then required under  applicable  Federal  Reserve  capital
guidelines or policies.  See "Description of Junior  Subordinated  Debentures --
Redemption" and "Description of Preferred Securities -- Liquidation Distribution
Upon Dissolution."

    A "Tax Event" means the receipt by the Issuer Trust of an opinion of counsel
to the Company  experienced  in such matters to the effect that,  as a result of
any amendment to, or change (including any announced prospective change) in, the
laws (or any  regulations  thereunder)  of the  United  States or any  political
subdivision  or  taxing  authority  thereof  or  therein,  or as a result of any
official  or  administrative   pronouncement  or  action  or  judicial  decision
interpreting or applying such laws or regulations,  which amendment or change is
effective or which  pronouncement  or decision is announced on or after the date
of issuance of the  Preferred  Securities,  there is more than an  insubstantial
risk that (i) the Issuer  Trust is, or will be within 90 days of the delivery of
such opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest payable
by the Company on the Junior  Subordinated  Debentures is not, or within 90 days
of the delivery of such opinion will not be, deductible by the Company, in whole
or in part,  for United States  federal  income tax purposes or (iii) the Issuer
Trust is, or will be within 90 days of the delivery of the  opinion,  subject to
more than a de  minimis  amount  of other  taxes,  duties or other  governmental
charges.

    See "-- Possible Tax Law Changes  Affecting the Preferred  Securities" for a
discussion of certain legislative proposals that, if adopted, could give rise to
a Tax Event, which may permit the Company to cause a redemption of the Preferred
Securities prior to March 31, 2002.

    "Investment  Company  Event"  means the  receipt by the  Issuer  Trust of an
opinion of  counsel to the  Company  experienced  in such  matters to the effect
that,  as a result  of the  occurrence  of a change  in law or  regulation  or a
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative  body,  court,  governmental
agency or regulatory  authority,  there is more than an insubstantial  risk that
the  Issuer  Trust is or will be  considered  an  "investment  company"  that is
required to be registered  under the Investment  Company Act of 1940, as amended
(the  "Investment  Company  Act"),  which change or  prospective  change becomes
effective or would become effective, as the case may be, on or after the date of
the issuance of the Preferred Securities.

                                       13


<PAGE>

    A  "Capital  Treatment  Event"  means the  reasonable  determination  by the
Company  that,  as a result of the  occurrence  of any  amendment  to, or change
(including  any  announced  prospective  change)  in,  the laws (or any rules or
regulations  thereunder)  of the  United  States  or any  political  subdivision
thereof  or  therein,   or  as  a  result  of  any  official  or  administrative
pronouncement or action or judicial decision  interpreting or applying such laws
or regulations,  which  amendment or change is effective or such  pronouncement,
action  or  decision  is  announced  on or  after  the date of  issuance  of the
Preferred Securities,  there is more than an insubstantial risk that the Company
will not be entitled to treat an amount equal to the  Liquidation  Amount of the
Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof) except
as otherwise  restricted  under the 25% Capital  Limitation (as defined herein),
for  purposes  of the  risk-based  capital  adequacy  guidelines  of the Federal
Reserve, as then in effect and applicable to the Company.

Exchange of Preferred Securities for Junior Subordinated Debentures

    The holders of all the outstanding  Common  Securities have the right at any
time to dissolve the Issuer Trust and,  after  satisfaction  of  liabilities  to
creditors of the Issuer Trust as provided by  applicable  law,  cause the Junior
Subordinated  Debentures  to be  distributed  to the  holders  of the  Preferred
Securities and Common Securities in liquidation of the Issuer Trust. The ability
of the Company, as holder of the Common Securities, to dissolve the Issuer Trust
may be subject to prior  regulatory  approval  of the Federal  Reserve,  if then
required under applicable  Federal Reserve capital  guidelines or policies.  See
"Description   of  Preferred   Securities  --  Liquidation   Distribution   Upon
Dissolution."

    Under current United States federal income tax law and  interpretations  and
assuming,  as  expected,  that  the  Issuer  Trust  will  not  be  taxable  as a
corporation,  a  distribution  of  the  Junior  Subordinated  Debentures  upon a
liquidation  of the Issuer  Trust will not be a taxable  event to holders of the
Preferred Securities. However, if a Tax Event were to occur that would cause the
Issuer Trust to be subject to United States  federal  income tax with respect to
income received or accrued on the Junior Subordinated Debentures, a distribution
of the Junior  Subordinated  Debentures  by the Issuer  Trust would be a taxable
event to the Issuer  Trust and the  holders  of the  Preferred  Securities.  See
"Certain Federal Income Tax Consequences -- Distribution of Junior  Subordinated
Debentures to Securityholders."

Rights Under the Guarantee

    Bankers  Trust  Company will act as the trustee under the Guarantee and will
hold the Guarantee  for the benefit of the holders of the Preferred  Securities.
Bankers  Trust  Company  will  also  act as  Debenture  Trustee  for the  Junior
Subordinated  Debentures  and as  Property  Trustee  under the Trust  Agreement.
Bankers Trust (Delaware) will act as Delaware Trustee under the Trust Agreement.
The  Guarantee  guarantees  to the  holders  of  the  Preferred  Securities  the
following payments,  to the extent not paid by or on behalf of the Issuer Trust:
(i)  any  accumulated  and  unpaid  Distributions  required  to be  paid  on the
Preferred  Securities,  to the extent  that the  Issuer  Trust has funds on hand
available  therefor at the payment date, (ii) the Redemption  Price with respect
to any Preferred Securities called for redemption, to the extent that the Issuer
Trust  has funds on hand  available  therefor  at such  time,  and (iii)  upon a
voluntary or  involuntary  dissolution,  winding up or liquidation of the Issuer
Trust (unless the Junior  Subordinated  Debentures are distributed to holders of
the Preferred  Securities),  the lesser of (a) the aggregate of the  Liquidation
Amount and all accumulated and unpaid  Distributions to the date of payment,  to
the extent that the Issuer  Trust has funds on hand  available  therefor at such
time, and (b) the amount of assets of the Issuer Trust  remaining  available for
distribution to holders of the Preferred Securities on liquidation of the Issuer
Trust. The Guarantee is subordinated as described under "-- Ranking of

                                       14


<PAGE>



Subordinated  Obligations  Under  the  Guarantee  and  the  Junior  Subordinated
Debentures"  and  "Description  of  Guarantee -- Status of the  Guarantee."  The
holders  of not less than a  majority  in  aggregate  Liquidation  Amount of the
outstanding  Preferred  Securities have the right to direct the time, method and
place of conducting  any  proceeding  for any remedy  available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust power
conferred  upon the  Guarantee  Trustee under the  Guarantee.  Any holder of the
Preferred  Securities  may  institute a legal  proceeding  directly  against the
Company to enforce its rights under the Guarantee  without  first  instituting a
legal proceeding  against the Issuer Trust,  the Guarantee  Trustee or any other
person or entity.

    If the Company  were to default on its  obligation  to pay  amounts  payable
under the Junior  Subordinated  Debentures,  the Issuer Trust may lack funds for
the payment of  Distributions  or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the Preferred Securities
would  not be able to rely  upon the  Guarantee  for  payment  of such  amounts.
Instead, if a Debenture Event of Default has occurred and is continuing and such
event is  attributable  to the failure of the Company to pay any amounts payable
in respect of the Junior  Subordinated  Debentures  on the payment date on which
such  payment is due and  payable,  then a holder of  Preferred  Securities  may
institute a legal  proceeding  directly  against the Company for  enforcement of
payment  to such  holder  of any  amounts  payable  in  respect  of such  Junior
Subordinated  Debentures  having  a  principal  amount  equal  to the  aggregate
Liquidation  Amount  of the  Preferred  Securities  of such  holder  (a  "Direct
Action").  In connection with such Direct Action,  the Company will have a right
of set-off under the Junior Subordinated  Indenture to the extent of any payment
made by the Company to such holder of Preferred Securities in the Direct Action.
Except as described herein,  holders of Preferred Securities will not be able to
exercise  directly  any other  remedy  available  to the  holders  of the Junior
Subordinated  Debentures  or assert  directly any other rights in respect of the
Junior  Subordinated   Debentures.   See  "Description  of  Junior  Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Preferred Securities,"
"--  Debenture  Events of Default" and  "Description  of  Guarantee."  The Trust
Agreement  provides  that each  holder of  Preferred  Securities  by  acceptance
thereof  agrees to the  provisions of the Guarantee and the Junior  Subordinated
Indenture.

Limited Voting Rights

    Holders of Preferred  Securities  will have limited  voting rights  relating
generally to the modification of the Preferred  Securities and the Guarantee and
the  exercise  of the  Issuer  Trust's  rights as holder of Junior  Subordinated
Debentures.  Holders of  Preferred  Securities  will not be entitled to appoint,
remove or replace the Property  Trustee or the Delaware  Trustee except upon the
occurrence  of certain  events  specified in the Trust  Agreement.  The Property
Trustee and the  holders of all the Common  Securities  may,  subject to certain
conditions,  amend the  Trust  Agreement  without  the  consent  of  holders  of
Preferred  Securities  to cure  any  ambiguity  or  make  other  provisions  not
inconsistent  with the Trust  Agreement  or to ensure that the Issuer  Trust (i)
will not be  taxable  as a  corporation  for United  States  federal  income tax
purposes,  or (ii) will not be required to register as an  "investment  company"
under the Investment  Company Act. See  "Description of Preferred  Securities --
Voting Rights; Amendment of Trust Agreement" and "-- Removal of Issuer Trustees;
Appointment of Successors."

Absence of Market

    The Preferred  Securities are a new issue of securities  with no established
trading market.  Application  has been made to list the Preferred  Securities in
the  Nasdaq  National  Market,  but  one of the  requirements  for  listing  and
continued  listing  is the  presence  of two  market  makers  for the  Preferred
Securities. The

                                       15


<PAGE>



Company and the Issuer Trust have been advised by Advest,  Inc.  that it intends
to make a market in the  Preferred  Securities.  However,  Advest,  Inc.  is not
obligated to do so and such market making may be interrupted or  discontinued at
any time without notice at the sole discretion of Advest,  Inc. Moreover,  there
can be no  assurance  of a second  market  maker for the  Preferred  Securities.
Accordingly, no assurance can be given as to the development or liquidity of any
market for the Preferred Securities.

Market Prices

    There can be no assurance as to the market prices for Preferred  Securities,
or the market prices for Junior Subordinated  Debentures that may be distributed
in exchange  for  Preferred  Securities  if a  liquidation  of the Issuer  Trust
occurs.  Accordingly,  the  Preferred  Securities  or  the  Junior  Subordinated
Debentures  that a holder of Preferred  Securities may receive on liquidation of
the Issuer Trust may trade at a discount to the price that the investor  paid to
purchase the Preferred  Securities offered hereby.  Because holders of Preferred
Securities  may receive  Junior  Subordinated  Debentures on  termination of the
Issuer Trust,  prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and should
carefully  review  all  the  information   regarding  the  Junior   Subordinated
Debentures   contained   herein.   See   "Description  of  Junior   Subordinated
Debentures."

Possible Tax Law Changes Affecting the Preferred Securities

     On February 6, 1997,  President  Clinton  released his budget proposals for
fiscal  year  1998.  One of the  revenue  provisions  of those  proposals  would
generally  deny interest  deductions  for interest on an instrument  issued by a
corporation  that has a maximum term of more than 15 years and that is not shown
as  indebtedness  on the  separate  balance  sheet of the issuer  or,  where the
instrument  is issued to a related party (other than a  corporation),  where the
holder or some other related party issues a related instrument that is not shown
as  indebtedness  on the  issuer's  consolidated  balance  sheet.  If enacted as
proposed by the  President,  this provision  would be effective for  instruments
issued on or after the date of first action by a  Congressional  committee  with
respect to the proposal.  It is not clear from the  President's  proposals as to
what constitutes Congressional "committee action" with respect to this proposal.
If the  provision  were to  apply to the  Junior  Subordinated  Debentures,  the
Company  would  be  unable  to  deduct  interest  on  the  Junior   Subordinated
Debentures.  There  can  be  no  assurance,  however,  that  future  legislative
proposals  or final  legislation  will not affect the  ability of the Company to
deduct interest on the Junior Subordinated Debentures.  Such a change could give
rise to a Tax Event,  which may permit the Company to cause a redemption  of the
Preferred   Securities  before  March  31,  2002.  See  "Description  of  Junior
Subordinated  Debentures -- Redemption" and "Description of Preferred Securities
- --  Redemption."  Seenior  also  "Certain  Federal  Income Tax  Consequences  --
Possible Tax Law Changes." Under current law, the Company will be able to deduct
interest on the Junior Subordinated Debentures.

RISK FACTORS RELATING TO THE COMPANY

Status of the Company as a Bank Holding Company

    The Company is a legal entity separate and distinct from the Bank,  although
the principal  source of the Company's cash revenues is dividends from the Bank.
The ability of the Company to pay the interest on, and  principal of, the Junior
Subordinated  Debentures will be  significantly  dependent on the ability of the
Bank to pay  dividends  to the  Company in  amounts  sufficient  to service  the
Company's debt

                                       16


<PAGE>

obligations. Payment of dividends by the Bank is restricted by various legal and
regulatory limitations.  Two different calculations are performed to measure the
amount of dividends  that may be paid: a recent  earnings  test and an undivided
profits test.  Under the recent earnings test, a dividend may not be paid if the
total of all  dividends  declared by a national  bank in any calendar year is in
excess of the current year's net profits  combined with the retained net profits
of the two  preceding  years  unless the bank  obtains the  approval of the OCC.
Under  the  undivided  profits  test,  dividends  may not be paid in excess of a
bank's  undivided  profits then on hand,  after deducting bad debts in excess of
the reserve for loan losses.  At December 31, 1996, under the retained  earnings
test,  which is  presently  the more  restrictive  of the  available  methods of
calculating  the dividend  limitations  of a national bank,  approximately  $7.7
million was  available  for payment of  dividends  to the Company  from the Bank
without prior regulatory approval.

    The right of the Company to participate in the assets of any subsidiary upon
the latter's  liquidation,  reorganization or otherwise (and thus the ability of
the  holders  of  Preferred  Securities  to  benefit  indirectly  from  any such
distribution)  will be  subject to the  claims of the  subsidiaries'  creditors,
which will take  priority  except to the extent that the Company may itself be a
creditor  with a  recognized  claim.  As of December  31,  1996,  the  Company's
subsidiaries  had indebtedness  and other  liabilities of  approximately  $403.4
million.

    The Bank is also subject to  restrictions  under federal law which limit the
transfer  of funds by the Bank to the  Company,  whether  in the form of  loans,
extensions of credit, investments,  asset purchases or otherwise. Such transfers
by the Bank to the Company  are  limited in amount to 10% of the Bank's  capital
and surplus. Furthermore, such loans and extensions of credit are required to be
secured in specified amounts.

Rapid Growth

    During the last three years, the Bank has experienced  rapid and significant
growth.  The total  assets of the Bank have  increased  from  $112.0  million at
December  31, 1993 to $436.8  million at December  31,  1996.  Although the Bank
believes that it has adequately  managed its growth in the past, there can be no
assurance  that the Bank will continue to experience  such rapid growth,  or any
growth,  in the future  and,  to the extent  that it does  experience  continued
growth,  that the Bank will be able to  adequately  and  profitably  manage such
growth.  See  "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations."

    The continued  growth has led the Company to undertake the present  offering
of Preferred Securities. The capital to be raised from the sale of the Preferred
Securities offered hereby, is necessary to provide sufficient capital to support
the growth of assets.  No  assurance  can be given that this rapid  growth  will
continue,  but,  if it does,  there is no  assurance  that the  earnings  of the
Company and the Bank can adequately  provide the necessary  capital for the Bank
and the Company to maintain required regulatory capital levels commensurate with
continued  rapid  growth.  After  giving  effect  to the  sale of the  Preferred
Securities and the First Union and Oritani branch purchases, the Company and the
Bank will be adequately capitalized. The level of future earnings of the Company
also will depend on the ability of the Company and the Bank to profitably deploy
and manage the increased assets.  The rapid growth of the Bank in asset size and
the rapid increase in its volume of total loans during the past three years have
increased the possible risks inherent in an investment in the Company.

    Although the Bank has  experienced  moderate loan losses to date,  the rapid
growth of its loan portfolio

                                       17


<PAGE>

from $83.4 million at December 31, 1993 to $295.5  million at December 31, 1996,
may result in an increase to its loan loss experience. Due to the high volume of
recent loans, many of the loans of the Bank are unseasoned,  thereby  increasing
the potential for additional loan losses even if the Bank continues to adhere to
the same underwriting  criteria and monitoring  procedures that have resulted in
the Bank's  moderate loan loss  experience.  See  "Management's  Discussion  and
Analysis  of  Financial   Condition   and  Results  of   Operations  --  Lending
Activities." The OCC has previously stated that banks  experiencing rapid growth
may be subject to greater risks.

Loan Portfolio Considerations

    During the past three years, the Company has experienced  significant growth
in its loan  portfolio.  Net loans  increased to $295.5  million at December 31,
1996,  from $183.6  million at December  31,  1995,  and from $134.9  million at
December 31, 1994.  While many components of the loan portfolio have contributed
to this  increase  over the past  three  years,  much of this  loan  growth  has
occurred in the portfolio of commercial  and  industrial  loans.  Commercial and
industrial loans increased by 87.7% or $104.2 million during 1996 as compared to
1995  and  comprised  75.5%  of  total  loans  as  of  December  31,  1996.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations-  -Analysis of Loan  Portfolio." As a result of this recent growth, a
significant  portion of the  Company's  total loan  portfolio  may be considered
unseasoned and, therefore, specific payment and loss experience for this portion
of the portfolio has not yet been fully established.  In addition, the nature of
commercial and  industrial  loans is such that they may present more credit risk
to the Company than other types of loans such as home equity or residential real
estate loans. Further,  these loans are concentrated in Cumberland,  Burlington,
Atlantic,  Ocean and Cape May Counties,  in southern New Jersey.  As a result, a
decline in the general  economic  conditions of southern New Jersey could have a
material  adverse  effect on the  Company's  financial  condition and results of
operations   taken  as  a  whole.   See   "Business   of  the   Company--Lending
Activities--Commercial and Industrial Loans."

Competition

    The banking business is highly competitive.  In its primary market area, the
Bank competes with other commercial banks, savings and loan associations, credit
unions, finance companies,  mutual funds, insurance companies, and brokerage and
investment  banking firms  operating  locally and elsewhere.  The Bank's primary
competitors  have  substantially  greater  resources and lending limits than the
Bank and may offer certain services,  such as trust services, that the Bank does
not provide at this time.  The  profitability  of the Company  depends  upon the
Bank's  ability  to  compete in its  primary  market  area.  See  "Business  - -
Competition."

Supervision and Regulation

    Bank holding  companies and banks operate in a highly regulated  environment
and are subject to the  supervision and examination by several federal and state
regulatory  agencies.  The Company is subject to the BHCA and to regulation  and
supervision  by the Federal  Reserve,  and the Bank is subject to regulation and
supervision  by the OCC and the FDIC.  The Bank is also a member of the  Federal
Home Loan Bank of New York (the  "FHLB") and is subject to  regulation  thereby.
Federal and state banking laws and  regulations  govern matters ranging from the
regulation of certain debt  obligations,  changes in the control of bank holding
companies,  and the  maintenance  of adequate  capital to the  general  business
operations and financial  condition of the Bank,  including  permissible  types,
amounts  and terms of loans and  investments,  the  amount of  reserves  against
deposits, restrictions on dividends, establishment of

                                       18


<PAGE>

branch offices, and the maximum rate of interest that may be charged by law. The
Federal Reserve, the FDIC, and the OCC also possess cease and desist powers over
bank  holding  companies  and  banks,  to  prevent  or remedy  unsafe or unsound
practices or violations of law. These and other restrictions limit the manner in
which the Company and the Bank may conduct their business and obtain  financing.
Furthermore,  the  commercial  banking  business is affected not only by general
economic  conditions,  but also by the monetary policies of the Federal Reserve.
These  monetary  policies  have  had  and  are  expected  to  continue  to  have
significant  effects on the operating  results of commercial  banks.  Changes in
monetary or  legislative  policies may affect the ability of the Bank to attract
deposits and make loans. See "Supervision and Regulation."

Potential Impact of Changes in Interest Rates

    The  Company's  profitability  is  dependent  to a large  extent  on its net
interest  income,  which  is the  difference  between  its  interest  income  on
interest-earning   assets  and  its   interest   expense   on   interest-bearing
liabilities.  The  Company,  like most  financial  institutions,  is affected by
changes in general interest rate levels and by other economic factors beyond its
control.   Interest  rate  risk  arises  from  mismatches  (i.e.,  the  interest
sensitivity  gap) between the dollar amount of repricing or maturing  assets and
liabilities,  and is  measured  in  terms  of the  ratio  of the  interest  rate
sensitivity  gap to  total  assets.  More  assets  repricing  or  maturing  than
liabilities  over a given  time  period  is  considered  asset-sensitive  and is
reflected as a positive  gap, and more  liabilities  repricing or maturing  than
assets  over a  given  time  period  is  considered  liability-sensitive  and is
reflected as negative gap. An  asset-sensitive  position  (i.e., a positive gap)
will generally  enhance  earnings in a rising interest rate environment and will
negatively  impact  earnings in a falling  interest  rate  environment,  while a
liability-sensitive  position  (i.e.,  a negative  gap) will  generally  enhance
earnings in a falling interest rate  environment and negatively  impact earnings
in a rising  interest rate  environment.  Fluctuations in interest rates are not
predictable  or  controllable.  The Company has attempted to structure its asset
and  liability  management  strategies  to mitigate  the impact on net  interest
income of changes in market interest rates.  However,  there can be no assurance
that  the  Company  will be able to  manage  interest  rate  risk so as to avoid
significant  adverse effects in net interest  income.  At December 31, 1996, the
Company had a one year cumulative  negative gap of 8.73%. This negative one year
gap position may, as noted above, have a negative impact on earnings in a rising
interest rate environment.  See "Management's Discussion and Analysis of Results
of Operations and Financial Condition -- Gap Analysis."

                                SUN CAPITAL TRUST

    The Issuer Trust is a statutory  business  trust created under  Delaware law
pursuant to the filing of a certificate of trust with the Delaware  Secretary of
State on February 13, 1997.  The Issuer Trust will be governed by an Amended and
Restated  Trust  Agreement  among  the  Company,  as  Depositor,  Bankers  Trust
(Delaware),  as Delaware Trustee, and Bankers Trust Company, as Property Trustee
(together with the Delaware  Trustee,  the "Issuer  Trustees").  Two individuals
will be selected by the holder of the Common Securities to act as administrators
with respect to the Issuer  Trust (the  "Administrators").  The  Company,  while
holder of the  Common  Securities,  intends to select  two  individuals  who are
employees  or  officers  of or  affiliated  with  the  Company  to  serve as the
Administrators.  See "Description of Preferred Securities -- Miscellaneous." The
Issuer  Trust exists for the  exclusive  purposes of (i) issuing and selling the
Trust Securities,  (ii) using the proceeds from the sale of the Trust Securities
to acquire the Junior  Subordinated  Debentures and (iii) engaging in only those
other  activities   necessary,   convenient  or  incidental   thereto  (such  as
registering  the  transfer  of the Trust  Securities).  Accordingly,  the Junior
Subordinated  Debentures  will be the  sole  assets  of the  Issuer  Trust,  and
payments under the Junior

                                       19


<PAGE>



Subordinated Debentures will be the sole source of revenue of the Issuer Trust.

    All the Common Securities will initially be owned by the Company. The Common
Securities  will rank pari passu,  and  payments  will be made thereon pro rata,
with the Preferred  Securities,  except that upon the  occurrence and during the
continuation  of a Debenture Event of Default arising as a result of any failure
by the  Company  to pay  any  amounts  in  respect  of the  Junior  Subordinated
Debentures  when due,  the  rights of the  holder of the  Common  Securities  to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise  will be  subordinated  to the rights of the holders of the  Preferred
Securities.  See "Description of Preferred Securities -- Subordination of Common
Securities."  The  Company  will  acquire  Common  Securities  in  an  aggregate
liquidation  amount equal to 3% of the total  capital of the Issuer  Trust.  The
Issuer Trust has a term of 31 years,  but may  terminate  earlier as provided in
the Trust  Agreement.  The  address of the  Delaware  Trustee  is Bankers  Trust
(Delaware), 1001 Jefferson Street, Wilmington,  Delaware 19801, telephone number
(302) 576-3301.  The address of the Property Trustee,  the Guarantee Trustee and
the Debenture Trustee is Bankers Trust Company,  Four Albany Street,  4th Floor,
New York, New York 10006, telephone number (212) 250-2500.

                                 USE OF PROCEEDS

    All the  proceeds  to the  Issuer  Trust  from  the  sale  of the  Preferred
Securities  will be  invested  by the Issuer  Trust in the  Junior  Subordinated
Debentures.  The proceeds from the sale of the Preferred Securities are expected
to qualify as Tier 1 or core  capital  with  respect  to the  Company  under the
guidelines established by the Federal Reserve, however capital received from the
proceeds of the sale of the Preferred Securities cannot constitute more than 25%
of the total  Tier 1 capital  of the  Company  (the "25%  Capital  Limitation").
Amounts  in excess  of the 25%  Capital  Limitation  will  constitute  Tier 2 or
supplementary  capital of the  Company.  The net  proceeds to be received by the
Company  from the sale of the  Junior  Subordinated  Debentures  will be used to
repay  existing  debt of the  Company  of  approximately  $6  million  (which is
collateralized  by a pledge of the Bank's stock) and make a $15 million  capital
contribution  through  investments  in or advances to the Bank. The remainder of
the  proceeds  will be  retained  by the  Company  and may be used to meet  debt
service   obligations  of  the  Company  pursuant  to  the  Junior  Subordinated
Debentures and make additional  advances to or investments in the Bank.  Pending
such  use,  the  net  proceeds  may  be   temporarily   invested  in  short-term
obligations.  The precise amounts and timing of the application of proceeds will
depend upon the funding requirements of the Company and its subsidiaries and the
availability  of other funds.  The Bank intends to use the capital in connection
with  the  First  Union  and  Oritani  branch   acquisitions  and  other  branch
acquisitions and/or acquisitions of other financial institutions.

                    FIRST UNION AND ORITANI BRANCH PURCHASES

    On December  19,  1996,  the Bank  entered  into a Purchase  and  Assumption
Agreement to acquire  approximately $73 million in deposit  liabilities and $2.5
million of loans and four branch  offices (the "First  Union  branch  purchase")
located in the southern New Jersey  counties of Salem and Burlington  from First
Union National Bank, Avondale, Pennsylvania ("First Union"). The Bank has agreed
to pay First  Union a premium of  approximately  $5.9  million  (8.03%)  for the
assumption  of the deposit  liabilities  and will  receive  approximately  $62.0
million in net  proceeds.  The  investment  and lending  activities of the First
Union  branch  purchase  will not  transfer to the Bank.  The First Union branch
purchase  will be accounted for using the purchase  method of accounting  and is
expected  to close  during the second  quarter  of 1997,  subject to  regulatory
approval. See "-- Pro Forma Consolidated Balance Sheet."

                                       20


<PAGE>




    On February  25,  1997,  the Bank  entered  into a Purchase  and  Assumption
Agreement to acquire  approximately $33 million in deposit  liabilities in three
branch offices (the "Oritani branch purchase") located in the Camden County, New
Jersey  communities  of Clementon,  Lindenwold and  Merchantville,  from Oritani
Savings Bank, SLA,  Hackensack,  New Jersey ("Oritani").  The Bank has agreed to
pay  Oritani  a  premium  of  $2,151,000  for  the  assumption  of  the  deposit
liabilities.  The Bank will  purchase two branches now owned by Oritani at their
fair market  value and assume the lease on the third branch  location.  The Bank
expects  to  receive   approximately  $30  million  in  net  proceeds  from  the
transaction.  The  investment  and  lending  activities  of the  Oritani  branch
purchase  will not transfer to the Bank.  The Oritani  branch  purchase  will be
accounted for using the purchase  method of accounting  and is expected to close
during the third quarter of 1997, subject to regulatory  approval.  There can be
no assurance that any regulatory approval, if required, could be obtained, would
not delay  consummation  of the First Union and  Oritani  branch  purchases,  or
either of them,  and would not be  conditioned  in a manner that would cause the
Bank to abandon the transactions.

    As of December  31,  1996,  the cost of funds  related to the deposits to be
assumed from the First Union branch purchase and the Oritani branch purchase was
approximately 2.65% and 4.84%,  respectively.  Management does not believe there
will be a material  deposit  outflow  after the branch  purchases.  The Bank has
historically  priced its  deposit  products  to be  competitive  in the  markets
served.  For the year  ended  December  31,  1996,  the Bank's  average  cost of
deposits was 4.00%.  It is  anticipated  that this  practice,  combined with the
level of personal service provided,  will allow the Bank to retain a significant
portion of the deposits acquired.  In this regard, First Union has agreed not to
directly  solicit the deposit  customers  affected by the branch  purchases,  or
establish a branch or loan  production  office within a three mile radius of the
branch  offices for a period of three years.  Oritani has agreed not to directly
solicit the deposit customers affected by the branch purchases,  nor establish a
branch or ATM  facility  within  Camden  County,  New Jersey for a period of one
year.

    While  management  does  not  believe  the  First  Union or  Oritani  branch
purchases will have a significant,  long-term, adverse impact on its operations,
it is expected that they will have a short-term  impact on its  performance  and
financial position ratios,  such as its return on average assets and its loan to
deposit  ratio,  as net cash  received  in the  branch  purchases  is  gradually
invested in investment securities and loans.


                                       21


<PAGE>

             Pro Forma Consolidated Statement of Financial Condition
                                December 31, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                     First Union Branch Oritani Branch    Pro Forma
                                                          Purchase         Purchase      Consolidated
                                           Company        Dr. (Cr.)        Dr. (Cr.)       Company
                                           -------        ---------        ---------       -------
                                                             (In thousands)
Assets
<S>                                        <C>            <C>            <C>               <C>     
Cash and amounts due from banks.....       $17,007        $ 1,234 (1)        500  (1)      $ 18,741
Federal funds sold..................         4,800         68,528 (1)     32,100  (1)
                                                          (5,870) (2)     (2,151) (3)        97,407
Investment securities available for
  sale..............................        95,581                                           95,581
Loans receivable (net)..............       295,501          2,573 (1)                       298,074
Bank properties and equipment.......        12,222            760 (1)        400  (1)
                                                              750 (2)                        14,132
Real estate owned...................           756                                              756
Accrued interest receivable.........         2,850                                            2,850
Excess of cost over fair value
  of net assets acquired............         5,365          5,120 (2)      2,151  (3)        12,636
Deferred taxes......................         1,071                                            1,071
Other assets........................         1,642                                            1,642
                                           -------          ---------       ---------      --------
   Total                                  $436,795            $73,095         $33,000      $542,890
                                           =======             ======          ======       =======
Liabilities and Shareholders' Equity
Liabilities:
Deposits............................      $385,986         73,095 (1)     33,000  (1)      $492,081
Advances from the Federal Home
  Loan Bank.........................        10,000                                           10,000
Loans payable.......................         6,000                                            6,000
Securities sold under agreements
  to repurchase.....................         5,253                                            5,253
Other liabilities...................         2,141                                            2,141
                                           -------           --------        --------       -------
  Total liabilities                        409,380             73,095          33,000       515,475
                                           -------             ------          ------       -------
Commitments and Contingent Liabilities
Shareholders' Equity:
Preferred stock.....................            --                                               --
Common stock........................         1,849                                            1,849
Surplus.............................        18,124                                           18,124
Retained earnings...................         8,420                                            8,420
Unrealized (loss) on securities, net
  of income taxes                            (978)                 --              --         (978)
                                          -------             -------        --------       -------
Total shareholders' equity..........        27,415                 --              --        27,415
                                           -------            -------        --------       -------
Total...............................      $436,795            $73,095         $33,000      $542,890
                                           =======             ======          ======       =======
</TABLE>

- ------------------
(1) To record branch purchase.
(2) To record  8.03%  premium  paid on the  assumption  of First  Union  deposit
    liabilities  ($5.9  million)  and to record the market  value of real estate
    ($750,000).  The excess of cost over fair value of net  assets  acquired  of
    approximately $5.1 million will be amortized over a seven year period.
(3) To record premium paid on the assumption of the Oritani deposit  liabilities
    ($2.2  million).  The excess of cost over fair value of net assets  acquired
    will be amortized over a seven year period.


                                       22


<PAGE>

                                 CAPITALIZATION

    The following table sets forth (i) the  consolidated  capitalization  of the
Company at  December  31,  1996,  (ii) the  consolidated  capitalization  of the
Company giving effect to the issuance of the Preferred Securities hereby offered
by Sun Capital Trust and application by the Company of the net proceeds from the
corresponding sale of the Junior Subordinated Debentures to Sun Capital Trust as
if the sale of the Preferred  Securities  had been  consummated  on December 31,
1996, and assuming the Underwriters' over-allotment was not exercised, (iii) the
pro forma effect of the First Union and Oritani  branch  purchases  and (iv) the
actual and pro forma capital ratios of the Company and the Bank.

<TABLE>
<CAPTION>
                                                                                 (Unaudited)                    
                                                                                 As Adjusted
                                                                      ---------------------------------------------
                                                                                          Sale of Preferred    
                                                                                         Securities and First
                                                                        Sale of         Union and Oritani
                                                        Actual      Preferred Securities   branch purchases
                                                        ------      --------------------   ----------------
                                                                           (dollars in thousands)
                                                                  
<S>                                                   <C>               <C>                     <C>      
    Loan Payable ..................................   $  6,000          $   --                  $   --        
                                                      --------          --------                --------
                                                                                              
  Guaranteed preferred beneficial interests in the                                            
    Company's subordinated debt (1) ...............       --              25,000                  25,000
                                                                                               
SHAREHOLDERS' EQUITY:                                                                          
  Preferred Stock $1 par value, 1,000,000 shares                                               
    authorized, none issued .......................       --                --                      --
  Common Stock $1 par value - 10,000,000 shares                                                
    authorized; 1,848,929 outstanding .............      1,849             1,849                   1,849
  Surplus .........................................     18,125            18,125                  18,125
  Unrealized loss on securities available for sale,                                            
    net of income taxes ...........................       (978)             (978)                   (978)
  Retained Earnings ...............................      8,419             8,419                   8,419
                                                      --------          --------                --------
      Total Shareholders' equity ..................     27,415            27,415                  27,415
                                                      --------          --------                --------
  Total Capitalization ............................   $ 33,415          $ 52,415                $ 52,415
                                                      ========          ========                ========
                                                                                               
COMPANY CAPITAL RATIOS(2):                                                                     
  Equity to total assets...........................       6.28%             6.01%                   5.57%
  Tier 1 risk-based capital ratio(3)...............       7.44             10.50                    8.03
  Total risk-based capital ratio...................       8.28             16.35                   12.87
  Leverage ratio (4)...............................       5.43              7.33                    4.65
                                                                                               
BANK CAPITAL RATIOS(2):                                                                        
  Equity to total assets...........................       7.62             10.69                    8.66
  Tier 1 risk-based capital ratio..................       9.34             14.07                   11.67
  Total risk-based capital ratio...................      10.18             14.90                   12.50
  Leverage ratio(4)................................       6.81              9.99                    6.81
                                                                                               
</TABLE>                           
- ------------------       
    (1)   Preferred Securities representing beneficial interests in an aggregate
          principal  amount  of  $25,000,000  of the 9.85%  Junior  Subordinated
          Debentures of the Company.  The Junior  Subordinated  Debentures  will
          mature on March 31, 2027.
    (2)   The capital  ratios,  as adjusted,  are computed  including  the total
          estimated net proceeds from the sale of the Preferred Securities, in a
          manner consistent with Federal Reserve guidelines.
    (3)   Federal Reserve guidelines for calculation of Tier 1 capital limit the
          amount of cumulative  preferred  stock which can be included in Tier 1
          capital to 25% of total Tier 1 capital.
    (4)   The  leverage  ratio is Tier 1 capital  divided by the  average  total
          assets less intangibles.

                                       23


<PAGE>



                              ACCOUNTING TREATMENT

        For financial reporting purposes,  the Issuer Trust will be treated as a
subsidiary  of the Company  and,  accordingly,  the accounts of the Issuer Trust
will be included in the consolidated  financial  statements of the Company.  The
Preferred  Securities will be included in the consolidated balance sheets of the
Company  and  appropriate  disclosures  about  the  Preferred  Securities,   the
Guarantee and the Junior  Subordinated  Debentures will be included in the notes
to the consolidated financial statements of the Company. For financial reporting
purposes,  Distributions  on the  Preferred  Securities  will be recorded in the
consolidated statements of income of the Company.

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

General

        The  primary  activity  of the  Company  is the  oversight  of the Bank.
Through  the Bank,  the  Company  engages in  community  banking  activities  by
accepting deposit accounts from the general public and investing such funds in a
variety of loans. These community banking activities primarily include providing
home  equity  loans,  mortgage  loans,  a variety  of  commercial  business  and
commercial  real estate loans and, to a much lesser extent,  installment  loans.
The Company also  maintains an investment  securities  portfolio.  The Company's
lending and  investing  activities  are funded by retail  deposits.  The largest
component of the Company's net income is net interest income. Consequently,  the
Company's earnings are primarily dependent on its net interest income,  which is
determined  by  (i)  the  difference   between  rates  of  interest   earned  on
interest-earning assets and rates paid on interest-bearing liabilities (interest
rate  spread),  and (ii) the  relative  amounts of  interest-earning  assets and
interest-bearing  liabilities.  The Company's net income is also affected by its
provision  for loan  losses,  as well as the amount of  non-interest  income and
non-interest expenses, such as salaries and employee benefits, professional fees
and services,  deposit  insurance  premiums,  occupancy and equipment  costs and
income taxes.

Overview

        Beginning in 1993,  the Company  embarked  upon a strategy to expand its
operations and retail market  throughout  southern New Jersey  through  internal
growth  and  mergers  and  acquisitions.  The  Board  and  management  perceived
opportunities  to  expand  the  Company  as a  result  of a lack of  competitive
commercial  banking services being provided to local businesses and the need for
a locally  based and managed  community  bank.  Continued  consolidation  of the
banking industry and a regionalization  of decision  authority by larger banking
institutions  left many  businesses  and  individuals  in the Bank's market area
underserved.

        In mid-1994,  the Company  acquired the First  National Bank of Tuckahoe
("Tuckahoe")  which  operated  three  branch  offices  in Cape May  County,  and
Southern  Ocean State Bank  ("Ocean"),  which  operated  four  branches in Ocean
County.  The two  transactions,  combined,  resulted in the  acquisition  of $49
million of loans and $105  million of deposits and an increase in assets of $117
million. These banks and their operations were merged into the Bank in 1994.

        In 1995,  as the  result  of  further  consolidation  of banks and their
restructuring  of  operations  in New Jersey,  the Bank  acquired $52 million of
deposits  and four  branches  located in the  southern  New Jersey  counties  of
Cumberland, Atlantic and Ocean from NatWest Bank and $70 million of deposits and
four branches  located in  Cumberland  and  Burlington  counties from New Jersey
National Bank. As a

                                       24


<PAGE>

result of these two branch purchase transactions, the Bank acquired $122 million
of  deposits;  the  corresponding  amount of cash  received  to fund the deposit
transfer was initially used to purchase investment securities.  In addition, the
Bank opened a new banking office in  Pleasantville in 1995 and an office in Cape
May Court House in 1996.

        In recent years,  the Bank also has  experienced a significant  level of
loan growth. The Bank's loan portfolio  increased from $83.4 million at December
31, 1993 to $295.5  million at December  31,  1996.  Much of this loan growth is
attributable  to the  Bank's  hiring of a number of  experienced  loan  officers
previously   employed  by  money  center  and   multi-state   regional   banking
organizations.  In most cases, these loan officers brought with them established
contacts and  relationships  with individuals or entities  throughout the Bank's
primary  market area and have been able thereby to increase the Bank's  customer
base and the number of loan originations. The Bank also has established a number
of regional  advisory boards that were  responsible for referring  approximately
$50  million  in loans to the Bank in 1996,  representing  one-third  of all new
outstanding loans last year. In addition,  the Bank has made significant efforts
to increase its share of seasonal  lending,  which has contributed to the Bank's
loan growth. As noted previously, a significant portion of the Bank's total loan
portfolio  may  be  considered  unseasoned  and,  therefore,   specific  payment
experience for this portion of the portfolio has not yet been established.

        To support and manage the expanded operations of the Bank and to provide
adequate  management  resources to support the further expansion and growth, the
Bank began to recruit and hire additional  experienced  commercial loan officers
(which  itself has  contributed  to much of the rapid growth in the Bank's total
loan portfolio),  credit, compliance,  loan review and internal audit personnel,
operations  personnel  and senior level  executives.  In addition,  the Bank has
enhanced and expanded its  operational  and  management  information  system and
taken steps to enhance its  oversight  of  third-party  vendors.  While the Bank
continues to monitor its rapid growth,  and the adequacy of the  management  and
resources  available to support such growth,  there can be no assurance that the
Bank will be successful in managing all elements relating to its rapid growth.

        The growth and expansion of operations  through mergers and acquisitions
and internal growth has resulted in a significant  increase in assets, loans and
deposits  since  December 31, 1993,  and a concomitant  increase in net interest
income, non-interest income and non-interest expenses.

RESULTS OF OPERATIONS

        Net income  for the year ended  December  31,  1996 was $3.0  million or
$1.58 per share in  comparison  to $2.8  million or $1.52 per share for the year
ended  December 31, 1995.  The  increase in net income was  primarily  due to an
increase in net interest income of $3.6 million which was  substantially  offset
by an increase in  non-interest  expenses  of $3.2  million,  an increase in the
provision  for loan  losses of $92,000  and an increase in income tax expense of
$222,000 in comparison to the results of operations for 1995.

        Net income for the year ended December 31, 1995 increased  $979,000,  or
53.2%,  to $2.8 million from $1.8 million for the year ended  December 31, 1994.
The increase in net income was generally attributable to a large increase in net
interest  income of $4.9  million and an  increase  of $900,000 in  non-interest
income. Net interest income increased from $8.3 million in 1994 to $13.2 million
in 1995; and non-interest income increased from $732,000 in 1994 to $1.7 million
in 1995. This increase was partially offset by increases in non-interest expense
of $4.1 million, an increase in the provision for loan losses

                                       25


<PAGE>
of $400,000  and an increase  in income tax  expense of  $365,000.  Non-interest
expenses  increased  from $6.0  million in 1994 to $10.0  million  in 1995.  The
provision for loan losses  increased  from $383,000 in 1994 to $808,000 in 1995.
Income tax expense increased from $775,000 in 1994 to $1.1 million in 1995.

Net Interest Income.  Net interest income is the most  significant  component of
the Company's  income from  operations.  Net interest  income is the  difference
between  interest  received  on  interest-earning  assets  (primarily  loans and
investment  securities)  and  interest  paid  on  interest-bearing   liabilities
(primarily  deposits and borrowed  funds).  Net interest  income  depends on the
volume and rate earned on  interest-earning  assets and the volume and  interest
rate paid on interest-bearing liabilities.

    The  following  table  sets  forth  a  summary  of  average   balances  with
corresponding  interest income and interest expense as well as average yield and
cost  information for the periods  presented.  Average balances are derived from
daily balances.
<TABLE>
<CAPTION>
                                                           Years Ended December 31,                                             
                              ----------------------------------------------------------------------------------------
                                        1996                         1995                         1994
                              -------------------------   -------------------------   --------------------------------
                                                  Average                        Average                       Average
                                Average            Yield/     Average             Yield/     Average            Yield/
                                Balance Interest   Cost       Balance  Interest   Cost       Balance Interest   Cost
                                ------- --------   ----       -------  --------   ----       ------- --------   ----
Interest-earning assets:                                  (Dollars in Thousands)
<S>                            <C>       <C>      <C>        <C>        <C>     <C>         <C>        <C>    <C>        
  Loans receivable (1)         $235,744  $22,074    9.36 %   $155,139   $15,101   9.73 %    $108,265   $9,591   8.86 %     
  Investment securities         129,164    7,127    5.52       85,445     5,286   6.19        33,931    2,151   6.34
  Federal funds sold              1,323       68    5.14        7,756       463   5.97        10,988      452   4.11
                               --------  -------  ------     --------   ------- ------      --------   ------ ------ 
    Total interest-earning 
      asset                     366,231   29,269    7.99      248,340    20,850   8.40       153,184   12,194   7.96
Non-interest-earning assets      40,316                        24,409                         15,076
                               --------                       -------                         ------
  Total assets                 $406,547                      $272,749                       $168,260
                               =========                     ========                       ========

Interest-bearing liabilities
  Interest-bearing deposit 
    accounts                   $298,538  $11,954    4.00 %   $202,276    $7,640   3.78 %    $122,843   $3,845   3.13 %
  Borrowed money                 10,397      580    5.58          775        47   6.06         1,202       93   7.74
                               --------  -------  ------     --------   ------- ------      --------   ------ ------ 
    Total interest-bearing 
      liabilities               308,935   12,534    4.06      203,051     7,687   3.79       124,045    3,938   3.17

Non-interest-bearing 
  liabilities                    72,486                        47,004                         28,551
                               --------                      --------                       --------

  Total liabilities             381,421                       250,055                        152,596

Shareholder's equity             25,126                        22,694                         15,664
                               --------                      --------                       --------

  Total liabilities 
    and shareholders equity    $406,547                      $272,749                       $168,260
                               ========                     =========                       ========
Net interest income                      $16,735                        $13,163                        $8,256
                                        ========                        =======                        ======
Interest rate spread (2)                            3.93 %                        4.61 %                        4.79 %
                                                    ====                          ====                          ====
Net yield on interest 
  earning assets (3)                                4.57 %                        5.30 %                        5.39 %
                                                    ====                          ====                          ====
Ratio of average 
  interest-earning assets
  to average interest-
  bearing liabilities                             118.55 %                      122.30 %                      123.49 %
                                                  ======                        ======                        ======
</TABLE>
- ----------------------
(1) Average balances include non-accrual loans.
(2) Interest rate spread represents the difference  between the average yield on
    interest-earning   assets   and  the   average   cost  of   interest-bearing
    liabilities.
(3) Net yield on  interest-earning  assets  represents net interest  income as a
    percentage of average interest-earning assets.

                                       26


<PAGE>



        The table  below sets forth  certain  information  regarding  changes in
interest income and interest  expense of the Company for the periods  indicated.
For each category of interest-earning  assets and interest-bearing  liabilities,
information  is  provided  on  changes  attributable  to (i)  changes  in volume
(changes  in  average  volume  multiplied  by old  rate);  (ii)  changes in rate
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in rate multiplied by the change in average volume).

<TABLE>
<CAPTION>
                                                                            Years ended December 31,
                                         -------------------------------------------------------------------------------------
                                                       1996  vs.  1995                        1995  vs.  1994
                                         ----------------------------------------    -----------------------------------------
                                                     Increase (Decrease)                    Increase (Decrease)
                                                           Due to                                 Due to
                                         ----------------------------------------    -----------------------------------------
                                                                Rate /                                      Rate /
                                          Volume       Rate     Volume       Net      Volume      Rate      Volume       Net
                                          ------       ----     ------       ---      ------      ----      ------       ---
Interest income:                                                           (In thousands)
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>    
  Loans receivable                       $ 7,847    ($  575)   ($  299)   $ 6,973    $ 4,156    $   945    $   409    $ 5,510
  Investment securities                    2,707       (573)      (293)     1,841      3,264        (51)       (45)     3,135
  Federal funds sold                        (382)       (65)        53       (394)      (133)       204        (60)        11
                                          ------    -------    -------    -------    -------    -------    -------    -------
    Total interest-earning assets        $10,172    ($1,213)   ($  539)   $ 8,420    $ 7,287    $ 1,098    $   271    $ 8,656
                                         =======    =======    =======    =======    =======    =======    =======    =======

Interest expense:
  Deposit accounts                       $ 3,658    $   445    $   211    $ 4,314    $ 2,483    $   796    $   515    $ 3,795
  Borrowings                                 584         (4)       (47)       533        (33)       (20)         7        (46)
                                          ------    -------    -------    -------    -------    -------    -------    -------
    Total interest-bearing 
      liabilities                         $4,242    $   441    $   164    $ 4,847    $ 2,450    $   776    $   522    $ 3,749
                                          ======    =======    =======    =======    =======    =======    =======    =======

Net change in interest income             $5,930      ($1,654) ($  703)   $ 3,573    $ 4,837    $   322    ($  252)   $ 4,907
                                          ======      =======  =======    =======    =======    =======    =======    =======
</TABLE>



        Net interest income  increased  $3,573,000 or 27% to $16,736,000 in 1996
compared to  $13,163,000 in 1995. The increase is due primarily to the growth of
average  interest-earning  assets from  $248,340,000  in 1995 to $366,231,000 in
1996,  partially  offset by a decline in the interest  rate spread from 4.61% in
1995  to  3.93%  in  1996.  The  decline  in  the  interest  rate  spread  had a
corresponding  impact on the net interest  margin which declined 73 basis points
to 4.57% in 1996.

        The increase in average interest-earning assets of $117,891,000 reflects
an  increase  of  $80,605,000  in  average  loans  and  $43,719,000  in  average
investment  securities  which were  funded by an  increase  of  $105,884,000  of
average  interest-bearing  liabilities and an increase of $25,482,000 of average
non-interest bearing liabilities.  This increase in interest-bearing liabilities
reflects the  acquisition  of the  branches and deposits in 1995,  the growth of
deposits at existing  offices in 1996,  the opening of two new  branches in 1995
and 1996 and an increase in borrowings in 1996.

        The  interest  rate  spread and net  interest  margin  declined  in 1996
compared  to 1995 due to a  decline  in the  yield on  average  interest-earning
assets from 8.40% in 1995 to 7.99% in 1996 and an increase in the interest  cost
of average interest-bearing liabilities from 3.79% in 1995 to 4.06% in 1996.

        The yield on average  interest-earning  assets declined in 1996 due to a
decline  in the yield of loans and  investment  securities.  As  general  market
interest rates were  relatively  stable during 1995 and 1996, the decline in the
yield of loans in 1996 reflects the impact of increased competition for new loan
originations The decline in the yield of investment securities was due primarily
to a  restructuring  of the available for sale investment  securities  portfolio
during 1996.

                                       27


<PAGE>



        The   increase  in  the  interest   cost  of  average   interest-bearing
liabilities  is  due  principally  to  an  increase  in  the  interest  cost  of
interest-bearing  deposits  from  3.78% in 1995 to 4.00%  in  1996.  The  higher
interest  cost  of  deposits  in  1996   reflects   primarily  the  increase  in
certificates of deposit,  as a percentage of total deposits and premium interest
rates offered by the Bank on certificates  of deposit,  during 1996. The premium
rates were offered on selected maturities of certificates of deposit to generate
deposit growth to fund the significant loan demand experienced by the Bank.

        Net interest income increased $4,907,000, or 59%, to $13,163,000 in 1995
compared to $8,256,000 in 1994.  The increase is due primarily to an increase in
average  earning  assets,  from  $153,184,000  in 1994 to  $248,340,000 in 1995,
partially  offset by a decline in the interest rate spread from 4.79% in 1994 to
4.61% in 1995. The decline in the spread results from a shift in the deposit mix
from lower cost savings  deposits  into higher cost time deposits and was offset
by an  increase  in the yield on earning  assets  from 7.96% in 1994 to 8.40% in
1995.  The yield on earning assets  increased due to a shift in investment  from
lower yielding federal funds sold to investment securities,  an increase in loan
yields from 8.86% in 1994 to 9.73% in 1995,  and an  increased  yield on federal
funds sold from 4.11% in 1994 to 5.97% in 1995.

        The  $95,156,000  increase  in earning  assets was largely the result of
branches  acquired  in 1995  and  assets  acquired  in the  Tuckahoe  and  Ocean
transactions completed in 1994.

        The average balance of loans outstanding  increased $46,874,000 in 1995,
to $155,139,000 from $108,265,000 in 1994. The increase in loans was a result of
the full  year's  impact  of the  acquisition  of  Tuckahoe  and  Ocean  and the
origination of new loans during the year.

        The average balance of investment  securities increased from $33,931,000
in 1994 to  $85,445,000  in 1995 as a direct  result  of the  acquisitions  that
occurred in mid-1994 and branch  acquisitions  in 1995.  The positive  impact on
interest  income  resulting  from  increased  balances was slightly  offset by a
decline in yield from 6.34% to 6.19% in 1995.

        Average   interest-bearing   deposit   balances   increased   65%   from
$122,843,000  in 1994 to  $202,276,000  in 1995,  primarily  due to the bank and
branch acquisitions. The impact on interest expense was augmented by an increase
in the cost of  deposits  from  3.13% in 1994 to  3.78% in 1995.  The  increased
interest  costs  resulted from a shift in deposit  composition  and an increased
cost on time deposits.  In 1994, savings and time deposits each comprised 31% of
total  deposits,  while time  deposits in 1995  increased to 39% of deposits and
savings  declined to 23% of  deposits.  In addition,  the cost of time  deposits
increased from 3.95% to 5.48% primarily due to generally higher market rates.

        Interest on borrowed  funds  decreased  $46,000  from $93,000 in 1994 to
$47,000  in 1995.  The  decrease  was  primarily  due to a  decrease  in average
balances,  from  $1,202,000 in 1994 to $775,000 in 1995. As a result of the cash
it received from its 1994 and 1995  acquisitions,  the Bank had a  significantly
lower need to borrow funds.

Provision for Loan Losses.  The Company  recorded a provision for loan losses of
$900,000  in 1996  compared  with  $808,000 in 1995 and  $383,000  in 1994.  The
increase  in the  provision  for  loan  losses  in 1995 was  attributable  to an
increase in the size of the loan portfolio due to the bank  acquisitions in 1994
and internal loan growth in 1995.  Management  regularly performs an analysis to
identify the inherent risk of loss in its loan portfolio. This analysis includes
evaluation of concentrations of credit,  past loss experience,  current economic
conditions,  amount and composition of the loan portfolio (including loans being
specifically  monitored  by  management),  estimated  fair  value of  underlying
collateral, loan commitments outstanding, delinquencies, and other factors.


                                       28


<PAGE>

        The Bank will continue to monitor its allowance for loan losses and make
future  adjustments  to the  allowance  through the provision for loan losses as
economic conditions dictate.  Although the Bank maintains its allowance for loan
losses at a level that it  considers  to be adequate to provide for the inherent
risk of loss in its loan portfolio, there can be no assurance that future losses
will not exceed estimated amounts or that additional  provisions for loan losses
will not be required in future periods. In addition, the Bank's determination as
to the amount of its  allowance for loan losses is subject to review by the OCC,
as part of its examination process,  which may result in the establishment of an
additional  allowance  based upon the  judgment of the OCC after a review of the
information available at the time of the OCC examination.

Non-Interest  Income.  Other operating income increased  $95,000,  or 5.7%, from
$1,651,000 for the year ended December 31, 1995 to $1,746,000 for the year ended
December 31, 1996. The increase was primarily a result of an increase in service
charges on deposit  accounts and other service  charges,  partially  offset by a
reduction  of gains  on asset  sales.  Gains on sales of  investment  securities
declined by $170,000,  from  $377,000 in 1995 to $207,000 in 1996.  During 1995,
the Company  recognized  $208,000 as gains on the sales of loans.  During  1996,
there were no sales of loans in which  gains or losses  were  recorded.  Service
charges on deposit accounts increased $397,000, from $660,000 for the year ended
December  31,  1995 to  $1,057,000  in 1996.  The  increase  was due to a larger
customer  base in 1996 as a result of the  branch  acquisitions  in 1995 and the
growth of the Bank's business and higher fees on deposit accounts. Other service
charges  increased  $88,000,  from  $28,000  in 1995 to  $116,000  in 1996.  The
increase was also a result of a larger customer base.

        Other operating  income increased  $919,000,  or 125%, from $732,000 for
the year ended  December 31, 1994 to $1,651,000 for the same period in 1995. The
increase was due to an increase in service charges on deposit accounts augmented
by gains on sales of loans and investment securities. Service charges on deposit
accounts increased $241,000, from $419,000 for the year ended December 31, 1994,
to $660,000 in 1995. The increased income was a result of a larger customer base
resulting from bank acquisitions  occurring during 1994 and branch  acquisitions
occurring during 1995. During 1995, the Company recorded gains on sales of loans
amounting to $208,000,  and gains on sales of investment securities amounting to
$377,000.  During  1994,  there  were no gains  on sales of loans or  investment
securities.

Non-Interest  Expenses.  Other operating  expenses  increased  $3,160,000,  from
$10,047,000  for the year ended  December 31, 1995 to  $13,207,000  for the year
ended December 31, 1996. The increase  reflects the Company's  strategy to build
an  infrastructure  to  support  planned  expansion.  Non-interest  expense  was
directly  impacted  by  increased  salaries  and  employee  benefits,  equipment
expense, data processing and amortization of intangibles,  partially offset by a
reduction  of  insurance  expense.  Salaries  and  employee  benefits  increased
$1,837,000,  from  $4,689,000 for the year ended December 31, 1995 to $6,526,000
during 1996.  The increase was a result of a higher number of officers and other
employees  during  1996.  In  addition,  during 1996 the Company  began a 401(k)
benefits  plan.  As a result of the  Company  match,  as well as  administrative
costs,  the Company  incurred  approximately  $91,000 in expenses  during  1996.
Equipment  costs increased  $359,000,  from $459,000 for the year ended December
31, 1995 to $818,000 in 1996.  Equipment costs increased as a result of the need
for more equipment to operate a larger organization,  as well as upgrades to the
Company's  telephone  system  and  establishment  of a  computer  network.  Data
processing  fees increased  $451,000,  from $635,000 for the year ended December
31, 1995 to  $1,086,000  for 1996.  The increase was a result of  maintaining  a
larger  deposit and loan base during 1996. The  amortization  of the excess cost
over fair value of assets increased  $484,000,  from $343,000 for the year ended
December 31, 1995 to $827,000 in 1996.  The increase was a result of a full year
of amortizing the intangibles  associated with the 1995 acquisitions.  Insurance
expenses declined $187,000,  from $383,000 for the year ended December 31, 1995,
to

                                       29


<PAGE>


$196,000 for 1996.  The  reduction  of  insurance  expense was a result of lower
insurance premiums assessed by the FDIC amounting to $181,000.

        Other operating expenses increased  $4,056,000,  from $5,991,000 for the
year ended  December 31, 1994 to  $10,047,000  in 1995.  The increase was due to
increased salaries and employee benefits, date processing expense,  amortization
of intangibles  and other  expenses.  Salaries and employee  benefits  increased
$2,062,000,  from  $2,627,000 for the year ended December 31, 1994 to $4,689,000
in 1995. The increase was a result of higher  staffing levels as a result of the
acquisitions  that occurred during 1995 and 1994. Data processing fees increased
by $316,000,  from $319,000 for the year ended  December 31, 1994 to $635,000 in
1995.  This increase was also due to added  processing  in  connection  with the
larger deposit and loan base resulting from the 1994 and 1995 acquisitions.  The
amortization  of the excess  cost over fair value of assets  acquired  increased
$209,000,  from  $134,000  for the year ended  December  31, 1994 to $343,000 in
1995. The increase was a direct result of the 1994 and 1995 acquisitions.  Other
expenses  increased by $892,000,  from $714,000 for the year ended  December 31,
1994, to $1,606,000 in 1995.  In 1995,  these  expenses  increased in almost all
categories as a result of operating a larger organization than in 1994.

Income Tax Expense. Income taxes increased $222,000, or 19%, from $1,140,000 for
the year ended December 31, 1995 to $1,362,000 for 1996. The increase was due to
increased  pre-tax  income.  For the same  reason,  income  taxes  increased  by
$365,000,  from  $775,000 for the year ended  December 31, 1994 to $1,140,000 in
1995.

LIQUIDITY AND CAPITAL RESOURCES

        A major source of the  Company's  funding is its retail  deposit  branch
network,  which  management  believes  will be  sufficient to meet its long-term
liquidity  needs.  The ability of the Company to retain and attract new deposits
is  dependent  upon  the  variety  and  effectiveness  of its  customer  account
products,  customer  service and convenience,  and rates paid to customers.  The
Company  also  obtains  funds from the  repayment  and  maturities  of loans and
maturities of investment securities, while additional funds can be obtained from
a variety of sources including loans sales,  securities sold under agreements to
repurchase,  FHLB advances,  and other secured and unsecured  borrowings.  It is
anticipated   that  FHLB  advances  and  securities  sold  under  agreements  to
repurchase will be secondary sources of funding, and management expects there to
be adequate collateral for such funding requirements.

        The Company's  primary uses of funds are the  origination of loans,  the
funding of the Company's maturing certificates of deposit,  deposit withdrawals,
and the repayment of  borrowings.  Certificates  of deposit  scheduled to mature
during the twelve  months  ending  December 31, 1997 total $169.5  million.  The
Company  may renew these  certificates,  attract new  replacement  deposits,  or
replace such funds with borrowings. As noted above, the Company has paid premium
rates on certain certificates of deposit, accordingly,  certain of these actions
may require the continued payment of premium rates with an adverse impact on net
interest income.

        The Company anticipates that cash and cash equivalents on hand, the cash
flow  from  assets  as well as other  sources  of funds  will  provide  adequate
liquidity for the Company's future operating,  investing and financing needs. In
addition to cash and cash equivalents of $21.8 million at December 31, 1996, the
Company has substantial  additional secured borrowing capacity with the FHLB and
other sources.

        Net cash provided by operating  activities  for the year ended  December
31, 1996 totalled  $3.8 million,  as compared to $4.1 million for the year ended
December 31, 1995. Net cash provided by

                                       30


<PAGE>



operating  activities for the year ended December 31, 1995 totalled $4.1 million
an increase of $2.6 million from the year ended December 31, 1994.

        Net cash used in investing  activities  for the year ended  December 31,
1996 totalled $64.4 million, a decrease from the year ended December 31, 1995 of
$80.7  million.  The  decrease  was  primarily  attributable  to the 1995 branch
acquisitions  which  resulted in an increase in  investment  securities of $97.6
million,   offset  by  an  increase  in  cash  used  for  loan  originations  of
approximately $62.0 million, and net proceeds from sale of investment securities
and mortgage-backed securities of approximately $50 million.

        Net cash used in investing  activities  for the year ended  December 31,
1995 totalled $145.1 million,  an increase from the year ended December 31, 1994
of $137.6 million.  This increase was primarily  attributable to the 1995 branch
acquisitions  which  resulted in an increase in  investment  securities of $97.6
million and an increase in loan originations of $47.8 million.

        Net cash provided by financing  activities  for the year ended  December
31, 1996 totalled $65.1 million.  This is a result of a net increase in deposits
of $50.7 million,  an increase in net  borrowings of $13.3  million,  and a $1.1
million  increase  resulting from the proceeds of the exercise of stock options.
The  increase in deposits  and net  borrowings  were used  primarily to fund the
increase in loan originations and investment securities.

        Net cash provided by financing  activities  for the year ended  December
31, 1995 totalled  $148.1  million.  This is a result of an increase in deposits
resulting from the 1995 branch acquisitions of $122.5 million, a net increase in
customers  deposits of $16.7  million,  and an increase in net  borrowings of $8
million. The increase in deposits and net borrowings were used primarily to fund
the increase in loan originations and investment securities.

        The   Company   has  a  number  of  sources  of   liquidity,   including
distributions from the Bank,  investment  securities,  cash and amounts due from
other banks, secondary sources of liquidity, which include the ability to borrow
funds from the Federal Reserve discount window of $5.0 million,  lines of credit
with the FHLB of $40.2 million,  and lines of credit at  correspondent  banks of
$18.0 million.

        The Company has  experienced a significant  increase in commercial  loan
demand,  and expects such demand to continue into 1997. The Company has met this
increased  need for  funds by  attracting  higher  levels of time  deposits  and
utilizing lines of credit. For long-term liquidity requirements, the Company has
the  ability to  liquidate  portions  of its  investment  portfolio,  the entire
balance of which was reclassified as available for sale. The Company believes it
has  adequate  liquidity  resources  to  satisfy  its  current  and  anticipated
obligations.

        The  Company  monitors  its  capital  levels  relative  to its  business
operations  and growth and has sought to maintain  the Bank's and its capital at
levels consistent with or in excess of the regulatory requirements. During 1996,
in order to maintain the Bank's total risk-based capital level in excess of 10%,
the Company  entered  into a $6 million  line of credit with  another  bank.  At
December 31, 1996,  the Company had fully drawn down this line of credit and the
proceeds were invested in the Bank as additional capital.

        Due to the  pending  branch  purchases  and  the  Company's  anticipated
further  growth,  the  Company  intends to raise  approximately  $25  million of
additional capital through the public offering of the Preferred Securities.


                                       31
<PAGE>

        The increase of commercial loans has also had the effect of lowering the
Company's   risk-based   capital  ratios.  In  general,   commercial  loans  are
categorized as having a 100% risk-weighting  using the calculations  required by
the  Company's  regulators.  The rate at which  commercial  loans have grown has
outpaced the growth rate of the Company's capital.

        It is the  Company's  intent to  maintain  adequate  risk-based  capital
levels. Management monitors capital levels and, when appropriate, will recommend
a  capital-raising  effort to the Company's board of directors.  The Company has
the ability to raise capital through a private  placement or a public  offering,
as may be  appropriate.  The  following  table sets forth the Bank's  risk-based
capital levels at December 31, 1996:

<TABLE>
<CAPTION>
                                                                               To Be Well Capitalized
                                                       Required for                 Under Prompt
                                                     Capital Adequacy            Corrective Action
                                Actual                  Purposes                    Provisions
                                Amount     Ratio         Amount        Ratio          Amount         Ratio
                                ------     -----         ------        -----          ------         -----
                          
<S>                           <C>          <C>        <C>              <C>          <C>             <C>  
  Tier 1 Risk-Based Capital   $28,907,862   9.34%     $12,380,480      4.00%        $18,570,720      6.00%
  Total Risk-Based Capital     31,503,174  10.18%      24,760,960      8.00%         30,951,200     10.00%
  Leverage                     28,907,862   6.81%      16,974,791      4.00%         21,218,489      5.00%
                                                                                                
</TABLE>

The  following  table  sets forth the  Company's  risk-based  capital  levels at
December 31, 1996:
<TABLE>
<CAPTION>
                                                                               To Be Well Capitalized
                                                       Required for                 Under Prompt
                                                     Capital Adequacy            Corrective Action
                                Actual                  Purposes                    Provisions
                                Amount     Ratio         Amount        Ratio          Amount         Ratio
                                ------     -----         ------        -----          ------         -----
                          
<S>                           <C>           <C>       <C>              <C>          <C>             <C>  
  Tier 1 Risk-Based Capital   $23,027,487   7.44%     $12,385,363      4.00%       $18,578,045       6.00%
  Total Risk-Based Capital     25,622,799   8.28%      24,770,727      8.00%        30,963,409      10.00%
  Leverage                     23,027,487   5.43%      16,978,392      4.00%        21,203,948       5.00%

</TABLE>


Asset and Liability Management

        The Company's exposure to interest rate risk results from the difference
in maturities on interest-bearing  liabilities and  interest-earning  assets and
the  volatility of interest  rates.  Because the Company's  assets have a longer
maturity than its liabilities, the Company's earnings will tend to be negatively
affected  during periods of rising  interest  rates.  Conversely,  this mismatch
should  benefit  the  Company  during  periods  of  declining   interest  rates.
Management  monitors the  relationship  between the interest rate sensitivity of
the Company's assets and liabilities. In this regard, the Company emphasizes the
origination of short-term  commercial  loans and revolving home equity loans and
de-emphasizes the origination of long-term mortgage loans.

                                       32


<PAGE>



Gap Analysis

        Banks have become  increasingly  concerned with the extent to which they
are able to match  maturities of  interest-earning  assets and  interest-bearing
liabilities.  Such matching is facilitated by examining the extent to which such
assets  and  liabilities  are  interest-rate  sensitive  and  by  monitoring  an
institution's interest rate sensitivity gap. An asset or liability is considered
to be  interest-rate  sensitive  if it will mature or reprice  within a specific
time  period.  The  interest  rate  sensitivity  gap is defined as the excess of
interest-earning assets maturing or repricing within a specific time period over
interest-bearing liabilities maturing or repricing within that time period. On a
monthly basis,  the Bank monitors its gap,  primarily its six-month and one-year
maturities  and works to maintain  its gap within a range that does not exceed a
negative  15% of total  assets.  The Company  attempts to maintain  its ratio of
rate-sensitive assets to rate-sensitive liabilities between 75% to 125%.

        The Bank currently has a negative  position with respect to its exposure
to interest rate risk. Management monitors its gap position at monthly meetings.
The  Asset/Liability  Committee of the Bank's Board of Directors meets quarterly
to discuss the Bank's  interest rate risk.  The Bank uses  simulation  models to
measure the impact of  potential  changes of up to 200 basis  points in interest
rates on the net interest  income of the Company.  As  described  below,  sudden
changes  to  interest  rates  should  not have a  material  impact to the Bank's
results  of  operations.  Should the Bank  experience  a  positive  or  negative
mismatch in excess of the approved range,  it has a number of remedial  options.
It has the ability to reposition its investment  portfolio to include securities
with more advantageous repricing and/or maturity characteristics. It can attract
variable- or fixed-rate loan products as appropriate.  It can also price deposit
products to attract  deposits with maturity  characteristics  that can lower its
exposure to interest rate risk.

        At December 31, 1996,  total  interest-bearing  liabilities  maturing or
repricing  within one year exceeded total  interest-earning  assets  maturing or
repricing  during the same time period by $38 million,  representing  a negative
cumulative   one-year   gap  ratio  of  8.73%.   As  a  result,   the  yield  on
interest-earning  assets of the Bank should adjust to changes in interest  rates
at a  slower  rate  than the cost of the  Bank's  interest-bearing  liabilities.
Because  the Bank had  positive  gap  characteristics  in its  shorter  maturity
periods,  the Bank's one-year gap mismatch would have a negligible effect on the
Bank's net interest margin during periods of rising or declining market interest
rates.

        The   following   table    summarizes   the   maturity   and   repricing
characteristics  of the  Bank's  interest-earning  assets  and  interest-bearing
liabilities as of December 31, 1996. All amounts are categorized by their actual
maturity  or  repricing  date  with the  exception  of  interest-bearing  demand
deposits  and  savings  deposits.  The Bank's  historical  experience  with both
interest-bearing  demand deposits and savings deposits reflects an insignificant
change  in  deposit  levels  for these  core  deposits.  As a  result,  the Bank
allocates  approximately  35% to the 0-3 month  category and 65% to the 1-5 year
category.

                                       33


<PAGE>

<TABLE>
<CAPTION>
                                              Maturity/Repricing Time Periods
                                                  (Amounts in Thousands)
                                0-3 Months 4-12 Months  1-5 Years  Over 5 Years   Total
                                ---------- -----------  ---------  ------------   -----

<S>                              <C>          <C>        <C>         <C>        <C>      
Loans Receivable                 $ 141,565    $ 38,460   $ 88,388    $ 29,683   $ 298,096
Investment Securities                    -       8,730     61,168      25,683      95,581
Federal Funds Sold                   4,800           -          -           -       4,800
                                   -------     -------    -------    --------    --------
  Total interest-earning assets    146,365      47,190    149,556      55,366     398,477
                                   -------     -------    -------    --------    --------
Interest-bearing demand deposits    21,173           -     35,951           -      57,124
Savings deposits                    25,769           -     37,738           -      63,507
Time certificates under $100,000    41,529      93,339     16,747           -     151,615
Time certificates $100,000 or more  18,805      15,810      2,626           -      37,241
Federal Home Loan Bank advances     10,000           -          -           -      10,000
Securities sold under agreements
  to repurchase                      5,253           -          -           -       5,253
                                   -------     -------    -------    --------    --------
  Total interest-bearing 
    liabilities                    122,529     109,149     93,062           -     324,740
                                   -------     -------    -------    --------    --------
Periodic Gap                      $ 23,836    $(61,959)  $ 56,494    $ 55,366   $  73,737
                                   =======    ========    =======     =======    ========
Cumulative Gap                    $ 23,836    $(38,123)  $ 18,371    $ 73,737
                                   =======    ========    =======     =======
Cumulative Gap Ratio                  5.46%      -8.73%      4.21%      16.88%
                                   =======    ========     =======     =======

</TABLE>



Impact of Inflation and Changing Prices

        The  financial  statements of the Company and notes  thereto,  presented
elsewhere  herein,  have been prepared in  accordance  with  generally  accepted
accounting principles,  which requires the measurement of financial position and
operating results in terms of historical dollars without  considering the change
in the relative  purchasing  power of money over time and due to inflation.  The
impact  of  inflation  is  reflected  in the  increased  cost  of the  Company's
operations.  Nearly all the assets and  liabilities of the Company are monetary.
As a result,  interest rates have a greater impact on the Company'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.

FINANCIAL CONDITION

General - The Company has  experienced  significant  growth in its  statement of
financial  condition.  The  increase  has been the  result of  acquisitions  and
internal growth.  Increases were most prevalent in loans,  generally  commercial
loans, and deposits.  The Company's  assets increased by $66.9 million,  or 18%,
from $369.9 million at December 31, 1995 to $436.8 million at December 31, 1996.
The increase in assets primarily  reflects the Company's  deployment of proceeds
into the loan  portfolio,  from sales of  investment  securities  and  increased
deposit levels. Comparing balances from December 31, 1996 to 1995, the Company's
net loans receivable increased $111.9 million, federal funds sold increased $4.8
million and investment  securities  decreased $51.4 million.  Total  liabilities
increased  $64.2  million,  or 19%, from $345.2  million at December 31, 1995 to
$409.4  million at December  31,  1996.  Deposits  increased  $50.7  million and
borrowed funds increased $13.2 million. Before the effect of unrealized gains or
losses on securities held for sale, shareholders' equity increased $4.1 million,
or 17%, from $24.3 million at December 31, 1995 to $28.4 million at December 31,
1996.

                                       34


<PAGE>



Loans - Net loans  receivable  increased  $111.9  million,  or 61%,  from $183.6
million  at  December  31,  1995  to  $295.5   million  at  December  31,  1996.
Approximately  $104.2  million  of this  increase  was in  commercial  loans  --
predominately  commercial  real estate loans.  This  significant  increase was a
result  of  a   considerably   larger   commercial   lending  staff  (many  with
long-established customer relationships) available to offer competitively priced
loans.  Installment  loans  increased $8.7 million,  mostly due to a more active
consumer  lending  department  and an increase  in  financing  of mobile  homes.
Residential  real  estate  loans  decreased  $568,000  as a result of  scheduled
principal repayments.  During 1996, the Bank used outside loan correspondents to
originate  residential  mortgages.  These loans were originated using the Bank's
underwriting  standards,  rates and terms,  and were  approved  according to the
Bank's lending policy prior to origination.  Prior to closing,  the Bank usually
had commitments to sell these loans with servicing released,  at par and without
recourse,  in the  secondary  market.  Secondary  market  sales  were  generally
scheduled to close shortly after the origination of the loan. Set forth below is
selected data relating to the  composition  of the Bank's loan portfolio by type
of loan on the dates indicated.

ANALYSIS OF LOAN PORTFOLIO
<TABLE>
<CAPTION>
                                                                  At December 31,                                            
                                  1996                  1995                 1994                 1993               1992
                            ------------------   -------------------  -----------------  ------------------ ---------------------
                               $          %         $           %          $         %         $        %         $          %
                              ---        ---       ---         ---        ---       ---       ---      ---       ---        ---
Type of Loan:                                                  (Dollars in Thousands)
<S>                         <C>         <C>      <C>          <C>     <C>         <C>    <C>         <C>      <C>         <C>   
  Commercial                $223,116     75.50   $118,874      64.73  $ 69,249     51.35  $ 41,642    49.94   $ 34,475     42.00  
  Home equity                 22,070      7.47     25,129      13.68    26,799     19.87    23,510    28.19     22,257     27.12  
  Residential real estate     31,777     10.75     29,287      15.95    29,633     21.97    19,151    22.97     26,213     31.94 
  Installment                 21,133      7.15     12,409       6.76    10,787      8.00       151     0.18        219      0.27 
Less:  Loan loss allowance     2,595      0.88      2,065       1.12     1,607      1.19     1,067     1.28      1,084      1.32
                            --------    ------   --------     ------  --------    ------  --------   ------   --------    ------ 
  Net loans                 $295,501    100.00   $183,634     100.00  $134,861    100.00  $ 83,387   100.00   $ 82,080    100.00
                            ========    ======   ========     ======  ========    ======  ========   ======   ========    ======


Type of Security:
  Residential real estate:

    1-4 family              $ 84,036     28.44   $ 68,904      37.52  $ 72,466     53.73  $ 49,777    59.69   $ 52,532     64.00 
    Other                     11,115      3.76      6,295       3.43       839      0.62       757     0.91        372      0.45
  Commercial real estate     166,893     56.48     85,239      46.42    48,845     36.22    28,682    34.40     23,930     29.15 
  Commercial business loans   20,455      6.92     13,822       7.53     6,621      4.91     5,031     6.03      6,099      7.43 
  Consumer                    15,229      5.15     11,214       6.11     6,511      4.83       151     0.18        219      0.27 
  Other                          368      0.12        225       0.11     1,186      0.88        56     0.07         12      0.01 
Less:  Loan loss allowance     2,595      0.88      2,065       1.12     1,607      1.19     1,067     1.28      1,084      1.32
                            --------    ------   --------     ------  --------    ------  --------   ------   --------    ------ 
  Net loans                 $295,501    100.00   $183,634     100.00  $134,861    100.00 $  83,387   100.00   $ 82,080    100.00
                            ========    ======   ========     ======  ========    ====== =========   ======   ========    ======
</TABLE>
                                                   
                                                   
                                                 


                                       35


<PAGE>

        The following table sets forth the estimated maturity of the Bank's loan
portfolio  at  December  31,  1996.  The table does not include  prepayments  or
scheduled  principal  prepayments.  Adjustable  rate mortgage loans are shown as
maturing based on contractual maturities.

                            Due     Due after             Allowance
                           within   1 through  Due after     for
                           1 year    5 years    5 years   Loan Loss     Total
                           ------    -------    -------   ---------     -----
                                           (In thousands)

Commercial and industrial $40,553   $109,168   $ 73,800    $(1,301)   $222,220

Home equity                                      22,069       (490)     21,579

Residential real estate     2,331      1,606     27,805       (139)     31,603

Installment                   867      6,444     13,453       (167)     20,597

Unassigned reserve                                            (498)       (498)
                          -------   --------   --------    -------    --------
                          $43,751   $117,218   $137,127    $(2,595)   $295,501
                           ======    =======    =======    =======    ========

        The following  table sets forth the dollar amount of all loans due after
December  31,  1997,  which have  pre-determined  interest  rates and which have
floating or adjustable interest rates.

                                       Floating or
                                       Adjustable
                          Fixed Rates     Rates     Total
                          -----------     -----     -----
                                    (In thousands)
Commercial and industrial   $ 97,729   $ 84,885   $182,614
Home equity                      621     21,111     21,732
Residential real estate       23,588      5,237     28,825

Installment                   19,897                19,897
                            --------   --------   --------
                            $141,835   $111,233   $253,068
                            ========   ========   ========



Non-Performing and Problem Assets

Loan  Delinquencies  - The Bank's  collection  procedures  provide  that after a
commercial loan is ten days past due, or a residential  mortgage loan is fifteen
days past due, a late  charge is added.  The  borrower is  contacted  by mail or
telephone and payment is requested.  If the  delinquency  continues,  subsequent
efforts are made to contact the borrower. If the loan continues to be delinquent
for ninety days or more,  the Bank  usually  initiates  foreclosure  proceedings
unless other repayment  arrangements  are made. Each delinquent loan is reviewed
on a case by case basis in accordance with the Bank's lending policy.

        Commercial  loans  and  commercial  real  estate  loans  are  placed  on
nonaccrual at the time the loan is 90 days delinquent  unless the credit is well
secured  and in the  process  of  collection.  Generally,  commercial  loans are
charged off no later than 120 days  delinquent  unless the loan is well  secured
and in the process of  collection  or other  extenuating  circumstances  support
collection.  Residential real estate loans are typically  charged off at 90 days
delinquent.  In all cases,  loans must be placed on nonaccrual or charged off at
an earlier date if collection of principal or interest is considered doubtful.

                                       36


<PAGE>

Non-Performing  Assets - During 1996,  the Company  experienced a decline in the
amount of loans that were on non-accrual.  Total non-performing  assets declined
by $903,000,  or 22%,  from  $4,079,000  at December 31, 1995 to  $3,176,000  at
December 31, 1996. The ratio of  non-performing  assets to net loans was .82% at
December  31,  1996   compared  to  1.74%  at  December   31,  1995.   In  1995,
non-performing assets increased by $563,000, from $3,516,000 at December 31,1994
to $4,079,000 at December 31, 1995.  Although the dollar amount  increased,  the
ratio of  non-performing  assets to net loans decreased,  from 1.84% at December
31,  1994 to  1.74% at  December  31,  1995.  The  following  table  sets  forth
information  regarding loans that are delinquent ninety days or more. Management
of the Bank believes that all loans accruing interest are adequately secured and
in the process of collection.  At the dates shown,  the Bank had no restructured
loans within the definition of SFAS No. 15.

Foreclosed  Real  Estate - Real  estate  acquired  by the  Bank as a  result  of
foreclosure  is  classified  as Real Estate Owned until such time as it is sold.
When Real Estate  Owned is  acquired,  it is recorded at the lower of the unpaid
principal balance of the related loan or its fair value less disposal costs. Any
write-down of Real Estate Owned is charged to operations.  At December 31, 1996,
the Bank had $755,628 classified as Real Estate Owned.

Non-Performing Assets
<TABLE>
<CAPTION>
                                                                  ---------------------------------------------------------
                                                                       1996       1995       1994     1993        1992
                                                                       ----       ----       ----     ----        ----
                                                                                       (Dollars in Thousands)
Loans accounted for on a non-accrual basis:                                                                                 
<S>                                                                 <C>         <C>        <C>       <C>        <C>     
  Commercial and industrial                                         $     354   $  1,721   $ 1,178   $ 1,074    $    428
  Home equity                                                             337        295       341       204          33    
  Residential real estate                                                 586        607       342       265         199   
  Installment                                                               -         35        40         -           -
                                                                    ---------   --------   --------  -------    --------    
Total                                                               $   1,277   $  2,658   $ 1,901   $ 1,543    $    660
                                                                    =========   ========   ========  =======    ========
                                                                 
Accruing loans that are contractually past                                                                                  
 due 90 days or more:                                             
  Commercial and industrial                                         $     404   $    135   $   525   $     -    $     -  
  Home equity                                                              62        279        30         -          -     
  Residential real estate                                                 572         64        20         2        183     
  Installment                                                             105         67         7         -          -     
                                                                    ---------   --------   --------  -------    --------    
Total                                                               $   1,143   $    545   $   582  $      2    $   183
                                                                    =========   ========   =======  ========    =======
                                                                                                                            
Total non-accrual and 90-day past due loans                         $   2,420   $  3,203   $ 2,483  $  1,545    $   843
Real estate owned                                                         756        876     1,033       359        144     
                                                                    ---------   --------   --------  -------    --------    
Total non-performing assets                                         $   3,176   $  4,079   $ 3,516  $  1,904    $   987     
                                                                    =========   ========   =======  ========    =======     
                                                                  
Total non-accrual and 90-day past due loans to net loans                 0.82%      1.74%     1.84%     1.85%      1.03%
Total non-accrual and 90-day past due loans to total assets              0.55%      0.87%     1.14%     1.38%      0.81%
Total non-performing assets to total assets                              0.73%      1.10%     1.62%     1.70%      0.95%
Total allowance for loan losses to total non-performing loans          107.26%     64.47%    64.74%    69.10%    128.53%
</TABLE>
                                                                  
                                                         
        Interest  income that would have been  recorded on loans on  non-accrual
status,  under the original terms of such loans, would have totaled $151,614 for
the year ended December 31, 1996.

Allowances  for  Losses on Loans  and Real  Estate  Owned - It is the  policy of
management  to provide  for losses on  unidentified  loans in its  portfolio  in
addition  to  classified  loans.  A  provision  for loan  losses is  charged  to
operations based on management's  evaluation of the potential losses that may be
incurred in the Bank's loan  portfolio.  Management also  periodically  performs
valuations of Real Estate Owned and establishes allowances to reduce book values
of the properties to their net realizable  values when necessary.  The following
table sets forth  information with respect to the Bank's allowance for losses on
loans at the dates indicated.

                                       37


<PAGE>
<TABLE>
<CAPTION>

                                                                             At December 31,                       
                                                                             ---------------                       
                                                                     1996         1995       1994
                                                                     ----         ----       ----  
                                                                          (Dollars in thousands)
                                                                  
<S>                                                               <C>             <C>       <C>                                 
Allowance for losses on loans, beginning of period                $   2,065    $  1,607  $   1,067                           
Charge-offs:                                                      
  Commercial                                                            307         286        312
  Mortgage                                                                9          73          1
  Installment                                                            85          67         37
                                                                  ---------    --------  ---------
    Total charge-offs                                                   401         426        350
                                                                  ---------    --------  ---------
Recoveries                                                        
  Commercial                                                              6          33         22
  Mortgage                                                                4          28
  Installment                                                            21          15         13
                                                                  ---------    --------  ---------
    Total recoveries                                                     31          76         35
                                                                  ---------    --------  ---------
Net charge-offs                                                         370         350        315
Provision for loan losses                                               900         808        383
Allowance on acquired loans                                               -           -        472
                                                                  ---------    --------  ---------
Allowance for losses on loans, end of period                      $   2,595    $  2,065  $   1,607
                                                                  =========    ========  =========
                                                                  
Net loans charged off as a percent of average loans outstanding        0.16%       0.23%      0.29%
                                                                  
</TABLE>
                                                    

        The following  table sets forth the  allocation of the Bank's  allowance
for loan losses by loan  category  and the percent of loans in each  category to
total  loans  receivable  at the dates  indicated.  The portion of the loan loss
allowance allocated to each loan category does not represent the total available
for future losses that may occur within the loan  category  since the total loan
loss allowance is a valuation reserve applicable to the entire loan portfolio.
<TABLE>
<CAPTION>

                                                      At December 31,
                                                      ---------------
                                          1996                        1995                   1994
                                          ----                        ----                   ----
                                                Percent of               Percent of                Percent
                                                 Loans to                 Loans to                 Loans
                                   Amount      Total Loans    Amount     Total Loans     Amount    Total
                                   ------      -----------    ------     -----------     ------    -----
                                                        (Dollars in thousands)
Balance at end of period applicable to:
<S>                              <C>              <C>       <C>             <C>       <C>           <C>    
  Commercial and industrial      $  1,301         74.98 %   $  1,094        64.02%    $     847     50.60 %
  Residential real estate             139         10.65          403        15.96           231     21.94
  Home equity                         490          7.40          319        13.34           155     19.58
  Installment                         167          6.97           54         6.68            47      7.88
  Unallocated                         498             -          195            -           327         -
                                 --------        ------     --------      -------     ---------    ------
    Total allowance              $  2,595        100.00 %   $  2,065       100.00%    $   1,607    100.00%
                                 ========        ======     ========      =======     =========    ======
</TABLE>

                                              38


<PAGE>



Investment  Securities - Substantially all of the Company's investment portfolio
is held at the Bank's  wholly-owned  subsidiary,  Med-Vine,  Inc.  ("Med-Vine").
Total  investment  securities  decreased  $51.4 million,  or 35.0%,  from $147.0
million at December 31, 1995 to $95.6 million at December 31, 1996. During 1996,
the investment portfolio was managed by a professional  portfolio manager. Under
the  arrangement  with the  manager,  the  board-approved  investment  policy of
Med-Vine  and the Bank was  implemented  and every  securities  transaction  was
approved by the investment officers of Med-Vine,  the Bank and/or the investment
committee of the Board of Directors. The investment portfolio, in most part, had
been  acquired in connection  with the Bank's  purchase of Tuckahoe and Ocean in
1994, and which were subsequently  contributed to Med-Vine.  The portfolios were
comprised of investments  which were generally  illiquid and of small  principal
amounts. The bank acquisitions originally increased investments by approximately
$59  million.  The  branch  acquisitions  resulted  in cash being  converted  to
investments of  approximately  $115 million.  During the course of the year, the
manager   restructured  the  portfolio  by  selling  a  large  number  of  these
investments,  then  reinvesting  them mostly in larger blocks of government  and
municipal bonds. Some of these investments were sold during the year to fund the
rapid growth of commercial loans.

        The investment  policy of the Bank is  established by senior  management
and  approved  by the  Board  of  Directors.  Med-Vine's  investment  policy  is
identical  to that of the Bank.  It is based on asset and  liability  management
goals and is designed to provide a portfolio  of high quality  investments  that
optimizes  interest  income  and  provides   acceptable  limits  of  safety  and
liquidity.  Prior to the fourth  quarter  of 1995,  investment  securities  were
purchased with the intent to hold them until their  maturity.  During the fourth
quarter  of 1995,  in  accordance  with the  implementation  of the SFAS No. 115
Guide, the bank  reclassified  its entire portfolio of investment  securities as
available for sale. As a result, the investment  securities are carried at their
approximate market value.

                                       39


<PAGE>



        The  following  table  sets  forth  the  carrying  value  of the  Bank's
investment securities portfolio at the dates indicated:

<TABLE>
<CAPTION>
                                                                           December 31,                                         
                                              -------------------------------------------------------------------------------------
                                                                1996                                    1995
                                              -------------------------------------------------------------------------------------
                                                                Net        Estimated                       Net         Estimated
                                               Amortized    Unrealized      Market       Amortized       Unrealized      Market     
Available for Sale:                                Cost        Losses       Value           Cost           Gains         Value
                                              ------------ -----------   ------------  --------------   -----------   -------------
<S>                                           <C>          <C>           <C>           <C>              <C>           <C>          
  U. S. Treasury securities                   $ 51,954,682 $  (920,871)  $ 51,033,811  $   41,674,219   $   230,269   $  41,904,488
  Mortgage-backed securities                        63,061           -         63,061      41,734,347       263,520      41,997,867
  State and political subdivision securities    20,168,222    (328,816)    19,839,406      16,666,509        75,082      16,741,591
  Other securities                              24,877,433    (232,327)    24,645,106      46,304,169        60,781      46,364,950
                                              ------------ -----------   ------------  --------------   -----------   -------------
    Total securities available for sale       $ 97,063,398 $(1,482,014)  $ 95,581,384  $  146,379,244   $   629,652   $ 147,008,896
                                              ============ ===========   ============  ==============   ===========   =============
</TABLE>

<TABLE>
<CAPTION>
                                                                   December 31, 1994                  
                                                          ---------------------------------------
                                                                            Net        Estimated
                                                           Amortized     Unrealized      Market
                                                              Cost         Losses        Value
                                                          ------------ ------------   -----------
                                                        
Held to maturity:                                                                                              
<S>                                                       <C>           <C>           <C>        
  U. S. Treasury securities                               $ 20,033,886  $  (369,712)  $19,664,174
  Government agency and                                                                                         
    mortgage-backed securities                              19,334,650     (504,981)   18,829,669
  State and political subdivision securities                13,550,137     (287,346)   13,262,791
  Other securities                                           7,406,062     (177,500)    7,228,562
                                                          ------------ ------------   -----------           
    Total securities held to maturity                       60,324,735   (1,339,539)   58,985,196
                                                          ------------ ------------   -----------
                                                        
Available for sale:                                                                                            
  U. S. Treasury securities                                                                                     
  Government agency and                                 
    mortgage-backed securities                                                                                 
  State and political subdivision securities
                                                        
  Other securities                                             313,250                    313,250
                                                          ------------ ------------   -----------
    Total securities available for sale                        313,250            -       313,250
                                                          ------------ ------------   -----------
      Total investment securities                         $ 60,637,985 $ (1,339,539)  $59,298,446
                                                          ============ ============   ===========
</TABLE>
                                                    
                                

                                       40


<PAGE>
        The  following  table  sets  forth  certain  information  regarding  the
carrying values, weighted average yields and maturities of the Bank's investment
portfolio at December 31, 1996. All securities are classified as being available
for sale, therefore the carrying value is the estimated market value.

<TABLE>
<CAPTION>
                             One Year or Less   One to Five Years  Five to Ten Years   More than Ten Years        Total            
                             ----------------   -----------------  -----------------   -------------------   ----------------       
                             Carrying  Average   Carrying  Average   Carrying Average    Carrying Average    Carrying  Aver
                              Value     Yield     Value    Yield      Value    Yield      Value    Yield      Value    Yield
                              -----     -----     -----    -----      -----    -----      -----    -----      -----    -----
                                                                 (Dollars in thousands)
                                       
<S>                           <C>       <C>     <C>         <C>      <C>         <C>      <C>         <C>     <C>       <C>     
U.S. Government Obligations   $7,960    5.40 %  $ 43,074    5.55 %                                            $ 51,034  5.53%
Government agency and                                                         
  mortgage-backed securities                      11,632    6.22     $  2,976    6.78 %   $    51     8.50%     14,659  6.34    
Municipal obligations            716    4.27         250    4.34       12,714    4.75       6,159     4.87      19,839  4.77     
Other securities                 110    5.00       5,107    6.03           30    7.35       4,802     6.36      10,049  6.18
                              ------    ----    --------    ----     --------    ----     --------    ----    --------  ---- 
    Total                     $8,786    5.30 %  $ 60,063    5.71 %   $ 15,720    5.14 %   $ 11,012    5.53 %  $ 95,581  5.56%
                              ======    ====    ========    ====     ========    ====     ========    ====    ========  ==== 
</TABLE>

Deposits - Consumer and  commercial  deposits  are  attracted  principally  from
within the Bank's primary market area through the offering of a broad  selection
of deposit  instruments  including  checking,  regular  savings,  money  market,
certificates  of deposit and individual  retirement  accounts.  Deposit  account
terms vary according to the minimum balance required, the time periods the funds
must remain on deposit and the  interest  rate,  among other  factors.  The Bank
regularly  evaluates  the  internal  cost of funds,  surveys  rates  offered  by
competing  institutions,  reviews the Bank's cash flow  requirements for lending
and liquidity, and executes rate changes when deemed appropriate.  The Bank does
not obtain funds through brokers, nor does it solicit funds outside the State of
New Jersey.

        Deposits at December 31, 1996 amounted to $386.0 million, an increase of
$50.8  million,  or 15%,  over the December 31, 1995 balance of $335.2  million.
Demand  deposits,  including NOW accounts and money market  accounts,  increased
$4.8  million,  from $128.8  million at December  31, 1995 to $133.6  million at
December 31, 1996. Savings deposits  decreased $3.5 million,  from $67.0 million
at December  31, 1995 to $63.5  million at December 31,  1996.  Certificates  of
deposit under $100,000 increased $35.1 million,  from $116.5 million at December
31, 1995 to $151.6  million at December  31,  1996.  Certificates  of deposit of
$100,000 or more  increased  $14.2  million,  from $23.0 million at December 31,
1995 to $37.2  million at December 31, 1996.  The  increase in  certificates  of
deposit  was  due  in  large  part  to  promotional  rates  offered  on  certain
certificates  of deposit  during the year in response to rates  offered by other
financial  institutions  in the Bank's market areas, as well as in response to a
general increase in overall market rates for certificates of deposit.

        The  following  table sets forth  average  deposits by various  types of
demand and time deposits:
<TABLE>
<CAPTION>

                                                 For the Years Ended December 31,
                                      -----------------------------------------------------------------------
                                         1996     Avg. Yield      1995      Avg. Yield    1994     Avg. Yield
                                      --------    ----------   ---------    ----------  --------   ----------  

                                                      (Dollars in thousands)

<S>                                   <C>            <C>      <C>              <C>     <C>            <C>
Non-interest bearing demand deposits  $ 65,556                $   45,562               $  26,949    
Interest bearing demand deposits        62,270       1.78 %       48,609       2.19       29,186       2.43 %
Savings deposits                        65,393       2.23         57,470       2.28       44,968       3.10
Time deposits                          170,875       5.49         96,256       5.48       45,611       3.95
                                      --------       ----      ---------       ----    ---------       ----  
    Total                             $364,094       3.28 %    $ 247,897       3.09    $ 146,714       3.66 %
                                      ========       ====      =========       ====    =========       ====  
</TABLE>                         



                                       41


<PAGE>




        The following  table  indicates the amount of certificates of deposit of
$100,000 or more by remaining maturity at December 31, 1996:

                                    (In thousands)
Remaining maturity:
  Three months or less                $ 18,805
  Over three through six months          6,389
  Over six through twelve months         9,421
  Over twelve months                     2,626
                                      --------
                                      $ 37,241
                                      ========

Borrowings - Borrowed funds increased $13.3 million, from $8 million at December
31, 1995 to $21.3  million at December 31,  1996.  Of the  increase,  $2 million
represents an increase in advances from the FHLB. Beginning in 1996, the Company
sold securities  under  agreements with customers to repurchase them, at par, on
the next business day. The securities sold were U.S. Treasury Notes. At December
31,  1996,  securities  sold under  agreements  to  repurchase  amounted to $5.3
million.  At December 30, 1996, the Company obtained a $6 million revolving line
of credit from a correspondent  bank with a term of 36 months. The floating rate
of interest is the prime rate plus fifty basis  points.  At December  31,  1996,
there was $6 million  outstanding at an interest rate of 8.75%.  The proceeds of
the loan were contributed to the bank as capital.

Federal Home Loan Bank Advances

                                              1996         1995
                                              ----         ---- 
Amount outstanding at December 31,         (Dollars in thousands)
  Advances                                 $ 10,000     $ 8,000
  Interest rate                               7.375%      5.875%

  Approximate average amount outstanding   $  5,265     $   150
  Approximate weighted average rate            5.44%       5.44%



        Deposits  are  the  primary  source  of  funds  for the  bank's  lending
activities, investment activities and general business purposes. Should the need
arise,  the Bank has the ability to access lines of credit from various  sources
including the Federal Reserve Bank, the Federal Home Loan Bank and various other
correspondent  banks.  In  addition,  on an  overnight  basis,  the Bank has the
ability to offer securities sold under agreements to repurchase.

                             BUSINESS OF THE COMPANY

General

        The Company is a one-bank holding company headquartered in Vineland, New
Jersey engaged primarily in commercial and consumer banking services through its
sole  subsidiary,  the Bank. The Company's  principal  business is to serve as a
holding  company for the Bank and was  incorporated  in 1985. In April 1995, the
Company changed its name from Citizens Investments, Inc. to its present name.

                                       42


<PAGE>



The  Bank  has  one  wholly-owned   subsidiary,   Med-Vine,   Inc.,  a  Delaware
corporation,  which  was  formed  in 1992 to hold a  majority  of the  Company's
investment portfolio.

        As previously discussed,  the Company is focused on a strategy to expand
its franchise  throughout  southern New Jersey.  Continued  consolidation of the
banking industry,  and a regionalization of decision authority by larger banking
institutions  resulted in many area  businesses  and  individuals  in the Bank's
market underserved. The opportunities provided in this market prompted the Board
and management to actively pursue strategic acquisitions.

        In June 1994, Tuckahoe was merged into the Bank and, in July 1994, Ocean
was merged into the Bank.  The Tuckahoe and Ocean  mergers  increased  the asset
size of the Bank by approximately $119 million and increased deposit liabilities
by approximately $105 million.  On July 14, 1995, the Bank purchased four branch
offices from NatWest Bank and on November  24,  1995,  the Bank  purchased  four
branch offices from the New Jersey National Bank (the "branch  purchases").  The
branch purchases increased deposit liabilities of the Bank by approximately $123
million.  On December 19, 1996,  the Bank entered into a Purchase and Assumption
Agreement  to  acquire  four  branch   offices   including  the   assumption  of
approximately  $73 million of deposit  liabilities  from First Union.  The First
Union branch purchase is subject to regulatory approval and is expected to close
during the second quarter of 1997. On February 25, 1997, the Bank entered into a
Purchase and Assumption  Agreement to acquire three branch offices including the
assumption of approximately $33 million of deposit liabilities from Oritani. The
Oritani  branch  purchase is subject to  regulatory  approval and is expected to
close during the third quarter of 1997.

        The Bank offers a wide variety of  commercial  and consumer  lending and
deposit services through its eighteen branch offices located throughout southern
New  Jersey.  The  commercial  loans  offered  by the Bank  include  short-  and
long-term business loans, lines of credit,  non-residential  mortgage loans, and
real estate  construction  loans.  Consumer  loans  include  home equity  loans,
residential  real estate  loans,  and  installment  loans.  The Bank also offers
deposits and personal banking services,  including  commercial banking services,
retail deposit services such as certificates of deposit,  money market accounts,
savings  accounts and automatic  teller  machine  ("ATM")  access and individual
retirement  accounts,  and securities brokerage and investment advisory services
through a third-party arrangement.

Market Area

        The Bank has been,  and intends to continue to be, a  community-oriented
financial institution, offering a wide variety of financial services to meet the
needs of the  communities it serves.  The Bank conducts its business  through 18
branch  offices and one loan  administration  office located in the southern New
Jersey counties of Atlantic,  Burlington, Cape May, Cumberland, Mercer and Ocean
("primary market area").  The Bank's deposit  gathering base and lending area is
concentrated in the communities surrounding its offices.

        The Bank is a  community-based  financial  institution  headquartered in
Cumberland  County,  New Jersey.  The city of Vineland is approximately 30 miles
southeast of Philadelphia,  Pennsylvania,  and 30 miles southeast of Camden, New
Jersey. The Philadelphia  International Airport is approximately 45 minutes from
Vineland.

        Southern New Jersey is among the fastest growing population areas in New
Jersey and has a significant  number of retired residents who have traditionally
provided  the Bank with a stable  source of deposit  funds.  The  economy of the
Bank's primary market area is based upon a mixture of the

                                       43


<PAGE>



agriculture,  transportation,  manufacturing and tourism trade. The area is also
home to  commuters  working in New  Jersey  suburban  areas  around New York and
Philadelphia.

        Management  considers the Bank's  reputation for customer service as its
major competitive  advantage in attracting and retaining customers in its market
area. The Bank also believes it benefits from its community orientation, as well
as its established deposit base and level of core deposits.

Lending Activities

        General.  The principal  lending activity of the Bank is the origination
of commercial real estate loans,  commercial business and industrial loans, home
equity loans,  mortgage loans and, to a much lesser extent,  installment  loans.
All loans are originated in the Bank's  primary  market area. See  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations" for a
description of the Bank's loan portfolio.

        Commercial and Industrial  Loans.  The Bank originates  several types of
commercial and  industrial  loans.  Included as commercial  loans are short- and
long-term  business loans, lines of credit,  non-residential  mortgage loans and
real  estate  construction  loans.  The  primary  focus  of the  Bank  is on the
origination  of  commercial  loans  secured by real estate.  The majority of the
Bank's customers for these loans are small- to medium-sized  businesses  located
in the southern part of New Jersey.

        Commercial  Real Estate Loans.  Loans  secured by commercial  properties
generally  involve a greater degree of risk than residential  mortgage loans and
carry larger loan balances.  This  increased  credit risk is a result of several
factors,  including the  concentration of principal in a limited number of loans
and  borrowers,  the  mobility of  collateral,  the effects of general  economic
conditions  on income  producing  properties  and the  increased  difficulty  of
evaluating  and monitoring  these types of loans.  A significant  portion of the
Bank's  commercial  real estate and  commercial  and  industrial  loan portfolio
includes a balloon payment feature.  A number of factors may affect a borrower's
ability to make or refinance a balloon payment, including without limitation the
financial  condition of the borrower at the time, the prevailing  local economic
conditions,  and the  prevailing  interest  rate  environment.  There  can be no
assurance that borrowers will be able to make or refinance balloon payments when
due.

        Furthermore, the repayment of loans secured by commercial real estate is
typically dependent upon the successful  operation of the related real estate or
commercial project. If the cash flow from the project is reduced, the borrower's
ability to repay the loan may be impaired. This cash flow shortage may result in
the failure to make loan payments.  In such cases,  the Company may be compelled
to modify the terms of the loan. In addition,  the nature of these loans is such
that they are  generally  less  predictable  and more  difficult to evaluate and
monitor.  As a result,  repayment  of these  loans may be  subject  to a greater
extent than residential loans to adverse conditions in the real estate market or
economy.

        Home Equity Loans.  The Bank  originates  home equity loans,  secured by
first or second  mortgages owned or being purchased by the loan applicant.  Home
equity loans are consumer  revolving lines of credit.  The interest rate charged
on such loans is usually a floating rate related to the prime lending rate. Home
equity loans may provide for interest only payments for the first two years with
principal  payments to begin in the third year.  A home equity loan is typically
originated  as a  fifteen-year  note that  allows the  borrower to draw upon the
approved line of credit during the same period as the note.  The Bank  generally
requires  a  loan-to-value  ratio in the  range  of 70% to 80% of the  appraised
value, less any outstanding mortgage.

                                       44


<PAGE>



        Residential Real Estate Loans. The Bank uses outside loan correspondents
to originate residential mortgages.  These loans are originated using the Bank's
underwriting  standards,  rates and terms,  and are  approved  according  to the
Bank's lending policy prior to origination.  Prior to closing,  the Bank usually
has  commitments  to sell  these  loans,  at par and  without  recourse,  in the
secondary  market.  Secondary  market  sales are  generally  scheduled  to close
shortly after the origination of the loan.

        The majority of the Bank's  residential  mortgage loans consist of loans
secured by owner-occupied,  single-family  residences.  The Bank's mortgage loan
portfolio  consists of both  fixed-rate  and  adjustable-rate  loans  secured by
various types of collateral as discussed below.  Management generally originates
residential   mortgage  loans  in  conformity  with  Federal  National  Mortgage
Association  ("FNMA")  standards  so that the loans will be eligible for sale in
the secondary market.  Management expects to continue offering mortgage loans at
market interest rates,  with  substantially  the same terms and conditions as it
currently offers.

        The Bank's residential  mortgage loans customarily  include  due-on-sale
clauses,  which  are  provisions  giving  the Bank the  right to  declare a loan
immediately due and payable in the event, among other things,  that the borrower
sells or  otherwise  disposes of the real  property  serving as security for the
loan.  Due-on-sale  clauses are an important means of adjusting the rates on the
Bank's  fixed-rate  mortgage  portfolio.  The Bank usually  exercises its rights
under these clauses.

        Installment  Loans. The Bank originates  installment,  or consumer loans
secured by a variety of collateral,  such as new and used automobiles.  The Bank
makes a very limited number of unsecured  installment loans.  Through its merger
with Ocean in 1994, the Bank acquired a credit card  portfolio  which it intends
to reduce as current customers pay off their lines of credit.

        Loan  Solicitation and Processing.  Loan originations are derived from a
number of sources such as loan officers, customers, borrowers and referrals from
real estate brokers, accountants, attorneys and regional advisory boards.

        Upon  receipt of a loan  application,  a credit  report is  ordered  and
reviewed  to  verify  specific  information  relating  to the  loan  applicant's
creditworthiness.  For residential  mortgage  loans,  written  verifications  of
employment  and deposit  balances are  requested by the Bank.  The Bank requires
that an  appraisal of the real estate  intended to secure the  proposed  loan is
undertaken  by a  certified  independent  appraiser  approved  by the  Bank  and
licensed by the State.  After all of the required  information is obtained,  the
Bank then makes its  credit  decision.  Depending  on the type,  collateral  and
amount of the credit  request,  various levels of approval may be necessary.  In
general,  loans of  $100,000  or more must be  presented  at an  Officers'  Loan
Committee  which has the  authority to approve  unsecured  loans to $750,000 and
secured loans to $1.5 million.  The Officers' Loan Committee is comprised of the
Bank's  CEO,  senior  lending  officer and  regional  lending  officers.  Credit
requests in excess of the Officers' Loan Committee must also be presented to the
Bank's Board of  Directors  for  approval.  Loans under  $100,000 are  generally
approved by various levels of Bank management. All loans require the approval of
at least two lending officers.

        Title  insurance  policies  are  required on all first  mortgage  loans.
Hazard insurance  coverage is required on all properties  securing loans made by
the Bank. Flood insurance is also required, when applicable.

        Loan  applicants are notified of the credit  decision by letter.  If the
loan is approved,  the loan commitment specifies the terms and conditions of the
proposed loan including the amount,  interest rate,  amortization  term, a brief
description of the required collateral, and the required insurance coverage. The
borrower  must  provide  proof of  fire,  flood  (if  applicable)  and  casualty
insurance  on the  property  serving  as  collateral,  which  insurance  must be
maintained during the full term of the loan. Generally, title insurance endorsed
to the Bank is required on all first mortgage loans.

                                       45


<PAGE>



        Loan Commitments.  When a commercial loan is approved, the Bank issues a
written  commitment to the loan  applicant.  The  commitment  indicates the loan
amount,  term  and  interest  rate  and is  valid  for  approximately  45  days.
Approximately  90% of the Bank's  commitments  are  accepted  or rejected by the
customer before the expiration of the commitment. At December 31, 1996, the Bank
had approximately $29.0 million in commercial loan commitments outstanding.

        Credit  Risk,  Credit   Administration  and  Loan  Review.  Credit  risk
represents the possibility  that a customer or  counterparty  may not perform in
accordance  with  contractual  terms.  The Bank incurs  credit risk  whenever it
extends credit to, or enters into other  transactions  with, its customers.  The
risks  associated  with  extensions of credit  include  general  risk,  which is
inherent in the lending  business,  and risk specific to  individual  borrowers.
Credit  administration  is responsible for the overall  management of the Bank's
credit risk and the  development,  application and enforcement of uniform credit
policies and procedures the principal purpose of which is to minimize such risk.
One  objective  of credit  administration  is to  identify  and,  to the  extent
feasible,  diversify extensions of credit by industry concentration,  geographic
distribution  and the type of  borrower.  Loan review and other loan  monitoring
practices  provide a means for the Bank's management to ascertain whether proper
credit,  underwriting and loan documentation policies,  procedures and practices
are being  followed by the Bank's loan officers and are being applied  uniformly
throughout the Bank.  Within the last year, the Bank has taken a number of steps
to enhance its credit  administration  and loan review functions in an effort to
better  manage its credit risk,  especially in light of the Bank's rapid growth.
While the Bank  continues to review these and other  related  functional  areas,
there  can be no  assurance  that the  steps  the Bank has taken to date will be
sufficient  to enable it to  identify,  measure,  monitor and control all credit
risk.

Investment Securities Activities

      General.  The  investment  policy  of the Bank is  established  by  senior
management  and  approved  by the Board of  Directors.  It is based on asset and
liability  management  goals and is  designed  to  provide a  portfolio  of high
quality investments that optimize interest income and provides acceptable limits
of safety and liquidity. The Bank's investment goal is to invest available funds
in instruments that meet specific requirements of the Bank's asset and liability
management  goals.  The investment  activities of the Bank consist  primarily of
investments  in federal  funds,  securities  issued or  guaranteed by the United
States  Government  or its  agencies,  states  and  political  subdivisions  and
corporate  bonds.  See  "Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations" for a description of the Bank's  investment
portfolio.

Sources of Funds

        General.  Deposits  are the major source of the Bank's funds for lending
and other investment purposes.  In addition to deposits,  the Bank derives funds
from  the  amortization,  prepayment  or sale of  loans,  maturities  or sale of
investment securities and operations.  Scheduled loan principal repayments are a
relatively  stable source of funds,  while deposit inflows and outflows and loan
prepayments are  significantly  influenced by general  interest rates and market
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a description of the Bank's sources of funds.

        Deposits.  Consumer and  commercial  deposits are attracted  principally
from  within the Bank's  primary  market area  through  the  offering of a broad
selection of deposit  instruments  including  checking,  regular savings,  money
market deposits,  term certificate accounts and individual  retirement accounts.
Deposit account terms vary according to the minimum balance  required,  the time
periods  the funds must  remain on deposit and the  interest  rate,  among other
factors.  The Bank regularly evaluates the internal cost of funds, surveys rates
offered by competing institutions, reviews the Bank's cash flow requirements

                                       46


<PAGE>



for lending and liquidity and executes rate changes when deemed appropriate. The
Bank does not obtain funds  through  brokers,  nor does it solicit funds outside
the State of New Jersey.

Competition

        The Bank faces  substantial  competition both in attracting loans and in
lending  funds.  The  State  of New  Jersey  has a  high  density  of  financial
institutions,  many of which are branches of significantly  larger  institutions
which  have  greater  financial  resources  than  the  Bank,  all of  which  are
competitors  of the Bank to varying  degrees.  In order to compete with the many
financial  institutions  serving its primary market area,  the Bank's  operating
goal is to continue to provide a broad range of financial services with a strong
emphasis on customer  service to  individuals  and  businesses  in southern  New
Jersey.

        The  competition  for  deposits  comes  from  other  insured   financial
institutions such as commercial banks, thrift  institutions,  credit unions, and
multi-state  regional  and  money  center  banks  in  the  Bank's  market  area.
Competition for funds also include a number of insurance  products sold by local
agents and investment products such as mutual funds and other securities sold by
local and  regional  brokers.  Loan  competition  varies  depending  upon market
conditions  and  comes  from  other  insured  financial   institutions  such  as
commercial banks, thrift institutions,  credit unions,  multi-state regional and
money center banks, and mortgage-bankers many of whom have far greater resources
then the Bank. Non-bank  competition,  such as investment  brokerage houses, has
intensified  in recent years for all banks since  non-bank  competitors  are not
subject to same regulatory burdens as banks.

Properties

        The  Company and the Bank  operate  from their main office and 17 branch
offices.  The Bank leases its main office and four branch offices. The remainder
of the branch  offices are owned by the Bank. The Bank has entered into Purchase
and  Assumption  Agreements  with First Union to acquire four branch offices and
Oritani to acquire three branch offices. In addition, the Bank plans to open two
de novo branch offices.

Personnel

        At  December  31,  1996,  the Bank had 158  full-time  and 43  part-time
employees, all of whom were on the payroll of the Bank. The Bank's employees are
not  represented by a collective  bargaining  group.  The Bank believes that its
relationship with its employees is good.

Legal Proceedings

        There are various  claims and  lawsuits in which the Company or the Bank
are  periodically  involved,  such as  claims  to  enforce  liens,  condemnation
proceedings  on properties in which the Bank holds  security  interests,  claims
involving  the making and  servicing of real  property  loans,  and other issues
incident to the Bank's business. In the opinion of management,  no material loss
is expected from any such pending claims or lawsuits.

                                       47


<PAGE>

                                   MANAGEMENT

Directors and Executive Officers

        The Board of  Directors  of the  Company is  currently  composed  of six
members,  each of whom  serves for a term of one year.  Executive  officers  are
elected annually by the Board of Directors and serve at the Board's discretion.

        The following table sets forth information with respect to the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
                                                                              Shares of
                                                               Current          Stock          Percent
 Director/Executive                                Director      Term       Beneficially          of
      Officer         Age (1)       Position         Since     Expires        Owned (3)         Class
      -------         -------       --------         -----     -------       -----------        -----

<S>                       <C>  <C>                    <C>         <C>           <C>             <C>   
Bernard A. Brown (2)      72   Chairman of the        1985        1997          931,960 (4)     42.32%
                                 Board
Sidney R. Brown (2)       39   Director, Treasurer    1990        1997           43,498          1.98%
Adolph F. Calovi          74   Director, President    1985        1997              218          0.01%
                                 and Chief
                                 Executive Officer

Peter Galetto, Jr.        43   Director, Secretary    1990        1997           18,604          0.84%

Philip W. Koebig, III     54   Director, Executive    1995        1997           95,525 (4)      4.34%
                                 Vice President
Anne E. Koons (2)         44   Director               1990        1997           38,228          1.74%

</TABLE>
- ------------------
(1)     At December 31, 1996
(2)     Bernard A.  Brown is the  father of Sidney R.  Brown and Anne E.  Koons.
        Sidney R. Brown is the brother of Anne E. Koons.
(3)     Includes  shares  held  directly  by the  individual  as well as by such
        individual's spouse, shares held in trust and in other forms of indirect
        ownership  over which shares the individual  effectively  exercises sole
        voting and investment  power and shares which the named individual has a
        right to acquire within sixty days of December 31, 1996, pursuant to the
        exercise of stock options.
(4)     Includes 78,750 and 10,500 options granted to Messrs.  Bernard Brown and
        Koebig, respectively, which are subject to shareholder approval.

Biographical Information

        Directors  and  Executive   Officers  of  the  Company.   The  principal
occupation of each  director and  executive  officer of the Company is set forth
below.  All directors and executive  officers have held their present  positions
for five years unless otherwise stated. All of the directors reside in the State
of New Jersey.

        Bernard A. Brown has been the  Chairman of the Board of Directors of the
Company since its inception in January,  1985. Mr. Brown is also the Chairman of
the Board of  Directors  of the Bank.  For many  years,  Mr.  Brown has been the
Chairman of the Board of  Directors  and  President of NFI  Industries,  Inc., a
trucking conglomerate headquartered in Vineland, New Jersey.

        Sidney R. Brown has been the  Treasurer  and a director  of the  Company
since April, 1990. Mr. Brown is an officer and director of NFI Industries, Inc.,
and one of the general partners of The Four B's,

                                       48


<PAGE>



a partnership  which has extensive  real estate  holdings in the Eastern  United
States.  Its primary  objective is investing in and  consequent  development  of
commercial  real estate,  leasing and/or sale. Mr. Brown is currently an officer
and  director  of  several   other   corporations   and   partnerships   in  the
transportation,  equipment  leasing,  insurance,  warehousing  and  real  estate
industries.

        Adolph F. Calovi has been the President,  Chief Executive  Officer and a
director of the Company  since its inception in January,  1985.  Mr. Calovi is a
director  of the Bank  and,  from  1985 to 1994,  was its  President  and  Chief
Executive Officer.

        Peter Galetto,  Jr. has been the Secretary and a director of the Company
since  April 1990.  Mr.  Galetto is the  President/Sales  for Stanker & Galetto,
Inc.,  located  in  Vineland,  New  Jersey.  He is  also  the  President  of the
Cumberland   Technology   Enterprise   Center.   Mr.   Galetto   has   been  the
Secretary/Treasurer  of Trimark Building Contractors.  He is also an officer and
director of several other corporations and organizations.

        Philip W.  Koebig,  III has been the  Executive  Vice  President  of the
Company since 1994. He has been a director of the Company since 1995. Mr. Koebig
is also a  director,  President  and Chief  Executive  Officer of the Bank since
January,  1995.  From 1990 to 1994,  Mr.  Koebig  had been  President  and Chief
Executive Officer of Covenant Bank for Savings, Haddonfield, New Jersey. He also
serves  on the Board of  Directors  of  numerous  charitable  organizations  and
corporations.

        Anne E. Koons has been a director of the Company since April,  1990. Ms.
Koons is a real  estate  agent with Fox & Lazo,  and a travel  agent for Leisure
Time Travel.  Ms. Koons is also a Commissioner of the Camden County  Improvement
Authority and a member of the Cooper Medical Center's Foundation Board.

        Additional   Executive   Officers  of  the  Bank.  Set  forth  below  is
biographical  information of certain executive  officers of the Bank who are not
also executive officers of the Company.

        Robert  F.  Mack has been  with the Bank  since  1992 and  serves as its
Senior Vice  President and Chief  Financial  Officer.  Mr. Mack has  twenty-five
years of  extensive  banking  experience  and has worked for several  commercial
banks in New Jersey.

        Bart A. Speziali has been with the Bank since 1992 as the Senior Lending
Officer and Senior Vice President. Mr. Speziali has over twenty years of banking
experience in southern New Jersey.

        James S.  Killough  joined  the Bank in  February  1997 as  Senior  Vice
President of Administrations,  Operations and Retail Banking. Before joining the
Bank, Mr. Killough was president and chief  professional  officer for the United
Way of Camden County,  New Jersey for two years. Prior to that, Mr. Killough was
executive  vice  president  for  Central  Jersey  Bank and Trust  and  Midlantic
National Bank/South.

Executive Compensation

        The Company has no full time  employees,  relying upon  employees of the
Bank for the limited services required by the Company.  All compensation paid to
officers and employees is paid by the Bank.

                                       49


<PAGE>

        Summary  Compensation Table. The following table sets forth compensation
awarded to the Chief  Executive  Officer and  Executive  Vice  President  of the
Company who, for the year ended  December  31, 1996,  received  total salary and
bonus  payments from the Bank in excess of $100,000.  Except as set forth below,
no executive officer of the Company had a salary and bonus during the year ended
December 31, 1996 that exceeded $100,000 for services rendered in all capacities
to the Company.
<TABLE>
<CAPTION>
                                                                            Long Term
                                                                           Compensation
                                                                           ------------
                                 Annual Compensation                          Awards
                                 -------------------                          ------
                                                                            Securities
         Name and                                                           Underlying         All Other
    Principal Position           Year         Salary              Bonus     Options(#)        Compensation
    ------------------           ----         ------              -----     ----------        ------------

<S>                              <C>       <C>             <C>                <C>           <C>         
 Adolph F. Calovi                1996      $   131,000     $       --              --       $         --
  President and Chief            1995          131,000             --              --                 --
  Executive Officer              1994          130,500             --              --           2,743(1)



Philip W. Koebig, III            1996          174,044         22,500          10,500          10,583(2)
  Executive Vice                 1995          150,000             --          52,499          10,383(3)
  President                      1994           25,965             --              --             240(4)

</TABLE>

- -----------------
(1)     Constitutes life insurance premiums.
(2)     Constitutes life and disability  insurance premiums of $7,253 and $3,330
        in country club dues.
(3)     Constitutes life and disability  insurance premiums of $7,253 and $3,130
        in country club dues.
(4)     Constitutes life and disability insurance premiums.

        Stock  Option  Plan.  The Company has adopted the 1985 Stock Option Plan
and the 1995 Stock Option Plan (the "Option  Plans").  Officers,  directors  and
employees are eligible to receive,  at no cost to them, options under the Option
Plans.  Options  granted  under the Option Plans may be either  incentive  stock
options  (options  that  afford  favorable  tax  treatment  to  recipients  upon
compliance  with  certain  restrictions  pursuant to Section 422 of the Internal
Revenue Code and that do not normally  result in tax  deductions to the Company)
or options that do not so qualify. The option price may not be less than 100% of
the fair market value of the shares on the date of the grant.  Option shares may
be paid in cash, shares of the common stock, or a combination of both.

        Options  granted under the 1985 Stock Option Plan are exercisable at the
fair  market  value of the  common  stock at the time of the grant and until the
year 2001.  Options  granted under the 1995 Stock Option Plan are exercisable at
the fair market  value of the common  stock at the time of the grant and for ten
years thereafter.

                                       50


<PAGE>
        The following table sets forth additional information concerning options
granted under the Option Plans.

<TABLE>
<CAPTION>
                                     Option Grants in Last Fiscal Year
                                     ---------------------------------
                                                                                  Potential Realizable
                              Individual Grants                                     Value at Assumed
                              -----------------                                   Annual Rates of Stock
                                                                                 Price Appreciation for
                                      Percent of Total                                     Option Term
                         Number of    Options Granted   Exercise                          -----------
                          Options      to Employees      Price      Expiration
Name                      Granted     in Fiscal Year   ($/Share)       Date          5% ($)         10% ($)
- ----                      -------     --------------   ---------       ----          ------         -------

<S>                        <C>              <C>          <C>       <C>               <C>            <C>    
Philip W. Koebig, III      10,500           8.34         16.67     July 16, 2006     87,518         175,035

</TABLE>

<TABLE>
<CAPTION>

                               Aggregated Option Exercises in Last Fiscal Year
                               -----------------------------------------------

                                                                                             Value of
                                                                      Number of            Unexercised
                                                                     Unexercised           In-the-money
                          Shares Acquired             Value          Options at             Options at
Name                      on Exercise (#)          Realized        Fiscal Year-End        Fiscal Year-End
- ----                      ---------------          --------        ---------------        ---------------

<S>                           <C>                  <C>                   <C>                    <C>                         
Adolph F. Calovi              101,346              $953,152              --                     --

</TABLE>


        Directors' Compensation.  Each member of the Board of Directors,  except
for the Chairman and employee directors, received a fee of $300 for each meeting
attended for the year ended  December 31, 1996.  For the year ended December 31,
1996, director fees totaled $26,700.

        Employment  Agreement.  The Company has an employment  agreement,  dated
January 2, 1995,  with Adolph F. Calovi,  its President and CEO. Under the terms
of the agreement,  Mr. Calovi will receive an annual salary of $131,000 for each
of the four years of the  agreement.  In addition,  he will receive all benefits
offered  officers  of the  Company  and  will  have  the use of a  Company-owned
automobile.

        If, during the term of the agreement, Mr. Calovi's employment terminates
for any reason except voluntary  resignation,  embezzlement,  fraud, or due to a
material default by Mr. Calovi of his employment  obligations,  the Company will
be fully liable for all remaining salary payments under the agreement.

        Compensation  Committee  Interlocks  and  Insider   Participation.   The
Compensation  Committee of the Company  during the year ended  December 31, 1996
consisted of Anne E. Koons,  Sidney R. Brown and Philip W. Koebig,  III. All are
members of the Board of Directors of the Company.  Mr. Koebig is also a Director
and  Officer  of the Bank  and did not  participate  in  matters  involving  his
personal compensation.

                                       51
<PAGE>



Certain Relationships and Related Transactions

        Bernard A. Brown,  the Chairman of the Board of Directors of the Company
and of the Bank, is, with his wife, the owner of Vineland  Construction Company.
The  Company  and the Bank lease  office  space in  Vineland,  New  Jersey  from
Vineland  Construction  Company. The Company believes that the transactions with
Vineland  Construction  Company are on terms substantially the same, or at least
as  favorable to the Bank,  as those that would be provided by a  non-affiliate.
The  Company  paid  $361,731  to  Vineland  Construction  during  the year ended
December 31, 1996.

        The Bank has a policy of offering  various  types of loans to  officers,
directors  and  employees of the Bank and of the Company.  These loans have been
made in the ordinary course of business and on substantially  the same terms and
conditions  (including  interest  rates and  collateral  requirements)  as,  and
following credit underwriting procedures that are not less stringent than, those
prevailing at the time for  comparable  transactions  by the Bank with its other
unaffiliated  customers  and do  not  involve  more  than  the  normal  risk  of
collectiblity,  nor  present  other  unfavorable  features.  See  Note  5 to the
Consolidated Financial Statements.

                           SUPERVISION AND REGULATION

Introduction

        Bank holding  companies and banks are  extensively  regulated under both
federal and state law. The following  information  describes  certain aspects of
that regulation  applicable to the Company and the Bank, and does not purport to
be  complete.  The  discussion  is qualified in its entirety by reference to all
particular statutory or regulatory provisions.

        The  Company is a legal  entity  separate  and  distinct  from the Bank.
Accordingly,  the right of the Company,  and consequently the right of creditors
and  shareholders  of the Company,  to  participate in any  distribution  of the
assets or earnings  of the Bank is  necessarily  subject to the prior  claims of
creditors  of the Bank,  except to the extent  that claims of the Company in its
capacity as creditor may be  recognized.  The principal  source of the Company's
revenue and cash flow is dividends from the Bank. There are legal limitations on
the extent to which a subsidiary  bank can finance or otherwise  supply funds to
its parent holding company.

The Company

        General. As a registered holding company, the Company is regulated under
the BHCA and is subject to  supervision  and regular  inspection  by the Federal
Reserve.  The BHCA  requires,  among  other  things,  the prior  approval of the
Federal  Reserve in any case where the  Company  proposes  to (i) acquire all or
substantially  all of the assets of any bank,  (ii)  acquire  direct or indirect
ownership or control of more than 5 percent of the voting shares of any bank, or
(iii) merge or consolidate with any other bank holding company.

        Acquisitions/Permissible Business Activities. The BHCA currently permits
bank  holding  companies  from  any  state to  acquire  banks  and bank  holding
companies located in any other state,  subject to certain conditions,  including
certain nationwide- and state-imposed  concentration  limits.  Effective June 1,
1997, the Bank will have the ability, subject to certain restrictions, including
state opt-out  provisions,  to acquire by acquisition or merger branches outside
its home state.  States may  affirmatively  opt-in to permit these  transactions
earlier,  which New Jersey,  among other states,  has done. The establishment of
new  interstate  branches  also will be possible in those  states with laws that
expressly permit it.

                                       52


<PAGE>



Interstate  branches will be subject to certain laws of the states in which they
are located. Competition may increase further as banks branch across state lines
and enter new markets.

        Under the BHCA, the Company is prohibited, with certain exceptions, from
acquiring direct or indirect  ownership or control of more than 5 percent of any
class of voting shares of any nonbanking  corporation.  Further, the Company may
not  engage  in any  business  other  than  managing  and  controlling  banks or
furnishing  certain  specified  services  to  subsidiaries,  and may not acquire
voting control of nonbanking  corporations except those corporations  engaged in
businesses or furnishing  services that the Federal  Reserve deems to be closely
related to banking.

        Community  Reinvestment.  Bank holding  companies  and their  subsidiary
banks are subject to the provisions of the Community  Reinvestment  Act of 1977,
as amended ("CRA"). Under the terms of the CRA, the Bank's record in meeting the
credit  needs  of  the  community  served  by  the  Bank,   including  low-  and
moderate-income  neighborhoods,  is generally annually assessed by the Office of
the Comptroller of the Currency (the "OCC"). When a bank holding company applies
for  approval  to  acquire a bank or other bank  holding  company,  the  Federal
Reserve will review the assessment of each subsidiary bank of the applicant bank
holding company,  and such records may be the basis for denying the application.
At December 31, 1996, the Bank was rated "Satisfactory" with respect to CRA.

        Source of Strength Policy.  Under Federal Reserve policy, a bank holding
company is  expected to serve as a source of  financial  strength to each of its
subsidiary banks and to commit  resources to support each such bank.  Consistent
with its "source of strength"  policy for subsidiary  banks, the Federal Reserve
has  stated  that,  as a matter  of  prudent  banking,  a bank  holding  company
generally  should not  maintain a rate of cash  dividends  unless its net income
available  to  common  shareholders  has  been  sufficient  to  fund  fully  the
dividends,  and  the  prospective  rate  of  earnings  retention  appears  to be
consistent  with the  corporation's  capital  needs,  asset  quality and overall
financial condition.

The Bank

        General.  The Bank is subject to supervision and examination by the OCC.
In addition,  the Bank is insured by and subject to certain  regulations  of the
FDIC  and is a  member  of the  FHLB.  The  Bank  is  also  subject  to  various
requirements   and   restrictions   under  federal  and  state  law,   including
requirements to maintain reserves against  deposits,  restrictions on the types,
amount and terms and conditions of loans that may be granted and  limitations on
the types of investments  that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of the
Bank.

        Dividend Restrictions.  Dividends from the Bank constitute the principal
source of income to the Company.  The Bank is subject to various  statutory  and
regulatory  restrictions  on its ability to pay dividends to the Company.  Under
such restrictions,  the amount available for payment of dividends to the Company
by the Bank totaled $7.7 million at December 31, 1996. In addition,  the OCC has
the  authority to prohibit the Bank from paying  dividends,  depending  upon the
Bank's financial condition, if such payment is deemed to constitute an unsafe or
unsound  practice.  The  ability of the Bank to pay  dividends  in the future is
presently,  and could be further,  influenced by bank regulatory and supervisory
policies.

        Affiliate Transaction Restrictions.  The Bank is subject to federal laws
that limit the  transactions by subsidiary banks to or on behalf of their parent
company and to or on behalf of any nonbank subsidiaries.  Such transactions by a
subsidiary  bank to its parent company or to any nonbank  subsidiary are limited
to 10 percent of a bank  subsidiary's  capital and surplus and,  with respect to
such parent

                                       53


<PAGE>

company and all such nonbank subsidiaries, to an aggregate of 20 percent of such
bank subsidiary's capital and surplus.  Further,  loans and extensions of credit
generally  are  required  to be  secured by  eligible  collateral  in  specified
amounts.  Federal law also prohibits banks from purchasing  "low-quality" assets
from affiliates.

        FDIC Insurance Assessments.  Deposits of the Bank are insured by the BIF
of the FDIC and are subject to FDIC  insurance  assessments.  The amount of FDIC
assessments paid by individual insured depository institutions is based on their
relative  risk as  measured  by  regulatory  capital  ratios and  certain  other
factors.  During  1995,  the FDIC's  Board of  Directors  significantly  reduced
premium  rates  assessed  on  deposits  insured  by the BIF.  Under the  current
regulations, the Company is assessed a premium on BIF-insured deposits.

        Enforcement Powers of Federal Banking Agencies. Federal banking agencies
possess broad powers to take corrective and other  supervisory  action as deemed
appropriate for an insured depository  institution and its holding company.  The
extent of these  powers  depends on  whether  the  institution  in  question  is
considered "well  capitalized",  "adequately  capitalized",  "undercapitalized",
"significantly  undercapitalized" or "critically undercapitalized".  At December
31, 1996,  the Bank  exceeded the required  ratios for  classification  as "well
capitalized" and the Company exceeded the required ratios for  classification as
adequately  capitalized.  On a pro forma basis, giving effect to the sale of the
Preferred  Securities,  the First Union and Oritani branch  purchases,  both the
Bank and the Company  will be  adequately  capitalized.  The  classification  of
depository  institutions  is  primarily  for the purpose of applying the federal
banking agencies' prompt  corrective action and other supervisory  powers and is
not intended to be, and should not be interpreted  as, a  representation  of the
overall financial condition or prospects of any financial institution.

        The agencies' prompt corrective  action powers can include,  among other
things,   requiring  an  insured  depository  institution  to  adopt  a  capital
restoration plan which cannot be approved unless guaranteed by the institution's
parent company;  placing limits on asset growth and  restrictions on activities;
including restrictions on transactions with affiliates; restricting the interest
rate the institution  may pay on deposits;  prohibiting the payment of principal
or interest on  subordinated  debt;  prohibiting the holding company from making
capital   distributions  without  prior  regulatory  approval  and,  ultimately,
appointing  a receiver for the  institution.  Among other  things,  only a "well
capitalized"  depository  institution may accept brokered deposits without prior
regulatory approval and only an "adequately  capitalized" depository institution
may accept brokered deposits with prior regulatory approval.

        Capital Guidelines.  Under the risk-based capital guidelines  applicable
to the  Company  and the  Bank,  the  minimum  guideline  for the ratio of total
capital  to  risk-weighted   assets   (including   certain  off-   balance-sheet
activities) is 8.00 percent. At least half of the total capital must be "Tier 1"
or core  capital,  which  primarily  includes  common  shareholders'  equity and
qualifying preferred stock, less goodwill and other disallowed tangibles.  "Tier
2" or supplementary capital includes,  among other items, certain cumulative and
limited-life preferred stock, qualifying subordinated debt and the allowance for
credit  losses,  subject to certain  limitations,  less  required  deductions as
prescribed by regulation.

        In addition,  the federal bank  regulators  established  leverage  ratio
(Tier 1 capital to total adjusted  average  assets)  guidelines  providing for a
minimum leverage ratio of 3 percent for bank holding companies and banks meeting
certain  specified  criteria,  including that such institutions have the highest
regulatory  examination  rating and are not contemplating  significant growth or
expansion.  Institutions  not meeting these  criteria are expected to maintain a
ratio which  exceeds the 3 percent  minimum by at least 100 to 200 basis points.
The  federal  bank  regulatory   agencies  may,  however,   set  higher  capital
requirements when particular  circumstances  warrant.  Under the federal banking
laws, failure to meet the

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<PAGE>



minimum  regulatory  capital  requirements  could subject a bank to a variety of
enforcement remedies available to federal bank regulatory agencies.

        At December 31, 1996, the Bank's and the Company's  respective total and
Tier 1  risk-based  capital  ratios and  leverage  ratios  exceeded  the minimum
regulatory capital requirements.

Legislative Proposals and Reforms

        In recent years, significant legislative proposals and reforms affecting
the financial  services  industry have been discussed and evaluated by Congress.
In the  last  Congress,  such  proposals  included  legislation  to  revise  the
Glass-Steagall  Act and the BHCA to expand  permissible  activities  for  banks,
principally to facilitate the convergence of commercial and investment  banking.
Certain  proposals also sought to expand  insurance  activities of banks.  It is
unclear  whether  any  of  these  proposals,  or  any  form  of  them,  will  be
reintroduced  in the current  Congress and become law.  Consequently,  it is not
possible to determine what effect,  if any, they may have on the Company and the
Bank.

                       DESCRIPTION OF PREFERRED SECURITIES

        Pursuant to the terms of the Trust  Agreement for the Issuer Trust,  the
Issuer  Trustees  on  behalf  of the  Issuer  Trust  will  issue  the  Preferred
Securities and the Common  Securities.  The Preferred  Securities will represent
preferred undivided  beneficial  interests in the assets of the Issuer Trust and
the holders  thereof will be entitled to a preference  in certain  circumstances
with respect to  Distributions  and amounts payable on redemption or liquidation
over the Common Securities,  as well as other benefits as described in the Trust
Agreement.  This summary of certain  provisions of the Preferred  Securities and
the Trust  Agreement  does not  purport to be  complete  and is subject  to, and
qualified  in its  entirety by  reference  to, all the  provisions  of the Trust
Agreement,   including  the  definitions  therein  of  certain  terms.  Wherever
particular  defined terms of the Trust  Agreement  are referred to herein,  such
defined terms are  incorporated  herein by reference.  A copy of the form of the
Trust Agreement is available upon request from the Issuer Trustees.

General

          The  Preferred  Securities  will be limited to  $25,000,000  aggregate
Liquidation  Amount  outstanding  (which  amount  may  be  increased  by  up  to
$3,750,000 aggregate  liquidation amount of Preferred Securities for exercise of
the Underwriters'  over-allotment  option).  See  "Underwriting."  The Preferred
Securities  will rank pari passu,  and  payments  will be made thereon pro rata,
with the Common Securities except as described under "-- Subordination of Common
Securities." The Junior  Subordinated  Debentures will be registered in the name
of the Issuer Trust and held by the Property Trustee in trust for the benefit of
the holders of the Preferred  Securities  and Common  Securities.  The Guarantee
will be a  guarantee  on a  subordinated  basis with  respect  to the  Preferred
Securities but will not guarantee payment of Distributions or amounts payable on
redemption or  liquidation of such  Preferred  Securities  when the Issuer Trust
does not have funds on hand available to make such payments. See "Description of
Guarantee."

Distributions

     The Preferred Securities represent preferred undivided beneficial interests
in the assets of the Issuer Trust, and Distributions on each Preferred  Security
will be payable at the annual rate of 9.85% of the stated  Liquidation Amount of
$25,  payable  quarterly  in  arrears  on March 31,  June 30,  September  30 and
December  31 of each year (each a  "Distribution  Date"),  to the holders of the
Preferred Securities at

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<PAGE>



the  close of  business  on 15th day of  March,  June,  September  and  December
(whether or not a Business Day (as defined  below)) next  preceding the relevant
Distribution Date. Distributions on the Preferred Securities will be cumulative.
Distributions  will accumulate from March 17, 1997. The first  Distribution Date
for the Preferred  Securities will be June 30, 1997. The amount of Distributions
payable for any period less than a full Distribution  period will be computed on
the basis of a 360-day year of twelve  30-day months and the actual days elapsed
in a  partial  month  in  such  period.  Distributions  payable  for  each  full
Distribution  period will be computed by dividing the rate per annum by four. If
any date on which Distributions are payable on the Preferred Securities is not a
Business  Day,  then payment of the  Distributions  payable on such date will be
made on the next  succeeding  day that is a Business Day (without any additional
Distributions  or other  payment in respect  of any such  delay),  with the same
force and effect as if made on the date such payment was originally payable.

     So long as no Debenture  Event of Default has  occurred and is  continuing,
the Company has the right under the Junior  Subordinated  Indenture to defer the
payment of interest on the Junior  Subordinated  Debentures  at any time or from
time to time for a period not exceeding 20  consecutive  quarterly  periods with
respect to each Extension  Period,  provided that no Extension Period may extend
beyond  the  Stated  Maturity  of  the  Junior  Subordinated  Debentures.  As  a
consequence  of any such  deferral,  quarterly  Distributions  on the  Preferred
Securities  by the Issuer  Trust  will be  deferred  during  any such  Extension
Period.  Distributions to which holders of the Preferred Securities are entitled
will accumulate additional Distributions thereon at the rate of 9.85% per annum,
compounded  quarterly  from the relevant  payment  date for such  Distributions,
computed on the basis of a 360-day year of twelve  30-day  months and the actual
days elapsed in a partial month in such period. Additional Distributions payable
for each full  Distribution  period will be  computed  by dividing  the rate per
annum by four.  The term  "Distributions"  as used herein shall include any such
additional Distributions.  During any such Extension Period, the Company may not
(i)  declare or pay any  dividends  or  distributions  on, or redeem,  purchase,
acquire or make a  liquidation  payment  with  respect to, any of the  Company's
capital  stock or (ii) make any payment of  principal of or interest or premium,
if any, on or repay,  repurchase  or redeem any debt  securities  of the Company
that rank pari passu in all  respects  with or junior in  interest to the Junior
Subordinated  Debentures  (other  than  (a)  repurchases,  redemptions  or other
acquisitions  of shares of capital stock of the Company in  connection  with any
employment  contract,  benefit plan or other similar arrangement with or for the
benefit of any one or more employees,  officers,  directors or  consultants,  in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection  with the  issuance of capital  stock of the  Company (or  securities
convertible  into or exercisable for such capital stock) as  consideration in an
acquisition  transaction entered into prior to the applicable  Extension Period,
(b) as a result  of an  exchange  or  conversion  of any  class or series of the
Company's  capital  stock (or any capital  stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or series
of the Company's  indebtedness for any class or series of the Company's  capital
stock,  (c) the  purchase of  fractional  interests  in shares of the  Company's
capital stock pursuant to the conversion or exchange  provisions of such capital
stock or the security  being  converted or exchanged,  (d) any  declaration of a
dividend in connection  with any  stockholder's  rights plan, or the issuance of
rights,  stock or other  property  under any  stockholder's  rights plan, or the
redemption or repurchase of rights pursuant thereto,  or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock  issuable upon exercise of such  warrants,  options or other rights is the
same stock as that on which the  dividend is being paid or ranks pari passu with
or junior to such stock). Prior to the termination of any such Extension Period,
the  Company  may  further  defer the  payment  of  interest,  provided  that no
Extension  Period may exceed 20 consecutive  quarterly  periods or extend beyond
the Stated Maturity of the Junior Subordinated Debentures.  Upon the termination
of any such  Extension  Period and the  payment  of all  amounts  then due,  the
Company may elect to begin a new Extension  Period. No interest shall be due and
payable during an Extension Period,  except at the end thereof. The Company must
give the Issuer  Trustees  notice of its  election of such  Extension  Period at
least one

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<PAGE>



Business  Day  prior to the  earlier  of (i) the date the  Distributions  on the
Preferred  Securities would have been payable but for the election to begin such
Extension  Period and (ii) the date the  Property  Trustee is  required  to give
notice to holders of the  Preferred  Securities  of the record  date or the date
such Distributions are payable,  but in any event not less than one Business Day
prior to such  record  date.  The  Property  Trustee  will  give  notice  of the
Company's  election  to  begin a new  Extension  Period  to the  holders  of the
Preferred  Securities.  Subject to the foregoing,  there is no limitation on the
number of times that the Company  may elect to begin an  Extension  Period.  See
"Description  of Junior  Subordinated  Debentures  -- Option To Extend  Interest
Payment Period" and "Certain  Federal Income Tax Consequences -- Interest Income
and Original Issue Discount."

        The Company has no current  intention of  exercising  its right to defer
payments of interest by  extending  the  interest  payment  period on the Junior
Subordinated Debentures.

        The revenue of the Issuer Trust available for distribution to holders of
the  Preferred   Securities  will  be  limited  to  payments  under  the  Junior
Subordinated  Debentures in which the Issuer Trust will invest the proceeds from
the issuance and sale of the Preferred  Securities.  See  "Description of Junior
Subordinated  Debentures."  If the Company does not make  payments on the Junior
Subordinated  Debentures,  the Issuer Trust may not have funds  available to pay
Distributions or other amounts payable on the Preferred Securities.  The payment
of Distributions  and other amounts payable on the Preferred  Securities (if and
to the  extent  the  Issuer  Trust  has  funds  legally  available  for and cash
sufficient  to make such  payments)  is  guaranteed  by the Company on a limited
basis as set forth herein under "Description of Guarantee."

Redemption

        Upon the  repayment or  redemption,  in whole or in part,  of the Junior
Subordinated  Debentures,  whether at maturity  or upon  earlier  redemption  as
provided in the Junior Subordinated Indenture,  the proceeds from such repayment
or redemption  shall be applied by the Property  Trustee to redeem a Like Amount
(as defined below) of the Preferred  Securities,  upon not less than 30 nor more
than 60 days' notice,  at a redemption price (the  "Redemption  Price") equal to
the aggregate  Liquidation Amount of such Preferred  Securities plus accumulated
but unpaid  Distributions  thereon to the date of  redemption  (the  "Redemption
Date") and the related  amount of the premium,  if any, paid by the Company upon
the  concurrent   redemption  of  such  Junior  Subordinated   Debentures.   See
"Description of Junior Subordinated  Debentures -- Redemption." If less than all
the Junior Subordinated  Debentures are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption  shall be allocated to
the redemption pro rata of the Preferred  Securities and the Common  Securities.
The amount of premium, if any, paid by the Company upon the redemption of all or
any part of the Junior  Subordinated  Debentures  to be repaid or  redeemed on a
Redemption  Date shall be allocated to the  redemption pro rata of the Preferred
Securities and the Common Securities.

     The Company has the right to redeem the Junior Subordinated  Debentures (i)
on or after March 31, 2002, in whole at any time or in part from time t time, or
(ii) in  whole,  but not in  part,  at any time  within  90 days  following  the
occurrence and during the continuation of a Tax Event,  Investment Company Event
or Capital  Treatment  Event (each as defined  below),  in each case  subject to
possible   regulatory   approval.   See  "--   Liquidation   Distribution   Upon
Dissolution." A redemption of the Junior  Subordinated  Debentures would cause a
mandatory  redemption  of a Like Amount of the Preferred  Securities  and Common
Securities at the Redemption Price.

        "25% Capital  Limitation"  means the  limitation  imposed by the Federal
Reserve  that the  proceeds  of  certain  qualifying  securities  like the Trust
Securities will qualify as Tier 1 capital of the issuer up to

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<PAGE>



an amount not to exceed 25% of the Issuer's  Tier 1 capital,  or any  subsequent
limitation adopted by the Federal Reserve.

        "Business  Day" means a day other than (a) a Saturday  or Sunday,  (b) a
day on which banking  institutions in the State of New Jersey or the City of New
York are authorized or required by law or executive  order to remain closed,  or
(c) a day  on  which  the  Property  Trustee's  Corporate  Trust  Office  or the
Corporate Trust Office of the Debenture Trustee is closed for business.

        "Like   Amount"  means  (i)  with  respect  to  a  redemption  of  Trust
Securities,  Trust  Securities  having a Liquidation  Amount (as defined  below)
equal to that portion of the principal amount of Junior Subordinated  Debentures
to be  contemporaneously  redeemed in  accordance  with the Junior  Subordinated
Indenture,  allocated to the Common  Securities and to the Preferred  Securities
based  upon the  relative  Liquidation  Amounts  of such  classes  and (ii) with
respect to a distribution of Junior Subordinated  Debentures to holders of Trust
Securities in connection  with a dissolution or liquidation of the Issuer Trust,
Junior   Subordinated   Debentures  having  a  principal  amount  equal  to  the
Liquidation  Amount of the Trust  Securities  of the holder to whom such  Junior
Subordinated Debentures are distributed.

        "Liquidation Amount" means the stated amount of $25 per Trust Security.

        "Tax  Event"  means the  receipt  by the  Issuer  Trust of an opinion of
counsel to the Company  experienced  in such  matters to the effect  that,  as a
result of any  amendment  to, or change  (including  any  announced  prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political  subdivision or taxing authority thereof or therein, or as a result of
any  official or  administrative  pronouncement  or action or judicial  decision
interpreting or applying such laws or regulations,  which amendment or change is
effective or which  pronouncement  or decision is announced on or after the date
of issuance of the  Preferred  Securities,  there is more than an  insubstantial
risk that (i) the Issuer  Trust is, or will be within 90 days of the delivery of
such opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest payable
by the Company on the Junior  Subordinated  Debentures is not, or within 90 days
of the delivery of such  opinion,  will not be,  deductible  by the Company,  in
whole or in part,  for United  States  federal  income tax purposes or (iii) the
Issuer  Trust is, or will be within  90 days of the  delivery  of such  opinion,
subject  to more  than a de  minimis  amount  of other  taxes,  duties  or other
governmental charges.

        "Investment  Company  Event" means the receipt by the Issuer Trust of an
opinion of  counsel to the  Company  experienced  in such  matters to the effect
that,  as a result  of the  occurrence  of a change  in law or  regulation  or a
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative  body,  court,  governmental
agency or regulatory  authority,  there is more than an insubstantial  risk that
the  Issuer  Trust is or will be  considered  an  "investment  company"  that is
required to be  registered  under the  Investment  Company Act,  which change or
prospective change becomes effective or would become effective,  as the case may
be, on or after the date of the issuance of the Preferred Securities.

        "Capital  Treatment  Event" means the  reasonable  determination  by the
Company  that,  as a result of the  occurrence  of any  amendment  to, or change
(including  any  announced  prospective  change)  in,  the laws (or any rules or
regulations  thereunder)  of the  United  States  or any  political  subdivision
thereof  or  therein,   or  as  a  result  of  any  official  or  administrative
pronouncement or action or judicial decision  interpreting or applying such laws
or regulations,  which  amendment or change is effective or such  pronouncement,
action  or  decision  is  announced  on or  after  the date of  issuance  of the
Preferred Securities,  there is more than an insubstantial risk that the Company
will not be entitled to treat an amount equal to the  Liquidation  Amount of the
Preferred Securities as "Tier 1 Capital" (or the then

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<PAGE>



equivalent  thereof),  except as  otherwise  restricted  under  the 25%  Capital
Limitation,  for purposes of the risk-based  capital adequacy  guidelines of the
Federal Reserve, as then in effect and applicable to the Company.

        If a Tax Event described in clause (i) or (iii) of the definition of Tax
Event above has occurred and is continuing and the Issuer Trust is the holder of
all the Junior Subordinated Debentures, the Company will pay Additional Sums (as
defined below), if any, on the Junior Subordinated Debentures.

        "Additional  Sums" means the  additional  amounts as may be necessary in
order that the amount of Distributions  then due and payable by the Issuer Trust
on the  outstanding  Preferred  Securities  and Common  Securities of the Issuer
Trust will not be reduced as a result of any additional taxes,  duties and other
governmental charges to which the Issuer Trust has become subject as a result of
a Tax Event.

Redemption Procedures

        Preferred  Securities redeemed on each Redemption Date shall be redeemed
at the Redemption  Price with the applicable  proceeds from the  contemporaneous
redemption of the Junior Subordinated  Debentures.  Redemptions of the Preferred
Securities  shall be made and the  Redemption  Price  shall be  payable  on each
Redemption  Date  only to the  extent  that the  Issuer  Trust has funds on hand
available for the payment of such Redemption  Price. See also "--  Subordination
of Common Securities."

        If the  Issuer  Trust  gives a notice of  redemption  in  respect of the
Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption
Date,  to the extent funds are  available,  in the case of Preferred  Securities
held in book-entry form, the Property Trustee will deposit  irrevocably with DTC
funds  sufficient  to pay the  applicable  Redemption  Price  and will  give DTC
irrevocable  instructions  and  authority  to pay the  Redemption  Price  to the
holders of the Preferred  Securities.  With respect to Preferred  Securities not
held  in  book-entry  form,  the  Property  Trustee,  to the  extent  funds  are
available,  will  irrevocably  deposit with the paying  agent for the  Preferred
Securities funds sufficient to pay the applicable Redemption Price and will give
such paying agent  irrevocable  instructions and authority to pay the Redemption
Price to the holders thereof upon surrender of their certificates evidencing the
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Preferred  Securities called for redemption
shall be payable to the  holders of the  Preferred  Securities  on the  relevant
record dates for the related  Distribution  Dates. If notice of redemption shall
have been  given and funds  deposited  as  required,  then upon the date of such
deposit all rights of the  holders of such  Preferred  Securities  so called for
redemption  will  cease,  except  the  right of the  holders  of such  Preferred
Securities  to receive  the  Redemption  Price,  but  without  interest  on such
Redemption Price, and such Preferred Securities will cease to be outstanding. If
any date fixed for  redemption  of Preferred  Securities  is not a Business Day,
then payment of the  Redemption  Price  payable on such date will be made on the
next  succeeding  day which is a Business  Day  (without  any  interest or other
payment in respect of any such delay),  except that,  if such Business Day falls
in the  next  calendar  year,  such  payment  will be  made  on the  immediately
preceding  Business  Day. In the event that payment of the  Redemption  Price in
respect of Preferred  Securities called for redemption is improperly withheld or
refused  and not paid either by the Issuer  Trust or by the Company  pursuant to
the Guarantee as described under  "Description of Guarantee,"  Distributions  on
such  Preferred  Securities  will continue to accumulate at the then  applicable
rate, from the Redemption  Date  originally  established by the Issuer Trust for
such Preferred Securities to the date such Redemption Price is actually paid, in
which case the actual  payment  date will be the date fixed for  redemption  for
purposes of calculating the Redemption Price.

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<PAGE>



        Subject to applicable law (including,  without limitation, United States
federal securities laws), the Company or its affiliates may at any time and from
time to time purchase  outstanding  Preferred  Securities by tender, in the open
market or by private agreement, and may resell such securities.

        If less than all the Preferred  Securities and Common  Securities are to
be redeemed on a Redemption Date, then the aggregate  Liquidation Amount of such
Preferred Securities and Common Securities to be redeemed shall be allocated pro
rata to the  Preferred  Securities  and the  Common  Securities  based  upon the
relative   Liquidation  Amounts  of  such  classes.   The  particular  Preferred
Securities to be redeemed shall be selected on a pro rata basis not more than 60
days prior to the Redemption  Date by the Property  Trustee from the outstanding
Preferred  Securities not previously called for redemption,  or if the Preferred
Securities are then held in the form of a Global Preferred  Security (as defined
below),  in accordance with DTC's  customary  procedures.  The Property  Trustee
shall  promptly  notify the  securities  registrar  for the Trust  Securities in
writing of the Preferred  Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be  redeemed.  For all  purposes of the Trust  Agreement,  unless the
context  otherwise  requires,  all  provisions  relating  to the  redemption  of
Preferred  Securities  shall  relate,  in the case of any  Preferred  Securities
redeemed  or to be  redeemed  only in  part,  to the  portion  of the  aggregate
Liquidation Amount of Preferred Securities which has been or is to be redeemed.

        Notice  of any  redemption  will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each  registered  holder of Preferred
Securities to be redeemed at its address  appearing on the  securities  register
for the  Trust  Securities.  Unless  the  Company  defaults  in  payment  of the
Redemption  Price  on the  Junior  Subordinated  Debentures,  on and  after  the
Redemption  Date  interest  will  cease to  accrue  on the  Junior  Subordinated
Debentures or portions  thereof (and,  unless payment of the Redemption Price in
respect of the  Preferred  Securities is withheld or refused and not paid either
by the Issuer Trust or the Company pursuant to the Guarantee, Distributions will
cease to accumulate on the Preferred  Securities or portions thereof) called for
redemption.

Subordination of Common Securities

        Payment  of  Distributions  on,  and the  Redemption  Price of,  and the
Liquidation  Distribution  in respect of, the  Preferred  Securities  and Common
Securities,  as  applicable,  shall be made pro  rata  based on the  Liquidation
Amount of such Preferred  Securities and Common Securities.  However,  if on any
Distribution  Date or Redemption  Date a Debenture Event of Default has occurred
and is  continuing  as a result of any failure by the Company to pay any amounts
in respect of the Junior  Subordinated  Debentures  when due,  no payment of any
Distribution on, or Redemption Price of, or Liquidation  Distribution in respect
of,  any of the  Common  Securities,  and no other  payment  on  account  of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid  Distributions
on all  the  outstanding  Preferred  Securities  for  all  Distribution  periods
terminating  on or prior  thereto,  or in the case of payment of the  Redemption
Price the full amount of such Redemption Price on all the outstanding  Preferred
Securities then called for redemption, shall have been made or provided for, and
all funds  available  to the  Property  Trustee  shall  first be  applied to the
payment in full in cash of all  Distributions  on, or  Redemption  Price of, the
Preferred Securities then due and payable.

        In the case of any Event of Default (as defined below)  resulting from a
Debenture Event of Default,  the holders of the Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default  under
the Trust Agreement until the effects of all such Events of Default with respect
to such Preferred  Securities have been cured,  waived or otherwise  eliminated.
See "-- Events of  Default;  Notice"  and  "Description  of Junior  Subordinated
Debentures -- Debenture Events

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<PAGE>



of Default."  Until all such Events of Default  under the Trust  Agreement  with
respect to the  Preferred  Securities  have been so cured,  waived or  otherwise
eliminated, the Property Trustee will act solely on behalf of the holders of the
Preferred  Securities and not on behalf of the holders of the Common Securities,
and only the holders of the Preferred  Securities  will have the right to direct
the Property Trustee to act on their behalf.

Liquidation Distribution Upon Dissolution

        The  amount  payable  on the  Preferred  Securities  in the event of any
liquidation of the Issuer Trust is $25 per Preferred  Security plus  accumulated
and unpaid  Distributions,  subject to certain  exceptions,  which may be in the
form of a distribution of such amount in Junior Subordinated Debentures.

        The holders of all the outstanding  Common  Securities have the right at
any time to dissolve the Issuer Trust and, after  satisfaction of liabilities to
creditors of the Issuer Trust as provided by  applicable  law,  cause the Junior
Subordinated  Debentures  to be  distributed  to the  holders  of the  Preferred
Securities and Common Securities in liquidation of the Issuer Trust.

        The Federal Reserve's  risk-based capital  guidelines  currently provide
that redemptions of permanent equity or other capital  instruments before stated
maturity  could have a significant  impact on a bank holding  company's  overall
capital structure and that any organization considering such a redemption should
consult  with the  Federal  Reserve  before  redeeming  any  equity  or  capital
instrument  prior to maturity if such redemption could have a material effect on
the level or composition of the  organization's  capital base (unless the equity
or capital instrument were redeemed with the proceeds of, or replaced by, a like
amount of a similar or higher quality capital instrument and the Federal Reserve
considers the  organization's  capital  position to be fully  adequate after the
redemption).

        In the event the Company, while a holder of Common Securities, dissolves
the Issuer Trust prior to the stated  maturity of the Preferred  Securities  and
the  dissolution  of the Issuer Trust is deemed to constitute  the redemption of
capital  instruments  by  the  Federal  Reserve  under  its  risk-based  capital
guidelines or policies,  the  dissolution of the Issuer Trust by the Company may
be subject to the prior approval of the Federal Reserve.  Moreover,  any changes
in  applicable  law or  changes  in the  Federal  Reserve's  risk-based  capital
guidelines or policies  could impose a requirement on the Company that it obtain
the prior approval of the Federal Reserve to dissolve the Issuer Trust.

        Pursuant to the Trust  Agreement,  the Issuer  Trust will  automatically
dissolve upon expiration of its term or, if earlier,  will dissolve on the first
to occur of: (i) certain events of bankruptcy, dissolution or liquidation of the
Company or the holder of the Common Securities,  (ii) the distribution of a Like
Amount  of the  Junior  Subordinated  Debentures  to the  holders  of the  Trust
Securities,  if the holders of Common Securities have given written direction to
the Property Trustee to dissolve the Issuer Trust (which  direction,  subject to
the foregoing restrictions,  is optional and wholly within the discretion of the
holders  of  Common  Securities),  (iii)  the  repayment  of all  the  Preferred
Securities in  connection  with the  redemption  of all the Trust  Securities as
described  under  "--  Redemption"  and  (iv)  the  entry  of an  order  for the
dissolution of the Issuer Trust by a court of competent jurisdiction.

        If  dissolution  of the Issuer  Trust occurs as described in clause (i),
(ii) or (iv) above,  the Issuer Trust will be liquidated by the Property Trustee
as  expeditiously  as  the  Property  Trustee   determines  to  be  possible  by
distributing, after satisfaction of liabilities to creditors of the Issuer Trust
as provided by  applicable  law, to the holders of such Trust  Securities a Like
Amount of the Junior  Subordinated  Debentures,  unless such distribution is not
practical,  in which event such  holders  will be entitled to receive out of the
assets  of the  Issuer  Trust  available  for  distribution  to  holders,  after
satisfaction of

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liabilities  to creditors of the Issuer Trust as provided by applicable  law, an
amount equal to, in the case of holders of Preferred  Securities,  the aggregate
of the Liquidation Amount plus accumulated and unpaid  Distributions  thereon to
the date of payment (such amount being the "Liquidation Distribution").  If such
Liquidation  Distribution  can be paid only in part because the Issuer Trust has
insufficient  assets  available  to  pay  in  full  the  aggregate   Liquidation
Distribution,  then the  amounts  payable  directly  by the Issuer  Trust on its
Preferred  Securities  shall be paid on a pro rata  basis.  The  holders  of the
Common  Securities  will be  entitled  to  receive  distributions  upon any such
liquidation pro rata with the holders of the Preferred  Securities,  except that
if a Debenture  Event of Default has occurred and is  continuing  as a result of
any  failure  by the  Company  to pay  any  amounts  in  respect  of the  Junior
Subordinated Debentures when due, the Preferred Securities shall have a priority
over the Common Securities. See "-- Subordination of Common Securities."

        After  the  liquidation  date  fixed  for  any  distribution  of  Junior
Subordinated Debentures (i) the Preferred Securities will no longer be deemed to
be outstanding,  (ii) DTC or its nominee,  as the registered holder of Preferred
Securities,  will  receive  a  registered  global  certificate  or  certificates
representing  the  Junior  Subordinated  Debentures  to be  delivered  upon such
distribution with respect to Preferred Securities held by DTC or its nominee and
(iii) any certificates  representing the Preferred Securities not held by DTC or
its  nominee  will be deemed to  represent  the Junior  Subordinated  Debentures
having  a  principal  amount  equal  to the  stated  Liquidation  Amount  of the
Preferred  Securities and bearing accrued and unpaid interest in an amount equal
to the accumulated and unpaid  Distributions  on the Preferred  Securities until
such  certificates  are  presented  to the  security  registrar  for  the  Trust
Securities for transfer or reissuance.

        If the Company does not redeem the Junior Subordinated  Debentures prior
to maturity and the Issuer Trust is not liquidated  and the Junior  Subordinated
Debentures  are not  distributed  to holders of the  Preferred  Securities,  the
Preferred  Securities will remain  outstanding until the repayment of the Junior
Subordinated Debentures and the distribution of the Liquidation  Distribution to
the holders of the Preferred Securities.

        There can be no  assurance  as to the market  prices  for the  Preferred
Securities or the Junior  Subordinated  Debentures  that may be  distributed  in
exchange for Preferred Securities if a dissolution and liquidation of the Issuer
Trust were to occur. Accordingly,  the Preferred Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Issuer Trust,  may trade at a discount to the
price that the  investor  paid to  purchase  the  Preferred  Securities  offered
hereby.

Events of Default; Notice

        Any one of the following events  constitutes an "Event of Default" under
the Trust  Agreement  (an "Event of  Default")  with  respect  to the  Preferred
Securities  (whatever  the reason for such  Event of Default  and  whether it is
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment,  decree or order of any court or any order,  rule or regulation of any
administrative or governmental body):

        (i) the occurrence of a Debenture Event of Default (see  "Description of
Junior Subordinated Debentures -- Debenture Events of Default"); or

        (ii) default by the Issuer Trust in the payment of any Distribution when
it becomes due and payable,  and continuation of such default for a period of 30
days; or

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        (iii) default by the Issuer Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or

        (iv) default in the performance,  or breach, in any material respect, of
any covenant or warranty of the Issuer  Trustees in the Trust  Agreement  (other
than a covenant or warranty a default in the  performance of which or the breach
of which is dealt with in clause (ii) or (iii) above),  and continuation of such
default  or  breach  for a period of 60 days  after  there  has been  given,  by
registered  or  certified  mail,  to the Issuer  Trustees and the Company by the
holders  of at least 25% in  aggregate  Liquidation  Amount  of the  outstanding
Preferred  Securities,  a written notice  specifying  such default or breach and
requiring  it to be  remedied  and  stating  that such  notice  is a "Notice  of
Default" under the Trust Agreement; or

        (v) the  occurrence of certain  events of bankruptcy or insolvency  with
respect to the  Property  Trustee if a successor  Property  Trustee has not been
appointed within 90 days thereof.

        Within five Business  Days after the  occurrence of any Event of Default
actually  known to the  Property  Trustee,  the Property  Trustee will  transmit
notice of such  Event of  Default to the  holders  of Trust  Securities  and the
Administrators,  unless  such  Event of Default  has been  cured or waived.  The
Company, as Depositor, and the Administrators are required to file annually with
the Property  Trustee a certificate  as to whether or not they are in compliance
with all the  conditions  and  covenants  applicable  to them  under  the  Trust
Agreement.

        If a Debenture  Event of Default has  occurred  and is  continuing  as a
result of any failure by the Company to pay any amounts in respect of the Junior
Subordinated   Debentures  when  due,  the  Preferred  Securities  will  have  a
preference over the Common Securities with respect to payments of any amounts in
respect of the Preferred Securities as described above. See "-- Subordination of
Common   Securities,"  "--  Liquidation   Distribution   Upon  Dissolution"  and
"Description of Junior Subordinated Debentures -- Debenture Events of Default."

Removal of Issuer Trustees; Appointment of Successors

        The holders of at least a majority in  aggregate  Liquidation  Amount of
the outstanding  Preferred Securities may remove an Issuer Trustee for cause or,
if a Debenture Event of Default has occurred and is continuing,  with or without
cause.  If an Issuer  Trustee  is  removed  by the  holders  of the  outstanding
Preferred Securities,  the successor may be appointed by the holders of at least
25% in Liquidation Amount of Preferred Securities. If an Issuer Trustee resigns,
such Trustee will appoint its successor. If an Issuer Trustee fails to appoint a
successor,  the holders of at least 25% in Liquidation Amount of the outstanding
Preferred  Securities  may  appoint a  successor.  If a  successor  has not been
appointed  by  the  holders,  any  holder  of  Preferred  Securities  or  Common
Securities  or the other  Issuer  Trustee  may  petition a court in the State of
Delaware to appoint a successor.  Any Delaware  Trustee must meet the applicable
requirements  of  Delaware  law.  Any  Property  Trustee  must be a national  or
state-chartered  bank, and at the time of appointment  have securities  rated in
one  of  the  three  highest  rating  categories  by  a  nationally   recognized
statistical  rating  organization  and  have  capital  and  surplus  of at least
$50,000,000.  No  resignation or removal of an Issuer Trustee and no appointment
of a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the provisions of the Trust Agreement.

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Merger or Consolidation of Issuer Trustees

        Any entity into which the Property  Trustee or the Delaware  Trustee may
be merged or  converted  or with  which it may be  consolidated,  or any  entity
resulting  from any merger,  conversion  or  consolidation  to which such Issuer
Trustee is a party,  or any entity  succeeding to all or  substantially  all the
corporate trust business of such Issuer  Trustee,  will be the successor of such
Issuer  Trustee  under the Trust  Agreement,  provided  such entity is otherwise
qualified and eligible.

Mergers, Consolidations, Amalgamations or Replacements of the Issuer Trust

        The Issuer Trust may not merge with or into, consolidate, amalgamate, or
be  replaced  by,  or  convey,  transfer  or lease  its  properties  and  assets
substantially  as an entirety to, any entity,  except as  described  below or as
otherwise set forth in the Trust Agreement. The Issuer Trust may, at the request
of the holders of the Common  Securities  and with the consent of the holders of
at least a majority in aggregate Liquidation Amount of the outstanding Preferred
Securities,  merge with or into, consolidate,  amalgamate,  or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to a trust  organized  as such under the laws of any State,  so long as (i) such
successor entity either (a) expressly  assumes all the obligations of the Issuer
Trust with  respect  to the  Preferred  Securities  or (b)  substitutes  for the
Preferred Securities other securities having substantially the same terms as the
Preferred  Securities  (the  "Successor  Securities")  so long as the  Successor
Securities  have the same priority as the Preferred  Securities  with respect to
distributions  and payments upon liquidation,  redemption and otherwise,  (ii) a
trustee of such successor  entity,  possessing the same powers and duties as the
Property Trustee, is appointed to hold the Junior Subordinated Debentures, (iii)
such merger, consolidation,  amalgamation,  replacement, conveyance, transfer or
lease  does  not  cause  the  Preferred  Securities   (including  any  Successor
Securities) to be downgraded by any  nationally  recognized  statistical  rating
organization,  if then rated,  (iv) such  merger,  consolidation,  amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect, (v) such successor entity has
a purpose  substantially  identical to that of the Issuer  Trust,  (vi) prior to
such merger, consolidation,  amalgamation,  replacement, conveyance, transfer or
lease,  the Issuer  Trust has  received  an  opinion  from  independent  counsel
experienced  in such matters to the effect that (a) such merger,  consolidation,
amalgamation,  replacement,  conveyance,  transfer  or lease does not  adversely
affect the rights,  preferences  and  privileges of the holders of the Preferred
Securities  (including any Successor Securities) in any material respect and (b)
following such merger,  consolidation,  amalgamation,  replacement,  conveyance,
transfer or lease,  neither the Issuer Trust nor such  successor  entity will be
required to register as an investment  company under the Investment Company Act,
and (vii) the Company or any permitted successor or assignee owns all the common
securities of such  successor  entity and  guarantees  the  obligations  of such
successor entity under the Successor  Securities at least to the extent provided
by the  Guarantee.  Notwithstanding  the  foregoing,  the Issuer  Trust may not,
except with the consent of holders of 100% in  aggregate  Liquidation  Amount of
the Preferred  Securities,  consolidate,  amalgamate,  merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to, any other  entity or permit any other entity to  consolidate,
amalgamate,   merge  with  or  into,  or  replace  it  if  such   consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Issuer Trust or the successor  entity to be taxable as a corporation  for United
States federal income tax purposes.

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Voting Rights; Amendment of Trust Agreement

        Except as  provided  above and under  "--  Removal  of Issuer  Trustees;
Appointment  of  Successors"  and  "Description  of Guarantee -- Amendments  and
Assignment"  and as  otherwise  required  by law and the  Trust  Agreement,  the
holders of the Preferred Securities will have no voting rights.

        The Trust Agreement may be amended from time to time by the holders of a
majority of the Common Securities and the Property Trustee,  without the consent
of the holders of the Preferred Securities,  (i) to cure any ambiguity,  correct
or supplement  any provisions in the Trust  Agreement  that may be  inconsistent
with any  other  provision,  or to make any other  provisions  with  respect  to
matters or questions  arising under the Trust Agreement,  provided that any such
amendment does not adversely affect in any material respect the interests of any
holder  of  Trust  Securities,  or  (ii)  to  modify,  eliminate  or  add to any
provisions  of the Trust  Agreement to such extent as may be necessary to ensure
that the Issuer  Trust will not be taxable as a  corporation  for United  States
federal  income  tax  purposes  at  any  time  that  any  Trust  Securities  are
outstanding  or to ensure that the Issuer Trust will not be required to register
as an "investment  company" under the Investment Company Act, and any amendments
of the Trust  Agreement  will become  effective when notice of such amendment is
given to the holders of Trust Securities.  The Trust Agreement may be amended by
the holders of a majority of the Common Securities and the Property Trustee with
(i) the consent of holders  representing  not less than a majority in  aggregate
Liquidation Amount of the outstanding  Preferred  Securities and (ii) receipt by
the Issuer  Trustees of an opinion of counsel to the effect that such  amendment
or the exercise of any power granted to the Issuer  Trustees in accordance  with
such  amendment  will not  affect  the  Issuer  Trust's  not being  taxable as a
corporation  for United States federal income tax purposes or the Issuer Trust's
exemption  from status as an "investment  company" under the Investment  Company
Act,  except  that,  without  the  consent  of each  holder of Trust  Securities
affected  thereby,  the Trust  Agreement  may not be  amended  to (i) change the
amount or timing  of any  Distribution  on the  Trust  Securities  or  otherwise
adversely affect the amount of any  Distribution  required to be made in respect
of the Trust  Securities as of a specified  date or (ii) restrict the right of a
holder of Trust  Securities to institute  suit for the  enforcement  of any such
payment on or after such date.

        So long as any  Junior  Subordinated  Debentures  are held by the Issuer
Trust,  the Property  Trustee will not (i) direct the time,  method and place of
conducting any proceeding for any remedy available to the Debenture Trustee,  or
execute any trust or power conferred on the Property Trustee with respect to the
Junior  Subordinated  Debentures,  (ii) waive any past  default that is waivable
under  Section 5.13 of the Junior  Subordinated  Indenture,  (iii)  exercise any
right to rescind or annul a declaration that the Junior Subordinated  Debentures
shall be due and  payable or (iv)  consent  to any  amendment,  modification  or
termination  of the Junior  Subordinated  Indenture  or the Junior  Subordinated
Debentures,  where  such  consent  shall be  required,  without,  in each  case,
obtaining the prior  approval of the holders of at least a majority in aggregate
Liquidation Amount of the outstanding  Preferred  Securities,  except that, if a
consent  under the Junior  Subordinated  Indenture  would require the consent of
each holder of Junior Subordinated  Debentures affected thereby, no such consent
will be given by the Property  Trustee  without the prior consent of each holder
of the  Preferred  Securities.  The  Property  Trustee may not revoke any action
previously  authorized  or approved  by a vote of the  holders of the  Preferred
Securities except by subsequent vote of the holders of the Preferred Securities.
The  Property  Trustee will notify each holder of  Preferred  Securities  of any
notice of  default  with  respect  to the  Junior  Subordinated  Debentures.  In
addition to obtaining  the  foregoing  approvals of the holders of the Preferred
Securities,  before taking any of the foregoing  actions,  the Property  Trustee
will obtain an opinion of counsel experienced in such matters to the effect that
the Issuer Trust will not be taxable as a corporation  for United States federal
income tax purposes on account of such action.

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        Any required approval of holders of Preferred Securities may be given at
a meeting  of holders  of  Preferred  Securities  convened  for such  purpose or
pursuant to written  consent.  The  Property  Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written  consent of such holders is to be taken,  to
be given to each  registered  holder of Preferred  Securities  in the manner set
forth in the Trust Agreement.

        No vote or  consent  of the  holders  of  Preferred  Securities  will be
required to redeem and cancel Preferred  Securities in accordance with the Trust
Agreement.

        Notwithstanding  that  holders of Preferred  Securities  are entitled to
vote or  consent  under any of the  circumstances  described  above,  any of the
Preferred  Securities that are owned by the Company,  the Issuer Trustees or any
affiliate of the Company or any Issuer Trustees, will, for purposes of such vote
or consent, be treated as if they were not outstanding.

Expenses and Taxes

        In the Indenture,  the Company, as borrower, has agreed to pay all debts
and other obligations (other than with respect to the Preferred  Securities) and
all costs  and  expenses  of the  Issuer  Trust  (including  costs and  expenses
relating to the  organization of the Issuer Trust,  the fees and expenses of the
Issuer  Trustees  and the costs and  expenses  relating to the  operation of the
Issuer  Trust)  and to pay any and all taxes and all  costs  and  expenses  with
respect thereto (other than United States withholding taxes) to which the Issuer
Trust might become subject.  The foregoing  obligations of the Company under the
Indenture  are for the  benefit of, and shall be  enforceable  by, any person to
whom  any  such  debts,  obligations,  costs,  expenses  and  taxes  are owed (a
"Creditor")  whether or not such Creditor has received notice thereof.  Any such
Creditor  may  enforce  such  obligations  of the Company  directly  against the
Company,  and the Company has irrevocably  waived any right or remedy to require
that any such  Creditor  take any action  against the Issuer  Trust or any other
person before proceeding against the Company. The Company has also agreed in the
Indenture to execute such additional agreements as may be necessary or desirable
to give full effect to the foregoing.

Book Entry, Delivery and Form

        The Preferred Securities will be issued in the form of one or more fully
registered  global securities which will be deposited with, or on behalf of, DTC
and registered in the name of DTC's nominee. Unless and until it is exchangeable
in whole or in part for the Preferred  Securities  in definitive  form, a global
security may not be transferred  except as a whole by DTC to a nominee of DTC or
by a  nominee  of DTC to DTC or  another  nominee  of DTC or by DTC or any  such
nominee to a successor of such Depository or a nominee of such successor.

        Ownership of beneficial  interests in a global  security will be limited
to  persons  that have  accounts  with DTC or its  nominee  ("Participants")  or
persons that may hold interests through Participants.  The Company expects that,
upon the  issuance of a global  security,  DTC will  credit,  on its  book-entry
registration  and  transfer  system,  the  Participants'   accounts  with  their
respective  principal  amounts of the Preferred  Securities  represented by such
global security.  Ownership of beneficial interests in such global security will
be shown on, and the transfer of such ownership  interests will be effected only
through,  records  maintained by DTC (with respect to interests of Participants)
and on the records of  Participants  (with  respect to interests of Persons held
through  Participants).  Beneficial owners will not receive written confirmation
from DTC of their purchase,  but are expected to receive  written  confirmations
from the  Participants  through  which the  beneficial  owner  entered  into the
transaction. Transfers of ownership

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interests will be accomplished by entries on the books of Participants acting on
behalf of the beneficial owners.

        So long as DTC,  or its  nominee,  is the  registered  owner of a global
security,  DTC or such nominee,  as the case may be, will be considered the sole
owner or holder of the Preferred Securities  represented by such global security
for all purposes  under the Junior  Subordinated  Indenture.  Except as provided
below, owners of beneficial  interests in a global security will not be entitled
to receive physical delivery of the Preferred  Securities in definitive form and
will  not  be  considered  the  owners  or  holders  thereof  under  the  Junior
Subordinated Indenture. Accordingly, each person owning a beneficial interest in
such a global security must rely on the procedures of DTC and, if such person is
not a  Participant,  on the  procedures  of the  Participant  through which such
person  owns its  interest,  to  exercise  any  rights of a holder of  Preferred
Securities  under the Junior  Subordinated  Indenture.  The Company  understands
that, under DTC's existing practices, in the event that the Company requests any
action  of  holders,  or an  owner  of a  beneficial  interest  in such a global
security desires to take any action which a holder is entitled to take under the
Junior Subordinated Indenture,  DTC would authorize the Participants holding the
relevant  beneficial  interests to take such action, and such Participants would
authorize beneficial owners owning through such Participants to take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.  Redemption  notices  will  also be sent to DTC.  If less  than all of the
Preferred  Securities are being  redeemed,  the Company  understands  that it is
DTC's  existing  practice to determine by lot the amount of the interest of each
Participant to be redeemed.

        Distributions on the Preferred Securities  registered in the name of DTC
or its nominee  will be made to DTC or its  nominee,  as the case may be, as the
registered owner of the global security  representing such Preferred Securities.
None of the Company, the Issuer Trustees,  the Administrators,  any Paying Agent
or any  other  agent  of the  Company  or the  Issuer  Trustees  will  have  any
responsibility  or  liability  for any  aspect  of the  records  relating  to or
payments  made on  account  of  beneficial  ownership  interests  in the  global
security  for such  Preferred  Securities  or for  maintaining,  supervising  or
reviewing  any  records  relating  to  such  beneficial   ownership   interests.
Disbursements of Distributions to Participants  shall be the  responsibility  of
DTC.  DTC's  practice is to credit  Participants'  accounts on a payable date in
accordance with their respective  holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payable date. Payments
by Participants to beneficial  owners will be governed by standing  instructions
and customary practices, as is the case with securities held for the accounts of
customers  in  bearer  form or  registered  in  "street  name,"  and will be the
responsibility  of such  Participant  and not of DTC,  the  Company,  the Issuer
Trustees,  the Paying  Agent or any other agent of the  Company,  subject to any
statutory or regulatory requirements as may be in effect from time to time.

        DTC may discontinue providing its services as securities depository with
respect to the Preferred  Securities at any time by giving  reasonable notice to
the Company or the Issuer  Trustees.  If DTC  notifies  the  Company  that it is
unwilling to continue as such,  or if it is unable to continue or ceases to be a
clearing agency registered under the Exchange Act and a successor  depository is
not appointed by the Company  within ninety days after  receiving such notice or
becoming aware that DTC is no longer so  registered,  the Company will issue the
Preferred  Securities in definitive form upon registration of transfer of, or in
exchange for, such global security. In addition, the Company may at any time and
in  its  sole  discretion   determine  not  to  have  the  Preferred  Securities
represented  by one or more global  securities  and,  in such event,  will issue
Preferred  Securities  in  definitive  form in  exchange  for all of the  global
securities representing such Preferred Securities.

        DTC has advised the  Company and the Issuer  Trust as follows:  DTC is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal  Reserve  System,  a "clearing  corporation"  within the
meaning of the Uniform Commercial Code and a "clearing agency"

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registered  pursuant to the  provisions  of Section 17A of the Exchange Act. DTC
was  created to hold  securities  for its  Participants  and to  facilitate  the
clearance and settlement of securities transactions between Participants through
electronic  book  entry  changes  to  accounts  of  its  Participants,   thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers (such as the Underwriter), banks, trust companies
and clearing  corporations and may include certain other organizations.  Certain
of such Participants (or their  representatives),  together with other entities,
own DTC. Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a custodial
relationship with a Participant, either directly or indirectly.

Same-Day Settlement and Payment

        Settlement for the Preferred  Securities will be made by the Underwriter
in immediately available funds.

        Secondary  trading  in  Preferred  Securities  of  corporate  issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Preferred
Securities will trade in DTC's Same-Day Funds Settlement  System,  and secondary
market trading  activity in the Preferred  Securities will therefore be required
by DTC to settle in immediately available funds. No assurance can be given as to
the effect,  if any, of settlement  in  immediately  available  funds on trading
activity in the Preferred Securities.

Payment and Paying Agency

        Payments  in respect of the  Preferred  Securities  will be made to DTC,
which will credit the relevant  accounts at DTC on the  applicable  Distribution
Dates or, if the Preferred Securities are not held by DTC, such payments will be
made by check  mailed to the  address  of the  holder  entitled  thereto as such
address appears on the securities register for the Trust Securities.  The paying
agent (the  "Paying  Agent")  will  initially  be the  Property  Trustee and any
co-paying   agent  chosen  by  the  Property   Trustee  and  acceptable  to  the
Administrators.  The Paying  Agent will be  permitted  to resign as Paying Agent
upon 30 days' written notice to the Property Trustee and the Administrators.  If
the Property  Trustee is no longer the Paying Agent,  the Property  Trustee will
appoint a successor (which must be a bank or trust company reasonably acceptable
to the Administrators) to act as Paying Agent.

Registrar and Transfer Agent

        The Property  Trustee will act as registrar  and transfer  agent for the
Preferred Securities.

        Registration  of  transfers  of  Preferred  Securities  will be effected
without charge by or on behalf of the Issuer Trust,  but upon payment of any tax
or  other  governmental  charges  that may be  imposed  in  connection  with any
transfer or exchange. The Issuer Trust will not be required to register or cause
to be registered  the transfer of the Preferred  Securities  after the Preferred
Securities have been called for redemption.

Information Concerning the Property Trustee

        The Property  Trustee,  other than during the occurrence and continuance
of an  Event  of  Default,  undertakes  to  perform  only  such  duties  as  are
specifically  set forth in the Trust Agreement and, after such Event of Default,
must  exercise  the same  degree  of care and skill as a  prudent  person  would
exercise  or use in the  conduct  of his or her  own  affairs.  Subject  to this
provision,  the Property  Trustee is under no  obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder

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of Preferred  Securities unless it is offered  reasonable  indemnity against the
costs, expenses and liabilities that might be incurred thereby.

        For  information  concerning  the  relationships  between  Bankers Trust
Company,  the Property  Trustee,  and the Company,  see  "Description  of Junior
Subordinated Debentures -- Information Concerning the Debenture Trustee."

Miscellaneous

        The  Administrators and the Property Trustee are authorized and directed
to conduct the affairs of and to operate the Issuer Trust in such a way that the
Issuer  Trust will not be deemed to be an  "investment  company"  required to be
registered  under the  Investment  Company Act or taxable as a  corporation  for
United States  federal  income tax purposes and so that the Junior  Subordinated
Debentures  will be treated as  indebtedness  of the Company  for United  States
federal income tax purposes.  In this  connection,  the Property Trustee and the
holders of Common Securities are authorized to take any action, not inconsistent
with  applicable  law, the certificate of trust of the Issuer Trust or the Trust
Agreement,  that the  Property  Trustee  and the  holders  of Common  Securities
determine in their discretion to be necessary or desirable for such purposes, as
long as such action does not  materially  adversely  affect the interests of the
holders of the Preferred Securities.

        Holders  of the  Preferred  Securities  have no  preemptive  or  similar
rights.

        The Issuer Trust may not borrow money,  issue debt or mortgage or pledge
any of its assets.

Governing Law

        The Trust Agreement will be governed by and construed in accordance with
the laws of the State of Delaware.

                  DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES

        The Junior  Subordinated  Debentures  are to be issued  under the Junior
Subordinated Indenture, under which Bankers Trust Company is acting as Debenture
Trustee. This summary of certain terms and provisions of the Junior Subordinated
Debentures and the Junior Subordinated Indenture does not purport to be complete
and is subject to, and is qualified  in its  entirety by  reference  to, all the
provisions  of the Junior  Subordinated  Indenture,  including  the  definitions
therein  of  certain  terms.  Whenever  particular  defined  terms of the Junior
Subordinated  Indenture  (as  amended  or  supplemented  from  time to time) are
referred to herein, such defined terms are incorporated  herein by reference.  A
copy of the  form  of  Junior  Subordinated  Indenture  is  available  from  the
Debenture Trustee upon request.

General

     Concurrently  with the  issuance of the  Preferred  Securities,  the Issuer
Trust will invest the proceeds thereof,  together with the consideration paid by
the Company for the Common  Securities,  in the Junior  Subordinated  Debentures
issued by the Company.  The Junior  Subordinated  Debentures will bear interest,
accruing  from  March 17,  1997,  at the annual  rate of 9.85% of the  principal
amount thereof,  payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year  (each,nt  thereof,  an "Interest  Payment  Date"),
commencing  June 30, 1997, to the person in whose name each Junior  Subordinated
Debenture is registered at the close of business on the 15th day of March, June,
September  or  December  (whether  or not a Business  Day) next  preceding  such
Interest Payment Date. It is anticipated

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that,  until  the  liquidation,  if  any,  of  the  Issuer  Trust,  each  Junior
Subordinated  Debenture  will be  registered in the name of the Issuer Trust and
held by the  Property  Trustee in trust for the  benefit  of the  holders of the
Trust Securities. The amount of interest payable for any period less than a full
interest period will be computed on the basis of a 360-day year of twelve 30-day
months and the actual days elapsed in a partial month in such period. The amount
of interest  payable for any full  interest  period will be computed by dividing
the rate per annum by four.  If any date on which  interest  is  payable  on the
Junior  Subordinated  Debentures  is not a  Business  Day,  then  payment of the
interest  payable on such date will be made on the next succeeding day that is a
Business  Day  (without  any  interest  or other  payment in respect of any such
delay),  with the same force and effect as if made on the date such  payment was
originally payable. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional  interest on the amount thereof (to the extent
permitted  by law) at the rate per  annum of  9.85%,  compounded  quarterly  and
computed on the basis of a 360-day year of twelve  30-day  months and the actual
days  elapsed  in a partial  month in such  period.  The  amount  of  additional
interest  payable for any full interest  period will be computed by dividing the
rate per annum by four. The term  "interest" as used herein  includes  quarterly
interest  payments,  interest on  quarterly  interest  payments  not paid on the
applicable  Interest  Payment Date and Additional  Sums (as defined  below),  as
applicable.

     The Junior Subordinated Debentures will mature on March 31, 2027.

        The  Junior  Subordinated  Debentures  will be  unsecured  and will rank
junior and be subordinate in right of payment to all Senior  Indebtedness of the
Company.  The Junior  Subordinated  Debentures  will not be subject to a sinking
fund.  The  Junior  Subordinated  Indenture  does not  limit the  incurrence  or
issuance of other  secured or unsecured  debt by the Company,  including  Senior
Indebtedness, whether under the Junior Subordinated Indenture or any existing or
other indenture that the Company may enter into in the future or otherwise.  See
"-- Subordination."

Option to Extend Interest Payment Period

     So long as no Debenture  Event of Default has  occurred and is  continuing,
the Company has the right at any time during the term of the Junior Subordinated
Debentures to defer the payment of interest at any time or from time to time for
a period not  exceeding 20  consecutive  quarterly  periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. During any such Extension Period
the  Company  shall have the right to make  partial  payments of interest on any
interest payment date. At the end of such Extension Period, the Company must pay
all interest  then accrued and unpaid  (together  with  interest  thereon at the
annual  rate of  9.85%,  compounded  quarterly  and  computed  on the basis of a
360-day  year of twelve  30-day  months and the actual days elapsed in a partial
month in such period,  to the extent permitted by applicable law). The amount of
additional  interest  payable for any full  interest  period will be computed by
dividing the rate per annum by four. During an Extension  Period,  interest will
continue to accrue and holders of Junior Subordinated  Debentures (or holders of
Preferred  Securities  while  outstanding)  will be required to accrue  interest
income for United  States  federal  income tax  purposes.  See "Certain  Federal
Income Tax Consequences -- Interest Income and Original Issue Discount."

        During any such Extension Period, the Company may not (i) declare or pay
any  dividends  or  distributions  on, or  redeem,  purchase,  acquire or make a
liquidation  payment with respect to, any of the Company's capital stock or (ii)
make any payment of  principal  of or interest or premium,  if any, on or repay,
repurchase or redeem any debt  securities of the Company that rank pari passu in
all respects  with or junior in interest to the Junior  Subordinated  Debentures
(other than (a)  repurchases,  redemptions  or other  acquisitions  of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other  similar  arrangement  with or for the  benefit of any one or more
employees, officers,

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directors  or  consultants,  in  connection  with  a  dividend  reinvestment  or
stockholder  stock  purchase plan or in connection  with the issuance of capital
stock of the Company (or securities  convertible  into or  exercisable  for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of an exchange or conversion
of any class or series of the Company's capital stock (or any capital stock of a
subsidiary  of the  Company)  for any class or series of the  Company's  capital
stock or of any class or series of the Company's  indebtedness  for any class or
series of the Company's capital stock, (c) the purchase of fractional  interests
in shares of the Company's  capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security  being  converted or exchanged,
(d) any  declaration of a dividend in connection with any  stockholder's  rights
plan, or the issuance of rights,  stock or other property under any stockholders
rights plan, or the redemption or repurchase of rights pursuant thereto,  or (e)
any dividend in the form of stock,  warrants,  options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants,  options or
other  rights is the same stock as that on which the  dividend  is being paid or
ranks pari passu with or junior to such stock).  Prior to the termination of any
such  Extension  Period,  the Company may further defer the payment of interest,
provided that no Extension Period may exceed 20 consecutive quarterly periods or
extend beyond the Stated Maturity of the Junior  Subordinated  Debentures.  Upon
the termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension  Period subject to the above
conditions.  No interest  shall be due and payable  during an Extension  Period,
except at the end thereof.  The Company must give the Issuer  Trustees notice of
its  election of such  Extension  Period at least one  Business Day prior to the
earlier of (i) the date the Distributions on the Preferred Securities would have
been  payable but for the election to begin such  Extension  Period and (ii) the
date the Property Trustee is required to give notice to holders of the Preferred
Securities of the record date or the date such Distributions are payable, but in
any event not less than one Business Day prior to such record date. The Property
Trustee  will give notice of the  Company's  election  to begin a new  Extension
Period to the holders of the Preferred Securities. There is no limitation on the
number of times that the Company may elect to begin an Extension Period.

Redemption

     The Junior Subordinated  Debentures are redeemable prior to maturity at the
option of the Company (i) on or after March 31, 2002, in whole at any time or in
part from time to time, or (ii) in whole, but not in part, at any time within 90
days  following  the  occurrence  and  during the  continuation  of a Tax Event,
Investment  Company  Event or Capital  Treatment  Event  (each as defined  under
"Description  of  Preferred  Securities  --  Redemption"),  in each  case at the
redemption  price described  below.  The proceeds of any such redemption will be
used by the Issuer Trust to redeem the Preferred Securities.

        The Federal Reserve's  risk-based capital guidelines,  which are subject
to change,  currently  provide that  redemptions  of  permanent  equity or other
capital  instruments before stated maturity could have a significant impact on a
bank holding  company's  overall  capital  structure  and that any  organization
considering  such a redemption  should  consult with the Federal  Reserve before
redeeming any equity or capital  instrument prior to maturity if such redemption
could have a material  effect on the level or composition of the  organization's
capital base (unless the equity or capital  instrument  were  redeemed  with the
proceeds  of, or  replaced  by, a like  amount of a  similar  or higher  quality
capital instrument and the Federal Reserve considers the organization's  capital
position to be fully adequate after the redemption).

        The  redemption  of the Junior  Subordinated  Debentures  by the Company
prior to their  Stated  Maturity  would  constitute  the  redemption  of capital
instruments under the Federal Reserve's current  risk-based  capital  guidelines
and may be subject to the prior approval of the Federal Reserve. The

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redemption of the Junior  Subordinated  Debentures  also could be subject to the
additional  prior approval of the Federal  Reserve under its current  risk-based
capital guidelines.

        The  redemption  price  for  Junior   Subordinated   Debentures  is  the
outstanding principal amount of the Junior Subordinated  Debentures plus accrued
interest  (including any Additional  Interest or any Additional Sums) thereon to
but excluding the date fixed for redemption.

Additional Sums

        The Company has covenanted in the Junior Subordinated Indenture that, if
and for so long as (i) the Issuer Trust is the holder of all Junior Subordinated
Debentures  and (ii) the Issuer Trust is required to pay any  additional  taxes,
duties or other  governmental  charges as a result of a Tax Event,  the  Company
will pay as additional sums on the Junior  Subordinated  Debentures such amounts
as may be required so that the  Distributions  payable by the Issuer  Trust will
not be  reduced  as a  result  of any such  additional  taxes,  duties  or other
governmental charges. See "Description of Preferred Securities -- Redemption."

Registration, Denomination and Transfer

        The Junior  Subordinated  Debentures will initially be registered in the
name of the Issuer Trust. If the Junior Subordinated  Debentures are distributed
to  holders of  Preferred  Securities,  it is  anticipated  that the  depositary
arrangements  for the  Junior  Subordinated  Debentures  will  be  substantially
identical to those in effect for the Preferred  Securities.  See "Description of
Preferred Securities -- Book Entry, Delivery and Form."

        Although DTC has agreed to the procedures  described  above, it is under
no  obligation  to perform or  continue  to perform  such  procedures,  and such
procedures may be  discontinued  at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor  depositary is not appointed by
the  Company  within 90 days of receipt of notice from DTC to such  effect,  the
Company will cause the Junior Subordinated Debentures to be issued in definitive
form.

        Payments  on  Junior  Subordinated  Debentures  represented  by a global
security  will be made to Cede & Co.,  the nominee  for DTC,  as the  registered
holder of the Junior Subordinated Debentures, as described under "Description of
Preferred  Securities -- Book Entry,  Delivery and Form." If Junior Subordinated
Debentures  are issued in  certificated  form,  principal  and interest  will be
payable, the transfer of the Junior Subordinated Debentures will be registrable,
and Junior Subordinated  Debentures will be exchangeable for Junior Subordinated
Debentures  of other  authorized  denominations  of a like  aggregate  principal
amount,  at the corporate trust office of the Debenture Trustee in New York, New
York or at the offices of any Paying  Agent or transfer  agent  appointed by the
Company,  provided  that  payment of  interest  may be made at the option of the
Company by check mailed to the address of the persons entitled thereto. However,
a  holder  of $1  million  or more  in  aggregate  principal  amount  of  Junior
Subordinated  Debentures may receive  payments of interest  (other than interest
payable at the Stated Maturity) by wire transfer of immediately  available funds
upon written  request to the  Debenture  Trustee not later than 15 calendar days
prior to the date on which the interest is payable.

        Junior  Subordinated  Debentures will be  exchangeable  for other Junior
Subordinated Debentures of like tenor, of any authorized denominations, and of a
like aggregate principal amount.

        Junior Subordinated Debentures may be presented for exchange as provided
above,  and may be  presented  for  registration  of transfer  (with the form of
transfer endorsed thereon, or a satisfactory written

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instrument  of  transfer,  duly  executed),  at the  office  of  the  securities
registrar appointed under the Junior Subordinated  Debenture or at the office of
any transfer agent  designated by the Company for such purpose  without  service
charge and upon payment of any taxes and other governmental charges as described
in the Junior  Subordinated  Indenture.  The Company will appoint the  Debenture
Trustee as securities  registrar under the Junior  Subordinated  Indenture.  The
Company may at any time designate additional transfer agents with respect to the
Junior Subordinated Debentures.

        In the event of any  redemption,  neither the Company nor the  Debenture
Trustee  shall be required to (i) issue,  register  the  transfer of or exchange
Junior  Subordinated  Debentures  during a period  beginning  at the  opening of
business  15 days  before  the day of  selection  for  redemption  of the Junior
Subordinated  Debentures  to be redeemed  and ending at the close of business on
the day of mailing of the  relevant  notice of  redemption  or (ii)  transfer or
exchange any Junior Subordinated Debentures so selected for redemption,  except,
in the case of any Junior  Subordinated  Debentures  being redeemed in part, any
portion thereof not to be redeemed.

        Any monies deposited with the Debenture  Trustee or any paying agent, or
then held by the  Company in trust,  for the  payment of the  principal  of (and
premium, if any) or interest on any Junior Subordinated  Debenture and remaining
unclaimed for two years after such principal  (and premium,  if any) or interest
has become due and payable  shall,  at the request of the Company,  be repaid to
the  Company  and  the  holder  of  such  Junior  Subordinated  Debenture  shall
thereafter  look,  as a general  unsecured  creditor,  only to the  Company  for
payment thereof.

Restrictions on Certain Payments; Certain Covenants of the Company

        The  Company  has  covenanted  that it will not (i)  declare  or pay any
dividends  or  distributions  on,  or  redeem,  purchase,  acquire,  or  make  a
liquidation  payment with respect to, any of the Company's capital stock or (ii)
make any payment of  principal  of or interest or premium,  if any, on or repay,
repurchase or redeem any debt  securities of the Company that rank pari passu in
all respects  with or junior in interest to the Junior  Subordinated  Debentures
(other than (a)  repurchases,  redemptions  or other  acquisitions  of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other  similar  arrangement  with or for the  benefit of any one or more
employees,  officers,  directors or  consultants,  in connection with a dividend
reinvestment  or  stockholder  stock  purchase  plan or in  connection  with the
issuance  of capital  stock of the Company (or  securities  convertible  into or
exercisable  for  such  capital  stock)  as   consideration  in  an  acquisition
transaction entered into prior to the applicable Extension Period or other event
referred to below,  (b) as a result of an exchange or conversion of any class or
series of the  Company's  capital stock (or any capital stock of a subsidiary of
the Company) for any class or series of the  Company's  capital  stock or of any
class or series  of the  Company's  indebtedness  for any class or series of the
Company's  capital stock, (c) the purchase of fractional  interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such  capital  stock or the  security  being  converted  or  exchanged,  (d) any
declaration of a dividend in connection with any  stockholder's  rights plan, or
the issuance of rights,  stock or other property under any stockholder's  rights
plan, or the  redemption or repurchase of rights  pursuant  thereto,  or (e) any
dividend  in the form of stock,  warrants,  options  or other  rights  where the
dividend stock or the stock issuable upon exercise of such warrants,  options or
other  rights is the same stock as that on which the  dividend  is being paid or
ranks pari passu  with or junior to such  stock),  if at such time (i) there has
occurred any event (a) of which the Company has actual  knowledge  that with the
giving of notice or the lapse of time,  or both,  would  constitute  a Debenture
Event of Default  and (b) that the  Company  has not taken  reasonable  steps to
cure, (ii) if the Junior  Subordinated  Debentures are held by the Issuer Trust,
the Company is in default with respect to its payment of any  obligations  under
the  Guarantee  or (iii) the  Company  has given  notice of its  election  of an
Extension Period as provided in the Junior Subordinated

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Indenture and has not rescinded such notice,  or such Extension  Period,  or any
extension thereof, is continuing.

        The Company has covenanted in the Junior  Subordinated  Indenture (i) to
continue  to  hold,  directly  or  indirectly,  100% of the  Common  Securities,
provided  that  certain  successors  that are  permitted  pursuant to the Junior
Subordinated  Indenture  may succeed to the  Company's  ownership  of the Common
Securities,  (ii)  as  holder  of the  Common  Securities,  not  to  voluntarily
terminate,  windup or liquidate the Issuer  Trust,  other than (a) in connection
with a  distribution  of Junior  Subordinated  Debentures  to the holders of the
Preferred  Securities  in  liquidation  of the Issuer Trust or (b) in connection
with certain mergers,  consolidations  or  amalgamations  permitted by the Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement,  to cause the Issuer Trust to continue not to
be taxable as a corporation for United States federal income tax purposes.

Modification of Junior Subordinated Indenture

        From time to time,  the Company and the Debenture  Trustee may,  without
the  consent  of any of the  holders  of  the  outstanding  Junior  Subordinated
Debentures, amend, waive or supplement the provisions of the Junior Subordinated
Indenture to: (1) evidence  succession of another  corporation or association to
the Company and the assumption by such person of the  obligations of the Company
under  the  Junior   Subordinated   Debentures,   (2)  add  further   covenants,
restrictions  or  conditions  for  the  protection  of  holders  of  the  Junior
Subordinated Debentures, (3) cure ambiguities or correct the Junior Subordinated
Debentures in the case of defects or inconsistencies in the provisions  thereof,
so long as any such cure or correction does not adversely affect the interest of
the holders of the Junior Subordinated  Debentures in any material respect,  (4)
change  the  terms of the  Junior  Subordinated  Debentures  to  facilitate  the
issuance  of  the  Junior  Subordinated  Debentures  in  certificated  or  other
definitive  form,  (5)  evidence or provide for the  appointment  of a successor
Debenture Trustee,  or (6) qualify, or maintain the qualification of, the Junior
Subordinated  Indentures under the Trust Indenture Act. The Junior  Subordinated
Indenture contains provisions  permitting the Company and the Debenture Trustee,
with the consent of the holders of not less than a majority in principal  amount
of the  Junior  Subordinated  Debentures,  to  modify  the  Junior  Subordinated
Indenture  in a  manner  affecting  the  rights  of the  holders  of the  Junior
Subordinated  Debentures,  except  that no such  modification  may,  without the
consent of the  holder of each  outstanding  Junior  Subordinated  Debenture  so
affected, (i) change the Stated Maturity of the Junior Subordinated  Debentures,
or reduce the  principal  amount  thereof,  the rate of interest  thereon or any
premium  payable  upon the  redemption  thereof,  or change the place of payment
where, or the currency in which,  any such amount is payable or impair the right
to institute suit for the  enforcement of any Junior  Subordinated  Debenture or
(ii)  reduce  the  percentage  of  principal   amount  of  Junior   Subordinated
Debentures,   the  holders  of  which  are  required  to  consent  to  any  such
modification of the Junior Subordinated Indenture.  Furthermore,  so long as any
of the Preferred Securities remain outstanding, no such modification may be made
that adversely affects the holders of such Preferred  Securities in any material
respect, and no termination of the Junior Subordinated  Indenture may occur, and
no waiver of any  Debenture  Event of Default or  compliance  with any  covenant
under the Junior  Subordinated  Indenture  may be  effective,  without the prior
consent  of the  holders  of at least a majority  of the  aggregate  Liquidation
Amount of the outstanding Preferred Securities unless and until the principal of
(and premium, if any, on) the Junior Subordinated Debentures and all accrued and
unpaid interest  thereon have been paid in full and certain other conditions are
satisfied.

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Debenture Events of Default

        The Junior  Subordinated  Indenture provides that any one or more of the
following  described events with respect to the Junior  Subordinated  Debentures
that has  occurred  and is  continuing  constitutes  an "Event of Default"  with
respect to the Junior Subordinated Debentures:

        (i)     failure  to  pay  any   interest  on  the  Junior   Subordinated
                Debentures  when due (subject to the deferral of any due date in
                the case of an Extension Period); or

        (ii)    failure  to pay any  principal  of or  premium,  if any,  on the
                Junior  Subordinated  Debentures  when due whether at  maturity,
                upon redemption, by declaration of acceleration or otherwise; or

        (iii)   failure to observe or perform in any  material  respect  certain
                other covenants contained in the Junior  Subordinated  Indenture
                for 90  days  after  written  notice  to the  Company  from  the
                Debenture  Trustee or the  holders of at least 25% in  aggregate
                outstanding   principal   amount  of  the   outstanding   Junior
                Subordinated Debentures; or

        (iv)    the Company  consents to the  appointment of a receiver or other
                similar  official  in any  liquidation,  insolvency  or  similar
                proceeding  with respect to the Company or all or  substantially
                all its property.

        For purposes of the Trust Agreement and this Prospectus, each such Event
of  Default  under  the  Junior  Subordinated  Debenture  is  referred  to  as a
"Debenture  Event  of  Default."  As  described  in  "Description  of  Preferred
Securities -- Events of Default; Notice," the occurrence of a Debenture Event of
Default  will  also  constitute  an Event of  Default  in  respect  of the Trust
Securities.

        The  holders of at least a majority  in  aggregate  principal  amount of
outstanding  Junior  Subordinated  Debentures have the right to direct the time,
method and place of conducting any  proceeding  for any remedy  available to the
Debenture Trustee.  The Debenture Trustee or the holders of not less than 25% in
aggregate  principal amount of outstanding  Junior  Subordinated  Debentures may
declare the  principal  due and payable  immediately  upon a Debenture  Event of
Default,   and,  should  the  Debenture   Trustee  or  such  holders  of  Junior
Subordinated  Debentures fail to make such declaration,  the holders of at least
25% in aggregate  Liquidation  Amount of the  outstanding  Preferred  Securities
shall have such right.  The holders of a majority in aggregate  principal amount
of outstanding  Junior  Subordinated  Debentures may annul such  declaration and
waive the default if all defaults  (other than the  non-payment of the principal
of  Junior  Subordinated   Debentures  which  has  become  due  solely  by  such
acceleration)  have  been  cured  and  a  sum  sufficient  to  pay  all  matured
installments  of interest and principal due otherwise than by  acceleration  has
been  deposited  with the  Debenture  Trustee.  Should  the  holders  of  Junior
Subordinated  Debentures fail to annul such  declaration and waive such default,
the holders of a majority in  aggregate  Liquidation  Amount of the  outstanding
Preferred Securities shall have such right.

        The holders of at least a majority in aggregate  principal amount of the
outstanding Junior  Subordinated  Debentures  affected thereby may, on behalf of
the holders of all the Junior Subordinated  Debentures,  waive any past default,
except a default in the payment of principal  (or  premium,  if any) or interest
(unless  such  default  has been cured and a sum  sufficient  to pay all matured
installments  of interest and principal due otherwise than by  acceleration  has
been deposited with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Junior Subordinated Indenture cannot be modified or
amended  without  the  consent  of  the  holder  of  each   outstanding   Junior
Subordinated Debenture

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affected thereby.  See "-- Modification of Junior  Subordinated  Indenture." The
Company is required to file annually with the Debenture Trustee a certificate as
to  whether or not the  Company is in  compliance  with all the  conditions  and
covenants applicable to it under the Junior Subordinated Indenture.

        If a Debenture  Event of Default occurs and is continuing,  the Property
Trustee will have the right to declare the  principal of and the interest on the
Junior Subordinated  Debentures,  and any other amounts payable under the Junior
Subordinated Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to the Junior Subordinated Debentures.

Enforcement of Certain Rights by Holders of Preferred Securities

        If a Debenture  Event of Default has occurred and is continuing and such
event is  attributable  to the failure of the Company to pay any amounts payable
in respect of the Junior  Subordinated  Debentures  on the date such amounts are
otherwise payable,  a registered holder of Preferred  Securities may institute a
Direct Action  against the Company for  enforcement of payment to such holder of
an  amount  equal to the  amount  payable  in  respect  of  Junior  Subordinated
Debentures having a principal amount equal to the aggregate  Liquidation  Amount
of the Preferred  Securities held by such holder.  The Company may not amend the
Junior  Subordinated  Indenture to remove the foregoing  right to bring a Direct
Action  without the prior  written  consent of the holders of all the  Preferred
Securities.  The  Company  will have the right  under  the  Junior  Subordinated
Indenture to set-off any payment made to such holder of Preferred  Securities by
the Company in connection with a Direct Action.

        The  holders  of the  Preferred  Securities  are not  able  to  exercise
directly  any  remedies  available  to the  holders of the  Junior  Subordinated
Debentures except under the circumstances  described in the preceding paragraph.
See "Description of Preferred Securities -- Events of Default; Notice."

Consolidation, Merger, Sale of Assets and Other Transactions

        The Junior  Subordinated  Indenture  provides  that the  Company may not
consolidate with or merge into any other Person or convey, transfer or lease its
properties and assets  substantially as an entirety to any Person, and no Person
may consolidate with or merge into the Company or convey,  transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i) if
the  Company  consolidates  with or merges  into  another  Person or  conveys or
transfers its properties and assets  substantially as an entirety to any Person,
the  successor  Person is organized  under the laws of the United  States or any
state or the District of Columbia,  and such successor Person expressly  assumes
the Company's obligations in respect of the Junior Subordinated Debentures; (ii)
immediately after giving effect thereto,  no Debenture Event of Default,  and no
event which, after notice or lapse of time or both, would constitute a Debenture
Event of Default,  has  occurred  and is  continuing;  and (iii)  certain  other
conditions as prescribed in the Junior Subordinated Indenture are satisfied.

        The  provisions  of the  Junior  Subordinated  Indenture  do not  afford
holders  of the  Junior  Subordinated  Debentures  protection  in the event of a
highly leveraged or other  transaction  involving the Company that may adversely
affect holders of the Junior Subordinated Debentures.

Satisfaction and Discharge

        The  Junior  Subordinated  Indenture  provides  that when,  among  other
things,  all Junior  Subordinated  Debentures  not  previously  delivered to the
Debenture  Trustee for cancellation  (i) have become due and payable,  (ii) will
become due and payable at the Stated  Maturity  within one year, and the Company
deposits or causes to be deposited with the Debenture  Trustee funds,  in trust,
for the

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<PAGE>



purpose and in an amount sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated  Debentures not previously delivered to the Debenture
Trustee for cancellation,  for the principal (and premium,  if any) and interest
to the date of the deposit or to the Stated  Maturity,  as the case may be, then
the Junior Subordinated  Indenture will cease to be of further effect (except as
to the  Company's  obligations  to pay all other sums due pursuant to the Junior
Subordinated Indenture and to provide the officers' certificates and opinions of
counsel described therein), and the Company will be deemed to have satisfied and
discharged the Junior Subordinated Indenture.

Subordination

        The Junior  Subordinated  Debentures  will be subordinate  and junior in
right of payment, to the extent set forth in the Junior Subordinated  Indenture,
to all Senior  Indebtedness  (as defined  below) of the Company.  If the Company
defaults in the payment of any principal,  premium, if any, or interest, if any,
or any other amount payable on any Senior Indebtedness when the same becomes due
and  payable,  whether  at  maturity  or at a date  fixed for  redemption  or by
declaration of  acceleration or otherwise,  then,  unless and until such default
has been cured or waived or has ceased to exist or all Senior  Indebtedness  has
been paid,  no direct or indirect  payment (in cash,  property,  securities,  by
setoff or otherwise) may be made or agreed to be made on the Junior Subordinated
Debentures, or in respect of any redemption,  repayment, retirement, purchase or
other acquisition of any of the Junior Subordinated Debentures.

        As used herein,  "Senior Indebtedness" means, whether recourse is to all
or a portion of the assets of the  Company and  whether or not  contingent,  (i)
every obligation of the Company for money borrowed; (ii) every obligation of the
Company  evidenced by bonds,  debentures,  notes or other  similar  instruments,
including  obligations  incurred in connection with the acquisition of property,
assets or businesses;  (iii) every reimbursement  obligation of the Company with
respect to letters of credit,  bankers' acceptances or similar facilities issued
for the account of the Company;  (iv) every  obligation of the Company issued or
assumed as the deferred purchase price of property services (but excluding trade
accounts  payable  or accrued  liabilities  arising  in the  ordinary  course of
business);  (v) every  capital  lease  obligation  of the  Company;  (vi)  every
obligation of the Company for claims (as defined in Section 101(4) of the United
States  Bankruptcy  Code of 1978, as amended) in respect of derivative  products
such as interest and foreign  exchange rate contracts,  commodity  contracts and
similar  arrangements;  and (vii) every  obligation  of the type  referred to in
clauses (i) through (vi) of another  person and all dividends of another  person
the  payment  of  which,  in either  case,  the  Company  has  guaranteed  or is
responsible or liable, directly or indirectly, as obligor or otherwise; provided
that "Senior Indebtedness" shall not include (i) any obligations which, by their
terms,  are expressly  stated to rank pari passu in right of payment with, or to
not be superior in right of payment to, the Junior Subordinated Debentures, (ii)
any Senior  Indebtedness  of the Company which when incurred and without respect
to any election under Section  1111(b) of the United States  Bankruptcy  Code of
1978, as amended, was without recourse to the Company, (iii) any indebtedness of
the  Company to any of its  subsidiaries,  (iv)  indebtedness  to any  executive
officer or director of the Company,  or (v) any  indebtedness in respect of debt
securities issued to any trust, or a trustee of such trust, partnership or other
entity  affiliated with the Company that is a financing entity of the Company in
connection  with the issuance of such  financing  entity of securities  that are
similar to the Preferred Securities.

        In the  event  of (i)  certain  events  of  bankruptcy,  dissolution  or
liquidation  of the  Company or the holder of the  Common  Securities,  (ii) any
proceeding for the liquidation,  dissolution or other winding up of the Company,
voluntary or  involuntary,  whether or not  involving  insolvency  or bankruptcy
proceedings, (iii) any assignment by the Company for the benefit of creditors or
(iv) any other marshalling of the assets of the Company, all Senior Indebtedness
(including  any interest  thereon  accruing after the  commencement  of any such
proceedings) shall first be paid in full before any payment or

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<PAGE>



distribution,  whether in cash,  securities or other property,  shall be made on
account of the Junior  Subordinated  Debentures.  In such event,  any payment or
distribution on account of the Junior Subordinated Debentures,  whether in cash,
securities or other property,  that would  otherwise (but for the  subordination
provisions)  be payable  or  deliverable  in respect of the Junior  Subordinated
Debentures  will  be  paid  or  delivered  directly  to the  holders  of  Senior
Indebtedness  in accordance with the priorities then existing among such holders
until all Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) has been paid in full.

        In the event of any such  proceeding,  after payment in full of all sums
owing with respect to Senior  Indebtedness,  the holders of Junior  Subordinated
Debentures,  together with the holders of any obligations of the Company ranking
on a parity with the Junior Subordinated Debentures, will be entitled to be paid
from the  remaining  assets of the Company the amounts at the time due and owing
on the Junior  Subordinated  Debentures  and such other  obligations  before any
payment or other distribution,  whether in cash, property or otherwise,  will be
made on account of any  capital  stock or  obligations  of the  Company  ranking
junior to the Junior Subordinated Debentures and such other obligations.  If any
payment or distribution on account of the Junior Subordinated  Debentures of any
character or any  security,  whether in cash,  securities  or other  property is
received by any holder of any Junior Subordinated Debentures in contravention of
any of the terms hereof and before all the Senior  Indebtedness has been paid in
full, such payment or distribution or security will be received in trust for the
benefit of, and must be paid over or delivered and  transferred  to, the holders
of the  Senior  Indebtedness  at the time  outstanding  in  accordance  with the
priorities  then existing  among such holders for  application to the payment of
all Senior Indebtedness remaining unpaid to the extent necessary to pay all such
Senior  Indebtedness in full. By reason of such  subordination,  in the event of
the insolvency of the Company,  holders of Senior Indebtedness may receive more,
ratably,  and holders of the Junior  Subordinated  Debentures  may receive less,
ratably,  than the other creditors of the Company.  Such  subordination will not
prevent  the  occurrence  of any  Event of  Default  in  respect  of the  Junior
Subordinated Debentures.

        The Junior Subordinated  Indenture places no limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company.  The Company
expects from time to time to incur additional  indebtedness  constituting Senior
Indebtedness.

Information Concerning the Debenture Trustee

        The Debenture Trustee,  other than during the occurrence and continuance
of a default by the Company in performance of its  obligations  under the Junior
Subordinated  Debenture,  is under no  obligation  to exercise any of the powers
vested in it by the Junior  Subordinated  Indenture at the request of any holder
of Junior Subordinated  Debentures,  unless offered reasonable indemnity by such
holder  against  the costs,  expenses  and  liabilities  that might be  incurred
thereby.  The Debenture  Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if  the  Debenture  Trustee  reasonably  believes  that  repayment  or  adequate
indemnity is not reasonably assured to it.

        Bankers Trust  Company,  the Debenture  Trustee,  may serve from time to
time as trustee under other  indentures or trust  agreements with the Company or
its subsidiaries relating to other issues of their securities.  In addition, the
Company and certain of its affiliates may have other banking  relationships with
Bankers Trust Company and its affiliates.

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<PAGE>



Governing Law

     The Junior Subordinated  Indenture and the Junior  Subordinated  Debentures
will be governed by and  construed in  accordance  with the laws of the State of
New York.

                            DESCRIPTION OF GUARANTEE

        The Guarantee will be executed and delivered by the Company concurrently
with the issuance of Preferred Securities by the Issuer Trust for the benefit of
the holders from time to time of the Preferred Securities. Bankers Trust Company
will act as  Guarantee  Trustee  under the  Guarantee.  This  summary of certain
provisions of the  Guarantee  does not purport to be complete and is subject to,
and  qualified  in its  entirety  by  reference  to, all the  provisions  of the
Guarantee,  including the  definitions  therein of certain  terms. A copy of the
form of Guarantee is available  upon  request from the  Guarantee  Trustee.  The
Guarantee  Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities.

General

        The  Company  will  irrevocably  agree to pay in full on a  subordinated
basis,  to the extent  set forth in the  Guarantee  and  described  herein,  the
Guarantee   Payments  (as  defined  below)  to  the  holders  of  the  Preferred
Securities,  as and when due,  regardless  of any  defense,  right of set-off or
counterclaim  that the Issuer Trust may have or assert other than the defense of
payment. The following payments with respect to the Preferred Securities, to the
extent not paid by or on behalf of the Issuer Trust (the "Guarantee  Payments"),
will be subject to the Guarantee:  (i) any accumulated and unpaid  Distributions
required to be paid on such Preferred Securities,  to the extent that the Issuer
Trust has funds on hand  available  therefor at such time,  (ii) the  Redemption
Price with respect to any Preferred  Securities  called for  redemption,  to the
extent that the Issuer Trust has funds on hand available  therefor at such time,
and (iii) upon a  voluntary  or  involuntary  dissolution,  of the Issuer  Trust
(unless the Junior  Subordinated  Debentures  are  distributed to holders of the
Preferred Securities), the lesser of (a) the aggregate of the Liquidation Amount
and all  accumulated  and unpaid  Distributions  to the date of payment,  to the
extent that the Issuer Trust has funds on hand available  therefor at such time,
and (b) the  amount  of assets  of the  Issuer  Trust  remaining  available  for
distribution to holders of the Preferred Securities on liquidation of the Issuer
Trust. The Company's  obligation to make a Guarantee Payment may be satisfied by
direct  payment of the  required  amounts by the  Company to the  holders of the
Preferred  Securities or by causing the Issuer Trust to pay such amounts to such
holders.

        The Guarantee will be an irrevocable  guarantee on a subordinated  basis
of the Issuer Trust's obligations under the Preferred Securities, but will apply
only to the  extent  that the  Issuer  Trust has funds  sufficient  to make such
payments, and is not a guarantee of collection.

        If the  Company  does  not  make  payments  on the  Junior  Subordinated
Debentures  held by the Issuer  Trust,  the Issuer Trust will not be able to pay
any amounts  payable in respect of the  Preferred  Securities  and will not have
funds legally available therefor. The Guarantee will rank subordinate and junior
in right of payment to all Senior Indebtedness of the Company. See "-- Status of
the Guarantee." The Guarantee does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior Indebtedness, whether
under the Junior  Subordinated  Indenture,  any other indenture that the Company
may enter into in the future or otherwise.

        The Company has, through the Guarantee,  the Trust Agreement, the Junior
Subordinated Debentures and the Junior Subordinated  Indenture,  taken together,
fully, irrevocably and unconditionally

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<PAGE>



guaranteed all the Issuer Trust's obligations under the Preferred  Securities on
a  subordinated  basis.  No  single  document  standing  alone or  operating  in
conjunction with fewer than all the other documents  constitutes such guarantee.
It is only the  combined  operation  of these  documents  that has the effect of
providing a full, irrevocable and unconditional  guarantee of the Issuer Trust's
obligations in respect of the Preferred Securities.  See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee."

Status of the Guarantee

        The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior  Indebtedness
of the Company in the same manner as the Junior Subordinated Debentures.

        The  Guarantee  will  constitute  a  guarantee  of  payment  and  not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the  Guarantor to enforce its rights under the  Guarantee  without first
instituting  a legal  proceeding  against  any  other  person  or  entity).  The
Guarantee  will be held by the Guarantee  Trustee for the benefit of the holders
of the  Preferred  Securities.  The Guarantee  will not be discharged  except by
payment of the  Guarantee  Payments in full to the extent not paid by the Issuer
Trust or distribution  to the holders of the Preferred  Securities of the Junior
Subordinated Debentures.

Amendments and Assignment

        Except with  respect to any changes  which do not  materially  adversely
affect the rights of holders of the Preferred  Securities (in which case no vote
will be required),  the Guarantee may not be amended  without the prior approval
of the holders of not less than a majority of the aggregate  Liquidation  Amount
of the  outstanding  Preferred  Securities.  The  manner of  obtaining  any such
approval will be as set forth under  "Description  of the Capital  Securities --
Voting  Rights;  Amendment of Trust  Agreement."  All  guarantees and agreements
contained  in the  Guarantee  shall  bind the  successors,  assigns,  receivers,
trustees  and  representatives  of the Company and shall inure to the benefit of
the holders of the Preferred Securities then outstanding.

Events of Default

        An event of default under the  Guarantee  will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder, or to
perform  any  non-payment   obligation  if  such  non-payment   default  remains
unremedied  for 30 days.  The holders of not less than a majority  in  aggregate
Liquidation  Amount of the  outstanding  Preferred  Securities have the right to
direct the time,  method and place of conducting  any  proceeding for any remedy
available to the Guarantee  Trustee in respect of the Guarantee or to direct the
exercise of any trust or power  conferred  upon the Guarantee  Trustee under the
Guarantee.

        Any  registered  holder of Preferred  Securities  may  institute a legal
proceeding  directly  against  the  Company  to  enforce  its  rights  under the
Guarantee without first instituting a legal proceeding against the Issuer Trust,
the Guarantee Trustee or any other person or entity.

        The  Company,  as  guarantor,  is  required  to file  annually  with the
Guarantee  Trustee  a  certificate  as to  whether  or  not  the  Company  is in
compliance  with all the  conditions  and  covenants  applicable to it under the
Guarantee.

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<PAGE>



Information Concerning the Guarantee Trustee

        The Guarantee Trustee,  other than during the occurrence and continuance
of a default by the  Company in  performance  of the  Guarantee,  undertakes  to
perform only such duties as are  specifically  set forth in the  Guarantee  and,
after the occurrence of an event of default with respect to the Guarantee,  must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own  affairs.  Subject to this  provision,  the
Guarantee Trustee is under no obligation to exercise any of the powers vested in
it by the  Guarantee  at the request of any holder of the  Preferred  Securities
unless it is  offered  reasonable  indemnity  against  the costs,  expenses  and
liabilities that might be incurred thereby.

        For  information  concerning  the  relationship  between  Bankers  Trust
Company,  as Guarantee  Trustee,  and the Company,  see  "Description  of Junior
Subordinated Debentures -- Information Concerning the Debenture Trustee."

Termination of the Guarantee

        The Guarantee  will terminate and be of no further force and effect upon
full payment of the  Redemption  Price of the  Preferred  Securities,  upon full
payment of the amounts  payable with respect to the  Preferred  Securities  upon
liquidation  of the Issuer  Trust or upon  distribution  of Junior  Subordinated
Debentures  to the  holders of the  Preferred  Securities.  The  Guarantee  will
continue to be  effective or will be  reinstated,  as the case may be, if at any
time any holder of the  Preferred  Securities  must restore  payment of any sums
paid under the Preferred Securities or the Guarantee.

Governing Law

        The Guarantee  will be governed by and construed in accordance  with the
laws of the State of New York.

             RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR
                    SUBORDINATED DEBENTURES AND THE GUARANTEE

Full and Unconditional Guarantee

        Payments  of  Distributions  and  other  amounts  due on  the  Preferred
Securities (to the extent the Issuer Trust has funds available for such payment)
are irrevocably  guaranteed,  on a subordinated  basis, by the Company as and to
the extent set forth under  "Description  of  Guarantee."  Taken  together,  the
Company's  obligations  under the  Junior  Subordinated  Debentures,  the Junior
Subordinated  Indenture,  the Trust Agreement and the Guarantee provide,  in the
aggregate,  a full,  irrevocable  and  unconditional  guarantee  of  payments of
Distributions  and other  amounts  due on the  Preferred  Securities.  No single
document  standing  alone or  operating in  conjunction  with fewer than all the
other documents constitutes such guarantee. It is only the combined operation of
these  documents  that has the  effect  of  providing  a full,  irrevocable  and
unconditional  guarantee  of the Issuer  Trust's  obligations  in respect of the
Preferred  Securities.  If and to the  extent  that  the  Company  does not make
payments on the Junior Subordinated  Debentures,  the Issuer Trust will not have
sufficient  funds to pay  Distributions  or other  amounts due on the  Preferred
Securities. The Guarantee does not cover payment of amounts payable with respect
to the Preferred Securities when the Issuer Trust does not have sufficient funds
to pay such  amounts.  In such  event,  the remedy of a holder of the  Preferred
Securities is to institute a legal  proceeding  directly against the Company for
enforcement of payment of the Company's obligations under Junior Subordinated

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<PAGE>



Debentures  having a principal  amount  equal to the  Liquidation  Amount of the
Preferred Securities held by such holder.

        The obligations of the Company under the Junior Subordinated  Debentures
and the Guarantee are  subordinate  and junior in right of payment to all Senior
Indebtedness.

Sufficiency of Payments

        As long  as  payments  are  made  when  due on the  Junior  Subordinated
Debentures,  such payments will be sufficient to cover  Distributions  and other
payments  distributable on the Preferred  Securities,  primarily because (i) the
aggregate principal amount of the Junior  Subordinated  Debentures will be equal
to  the  sum  of the  aggregate  stated  Liquidation  Amount  of  the  Preferred
Securities and Common Securities;  (ii) the interest rate and interest and other
payment dates on the Junior Subordinated  Debentures will match the Distribution
rate,  Distribution Dates and other payment dates for the Preferred  Securities;
(iii) the Company will pay for any and all costs,  expenses and  liabilities  of
the Issuer Trust except the Issuer  Trust's  obligations to holders of the Trust
Securities;  and (iv) the Trust Agreement further provides that the Issuer Trust
will not engage in any activity that is not consistent with the limited purposes
of the Issuer Trust.

        Notwithstanding  anything  to the  contrary  in the Junior  Subordinated
Indenture,  the Company  has the right to set-off  any  payment it is  otherwise
required  to  make  thereunder  against  and  to  the  extent  the  Company  has
theretofore  made,  or is  concurrently  on the date of such payment  making,  a
payment under the Guarantee.

Enforcement Rights of Holders of Preferred Securities

        A holder of any  Preferred  Security  may  institute a legal  proceeding
directly  against the Company to enforce its rights under the Guarantee  without
first instituting a legal proceeding against the Guarantee  Trustee,  the Issuer
Trust or any other person or entity. See "Description of Guarantee."

        A default  or event of  default  under any  Senior  Indebtedness  of the
Company  would not  constitute  a default  or Event of Default in respect of the
Preferred  Securities.  However,  in the event of  payment  defaults  under,  or
acceleration  of,  Senior   Indebtedness  of  the  Company,   the  subordination
provisions of the Junior Subordinated  Indenture provide that no payments may be
made  in  respect  of the  Junior  Subordinated  Debentures  until  such  Senior
Indebtedness  has been paid in full or any payment  default  thereunder has been
cured  or  waived.  See  "Description  of  Junior  Subordinated   Debentures  --
Subordination."

Limited Purpose of Issuer Trust

        The  Preferred   Securities  represent  preferred  undivided  beneficial
interests in the assets of the Issuer Trust, and the Issuer Trust exists for the
sole  purpose of issuing its  Preferred  Securities  and Common  Securities  and
investing the proceeds thereof in Junior  Subordinated  Debentures.  A principal
difference  between the rights of a holder of a Preferred  Security and a holder
of a Junior  Subordinated  Debenture  is that a holder of a Junior  Subordinated
Debenture  is  entitled  to  receive   from  the  Company   payments  on  Junior
Subordinated Debentures held, while a holder of Preferred Securities is entitled
to receive  Distributions  or other  amounts  distributable  with respect to the
Preferred  Securities  from the  Issuer  Trust  (or from the  Company  under the
Guarantee)  only if and to the extent the Issuer Trust has funds  available  for
the payment of such Distributions.

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<PAGE>



Rights Upon Dissolution

        Upon any voluntary or involuntary dissolution of the Issuer Trust, other
than any such dissolution  involving the distribution of the Junior Subordinated
Debentures,  after  satisfaction of liabilities to creditors of the Issuer Trust
as required by applicable  law, the holders of the Preferred  Securities will be
entitled to receive,  out of assets held by the Issuer  Trust,  the  Liquidation
Distribution in cash. See  "Description  of Preferred  Securities -- Liquidation
Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation or
bankruptcy of the Company,  the Issuer Trust, as registered holder of the Junior
Subordinated  Debentures,  would  be a  subordinated  creditor  of the  Company,
subordinated  and junior in right of payment to all Senior  Indebtedness  as set
forth in the Junior Subordinated  Indenture,  but entitled to receive payment in
full of all amounts payable with respect to the Junior  Subordinated  Debentures
before any stockholders of the Company receive payments or distributions.  Since
the Company is the guarantor under the Guarantee and has agreed under the Junior
Subordinated  Indenture to pay for all costs,  expenses and  liabilities  of the
Issuer Trust (other than the Issuer  Trust's  obligations  to the holders of the
Trust Securities),  the positions of a holder of the Preferred  Securities and a
holder of such Junior Subordinated Debentures relative to other creditors and to
stockholders  of the Company in the event of  liquidation  or  bankruptcy of the
Company are expected to be substantially the same.

                     CERTAIN FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of Preferred Securities.
This summary  only  addresses  the tax  consequences  to a person that  acquires
Preferred  Securities on their original  issue at their original  offering price
and that is, except as noted below, (i) an individual citizen or resident of the
United States, (ii) a corporation,  partnership, or other entity organized under
the laws of the United  States or any state thereof or the District of Columbia,
(iii) an estate the income of which is subject to United States  federal  income
tax regardless of source, or (iv) a trust if (a) a United States court of law is
able to exercise primary supervision over the trust's administration and (b) one
or more  United  States  fiduciaries  have the  authority  to control all of the
trust's substantial decisions (a "United States Person").  This summary does not
address all tax  consequences  that may be  applicable to a United States Person
that is a beneficial owner of Preferred Securities,  nor does it address the tax
consequences  to, except as noted below,  (i) persons that are not United States
Persons,  (ii)  persons  that may be subject to special  treatment  under United
States  federal  income  tax law,  such as banks,  insurance  companies,  thrift
institutions,  regulated  investment  companies,  real estate investment trusts,
tax-exempt investors and dealers in securities or currencies, (iii) persons that
will hold Preferred  Securities as part of a position in a "straddle" or as part
of a "hedging,"  "conversion"  or other  integrated  investment  transaction for
United  States  federal  income tax  purposes,  (iv)  persons  whose  functional
currency  is not the  United  States  dollar  or (v)  persons  that do not  hold
Preferred  Securities  as capital  assets.  In  addition,  this summary does not
include any description of alternative  minimum tax consequences or the tax laws
of any state,  local or foreign government that may be applicable to a holder of
Preferred Securities.

        The  statements  of law or legal  conclusions  set forth in this summary
constitute the opinion of Malizia,  Spidi, Sloane & Fisch, P.C., in its capacity
as special tax counsel to the Company and the Issuer Trust ("Tax Counsel"). This
summary  is based  upon the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code"),  Treasury  regulations,  Internal  Revenue  Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time. Such changes may be applied  retroactively  in a manner that
could cause the tax  consequences to vary  substantially  from the  consequences
described below,  possibly  adversely  affecting a beneficial owner of Preferred
Securities.  In particular,  legislation  has been proposed that could adversely
affect the Company's ability to deduct

                                       83


<PAGE>



interest  on the Junior  Subordinated  Debentures,  which may in turn permit the
Company to cause a redemption of the Preferred Securities.  See "-- Possible Tax
Law  Changes."  The  authorities  on which this  summary is based are subject to
various  interpretations,  and it is therefore  possible  that the United States
federal  income tax treatment of the  purchase,  ownership  and  disposition  of
Preferred Securities may differ from the treatment described below.

        PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS
IN LIGHT OF THEIR OWN PARTICULAR  CIRCUMSTANCES  AS TO THE UNITED STATES FEDERAL
TAX  CONSEQUENCES  OF THE  PURCHASE,  OWNERSHIP  AND  DISPOSITION  OF  PREFERRED
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.

Classification of the Junior Subordinated Debentures and the Issuer Trust

        Under  current law and assuming  compliance  with the terms of the Trust
Agreement,  the  Issuer  Trust will not be  taxable  as a  corporation  but will
instead be classified as a grantor  trust for United States  federal  income tax
purposes.  As a  result,  each  beneficial  owner  of  Preferred  Securities  (a
"Securityholder") will be treated for federal income tax purposes as a holder of
its pro rata  share of the  Junior  Subordinated  Debentures  held by the Issuer
Trust. Accordingly, each Securityholder will be required to include in its gross
income its pro rata share of the interest income, including OID, paid or accrued
with  respect  to the  Junior  Subordinated  Debentures  whether  or not cash is
actually  distributed  to the  Securityholders.  See  "--  Interest  Income  and
Original Issue Discount." The Junior Subordinated  Debentures will be classified
as indebtedness of the Company for United States federal income tax purposes.

        The Company,  the Issuer Trust and holders of the  Preferred  Securities
(by the acceptance of a beneficial  interest in a Preferred Security) will agree
to treat the Junior  Subordinated  Debentures as indebtedness  for United States
federal  income tax  purposes.  In  connection  with the  issuance of the Junior
Subordinated Debentures,  Tax Counsel is of the opinion that, under current law,
and based on the  representations,  facts and assumptions set forth herein,  the
Junior  Subordinated  Debentures will be classified as  indebtedness  for United
States federal income tax purposes.

Interest Income and Original Issue Discount

        Under applicable Treasury  regulations (the  "Regulations"),  a "remote"
contingency  that  stated  interest  will not be timely  paid will be ignored in
determining  whether a debt instrument is issued with OID. The Company  believes
that the  likelihood of its  exercising its option to defer payments of interest
is  remote.  Based on the  foregoing,  the  Company  believes  that  the  Junior
Subordinated Debentures will not be considered to be issued with OID at the time
of their original issuance and, accordingly,  a Securityholder should include in
gross  income such  Securityholder's  allocable  share of interest on the Junior
Subordinated  Debentures in accordance with such Securityholder's  method of tax
accounting.

        Under the Regulations,  if the Company exercised its option to defer any
payment of interest,  the Junior  Subordinated  Debentures would at that time be
treated as issued with OID, and all stated interest (and de minimis OID, if any)
on the Junior Subordinated Debentures would thereafter be treated as OID as long
as the Junior Subordinated  Debentures remained outstanding.  In such event, all
of a  Securityholder's  taxable  interest  income  with  respect  to the  Junior
Subordinated  Debentures  would be accounted  for as OID on an economic  accrual
basis regardless of such Securityholder's  method of tax accounting,  and actual
distributions of stated interest would not be reported as taxable income.

                                       84


<PAGE>



Consequently,  a Securityholder would be required to include in gross income OID
even  though the  Company  would not make any  actual  cash  payments  during an
Extension Period.

        The  Regulations  have not been  addressed in any  published  rulings or
other  published  interpretations  by the IRS,  and it is possible  that the IRS
could take a position contrary to the interpretation herein.

        Because income on the Preferred  Securities will constitute  interest or
OID,  corporate  Securityholders  will not be entitled  to a  dividends-received
deduction  with respect to any income  recognized  with respect to the Preferred
Securities.

        Subsequent uses of the term "interest" in this summary include income in
the form of OID.

Distribution of Junior Subordinated Debentures to Securityholders

        Under  current  law, a  distribution  by the Issuer  Trust of the Junior
Subordinated Debentures as described under the caption "Description of Preferred
Securities -- Liquidation Distribution Upon Dissolution" will be non-taxable and
will result in the  Securityholder  receiving directly its pro rata share of the
Junior  Subordinated  Debentures  previously held indirectly  through the Issuer
Trust, with a holding period and aggregate tax basis equal to the holding period
and aggregate  tax basis such  Securityholder  had in its  Preferred  Securities
before such distribution.  If, however, the liquidation of the Issuer Trust were
to occur because the Issuer Trust is subject to United States federal income tax
with  respect  to  income  accrued  or  received  on  the  Junior   Subordinated
Debentures,    the   distribution   of   Junior   Subordinated   Debentures   to
Securityholders by the Issuer Trust would be a taxable event to the Issuer Trust
and each Securityholder,  and the Securityholder would recognize gain or loss as
if the  Securityholder  had exchanged its  Preferred  Securities  for the Junior
Subordinated  Debentures it received upon the liquidation of the Issuer Trust. A
Securityholder will accrue interest in respect of Junior Subordinated Debentures
received from the Issuer Trust in the manner  described above under "-- Interest
Income and Original Issue Discount."

        Under certain circumstances described herein (see "Description of Junior
Subordinated Debentures -- Redemption"),  the Junior Subordinated Debentures may
be  redeemed  by the  Company  for  cash  and the  proceeds  of such  redemption
distributed  by the Issuer  Trust to holders in  redemption  of their  Preferred
Securities.  Under  current law,  such a  redemption  would,  for United  States
federal  income tax purposes,  constitute a taxable  disposition of the redeemed
Preferred  Securities,  and a holder would  recognize gain or loss as if it sold
such  redeemed  Preferred  Securities  for  cash.  See "--  Sales  of  Preferred
Securities."

Sales of Preferred Securities

        A Securityholder that sells Preferred  Securities will recognize gain or
loss equal to the  difference  between its adjusted  tax basis in the  Preferred
Securities  and the amount  realized on the sale of such  Preferred  Securities.
Assuming  that the  Company  does not  exercise  its option to defer  payment of
interest on the Junior Subordinated Debentures, and the Preferred Securities are
not  considered  issued with OID, a  Securityholder's  adjusted tax basis in the
Preferred Securities generally will be its initial purchase price. If the Junior
Subordinated  Debentures  are  deemed to be  issued  with OID as a result of the
Company's deferral of any interest payment, or otherwise, a Securityholder's tax
basis in the Preferred  Securities generally will be its initial purchase price,
increased by OID previously includible in such Securityholder's  gross income to
the date of  disposition  and  decreased  by  distributions  or  other  payments
received  on  the  Preferred   Securities   since  and  including  the  date  of
commencement of the first Extension

                                       85


<PAGE>



Period.  Such gain or loss  generally  will be a capital gain or loss (except to
the extent of any accrued  interest  with respect to such  Securityholder's  pro
rata share of the Junior  Subordinated  Debentures  required  to be  included in
income) and generally will be a long-term  capital gain or loss if the Preferred
Securities have been held for more than one year.

        Should the Company  exercise its option to defer any payment of interest
on the Junior Subordinated  Debentures,  the Preferred Securities may trade at a
price that does not accurately  reflect the value of accrued but unpaid interest
with respect to the underlying Junior Subordinated  Debentures.  In the event of
such a deferral,  a  Securityholder  that disposes of its  Preferred  Securities
between record dates for payments of  distributions  thereon will be required to
include in income as ordinary income its share of accrued but unpaid interest on
the Junior  Subordinated  Debentures to the date of  disposition as OID, but may
not receive the cash related thereto. However, such Securityholder will add such
amount to its adjusted tax basis in the Preferred Securities.  To the extent the
selling  price is less  than  the  Securityholder's  adjusted  tax  basis,  such
Securityholder  will  recognize  a capital  loss.  Subject  to  certain  limited
exceptions,  capital  losses  cannot be  applied to offset  ordinary  income for
United States federal income tax purposes.

Backup Withholding Tax and Information Reporting

        The  amount  of  interest  income  paid  or  accrued  on  the  Preferred
Securities held of record by United States Persons (other than  corporations and
other exempt  Securityholders) will be reported to the IRS. "Backup" withholding
at a rate of 31% will apply to payments of interest to non-exempt  United States
Persons unless the Securityholder  furnishes its taxpayer  identification number
in the manner prescribed in applicable Treasury regulations, certifies that such
number is correct,  certifies as to no loss of exemption from backup withholding
and meets certain other conditions.

        Payment of the proceeds from the disposition of Preferred  Securities to
or through  the  United  States  office of a broker is  subject  to  information
reporting  and backup  withholding  unless  the  Securityholder  establishes  an
exemption from information reporting and backup withholding.

        Any amounts withheld from a Securityholder  under the backup withholding
rules  will be  allowed as a refund or a credit  against  such  Securityholder's
United States federal income tax liability, provided the required information is
furnished to the IRS.

        It is  anticipated  that  income  on the  Preferred  Securities  will be
reported  to  Securityholders  on Form  1099 and  mailed to  Securityholders  by
January 31 following each calendar year.

        These backup  withholding tax and information  reporting rules currently
are under review by the United States Treasury  Department and proposed Treasury
regulations  issued  on April  15,  1996  would  modify  certain  of such  rules
generally  with respect to payments made after  December 31, 1997.  Accordingly,
the application of such rules to the Preferred Securities could be changed.

United States Alien Securityholders

        For purposes of this discussion,  a "United States Alien Securityholder"
is any person that for United States federal income tax purposes is not a United
States Person (as defined above).

        Under current  United States federal income tax law: (i) payments by the
Issuer Trust or any of its paying  agents to any holder of Preferred  Securities
that is a United  States  Alien  Securityholder  will not be  subject  to United
States federal withholding tax, provided that (a) the beneficial owner of the

                                       86


<PAGE>



Preferred  Securities does not actually or constructively own 10% or more of the
total combined  voting power of all classes of stock of the Company  entitled to
vote, (b) the beneficial  owner of the Preferred  Securities is not a controlled
foreign corporation that is related to the Company through stock ownership,  and
(c) either (A) the beneficial owner of the Preferred Securities certifies to the
Issuer Trust, or its agent, under penalties of perjury,  that it is not a United
States  Person and provides its name and address,  or (B) a securities  clearing
organization,   bank  or  other  financial  institution  that  holds  customers'
securities  in the  ordinary  course  of its  trade or  business  (a  "Financial
Institution") and holds the Preferred  Securities  certifies to the Issuer Trust
or its agent under  penalties of perjury that such  statement  has been received
from the beneficial owner by it or by a Financial Institution between it and the
beneficial  owner  and  furnishes  the  Issuer  Trust or its  agent  with a copy
thereof;  and (ii) a United States Alien  Securityholder of Preferred Securities
will  not be  subject  to  United  States  federal  withholding  tax on any gain
realized upon the sale or other disposition of Preferred Securities.

Possible Tax Law Changes

        On February 6, 1997, President Clinton released his budget proposals for
fiscal  year  1998.  One of the  revenue  provisions  of those  proposals  would
generally  deny interest  deductions  for interest on an instrument  issued by a
corporation  that has a maximum term of more than 15 years and that is not shown
as  indebtedness  on the  separate  balance  sheet of the issuer  or,  where the
instrument  is issued to a related party (other than a  corporation),  where the
holder or some other related party issues a related instrument that is not shown
as  indebtedness  on the  issuer's  consolidated  balance  sheet.  If enacted as
proposed by the  President,  this provision  would be effective for  instruments
issued on or after the date of first action by a  Congressional  committee  with
respect to the proposal.  It is not clear from the  President's  proposals as to
what constitutes Congressional "committee action" with respect to this proposal.
If the proposed provision were to apply to the Junior  Subordinated  Debentures,
the  Company  would be unable  to deduct  interest  on the  Junior  Subordinated
Debentures.  Under  current law, the Company will be able to deduct  interest on
the Junior Subordinated  Debentures,  however,  the Company and the Issuer Trust
have been advised by Tax Counsel that such recently  proposed  legislation would
change  the  deductibility  of the  interest  paid by the  Company on the Junior
Subordinated Debentures for federal income tax purposes, and that Congress could
amend such legislation  giving it retroactive effect prior to its enactment into
law.  There can be no  assurance  that  future  legislative  proposals  or final
legislation will not affect the ability of the Company to deduct interest on the
Junior  Subordinated  Debentures.  Such a change could give rise to a Tax Event,
which may permit the Company to cause a redemption of the Preferred  Securities,
as  described  more fully in this  Prospectus  under  "Description  of Preferred
Securities -- Redemption."

                          CERTAIN ERISA CONSIDERATIONS

        The Company and certain affiliates of the Company may each be considered
a "party in  interest"  within the  meaning of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA") or a "disqualified person" within the
meaning of Section 4975 of the Code with respect to many employee  benefit plans
("Plans") that are subject to ERISA. The purchase of the Preferred Securities by
a Plan that is subject to the  fiduciary  responsibility  provisions of ERISA or
the  prohibited  transaction  provisions of Section  4975(e)(1) of the Code) and
with respect to which the Company,  or any affiliate of the Company is a service
provider  (or  otherwise  is a party in interest or a  disqualified  person) may
constitute or result in a prohibited  transaction under ERISA or Section 4975 of
the Code,  unless the  Preferred  Securities  are  acquired  pursuant  to and in
accordance with an applicable  exemption.  Any pension or other employee benefit
plan  proposing  to acquire any  Preferred  Securities  should  consult with its
counsel.

                                       87


<PAGE>


                                  UNDERWRITING

     Subject to the terms and  conditions  of the  Underwriting  Agreement  (the
"Underwriting  Agreement")  dated March 11, 1997, among the Company,  the Issuer
Trust and the underwriters named therein (the "Underwriters"),  the Issuer Trust
has agreed to sell to the  Underwriters,  and the  Underwriters  have  severally
agreed to purchase  from the Issuer  Trust the  following  respective  aggregate
Liquidation Amount of Preferred Securities at the public offering price less the
underwriting  discounts  and  commissions  set forth on the  cover  page of this
Prospectus:

Underwriter:                                    Number of Shares:
- -----------                                     ----------------

Advest, Inc..................................         730,000

J.C. Bradford & Co...........................          30,000
EVEREN Securities, Inc.......................          30,000
First Albany Corporation.....................          30,000
Friedman, Billings, Ramsey & Co., Inc........          30,000
Janney Montgomery Scott Inc..................          30,000
Piper Jaffray Inc............................          30,000
The Robinson Humphrey Company, Inc...........          30,000
Stifel, Nicolaus & Company, Incorporated.....          30,000
Wheat, First Securities, Inc.................          30,000
                                                 ------------

Total..........................................     1,000,000
                                                 ============

        The  Underwriting   Agreement  provides  that  the  obligations  of  the
Underwriters  are  subject  to  certain   conditions   precedent  and  that  the
Underwriters will purchase all of the Preferred Securities offered hereby if any
of such Preferred Securities are purchased.

     The  Company has been  advised by the  Underwriters  that the  Underwriters
propose to offer the Preferred  Securities to the public at the public  offering
price set forth on the cover page of this  Prospectus and to certain  dealers at
such price less a concession not in excess of $0.50 per Preferred Security.  The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $0.10 per  Preferred  Security  to certain  other  dealers.  After the public
offering,  the  offering  price and other  selling  terms may be  changed by the
Underwriters.

     The Company  has granted to the  Underwriters  an option,  exercisable  not
later  than 30 days  after the date of this  Prospectus,  to  purchase  up to an
additional  $3,750,000 aggregate  Liquidation Amount of the Preferred Securities
at the public offering price plus accrued Distributions,  if any, from March 17,
1997. To the extent that the Underwriter  exercises suc option, the Company will
be obligated,  pursuant to the option, to sell such Preferred  Securities to the
Underwriters.   The   Underwriters  may  exercise  such  option  only  to  cover
over-allotments  made in connection  with the sale of the  Preferred  Securities
offered  hereby.  If  purchased,  the  Underwriters  will offer such  additional
Preferred  Securities  on the same  terms as  those  on  which  the  $25,000,000
aggregate Liquidation Amount of the Preferred Securities are being offered.

     In view of the fact  that  the  proceeds  from  the  sale of the  Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Company,  the Underwriting  Agreement  provides that the Company will pay as
compensation  for the  Underwriter's  arranging the  investment  therein of such
proceeds  an amount of $1.00 per  Preferred  Security  (or $1.0  million  ($1.15
million if the over-allotment option is exercised in full) in the aggregate) for
the account of the Underwriters.

        Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Preferred Securities as interests in a direct participation
program,  the offering of the  Preferred  Securities is being made in compliance
with the applicable provisions of Rule 2810 of the NASD's Conduct Rules.

                                       88


<PAGE>



        The  Preferred  Securities  are  a  new  issue  of  securities  with  no
established  trading market.  The Company and the Issuer Trust have been advised
by the  Underwriters  that  they  intend  to  make  a  market  in the  Preferred
Securities. However, the Underwriters are not obligated to do so and such market
making may be interrupted or discontinued at any time without notice at the sole
discretion of each of the Underwriters. Application has been made by the Company
to list the Preferred  Securities in the Nasdaq National Market,  but one of the
requirements  for listing and  continuing  listing is the presence of two market
makers for the Preferred  Securities,  and the presence of a second market maker
cannot be assured.  Accordingly, no assurance can be given as to the development
or liquidity of any market for the Preferred Securities.

        The  Company  and  the  Issuer  Trust  have  agreed  to  indemnify   the
Underwriters  against  certain  liabilities,  including  liabilities  under  the
Securities Act.

        The  Underwriters  may in the future  perform  various  services  to the
Company,  including investment banking services, for which it has or may receive
customary fees for such services.

                             VALIDITY OF SECURITIES

        The validity of the Guarantee and the Junior Subordinated Debentures and
certain  tax matters  will be passed  upon for the  Company by  Malizia,  Spidi,
Sloane & Fisch, P.C.,  Washington,  D.C., counsel to the Company.  Certain legal
matters  will be  passed  upon and for the  Underwriters  by  Arnold  &  Porter,
Washington,  D.C.,  and New York,  New York.  Certain  matters of  Delaware  law
relating to the validity of the Preferred Securities,  the enforceability of the
Trust  Agreement  and the  creation  of the Issuer  Trust will be passed upon by
Richards,  Layton & Finger,  special  Delaware  counsel to the  Company  and the
Issuer Trust. Malizia, Spidi, Sloane & Fisch, P.C. and Arnold & Porter will rely
as to certain  matters of  Delaware  law on the  opinion of  Richards,  Layton &
Finger.

                                     EXPERTS

        The consolidated  financial statements of the Company as of December 31,
1996 and 1995, and for the three years ended December 31, 1996, included in this
Prospectus have been audited by Deloitte & Touche LLP, independent  auditors, as
stated in their report appearing in this  Prospectus,  and have been included in
reliance  upon the report of such firm given upon their  authority as experts in
accounting and auditing.

                              AVAILABLE INFORMATION

        The  Company  is  subject  to  the  informational  requirements  of  the
Securities  Exchange  Act of 1934,  as  amended  (the  "Exchange  Act"),  and in
accordance therewith, files reports, proxy statements and other information with
the  Commission.  Such reports,  proxy  statements and other  information can be
inspected and copied at the public  reference  facilities  of the  Commission at
Room 1024, 450 Fifth Street,  N.W.,  Washington,  D.C. 20549 and at the regional
offices of the  Commission  located at 7 World Trade Center,  13th Floor,  Suite
1300, New York, New York 10048 and Suite 1400,  Citicorp Center, 14th Floor, 500
West Madison Street,  Chicago,  Illinois 60661. Copies of such material can also
be obtained at prescribed  rates by writing to the Public  Reference  Section of
the Commission at 450 Fifth Street, N.W., Washington,  D.C. 20549. Such material
also may be accessed  electronically  by means of the Commission's  home page on
the Internet at  http://www.sec.gov.  This  Prospectus  does not contain all the
information set forth in the Registration  Statement and exhibits thereto, which
the Company has filed with the Commission  under the Securities Act and to which
reference is hereby made.

                                       89


<PAGE>



        No separate financial  statements of the Issuer Trust have been included
or  incorporated  by reference  herein.  The Company and the Issuer Trust do not
consider  that such  financial  statements  would be  material to holders of the
Preferred  Securities because the Issuer Trust is a newly formed special purpose
entity, has no operating history or independent operations and is not engaged in
and does not  propose  to engage in any  activity  other  than  holding as trust
assets the Junior Subordinated Debentures and issuing the Trust Securities.  See
"Sun Capital  Trust,"  "Description  of Preferred  Securities,"  "Description of
Junior Subordinated Debentures" and "Description of Guarantee." In addition, the
Company does not expect that the Issuer Trust will be filing  reports  under the
Exchange Act with the Commission.

                                       90


<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of
   Sun Bancorp, Inc.:

We have audited the accompanying  consolidated statements of financial condition
of Sun Bancorp,  Inc. and  subsidiaries  (the "Company") as of December 31, 1996
and 1995,  and the  related  consolidated  statements  of income,  shareholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1996.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  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,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of Sun Bancorp, Inc. and subsidiaries
as of December 31, 1996 and 1995, and the results of their  operations and their
cash flows for each of the three years in the period ended  December 31, 1996 in
conformity with generally accepted accounting principles.



/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania


January 31, 1997



                                      F-1
<PAGE>
SUN BANCORP, INC.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
- -----------------------------------------------------------------------------------------------------------------

ASSETS                                                                                 1996                1995
<S>                                                                                <C>              <C>          
Cash and due from banks                                                            $  17,006,758    $  17,242,366
Federal funds sold                                                                     4,800,000
                                                                                   -------------    -------------
           Cash and cash equivalents                                                  21,806,758       17,242,366

Investment securities available for sale (amortized cost -
  $97,063,398; 1996 and $146,379,244; 1995)                                           95,581,384      147,008,896
Loans receivable (net of allowance for loan losses - $2,595,312;
   1996 and $2,064,640; 1995)                                                        295,500,668      183,633,631
Bank properties and equipment                                                         12,222,507       11,419,175
Real estate owned                                                                        755,628          876,302
Accrued interest receivable                                                            2,850,399        2,564,921
Excess of cost over fair value of net assets acquired                                  5,365,218        6,191,919
Deferred taxes                                                                         1,070,535          205,169
Other assets                                                                           1,641,959          752,257
                                                                                   -------------    -------------
TOTAL                                                                              $ 436,795,056    $ 369,894,636
                                                                                   =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
  Deposits                                                                         $ 385,986,905    $ 335,247,796
  Advances from the Federal Home Loan Bank                                            10,000,000        8,000,000
  Loan payable                                                                         6,000,000
  Securities sold under agreements to repurchase                                       5,253,048
  Other liabilities                                                                    2,140,527        1,976,044
                                                                                   -------------    -------------

           Total liabilities                                                         409,380,480      345,223,840
                                                                                   -------------    -------------

COMMITMENTS AND CONTINGENT LIABILITIES  (Note 13)

SHAREHOLDERS' EQUITY
  Preferred stock $1 par value, 1,000,000 shares authorized,  none issued 
  Common stock $1 par value, 10,000,000 shares authorized:
    issued and outstanding; 1,848,929 shares; 1996 and 1,651,175 shares; 1995          1,848,929        1,651,175
  Surplus                                                                             18,124,359       17,197,275
  Retained earnings                                                                    8,419,417        5,406,774
  Unrealized (loss) gain on securities available for sale, net of income taxes .        (978,129)         415,572
                                                                                   -------------    -------------

           Total shareholders' equity                                                 27,414,576       24,670,796
                                                                                   -------------    -------------

TOTAL                                                                              $ 436,795,056    $ 369,894,636
                                                                                   =============    =============
</TABLE>

See notes to consolidated financial statements.

                                      F-2
<PAGE>
SUN BANCORP, INC.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------------------------------------
                                                                      1996           1995          1994
                                                                      ----           ----          ----
<S>                                                                <C>           <C>           <C>          
INTEREST INCOME:
  Interest and fees on loans                                       $22,073,767   $15,100,885   $ 9,590,994
  Interest on investment securities                                  7,127,393     5,285,877     2,151,351
  Interest on federal funds sold                                        68,366       463,001       452,117
                                                                   -----------   -----------   -----------  
           Total interest income                                    29,269,526    20,849,763    12,194,462
                                                                   -----------   -----------   -----------  
INTEREST EXPENSE:
  Interest on deposits                                              11,953,591     7,639,933     3,844,753
  Interest on borrowed funds                                           580,412        47,158        93,796
                                                                   -----------   -----------   -----------
           Total interest expense                                   12,534,003     7,687,091     3,938,549
                                                                   -----------   -----------   -----------
                                                                           
           Net interest income                                      16,735,523    13,162,672     8,255,913

PROVISION FOR LOAN LOSSES                                              900,000       807,660       382,671
                                                                   -----------   -----------   -----------
                                                                           
           Net interest income after provision for loan losses      15,835,523   12,355,012     7,873,242
                                                                   -----------   -----------   -----------
                                                                         
OTHER INCOME:
  Service charges on deposit accounts                                1,057,139       659,811       419,363
  Other service charges                                                115,999        28,068        17,224
  Gain on sale of fixed assets                                          45,207        46,487        21,164
  Gain on sale of loans                                                              207,984
  Gain on sale of investment securities                                206,538       377,126
  Other                                                                320,890       331,513       274,533
                                                                   -----------   -----------   -----------  
           Total other income                                        1,745,773     1,650,989       732,284
                                                                   -----------   -----------   ----------- 
OTHER EXPENSES:
  Salaries and employee benefits                                     6,525,903     4,689,269     2,626,679
  Occupancy expense                                                  1,407,875     1,269,514     1,090,833
  Equipment expense                                                    817,696       459,460       249,951
  Provision for losses on  real estate owned                                          78,000       120,000
  Professional fees and services                                       352,970       249,760       164,770
  Data processing expense                                            1,085,874       634,753       318,552
  Amortization of excess cost over fair value of assets acquired       826,701       342,562       134,435
  Postage and supplies                                                 420,120       335,055       173,823
  Insurance                                                            196,110       382,554       397,961
  Other                                                              1,573,404     1,606,404       713,733
                                                                   -----------   -----------   -----------
                                                                            
           Total other expenses                                     13,206,653    10,047,331     5,990,737
                                                                   -----------   -----------   -----------
                                                                        
INCOME BEFORE INCOME TAXES                                           4,374,643     3,958,670     2,614,789

INCOME TAXES                                                         1,362,000     1,140,000       775,134
                                                                   -----------   -----------   -----------
                                                                               
NET INCOME                                                         $ 3,012,643   $ 2,818,670   $ 1,839,655
                                                                   ============= ===========   ===========

Earnings per common and common equivalent share
  Net income                                                       $      1.58   $      1.52   $      1.42
                                                                   ===========   ===========   ===========
Earnings per common share - assuming full dilution
  Net income                                                       $      1.56   $      1.52   $      1.42
                                                                   ===========   ===========   ===========
Weighted average shares                                              1,797,900     1,720,295     1,200,503
                                                                   ===========   ===========   ===========
</TABLE>

See notes to consolidated financial statements

                                      F-3
<PAGE>

SUN BANCORP, INC.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Unrealized
                                                                                                  Gain (Loss)
                                                                                                 on Securities
                                                  Common                           Retained        Available
                                                  Stock           Surplus          Earnings         For Sale          Total

<S>                                             <C>           <C>              <C>                <C>          <C>           
BALANCE, JANUARY 1, 1994                        $ 1,017,522   $ 10,540,290     $    748,449                    $   12,306,261

  Exercise of stock options                             450          2,943                                              3,393

  Sale of common stock                              538,462      5,883,415                                          6,421,877

  Net income                                                                      1,839,655                         1,839,655
                                              -------------   ------------     ------------       -----------     -----------

BALANCE, DECEMBER 31, 1994                        1,556,434     16,426,648        2,588,104                        20,571,186

  Exercise of stock options                          74,741        530,627                                            605,368

  Sale of common stock                               20,000        240,000                                            260,000

  Unrealized gain on securities
    available for sale, net of income taxes                                                       $   415,572         415,572

  Net income                                                                      2,818,670                         2,818,670
                                              -------------   ------------      ------------       -----------    ------------

BALANCE, DECEMBER 31, 1995                        1,651,175     17,197,275        5,406,774           415,572      24,670,796

  Stock dividend                                     87,892        (87,892)

  Cash paid for fractional interest
    resulting from stock dividend                                   (2,146)                                            (2,146)


  Exercise of stock options                         109,862      1,017,122                                          1,126,984

  Unrealized loss on securities
    available for sale,
    net of income taxes                                                                            (1,393,701)     (1,393,701)

  Net income                                                                      3,012,643                         3,012,643
                                              -------------   ------------     ------------       -----------    ------------

BALANCE, DECEMBER 31, 1996                    $   1,848,929   $ 18,124,359     $  8,419,417       $  (978,129)   $ 27,414,576
                                              =============   ============     ============       ===========    ============

</TABLE>


See notes to consolidated financial statements.

                                      F-4
<PAGE>
SUN BANCORP, INC.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                             1996           1995           1994
                                                                                             ----           ----           ----
<S>                                                                                    <C>            <C>            <C>          
OPERATING ACTIVITIES:
  Net income                                                                           $   3,012,643  $   2,818,670  $   1,839,655
  Adjustments to reconcile net income to net cash  provided by operating activities:
    Provision for loan losses                                                                900,000        807,660        382,671
    Provision for loss on real estate owned                                                                  78,000        120,000
    Depreciation and amortization                                                            484,059        325,913        215,381
    Amortization of excess cost over fair value of assets acquired                           826,701        342,562        134,435
    Gain on sale of loans                                                                                  (207,984)
    Gain on sale of investment securities available for sale                                (206,538)      (246,129)
    Gain on sale of mortgage-backed securities available for sale                                          (130,997)
    Gain on sale of bank properties and equipment                                            (29,298)       (46,487)       (21,164)
    Deferred income taxes                                                                   (147,401)       (27,398)      (193,836)
    Changes in assets and liabilities which provided (used) cash:

      Accrued interest and other assets                                                   (1,175,180)      (838,246)       196,972
      Accounts payable and accrued expenses                                                  164,483      1,215,343     (1,145,147)
                                                                                       -------------  -------------  -------------

           Net cash provided by operating activities                                       3,829,469      4,090,907      1,528,967
                                                                                       -------------  -------------  -------------
INVESTING ACTIVITIES:
  Purchases of investment securities held to maturity                                                   (30,094,922)    (6,056,403)
  Purchases of investment securities available for sale                                 (194,220,677)   (27,823,745)
  Purchases of mortgage-backed securities held to maturity                                              (45,544,706)      (778,160)
  Purchases of mortgage-backed securities available for sale                                             (4,074,088)
  Increase in investment securities resulting from branch acquisitions                                  (97,600,000)
  Proceeds from maturities of investment securities held to maturity                                     65,280,038      8,141,545
  Proceeds from maturities of investment securities available for sale                    99,213,685     10,344,666
  Proceeds from maturities of mortgage-backed securities held to maturity                                19,908,185        176,542
  Proceeds from maturities of mortgage-backed securities available for sale                  125,716
  Proceeds from sale of investment securities available for sale                          93,679,375     16,880,505
  Proceeds from sale of mortgage-backed securities available for sale                     50,782,081      7,359,934
  Proceeds from sale of loans                                                                             1,870,608
  Net increase in loans                                                                 (112,767,037)   (50,605,944)    (2,845,797)
  Increase in loans resulting from branch acquisitions                                                     (636,714)
  Purchase of bank properties and equipment                                               (1,359,295)      (825,912)      (481,895)
  Increase in bank properties and equipment resulting from branch acquisitions                           (5,430,744)
  Proceeds from sale of bank properties and equipment                                         42,606        250,824         21,164
  Excess of cost over fair value of branch assets acquired                                               (4,450,145)
  Decrease (increase) in real estate owned                                                   120,674         78,578       (244,249)
  Purchase price of acquisitions, net of cash received                                                                  (5,410,572)
                                                                                       -------------  -------------  -------------
           Net cash used in investing activities                                         (64,382,072)  (145,113,582)    (7,477,825)
                                                                                       -------------  -------------  -------------
FINANCING ACTIVITIES:
  Net increase (decrease) in deposits                                                     50,739,109     16,685,101     (6,638,004)
  Increase in deposits resulting from branch acquisitions                                               122,543,875
  Borrowings and repurchase agreements                                                    21,253,048     12,500,000      4,500,000
  Repayment of borrowings and repurchase agreements                                       (8,000,000)     4,500,000     (5,750,000)
  Proceeds from exercise of stock options                                                  1,126,984        605,368          3,393
  Payments for fractional interests resulting from stock dividend                             (2,146)
  Proceeds from issuance of common stock                                                                    260,000      6,421,877
                                                                                       -------------  -------------  -------------
           Net cash provided by (used in) financing activities                            65,116,995    148,094,344     (1,462,734)
                                                                                       -------------  -------------  -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       4,564,392      7,071,669     (7,411,592)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                              17,242,366     10,170,697     17,582,289
                                                                                       -------------  -------------  -------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                 $  21,806,758  $  17,242,366  $  10,170,697
                                                                                       =============  =============  =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid                                                                        $  12,743,696  $   6,100,954  $   3,827,301
                                                                                       =============  =============  =============
  Income taxes paid                                                                    $   1,577,757  $     994,516  $   1,115,000
                                                                                       =============  =============  =============
SUPPLEMENTAL DISCLOSURE OF NONCASH ITEMS -
  Transfer of loans to real estate owned                                               $     424,644  $     196,181  $     449,478
                                                                                       =============  =============  =============
</TABLE>

See notes to consolidated financial statements.

                                      F-5

<PAGE>
SUN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------

1. NATURE OF OPERATIONS

   Sun Bancorp,  Inc. (the  "Company")  is registered as a bank holding  company
   under the Bank  Holding  Company Act of 1956,  as amended.  The  consolidated
   financial statements include the accounts of the Company and its wholly owned
   subsidiary,  Sun  National  Bank (the  "Bank"),  and the Bank's  wholly owned
   subsidiary,   Med-Vine,  Inc.  All  significant  inter-company  balances  and
   transactions have been eliminated.

   The Company and the Bank have their administrative  offices in Vineland,  New
   Jersey.  The Bank has nineteen  financial service centers located  throughout
   central and southern New Jersey. The Company's principal business is to serve
   as a holding  company for the Bank. The Bank is in the business of attracting
   customer  deposits  and  using  these  funds to  originate  loans,  primarily
   commercial  real  estate and  non-real  estate  loans.  Med-Vine,  Inc.  is a
   Delaware  holding  company which holds the majority of the Bank's  investment
   portfolio. The principal business of Med-Vine, Inc. is investing.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Use of Estimates in the Preparation of Financial Statements - The preparation
   of financial  statements,  in conformity with generally  accepted  accounting
   principles, requires management to make estimates and assumptions that affect
   the reported  amounts of assets and  liabilities,  disclosure  of  contingent
   assets  and  liabilities  at the  date of the  financial  statements  and the
   reported  amounts of income and expenses  during the  reporting  period.  The
   significant  estimates include:  allowance for loan losses, real estate owned
   and  excess of cost over fair value of net assets  acquired.  Actual  results
   could differ from those estimates.

   Investment  Securities - The Bank accounts for debt and equity  securities as
   follows:

      Held to Maturity - Debt securities that management has the positive intent
      and ability to hold until  maturity are classified as held to maturity and
      carried at their remaining  unpaid principal  balance,  net of unamortized
      premiums or unaccreted discounts. Premiums are amortized and discounts are
      accreted  using the interest  method over the estimated  remaining term of
      the underlying security.

      Available  for Sale - Debt and  equity  securities  that  will be held for
      indefinite  periods  of  time,  including  securities  that may be sold in
      response to changes to market  interest  or  prepayment  rates,  needs for
      liquidity, and changes in the availability of and the yield of alternative
      investments,  are  classified  as  available  for sale.  These  assets are
      carried at fair value.  Fair value is determined using published quotes as
      of the close of business.  Unrealized  gains and losses are excluded  from
      earnings  and  are  reported  net  of  tax  as  a  separate  component  of
      shareholders' equity until realized. Realized gains and losses on the sale
      of investment  securities  are reported in the  consolidated  statement of
      income and  determined  using the adjusted  cost of the specific  security
      sold. 

   Loans  Purchased - The discounts and premiums  resulting from the purchase of
   loans are  amortized to income using the interest  method over the  remaining
   period to contractual maturity, adjusted for anticipated prepayments.

   Interest  Income  on  Loans  -  Interest  on  commercial,   real  estate  and
   installment  loans is credited to operations  based upon the principal amount
   outstanding. Interest accruals are generally discontinued when a loan becomes
   90 days past due or when  principal  or  interest is  considered  doubtful of
   collection.  When interest  accruals are  discontinued,  interest credited to
   income in the current  year is reversed,  and  interest  accrued in the prior
   year is charged to the allowance for loan losses.

                                       F-6
<PAGE>

   Allowance  for Loan Losses - The  allowance  for loan losses is determined by
   management based upon past experience, an evaluation of potential loss in the
   loan portfolio,  current economic conditions and other pertinent factors. The
   allowance for loan losses is maintained at a level that management  considers
   adequate to provide for  potential  losses based upon an  evaluation of known
   and inherent risk in the loan portfolio. Allowances for loan losses are based
   on estimated  net  realizable  value unless it is probable that loans will be
   foreclosed, in which case allowances for loan losses are based on fair value.
   Management's  periodic  evaluation is based upon evaluation of the portfolio,
   past loss experience, current economic conditions and other relevant factors.
   While   management  uses  the  best   information   available  to  make  such
   evaluations, future adjustments to the allowance may be necessary if economic
   conditions  differ  substantially  from the  assumptions  used in making  the
   evaluations.

   The Bank  adopted the  requirements  of  Statement  of  Financial  Accounting
   Standard ("SFAS") No. 114,  Accounting by Creditors for Impairment of a Loan,
   and SFAS No. 118,  Accounting  by Creditors  for  Impairment of a Loan Income
   Recognition  and  Disclosures,  effective  January 1, 1995. SFAS 114 requires
   that certain  impaired loans be measured based either on the present value of
   expected future cash flows discounted at the loan's effective  interest rate,
   the loan's  observable  market price,  or the fair value of the collateral if
   the loan is collateral dependent. There was no effect on financial statements
   as previously  reported and on current earnings of initially applying the new
   standards.

   Bank  Properties and Equipment - Bank  properties and equipment are stated at
   cost, less  allowances for  depreciation.  The provision for  depreciation is
   computed by the  straight-line  method based on the estimated useful lives of
   the assets.

   Deferred Loan Fees - Loan fees net of certain direct loan  origination  costs
   are deferred and the balance is recognized into income as a yield  adjustment
   over the life of the loan using the interest method.

   Real  Estate  Owned - Real estate  owned is  comprised  of property  acquired
   through  foreclosure  and is carried at the lower of the related loan balance
   or fair value of the  acquired  property  based on an annual  appraisal  less
   estimated cost to dispose.  Losses arising from foreclosure  transactions are
   charged  against  the  allowance  for  loan  losses.   Losses  subsequent  to
   foreclosure are charged against operations.

   Excess of Cost Over Fair  Value of Net  Assets  Acquired - The excess of cost
   over fair value of net assets acquired is net of accumulated  amortization of
   $2,037,866 and $1,211,165 at December 31, 1996 and 1995, respectively, and is
   amortized by the straight-line method over 15 years for bank acquisitions and
   over 7 years for branch acquisitions.

   Cash and Cash  Equivalents - For purposes of reporting  cash flows,  cash and
   cash equivalents include amounts due from banks and federal funds sold.

   Income Taxes - The Company  accounts for income taxes in accordance with SFAS
   No. 109,  Accounting  for Income Taxes.  Under this method,  deferred  income
   taxes are recognized for the tax  consequences of "temporary  differences" by
   applying   enacted   statutory  tax  rates  applicable  to  future  years  to
   differences  between the  financial  statement  carrying  amounts and the tax
   bases of existing  assets and  liabilities.  Also,  under SFAS No.  109,  the
   effect on deferred  taxes of a change in tax rates is recognized in income in
   the period that includes the enactment date.

   Earnings  Per Share - Earnings  per common  and  common  equivalent  share is
   computed  using the  weighted  average  common  shares and common  equivalent
   shares outstanding during the period.

   Stock  dividend - On September  17, 1996,  the  Company's  Board of Directors
   declared a special 5% stock  dividend  which was paid on October  30, 1996 to
   stockholders of record on October 15, 1996.  Accordingly,  earnings per share
   for the years ended  December 31, 1995 and 1994 have been restated to reflect
   the increased number of shares outstanding.

   Accounting  for  Stock  Options  -  The  Company   accounts  for  stock-based
   compensation  in  accordance  with the  Accounting  Principles  Board ("APB")
   Opinion  No.  25,  Accounting  for Stock  Issued to  Employees.  This  method
   calculates  compensation  expense  using the  intrinsic  value  method  which
   recognizes  as expense the  difference  between the market value of the stock
   and the  exercise  price at grant date.  The Company has not  recognized  any
   compensation expense under this method. In the year ending December 31, 1996,
   the Company  adopted the reporting  disclosure  requirements of SFAS No. 123,
   Accounting  for  Stock-Based  Compensation  which  requires  the  Company  to
   disclose the pro forma effects of  accounting  for  stock-based  compensation
   using the fair value method as described in the  accounting  requirements  of
   SFAS No. 123. As  permitted  by SFAS No. 123,  the Company  will  continue to
   account for stock-based compensation under APB Opinion No. 25.

                                       F-7
<PAGE>

   Accounting  Principles Issued and Not Adopted - In June 1996, the FASB issued
   SFAS No. 125,  Accounting for Transfers and Servicing of Financial Assets and
   Extinguishments  of  Liabilities.   The  statement  which  is  effective  for
   transactions  occurring  after  December  31,  1996,  requires  an  entity to
   recognize,  prospectively, the financial and servicing assets it controls and
   the liabilities it has incurred,  derecognize  financial  assets when control
   has been  surrendered,  and derecognize  liabilities  when  extinguished.  It
   requires that servicing  assets and other  retained  interests in transferred
   assets be measured by allocating  the previous  carrying  amount  between the
   asset sold, if any, and retained  interest,  if any,  based on their relative
   fair values at the date of transfer. It also provides implementation guidance
   for servicing of financial assets,  securitizations,  loan syndications,  and
   participations  and transfers of  receivables  with  recourse.  The Statement
   supersedes SFAS No. 122, Accounting for Mortgage Servicing Rights,  which was
   adopted  by the  Company on January  1,  1996,  and which  management  of the
   Company  determined  had no  material  impact  on the  Company's  results  of
   operations or financial position.  In December 1996, the FASB issued SFAS No.
   127,  Deferral of the Effective Date of Certain  Provisions of FASB Statement
   No. 125. SFAS No. 127 defers for one year the effective date of Statement No.
   125 as it relates to transactions involving secured borrowings and collateral
   and transfers and servicing of financial assets. This Statement also provides
   additional guidance on these types of transactions. Management of the Company
   does not believe the Statements  will have a material impact on the Company's
   results of operations or financial position when adopted.

   Reclassifications - Certain  reclassifications have been made in the 1995 and
   1994 consolidated  financial  statements to conform to those  classifications
   used in 1996.

3. ACQUISITIONS

   On July 14, 1995,  the Bank  purchased  four branches from NatWest Bank.  The
   Bank acquired approximately  $52,317,000 of deposit liabilities plus $479,000
   of accrued  interest,  $1,755,000 of real estate and  equipment,  $588,000 of
   loans plus related  accrued  interest  and $610,000 in cash.  The Bank paid a
   premium of  approximately  $2,082,000,  which is being  amortized  over seven
   years.

   On November  24,  1995,  the Bank  purchased  four  branches  from New Jersey
   National  Bank.  The  Bank  acquired  approximately  $70,227,000  of  deposit
   liabilities plus $492,000 of accrued interest,  $3,675,000 of real estate and
   equipment,  $48,000 of loans plus related accrued  interest and $1,009,000 in
   cash.  The Bank paid a premium of  approximately  $2,368,000,  which is being
   amortized over seven years.

   On June 29, 1994, the Company acquired 100% of the outstanding  shares of The
   First National Bank of Tuckahoe  ("Tuckahoe") for  approximately  $7,070,000.
   The purchase method of accounting was used to record the  acquisition.  Under
   the purchase method of accounting,  all assets and liabilities  acquired were
   adjusted to fair value as of the acquisition date, and the resultant premiums
   and discounts are amortized to income over the expected economic lives of the
   related  assets  and  liabilities.  Excess  cost  over  fair  value of assets
   acquired resulting from this acquisition  amounted to approximately  $612,000
   and is being amortized over 15 years using the straight-line method.

   A summary statement of the cash used to purchase Tuckahoe is set forth below:

       Fair value of assets purchased                          $50,782,529
       Liabilities assumed                                      43,073,874
                                                               ----------- 
       Cssh paid                                                 7,708,655
       Cash acquired                                             7,270,791
                                                               -----------
       Net cash used for purchase                              $   437,864
                                                               ===========

                                       F-8
<PAGE>

   On July 29, 1994, the Bank acquired 100% of the outstanding  capital stock of
   Southern Ocean State Bank ("Ocean") from BMJ Financial Corp., the parent bank
   holding company of Ocean for approximately $6,560,000. The purchase method of
   accounting was used to record the acquisition. Excess cost over fair value of
   assets  acquired  resulting  from the  valuations  amounted to  approximately
   $920,000 and is being amortized over 15 years using the straight-line method.

   A summary statement of the cash used to purchase Ocean is set forth below:

      Fair value of assets purchased              $68,357,063
      Liabilities assumed                          61,511,320
                                                  -----------
      Cash paid                                     6,845,743
      Cash acquired                                 1,873,035
                                                  -----------
      Net cash used for purchase                  $ 4,972,708
                                                  ===========

   The results of operations of the acquired  entities have been included in the
   consolidated results of operations from the dates of acquisitions.

4. INVESTMENT SECURITIES

   During 1995, in accordance with the implementation of the SFAS No. 115 Guide,
   the Company reclassified its portfolio of investment  securities as available
   for sale. The carrying  amounts of investment  securities and the approximate
   market values at December 31, 1996 and 1995 were as follows:


<TABLE>
<CAPTION>

                                                     December 31, 1996
                                ----------------------------------------------------------
                                                     Gross        Gross        Estimated
                                    Amortized      Unrealized   Unrealized       Market
Available for Sale:                   Cost           Gains        Losses         Value

<S>                              <C>             <C>           <C>            <C>        
Debt Securities
U. S. Treasury Obligations       $ 51,954,682    $    12,086   $  (932,957)   $51,033,811
State and Municipal Obligations    20,168,222         28,006      (356,822)    19,839,406
Other bonds                        20,075,483          7,635      (239,962)    19,843,156
Mortgage-backed securities             63,061           --            --           63,061
                                 ------------    -----------   -----------    -----------


    Total debt securities          92,261,448         47,727    (1,529,741)    90,779,434
                                 ------------    -----------   -----------    -----------

Equity Securities
  Federal Reserve Bank stock          617,800                                     617,800
  Federal Home Loan Bank stock      4,100,900                                   4,100,900
  Atlantic Central Bankers Bank 
    stock                              83,250                                      83,250
                                 ------------    -----------   -----------    -----------
    Total equity securities         4,801,950              -             -      4,801,950
                                 ------------    -----------   -----------    -----------
      Total                      $ 97,063,398    $    47,727   $(1,529,741)   $95,581,384
                                 ============    ===========   ===========    ===========

</TABLE>
                                       F-9
<PAGE>
<TABLE>
<CAPTION>

                                                                        December 31, 1995
                                          -----------------------------------------------------------
                                                               Gross         Gross        Estimated
                                               Amortized     Unrealized    Unrealized       Market
Available for Sale:                              Cost          Gains         Losses         Value

<S>                                        <C>              <C>          <C>            <C>         
Debt Securities
  U. S. Treasury Obligations               $   41,674,219   $  245,730   $   (15,461)   $ 41,904,488
  State and Municipal Obligations              16,666,509      103,281       (28,199)     16,741,591
  Other bonds                                  44,901,919       70,123        (9,342)     44,962,700
  Mortgage-backed securities                   41,734,347      289,003       (25,483)     41,997,867
                                           --------------   ----------   -----------    ------------
    Total debt securities                     144,976,994      708,137       (78,485)    145,606,646
                                           --------------   ----------   -----------    ------------
Equity Securities
  Federal Reserve Bank stock                      533,800                                    533,800
  Federal Home Loan Bank stock                    818,200                                    818,200
  Atlantic Central Bankers Bank stock              50,250                                     50,250
                                           --------------   ----------   -----------    ------------      
    Total equity securities                     1,402,250            -             -       1,402,250
                                           --------------   ----------   -----------    ------------
      Total                                $  146,379,244   $  708,137   $   (78,485)   $147,008,896
                                           ==============   ==========   ===========    ============
</TABLE>




   During 1996,  the Bank sold  $144,529,374  of  securities  available for sale
   resulting in a gross gain of $206,538. During 1995, the Bank sold $24,240,439
   of securities available for sale resulting in a gross gain of $377,126. There
   were no such sales during 1994.

   At  December  31, 1996 the Bank was  required to maintain an average  reserve
   balance of $3,579,000 with the Federal Reserve Bank.

   The maturity schedule of the investment in debt securities available for sale
   at December 31, 1996 is as follows:

<TABLE>
<CAPTION>
                                                                   Amortized          Estimated
                                                                      Cost           Market Value
    
    <S>                                                          <C>                <C>          
    Due in one year or less                                      $   8,828,772      $   8,786,619
    Due after one year through five years                           61,132,578         60,063,074
    Due after five years through ten years                          15,890,087         15,708,094
    Due after ten years                                              6,346,950          6,158,586
                                                                 -------------      -------------
                                                                    92,198,387         90,716,373
    Mortgage-backed securities                                          63,061             63,061
                                                                 -------------      -------------
                                                                 $  92,261,448      $  90,779,434
                                                                 =============      =============
</TABLE>


   At December  31,  1996,  $4,000,000  of U.S.  Treasury  Notes were pledged to
   secure public deposits.

                                       F-10
<PAGE>




5.    LOANS

   The components of loans as of December 31, 1996 and 1995 were as follows:

                                             1996             1995
    
    Commercial and industrial           $ 223,116,474    $ 118,874,150
    Real estate-residential mortgages      53,846,436       54,414,800
    Installment                            21,133,070       12,409,321
                                        -------------    -------------
      Total gross loans                   298,095,980      185,698,271
    Allowance for loan losses              (2,595,312)      (2,064,640)
                                        -------------    -------------
    Net loans                           $ 295,500,668    $ 183,633,631
                                        =============    =============
    
    Nonaccrual loans                    $   1,277,208    $   2,658,118
                                        =============    =============



   There were no irrevocable  commitments to lend additional funds on nonaccrual
   loans at December 31, 1996. The reduction in interest  income  resulting from
   nonaccrual  loans was  $151,614,  $276,955  and  $146,308 for the years ended
   December 31, 1996, 1995 and 1994, respectively. Interest income recognized on
   these  loans  during the years ended  December  31,  1996,  1995 and 1994 was
   $15,414, $24,989 and $18,907, respectively.

   Certain officers, directors and their associates (related parties) have loans
   and conduct other  transactions with the Company.  Such transactions are made
   on substantially the same terms, including interest rates and collateral,  as
   those  prevailing at the time for other nonrelated  party  transactions.  The
   aggregate  dollar amount of these loans to related parties as of December 31,
   1996,  along with an analysis of the  activity  for 1996,  is  summarized  as
   follows:

                                         1996            1995      
      
      Balance, beginning of year   $  8,621,460    $  6,132,256
      Additions                       7,306,997       4,272,121
      Repayments                     (4,491,323)     (1,782,917)
                                   ------------    ------------
      Balance, end of year         $ 11,437,134    $  8,621,460
                                   ============    ============


   Under  approved  lending  decisions,  the  Company  has  commitments  to lend
   additional  funds  totaling  approximately  $58,635,413  and  $67,928,316  at
   December 31, 1996 and 1995,  respectively.  Commitments  to extend credit are
   agreements  to lend to a  customer  as long as there is no  violation  of any
   condition  established  in the  contract.  Commitments  generally  have fixed
   expiration  dates or other  termination  clauses and may require payment of a
   fee. Since many of the commitments are expected to expire without being drawn
   upon, the total commitment  amounts do not necessarily  represent future cash
   requirements.  The  Bank  evaluates  each  customer's  creditworthiness  on a
   case-by-case  basis.  The type and amount of collateral  obtained,  if deemed
   necessary  by the Bank upon  extension  of credit,  is based on  management's
   credit evaluation of the borrower.

   Most of the Bank's  business  activity is with  customers  located within its
   local market area.  Generally,  loans granted are secured by commercial  real
   estate,  residential real estate and other assets.  The ultimate repayment of
   loans is dependent to a certain  degree on the local  economy and real estate
   market.

                                       F-11

<PAGE>


6. ALLOWANCE FOR LOAN LOSSES

   An analysis of the change in the allowance for loan losses is as follows:

                                       1996           1995           1994    
   
   Balance, January 1              $ 2,064,640    $ 1,607,375    $ 1,067,402
   Charge-offs                        (400,387)      (426,289)      (349,439)
   Recoveries                           31,059         75,894         34,829
                                   -----------    -----------    -----------
        Net  charge-offs              (369,328)      (350,395)      (314,610)
   Allowance on acquired loans               0              0        471,912
   Provision for loan losses           900,000        807,660        382,671
                                   -----------    -----------    -----------
   Balance, December 31            $ 2,595,312    $ 2,064,640    $ 1,607,375
                                   ===========    ===========    ===========


   The provision for loan losses  charged to expense is based upon past loan and
   loss  experience  and an evaluation  of estimated  losses in the current loan
   portfolio, including the evaluation of impaired loans under SFAS Nos. 114 and
   118. A loan is considered to be impaired when, based upon current information
   and  events,  it is  probable  that the Bank will be unable  to  collect  all
   amounts due according to the contractual  terms of the loan. An insignificant
   delay or  insignificant  shortfall in amount of payments does not necessarily
   result in the loan being  identified as impaired.  For this  purpose,  delays
   less than 90 days are considered to be  insignificant.  Impairment losses are
   included in the provision for loan losses. SFAS Nos. 114 and 118 do not apply
   to large groups of smaller balance,  homogeneous  loans that are collectively
   evaluated  for  impairment,  except  for  those  loans  restructured  under a
   troubled debt  restructuring.  Loans  collectively  evaluated for  impairment
   include  consumer  loans  and  residential  real  estate  loans,  and are not
   included in the data that follows:

<TABLE>
<CAPTION>
                                           December 31, 1996           December 31, 1995
                                           -----------------           -----------------

<S>                                          <C>                         <C>    
Impaired loans with related reserve for
  loan losses ($296,307) calculated               
    under SFAS No. 114                                                   $    454,489
                                                                              
Impaired loans with no related reserve for                                    
  loan losses calculated                                                      
    under SFAS No. 114                       $    584,114                     527,908
                                             ------------                ------------
                                                                              
    Total impaired loans                     $    584,114                $    982,397
                                             ============                ============
</TABLE>

<TABLE>
<CAPTION>
                                                                            Year Ended                    Year Ended
                                                                         December 31, 1996             December 31, 1995

<S>                                                                      <C>                           <C>              
Average impaired loans                                                   $         596,519             $         411,289
                                                                         =================             =================
Interest income recognized on impaired loans                             $          18,284             $          18,561
                                                                         =================             =================
Cash basis interest income recognized on impaired loans                  $          15,414             $               0
                                                                         =================             =================
</TABLE>
                                                 

   Interest payments on impaired loans are typically applied to principal unless
   the ability to collect the principal  amount is fully assured,  in which case
   interest is recognized on the cash basis.

   Commercial loans and commercial real estate loans are placed on nonaccrual at
   the time the loan is 90 days delinquent unless the credit is well secured and
   in the process of collection.  Generally, commercial loans are charged off no
   later than 120 days  delinquent  unless the loan is well  secured  and in the
   process of collection, or other extenuating circumstances support collection.
   Residential  real estate loans are typically placed on nonaccrual at the time
   the loan is 90 days  delinquent.  Other consumer loans are typically  charged
   off at 90 days delinquent.  In all cases,  loans must be placed on nonaccrual
   or charged off at an earlier date if  collection  of principal or interest is
   considered doubtful.

                                       F-12
<PAGE>



7. BANK PROPERTIES AND EQUIPMENT

   Bank  properties and equipment at December 31 consist of the following  major
   classifications:

                                                    1996            1995    
   
   Land                                        $  3,084,395    $  2,873,500
   Buildings                                      6,982,449       6,861,123
   Leasehold improvements and equipment           3,991,723       3,090,188
                                               ------------    ------------
                                                 14,058,567      12,824,811
   Accumulated depreciation and amortization     (1,836,060)     (1,405,636)
                                               ------------    ------------
   Total                                       $ 12,222,507    $ 11,419,175
                                               ============    ============




8. REAL ESTATE OWNED

   Real estate owned consisted of the following:

                                                         December 31,
                                                   ----------------------
                                                      1996         1995
   
   Commercial properties                           $ 435,765    $ 492,501   
   Residential properties                            360,863      471,801
                                                   ---------    --------- 
                                                     796,628      964,302 
   Allowance                                         (41,000)     (88,000)
                                                   ---------    ---------   
   Total                                           $ 755,628    $ 876,302
                                                   =========    =========
                          


   During 1996,  1995 and 1994,  $0,  $78,000 and  $120,000,  respectively,  was
   charged against operations to adjust real estate owned for declines in value.

9. DEPOSITS

Deposits consist of the following major classifications:

                                                      December 31,          
                                               ---------------------------
                                                   1996           1995
   Demand Deposits                             $133,624,391   $128,802,293
   Savings Deposits                              63,506,894     66,970,293
   Time Certificates under $100,000             151,615,202    116,462,390
   Time Certificates $100,000 or more            37,240,418     23,012,820
                                               ------------   ------------
   Total                                       $385,986,905   $335,247,796
                                               ============   ============
                                      
                                       F-13
<PAGE>


   Of the total demand deposits,  approximately  $76,500,000 and $62,700,000 are
   non-interest bearing at December 31, 1996 and 1995, respectively.

   A summary of certificates by year of maturity is as follows:

Year Ended December 31,

      1997                                            $        169,482,951
      1998                                                      12,828,611
      1999                                                       4,032,751
      Thereafter                                                 2,511,307
                                                      --------------------
      Total                                           $        188,855,620
                                                      ====================


   A summary of interest expense on deposits is as follows:

                                        Year Ended December 31,
                               ---------------------------------------
                                   1996          1995          1994
   
   Savings Deposits            $ 1,455,043   $ 1,394,849   $ 1,334,432
   Time Certificates             9,382,920     5,274,045     1,802,296
                                                           
   Interest-Bearing Checking     1,115,628       971,039       708,025
                               -----------   -----------   -----------
   
   Total                       $11,953,591   $ 7,639,933   $ 3,844,753
                               ===========   ===========   ===========


10. ADVANCES FROM THE FEDERAL HOME LOAN BANK AND OTHER BORROWINGS

   Federal  Home  Loan  Bank  advances  at  December  31,  1996  and  1995  were
   $10,000,000 and $8,000,000, respectively. Advances are collateralized under a
   blanket  collateral lien agreement.  The amounts  outstanding at December 31,
   1996 and 1995 were borrowed under overnight lines of credit at interest rates
   of 7.375% and 5.875%, respectively. Interest expense on advances was $286,316
   and $6,733 for the years  ended  December  31,  1996 and 1995,  respectively.
   There were no such borrowings during 1994.

   At December 30, 1996,  the Company  obtained a $6,000,000  revolving  line of
   credit from a correspondant  bank with a term of 36 months. The floating rate
   of interest is the prime rate plus fifty basis points.  At December 31, 1996,
   there was $6,000,000 outstanding at an interest rate of 8.75%.

   During  1996,  the  Bank  entered  into  various  retail   transactions  with
   securities sold under  agreements to repurchase with approved  customers.  At
   December 31, 1996 the total of such repurchase  agreements is $5,253,048 with
   an average interest rate of 5.01%.  Interest expense on repurchase agreements
   was $122,788 during 1996.

11. STOCK OPTION PLAN

   On April 18, 1995, the Company adopted a Stock Option Plan (the "1995 Plan").
   Options granted under the 1995 Plan may be either  qualified  incentive stock
   options or nonqualified  options as determined by the Executive  Compensation
   Committee.

   Options  granted under the 1995 Plan are at the  estimated  fair value at the
   date of grant and are  exercisable  at the time of the grant and for 10 years
   thereafter.  There were 100,000  shares of stock  reserved for issuance under
   the 1995 Plan.

   On May 31, 1985,  the Company  adopted a Stock Option Plan (the "1985 Plan").
   During  1995,  options were no longer  eligible to be granted  under the 1985
   Plan.  Options  granted under the 1985 Plan were either  qualified  incentive
   stock  options  or  nonqualified  options  as  determined  by  the  Executive
   Compensation Committee.

                                       F-14
<PAGE>
   Options  granted under the 1985 Plan were at the estimated  fair value at the
   date of grant and are exercisable at the time of the grant and until the year
   2001. There were 313,826 shares of stock reserved for issuance under the 1985
   Plan.

   Options  granted  under the 1995 and 1985  Plans,  adjusted  for the 5% stock
   dividend granted in 1996, are as follows:

<TABLE>
<CAPTION>

                                                                                       Incentive        Nonqualified

<S>                                                                               <C>                  <C>   
Options granted and outstanding:
  December 31, 1996 at prices ranging from $7.18 to $16.67 per share                      290,722               50,674
                                                                                  ===============      ===============
  December 31, 1995 at prices ranging from $7.18 to $15.42 per share                      186,153              157,087
                                                                                  ===============      ===============
  December 31, 1994 at prices ranging from $7.18 to $15.42 per share                       91,581              201,577
                                                                                  ===============      ===============  
</TABLE>
   Activity in the stock option plans for the  three-year  period ended December
   31, 1996:
<TABLE>
<CAPTION>
                                                                             Weighted
                                                                              Average
                                                           Exercise          Exercise
                                               Number       Price             Price
                                             of Shares     Per Share         Per Share
                                             ---------   ---------------    -----------
<S>                                           <C>        <C>                <C>       
Outstanding at January 1, 1994                 295,730   $7.18 -  $15.42    $     8.49
1994:
  Exercised                                       (472)            $7.18          7.18
  Expired                                       (2,100)           $12.38         12.38
                                              --------
Outstanding at December 31, 1994               293,158                            8.46
1995:
  Granted                                      131,250            $12.38         12.38
  Exercised                                    (78,478)  $7.18 -  $ 9.98          7.71
  Expired                                       (2,690)  $7.18 -  $15.42         13.81
                                              --------
Outstanding at December 31, 1995               343,240                           10.12
1996:
  Granted                                      113,925            $16.67         16.67
  Exercised                                   (115,303)  $7.18 -  $ 9.07          8.82
  Expired                                         (466)           $15.42         15.42
                                              --------
Outstanding at December 31, 1996               341,396   $7.18 -  $16.67         12.73
                                              ========   ---------------
</TABLE>
   The following table  summarizes  stock options  outstanding at December 31,
   1996:
<TABLE>
<CAPTION>
                            Number of Options  Weighted Average Remaining  Weighted Average
   Range of Exercise Price    Outstanding          Contractural Life        Exercise Price
   -----------------------    -----------          -----------------        --------------
<S>     <C>                    <C>                         <C>                      <C> 
         7.18 -  7.90           76,464                      5                        7.39
        12.38 - 16.67          264,932                      9                       14.52
        -----   -----          -------                      -                       -----
                               341,396                      8                       12.87
                               =======                      =                       =====
</TABLE>
   Under the 1995 Plan, the  nonqualified  options expire ten years and ten days
   after the date of grant,  unless  terminated  earlier under the option terms.
   The  incentive  options  expire  ten years  after  the date of grant,  unless
   terminated  earlier under the option terms.  Under the 1985 Plan, all options
   expire in the year 2001.  All options are exercisable at December 31, 1996.

   The Company  accounts for  stock-based  compensation  in accordance  with APB
   Opinion  No.  25,  Accounting  for Stock  Issued to  Employees.  This  method
   calculates  compensation  expense  using the  intrinsic  value  method  which
   recognizes  as expense the  difference  between the market value of the stock
   and the  exercise  price at grant date.  The Company has not 

                                       F-15

<PAGE>
   recognized  any  compensation  expense under this method.  In the year ending
   December 31, 1996, the Company adopted the reporting disclosure  requirements
   of SFAS No. 123,  Accounting for Stock-Based  Compensation which requires the
   Company to  disclose  the pro forma  effects of  accounting  for  stock-based
   compensation  using the fair  value  method as  described  in the  accounting
   requirements  of SFAS No. 123. As permitted by SFAS No. 123, the Company will
   continue to account for stock-based compensation under APB Opinion No. 25.

   Had  compensation  cost  for  the  Company's  two  stock  option  plans  been
   determined  based on the fair value at the dates of awards  under those plans
   consistent  with the method of SFAS No.  123,  the  Company's  net income and
   income per share would have been reduced to the pro forma  amounts  indicated
   below:

<TABLE>
<CAPTION>
                                                                                 1996              1995
                                                                                 ----              ----
<S>                                                   <C>                    <C>                <C>        
Net income:                                           As reported            $ 3,012,643        $ 2,818,670
                                                      Pro forma              $ 2,461,089        $ 2,370,020

Net income per common and common equivalent share:
  Primary                                             As reported            $      1.58        $      1.52
                                                      Pro forma              $      1.29        $      1.28

  Fully diluted                                       As reported            $      1.56        $      1.52
                                                      Pro forma              $      1.27        $      1.28
</TABLE>

   Significant  assumptions used to calculate the above fair value of the awards
   are as follows:
                        
                                                     1996          1995
                                                     ----          ----
         Risk free interest rate of return           6.44%         5.65%
         Expected option life                      60 months     60 months
         Expected volatility                          14%           15%
         Expected dividends                            0             0

12. BENEFITS

   During  1996,  the Company  established  a 401(k)  Savings  Plan (the "401(k)
   Plan") for all qualified employees.  Substantially all employees are eligible
   to participate in the 401(k) Plan following completion of one year of service
   and attaining age 21. Vesting in the Company's contribution accrues over four
   years at 25% each year. Pursuant to the 401(k) Plan, employees can contribute
   up to 15% of their  compensation  to a maximum of $9,500 in 1996. The Company
   contributes 50% of the employee contribution,  up to 6% of compensation.  The
   Company's  contribution  to the 401(k)  Plan was  $85,722  for the year ended
   December 31,  1996.  The Company paid $4,861  during 1996 to  administer  the
   401(k) Plan.

13. COMMITMENTS AND CONTINGENT LIABILITIES

   The  Company,  from time to time,  may be a  defendant  in legal  proceedings
   related to the conduct of its business.  Management,  after consultation with
   legal  counsel,  believes  that the  liabilities,  if any,  arising from such
   litigation  and claims  will not be material  to the  consolidated  financial
   statements.

   In the  normal  course of  business,  the Bank has  various  commitments  and
   contingent  liabilities,  such as  customers'  letters  of credit  (including
   standby  letters of credit of $9,663,853  and $6,196,871 at December 31, 1996
   and  1995,  respectively),  which  are  not  reflected  in  the  accompanying
   financial statements.  Standby letters of credit are conditional  commitments
   issued by the Bank to  guarantee  the  performance  of a customer  to a third
   party.  The credit risk involved in issuing  letters of credit is essentially
   the same as that involved in extending loan  facilities to customers.  In the
   judgment of  management,  the  financial  position of the Company will not be
   affected  materially by the final outcome of any contingent  liabilities  and
   commitments.

   Office space and branch facilities are leased from a company  affiliated with
   the chairman under separate  agreements with the Company.  The leases,  which
   expire in the year 2012,  provide  for a combined  annual  rental of $286,641
   with annual increases based on increases in the Consumer Price Index.

   In February  1985,  the Bank  entered into an  agreement  with a  partnership
   comprised  of  directors  and  shareholders  of the Bank to  lease an  office
   building for an initial term of 10 years with three  renewal  options of five
   years each,  requiring  annual  rentals of $96,000 in addition to real estate
   taxes  during  the  extension  periods.  The Bank  has  exercised  its  first
   five-year  renewal  option.  The  Bank  subleases  a  portion  of the  office
   building.

                                       F-16
<PAGE>

   Future minimum  payments under  noncancelable  operating  leases with initial
   terms of one year or more consisted of the following at December 31, 1996:

           1997                                      $            455,966
           1998                                                   421,371
           1999                                                   415,041
           2000                                                   327,041
           2001                                                   319,041
           Thereafter                                           3,214,623
                                                     --------------------
                                                     $          5,153,083
                                                     ====================
           
   Rental  expense  included in occupancy  expense for all operating  leases was
   $516,526, $510,285 and $390,157 for 1996, 1995 and 1994, respectively.

14. INCOME TAXES

   The income tax provision consists of the following:

                        1996                1995                1994     
                                                          
    Current         $ 1,509,401         $ 1,167,398         $   968,970
    Deferred           (147,401)            (27,398)           (193,836)
                    -----------         -----------         -----------
    Total           $ 1,362,000         $ 1,140,000         $   775,134
                    ===========         ===========         ===========
                                                            
           
           

   Items that gave rise to significant  portions of the deferred tax accounts at
   December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                                     1996          1995     
   <S>                                          <C>            <C>        
   
   Deferred tax asset:
     Allowance for loan losses                  $   590,257    $   427,997
     Deferred loan fees                              63,900         89,012
     Other real estate                               73,344         89,324
     Goodwill amortization                           72,150         20,358
     Unrealized loss on investment securities       503,885
     Other                                           51,274         62,229
                                                -----------    -----------
   Total deferred tax asset                       1,354,810        688,920
   
   Deferred tax liability:
     Property                                      (284,275)      (269,671)
     Unrealized gain on investment securities                     (214,080)
                                                -----------    -----------
   Total deferred tax liability                    (284,275)      (483,751)
                                                -----------    -----------
   Net deferred tax asset                       $ 1,070,535    $   205,169
                                                ===========    ===========
   </TABLE>

   The provision for federal income taxes in 1996,  1995 and 1994,  differs from
   that completed at the statutory rate as follows:


                                                 Year Ended December 31,
                                      ------------------------------------------
                                          1996           1995           1994
Tax computed at the statutory rate    $ 1,487,379    $ 1,345,948    $   889,028
Increase in charge resulting from:
  State tax, net of federal benefit                                      33,785
  Goodwill amortization                    57,327         57,160         43,464
  Tax exempt interest (net)              (340,896)      (157,940)       (72,009)
  Other, net                              158,190       (105,168)      (119,134)
                                      -----------    -----------    -----------
                                      $ 1,362,000    $ 1,140,000    $   775,134
                                      ===========    ===========    ===========
 
                                       F-17
<PAGE>

15. EARNINGS PER SHARE

   Earnings per common share and common equivalent share is computed by dividing
   the net income by the weighted  average  number of shares of common stock and
   common stock equivalents  outstanding  during the year. Stock options granted
   and  outstanding  have been  considered to be the  equivalent of common stock
   from the time of issuance.  The number of common  shares was increased by the
   number of common  shares  that are  assumed to have been  purchased  with the
   proceeds  from the exercise of the options  (treasury  stock  method);  those
   purchases were assumed to have been made at the estimated market price of the
   common stock, but not to exceed twenty percent of the outstanding shares. The
   market price of common shares is based either on an independent  valuation of
   the Company's  shares or on the price  received on shares sold on or near the
   reporting  dates.  Retroactive  recognition  has been given to market values,
   common stock and common stock  equivalents  outstanding  for periods prior to
   the date of the Company's stock dividend.

<TABLE>
<CAPTION>
                                                                                                   For the Years Ended
                                                                                                       December 31,
                                                                               -----------------------------------------------------
                                                                                             1996          1995         1994
<S>                                                                                        <C>          <C>          <C>        
Assumptions:
  Net income for the period                                                                $3,012,643   $2,818,670   $1,839,655 
  Average common shares outstanding                                                         1,797,900    1,720,295    1,200,503
  Dilutive options outstanding to purchase equivalent shares                                  341,396      343,241      271,779
  Average exercise price per share                                                         $    12.73   $    10.12   $     8.08
  Estimated average market value per common share - for primary computation                $    18.84   $    16.19   $    12.38
  Estimated period-end market value per common share - for fully diluted computation       $    21.00   $    16.19   $    12.38 

Computation:                                                                              

  Application of assumed proceeds:                                                        
    Towards repurchase of outstanding common shares of applicable market value             $4,346,654   $3,471,962   $2,196,232

  Adjustment of shares outstanding - primary:                                                                                 
    Actual average shares                                                                   1,797,900    1,720,295    1,200,503
    Net additional shares issuable                                                            110,656      128,796       94,391 
                                                                                            ---------    ---------    ---------
    Adjusted shares outstanding                                                             1,908,556    1,849,091    1,294,894
                                                                                            =========    =========    =========
  Adjustment of shares outstanding - fully diluted:                                       
    Actual average shares                                                                   1,797,900    1,720,295    1,200,503
    Net additional shares issuable                                                            134,412      128,796       94,391
                                                                                            ---------    ---------    ---------
    Adjusted shares outstanding                                                             1,932,312    1,849,091    1,294,894
                                                                                            =========    =========    =========
  Earnings per common and common equivalent share                         

    Primary                                                                                $     1.58   $     1.52   $     1.42

    Fully diluted                                                                          $     1.56   $     1.52   $     1.42


</TABLE>


16. REGULATORY MATTERS

   The  ability of the Bank to pay  dividends  to the Company is  controlled  by
   certain   regulatory   restrictions.   Permission  from  the  Office  of  the
   Comptroller  of the  Currency  ("OCC") is required if the total of  dividends
   declared in a calendar  year exceeds the total of the Bank's net profits,  as
   defined by the  Comptroller,  for that year,  combined  with its retained net
   profits of the two  preceding  years.  At December  31, 1996 such amounts are
   $7,670,968.

                                       F-18

<PAGE>

   The Bank is subject to various regulatory capital  requirements  administered
   by 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 and certain  off-balance  sheet items as calculated  under  regulatory
   accounting practices. The Bank's capital amounts and classifications 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 in the
   table  below) of capital (as defined in the  regulations)  to total  adjusted
   assets (as defined),  and of risk-based capital (as defined) to risk-weighted
   assets (as defined).  Management believes,  as of December 31, 1996, that the
   Bank meets all applicable capital adequacy requirements.

   The most recent  notification from the OCC (as of March 31, 1996) categorized
   the Bank as adequately  capitalized under the regulatory framework for prompt
   corrective action. To be categorized as adequately capitalized, the Bank must
   maintain minimum Tier 1 Capital, Total Risk-Based Capital and Leverage Ratios
   as set forth in the table.  Since the most recent  notification from the OCC,
   the  Bank  received  additional  capital  from  the  Company.  As  a  result,
   management believes that the Bank would be considered well-capitalized by the
   OCC at December 31, 1996. The Bank's  actual  capital amounts and ratios  are
   also in the table below:


<TABLE>
<CAPTION>
                                                                                                                 To Be
                                                                                                           Well Capitalized
                                                                                 Required for                 Under Prompt
                                                                               Capital Adequacy            Corrective Action
                                                    Actual                         Purposes                   Provisions
                                               -------------------------------------------------------------------------------
                                                   Amount      Ratio           Amount         Ratio       Amount        Ratio
                                                   ------      -----           ------         -----       ------        -----

<S>                                            <C>             <C>         <C>                <C>       <C>             <C>  
At December 31, 1996
  Tier 1 Risk-Based Capital                    $ 28,907,862     9.34%       $ 12,380,480      8.00%     $ 18,570,720     6.00%
  Total Risk-Based Capital                       31,503,174    10.18%        24,760,960       8.00%       30,951,200    10.00%
  Leverage                                       28,907,862     6.81%        16,974,791       4.00%       21,218,489     5.00%


At December 31, 1995
  Tier 1 Risk-Based Capital                    $ 18,063,305     8.26%     $   8,750,160       4.00%     $ 13,125,240     6.00%
  Total Risk-Based Capital                       20,127,945     9.20%        17,500,320       8.00%       21,875,400    10.00%
  Leverage                                       18,063,305     5.61%        12,869,123       4.00%       16,086,404     5.00%

</TABLE>

   The  Company's  tier 1 risk-based  capital,  total  risk-based  capital,  and
   leverage capital are 7.44%,  8.28%, and 5.43% at December 31, 1996 and 8.67%,
   9.64%, and 5.74% at December 31, 1995.

   Under the framework, an adequately capitalized bank's capital levels will not
   allow  the Bank to accept  brokered  deposits  without  prior  approval  from
   regulators.  

17. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

                                       F-19
<PAGE>

<TABLE>
<CAPTION>
                                                     December 31, 1996                            December 31,1995
                                        -----------------------------------------------------------------------------------
                                                                    Estimated                                   Estimated
                                               Carrying                Fair                Carrying                Fair
                                                Amount                 Value                 Amount                Value

<S>                                     <C>                    <C>                    <C>                 <C>             
Assets:
  Cash and cash equivalents             $     21,806,758       $     21,806,758       $     17,242,366    $     17,242,366
  Investment securities                       95,581,384             95,581,384            147,008,896         147,008,896
  Loans receivable                           295,500,668            293,777,592            183,633,631         187,037,088
Liabilities:
  Demand deposits                            133,624,391            133,624,391            128,802,293         128,802,293
  Savings deposits                            63,506,894             63,506,894             66,970,293          66,970,293
  Certificates of deposit                    188,855,620            191,448,487            139,475,210         140,877,573
  Federal Home Loan Bank                      10,000,000             10,000,000              8,000,000           8,000,000
Advances
  Loan payable                                 6,000,000              6,000,000                      0                   0
  Repurchase agreements                        5,253,048              5,253,048                      0                   0

</TABLE>


   Cash and cash  equivalents  - For cash  and cash  equivalents,  the  carrying
   amount is a reasonable estimate of fair value.

   Investment securities - For investment  securities,  fair values are based on
   quoted  market  prices,  dealer quotes and prices  obtained from  independent
   pricing services.

   Loans  receivable - The fair value was estimated by  discounting  approximate
   cash flows of the portfolio to achieve a current market yield.

   Demand deposits, savings deposits,  certificates of deposit and advances from
   the  Federal  Home Loan Bank - The fair  value of  demand  deposits,  savings
   deposits and advances  from the Federal Home Loan Bank is the amount  payable
   on demand at the reporting date. The fair value of certificates of deposit is
   estimated using rates currently  offered for deposits and advances of similar
   remaining maturities.

   Loan  payable - The fair  value of the loan  payable is  estimated  to be the
   amount  outstanding  at the  reporting  date.  The interest  rate on the loan
   adjusts with changes in the prime lending rate.

   Repurchase  agreements - Securities  sold under  agreements to repurchase are
   overnight  transactions,  therefore  the  carrying  amount  is  a  reasonable
   estimate of fair value.

   Commitments  to extend  credit and  letters of credit - The  majority  of the
   Bank's  commitments  to extend  credit and  letters of credit  carry  current
   market  interest rates if converted to loans.  Because  commitments to extend
   credit and letters of credit are generally unassignable by either the Bank or
   the  borrower,  they  only  have  value  to the Bank  and the  borrower.  The
   estimated fair value  approximates the recorded  deferred fee amounts,  which
   are not significant.

   No  adjustment  was made to the  entry-value  interest  rates for  changes in
   credit performing  commercial loans and real estate loans for which there are
   no known credit  concerns.  Management  segregates  loans in appropriate risk
   categories.  Management  believes that the risk factor embedded in the entry-
   value  interest  rates  along with the  general  reserves  applicable  to the
   performing  commercial and real estate loan portfolios for which there are no
   known  credit  concerns  result  in a fair  valuation  of  such  loans  on an
   entry-value basis.

   The fair value estimates presented herein are based on pertinent  information
   available to management as of December 31, 1996 and 1995. Although management
   is not aware of any factors  that would  significantly  affect the  estimated
   fair value amounts,  such amounts have not been comprehensively  revalued for
   purposes of these consolidated  financial  statements since December 31, 1996
   and  1995,  and  therefore,  current  estimates  of  fair  value  may  differ
   significantly from the amounts presented herein.

                                       F-20
<PAGE>

18. INTEREST RATE RISK

   The Company's  exposure to interest rate risk results from the  difference in
   maturities on interest-bearing  liabilities and  interest-earning  assets and
   the volatility of interest rates. Because the Company's assets have a shorter
   maturity  than  its  liabilities,  the  Company's  earnings  will  tend to be
   negatively  affected during periods of declining interest rates.  Conversely,
   this mismatch  should benefit the Company  during periods of rising  interest
   rates.  Management  monitors  the  relationship  between  the  interest  rate
   sensitivity of the Company's assets and liabilities.

19. PENDING ACQUISITIONS (UNAUDITED)

   On  December  19,  1996,  the Bank  entered  into a purchase  and  assumption
   agreement  with First Union National Bank ("First  Union"),  whereby the Bank
   will assume  certain  deposits  liabilities of four branch offices from First
   Union. At December 31, 1996, the branches had deposits of  approximately  $73
   million.  In addition,  the Bank will acquire  approximately  $2.5 million of
   loans as well as property and equipment pertaining to the branches.  The Bank
   has agreed to pay First Union a premium of  approximately  $5.9 million.  The
   transaction  is expected to be completed in the second  quarter of 1997.  The
   agreement is subject to regulatory approval.

   In addition,  the Bank entered into a purchase and assumption  agreement with
   Oritani Savings Bank, SLA  ("Oritani"),  whereby the Bank will assume certain
   deposit  liabilities  of three branch  offices from Oritani.  At December 31,
   1996, the branches had deposits of  approximately  $33 million.  In addition,
   the Bank will acquire property and equipment pertaining to the branches.  The
   Bank has agreed to pay Oritani a premium of approximately  $2.1 million.  The
   transaction  is expected to be  completed in the third  quarter of 1997.  The
   agreement is subject to regulatory approval.

20. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

Condensed Statements of Financial Condition                 December 31,
                                                  ------------------------------
                                                        1996            1995
Assets
Cash                                              $     27,187    $    159,205
Investments in subsidiaries                         33,294,851      24,463,659
Office property and equipment                                            9,756
Accrued interest and other assets                       95,417          38,176
                                                  ------------    ------------
Total                                             $ 33,417,455    $ 24,670,796
                                                  ============    ============
                                            
Liabilities and Shareholders' Equity
Loans Payable                                     $  6,000,000
Accrued interest payable                                 2,879
Shareholders' Equity                                27,414,576    $ 24,670,796
                                                  ------------    ------------
Total                                             $ 33,417,455    $ 24,670,796
                                                  ============    ============



<TABLE>
<CAPTION>
Condensed Statements of Income                              Years Ended December 31,
                                                  --------------------------------------------
                                                          1996            1995            1994

<S>                                               <C>             <C>             <C>
Net interest (expense)                            $     (1,888)                   $    (27,045)
Other income                                            15,909    $     12,278           7,200
Expenses                                               (16,271)        (27,025)         (8,090)
                                                  ------------    ------------    ------------

(Loss) before equity in undistributed
  income of subsidiaries and income tax expense         (2,250)        (14,747)        (27,935)
Equity in undistributed income of subsidiaries       3,014,893       2,833,417       1,877,590
Income tax expense                                                                     (10,000)
                                                  ------------    ------------    ------------
Net income                                        $  3,012,643    $  2,818,670    $  1,839,655
                                                  ============    ============    ============
</TABLE>
                                       F-21
<PAGE>
<TABLE>
<CAPTION>

Condensed Statements of Cash Flows                                                  Year Ended December 31,
                                                                      ---------------------------------------------------
                                                                             1996             1995            1994
<S>                                                                       <C>              <C>             <C>          
Operating activities:
  Net income                                                              $   3,012,643    $   2,818,670   $   1,839,655
  Adjustments to reconcile net income to
    net cash (used in) provided by operating activities:
    Depreciation and amortization                                                 9,756            8,360           4,486
    Undistributed income of subsidiaries                                     (3,014,893)      (2,833,417)     (1,877,590)
    Tax benefit from exercise of non-qualified stock options (net)             (110,000)
    Changes in assets and liabilities which provided (used) cash:
      Accrued interest and other assets                                         (57,241)           9,665          (9,701)
      Accounts payable and accrued expenses                                       2,879
                                                                          -------------    -------------   -------------
             Net cash provided by (used in) operating activities               (156,856)           3,278         (43,150)
                                                                          -------------    -------------   -------------
Investing activities:
  Proceeds from maturities of investment securities                                                            2,000,000
  Purchase price of acquisitions, net of cash received                                                        (7,801,950)
  Exercise of stock options                                                   1,126,984          605,358           3,393   
  Payment for fractional interest resulting from stock dividend                  (2,146)
  Purchase of bank properties and equipment                                                                      (20,904)
  Dividend from subsidiary                                                                                     1,400,000
  Advances to subsidiary                                                     (7,100,000)      (1,700,000)     (1,200,000)
                                                                          -------------    -------------   -------------

           Net cash used in investing activities                             (5,975,162)      (1,094,642)     (5,619,461)
                                                                          -------------    -------------   -------------
Financing activities:
  Net borrowings under line of credit agreement                               6,000,000                        4,500,000
  Repayments of short-term borrowings                                                                         (4,500,000)
  Proceeds from issuance of common stock                                                         260,000       6,421,877
                                                                          -------------    -------------   -------------
           Net cash provided by financing activities                          6,000,000          260,000       6,421,877
                                                                          -------------    -------------   -------------
(Decrease) increase in cash                                                    (132,018)        (831,364)        759,266
Cash, beginning of year                                                         159,205          990,569         231,303
                                                                          -------------    -------------   -------------

 Cash, end of year                                                        $      27,187    $     159,205   $     990,569
                                                                          ==============   =============   =============
                                       
</TABLE>

21. SUBSEQUENT EVENT

   In February 1997, the Company intends to create a special purpose  subsidiary
   to issue  approximately  $25  million  of  trust  preferred  securities.  The
   proceeds from the sale of these  securities  are intended to purchase  junior
   subordinated  notes  issued by the  Company.  The  proceeds  received  by the
   Company  from the sale of the junior  subordinated  notes are  expected to be
   used to increase its capital to support recent and pending  acquisitions  and
   for other general corporate purposes.

                                       F-22





<PAGE>

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

No person has been  authorized  in 
connection  with the offering made 
hereby to give  any  information  or to
make  any  representation  not  contained 
in this prospectus and, if given or made,
such information or representation must
not be relied upon as having been authorized 
by the company or any underwriter.  This 
prospectus does not constitute an offer to                     [Logo]
sell or a solicitation of any offer to buy
any of the securities offered hereby to                   $25,000,000
any person or by anyone in any jurisdiction 
in which it is unlawful to make such offer or
solicitation.  Neither the delivery of this               SUN CAPITAL TRUST
prospectus nor any sale made hereunder shall,
under any circumstances, create any implication
that the information contained herein is correct    9.85% Preferred Securities
as of any date subsequent to the date hereof.       (Liquidation Amount $25 per 
                                                         Preferred Security)
                                                      guaranteed, as described 
                                                            herein, by

TABLE OF CONTENTS

                                          PAGE            SUN BANCORP, INC.

Summary...................................
Selected Consolidated Financial Data......   5
  and Other Information...................  10          -------------------
Risk Factors..............................  11               PROSPECTUS
Sun Capital Trust.........................  19          -------------------
Use of Proceeds...........................  20
First Union and Oritani Branch Purchases..  20
Capitalization............................  23
Accounting Treatment......................  24             Advest, Inc.
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations...........................  24
Business of the Company...................  42            March 11, 1997
Management................................  48
Supervision and Regulation................  52
Description of Preferred Securities.......  55
Description of Junior Subordinated
  Debentures..............................  69
Description of Guarantee..................  79
Relationship Among the Preferred
  Securities, the Junior Subordinated
  Debentures and the Guarantee............  81
Certain Federal Income Tax
  Consequences............................  83
Certain ERISA Considerations..............  87
Underwriting..............................  88
Validity of Securities....................  89
Experts...................................  89
Available Information.....................  89
Financial Statements...................... F-1

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



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