INDEPENDENCE BANCORP INC /NJ/
10-K405, 1996-04-01
STATE COMMERCIAL BANKS
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K
       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                       EXCHANGE ACT OF 1934 (FEE REQUIRED)
                   For the fiscal year ended December 31, 1995
                                       OR
    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
           For the Transition Period From __________ To ____________.
                         Commission file number 0-14129

                           INDEPENDENCE BANCORP, INC.
             (Exact name of registrant as specified in its charter)
- -----------------------------------------------------------------------------
           New Jersey                                       22-2483513
- ---------------------------------                       --------------------
  (State or other jurisdiction                             (IRS Employer
of incorporation or organization)                        Identification No.)

               1100 Lake Street, Ramsey, New Jersey 07446
- -----------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

        Registrants telephone number, including area code: 201-825-1000

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:

                                                     9% SERIES A
      COMMON STOCK                    CUMULATIVE CONVERTIBLE PREFERRED STOCK
    (Title of Class)                              (Title of Class)

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

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

        The aggregate market value of voting stock held by non affiliates of the
Registrant is approximately $11,461,400.(1)

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the last practicable date.
  
Common Stock $1.6675 Par Value                      1,312,908
- -------------------------------       -----------------------------------------
        Title of Class                Number of Shares Outstanding as of 3/8/96

                      DOCUMENTS INCORPORATED BY REFERENCE

Parts II and IV incorporate certain information by reference to the Registrant's
Annual Report to Shareholders for the fiscal year ended December 31, 1995 (the
"Annual Report"). Part III incorporates certain information by reference to the
Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders.

- --------------- 
(1) The aggregate dollar amount of the voting stock set forth equals the number
of shares of Common Stock outstanding, reduced by the number of shares of Common
Stock held by executive officers, directors and shareholders owning 10% or more
of the Company's Common Stock, multiplied by the last sale price for the
Company's Common Stock on March 8, 1996. The information provided shall in no
way be construed as an admission that any officer, director, or 10% shareholder
may be deemed an affiliate of the registrant or that such person is the
beneficial owner of the shares reported as being held by him, and any such
inference is hereby disclaimed. The information provided herein is included
solely for the record keeping purposes of the Securities and Exchange
Commission.
<PAGE>


                           INDEPENDENCE BANCORP, INC.
                        FORM 10-K CROSS-REFERENCE INDEX

The preceding Annual Report and this Form 10-K incorporates into a single
document the requirements of the accounting profession and the Securities and
Exchange Commission. There has been no action by the Commission, however, to
approve or disapprove or pass upon the accuracy or adequacy of the Annual Report
and Form 10-K.

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                                                                                             Page
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Part I
<S>          <C>                                                                                 <C>
        Item 1.   Business ................................................................      47
        Item 2.   Properties ..............................................................      54
        Item 3.   Legal Proceedings .......................................................      54
        Item 4.   Submission of Matters to a Vote of Security Holders
                  (This item is omitted since no matters were submitted for 
                  security vote during the fourth quarter of 1995).
Part II          
        Item 5.   Market for the Registrants Common Equity and
                  Related Stockholder Matters ..............................................     21
        Item 6.   Selected Financial Data ..................................................      3
        Item 7.   Managements Discussion and Analysis of Financial
                  Condition and Results of Operations ......................................      5
        Item 8.   Financial Statements and Supplementary Financial Data ....................     22
        Item 9.   Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure
                  (This item is omitted since no information 
                  is required to be reported hereunder)
Part III
        Item 10.  Director and Executive Officers of the Registrant 
        Item 11.  Executive Compensation 
        Item 12.  Security Ownership of Certain Beneficial Owners and
                  Management 
        Item 13.  Certain Relationships and Related Transactions
                  (The information required by the items in this part has been
                  omitted since it will be contained in the definitive proxy 
                  statement to be filed pursuant to Regulation 14A.)



Part IV
        Item 14.  Exhibits, Financial Statement Schedules, and Reports on
                  Form 8-K ..................................................................    44

        (a) The financial statements listed on the index set forth in Item 8 of this Annual
            Report on Form 10-K are filed as part of this Annual Report.

        3.1     Certificate of Incorporation of the Company, as amended 
                (incorporated herein by reference to Exhibit 3.1 to the Company's 
                Quarterly Report on Form 10-Q for the quarterly period ended 
                March 31, 1995).

        3.2     By-Laws of the Company, as amended (incorporated herein by 
                reference to Exhibit 3.2 to the Company's Quarterly Report on 
                Form 10-Q for the quarterly period ended June 30, 1995).

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

<S>     <C>                                 <C>                          
        10.1    Lease Agreement, dated July 18,1985, between Office Court
                Associates and the Bank, relating to the branch office in
                Ramsey, New Jersey (incorporated herein by reference to the
                Company's Form S-1 Registration Statement No. 33-6062).

        10.2    Lease Agreement, dated March 16, 1984 between Office Court
                Associates and the Bank, relating to the branch office in
                Ramsey, New Jersey (incorporated herein by reference to the
                Company's Form S-1 Registration Statement No. 33-6062).

        10.3    Lease Agreement, dated December 14, 1982, between Esko J.
                Koskinen and Miriam E. Koskinen and the Bank, relating to the
                branch office in Montvale, New Jersey (incorporated herein by
                reference to the Company's Form S-1 Registration Statement No.
                33-6062).

        10.4    Lease Agreement, dated July 1, 1987 between Office Court
                Associates and the Bank, relating to the branch office in
                Ramsey, New Jersey (incorporated herein by reference to Exhibit
                10.5 to the Company's Annual Report on Form 10-K for the year
                ended December 31, 1987).

        10.5    Lease Agreement, dated May 28, 1987 between Gerth's Pork Store,
                Inc., and the Bank, relating to the branch office in Hawthorne,
                New Jersey (incorporated herein by reference to Exhibit 10.6 to
                the Company's Annual Report on Form 10-K for the year ended
                December 31, 1987).
 
        10.6    Lease Agreement, dated October 24, 1988 between Fairleigh
                Dickinson University and the Bank, relating to the branch office
                in Hackensack, New Jersey (incorporated herein by reference to
                Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
                year ended December 31, 1988).

        10.7    Amended Lease Agreement, dated January 18, 1989, between Esko J.
                Koskinen and Miriam E. Koskinen and the Bank, relating to the
                branch office in Montvale, New Jersey (incorporated herein by
                reference to Exhibit 10.11 to the Company's Annual Report on Form
                10-K for the year ended December 31, 1988).

        10.8    Lease Agreement, dated February 15, 1990, between Office Court
                Associates and the Bank, relating to the branch office in
                Ramsey, New Jersey (incorporated herein by reference to Exhibit
                10.12 to the Company's Annual Report on Form 10-K for the year
                ended December 31, 1989).

 
        10.9    Lease Agreement, dated September 25, 1990, between Office Court
                Associates and the Bank, relating to the branch office in
                Ramsey, New Jersey (incorporated herein by reference to Exhibit
                10.13 to the Company's Annual Report on Form 10-K for the year
                ended December 31, 1990).

        10.10   Term Loan Agreement among Independence Bancorp, Inc., Employee
                Stock Ownership Trust and Commerce Bank, N.A., dated October 16,
                1992 (incorporated herein by reference to Exhibit 10.13 to the
                Company's Annual Report on Form 10-K for the year ended December
                31, 1992).
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

<S>     <C>                                                               <C>
        13.1    Annual Report to Shareholders for the year ended December 31,
                1995 (such Report, except for those portions expressly
                incorporated by reference in the filing, is furnished for the
                information of the Commission and is not to be deemed "filed" as
                part of this Form 10-K).

        21.1    Subsidiaries of the Company (incorporated herein by reference to
                the Company's Form S-1 Registration Statement No. 33-6062).

        23.1    Consent of Arthur Andersen LLP.

        Executive Compensation Plans and Arrangements

        10.11   1986 Stock Option Plan (incorporated herein by reference to
                Exhibit 10.6 of the Company's Form S-1 Registration Statement No.
                33-6062).
 
        10.12   Independence Bank Salary Savings Plan (incorporated herein by
                reference to Exhibit 10.9 to the Company's Annual Report on Form
                10-K for the year ended December 31, 1988).

        10.13   The Company's 1990 Stock Option Plan for Non-Employee Directors.
                (incorporated herein by reference to Exhibit 10.13 to the
                Company's Annual Report on Form 10-K for the year ended December
                31, 1994).

        10.14   Employee Stock Ownership Plan (incorporated by reference to
                Exhibit 10.15 of the Company's Form S-1 Registration Statement
                No. 33-48002).

        10.15   1994 Stock Option Plan (incorporated herein by reference to
                Exhibit 10.15 to the Company's Annual Report on Form 10-K for the
                year ended December 31, 1994).

        (b)  Current Reports on Form 8-K during the quarter ended December 31,
             1994. The Company filed no reports on Form 8-K during the quarter.

        (c)  The exhibits required by Item 601 of Regulation S-K and listed
             above under Item 14(a) are filed as exhibits to this Form 10-K.
 
        (d)  All financial statement schedules for which provision is made in
             the regulations of the Securities and Exchange Commission have been
             omitted since they are not required to be filed pursuant to the
             instructions to the regulations or are inapplicable.
</TABLE>

<PAGE>

                                     Part I

Item 1. Business

General

Independence Bancorp, Inc. ("the Company"), is a New Jersey business corporation
which is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended (the "Holding Company Act"). As a bank holding company, the
Company's operations are confined to the ownership and operation of banks and
activities deemed by the Federal Reserve Board to be closely related to banking
to be a proper incident thereto. The Company incorporated on November 10, 1983
for the purpose of acquiring Independence Bank of New Jersey (the "Bank") and
thereby enabling the Company to operate within the bank holding company
structure. On June 28, 1984 the Company acquired 100 percent of the outstanding
shares of the Bank.

Except as otherwise indicated, all references herein to the Company include the
Bank.

The principal activities of the Company are the owning and supervising of the
Bank, which engages in a general banking business from seven offices located in
Bergen County, New Jersey and one office in Passaic County, New Jersey. The
Company directs the policies and coordinates the financial resources of the
Bank. The Company provides and performs various technical, advisory and auditing
services for the Bank, coordinates the Bank's general policies and activities
and participates in the Bank's major business decisions. The day-to-day affairs
of the Bank are managed by the Bank's officers and directors. The Company's
principal executive offices are located at 1100 Lake Street, Ramsey, New Jersey.

The Bank

The Bank is an independent community bank which seeks to provide personal
attention and professional financial assistance to its customers. The Bank is a
locally managed, owned and oriented financial institution.

The Bank is a member of the Commerce Network (the "Network") and has the
exclusive right to use the "Yes Bank" logo within its primary service area. The
Network provides certain marketing and support services to the Bank. The Network
is a group of five independent community banks with over 70 branch banking
offices which provides various support services and ancillary services to its
members which allows them to take advantage of the Network's size.

The Bank provides a broad range of retail and commercial banking through branch
offices in Ramsey, Allendale, Ridgewood, Mahwah, Montvale, Park Ridge,
Hackensack and Hawthorne, New Jersey. The Bank is not a member of the Federal
Reserve System. The Bank's deposits are insured by the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation (the "FDIC") to the maximum
extent permitted by law. As of December 31, 1995, the Bank had total assets of
$325.7 million, total deposits of $304.5 million and total stockholders equity
of $19.6 million.

The Bank has focused its strategy for growth primarily on the further
development of its community-based retail banking network. The objective of this
corporate strategy is to build earnings growth potential for the future as the
retail branch office network matures. The Bank's branch concept uses a prototype
or standardized branch office building, convenient locations and active
marketing, all designed to attract retail deposits. Using this prototype branch
concept, the Bank plans to open a number of new branch offices in the next five
years. The Bank's retail approach to banking emphasizes a combination of
long-term customer relationships, quick responses to customer needs, active
marketing, convenient locations, free checking for customers maintaining certain
minimum balances and extended hours of operation.

<PAGE>

The Bank is not dependent on any one or more major customers.

Service Area

The Bank's primary service area includes Bergen and Passaic Counties, New Jersey
and more particularly the following cities located in these counties where the
Bank has branch offices: Ramsey, Allendale, Ridgewood, Mahwah, Montvale, Park
Ridge, Hackensack and Hawthorne. The Bank has attempted to locate its branches
in the fastest growing communities within its service area. Retail deposits
gathered through these focused branching activities are used to support the
Bank's lending throughout Northern New Jersey.

Retail Banking Activities

The Bank provides a broad range of retail banking services and products,
including free personal checking accounts and savings programs, negotiable
orders of withdrawal ("NOW") accounts, money-market accounts, certificates of
deposit, secured and unsecured loans, consumer loan programs (including
installment loans for home improvement and the purchase of consumer goods and
automobiles), home equity and Visa/MasterCard revolving lines of credit,
overdraft checking, mortgage loans, safe deposit facilities, wire transfers,
automated teller facilities, money orders and holiday club accounts.

Commercial Banking Activities

The Bank offers a broad range of commercial banking services, including free
checking accounts (subject to a $1,000 minimum balance), night depository
facilities, wire transfers, money-market accounts, certificates of deposit,
short-term loans for seasonal or working capital purposes, term loans for fixed
assets and expansion purposes, revolving credit plans and other commercial loans
to fit the needs of its customers. The Bank also finances the construction of
business properties and makes real estate mortgage loans on completed buildings.
Where the needs of the customer exceed the Bank's lending limit for any one
customer (approximately $3,343,000 at December 31, 1995), the Bank may
participate with other banks in making a loan.

Competition

The Bank's service area is characterized by intense competition for banking
business among bank holding companies and commercial banks, thrift institutions
and other financial institutions. The Bank actively competes with such banks and
financial institutions for local retail and commercial accounts. The Bank also
is subject to competition from other major banking and financial institutions
outside its service area, many of which are substantially larger and have
greater financial resources than the Bank. Other competitors, including credit
unions, consumer finance companies, insurance companies and money-market mutual
funds, compete with certain lending and deposit gathering services offered by
the Bank.

In commercial transactions, the Banks legal lending limit to a single borrower
(approximately $3,343,000 as of December 31, 1995) enables it to compete
effectively for the business of smaller businesses. However, this legal lending
limit is considerably lower than that of various competing institutions and thus
may act as a constraint on the Bank's effectiveness in competing for financings
in excess of these limits.

In consumer transactions, the Bank believes that it is able to compete on a
substantially equal basis with larger financial institutions because it offers
longer hours of operation, personalized service and competitive interest rates
on savings and time accounts with low minimum deposit requirements.

In order to compete with other financial institutions both within and beyond its
primary service area, the Bank uses, to the fullest extent possible, the

<PAGE>

flexibility which independent status permits. This includes an emphasis on
specialized services for the small business person and professional contacts by
the Bank's officers, directors and employees, and the greatest possible efforts
to understand fully the financial situation of relatively small borrowers. The
size of such borrowers, in managements opinion, often inhibits close attention
to their needs by larger institutions. The Bank may seek to arrange for loans in
excess of its lending limit on a participation basis with other financial
institutions in order to more fully service customers whose loan demands exceed
the Bank's lending limit.

The Bank endeavors to be competitive with all competing financial institutions
in its primary service area with respect to interest rates paid on time and
saving deposits, its overdraft charges on deposit accounts, and interest rates
charges on loans.

Employees

As of December 31, 1995, the Company, including the Bank, had approximately 182
full-time equivalent employees of whom 41 were part-time. The Company considers
its relationships with its employees to be good.

Supervision and Regulation

The banking industry is highly regulated. Statutory and regulatory controls
increase the cost of doing business. The operations of the Bank are subject to
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, and limitations on the types
of investments that may be made and the types of services which can be offered.
Various consumer laws and regulations also affect the operations of the Bank.

The Company

The Company is registered as a "bank holding company" under the Holding Company
Act and is, therefore, subject to regulation by the Board of Governors of the
Federal Reserve System (the "FRB").

Under the Holding Company Act, the Company is required to obtain the prior
approval of the FRB before it can merge or consolidate with any other bank
holding company or acquire all or substantially all of the assets of any bank
that is not already majority owned by it or acquire direct or indirect ownership
or control of any voting shares of any bank that is not already majority owned
by it, if after such acquisition it would directly or indirectly own or control
more than 5% of the voting stock of such bank. See "Recent Legislation".

The Company is generally prohibited under the Holding Company Act from engaging
in, or acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company engaged in nonbanking activities unless the FRB, by
order or regulation, has found such activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making such determination, the FRB considers whether the performance of these
activities by a bank holding company can reasonably be expected to produce
benefits to the public which outweigh the possible adverse effects. The FRB has
been regulation determined that certain activities are closely related to
banking within the meaning of the Holding Company Act. These activities include,
among others, operating a mortgage, finance, credit card or factoring company;
performing certain data processing operations; providing investment and
financial advice, acting as an insurance agent for certain types of
credit-related insurance; leasing personal property on a full payout,
non-operating basis; and certain stock brokerage and investment advisory
services.

Under the policy of the FRB with respect to bank holding company operations, a
bank holding company is deemed to serve as a source of financial strength to its
subsidiary depository institutions and to commit resources to support such

<PAGE>



institutions in circumstances where it might not do so absent such policy. Under
the Federal Deposit Insurance Corporation Improvement Act of 1991 ("1991 Banking
Law") a bank holding company is required to guarantee that any
"undercapitalized" (as such term is defined in the statute) insured depository
institution subsidiary will comply with the terms of any capital restoration
plan filed by such subsidiary with its appropriate federal banking agency to the
lesser of (i) an amount equal to 5% of the institution's total assets at the
time the institution became undercapitalized, or (ii) the amount which is
necessary (or would have been necessary) to bring the institution into
compliance with all capital standards as of the time the institution failed to
comply with such capital restoration plan. In addition, under the Holding
Company Act, the Company is required to file periodic reports of its operations
with, and is subject to examination by, the FRB.

The Company is also under the jurisdiction of the Securities and Exchange
Commission and various state securities commissions for matters related to the
offering and sale of its securities, and is subject to the Securities and
Exchange Commission's rules and regulations relating to periodic reporting,
reporting to shareholders, proxy solicitation and insider trading.

The Company, as an affiliate of the Bank within the meaning of the Federal
Reserve Act, is subject to certain restrictions under the Federal Reserve Act
regarding, among other things, extensions of credit to it by the Bank and the
use of the stock or other securities of the Company as collateral for loans by
the Bank to any borrower. Further, under the Federal Reserve Act and the FRB
regulations, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with extensions of credit
or provisions of property or services. These so-called "anti-tie-in provisions"
generally provide that a bank may not extend credit, lease or sell property or
furnish any service or fix or vary the consideration for any of the foregoing
(or obtain the same from), to a customer on the condition or requirement that
the customer provide some additional credit, property or service to the bank,
the bank's holding company or any other subsidiary of the bank's holding
company, or on the condition or requirement that the customer not obtain other
credit, property or services from a competitor of the bank, the bank's holding
company or any subsidiary of the bank's holding company.

The Bank

The Bank, as a state-chartered subsidiary bank, is subject to the New Jersey
Banking Act of 1948, as amended. The Bank is also subject to the supervision of,
and to regular examination by, the New Jersey Department of Banking
("Department") and the FDIC and is required to furnish periodic reports to each
agency. Although the Bank is not a member of the Federal Reserve System, it is
still subject to substantial regulation by the FRB. The approval of the
Department is necessary for the establishment of any additional branch offices
by any state bank, subject to applicable state law restrictions. Under present
New Jersey Law, the Bank may operate offices at any location in New Jersey
approved by the Department. See "Recent Legislation."

The aspects of the lending and deposit business of the Bank which is regulated
by the above mentioned agencies include, among others, personal lending and
mortgage lending. The operations of the Bank are also subject to numerous
Federal, state and local laws and regulations which set forth specific
restrictions and procedural requirements with respect to the extension of
credit, credit practices, the disclosure of credit terms and discrimination in
credit transactions.

State-chartered banks are prohibited from engaging as principals in activities
that are not permitted for national banks, unless: (i) the FDIC determines the
activity would pose no significant risk to the appropriate deposit insurance
fund, and (ii) the bank is, and continues to be, in compliance with all
applicable capital standards. The Bank currently does not engage as principal in
activities not permitted for national banks.

<PAGE>

The Bank, as an institution, the deposits of which are insured by the BIF of the
FDIC, is subject to an insurance assessment imposed by the FDIC. The insurance
assessment paid by BIF-insured institutions is determined under a risk-based
assessment system. Under this system, banks pay a semi-annual assessment at a
rate which is based upon the assessment risk classification assigned to the bank
by the FDIC. In determining the assessment risk classification, the FDIC assigns
each bank to one of the three capital groups and within each capital group to
one of the three supervisory subgroups. Depending upon the assessment risk
classification assigned to a bank, the semi-annual assessments paid by banks
range from 0.00% of an institutions average assessment base for banks assigned
to the highest capital group and highest supervisory subgroup to 0.31% for banks
assigned to the lowest capital group and lowest supervisory subgroup. Banks are
notified of the assessment risk classification by the first day of the month
preceding each semi-annual period. The Bank's current assessment rate is 0.00%.

Under the Community Reinvestment Act, as amended ("CRA"), as implement by FDIC
regulations, a bank has a continuing and affirmative obligation consistent with
its safe and sound operation to help meet the credit needs of its entire
community, including low- and moderate-income neighborhoods. CRA does not
establish specific lending requirements or programs for financial institutions
nor does it limit an institution's discretion to develop the types of products
and services that it believes are best suited to its particular community,
consistent with CRA. CRA requires the FDIC to assess an institutions record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications by such institution. The CRA requires
public disclosure of an institution's CRA rating and requires that the FDIC
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system. An institution's CRA rating is considered
in determining whether to grant charters, branches and other deposit facilities,
relocations, mergers, consolidations and acquisitions. Performance less than
satisfactory may be the basis for denying an application. In 1994 and 1995, the
Bank received a "needs to improve" rating, which is the rating immediately below
"satisfactory." A continued "needs to improve" rating could have an effect on
the ability of the Bank to expand in the future. The Company has taken steps to
improve the Bank's performance under CRA including strengthening its ongoing
commitment to small business lending and expanding its commitment to specialized
lending to low- and moderate-income areas within the Companys market areas.
While the Company believes that its efforts will be successful in raising the
Bank's CRA rating, there can be no assurances that the Company's efforts will be
successful and that the rating will improve.

Capital Requirements

Effective December 31, 1992, risk-based capital standards issued by bank
regulatory authorities in the United States were fully implemented. Theses
capital standards attempt to relate a banking company's capital to the risk
profile of its assets and provide the basis for which all banking companies and
banks are evaluated in terms of capital adequacy. The risk-based capital
standards require all banking organizations to meet a minimum ratio of total
capital to risk weighted assets of 8.00% (including certain off-balance sheet
activities, such as standby letters of credit) of which at least 4.00% was
required to be in the form of Tier I capital.

A banking organization's qualifying total capital consists of two components:
Tier I capital (core capital) and Tier II capital (supplementary capital). At
least 50% of a banking organization's total regulatory capital must consist of
Tier I capital. Tier I capital is an amount equal to the sum of (i) common
stockholders' equity (including adjustments for any surplus or deficit); (ii)
non-cumulative perpetual preferred stock (plus, for bank holding companies,
cumulative perpetual preferred stock in an amount up to 25% of Tier I capital);
and (iii) the company's minority interest in the equity account of consolidated
subsidiaries, less certain goodwill items.

Tier II capital may consist of a limited amount of subordinated debt and
intermediate-term preferred stock, certain hybrid capital instruments and other
debt securities, perpetual preferred stock and a limited amount of the allowance
for possible loan losses.

<PAGE>


Under the risk-weighted capital guidelines, balance sheet assets and certain
off-balance sheet items, such as standby letter of credit, are assigned to one
of four risk-weight categories (0%, 20%, 50% or 100%) according to the nature of
the assets and their collateral or the identity of any obligor or guarantor. For
example, cash is assigned to the 0% risk category, while loans secured by
one-to-four family residences are assigned to the 50% risk category. The
aggregated amount of such assets and off-balance sheet items in each risk
category is adjusted by the risk-weight assigned to that category to determine
weighted values, which are added together to determine the total risk-weighted
assets for the banking organization. Accordingly, an asset, such as a commercial
loan, which is assigned to a 100% risk category is included in risk-weighted
assets at its nominal face value, whereas a loan secured by a single-family
mortgage is included at only 50% of its nominal face value.

Under regulations issued by the FRB, bank holding companies, including the
Company, are required to maintain 3% minimum leverage capital ratio (Tier I
capital, less intangible assets, to total average assets) plus an additional
capital cushion of 100 to 200 basis points (1 - 2%). In order for an institution
to operate at or near the minimum leverage requirements of 3%, the FRB expects
that such institution would have well-diversified risk, no undue interest rate
risk exposure, excellent asset quality, high liquidity and good earnings. In
general, the bank holding company would have to be considered a strong banking
organization, rated in the highest category under the bank holding company
rating system and have no significant plans for expansion. Higher capital ratios
of up to 5% will generally be required if all the above characteristics are not
exhibited, or if the institution is undertaking expansion, seeking to engage in
new activities, or otherwise faces unusual or abnormal risks.

The FDIC adopted a similar rule for insured non-member banks, such as the Bank,
in March 1991. Pursuant to the rule, the FDIC is not precluded from requiring a
bank to maintain a higher capital level based on the institutions particular
risk profile. The FDIC rule provides that institutions not in compliance with
the regulation are expected to be operating in compliance with a capital plan or
agreement with the regulator. If they do not do so, they are deemed to be
engaging in an unsafe and unsound practice and may be subject to enforcement
action. Enforcement actions could include a capital directive, a cease and
desist order, civil monetary penalties, removal and prohibition orders against
institution-affiliated parties, the establishment of restrictions on the Bank's
operations, and appointment of a conservator or receiver. Failure to maintain
capital of at least 2% of assets constitutes an unsafe and unsound condition
justifying termination of FDIC insurance.

The 1991 Banking Law requires each federal Banking agency including the Board of
Governors of the FRB to revise its risk-based capital standards to ensure that
those standards take adequate account of interest rate risk, concentration of
credit risk and the risks of non-traditional activities, as well as reflect the
actual performance and expected risk of loss on multi-family mortgages. All of
the bank regulatory agencies recently issued a final rule that amends their
capital guidelines for interest rate risk and requires such agencies to consider
in their evaluation of a banks capital adequacy the exposure of a bank's capital
and economic value to changes in interest rates. This law also requires each
federal Banking agency, including the FRB, to specify, by regulation, the levels
at which an insured institution would be considered "well-capitalized",
"adequately capitalized", "undercapitalized", "significantly undercapitalized",
or "critically undercapitalized." At December 31, 1995, the Bank and the Company
each met the regulatory definition of a "well-capitalized" financial
institution, i.e., a leverage capital ratio exceeding 5%, and a Tier I
risk-based capital ratio exceeding 6%, and a total risk-based capital ratio
exceeding 10%.

Recent Legislation

On September 29, 1994, the President signed into law the "Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994" (the "Interstate Act"). Among
other things, the Interstate Act permits bank holding companies to acquire banks
in

<PAGE>

any state one year after enactment. Beginning June 1, 1997, a bank may merge
with a bank in another state so long as both states have not opted out of
interstate branching between the date of enactment of the Interstate Act and May
31, 1997. States may enact laws opting out of interstate branching before June
1, 1997, subject to certain conditions. States may also enact laws permitting
interstate merger transactions before June 1, 1997 and host states may impose
conditions on a branch resulting from an interstate merger transaction that
occurs before June 1, 1997, if the conditions do not discriminate against
out-of-state banks, are not preempted by Federal law and do not apply or require
performance after May 31, 1997. Interstate acquisitions and mergers would both
be subject, in general, to certain concentration limits and state entry rules
relating to the age of the bank.

Under the Interstate Act, the Federal Deposit Insurance Act is amended to permit
the responsible Federal regulatory agency to approve the acquisition of a branch
of an insured bank by an out-of-state bank or bank holding company without the
acquisition of the entire bank or the establishment of a "de novo" branch only
if the law of the state in which the branch is located permits out-of-state
banks to acquire a branch of a bank without acquiring the bank or permits
out-of-state banks to establish "de novo" branches.

New Jersey currently has legislation pending opting-in early to interstate bank
mergers and allowing out-of-state banks and bank holding companies to branch in
New Jersey by the acquisition of a branch without the acquisition of the entire
bank and by the establishment of a "de novo" branch.

On September 23, 1994, the President signed into law the "Riegel Community
Development and Regulatory Improvement Act of 1994" (the "Development Act").
Among other things, the Development Act establishes a $382 million fund (the
"Fund") to promote economic development and credit availability in underserved
communities by providing financial and technical assistance to community
development financial institutions ("CDFI's").

CDFI's include banks, savings associations and bank holding companies which have
a primary mission of promoting community development. Institutions receiving
monies from the Fund will be required to provide matching funds dollar for
dollar. Under the Fund, a CDFI may receive up to $5 million over a three-year
period, with affiliates in other states not presently served eligible to receive
up to an additional $3.75 million over three years.

One third of the Fund will be used to finance the Bank Enterprise Act, an
existing (but previously unfunded) incentive program designed to encourage
depository institutions to increase funding in distressed neighborhoods.

In addition to the above, the Development Act contains provisions relating to,
among others, small business capital formation, small business loan
securitization, consumer protection for "reverse mortgages", paperwork reduction
and reform of the national flood insurance program.

The foregoing is a summary and general description of certain provisions of each
of the Interstate Act and the Development Act and does not purport to be
complete. Many of the provisions of each will be implemented through the
adoption of regulations by the various Federal banking agencies. Moreover, many
of the significant provisions of the legislation have not yet become effective.
As of the date hereof, the Company is continuing to study the legislation and
regulations relating to the legislation but cannot yet assess its impact on the
Company.

National Monetary Policy

In addition to being affected by general economic conditions, the earnings and
growth of the Bank and the Company are affected by the policies of the
regulatory agencies, including the FRB and FDIC. An important function of the

<PAGE>

FRB is to regulate the money supply and credit conditions. Among the instruments
used to implement these objectives are open market operations in United States
Government securities, setting the discount rate and changes in reserve
requirements against bank deposits. These instruments are used in varying
combinations to influence overall growth of bank loans, investments and deposits
and their use may also affect interest rates charged on loans or paid on
deposits. The monetary policies and regulations of the FRB have had a
significant effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future. The effects of such policies
upon the future business, earnings and growth of the Company and the Bank cannot
be predicted.

Item 2. Properties

The Bank maintains eight branches, five of which are leased, two are owned and
one is in a building owned by the Bank on land leased by the Bank.

The executive offices of the Company and the Bank are located at 1100 Lake
Street, Ramsey, New Jersey. The Bank also maintains a branch office at this
location. These facilities are housed in a three story building known as the
"Independence Bank Building," in which the Bank leases 19,709 square feet of
space. The Bank leases branch offices located at Grand Avenue and Chestnut Ridge
Road in Montvale, 142 Kinderkamack Road in Park Ridge, 617 Lafayette Avenue in
Hawthorne and River Street and University Plaza Drive in Hackensack, New Jersey.
The branch office located at 63 West Allendale Avenue, Allendale, New Jersey, is
housed in a building owned by the Bank but on land leased by the Bank. The Bank
maintains a branch located at 133 Franklin Avenue, Ridgewood, New Jersey and 814
Wyckoff Avenue, Mahwah, which are owned by the Bank.

Item 3. Legal Proceedings

Neither the Company, the Bank nor any of their properties is subject to any
material legal proceedings other than routine litigation incidental to its
business which primarily consists of collection proceedings in which the Bank is
seeking to enforce obligations due it.

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

The Company had no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year being reported on in this report.



<PAGE>




                                   SIGNATURES

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


                                   INDEPENDENCE BANCORP, INC.

 DATE: MARCH 14, 1996                BY: /s/ A. Roger Bosma
                                     ----------------------
                                         A. Roger Bosma
                                         President

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

Signature                          Title                           Date
- -----------                       -------                          ----
/s/ James R. Napolitano    Chairman of the Board               March 14, 1996  
- -----------------------    (Principal Executive Officer) 
James R. Napolitano            
                                                             
/s/ A. Roger Bosma         President and Director              March 14, 1996
- -----------------------
A. Roger Bosma                                               
                                                             
/S/ ESKO J. KOSKINEN       Director                            March 14, 1996
- -----------------------
Esko J. Koskinen                                             
                                                             
/s/ William F. Dator       Director                            March 14, 1996
- -----------------------
William F. Dator                                             
                                                             
/s/ Julius J. Franchini    Director                            March 14, 1996
- -----------------------
Julius J. Franchini                                          
                                                             
- -----------------------
Robert F. Frasco           Director                            March 14, 1996
                                                             
/s/ Robert O. Hagman       Director                            March 14, 1996
- -----------------------
Robert O. Hagman                                             
                                                             
/s/ Joseph A. Haynes       Director                            March 14, 1996
- -----------------------
Joseph A. Haynes                                             
                                                             
/s/ Joseph Lo Scalzo       Director                            March 14, 1996
- -----------------------
Joseph Lo Scalzo                                             
                                                             
/s/ Kevin J. Killian       Executive Vice President and        March 14, 1996
- -----------------------    Secretary (Principal Financial 
Kevin J. Killian           and Accounting Officer)        
                           


<PAGE>
INDEPENDENCE BANCORP, INC. AND SUBSIDIARY

- -------------------------------------------------------------------------------
Dear Shareholders, Customers and Friends:
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
The Directors and Management of Independence Bancorp are pleased to report to
you on the results for the year ended December 31, 1995.

Throughout the year, Independence Bank continued to focus on its proven retail
approach to branch banking. While many New Jersey banks experienced turmoil
caused by a wave of mergers, Independence moved forward with confidence. A
steady increase in market share was a clear indication that Independence is
strengthening its position as the leading community bank in the Bergen County
area.

Other key indications of the Bank's success in 1995 were:

o Assets: Total assets increased 15% to $325 million.

o Deposits: In direct response to our "YES" Banking service, including 100% free
  personal checking and Sunday banking, deposits grew by 15% to $304 million.

o Net Income: Total net income increased 81% to $3.1 million.

o Net Income Per Share: On a fully diluted basis, net income per share increased
  64% to $1.43.

o Stockholders' Equity: Due to our strong overall performance, stockholders'
  equity increased 20.9% to $18.6 million.

In addition, the Bancorp declared a regular quarterly dividend of 6 1/4c per
share payable to shareholders of record as of February 15, 1996, representing an
increase of 150% over the quarterly dividend paid in 1995.

Independence Bank's unsurpassed commitment to exceeding our customers'
expectations and our full range of convenient, competitively priced services
reflect the essence of our "YES" Bank philosophy. Our dedication to providing
quality service also extends well beyond our branch offices. Across Bergen and
Passaic Counties, Independence Bank is an active partner in a wide range of
non-profit organizations and civic groups.

Looking ahead, 1996 will be an exciting year for Independence Bank as we mark
our 20th anniversary. We approach this significant milestone with great momentum
and enthusiasm.

The Directors and Management wish to thank all of you for your continued support
of our shared vision.

Very truly yours,


/s/ James R. Napolitano
- -----------------------
James R. Napolitano
Chairman of the Board
April 3, 1996

<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                               Percentage
(In thousands, except per share data)                                           1995             1994*           Change
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>              <C>    
For the Year Ended December 31
Net income ............................................................      $  3,050        $   1,683            81.2%
Per common share:
Net income-primary ....................................................          1.79              .95            88.4
Net income-fully diluted ..............................................          1.43              .87            64.4
Book value at year end-primary ........................................          9.26             7.97            16.2
Book value at year end-fully diluted ..................................          8.72             7.97             9.4
- -----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data at December 31
Total assets ..........................................................      $325,187         $283,251            14.8%
Total deposits ........................................................       304,346          265,432            14.7
Total loans ...........................................................       142,494          130,458             9.2
Securities ............................................................       136,663          115,869            17.9
Stockholders' equity ..................................................        18,627           15,412            20.9
Allowance for possible loan losses ....................................         2,694            2,630             2.4
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated Ratios
Return on average assets ..............................................          1.01%             .63%
Return on average common equity .......................................         18.39            11.37
Leverage capital ......................................................          5.76             5.46
Tier I capital to risk-adjusted assets ................................         10.70            10.23
Total capital to risk-adjusted assets .................................         11.95            11.71
Non-performing assets to total assets .................................           .93             1.64
Allowance for possible loan losses to non-performing loans ............        156.72            77.04
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*The 1994 amounts have been adjusted to reflect the retroactive adoption of SOP
 93-6 "Employers' Accounting for Employee Stock Ownership Plans" (See Note 10 to
 the consolidated financial statements).


2
<PAGE>
- -------------------------------------------------------------------------------
Summary of Selected Financial Data
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                              Year Ended December 31
                                                             -------------------------------------------------------------------
                                                              1995           1994          1993          1992          1991
- --------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>           <C>           <C>           <C>   
Income Statement Data (dollars in thousands)
  Interest income ..................................     $   20,711     $   17,073    $   16,471    $   17,238    $   19,139
  Interest expense .................................          6,122          4,610         4,764         6,554        10,252
- --------------------------------------------------------------------------------------------------------------------------------
  Net interest income ..............................         14,589         12,463        11,707        10,684         8,887
  Provision for possible loan losses ...............            559          1,014         2,635         2,697        10,162
- --------------------------------------------------------------------------------------------------------------------------------
  Net interest income (loss) after 
   provision for possible loan losses ..............         14,030         11,449         9,072         7,987        (1,275)
  Non-interest income ..............................          2,131          2,057         3,333         2,606         3,988
  Non-interest expense .............................         11,800         11,000        10,912         9,590         8,652
- --------------------------------------------------------------------------------------------------------------------------------
  Income (loss) before income taxes ................          4,361          2,506         1,493         1,003        (5,939)
  Income tax provision (benefit) ...................          1,311            823           284            --        (1,875)
- --------------------------------------------------------------------------------------------------------------------------------
  Net income (loss) ................................     $    3,050     $    1,683    $    1,209    $    1,003    $   (4,064)
- --------------------------------------------------------------------------------------------------------------------------------
Common Share Data
  Net income (loss)-primary ........................     $     1.79     $      .95    $      .50    $      .68    $    (3.14)
  Net income (loss)-fully diluted ..................           1.43            .87           .50           .68         (3.14)
  Cash dividends declared ..........................           .075             --            --            --           .15
  Book value (year end)-primary ....................           9.26           7.97          7.17          6.68          6.65
  Book value (year end)-fully diluted ..............           8.72           7.97          7.17          6.68          6.65
  Average common shares outstanding:
    Primary ........................................      1,460,549      1,317,307     1,305,668     1,305,668     1,294,381
    Fully diluted ..................................      2,127,188      1,933,570     1,305,668     1,305,668     1,294,381
  Common shares outstanding ........................      1,312,748      1,308,328     1,305,668     1,305,668     1,305,668
- --------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (at year end, in thousands)
  Total assets .....................................     $  325,187     $  283,251    $  260,935    $  247,161    $  236,870
  Total deposits ...................................        304,346        265,432       244,683       231,596       227,190
  Total loans, net .................................        139,800        127,828       121,652       129,346       117,735
  Securities .......................................        136,663        115,869        91,203        66,955        55,348
  Stockholders equity ..............................         18,627         15,412        14,169        13,458         8,606
- --------------------------------------------------------------------------------------------------------------------------------
Operating Ratios
  Return on average assets .........................           1.01%           .63%          .49%          .43%        (1.75)%
  Return on average common equity ..................          18.39          11.37          8.77         10.33        (41.54)
  Dividend payout ..................................           4.19             --            --            --            --
- --------------------------------------------------------------------------------------------------------------------------------
Loan Quality Ratios
  Allowance for possible loan losses
    to total loans .................................           1.89%          2.02%         2.01%         2.56%         2.63%
  Allowance for possible loan losses
    to non-performing loans ........................         156.72          77.04         44.56         32.19         24.32
  Non-performing assets as a
    percentage of total assets .....................            .93           1.64          2.72          4.41          5.81
- --------------------------------------------------------------------------------------------------------------------------------
Capital Ratios
  Average equity to average assets .................           5.52%          5.50%         5.55%         4.13%         4.21%
  Leverage capital .................................           5.76           5.46          5.31          5.28          3.63
  Tier I capital to risk-adjusted assets ...........          10.70          10.23          9.27          8.24          6.08
  Total capital to risk-adjusted assets ............          11.95          11.71         10.97         10.02          7.59
- --------------------------------------------------------------------------------------------------------------------------------
Other Data (at year end)
  Number of employees (full-time
   equivalent) .....................................            182            161           150           150           142
  Number of banking offices ........................              8              8             8             8             8
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                               3
<PAGE>

- --------------------------------------------------------------------------------
DIRECTORS OF INDEPENDENCE BANCORP, INC. & SUBSIDIARY
- --------------------------------------------------------------------------------

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








                                   

                                      PHOTO













From Left to Right: Joseph A. Haynes, Registered Representative, Smith Barney;
Robert F. Frasco, President, Frasco Enterprises; Julius J. Franchini, President,
Lynn Chevrolet, Inc., President, Franchini Chevrolet, Inc.; Robert O. Hagman,
Partner, CSA Equipment Co.; Joseph M. Lo Scalzo, President, Lo Scalzo Builders,
Ltd.; James R. Napolitano, Esq., Chairman of the Board, Independence Bancorp,
Inc. and Independence Bank of New Jersey, Attorney, Napolitano & Napolitano;
William F. Dator, Partner, The Dator Commercial Agency, Inc.Real Estate; A.
Roger Bosma, President, Independence Bancorp, Inc. and Independence Bank of New
Jersey; Esko J. Koskinen, President, Greenway Construction Co. (not shown).













4



<PAGE>

INDEPENDENCE BANCORP, INC. AND SUBSIDIARY

- -------------------------------------------------------------------------------
Management's Discussion and Analysis of Consolidated
- -------------------------------------------------------------------------------
Financial Condition and Results of Operations
- -------------------------------------------------------------------------------

                                Financial Review

This financial review presents management's discussion and analysis of results
of operations and financial condition. It should be read in conjunction with the
audited consolidated financial statements and the accom-panying notes appearing
in this report.

                                    Overview

Independence Bancorps (the "Company") performance for 1995 was highlighted by
continued progress in earnings growth, record levels in deposits, loans and
assets and improved asset quality. This was the fourth consecutive year of
improved earnings and net income exceeded the previous high achieved in 1989.
For the first time in four years a common stock cash dividend was paid.

Net income for 1995 was $3.1 million, an increase of 81.2% compared to the $1.7
million recorded in 1994. The results for 1994 rose 39.2% over the $1.2 million
recorded in 1993. Fully diluted earnings per common share were $1.43 for 1995 as
compared to $.87 for 1994, and $.50 for 1993. Earnings were enhanced by the loan
and securities growth experienced during the year. Return on average assets
("ROA") was 1.01% in 1995 as compared to .63% in 1994 and .49% in 1993, while
the return on average equity ("ROE") was 18.39% in 1995, which compared in
11.37% in 1994 and 8.77% in 1993.

Continued progress in asset quality was reflected by the decline in
non-performing assets. During 1995, non-performing loans, including impaired
loans, and other real estate ("ORE") declined 34.9%, or $1.6 million, to $3.0
million, or .93% of total assets. The comparable figures for December 31, 1994
and 1993 were $4.6 million, or 1.64% and $7.1 million, or 2.72%, respectively.

Consolidated assets at year end 1995 amounted to $325.2 million, representing an
increase of 14.8% over 1994. Loans, net of unearned fees, amounted to $142.5
million, or 43.8% of total assets, at December 31, 1995 as compared to $130.5
million, or 46.1% of total assets, at year end 1994. Total securities, including
securities available for sale, increased to $136.7 million and accounted for
42.0% of total assets as compared to 40.9% last year. Time deposits increased by
$13.7 million, or 25.6%, to $67.2 million at year end. Demand deposits, both
non-interest and interest bearing, and savings deposits grew by $25.2 million,
or 11.9%, over 1994 to $237.1 million.

At December 31, 1995, the Companys Tier I capital was 10.70% and Total capital
was 11.95% as compared to 10.23% and 11.71%, respectively, at December 31, 1994.
The leverage ratio at year end 1995 was 5.76%, as compared to 5.46% for the
prior year. At December 31, 1995, Independence Bank of New Jerseys (the "Bank")
Tier I, Total capital and leverage capital ratios were 11.29%, 12.54% and 6.10%,
respectively.

<PAGE>

                             Results of Operations

Summary

Net income before preferred dividends for the year ended December 31, 1995 was
$3.1 million, or $1.43 fully diluted per common share compared to $1.7 million,
or $.87 fully diluted per common share in 1994 and $1.2 million, or $.50 fully
diluted per common share in 1993. Earnings performance for 1995 reflected gains
in net interest income, an increase in non-interest income and a decrease in the
provision for possible loan losses. These positive factors were partially offset
by an increase in non-interest expense. For the year ended December 31, 1995,
net interest income rose $2.1 million, or 16.8%, over the prior year as a result
of growth in earning assets, particularly securities, as well as increased
non-interest bearing demand deposits. The provision for possible loan losses
decreased $455 thousand as a result of the declining level of non-performing
loans. Non-interest expenses increased $800 thousand reflecting increases in
salaries and benefits, advertising, and stationery and supplies expense.

Net interest income in 1994 rose 6.5% over the prior year as a result of an
increase in non-interest bearing demand deposits and the favorable impact of
lower non-performing loans on earning assets. The loan loss provision decreased
$1.6 million as a result of the declining levels of non-performing loans. These
factors were partially offset by the $1.3 million decrease in non-interest
income and the $539 thousand increase in the provision for income taxes.

Net Interest Income

Tax equivalent net interest income increased $2.2 million in 1995 or 17.6%,
compared to increases of 6.8% in 1994 and 9.3% in 1993. The net interest margin
was 5.26% in 1995 versus 5.06% in 1994 and 5.11% in 1993. The increase in 1995
was primarily due to the increase in earning assets and slightly wider interest
rate spreads, coupled with a 22.8% increase in non-interest bearing liabilities.
The table on pages 7 and 8 provides the components of average assets and
liabilities together with their respective yields. The table on page 6 provides
a reconciliation of the changes in net interest income attributable to
variations in balances and yields.

Average earning assets increased $31.8 million in 1995 compared to an increase
of $17.8 million in 1994. Average earning assets comprise 92.1% of average total
assets, compared to 92.2% in 1994 and 92.4% in 1993. 

Average loans increased $11.2 million or 8.9% in 1995 compared to a decrease of
4.2% in 1994. Loans grew throughout 1995, and showed a marked increase in the
fourth quarter. At year end, loans outstanding had grown 9.2% overall from year
end 1994 levels. The Company's securities portfolio (securities held to maturity
and securities available for sale) increased on average $16.3 million or 14.9%
in 1995 compared to an increase of 32.5% in 1994.

Average interest bearing liabilities increased $19.9 million or 10.2% in 1995,
compared to an increase of 6.0% in 1994 and 1.2% in 1993. The ratio of average
non-interest bearing deposits to interest bearing liabilities was 32.0% for
1995, compared to 28.7% for 1994 and 25.6% for 1993. The increase in
non-interest bearing deposits comes from the Companys expanded customer base and
its ability to attract and retain these type of deposits.

The Company's net interest rate spread increased 4 basis points during 1995 to
4.61%, following a decrease of 4 basis points in 1994 to 4.57% and an increase
of 14 basis points in 1993 to 4.61%. Yields on earning assets increased 53 basis
points during 1995 to 7.45% compared to a decrease of 27 basis points in 1994 to
6.92% and 86 basis points in 1993 to 7.19%.

The rates paid on interest bearing liabilities increased 49 basis points during
1995 to 2.84% compared to a decrease of 23 basis points in 1994 to 2.35% and a
decrease of 100 basis points in 1993 to 2.58%. In 1995, the Company continued to
benefit from the ratio of non-interest demand and other low cost deposits to
total earning assets, without significantly increasing deposit rates.

In 1994, the net interest margin benefited from an increase in the ratio of
non-interest demand and low cost deposits to total earning assets, reducing
overall funding costs during the year. However, earning asset growth was
primarily in securities-from 36% of earning assets in 1993 to 44% in 1994-which
reduced the yield on earning assets in 1994.

<PAGE>

<TABLE>
<CAPTION>

                                                1995 vs. 1994             1994 vs. 1993
                                             Increase (Decrease)        Increase (Decrease)
                                           Due to Changes in (1):      Due to Changes in (1):
                                         -------------------------    -----------------------
(In thousands)                             Volume   Rate     Total    Volume    Rate    Total
- ---------------------------------------------------------------------------------------------
<S>                                       <C>       <C>      <C>      <C>       <C>     <C>
Increase (decrease) in:
    Interest income
          Securities:
               Taxable ...............   $  815     $293    $1,108    $1,518    $(598)   $920
               Tax-exempt ............      120       (7)      113        --        2       2
          Deposits with banks ........      (54)      91        37       (93)      57     (36)
          Federal funds sold .........      281      184       465      (105)     152      47
          Loans:
               Commercial ............     (156)     523       367      (707)      42    (665)
               Real estate ...........      995       70     1,065       340      (47)    293
               Installment ...........      160      363       523      (141)     172      31
               Tax-exempt ............       (6)       3        (3)       40      (17)     23
- ---------------------------------------------------------------------------------------------
Total interest income                     2,155    1,520     3,675       852     (237)    615
- ---------------------------------------------------------------------------------------------
    Interest expense
          Deposits:
               NOW accounts ..........       70       58       128       207     (226)    (19)
               Money-market ..........       86       75       161       (80)     (10)    (90)
               Savings deposits ......      (46)     (21)      (67)      347     (306)     41
               Time deposits .........      536      762     1,298      (207)      (2)   (209)       
    Long-term debt - ESOP Loan .......      (10)       2        (8)      123              123
- ---------------------------------------------------------------------------------------------
Total interest expense ...............      636      876     1,512       390     (544)   (154)
- ---------------------------------------------------------------------------------------------
Net increase .........................   $1,519     $644    $2,163     $ 462    $ 307    $769
=============================================================================================
</TABLE>

(1) Changes due to both volume and rate have been allocated to volume or
rate changes in proportion to the absolute dollar amounts of the change of each.

<PAGE>

- -------------------------------------------------------------------------------
Average Statements of Condition with
- -------------------------------------------------------------------------------
Resultant Interest and Average Rates
- -------------------------------------------------------------------------------

The following table reflects the components of the Company's net interest
income, setting forth, for the year ends presented herein, (1) average assets,
liabilities and stockholders' equity, (2) interest income earned on interest
earning assets and interest expense paid on interest bearing liabilities, (3)
average yields earned on interest earning assets and average rates paid on
interest bearing liabilities and (4) the Company's net yield on interest earning
assets (i.e., net interest income divided by average interest earning assets).
Rates are computed on a tax-equivalent basis.

<TABLE>
<CAPTION>

                                                                    1995
- ---------------------------------------------------------------------------------------
                                                    Average                     Average
(In thousands)                                      Balance       Interest       Yield
- ---------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C> 
Assets:
Interest earning assets:
     Securities:
             Taxable ...........................    $123,719      $ 7,120        5.76%
             Tax-exempt ........................       2,087          126        6.12
     Deposits with banks .......................       4,230          245        5.79
     Federal funds sold ........................      12,757          755        5.84
     Loans: (1)
             Commercial ........................      28,085        2,672        9.51
             Real estate .......................      73,813        6,437        8.72
             Installment .......................      33,484        3,318        9.91
             Tax-exempt ........................         949          122       12.86
- ---------------------------------------------------------------------------------------
Total interest earning assets ..................     279,124       20,795        7.45
- ---------------------------------------------------------------------------------------
Non-interest earning assets:
     Cash and due from banks ...................      17,128
     Other assets ..............................       9,758
Allowance for possible loan losses .............      (2,796)
- ---------------------------------------------------------------------------------------
Total assets ...................................    $303,214
- ---------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
     NOW accounts ..............................    $ 48,525       $  823        1.70%
     Money-market ..............................      40,222          940        2.34
     Savings deposits ..........................      65,076        1,384        2.13
     Time deposits .............................      60,844        2,860        4.70
     Long-term debt - ESOP Loan ................       1,246          115        9.23
- ---------------------------------------------------------------------------------------
Total interest bearing liabilities .............     215,913        6,122        2.84
- ---------------------------------------------------------------------------------------
Non-interest bearing liabilities:
     Demand deposits ...........................      69,070
     Other liabilities .........................       1,646
Stockholders' equity ...........................      16,585
- ---------------------------------------------------------------------------------------
Total liabilities and stockholders' equity .....    $303,214
=======================================================================================
Net interest income ............................                  $14,673
=======================================================================================
Net interest spread ............................                                 4.61%
=======================================================================================
Total cost of funds ............................                                 2.19%
=======================================================================================
Net interest margin ............................                                 5.26%
=======================================================================================
</TABLE>

(1) Non-accrual loans are included in the daily average loan amounts
outstanding. Fees are included in loan interest. Loans and total interest
earnings assets are net of unearned income.

<PAGE>

                1994                            1993
- ---------------------------------------------------------------
 Average                Average   Average              Average
 Balance    Interest     Yield    Balance   Interest    Yield
- ---------------------------------------------------------------


 $109,341    $6,012      5.50%    $82,533    $5,092     6.17%
      133        13      9.91         100        11    10.61
    5,464       208      3.81       8,164       244     2.99
    7,298       290      3.92       8,174       243     2.93

   30,021     2,305      7.68      38,012     2,970     7.81
   62,377     5,372      8.61      58,473     5,079     8.69
   31,733     2,795      8.81      33,384     2,764     8.28
      998       125     12.54         746       102    13.68
- ---------------------------------------------------------------  
  247,365    17,120      6.92     229,586    16,505     7.19
- ---------------------------------------------------------------

   14,231                          12,475
    9,283                           9,425
   (2,588)                         (3,029)
- ---------------------------------------------------------------  
 $268,291                        $248,457
- ---------------------------------------------------------------

 $ 44,184    $  695      1.57%   $ 38,302     $ 714     1.87%
   36,359       779      2.14      37,018       869     2.35
   67,083     1,451      2.16      57,950     1,410     2.43
   47,067     1,562      3.32      51,733     1,771     3.42
    1,355       123      9.08         --          
- ---------------------------------------------------------------
  196,048     4,610      2.35     185,003     4,764     2.58
- ---------------------------------------------------------------

   56,231                          47,295
    1,212                           2,391
   14,800                          13,768
- ---------------------------------------------------------------
 $268,291                        $248,457
===============================================================
            $12,510                         $11,741
===============================================================
                         4.57%                          4.61%
===============================================================
                         1.86%                          2.08%
===============================================================
                         5.06%                          5.11%
===============================================================

<PAGE>


Provision for Possible Loan Losses

The Company maintains an allowance for possible loan losses at a level
considered by management to be adequate to cover the inherent risk of loss
associated with its loan portfolio. The allowance for possible loan losses is
based on estimates, and ultimate losses may vary from the current estimates.
Management reviews the loan portfolio and evaluates credit risk on a quarterly
basis. Such review takes into consideration the financial condition of the
borrowers, fair market value of the collateral, level of delinquency, historical
loss experience by portfolio, industry trends and the impact of local and
national economic conditions. If there are any significant changes to the
Companys estimate of the adequacy of the allowance, they are reflected in
operations during the period in which they become known. For a further
discussion see "Asset Quality and Risk Elements."

The provision for possible loan losses was $559 thousand for 1995 as compared to
$1.0 million for 1994 and $2.6 million for 1993. This reduction was due
principally to the decline in non-performing loans arising primarily from
improved economic conditions and real estate values in the Company's market
area.

Non-Interest Income

Various types of non-interest income, such as service charges on deposit
accounts and other service charges, commissions and fees are generated through
the Company's core business operations. Total non-interest income, amounted to
$2.1 million in 1995 which approximates 1994. Total non-interest income in 1994,
including securities gains, decreased $1.2 million, or 36.4%, from 1993. The
decrease in non-interest income in 1994 reflects the adoption of the Free
Personal Checking Program that was instituted during early 1994.

The following table presents the components of non-interest income for the years
ended December 31, 1995, 1994 and 1993.

<TABLE>
<CAPTION>

                                                                                             Percent
                                                         For the Year Ended                  Increase
                                                             December 31                    (Decrease)
- ----------------------------------------------------------------------------------------------------------------
(In thousands)                                        1995      1994      1993    1995 vs. 1994   1994 vs. 1993
- ----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>       <C>       <C>          <C>           <C>
Non-Interest Income
        Service charges on deposit accounts .....   $1,299     $1,154    $1,409       12.6%         (18.1)%
        Securities gains ........................       --         --       472        *               *
        Gain on sale of loans ...................       25          3       603      733.3          (99.5)
        Safe deposit rental income ..............      103        107       114       (3.7)          (6.1)
        Other commissions and fees ..............      213        207       194        2.9            6.7
        Other ...................................      491        586       541      (16.2)           8.3
- ----------------------------------------------------------------------------------------------------------------
                                                    $2,131     $2,057    $3,333        3.6%         (38.3)% 
================================================================================================================
</TABLE>

*Percentage change not relevant.

<PAGE>

Service charges on deposit accounts increased $145 thousand, or 12.6% to $1.3
million in 1995. This growth was primarily attributable to the growth in
deposits experienced during 1995. Service charges on deposit accounts represents
61.0%, 56.1% and 49.2% of total non-interest income, not including securities
gains, for the three years ended December 31, 1995.

Other income totaled $832 thousand in 1995 as compared with $903 thousand for
1994. The decrease in 1995 in other income is attributable to the gains on sales
of ORE that occurred in 1994 which were partially offset by the increases in
automated teller network fees and check printing income. Other income in 1994
decreased 37.8% from 1993. The decrease in 1994 is attributable to the one-time
gain on the sale of fixed rate mortgage loans that occurred in 1993.

During 1995 and 1994, there were no sales of securities. Net gains on securities
transactions in 1993 amounted to $472 thousand. The gains in 1993 were
recognized as certain government mortgage-backed securities were sold to reduce
prepayment risk resulting from the declining interest rate environment and heavy
refinancing activity.

Non-Interest Expense

Non-interest expense totaled $11.8 million for 1995, $800 thousand, or 7.3%,
above the 1994 level. This compared to an increase in 1994 of $88 thousand, or
 .8%, over 1993. 

Non-interest expense categories for the years ended December 31, 1995, 1994 and
1993 are shown in the table below.
  
<TABLE>
<CAPTION>
                                                                                           Percent
                                                         For the Year Ended                Increase
                                                             December 31                  (Decrease)
- ----------------------------------------------------------------------------------------------------------------
(In thousands)                                       1995       1994      1993    1995 vs. 1994   1994 vs. 1993
- ----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>        <C>       <C>         <C>             <C>    

Non-Interest Expense
        Salaries and employee benefits              $5,481     $4,900    $4,628       11.9%            5.9%
        Occupancy                                    1,499      1,452     1,396        3.2             4.0
        Equipment                                    1,041        892       788       16.7            13.2
        Foreclosed real estate expense                 425        491       625      (13.4)          (21.4)
        FDIC insurance assessment                      339        643       644      (47.3)            (.2)
        Legal fees (a)                                 259        360       502      (28.1)          (28.3)
        Audit and regulatory expenses                  104        221       379      (52.9)          (41.7)
        Credit reports                                 195        172       298       13.4           (42.3)
        Other                                        2,457      1,869     1,652       31.5            13.1
- ----------------------------------------------------------------------------------------------------------------
                                                   $11,800    $11,000   $10,912        7.3%             .8%
================================================================================================================
</TABLE>

(a) The Bank paid a total of $119, $135 and $192 in legal fees to a law firm of
which a director is a partner during the years ended December 31, 1995, 1994 and
1993, respectively.

The largest component of non-interest expense is salaries and employee benefits
which accounted for 46.4% of total non-interest expense in 1995 as compared to
44.5% and 42.4% in 1994 and 1993, respectively. Salaries and employee benefits
expense totaled $5.5 million in 1995 as compared with $4.9 million in 1994. The
$581 thousand, or 11.9% increase, compared to an 5.9% increase in 1994. These
increases are due primarily to staffing increases relative to the Companys
growth, normal wage increases and increases in the cost of employee benefits,
primarily the Employee Stock Ownership Plan. Total full-time equivalent
employees at December 31, 1995 were 182, compared to 161 at December 31, 1994,
an increase of 13.0%. This compares to full-time equivalent employees of 150 at
December 31, 1993.

<PAGE>

Occupancy expenses were $1.5 million for 1995, an increase of 3.2% over 1994.
This increase was attributed to normal increases in the operating expenses of
the Company's facilities. The increase in 1994 over 1993 was primarily due to
increased levels of rents and additional maintenance costs, primarily snow
removal in the first quarter of 1994. Equipment expenses in 1995 amounted to
$1.0 million, an increase of $149 thousand, or 16.7% over 1994. The increase was
principally due to additional lease and maintenance costs associated with new
equipment required to support the data processing conversion and the branch
automation project completed in the third quarter of 1994. Also reflected in
1995 is the installation of two new on-site automated teller machines and
related costs.

FDIC insurance of $339 thousand for the year ended December 31, 1995, decreased
$304 thousand, or 47.3% compared to $643 thousand for the year ended December
31, 1994. During 1995, the Company received the most favorable risk
classification for purposes of determining the annual deposit insurance
assessment rate, which resulted in a refund of $170 thousand from the FDIC for
excess premium payments made during 1995. Although the Company's deposits
increased in 1995, the overall rate charged by the FDIC decreased 82.6%.
Insurance premiums in 1994 remained at the same level as 1993 as the decrease in
the overall rate charged by the FDIC more than offset the increase in the
Company's deposits.

Foreclosed real estate expense, which results from costs of holding and
operating other real estate in addition to valuation reserves, were $425
thousand in 1995, down $66 thousand, or 13.4% from 1994 due to a reduction in
the number of ORE properties. In 1994, these costs were $491 thousand as
compared to $625 thousand in 1993. A provision of $230 thousand to increase
valuation reserves was recorded in 1995, compared to $277 thousand in 1994.

Other expenses, including legal fees, audit and regulatory and expenses, loan
related expenses and advertising were $3.0 million in 1995, an increase of $393
thousand, or 15.0% from 1994. Other expenses for 1994 were $2.6 million, or 7.4%
lower than that of 1993. The increase in 1995 was the result of higher
advertising costs, stationery and supplies expense and loan related expenses.
These increases were offset by lower legal fees and lower audit and regulatory
charges. The decrease in 1994 was the result of lower legal fees and lower audit
and regulatory costs offset by higher stationery and supplies expense and
advertising costs.

Income Taxes

The provision for income taxes increased $488 thousand in 1995 to $1.3 million,
as compared to $823 thousand in 1994 and $284 thousand in 1993. These increases
were primarily attributable to the Companys improved earnings.

Effective January 1, 1992, the Company began accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS 109). This standard requires, among other things,
recognition of future tax benefits, measured by enacted tax rates, attributable
to temporary differences between financial statement and the income tax basis of
assets and liabilities and net operating loss carryforwards, to the extent that
realization of such benefits is more likely than not.

The Company has future tax liability attributable to temporary differences of
$153 thousand.

Financial Condition

Total average assets increased $34.9 million, or 13.0%, to $303.2 in 1995, while
total assets reached $325.2 million at year end, an increase of 14.8% from the
1994 balance. Average interest earning assets, which represented 92.1% of total
average assets, increased $31.8 million, or 12.8%, from 1994 to $279.1 million
in 1995. Specifically, average total securities, including short-term
investments, increased $20.5 million, or 16.8%, over 1994. Average loan balances
increased by 8.9% or $11.2 million during 1995. The majority of this growth was
in the real estate portfolio.

<PAGE>

Securities

The Company maintains a securities portfolio to fund increases in loans or
decreases in deposits. The portfolio is comprised of securities that the Company
believes will suit its needs and perform reasonably well under various interest
rate scenarios. The Companys securities portfolio is comprised primarily of U.S.
government and federal agency securities. These securities are of high quality
and are extremely liquid.

The Company's securities portfolio consists of securities classified as held to
maturity and available for sale. The Company designates securities upon purchase
into one of the two categories. At December 31, 1995, securities classified as
held to maturity totaled $90.3 million and represented securities that the
Company has the positive intent and ability to hold to maturity. Available for
sale securities totaled $46.4 million and represented securities that the
Company may sell to meet liquidity needs or in response to significant changes
in interest rates or prepayment risks. The Company took advantage of the
one-time opportunity to transfer securities out of the held to maturity category
without penalty. The Company transferred $40.7 million of securities that had
been previously classified as held to maturity to available for sale in December
1995. These consisted of $32.7 million in U.S. Treasury securities and $8.0
million of obligations of other U.S. government agencies.

At December 31, 1995, the securities portfolio, including available for sale,
totaled $136.7 million, an increase of 17.9% from year end 1994. On average, the
securities portfolio increased 14.9% in 1995 and 32.5% in 1994. Average
securities represented 45.1%, 44.3% and 36.0% of earning assets for 1995, 1994
and 1993, respectively. 

At December 31, 1995, the Company had net unrealized gains in the held to
maturity securities portfolio of $29 thousand compared to net unrealized losses
of $8.1 million at December 31, 1994.

The following table presents held to maturity securities as of December 31,
1995, and the maturity distribution and weighted average yield, on a fully
taxable-equivalent basis.

<TABLE>
<CAPTION>

                                                             After
                                            After 1 Year    5 Years
                                   Within    but Within    but Within    After
(In thousands)                     1 Year      5 Years      10 Years   10 Years        Total
- ------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>          <C>          <C>           <C> 
U.S. Treasury securities:
    Book value ................     $ --       $23,496       $   --     $    --        $23,496
- ------------------------------------------------------------------------------------------------
  Weighted Average Yield ......       --%         5.11%          --%         --%          5.11%
Obligations of other U.S.
  Government agencies:
    Book value ................    1,106        41,800        5,107      13,480         61,493
- ------------------------------------------------------------------------------------------------
  Weighted Average Yield ......     7.00%         6.22%        6.04%       6.88%          6.36%
- ------------------------------------------------------------------------------------------------
Obligations of states and
  political subdivisions:
    Book value ................    5,008           200          100          --          5,308
- ------------------------------------------------------------------------------------------------
  Weighted Average Yield ......     3.77%         6.13%        5.25%         --%          3.89%
- ------------------------------------------------------------------------------------------------
Total securities:
    Book value ................   $6,114       $65,496       $5,207     $13,480        $90,297
- ------------------------------------------------------------------------------------------------
  Weighted Average Yield ......     4.35%         5.82%        6.03%       6.88%          5.89%
================================================================================================
</TABLE>

<PAGE>

The following table presents available for sale securities as of December 31,
1995 and the maturity distribution and weighted average yield, on a fully
taxable-equivalent basis.
<TABLE>
<CAPTION>

                                                             After
                                            After 1 Year    5 Years
                                 Within      but Within    but Within      After
(In thousands)                   1 Year       5 Years       10 Years     10 Years       Total
- ------------------------------------------------------------------------------------------------
<S>                              <C>           <C>           <C>         <C>           <C> 
Treasury securities:
    Book value ...............   $12,745       $17,174       $4,177      $   --        $34,096
- ------------------------------------------------------------------------------------------------
  Weighted Average Yield .....      5.67%         5.74%        6.04%         --%          5.75%
- ------------------------------------------------------------------------------------------------
Obligations of other U.S.
  Government agencies:
    Book value ...............        --         7,125        4,093          55         11,273
- ------------------------------------------------------------------------------------------------  
Weighted Average Yield .......        --%         7.15%        6.10%       8.50%          6.77%
- ------------------------------------------------------------------------------------------------
Equity securities:
    Book value ...............        --            --           --         997            997
- ------------------------------------------------------------------------------------------------
  Weighted Average Yield .....        --%           --%          --%       6.00%          6.00%
- ------------------------------------------------------------------------------------------------
Total securities:
    Book value ...............   $12,745       $24,299       $8,270      $1,052        $46,366
- ------------------------------------------------------------------------------------------------
  Weighted Average Yield .....      5.67%         6.15%        6.06%       6.13%          6.01%
================================================================================================
</TABLE>

Loans

The loan portfolio totaled $142.5 million at December 31, 1995, an increase of
9.2% from December 31, 1994. This follows a 5.1% increase in 1994. Average total
loans for the year were $136.3 million, representing a 8.9% increase from 1994,
compared to a 4.2% average decrease experienced in 1994.

The following table shows the classification of loans by major category, at
December 31, for each of the past five years:

<TABLE>
<CAPTION>
                                  --------------------------------------------------------
(In thousands)                      1995         1994       1993        1992       1991
- ------------------------------------------------------------------------------------------
<S>                               <C>          <C>         <C>         <C>        <C>
Commercial ...................    $26,592      $27,109     $32,839     $44,566    $55,026
Real estate: Construction ....      5,777        2,750       3,885         884        734
             Commercial ......     44,360       39,803      34,463      28,656     23,829
             Residential .....     29,378       28,205      20,466      24,523     10,437
Installment ..................     36,387       32,591      32,491      34,117     30,893
- ------------------------------------------------------------------------------------------
Total ........................   $142,494     $130,458    $124,144    $132,746   $120,919
==========================================================================================
</TABLE>


<PAGE>

Commercial loans are made to companies located within the Company's market area
for working capital and other short-term needs and term loans for the
acquisition of assets. Commercial loans decreased by $517 thousand, or 1.9% for
the year and represented 18.7% of the total loan portfolio. This follows a
decrease of $5.7 million, or 17.4%, in 1994 from 1993. Construction loans are
primarily made to local developers. Construction loans are primarily made on
single family structures which are generally under contract before being built.
Advances under loans are closely monitored and made after inspection by officers
of the Company. Construction loans increased $3.0 million or 110.1% in 1995 from
1994. The growth in construction loans was due to the increased activity in the
Companys market area. Construction loans decreased by $1.1 million in 1994 from
1993. The decline in the portfolio in 1994 was the result of completed projects
going to permanent financing.

Commercial mortgage loans are made to local property owners and are written
using board approved underwriting standards. Commercial mortgage loans increased
in 1995 by $4.5 million, or 11.4%, from 1994 and comprise 31.1% of the Company's
total loan portfolio. Commercial mortgages increased from 1993 to 1994 by $5.3
million, or 15.5%. The commercial mortgage portfolio is comprised primarily of
owner occupied properties.

At December 31, 1995, residential loans totaled $29.4 million, or 20.6% of the
Companys total loan portfolio. Residential loans are predominately secured by
one to four family properties in the Company's primary market area. Residential
loans increased by $1.2 million, or 4.2%, from 1994 to 1995 primarily as a
result of the Company adding to its adjustable rate portfolio. Adjustable rate
loans are generally retained in the portfolio. Residential loans increased by
$7.7 million, or 37.8%, from 1993 to 1994. In order to maintain interest rate
risk at levels in line with the Company's internal requirements, loans may be
periodically sold into the secondary market. This allows the Company to keep its
portfolio mixed between fixed rate and variable rate loans, as well as
maintaining a shorter maturity of its portfolio.

Installment loans at December 31, 1995 increased $3.8 million, or 11.6% from
December 31, 1994. The increase was due to the increase of $4.7 million in fixed
rate home equity loans. Installment loans increased slightly at December 31,
1994 from December, 1993. The increase was due to the increase of $1.4 million
in fixed rate home equity loans offset by the decrease of $887 thousand and $361
thousand in the adjustable rate home equity portfolio and the credit card
portfolio, respectively.

The following table summarizes the maturities of certain loan categories at
December 31, 1995:

                                  Due in      Due in      Due in
                                 One Year     One to        Over
(In thousands)                   or Less    Five Years   Five Years    Total
- -----------------------------------------------------------------------------
Commercial ...................   $1,859       $4,824      $19,909     $26,592
Real estate: Construction ....    5,777           --           --       5,777
             Commercial ......    1,297       21,481       21,582      44,360
             Residential .....    8,569       12,760        8,049      29,378
Installment ..................    2,006        4,309       30,072      36,387
- -----------------------------------------------------------------------------
Total ........................  $19,508      $43,374      $79,612    $142,494
=============================================================================
Included above in loans due after one year are adjustable rate loans of $51,803
and fixed rate loans of $71,183.

Loan concentrations are considered to exist when there are amounts loaned to
separate borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions. At December 31, 1995 and
1994, there were no concentrations of loans exceeding 10% of total loans which
are not otherwise disclosed as a category on the Company's financial statements.

<PAGE>

Asset Quality and Risk Elements

Lending is one of the most important functions performed by the Company and by
its very nature, it is the most risky, complicated and profitable part of the
Company's business. A separate risk management department monitors risk
assessment, credit file maintenance and overall financial condition of
borrowers. Additionally, efforts are made to limit concentrations of credit
within the loan portfolio so as to minimize the impact of a downturn in any one
economic sector.

Management realizes that some degree of risk must be expected in the normal
course of lending activities. Reserves are maintained to absorb such potential
loan losses. The allowance for possible loan losses and related provision are a
statement of managements evaluation of the credit portfolio and economic
climate.

Statements of Financial Accounting Standards (SFAS) No. 114 and No. 118,
"Accounting by Creditors for Impairment of a Loan," were adopted effective
January 1, 1995. These new statements require that an impaired loan that is
within the scope of this statement be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate or
at the loans observable market price, or if the loan is collateral dependent,
based on the fair value of the collateral. A loan is impaired when, based on
current information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. As of December 31, 1995, impaired loans totaled $1.7 million.

Non-performing assets include non-accrual loans, impaired loans and other real
estate (ORE). Loans which are past due in excess of 90 days as to the collection
of principal or interest constitute non-accrual loans, except that loans which
are contractually past due by more than 90 days may continue on an accrual basis
if the loan is sufficiently collateralized and is in the process of being
collected. ORE is acquired through foreclosure on loans secured by land or real
estate. ORE is reported at the lower of carrying value or fair market value as
determined by appraisal on the date of acquisition less costs to dispose.

Non-performing assets were $3.0 million and $4.6 million at December 31, 1995
and 1994, respectively, and amounted to .93% and 1.64% of total assets for each
of these periods, respectively. Non-performing assets are at the lowest level in
the last six years. Non-accrual loans totaled $1.6 million and $2.6 million, at
December 31, 1995 and December 31, 1994, respectively. Impaired loans not
included in non-accrual totaled $146 thousand at December 31, 1995 compared to
$792 thousand at December 31, 1994. ORE amounted to $1.3 million at December 31,
1995, an increase of $79 thousand or 6.5% from ORE of $1.2 million at December
31, 1994. All costs associated with the holding and maintaining of ORE
properties are expensed as incurred. The decrease in non-performing assets is
the result of loans returned to accrual status, payoffs, payments and
charge-offs.

<PAGE>

The following table sets forth summary data related to the allowance for
possible loan losses, the provision for possible loan losses and charge-off
experience for the past five years:
<TABLE>
<CAPTION>
                                                               Year ended December 31
                                          -------------------------------------------------------------------
(In thousands)                              1995         1994           1993           1992          1991
- -------------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>            <C>           <C>            <C> 
Loans, net of unearned income,
 (at end of year) .....................   $142,494     $130,458       $124,144       $132,746       $120,919
- -------------------------------------------------------------------------------------------------------------
Average loans outstanding .............   $136,331     $125,129       $130,615       $128,727       $129,894
- -------------------------------------------------------------------------------------------------------------
Balance of allowance for possible loan
  losses at beginning of year .........   $  2,630     $  2,492       $3,400         $  3,184       $  3,278
Loans charged-off:
  Commercial ..........................        658        1,040        2,974              993          7,303
  Commercial lease financing ..........         --           32          190            1,464          1,375
  Real estateconstruction .............         --           --           --               --            174
  Real estatecommercial ...............         --            1           --              131             --
  Real estateresidential ..............         77           11           41               12            146
  Installment .........................        191          152          804              794          1,640
- -------------------------------------------------------------------------------------------------------------
    Total loans charged-off ...........        926        1,236        4,009            3,394         10,638
- -------------------------------------------------------------------------------------------------------------
Recoveries of loans:
  Commercial ..........................        323          146          177              659            285
  Commercial lease financing ..........          9           66          155              150             57
  Real estatecommercial ...............         --            1            1               16              3
  Real estateresidential ..............         --           --           20               --             --             
  Installment .........................         99          147          113               88             37
- -------------------------------------------------------------------------------------------------------------
    Total recoveries ..................        431          360          466              913            382
- -------------------------------------------------------------------------------------------------------------
Net loans charged-off .................        495          876        3,543            2,481         10,256
Provision charged to expense ..........        559        1,014        2,635            2,697         10,162
- -------------------------------------------------------------------------------------------------------------
Balance at end of year ................   $  2,694     $  2,630       $2,492         $  3,400       $  3,184
- -------------------------------------------------------------------------------------------------------------
Allowance for possible loan
  losses to total loans outstanding
  (at year end) .......................       1.89%        2.02%        2.01%            2.56%          2.63%
- -------------------------------------------------------------------------------------------------------------
Net loans charged-off to average loans
        outstanding ...................        .36%         .70%        2.71%            1.93%          7.90%
=============================================================================================================
</TABLE>


<PAGE>

The following table sets forth the allocation of the allowance for possible loan
losses by category of loans and the percentage of loans in each category to
total loans. The allocation is based upon management's review of the portfolio
as well as historical trends and current loan growth.

<TABLE>
<CAPTION>
                                                                      Year ended December 31
                             ------------------------------------------------------------------------------------------------------
                                     1995                1994                1993               1992                1991
                             ------------------------------------------------------------------------------------------------------
                               Amount  % of Loans  Amount   % of Loans  Amount   % of Loans  Amount   % of Loans Amount  % of Loans
                                 of     to Total     of      to Total     of      to Total     of      to Total    of     to Total 
(In thousands)               Allowance   Loans    Allowance   Loans    Allowance   Loans    Allowance   Loans   Allowance   Loans
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>         <C>       <C>       <C>       <C>       <C>        <C>        <C>

Commercial ................   $  942      18.3%    $1,291     20.3%     $1,214     24.7%     $1,946     30.7%    $1,501     39.7%
Commercial lease 
  financing ...............        9        .3          8       .6          25      1.3          56       2.6       699      5.8
Real estate-construction ..      138       2.5        152      2.1          39      3.2           7        .6        27       .5
Real estate-commercial ....    1,019      32.7        691     30.3         680     27.7         587      21.7       317     19.7
Real estate-residential ...      235      20.6        191     21.7         157     16.5         218      18.3       160      8.4
Installment                      351      25.6        297     25.0         377     26.6         586      26.1       480     25.9
- -----------------------------------------------------------------------------------------------------------------------------------
         Total ............   $2,694     100.0%    $2,630    100.0%     $2,492    100.0%     $3,400     100.0%   $3,184    100.0%
===================================================================================================================================
</TABLE>

The allowance for possible loan losses at year end 1995 was $2.7 million, an
increase of $64 thousand as compared to year end 1994. The allowance at December
31, 1995 represents 1.89% of total loans outstanding as compared to 2.02% at
December 31, 1994. At December 31, 1995 and 1994, the allowance for possible
loan losses represented 156.7% and 77.0% of total non-performing loans,
respectively.

The Company is continually analyzing its loan portfolio in order to identify
early risk elements that require managements attention. The loan portfolio is
subject to review by lending management, the Company's internal loan review
staff, the Company's independent public accountants and various regulatory
agencies. The Company believes that its low level of non-performing assets are a
reflection of the Company's underwriting discipline and its practice of early
problem recognition and resolution.

As of December 31, 1995, a commercial mortgage in the amount of $1.6 million was
classified as a potential problem loan. This is a loan which management has
information which indicates that the borrower may not be able to comply with
current payment terms. Although there is some question about the borrowers
ability to comply with current loan payments terms, minimal loss, if any, are
anticipated.

Net loan charge-offs were $495 thousand for the year ended December 31, 1995 as
compared with $876 thousand for the year ended December 31, 1994. The ratio of
net charge-offs to average loans amounted to .36% for 1995 as compared with .70%
in 1994.

Deposits

The Company's deposit base is its primary source of funds. The Company offers a
broad range of deposit products, including non-interest bearing demand deposits,
NOW accounts, savings accounts, money-market accounts and certificates of
deposit. The Company remains a deposit-driven financial institution with
emphasis on core deposit accumulation and retention as a basis for sound growth
and profitability.

The December 31, 1995 total deposit balance of $304.3 million represents an
increase of $38.9 million, or 14.7%, from the December 31, 1994 balance of
$265.4 million. This increase was primarily the result of the $26.7 million
increase in demand deposits, both non-interest bearing and interest bearing, and
the $13.7 million increase in time deposits partially offset by the $1.5 million
decrease in savings deposits. The Company believes that its record of sustaining
core deposit growth is reflective of the Company's retail approach to banking
which emphasizes a combination of free checking accounts, convenient branch
locations, extended hours of operation, quality service and active marketing.

<PAGE>

The following is a breakdown of the maturity of certificates of deposits of
$100,000 or more as of December 31, 1995 and 1994, respectively:

(In thousands)                    1995        1994
- ----------------------------------------------------
3 months or less ...........    $11,422      $5,010
3 to 6 months ..............        511         587
6 to 12 months .............        720         232
Over 12 months .............        425         218
- ----------------------------------------------------
 Total .....................    $13,078      $6,047
====================================================

Interest Rate Sensitivity

Interest rate sensitivity and the repricing characteristics of assets and
liabilities are managed by the Company's Asset/Liability Committee. The
principal objective of the Committee is to maximize net interest income within
acceptable levels of risk established by policy. The Committee attempts to
maintain stable net interest margins by generally matching the volume of assets
and liabilities maturing, or subject to repricing, and by adjusting rates in
relation to market conditions to influence volumes and spreads.

The following table shows the gap position of the Company at December 31, 1995:
<TABLE>
<CAPTION>


                                                           Due Between
                                              Due Within   91 Days and     Due After    Non-Interest
(In thousands)                                  90 Days      One Year       One Year      Bearing      Total
- --------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>            <C>           <C>          <C>

Net loans .................................    $ 59,565     $ 12,059       $ 69,151      $  1,719     $142,494
Short-term investments ....................      18,631           --             --            --       18,631
Securities ................................       3,641       16,316        116,706            --      136,663
Non-interest bearing assets ...............          --           --             --        27,399       27,399
- --------------------------------------------------------------------------------------------------------------
    Total assets ..........................    $ 81,837     $ 28,375       $185,857      $ 29,118     $325,187
- --------------------------------------------------------------------------------------------------------------
Interest bearing deposits .................    $168,606     $ 15,876       $ 38,987      $   --       $223,469
Other liabilities .........................          --           --             --        83,091       83,091
Stockholders equity .......................          --           --             --        18,627       18,627
- --------------------------------------------------------------------------------------------------------------
    Total liabilities and stockholders
    equity ................................    $168,606     $ 15,876       $ 38,987      $101,718     $325,187
- --------------------------------------------------------------------------------------------------------------
Period gap ................................    $(86,769)    $ 12,499       $146,870      $(72,600)
- --------------------------------------------------------------------------------------------------------------
Cumulative gap ............................     (86,769)     (74,270)        72,600
- --------------------------------------------------------------------------------------------------------------
Period gap to total assets ................      (26.68)%       3.84%         45.16%
Cumulative gap to total assets ............      (26.68)%     (22.84)%        22.32%
==============================================================================================================
</TABLE>


The difference between the volume of assets and liabilities that reprice in a
given period is the interest sensitivity gap. A "positive" gap results when more
assets than liabilities mature or are repriced in a given time frame.
Conversely, a "negative" gap results when there are more liabilities than assets
maturing or being repriced during a given period of time. The smaller the gap,
the less the effect of market volatility on net interest income. Asset/liability
management is the utilization of this information to develop strategies to
allocate funds to certain types of assets and to offer different liability
products to achieve a certain asset/liability balance in order to produce
desired profit margins.

<PAGE>

As depicted in the table above, sensitivity to interest rate fluctuations is
measured in a number of time frames. At December 31, 1995, rate sensitive
liabilities exceeded rate sensitive assets at the 90 day interval and resulted
in a negative gap of $86.8 million. Rate sensitive assets exceeded rate
sensitive liabilities at the 91 to 365 day interval by $12.5 million. The total
cumulative negative gap repricing within 365 days is $74.3 million. As the
Company is liability sensitive, the Companys net interest margin would be
negatively affected in a rising rate environment as liabilities reprice more
quickly than assets. 

Management has identified numerous strategies, including a redeployment of asset
maturities and cash flows to attempt to insulate net interest income from the
effects of changes in interest rates.

These gap positions are monitored as part of the committee process. This
activity includes periodic forecasts of future business activity which are
applied to various interest rate environments in a simulation process. The use
of these financial modeling techniques assists management in its continuing
efforts to achieve stable earnings growth in an ever-changing interest rate
environment.

While gap analysis is a general indicator of the potential effect that changing
interest rates may have on net interest income, the gap itself does not present
a complete picture of interest rate sensitivity. First, changes in the general
level of interest rates do not affect all categories of assets and liabilities
equally or simultaneously. Second, assumptions must be made to construct a gap
table. Money-market deposits, for example, which have no contractual maturity,
are assigned a repricing interval of 90 days. Management can influence the
actual repricing of these deposits independent of the gap assumptions, by among
other methods, adjusting rates.

Third, the gap table represents a one-day position and cannot incorporate a
changing mix of assets and liabilities over time as interest rates change.

For this reason, the Company primarily uses simulation techniques to project
future net interest income streams, incorporating the current "gap" position,
the forecasted balance sheet mix and the market rates and bank products under a
variety of interest rate scenarios.

Liquidity

Liquidity measures the ability to satisfy current and future cash flow needs as
they become due. Maintaining a level of liquid funds through asset/liability
management seeks to ensure that these needs are met at a reasonable cost. On the
asset side, liquid funds are maintained in the form of cash and due from banks,
federal funds sold and unpledged short-term securities and securities available
for sale. At December 31, 1995, these assets amounted to $85.3 million as
compared to $34.2 million for the same period in 1994. This represents 26.2% and
12.1% of total assets at December 31, 1995 and 1994, respectively.

The primary source of liquidity is the Companys ability to attract new deposits
and retain deposit obligations as they mature. The Company utilizes its branch
network to access retail customers who provide a highly stable source of core
funds. These funds are comprised of demand deposits, savings accounts and
certificates of deposit. Core deposits averaged $283.7 million and $250.9
million for 1995 and 1994, respectively, representing an increase of $32.8
million, or 13.1%. The Company remains a deposit-driven financial institution
with emphasis on core deposit accumulation and retention as a basis for sound
growth and profitability. The Company believes that its record of sustaining
core deposit growth is reflective of the Company's retail approach to banking
which emphasizes a combination of free personal checking accounts, convenient
branch locations, extended hours of operation, quality service and active
marketing. Historically, the overall liquidity of the Company has been enhanced
by the significant amount of core deposits.

Capital Resources

A significant measure of the strength of a financial institution is a strong
capital base which can expand in close proportion to asset growth. It is the
capital base which provides the primary risk insurance to depositors. Also, it
is an important consideration to federal regulators, analysts of the Companys
common stock, as well as others in the marketplace.

<PAGE>

The Federal Reserve Board and the FDIC have issued risk-based capital guidelines
for U.S. banking organizations. The objective of these efforts was to provide a
more uniform capital framework that is sensitive to differences in risk profiles
among banking companies.

The risk based guidelines define a two-tier framework. Tier I capital consists
primarily of common stockholders' equity and qualifying perpetual preferred
stock, less goodwill, while total capital consists of Tier I capital and the
allowance for possible loan losses up to 1.25% of risk-weighted assets.

The table below presents in summary form the risk-based and leverage capital
ratios of the Company and the Bank as of December 31, 1995 and 1994:

<TABLE>
<CAPTION>

                                           1995                                 1994
                                           ----                                 ---- 
                               Company               Bank             Company             Bank
- ----------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>               <C>                <C>
Risk-Based Capital Ratios
Tier I Capital:
  Actual ...................     10.70%             11.29%             10.23%            11.30%
  Regulatory Minimum
    Requirement ............      4.00%              4.00%              4.00%             4.00%
Total Capital:
  Actual ...................     11.95%             12.54%             11.71%            12.55%
  Regulatory Minimum
    Requirement ............      8.00%              8.00%              8.00%             8.00%
Leverage Ratios
  Actual ...................      5.76%              6.10%              5.46%             6.02%
  Regulatory Minimum
    Requirement ............ 4.00% to 5.00%     4.00% to 5.00%     4.00% to 5.00%     4.00 to 5.00%
====================================================================================================
</TABLE>

Market Price of and Dividends on Equity Securities and Related Matters

Effective May 26, 1995, the Common Stock of the Company is listed for quotation
on the NASDAQ National issues market under the symbol IBNJ. There is no
established public trading market for the Common Stock and trading in the Common
Stock has been limited. The following table sets forth the range of the high and
low bid prices for the Common Stock for the first three quarters of 1994, and
the range of high and low sales prices for the Common Stock for the fourth
quarter of 1994 and each quarter of 1995. The high and low bid prices reflect
inter-dealer quotations, without retail mark-up, mark-down or commissions and do
not necessarily represent actual transactions. The market price of the common
stock was $13.00 at December 31, 1995, compared with $8.50 the prior year end.

Year    Quarter                    High      Low     Dividends Paid
- --------------------------------------------------------------------
1994    First ...............     $ 8.25     $7.25        $  --
        Second ..............       8.25      7.50           --
        Third ...............       8.25      8.00           --
        Fourth ..............      10.50      8.75           --


1995    First ...............      10.50      8.50           --
        Second ..............      13.25      9.50         .025
        Third ...............      14.25     12.25         .025
        Fourth ..............      14.50     12.50         .025
====================================================================

As of February 2, 1996, there were 1,312,908 shares of the Company's Common
Stock outstanding and approximately 610 holders of record of such stock.
     


<PAGE>

INDEPENDENCE BANCORP, INC. AND SUBSIDIARY

- --------------------------------------------------------------------------------
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
                                                               December 31
                                                           -------------------
(In thousands, except share data)                          1995           1994
- --------------------------------------------------------------------------------
Assets
Cash and due from banks (Note 2) .....................   $  20,280    $  17,326
Interest bearing deposits in other banks .............       5,811        4,860
Federal funds sold ...................................      12,820        8,550
- --------------------------------------------------------------------------------
            Cash and cash equivalents ................      38,911       30,736
- --------------------------------------------------------------------------------
Securities (Notes 1 and 3)
        Available for sale, at market ................      46,366        3,451
        Held to maturity, at cost
        (market value $90,326 and $104,364) ..........      90,297      112,418
- --------------------------------------------------------------------------------
            Total securities .........................     136,663      115,869
- --------------------------------------------------------------------------------
Loans (Notes 1, 4 and 5)
        Commercial ...................................      26,592       27,109
        Real estate-construction .....................       5,777        2,750
        Real estate-commercial .......................      44,360       39,803
        Real estate-residential ......................      29,378       28,205
        Installment ..................................      36,387       32,591
- --------------------------------------------------------------------------------
            Total loans ..............................     142,494      130,458
Less:
        Allowance for possible loan losses ...........       2,694        2,630
- --------------------------------------------------------------------------------
            Loans, net ...............................     139,800      127,828
- --------------------------------------------------------------------------------
Premises and equipment, net (Notes 1 and 6) ..........       5,455        5,257
Accrued interest receivable ..........................       2,759        1,890
Other real estate, net (Notes 1 and 4) ...............       1,230        1,148
Other assets .........................................         369          523
- --------------------------------------------------------------------------------
            Total assets .............................   $ 325,187    $ 283,251
- --------------------------------------------------------------------------------
Liabilities and Stockholders Equity
Deposits
        Demand (non-interest bearing) ................   $  80,877    $  63,569
        Money-market, NOW and super NOW ..............      91,293       81,928
        Savings ......................................      64,928       66,397
        Time certificates of $100,000 or more ........      13,078        6,047
        Other time certificates ......................      54,170       47,491
- --------------------------------------------------------------------------------
            Total deposits ...........................     304,346      265,432
- --------------------------------------------------------------------------------
Other liabilities ....................................       1,020        1,100
Employee Stock Ownership Plan (ESOP) debt (Note 10) ..       1,194        1,307
- --------------------------------------------------------------------------------
            Total liabilities ........................     306,560      267,839
- --------------------------------------------------------------------------------
Commitments and Contingencies (Note 7)
Stockholders equity (Notes 8, 9, 10 and 12)
Preferred stock, no par value, 1,000,000 shares 
  authorized..........................................          --           -- 
Cumulative convertible preferred stock, 9% Series A, 
  $1 par value, 776,875 issued and outstanding 
  (liquidation value $6,215)..........................         777          777
Nonconvertible preferred stock, Series B, $1 stated 
  value, authorized 217,500 shares, none issued.......          --           --
Common stock, par value $1.667 per share, 5,000,000 
  authorized; 1,312,748 and 1,308,328, respectively,
  issued and outstanding..............................       2,189        2,182
Additional paid-in capital ...........................      12,970       12,802
Retained earnings ....................................       3,594        1,084
Net unrealized holding gain (loss) on securities 
  available for sale, net of income taxes ............         291         (126)
Unearned ESOP preferred stock ........................      (1,194)      (1,307)
- --------------------------------------------------------------------------------
   Total stockholders equity .........................      18,627       15,412
- --------------------------------------------------------------------------------
   Total liabilities and stockholders equity .........   $ 325,187    $ 283,251
- --------------------------------------------------------------------------------
          The accompanying notes to consolidated financial statements
                    are an integral part of these statements.

22
<PAGE>

INDEPENDENCE BANCORP, INC. AND SUBSIDIARY

- --------------------------------------------------------------------------------
Consolidated Statements of Income
- --------------------------------------------------------------------------------
                                                      Year Ended December 31
                                                     ------------------------
(In thousands, except share data)                    1995      1994      1993
- --------------------------------------------------------------------------------
Interest income:
        Loans ...................................   $12,508   $10,554   $10,885
        Securities:
                Taxable .........................     7,120     6,012     5,092
                Tax-exempt ......................        83         9         7
        Deposits with banks .....................       245       208       244
        Federal funds sold ......................       755       290       243
- --------------------------------------------------------------------------------
        Total interest income ...................    20,711    17,073    16,471
- --------------------------------------------------------------------------------
Interest expense:
        Interest on deposits ....................     6,007     4,487     4,764
        Interest on ESOP loan (Note 10) .........       115       123
- --------------------------------------------------------------------------------
        Total interest expense ..................     6,122     4,610     4,764
- --------------------------------------------------------------------------------
        Net  interest income ....................    14,589    12,463    11,707
Provision for possible loan losses ..............       559     1,014     2,635
- --------------------------------------------------------------------------------
        Net interest income after provision
        for possible loan losses ................    14,030    11,449     9,072
- --------------------------------------------------------------------------------
Non-interest income:
        Service charges on deposit accounts .....     1,299     1,154     1,409
        Gain on sale of-
                Securities ......................        --        --       472
                Residential mortgage loans and
                related servicing rights ........        25         3       603
        Other income ............................       807       900       849
- --------------------------------------------------------------------------------
                                                      2,131     2,057     3,333
- --------------------------------------------------------------------------------
Non-interest expense:
        Salaries and employee benefits ..........     5,481     4,900     4,628
        Occupancy ...............................     1,499     1,452     1,396
        Equipment ...............................     1,041       892       788
        Other expenses (Note 13) ................     3,779     3,756     4,100
- --------------------------------------------------------------------------------
                                                     11,800    11,000    10,912
- --------------------------------------------------------------------------------
        Income before income taxes ..............     4,361     2,506     1,493
        Income tax provision (Notes 1 and 11) ...     1,311       823       284
- --------------------------------------------------------------------------------
Net income ......................................     3,050     1,683     1,209
        Dividends on preferred stock (Note 10) ..       441       423       559
- --------------------------------------------------------------------------------
        Net income applicable to common stock ...    $2,609    $1,260     $ 650
- --------------------------------------------------------------------------------
Income per common share (Note 1)
        Primary .................................     $1.79      $.95       .50
        Fully Diluted ...........................      1.43       .87       .50
- --------------------------------------------------------------------------------
Average common shares outstanding:
        Primary .................................     1,461     1,317     1,306
        Fully Diluted ...........................     2,127     1,934     1,306
- --------------------------------------------------------------------------------
          The accompanying notes to consolidated financial statements
                    are an integral part of these statements
                                                                              23
<PAGE>
INDEPENDENCE BANCORP, INC. AND SUBSIDIARY

- -------------------------------------------------------------------------------
Consolidated Statement of Changes
- -------------------------------------------------------------------------------
in Stockholders Equity
- -------------------------------------------------------------------------------
For the years ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                                              Net
                                                                                           Unrealized
                                      Cumulative                                           Gain (Loss)   Unearned
                                      Convertible              Additional      Retained   on Securities    ESOP          Total
(In thousands,                         Preferred     Common      Paid In       Earnings     Available    Preferred    Stockholders
except share data)                       Stock       Stock       Capital       (Deficit)     for Sale      Stock         Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>            <C>        <C>            <C>         <C>           <C>           <C>
Balance at 
  December 31, 1992...............       $777        $2,177      $12,790      $ (814)       $    --      $(1,472)        $13,458
Net income -- 1993 ...............                                             1,209                                       1,209
Cash dividends on preferred
  stock ($.72 per share)..........                                              (559)                                       (559)
Principal payment on
  ESOP debt.......................                                                                            61              61
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at
  December 31, 1993 ..............        777         2,177       12,790        (164)             --      (1,411)         14,169
Net income -- 1994 ...............                                             1,683                                       1,683
Cash dividends on preferred           
  stock ($.72 per share) .........                                              (432)                                       (432)
Common stock issued 
  pursuant to stock option
  plan (2,250 shares) ............                        4           10                                                      14
Common stock issued
  pursuant to stock bonus
  plan (410 shares) ..............                        1            2          (3)     
ESOP shares earned ...............                                                                            104            104
Net unrealized holding loss
  on securities available for
  sale, net of tax benefit .......                                                               (126)                      (126)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at
  December 31, 1994 ..............        777         2,182        12,802       1,084            (126)     (1,307)        15,412
Net income -- 1995 ...............                                              3,050                                      3,050 
Cash dividends on preferred 
  stock ($.72 per share) .........                                               (441)                                      (441)
Cash dividends on common 
  stock ($.075 per share) ........                                                (99)                                       (99)
Common stock issued
  pursuant to dividend
  reinvestment and stock
  option plans (4,420 shares) ....                        7            40                                                     47
ESOP shares earned ...............                                     82                                     113            195
Tax benefit on dividends
  paid to ESOP ...................                                     46                                                     46
Change in net unrealized
  holding gain (loss) on
  securities available for
  sale, net of income taxes ......                                                                417                        417
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at
  December 31, 1995 ..............       $777        $2,189       $12,970      $3,594           $ 291     $(1,194)       $18,627
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.

24
<PAGE>
INDEPENDENCE BANCORP, INC. AND SUBSIDIARY

- -------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
                                                      Year Ended December 31
                                                  -----------------------------
(In thousands)                                        1995     1994     1993
- -------------------------------------------------------------------------------

Cash Flows From Operating Activities:
        Net income ................................ $ 3,050   $ 1,683  $ 1,209
- -------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
 Provision for possible loan losses ...............     559     1,014    2,635
 Depreciation of bank premises and equipment ......     621       606      659
 Net amortization and accretion on securities .....     (37)      385      312
 Provision for possible losses on other real estate     230       277      375
 Gain on sale of securities .......................      --        --     (472)
 Loss (gain) on sale of other real estate .........       3      (106)     (37)
 Gain on sale of residential mortgage loan 
   and related servicing rights ...................     (25)       (3)    (603)
 Increase in accrued interest receivable ..........    (869)     (336)    (162)
 Decrease in other assets .........................     154       318      343
 (Decrease) increase in other liabilities .........     (80)      428       38
- -------------------------------------------------------------------------------
    Total Adjustments .............................     556     2,583    3,088
- -------------------------------------------------------------------------------
 Net cash provided by operating activities ........   3,606     4,266    4,297
- -------------------------------------------------------------------------------
Cash Flows From Investing Activities:
 Proceeds from sale of securities:
   Held to maturity ...............................      --        --   24,491
 Proceeds from maturities of securities:
   Available for sale .............................   3,345     2,194       -- 
   Held to maturity ...............................  17,681    13,872   20,992
 Purchase of securities:
   Available for sale .............................  (3,842)       --       -- 
   Held to maturity ............................... (37,574)  (41,315) (69,571)
 Net (increase) decrease in loans ................. (12,677)   (8,728)   4,823
 (Increase) decrease in other real estate .........     (79)    1,560     (582)
 Capital expenditures .............................    (819)     (979)    (627)
- -------------------------------------------------------------------------------
 Net cash used in investing activities ............ (33,965)  (33,396) (20,474)
- -------------------------------------------------------------------------------
Cash Flows From Financing Activities:
 Net increase in deposit accounts .................  38,914    20,749   13,087
 Principal payments on ESOP debt ..................     113       104       61
 Proceeds from the issuance of common stock .......      47        14       -- 
 Dividends paid on preferred stock ................    (441)     (432)    (559)
 Dividends paid on common stock ...................     (99)       --       -- 
- -------------------------------------------------------------------------------
 Net cash provided by financing activities ........  38,534    20,435   12,589
- -------------------------------------------------------------------------------
 Net increase (decrease) in cash and cash equivalents 8,175    (8,695)  (3,588)
 Cash and cash equivalents, beginning of year .....  30,736    39,431   43,019
- -------------------------------------------------------------------------------
 Cash and cash equivalents, end of year ........... $38,911   $30,736  $39,431
- -------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
 Cash paid during the year for:
   Interest ....................................... $ 6,007   $ 4,487  $ 4,764
   Income taxes ...................................     900       420       90
- -------------------------------------------------------------------------------

The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                                                              25



<PAGE>

- -------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
(Amounts in thousands, except share data)

Note 1. Summary of Significant Accounting Policies

Nature of Operations. Independence Bancorp, Inc. (the "Company") commenced
operations in June, 1984, as a New Jersey corporation and as a bank holding
company registered under the Bank Holding Company Act of 1956. Through its
banking subsidiary Independence Bank of New Jersey (the "Bank"), the Company
provides a full range of banking services to individual and corporate customers
primarily located in Northeastern New Jersey. The Company is regulated by
various Federal and state agencies and is subject to periodic examination by
those regulatory authorities.

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and practices within the banking
industry. The significant accounting policies are summarized as follows:

Principles of Consolidation and Use of Estimates. The accompanying consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiary, the Bank and the Bank's wholly-owned investment subsidiary,
Independence Asset Management, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Securities. The Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115), effective January 1, 1994. SFAS 115 requires the Company to classify its
securities as: (1) held to maturity, (2) available for sale and (3) trading.

Securities held to maturity consist of debt securities that management intends
to, and the Company has the ability to, hold until maturity. Such securities are
stated at cost, adjusted for amortization of premium and accretion of discount.

Securities available for sale consist of debt and equity securities that are not
intended to be held to maturity and are not held for trading. Securities
available for sale are reported at fair value, with unrealized gains and losses
credited or charged, net of tax effect, directly to stockholders' equity.
Realized gains and losses on securities available for sale are determined on a
specific identification basis.

The Company has not classified any of its securities as trading.

Loans. Substantially all loans classified as commercial loans are at least
partially secured by real estate. Loans are stated at their principal amount
outstanding, net of any unearned income and net of loan origination fees and
costs. Nonrefundable loan origination fees and certain direct loan origination
costs are deferred and recognized over the life of the loan as an adjustment to
the loan's yield. The Bank does not accrue interest on any loan when factors
indicate collectibility is doubtful. In general, the accrual of interest is
discontinued when a loan becomes 90 days past due as to principal or interest.

<PAGE>

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 possible loan losses. Management may elect to continue the
accrual of interest when the estimated net realizable value of collateral is
sufficient to cover the principal balance and accrued interest. Non-accrual
loans are returned to accrual status when interest is received on a current
basis and other factors indicating doubtful collection cease.

Allowance for Possible Loan Losses. The allowance for possible loan losses is
maintained at a level believed by management to be adequate to meet reasonably
foreseeable loan losses on the basis of many factors including the risk
characteristics of the portfolio, underlying collateral, current and anticipated
economic conditions that may affect the borrower's ability to pay, specific
problem loans, and trends in loan delinquencies and charge-offs. Possible losses
on loans are provided for under the allowance method of accounting. The
allowance is increased by provisions charged to earnings and reduced by loan
charge-offs, net of recoveries. Loans are charged-off in whole or in part when,
in management's opinion, collectibility is not probable.

While management uses available information to establish the allowance for
possible loan losses, future additions to the allowance may be necessary if
economic developments differ substantially from the assumptions used in making
the evaluation. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for possible
loan losses. Such agencies may require the Bank to recognize additions to the
allowance based on judgments different from those of management.

The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended, as of January 1, 1995. This statement requires that certain
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's original effective interest rate. As a practical
expedient, impairment may be measured based on the loan's observable market
price or the fair value of the collateral if the loan is collateral dependent.
When the measure of the impaired loan is less than the recorded investment in
the loan, the impairment is recorded through a valuation allowance. This
statement is not applicable to large groups of smaller homogeneous loans, such
as residential mortgage loans, credit card loans and consumer loans, which are
collectively evaluated for impairment.

The Company had previously measured the allowance for possible loan losses using
methods similar to those prescribed in the statement. As a result of adopting
these statements, no additional allowance for possible loan losses was required
as of January 1, 1995.

Premises and Equipment. Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized on a straight-line basis over the lives of the
related leases, or the life of the improvement, whichever is shorter.

Other Real Estate. Other real estate is comprised of commercial and residential
real estate properties acquired in partial or total satisfaction of problem
loans.

Other real estate is carried at the lower of fair value, as determined by
current appraisals, less estimated costs to sell, or the recorded investment in
the loan on the property. Losses identified at the time of acquisition of such
properties are charged against the allowance for possible loan losses.
<PAGE>

Subsequent write-downs that may be required to the carrying value of these
assets and losses realized from asset sales are charged to other operating
expenses. Costs of holding such property are charged to expense as incurred.
Gains, to the extent allowable, realized on the disposition of these properties
are included in other operating income.

Income Taxes. The asset and liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

The Company files a consolidated Federal income tax return, and the amount of
income tax expense or benefit is allocated on a subsidiary by subsidiary basis.

Interest on Loans. Interest on commercial, industrial, simple interest
installment and real estate loans is credited to operations based upon the
principal amount outstanding. Interest on other installment loans is taken into
income on scheduled payment dates by use of the sum-of-the-months-digits method.

Net Income Per Common Share. Primary net income per common and common equivalent
shares, after preferred dividends, is based on the weighted average common
shares and common share equivalents, including stock options and warrants,
outstanding during the year, adjusted for the effect of subsequent common stock
dividends and after adjustment for the elimination of dividends paid on
unallocated shares of the ESOP Plan (See Note 10). Fully diluted income per
share is based on the weighted average number of common and common equivalent
shares outstanding adjusted for shares issuable upon conversion of preferred
stock and the elimination of dividends paid on unallocated shares of the ESOP
Plan. For the year ended December 31, 1993, shares issuable upon conversion of
preferred stock and stock options were antidilutive and have not been included
in the computations of per share information.

Statement of Cash Flows. For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks, interest bearing deposits with
banks and Federal funds sold.

Reclassification. Certain reclassifications have been made to prior period
consolidated financial statements to place them on a basis comparable with the
current period consolidated financial statements.

New Financial Accounting Standards. The Financial Accounting Standards Boards
(FASB) issued SFAS No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed Of," in March 1995. This statement is
effective for the year ended December 31, 1996. SFAS No. 121 requires that
long-lived assets to be held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company has evaluated the impact of SFAS
No. 121 on its financial statements and does not expect it to be material.

Note 2. Cash and Due From Banks

The Bank is required to maintain a cash reserve balance based upon its deposits
in accordance with banking regulations. The average amount of this reserve for
the years ended December 31, 1995 and 1994 was approximately $4,334 and $3,274,
respectively.
<PAGE>

Note 3. Securities

The amortized cost and estimated market values of the Company's securities
available for sale portfolio at December 31, 1995 and 1994 is as follows
<TABLE>
<CAPTION>
                                                                                            1995
                                                                       ---------------------------------------------------
                                                                                      Gross         Gross
                                                                       Amortized    Unrealized    Unrealized       Market
Available for Sale                                                        Cost        Gains         Losses          Value
- --------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>        <C>             <C>
U. S. Treasury securities......................................         $ 33,644        $462      $    (10)       $ 34,096
Obligations of other U.S. Government agencies..................           11,283          68           (78)         11,273
Equity securities..............................................              997           -             -             997
- --------------------------------------------------------------------------------------------------------------------------
  Total........................................................         $ 45,924        $530      $    (88)       $ 46,366
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                             1994
                                                                       ---------------------------------------------------
                                                                                      Gross         Gross
                                                                       Amortized    Unrealized    Unrealized       Market
Available for Sale                                                        Cost        Gains         Losses          Value
- --------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>        <C>             <C>

Obligations of other U.S. Government agencies..................          $ 3,651        $ -       $ (200)         $ 3,451
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Information relative to the Company's securities held to maturity portfolio at
December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
                                                                                             1995
                                                                       ---------------------------------------------------
                                                                                      Gross         Gross
                                                                       Amortized    Unrealized    Unrealized       Market
Held to Maturity                                                         Cost        Gains         Losses          Value
- --------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>        <C>             <C>
U. S. Treasury securities......................................         $ 23,496        $111    $  (137)        $ 23,470
Obligations of other U.S. Government agencies..................           61,493         293       (241)          61,545
Obligations of states and political subdivisions...............            5,308           8         (5)           5,311
- --------------------------------------------------------------------------------------------------------------------------
  Total........................................................         $ 90,297        $412    $  (383)        $ 90,326
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                             1994
                                                                       ---------------------------------------------------
                                                                                      Gross         Gross
                                                                       Amortized    Unrealized    Unrealized       Market
Held to Maturity                                                         Cost        Gains         Losses          Value
- --------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>        <C>             <C>
U. S. Treasury securities......................................         $ 57,471        $  -       $(3,522)        $ 53,949
Obligations of other U.S. Government agencies..................           54,647           -        (4,532)          50,115
Obligations of states and political subdivisions...............              300           -             -              300
- ----------------------------------------------------------------------------------------------------------------------------
  Total........................................................         $112,418        $  -       $(8,054)        $104,364
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The contractual maturities of securities at December 31, 1995 are set forth in
the following table:
<TABLE>
<CAPTION>
                                                                        Held to Maturity           Available For Sale
                                                                        ----------------           -------------------
                                                                    Amortized    Estimated      Amortized       Estimated
                                                                      Cost     Market Value       Cost         Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>            <C>             <C>     
Due in one year................................................      $ 5,008      $ 5,004        $ 12,712        $ 12,745
Due after one year through five years..........................       52,015       52,062          20,897          21,177
Due after five years through ten years.........................        3,204        3,234           8,062           8,270
Mortgage-backed securities.....................................       30,070       30,026           3,256           3,177
Equity securities..............................................            -            -             997             997
- ----------------------------------------------------------------------------------------------------------------------------
  Total securities.............................................      $90,297      $90,326        $ 45,924        $ 46,366
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Actual maturities on debt securities may differ from those presented above as
certain obligations provide the issuer the right to call or prepay the
obligation prior to scheduled maturity without penalty.
<PAGE>

In November 1995, the FASB issued a special report - "A Guide to Implementation
of Statement No. 115 on Accounting for Certain Investments in Debt and Equity
Securities." This special report allowed a company to make a one-time
reclassification of securities from its held to maturity category without
tainting the classification of the other securities remaining within the
category. Accordingly, in December 1995, the Bank reclassified $40.7 million of
held to maturity securities to available for sale resulting in a mark-to-market
gain of $286, net of tax.

In 1993, the Company sold securities totaling $24,982 for a gross gain of $472.
No securities were sold during 1994 and 1995.

The carrying value of securities pledged to secure public deposits, treasury tax
and loan deposits and for other purposes as required by law, approximate $1,243
at December 31, 1995.

Note 4. Loans

Non-Performing Assets

The following table presents categories of non-performing assets, and the ratio
of total non-performing assets to total assets:

                                                         1995          1994
- -----------------------------------------------------------------------------
Non-accrual loans:
  Commercial.........................................  $  994         $2,207
  Commercial lease financing.........................       -             22
  Installment........................................     272            306
  Real estate-commercial.............................     285            758
  Real estate-residential............................     168            121
- -----------------------------------------------------------------------------
    Total............................................   1,719          3,414
- -----------------------------------------------------------------------------
Other real estate owned..............................   1,301          1,222
- -----------------------------------------------------------------------------
Total non-performing assets..........................  $3,020         $4,636
- -----------------------------------------------------------------------------
Ratio of non-performing assets to total assets.......     .93%          1.64%
- -----------------------------------------------------------------------------
Accruing loans past due 90 days or more:
  Commercial.........................................  $   21         $  154
  Installment........................................      12             35
- -----------------------------------------------------------------------------
    Total............................................  $   33         $  189
- -----------------------------------------------------------------------------

The amount of interest income lost on those loans classified as non-accrual in
1995 and 1994, had these loans been current in accordance with their original
terms, was $136 and $250, respectively. There were no significant restructured
loan amounts at December 31, 1995 and 1994.

Related Party Loans

Loans have been granted to officers and directors of the Company and its
subsidiary and to their associates. As of December 31, 1995, there were no
related party loans which were past due. The aggregate dollar amount of these
loans was $3,483 and $7,323 at December 31, 1995 and 1994, respectively. During
1995, there were $1,903 of new loans made and repayments totaled $3,016 and a
reduction of $2,727 due to the resignation of a director.

Note 5. Allowance For Possible Loan Losses

The allowance for possible loan losses is based upon estimates, and ultimate
losses may vary from the current estimates. These estimates are reviewed
periodically and, as adjustments become necessary, they are reflected in
operations in the periods in which they become known.
<PAGE>

A summary of the activity in the allowance for possible loan losses is as
follows:

                                                     1995      1994       1993
- -------------------------------------------------------------------------------
Balance at beginning of year......................  $2,630    $2,492    $3,400
Provision charged to operations...................     559     1,014     2,635
Recoveries of charged-off loans...................     431       360       466
Loans charged-off.................................    (926)   (1,236)   (4,009)
- -------------------------------------------------------------------------------
Balance at end of year............................  $2,694    $2,630    $2,492
- -------------------------------------------------------------------------------

A loan is considered impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. These loans consist primarily of non-accrual loans but may include
performing loans to the extent that situations arise which would reduce the
probability of collection in accordance with the contractual terms. As of
December 31, 1995, the Company's recorded investment in impaired loans and the
related valuation allowance calculated under SFAS No. 114 are as follows:

                                                         Recorded     Valuation
                                                        Investment    Allowance
- -------------------------------------------------------------------------------
Impaired loans -
Valuation allowance required..........................    $  160        $115
No valuation allowance required.......................     1,559           -
- -------------------------------------------------------------------------------
Total impaired loans..................................    $1,719         $115
- -------------------------------------------------------------------------------

This valuation allowance is included in the allowance for possible loan losses
in the consolidated balance sheet.

The average recorded investment in impaired loans for the year ended December
31, 1995 was $2,686. Interest payments received on impaired loans are recorded
as interest income unless collection of the remaining recorded investment is
doubtful at which time payments received are recorded as reductions of
principal. The Company did not recognize any interest income on impaired loans
for the year ended December 31, 1995.

Note 6. Premises And Equipment

The net carrying amount of premises and equipment is summarized as follows:

                                                                December 31
                                                           -------------------
                                                            1995        1994
- -------------------------------------------------------------------------------
Land and land improvements..............................   $1,476      $1,457
Building................................................    2,503       2,122
Furniture, fixtures and equipment.......................    3,316       2,820
Leasehold improvements..................................    2,038       2,023
- -------------------------------------------------------------------------------
                                                            9,333       8,422
Less accumulated depreciation and amortization..........    3,878       3,165
- -------------------------------------------------------------------------------
                                                           $5,455      $5,257
- -------------------------------------------------------------------------------
<PAGE>

Note 7. Commitments And Contingencies

Lease Commitments

Certain Bank facilities are occupied under non-cancelable long-term operating
leases which expire at various dates through 2013. Certain lease agreements
provide for renewal options and increases in rental payments based upon
increases in the consumer price index or the lessor's cost of operating the
facility. Minimum aggregate lease payments for the remainder of the term are as
follows:
- -------------------------------------------------------------------------------
1996...............................................................    $  957
1997...............................................................       740
1998...............................................................       637
1999...............................................................       671
2000...............................................................       709
Thereafter.........................................................     4,405
- -------------------------------------------------------------------------------
  Total lease commitments..........................................    $8,119
- -------------------------------------------------------------------------------

Net occupancy and equipment expense for 1995, 1994 and 1993 includes
approximately $1,106, $992 and $932, respectively, of rental expense for bank
facilities.

The Bank leases one of its branches from a director and its headquarters
facility from a partnership in which a director has a substantial interest. In
management's opinion, the terms of these leases are considered comparable to
those which would exist with unaffiliated parties, and aggregate rental payments
under these leases totaled $554, $477 and $453, in 1995, 1994 and 1993,
respectively, and are included in net occupancy and equipment expense.

Financial Instruments with Off-Balance Sheet Risk

In the ordinary course of the business of meeting the financial needs of its
customers, the Company, through its banking subsidiary, is party to various
financial instruments which are properly not reflected in the consolidated
financial statements. These financial instruments include standby letters of
credit, unused portions of lines of credit and commitments to extend various
types of credit.

These instruments involve, to varying degrees, elements of credit risk in excess
of the amounts recognized in the consolidated financial statements. The Company
seeks to limit any exposure of credit loss by applying the same credit
underwriting standards it uses for on-balance sheet lending facilities. The
following table provides a summary of financial instruments with off-balance
sheet risk at December 31, 1995:

                                                                      Contract
                                                                       Amount
- -------------------------------------------------------------------------------
Standby letters of credit.........................................    $ 3,276
Commitments under unused lines of credit..........................     47,661
Outstanding loan commitments......................................     12,737
- -------------------------------------------------------------------------------
Total financial instruments with off-balance sheet risk...........    $63,674
- -------------------------------------------------------------------------------

Litigation

In the normal course of business, the Company may be a party to various legal
proceedings and claims. In the opinion of management, the consolidated financial
position or results of operations of the Company will not be materially affected
by the outcome of such legal proceedings and claims.
<PAGE>

Note 8. Benefit Plans

Stock Option Plan

Under the 1986 Employee Stock Option Plan and the 1994 Employee Stock Option
Plan (the "Option Plans") 102,102 and 100,000 shares of common stock,
respectively, were available for issuance under the plan to key employees of the
Company and its subsidiary.

At the date the options are granted, the exercise price cannot be less than the
fair market value of the Company's common stock. The options may not be
exercised until one year from the date the options are granted, and expire ten
years from such date. The following is a summary of the option transactions
which occurred under the Option Plans during 1995, 1994 and 1993.

                                                       Number of
                                                        Shares  Price Per Share
- -------------------------------------------------------------------------------
Balance, December 31, 1992............................  81,488   $5.50 - $22.68
Options granted.......................................  25,400        6.25
Options cancelled.....................................  (6,372)   6.00 -  22.68
- -------------------------------------------------------------------------------
Balance, December 31, 1993............................ 100,516    5.50 -  22.68
Options granted.......................................  18,600        8.75
Options cancelled..................................... (25,081)   6.00 -  22.68
Options exercised.....................................  (2,250)       6.00
- -------------------------------------------------------------------------------
Balance, December 31, 1994............................  91,785    5.50 -  22.68
Options granted.......................................  20,600       13.25
Options cancelled.....................................  (3,036)   6.00 -  22.68
Options exercised.....................................  (1,591)   6.00 -   8.75
- -------------------------------------------------------------------------------
Balance, December 31, 1995 (40,100 shares exercisable) 107,758   $5.50 - $22.68
- -------------------------------------------------------------------------------

The 1990 Stock Option Plan for Non-Employee Directors (the "Non-Employee Plan")
reserves 84,000 shares of the Company's common stock for issuance under the plan
to members of the Board of Directors of the Company and its subsidiary who are
not also employees. At the date the options are granted, the exercise price
cannot be less than the fair market value of the Company's common stock. The
options may not be exercised until one year from the date the options are
granted and expire ten years from such date. The following is a summary of the
option transactions which occurred under the Non-Employee Plan during 1995, 1994
and 1993.

                                                       Number of
                                                        Shares  Price Per Share
- -------------------------------------------------------------------------------
Balance, December 31, 1992............................  12,725     $6.00-$18.09
Options granted.......................................   4,000         7.50
- -------------------------------------------------------------------------------
Balance, December 31, 1993............................  16,725      6.00- 18.09
Options granted.......................................   8,000         8.00
- -------------------------------------------------------------------------------
Balance, December 31, 1994............................  24,725      6.00- 18.09
Options granted.......................................   7,000         11.375
Options cancelled.....................................  (3,025)     6.00- 18.09
- -------------------------------------------------------------------------------
Balance, December 31, 1995 (21,700 shares exercisable)  28,700     $6.00-$18.09
- -------------------------------------------------------------------------------

Dividend Reinvestment Plan

The Company's Dividend Reinvestment Plan authorizes the sale of 100,000 shares
of common stock to stockholders who choose to invest all or a portion of their
cash dividends. During 1995, 2,828 shares of common stock were issued through
the dividend reinvestment plan. During 1994 and 1993, no shares of common stock
were issued through the dividend reinvestment plan.


<PAGE>

Retirement Savings Plan

The Company has a retirement savings plan covering substantially all of its
employees. Under the Plan, the Company matches 50 percent of the employee's
contribution (up to a maximum of three percent of their contribution). The
Company's contributions under the Plan were approximately $69, $61 and $59 in
1995, 1994 and 1993, respectively.

The Company and the Bank offer no postretirement or postemployment employee
benefits other than those described above.

Note 9. Preferred Stock

On October 16, 1992, the Company issued 776,875 shares of nonvoting Series A 9%
cumulative convertible preferred stock. The 9% convertible preferred stock bears
a cumulative annual dividend of $.72 per share and is convertible at any time at
the option of the holder into one share of common stock, subject to adjustment
in certain events. The 9% convertible preferred stock is redeemable at the
option of the Company, under certain circumstances, at redemption prices ranging
from $9.20 to $8.00 per share plus any accumulated and unpaid dividends to the
date fixed for redemption.

Each share of the 9% convertible preferred stock gives the holder thereof the
option to purchase one share of common stock for $9.60 per share, subject to
adjustment in certain events, until the earlier to occur of October 30, 1997 or
the conversion or redemption of the 9% convertible preferred stock. The common
stock purchase right is not transferable separately from the 9% convertible
preferred stock.


Note 10. Employee Stock Ownership Plan

In 1992, the Company's Board of Directors approved the adoption of an Employee
Stock Ownership Plan ("ESOP"). The ESOP is a qualified retirement plan for the
benefit of eligible employees of the Company and its subsidiary. The ESOP
invests primarily in common stock or preferred stock which is convertible into
common stock. The assets of the ESOP are held in a trust fund pursuant to a
Trust Agreement. The trustees under the Trust Agreement are authorized to invest
up to 100% of the trust fund in common stock or convertible preferred stock of
the Company. The trustees are also authorized to borrow money for the purpose of
purchasing common stock or convertible preferred stock of the Company.

The ESOP purchased directly from the Company 187,500 shares of the 9%
convertible preferred stock during the 1992 preferred stock offering. To
purchase such shares, the ESOP received a loan from a bank in which a former
director of the Company has a substantial interest. The loan bears interest at a
fixed annual rate of 9% and is a five year term loan requiring 19 quarterly
payments of principal and interest of $57 and a final quarterly balloon payment
of the remaining principal and interest. The loan is secured by a pledge of the
shares owned by the ESOP. In addition, the Company has guaranteed repayment of
the loan and is required to contribute annually to the ESOP an amount sufficient
to pay the required debt service on the loan. As part of the lending
arrangement, the Company has issued the lending bank a stock purchase warrant to
purchase 187,500 shares of the Company's Series B Preferred Stock.

The Accounting Standards Division of the American Institute of Certified Public
Accountants issued Statement of Position 93-6 (SOP 93-6), "Employers' Accounting
for Employee Stock Ownership Plans," in November 1993. SOP 93-6 requires
accounting for ESOPs under the shares allocated method for shares purchased by
the ESOPs after December 31, 1992. Application of the guidance in this SOP may
be elected, and is encouraged, for shares acquired by ESOPs on or before
December 31, 1992. The Company elected to adopt this statement in 1995 with
retroactive application, as required, effective January 1, 1994.
<PAGE>

A summary of dividends and expenses for the ESOP as of December 31, 1995 and
1994 are as follows

                                    1995    1994
                                    ----    ----
            Compensation expense    $196    $104
            Interest expense         115     123
            Dividends -
              Allocated shares        17       8
              Unallocated shares     118     127

In 1993, the Company reported compensation expenses of $95 which is equal to the
ESOP debt principal repayments less dividends received by the ESOP. Interest
incurred on the ESOP debt of $132 in 1993 was not recorded by the Company.
Dividends paid on ESOP shares were reflected as a reduction of retained earnings
and all ESOP shares were considered outstanding for earnings per share
computations.

All dividends received by the ESOP are used to pay debt service. The ESOP shares
initially were pledged as collateral for its debt. As the debt is repaid, shares
are released from collateral and allocated to active employees based on the
proportion of debt service paid in the year. Debt of the ESOP is recorded as
debt of the Company and the shares pledged as collateral are reported as
unearned ESOP preferred stock in the balance sheet. As shares are released from
collateral, the Company reports compensation expense equal to the current market
price of the shares, and the shares become outstanding for earnings per share
computations. Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings; dividends on unallocated ESOP shares are recorded as a
reduction of ESOP debt and related accrued interest. During 1993, 176,377 shares
of preferred stock were considered outstanding for earnings per share purposes
that are no longer considered outstanding in 1995 and 1994.

The ESOP preferred shares as of December 31, 1995 and 1994 are as follows:

                                                           1995           1994
                                                           ----           ----
        Allocated shares, beginning of year               24,100         11,123
        Shares released for allocation on December 31     14,202         12,977
        Unearned shares, at end of year                  149,085        163,400
                                                      ----------     ----------
        Total ESOP preferred shares                      187,387        187,500
                                                      ==========     ==========
        Fair value of unearned shares at December 31  $2,348,000     $1,797,000
                                                      ==========     ==========

During 1995, 113 shares were withdrawn from the ESOP.

Note 11. Income Taxes

The current and deferred amounts of Federal income tax expense are as follows:

                                                         Year Ended December 31
                                                        -----------------------
                                                          1995    1994    1993
- -------------------------------------------------------------------------------
Current...............................................   $1,619   $594    $141
Deferred..............................................    (308)    229     143
- -------------------------------------------------------------------------------
                                                         $1,311   $823    $284
- -------------------------------------------------------------------------------
<PAGE>

A reconciliation of the Federal income tax provision to the applicable statutory
Federal income tax rate is as follows:

                                                         Year Ended December 31
                                                        -----------------------
                                                          1995    1994    1993
- -------------------------------------------------------------------------------
Income before income taxes............................   $4,361  $2,506  $1,493
Tax expense at statutory rate.........................    1,483     852     508
Increase (decrease) in Federal income tax
  resulting from:
   Tax-exempt interest................................      (48)    (25)    (24)
   Reduction of valuation allowance on 
    deferred tax asset................................     (124)      -    (346)
Other, net............................................        -      (4)    146
- -------------------------------------------------------------------------------
                                                          $1,311 $  823  $  284
- -------------------------------------------------------------------------------

The components of the net deferred tax asset (liability) at December 31, 1995
and 1994 are as follows:

                                                         Year Ended December 31
                                                         ----------------------
                                                             1995       1994
- -------------------------------------------------------------------------------
Allowance for possible loan losses.......................   $(302)     $(172)
Depreciation.............................................     149        (31)
Other, net...............................................       -         35
Federal tax operating loss carryforwards.................       -          -
Federal AMT credit carryforward..........................       -        403
- -------------------------------------------------------------------------------
Total....................................................    (153)       235
Valuation allowance......................................       -       (124)
- -------------------------------------------------------------------------------
                                                             (153)       111
Unrealized (gain) loss on securities available
  for sale...............................................    (161)        74
- -------------------------------------------------------------------------------
                                                            $(314)     $ 185
- -------------------------------------------------------------------------------

The Company recorded a valuation allowance of $124 thousand against its net
deferred tax asset at December 31, 1994. During 1995, this valuation allowance
was reversed as the Company believes its income levels have fully stabilized and
it is more likely than not that the Company will realize the benefit of its
deferred tax asset.

Note 12. Capital Requirements

The Bank's regulators have classified and defined bank capital into the
following components: (1) Tier I capital which includes intangible stockholders'
equity for common stock and certain perpetual preferred stock and (2) Tier II
capital which includes a portion of the allowance for possible loan losses,
certain qualifying long-term debt and preferred stock which does not qualify for
Tier I capital. The Company's regulators have implemented risk-based capital
guidelines which require a bank to maintain certain minimum capital as a percent
of such bank's assets and certain off-balance sheet items adjusted for
predefined credit risk factors (risk-adjusted assets). The regulatory minimum
Tier I and combined Tier I and Tier II capital ratios are 4.0% and 8.0%,
respectively. In addition to the risk-based capital requirements, a bank is also
required by its regulators to maintain a certain level of Tier I capital as a
percent of average tangible assets (leverage ratio).

<PAGE>

The following table reflects the Company and the Bank's capital ratios as of
December 31, 1995:
                                                             Required Regulatory
                                                     Actual   Capital Ratios (%)
- -------------------------------------------------------------------------------
Company
Tier I leverage capital.............................   5.76%    4.00% to 5.00%
Risk-based capital
  Tier I............................................  10.70          4.00
  Total (Tier I and Tier II)........................  11.95          8.00

Bank
Tier I leverage capital.............................   6.10%    4.00% to 5.00%
Risk-based capital
  Tier I............................................  11.29           4.00
  Total (Tier I and Tier II)........................  12.54           8.00
- -------------------------------------------------------------------------------

The Federal Reserve Board (FRB) also stipulates certain capital requirements for
the Company and the Bank. In the opinion of management, the Company's leverage
capital ratio of 5.76% and the Bank's leverage capital ratio of 6.10% at
December 31, 1995, are in excess of the FRB's minimum requirements for such
ratios.

Note 13. Other Expenses

Other non-interest expense for the years ended December 31, 1995, 1994 and 1993
consists of the following:

                                                      1995      1994      1993
- -------------------------------------------------------------------------------
Foreclosed real estate expense....................  $  425    $  491    $  625
FDIC insurance assessment.........................     339       643       644
Legal fees (a)....................................     259       360       502
Audit and regulatory expenses.....................     104       221       379
Credit reports....................................     195       172       298
Other.............................................   2,457     1,869     1,652
- -------------------------------------------------------------------------------
                                                    $3,779    $3,756    $4,100
- -------------------------------------------------------------------------------

(a) The Bank paid a total of $119, $135 and $192 in legal fees to a law firm of
which a director is a partner during the years ended December 31, l995, 1994 and
1993, respectively.

Note 14. Restrictions On Subsidiary Bank Dividends

Certain bank regulatory limitations exist on the availability of subsidiary bank
undistributed net assets for the payment of dividends to the Company without the
prior approval of the bank regulatory authorities.

Under New Jersey State Law dividends may be paid only if capital would remain
unimpaired and remaining surplus would be no less than 50% of capital stock. In
addition to these statutory restrictions, the subsidiary bank is required to
maintain adequate levels of capital. At December 31, 1995, $4,522 was available
under the most restrictive limitations for the payment of dividends to the
Company.


<PAGE>

Note 15. Independence Bancorp, Inc.

Financial Statements of Parent Company Only

                                                             December 31
                                                          ---------------------
CONDENSED BALANCE SHEETS                                    1995       1994
- -------------------------------------------------------------------------------
Assets:
  Deposits in subsidiary................................   $   124     $   143
  Other assets..........................................       205          44
  Investment in subsidiary..............................    19,594      16,674
- -------------------------------------------------------------------------------
    Total assets........................................   $19,923     $16,861
- -------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
  Employee Stock Ownership Plan (ESOP) Debt.............   $ 1,194     $ 1,307
  Other liabilities.....................................       102         142
  Stockholders' equity..................................    18,627      15,412
- -------------------------------------------------------------------------------
    Total liabilities and stockholders' equity..........   $19,923     $16,861
- -------------------------------------------------------------------------------

                                                         Year Ended December 31
                                                         ----------------------
CONDENSED STATEMENTS OF INCOME                             1995    1994    1993
- -------------------------------------------------------------------------------
Dividends from subsidiary............................... $  816  $  717  $  517
Expenses:
  Interest expense - ESOP loan..........................    115     123       -
  General and administrative expenses...................    296     182     162
- -------------------------------------------------------------------------------
Income before income taxes..............................    405     412     355
Income tax benefit......................................    139     77       32
- -------------------------------------------------------------------------------
Income before equity in undistributed
income of subsidiary....................................    544     489     387
Equity in undistributed income of subsidiary............  2,506   1,194     822
- -------------------------------------------------------------------------------
Net income.............................................. $3,050  $1,683  $1,209
- -------------------------------------------------------------------------------

                                                         Year Ended December 31
                                                         ----------------------
CONDENSED STATEMENTS OF CASH FLOWS                         1995    1994    1993
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net income.......................................... $ 3,050   $ 1,683   $1,209
Less equity in undistributed income of subsidiary...  (2,506)   (1,194)    (822)
(Increase) decrease in other assets.................    (161)      (44)      21
Decrease in other liabilities.......................    (40)      (136)      (5)
Other, net..........................................     18          -        -
- -------------------------------------------------------------------------------
Net cash provided by operating activities...........    361        309      403
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid - preferred..........................   (441)      (432)    (559)
Dividends paid - common.............................    (99)         -        -
Issuance of common stock............................     47         14        -
Principal payment on ESOP debt......................    113        104       61
- -------------------------------------------------------------------------------
Net cash used in financing activities...............   (380)      (314)    (498)
- -------------------------------------------------------------------------------
Net change in cash..................................    (19)        (5)     (95)
Cash at beginning of year...........................    143        148      243
- -------------------------------------------------------------------------------
Cash at end of year................................. $  124     $  143   $  148
- -------------------------------------------------------------------------------
<PAGE>

Note 16. Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" (SFAS 107), requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. The fair
value of a financial instrument is defined as the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. SFAS 107 excludes certain financial instruments
and all non-financial instruments from its disclosure requirements. Accordingly,
the aggregate fair value amounts presented do not represent the underlying value
of the Company.

Fair value estimates are made at a specific point in time based on relevant
market information and information about the financial instrument. In cases
where the quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the entire holdings of a particular financial instrument. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimated future cash flows, and judgements regarding expected
loss experience, current economic conditions, risk characteristics of various
financial instruments and other factors. These estimates involve uncertainties
and are subjective in nature, and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

Fair value estimates are determined for on- and off-balance sheet financial
instruments, without attempting to estimate the value of anticipated future
business, and the value of assets and liabilities that are not considered
financial instruments. Tax implications related to the realization of the
unrealized gains and losses have a significant effect on fair value estimates
and have not been considered in any of the estimates.

Reasonable comparability between financial institutions may not be likely due to
the various valuation techniques permitted and numerous estimates which must be
made given the absence of secondary markets for many of the financial
instruments. This lack of uniform valuation methodologies introduces a greater
degree of subjectively of these estimated fair values.

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.

Cash and cash equivalents and accrued interest receivable:
- ----------------------------------------------------------

The carrying amounts for cash and cash equivalents and accrued interest
receivable approximate fair value.

Securities:
- -----------

The fair values for securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.

Loans:
- ------

The fair values of loans are estimated by discounting future cash flows, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality.

Deposits:
- ---------

The fair value of demand and savings deposits are equal to the carrying amounts
reported in the consolidated financial statements. For certificates of deposit,
fair value is estimated using the rates currently offered for deposits of
similar maturities.
<PAGE>

Standby letters of credit and commitments to extend credit:
- ----------------------------------------------------------
These off-balance sheet instruments are primarily comprised of unfunded loan
commitments which are generally priced at market at the time of funding,
therefore, the fair values of these items are substantially similar to the
related notional amounts. The carrying values and estimated fair values of the
Bank's financial statements are as follows:
<TABLE>
<CAPTION>

                                                                                              December 31
                                                                     --------------------------------------------------------------
                                                                                 1995                              1994
                                                                     -----------------------------     ----------------------------
                                                                       Carrying     Estimated Fair     Carrying     Estimated Fair
                                                                        Amount           Value          Amount           Value
                                                                     -----------------------------     ----------------------------
<S>                                                                    <C>              <C>             <C>             <C>
Financial assets:
  Cash and cash equivalents.........................................    $ 38,911        $ 38,911        $ 30,736        $ 30,736
  Securities available for sale.....................................      46,366          46,366           3,451           3,451
  Securities held to maturity.......................................      90,297          90,326         112,418         104,364
  Loans, net........................................................     139,800         143,944         127,828         127,333
  Accrued interest receivable.......................................       2,759           2,759           1,890           1,890
Financial liabilities:
  Deposits..........................................................     304,346         304,882         265,432         265,519
  Accrued interest payable..........................................         458             458             345             345
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

There is no material difference between the notional amount and the estimated
fair value of off-balance sheet unfunded loan commitments and standby letters of
credits which totaled $60,398 and $3,276, respectively, at December 31, 1995 and
$50,089 and $2,423 as of December 31, 1994, respectively.

Note 17. Selected Quarterly Financial Information (unaudited)

The following quarterly financial information for the two years ended December
31, 1995 is unaudited. However, in the opinion of management, all adjustments,
which include only normal recurring adjustments necessary to present fairly the
results of operations for the periods, are reflected. Results of operations
for the periods are not necessarily indicative of the results of the entire year
or any other interim period.
<TABLE>
<CAPTION>


                                                                                Three months ended
                                                               -----------------------------------------------------
1995                                                             March 31      June 30    September 30   December 31
- --------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>           <C>           <C>           <C>
Total interest income                                             $4,894        $5,198        $5,232        $5,387
Net interest income                                                3,522         3,687         3,705         3,675
Provision for possible loan losses                                   180           160           140            79
Net income                                                           549           700           831           970
Net income per share - primary                                    $  .31        $  .42        $  .44        $  .64*
Net income per share - fully diluted                              $  .26        $  .33        $  .35        $  .47*
- --------------------------------------------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------------------------------------------
Total interest income                                             $3,927        $4,167        $4,379        $4,600
Net interest income                                                2,901         3,092         3,237         3,233
Provision for possible loan losses                                   250           250           250           264
Net income                                                           401           431           456           395
Net income per share - primary                                    $  .20        $  .22        $  .24        $  .28
Net income per share - fully diluted                              $  .19        $  .20        $  .21        $  .28
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

* The Company adopted the AICPA Statement of Position 93-6, "Employers'
Accounting for Employee Stock Ownership Plans," in December 1995 (See Note 10).
The required adjustments and per share effect have been reflected in the fourth
quarter of 1995 and 1994 since the effect on interim quarters would not be
significantly different from amounts previously reported.

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders and Board of Directors of Independence Bancorp, Inc.:

We have audited the accompanying consolidated balance sheets of Independence
Bancorp, Inc. (a New Jersey corporation) and subsidiary as of December 31, 1995
and 1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Independence Bancorp, Inc. and
subsidiary as of December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.

As discussed in Note 1 and 10 to the consolidated financial statements, on
January 1, 1994 the Company changed its method of accounting for securities and
in 1995, retroactive to January 1, 1994, its method of accounting for its
Employee Stock Ownership Plan.


                                        Arthur Anderson LLP


Roseland, New Jersey
January 19, 1996



<PAGE>





Board of Directors
- --------------------------------------------------------------------------
James R. Napolitano, Esq.
Chairman of the Board
Independence Bancorp, Inc. and Independence Bank
of New Jersey
Attorney, Napolitano & Napolitano

A. Roger Bosma
President, Independence Bancorp, Inc. and Independence Bank 
of New Jersey

William F. Dator
Partner, The Dator Commercial Agency, Inc.
Real Estate

Julius J. Franchini
President, Lynn Chevrolet, Inc.
President, Franchini Chevrolet, Inc.

Robert F. Frasco
President, Frasco Enterprises

Robert O. Hagman
Partner, CSA Equipment Co.

Joseph A. Haynes
Registered Representative, Smith Barney

Esko J. Koskinen
President, Greenway Construction Co.

Joseph M. Lo Scalzo
President, Lo Scalzo Builders, Ltd.
<PAGE>

Officers
- ------------------------------------------------------------------------------
James R. Napolitano, Esq.
Chairman of the Board

A. Roger Bosma
President

Kevin J. Killian
Executive Vice President, Chief Financial Officer
and Secretary

Patrick W. Thaller
Executive Vice President, Chief Lending Officer

Daniel J. Kosky
Senior Vice President

Carl Bushong
Vice President,Commercial Loans

Anthony E. Farley
Vice President, Audit

Karen J. Hall
Vice President, Controller

Michael J. Maloney
Vice President, Branch Administration

Stephen C. Novak
Vice President, Commercial Loans


Cindy M. Schroeder
Vice President, Human Resources

Patricia M. Smith
Vice President, Consumer Lending

Sharon Barber
Assistant Vice President, Deposit Operations

Barbara A. Blaschak
Assistant Vice President, Commercial Loan Operations

Christine A. Chagares
Assistant Vice President, Commercial Loans

Julie P. Fleming
Assistant Vice President, Credit Administration

Eileen D. Piersa
Assistant Vice President, Assistant Controller

Elizabeth A. Ridgeway
Assistant Vice President, Residential Loans

Vincent A. Spero
Assistant Vice President, Commercial Loans

Luke S. Templin
Assistant Vice President, Commercial Loans

- ------------------------------------------------------------------------------
<PAGE>




Branch Officers
- -------------------------------------------------------------------------------
Joan McGeechan   Margaret Hageney   Christopher Meyer    Christine Mazzola
Ramsey           Allendale          Ridgewood            Mahwah

Elise Guild      Lisa Gold          Rosalind Vicario     Jill Holly
Montvale         Park Ridge         Hawthorne            Hackensack


Branch Offices
- -------------------------------------------------------------------------------
1100 Lake Street, Ramsey, NJ 07446
(201) 825-1000

63 West Allendale Avenue, Allendale, NJ 07401
(201) 825-1011

133 Franklin Avenue, Ridgewood, NJ 07450
(201) 670-1008

814 Wyckoff Avenue, Mahwah, NJ 07430
(201) 891-9200

111 Chestnut Ridge Road, Montvale, NJ 07645
(201) 930-0800

139 Kinderkamack Road, Park Ridge, NJ 07656
(201) 391-0505

617 Lafayette Avenue, Hawthorne, NJ 07506
(201) 423-0011

540 River Street, Hackensack, NJ 07601
(201) 488-8118
<PAGE>





Corporate Information
- -------------------------------------------------------------------------------
Headquarters
Independence Bancorp, Inc.
1100 Lake Street
Ramsey, NJ 07446

Annual Shareholders Meeting
Independence Bancorp, Inc.'s annual shareholders 
meeting will be held on Thursday, 
April 25, 1996 at 4:00 p.m. at the 
Corporate Office.

Contacts
Analysts, portfolio managers and others 
seeking financial information about 
Independence Bancorp, Inc. should 
contact Kevin J. Killian, executive 
vice president, at (201) 825-1000.

News media representatives and others 
seeking general corporate information
should contact Kevin J. Killian, 
executive vice president, at (201) 825-1000.

Shareholders seeking assistance should write
to Karen J. Hall, vice president
and controller. For assistance with 
stock records, please contact First National
Bank of Boston at (617) 575-3170.

Annual Report and Form 10-K
Additional copies of Independence Bancorp, 
Inc.'s Annual Report and Form 10-K
are available without charge by writing 
Independence Bancorp, Inc., Shareholder
Relations, 1100 Lake Street, Ramsey, NJ 07446. 

NASDAQ Symbols
Shares of Independence Bancorp, Inc.'s 
common stock and series A 9% cumulative
convertible preferred stock are traded 
under the symbols, IBNJ and IBNJP,
respectively, in the National Issues Market 
and the Small Capital Issues Market,
respectively, and are listed in NASDAQ Quotations. 

Transfer and Dividend Paying
Agent/Registrar
(Common and Preferred)
First National Bank of Boston
Shareholder Services Division
P.O. Box 644
Boston, MA 02102

Market Makers
The following investment-brokerage houses 
make a market in Independence Bancorp, Inc.'s 
stock:

Janney Montgomery Scott Inc.
F.J. Morrissey & Co., Inc.
Oppenheimer & Co., Inc.
Ryan Beck & Co., Inc.
Herzog, Heine Geduld, Inc.

Independent Public Accountants
Arthur Andersen LLP
101 Eisenhower Parkway
Roseland, NJ 07068






<PAGE>



                              ARTHUR ANDERSEN LLP


                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Independence Bancorp, Inc.:

As independent public accountants, we hereby consent to the use of our report
dated January 19, 1996 and to all references to our Firm included in or made a
part of this Form 10-K. It should be noted that we have not audited any
financial statements of Independence Bancorp, Inc. subsequent to December 31,
1995 or performed any audit procedures subsequent to the date of our report.



                                             /S/   ARTHUR ANDERSEN LLP
                                             --------------------------
                                                ARTHUR ANDERSEN LLP


Roseland, New Jersey
March 26, 1996






<TABLE> <S> <C>

<PAGE>

<ARTICLE> 9
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-END>                               DEC-31-1995
<CASH>                                          20,280
<INT-BEARING-DEPOSITS>                           5,811
<FED-FUNDS-SOLD>                                12,820
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                     46,366
<INVESTMENTS-CARRYING>                          90,297
<INVESTMENTS-MARKET>                            90,326
<LOANS>                                        142,494
<ALLOWANCE>                                      2,694
<TOTAL-ASSETS>                                 325,187
<DEPOSITS>                                     304,346
<SHORT-TERM>                                         0
<LIABILITIES-OTHER>                              1,020
<LONG-TERM>                                      1,194
                              777
                                          0
<COMMON>                                         2,189
<OTHER-SE>                                      15,661
<TOTAL-LIABILITIES-AND-EQUITY>                 325,187
<INTEREST-LOAN>                                 12,508
<INTEREST-INVEST>                                7,208
<INTEREST-OTHER>                                 1,000
<INTEREST-TOTAL>                                20,711
<INTEREST-DEPOSIT>                               6,007
<INTEREST-EXPENSE>                               6,122
<INTEREST-INCOME-NET>                           14,589
<LOAN-LOSSES>                                      559
<SECURITIES-GAINS>                                   0
<EXPENSE-OTHER>                                 11,800
<INCOME-PRETAX>                                  4,361
<INCOME-PRE-EXTRAORDINARY>                       4,361
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     3,050
<EPS-PRIMARY>                                     1.79
<EPS-DILUTED>                                     1,43
<YIELD-ACTUAL>                                    5.26
<LOANS-NON>                                      1,719
<LOANS-PAST>                                        33
<LOANS-TROUBLED>                                     0
<LOANS-PROBLEM>                                      0
<ALLOWANCE-OPEN>                                 2,630
<CHARGE-OFFS>                                      926
<RECOVERIES>                                       431
<ALLOWANCE-CLOSE>                                2,694
<ALLOWANCE-DOMESTIC>                             2,694
<ALLOWANCE-FOREIGN>                                  0
<ALLOWANCE-UNALLOCATED>                              0
        







</TABLE>


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