BASSWOOD PARTNERS L P ET AL, PRRN14A, 1998-05-11

BASSWOOD PARTNERS L P ET AL
PRRN14A, 1998-05-11

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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)

Filed by the registrant |_|
Filed by party other than the registrant |X|

Check the appropriate box:

|X| Preliminary proxy statement |_| Confidential, for Use of the
|_| Definitive proxy statement Commission Only (as permitted by
|_| Definitive additional materials Rule 14a-6(e)(2))
|_| Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12

NSS BANCORP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

BASSWOOD FINANCIAL PARTNERS, L.P.
(NAME OF PERSON(S) FILING PROXY STATEMENT)

Payment of filing fee (Check the appropriate box):

|X| No fee required.

|_| Fee computed on table below per Exchange Act Rules 14a-6(i)4 and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

|_| Fee paid previously with preliminary materials.

|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

<PAGE>

PRELIMINARY COPY - SUBJECT TO COMPLETION, DATED MAY 11, 1998

BASSWOOD FINANCIAL PARTNERS, L.P.
52 Forest Avenue
Paramus, New Jersey 07652

[DATE], 1998

Dear Fellow NSS Shareholder:

The past few years have seen the stock market perform far above most
people's expectations. In the midst of this environment, the value of NSS stock
has also risen. However, we should not rely on the current exuberance of the
market to continue forever. As owners (together with our affiliates) of
approximately 9.81% of the outstanding common shares of NSS, we are deeply
concerned about the performance of management and the future value of NSS stock
in the uncharted years leading up to the year 2000 and beyond.

We believe that NSS shareholders are in a position to take advantage of
the spectacular merger activity in the banking industry over the past several
years. Now is the time to act! This is an excellent opportunity for NSS to
actively explore the possibilities of achieving the sale of the company in order
to maximize shareholder value. There is no assurance that we will continue to
experience the rapid pace of merger activity we have seen in recent years. Nor
is there any assurance that the value of NSS stock will remain at or exceed its
current level if the opportunity to merge is missed.

For these reasons, we are asking for your support for the election of
three independent director nominees for the NSS board at the [DATE] Annual
Meeting. We also are soliciting in favor of a shareholder proposal, which we
understand will be included in NSS's proxy materials for the Annual Meeting,
that, if adopted, would request management to take the necessary steps to
achieve the sale of the company on terms most favorable to shareholders. We
believe that NSS shareholders have an opportunity now to maximize, as well as
lock-in and secure the recent appreciation of, the value of their NSS shares
through such a sale. We urge you to sign and return the enclosed WHITE proxy
card in the envelope provided.

THE NOMINEES

If elected, our proposed nominees would constitute three out of eight
directors on the NSS board. Our nominees are successful businessmen with
expertise in the financial services industry who can provide guidance in a time
of rapid evolution of the banking industry. You should also know that Messrs.
Schoellkopf and Zoffinger are truly independent nominees in that neither is
affiliated with Basswood Financial Partners or any of our affiliates, nor is
either committed to any agenda set by us. We believe that after you have
reviewed each of the nominee's qualifications, you will agree that they have the
knowledge and experience to represent the interests of the company and of all
shareholders.

Wolfgang Schoellkopf currently is a principal of the Ramius Capital
Group, an investment management company. Mr. Schoellkopf is also a
director of SLM Holding Corporation. From 1996 to 1997, Mr. Schoellkopf
was Vice Chairman of First Union National Bank in Newark, New Jersey.
Prior thereto, he was Vice Chairman and Chief Financial Officer of
First Fidelity Bancorporation

<PAGE>

(which was merged into First Union Corporation in 1996). Mr.
Schoellkopf is also a member of the Board of the Inner-City Scholarship
Fund at MaryMount University.

George R. Zoffinger currently is the President and Chief Executive
Officer of Constellation Capital Corp., an investment management
company. Mr. Zoffinger is also a director of New Jersey Resources
Corporation and Camelot Music Holding, Inc. From 1995 to February 1998,
Mr. Zoffinger was the President and Chief Executive Officer of Value
Property Trust, a real estate investment trust (REIT) which was
recently sold to Wellsford Properties. From 1994 to 1996, Mr. Zoffinger
was the Chairman of CoreStates New Jersey National Bank. From 1991 to
1994, he was the President and Chief Executive Officer of Constellation
Bancorp (which was merged into CoreStates Financial Corp and,
thereafter, into First Union Corporation). Prior to that, Mr. Zoffinger
served as the Commissioner of Commerce and Economic Development for the
State of New Jersey and he was appointed by President Clinton to serve
as a delegate to the White House Conference on Small Business.

Bennett Lindenbaum has been a money manager for Basswood Partners, L.P.
and the Vice President of Basswood Management, Inc. since 1993. Both
Basswood Partners and Basswood Management oversee and manage the
investment of other affiliates which primarily invest in banks, bank
holding companies and thrift institutions. Prior to that, Mr.
Lindenbaum was the Vice President of Investments for MGS Corporation, a
company involved in propane gas distribution, a bank analyst at SNL
Securities, and a financial analyst in the Investment Banking Group at
Shearson Lehman Brothers.

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

If you wish to elect independent nominees pledged to protect to secure
the interests of NSS and of all shareholders, and believe that NSS management
should seriously explore all options to maximize shareholder value, including
the sale of the company, please sign, date and return the enclosed WHITE proxy
card in the envelope provided. If you have already returned a proxy card to NSS,
you may revoke that vote by sending us a later-dated WHITE proxy card. Only your
latest dated proxy counts.

If you have any questions, please contact Beacon Hill Partners, who are
assisting us in the solicitation, toll-free at 1-800-755-5001 or collect at
212-843-8500.

Thank you for your time and consideration in this matter.

Sincerely yours,

BASSWOOD FINANCIAL PARTNERS, L.P.

Matthew Lindenbaum

<PAGE>

PRELIMINARY COPY - SUBJECT TO COMPLETION, DATED MAY 11, 1998

PROXY STATEMENT IN
OPPOSITION TO THE SOLICITATION BY
THE BOARD OF DIRECTORS
OF NSS BANCORP, INC.
OF
BASSWOOD FINANCIAL PARTNERS, L.P.

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

1998 ANNUAL MEETING OF SHAREHOLDERS To Be
Held on [DATE], 1998

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

To Our Fellow Shareholders of NSS Bancorp, Inc.:

This proxy statement (the "Proxy Statement") and the enclosed WHITE
proxy card are being furnished to holders of shares of common stock, par value
$.01 per share (the "Shares"), of NSS Bancorp, Inc., a Connecticut corporation
("NSS" or the "Company"), of record on [DATE], 1998 (the "Record Date"), by
Basswood Financial Partners, L.P. ( "Basswood") in connection with the
solicitation of proxies by Basswood for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting"). The Annual Meeting is
currently scheduled by NSS to be held on [DAY], [DATE], 1998, but may be
adjourned or postponed. The Annual Meeting will be held at [LOCATION],
[ADDRESS], at [TIME] E.D.S.T. This Proxy Statement and the accompanying WHITE
proxy card are first being sent to shareholders on or about [DATE], 1998. The
mailing address of NSS is 48 Wall Street, P.O. Box 28, Norwalk, Connecticut
06852.

Basswood is seeking your proxies in support of:

o the election of three independent nominees (the "Nominees") to the
Board of Directors (the "Board") of NSS; and

o the adoption of a shareholder proposal, which we understand will be
included in NSS's proxy materials for the Annual Meeting, that
requests the Board to immediately take the necessary steps to
achieve a sale, merger or other acquisition of the Company on terms
most favorable to shareholders (the "Shareholder Proposal").

We believe that a Board that includes the Nominees will better
represent the interests of the Company and of all the Company's shareholders
than a Board composed entirely of incumbents nominated by the Company's existing
management. The Nominees are both independent of NSS management and have not
been previously tied to NSS in any manner and therefore, we believe, should be
able to bring new ideas and insights to NSS management and the Board. Moreover,
Messrs. Schoellkopf and Zoffinger are truly independent nominees in that neither
is affiliated with Basswood or any of our affiliates, nor is either committed to
any agenda set by us. The Nominees are successful businessmen with expertise in
the financial services industry who, we believe, can provide valuable insight
and guidance in a time of rapid evolution of

<PAGE>

the banking industry. Additionally, the Nominees are opposed to any programs, in
general, which may adversely affect shareholder value or serve to entrench
management and have indicated their openness to steps, such as seeking buyers
for NSS, intended to enhance shareholder value.

We also believe that shareholders are in a position to take advantage
of the spectacular merger activity in the banking industry over the past several
years. Now is the time to act! This is a perfect time for the Company
legitimately to explore the possibilities of achieving the sale of the Company
in order to maximize shareholder value. There is no assurance that we will
continue to experience the rapid pace of merger activity we have seen in recent
years. Nor is there any assurance that the value of NSS stock will remain at or
exceed its current level if the opportunity to merge is missed. We have included
a space for adopting the Shareholder Proposal on our proxy card in the interest
of simplifying the proxy process for the shareholders of NSS.

We have also included a space for ratifying the appointment of the
independent auditor for the coming year on our proxy card in the interest of
simplifying the proxy process for the shareholders of NSS. This way, all you
need to do in order to vote for a full slate of directors and express a view
with respect to the Shareholder Proposal and the independent auditor is sign,
date and return the enclosed WHITE proxy card. You do not need to do anything
with the [COLOR] proxy card sent to you by the management of NSS.

According to the Company's articles of incorporation and by-laws, NSS
currently has a total of eight directors constituting the entire Board, divided
into three classes, CLASS I consisting of three directors, CLASS II consisting
of three directors, and CLASS III consisting of two directors. The articles of
incorporation provide for each class of directors to be elected for three-year
terms on a staggered basis. At the Annual Meeting, three Class I directors are
to be elected to serve until the 2001 annual meeting of shareholders and until
their respective successors have been elected. The three nominees for director
receiving the highest number of votes will be elected to the Board.

Basswood and its affiliates currently beneficially own 234,971 Shares
(approximately 9.81% of the outstanding Shares). Information concerning
Basswood, its affiliates and the beneficial ownership of Shares is set forth in
"INFORMATION CONCERNING BASSWOOD AND RELATED PERSONS" and Appendices A and B
hereto. The principal executive offices of Basswood are located at 52 Forest
Avenue, Paramus, New Jersey 07652, telephone number (201) 843-3644. Shareholders
who have questions concerning this solicitation should contact Beacon Hill
Partners, Inc. ("Beacon Hill Partners") toll-free at 1-800-755-5001 or collect
at (212) 843-8500.

PLEASE REVIEW THIS PROXY STATEMENT CAREFULLY. YOUR VOTE IS IMPORTANT.
PLEASE VOTE FOR THE ELECTION OF THE NOMINEES AND FOR THE ADOPTION OF THE
SHAREHOLDER PROPOSAL BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY
CARD TODAY. PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED BY BASSWOOD. IF
YOU SIGN AND RETURN THE WHITE PROXY CARD BUT DO NOT CHECK ANY OF THE BOXES, YOUR
PROXY CARD WILL BE VOTED FOR THE ELECTION OF THE NOMINEES, VOTED FOR THE
ADOPTION OF THE SHAREHOLDER PROPOSAL AND ABSTAINED WITH RESPECT TO THE ELECTION
OF AUDITORS. HOLDERS OF RECORD OF SHARES AS OF THE RECORD DATE ARE URGED TO
SUBMIT WHITE PROXY CARDS EVEN IF SUCH SHARES HAVE BEEN OR WILL BE SOLD AFTER THE
RECORD DATE. SEE "VOTING AND PROXY PROCEDURES" BELOW.

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<PAGE>

DO NOT MAIL ANY [COLOR] PROXY CARDS IF YOU WISH TO VOTE FOR THE
NOMINEES AND THE SHAREHOLDER PROPOSAL. IF YOU HAVE ALREADY SENT A [COLOR] PROXY
TO THE BOARD OF NSS, YOU HAVE THE RIGHT TO REVOKE THAT PROXY AND VOTE FOR THE
NOMINEES AND THE SHAREHOLDER PROPOSAL BY SIGNING, DATING AND MAILING A LATER
DATED WHITE PROXY CARD.

Any proxy given in connection with the Annual Meeting may be revoked at
any time prior to the voting thereof at the Annual Meeting by filing a written
notice of revocation with the Secretary of NSS or with the presiding officer of
the Annual Meeting, by executing and delivering a later dated proxy, or by
voting in person at the Annual Meeting.

There is no limit on the number of times that a shareholder may revoke
his or her proxy prior to the Annual Meeting. ONLY THE LATEST DATED, PROPERLY
SIGNED PROXY CARD THAT YOU SEND IN WILL COUNT. MAKE SURE THAT CARD IS A WHITE
CARD!

REASONS FOR SOLICITATION

INTRODUCTION

As a significant shareholder of NSS, Basswood is deeply concerned over
the way in which the Company is being managed by its current executives and its
current Board.

With the addition of new directors, we believe that the likelihood will
increase that the Company's financial and operational performance can be
improved, shareholder value can be enhanced and the best interests of the
shareholders can be accorded the appropriate attention. The Nominees are
successful businessmen with expertise in the financial services industry who can
provide valuable guidance in a time of rapid evolution of the banking industry.
Although the Nominees, if elected, will not constitute a majority of the Board,
their expertise and guidance will contribute to, augment and beneficially
influence the ability of the Board to manage NSS in this time of rapid
evolution. They are dedicated to supporting measures which can improve the
Company's performance and returns to shareholders. Most importantly, the
Nominees have expressed their openness to seeking buyers for the Company.
Accordingly, given the recent proliferation of mergers and acquisitions in the
banking industry and the ability of shareholders to obtain substantial premiums
in such transactions, we are further convinced that the time is now for the
Board to seriously explore the possibility of achieving a sale, merger or other
acquisition of the Company on terms most favorable to shareholders. Seize the
day! We are concerned that the Board is allowing a major opportunity to pass,
and that at some time in the near future current premium levels will no longer
be available to NSS shareholders.

BACKGROUND OF SOLICITATION

Since Basswood and its affiliates first acquired Shares in January
1995, representatives of Basswood have met with representatives of NSS on
several occasions, including meetings with Robert T. Judson, a director and the
President and Chief Executive Officer of NSS, and John L. Segall, a director of
NSS. Discussions regarding areas of needed improvement relating to the Company's
performance focused on operating efficiency and core profitability. Furthermore,
the Company's current and prospective financial performance and results of
operations were discussed, and the Basswood representatives attempted to

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<PAGE>

evaluate whether the Company's management would pursue opportunities for the
acquisition of the Company by another financial institution or other purchaser
if any such party indicated a willingness to pursue such a transaction. As a
result of such meetings, Basswood formed a belief that management had no
workable plan for maximizing shareholder value and was effectively unwilling to
entertain the prospect of the sale of the Company.

On November 13, 1997, Basswood Partners, L.P. ("Basswood Partners"),
the general partner of Basswood, wrote to the Board stating its disappointment
in the financial results of the Company. Basswood Partners also stated its
belief that larger financial institutions might have a serious interest in
purchasing the Company. That belief was based, among other things, on the
observation that recently announced acquisitions throughout the nation, and
particularly in Connecticut, such as the Webster Financial Corporation/Eagle
Financial Corporation and People's Bank of Bridgeport/Norwich Financial
Corporation mergers, had provided, or were to provide, shareholders of target
institutions with substantial premiums. Basswood Partners also stated that it
intended to communicate with other shareholders of the Company regarding methods
to improve the Company's future financial performance and to enhance shareholder
value. In addition, Basswood Partners requested the right to inspect and copy
certain records of the Company, including the record of shareholders of the
Company. However, the Company refused to provide Basswood Partners any access to
such records. Consequently, Basswood Partners was forced to take appropriate
measures to enforce its right as a shareholder by filing an action to compel the
Company to grant it access to such records. On February 6, 1998, the Superior
Court of the State of Connecticut issued an order granting Basswood Partners
access to such records. Subsequently, the record of shareholders of the Company
was provided to Basswood Partners and the Company agreed to provide to Basswood
Partners a non-objecting beneficial shareholder list (a NOBO list) if and when
obtained by the Company prior to the Annual Meeting.

On or about March 13, 1995, Basswood Partners, Matthew Lindenbaum and
Bennett Lindenbaum filed a statement on Schedule 13D (as originally filed under
cover of a Form F-11 with the Federal Deposit Insurance Corporation, the
"Schedule 13D") with the Commission disclosing the extent of such their
beneficial ownership of outstanding Shares. The Schedule 13D was amended on or
about January 18, 1996, May 13, 1996 and November 14, 1997 to reflect changes in
such beneficial ownership. The Schedule 13D was amended on November 14, 1997,
January 5, 1998, February 10, 1998 and February 24, 1998 to disclose the
developments described above. On April 13, 1998, the Schedule 13D was amended,
indicating that Basswood may solicit proxies from other shareholders for either
the election of the Nominees or the adoption of the Shareholder Proposal, or
both.

On April 13, 1998, Basswood sent a letter, dated April 9, 1998, to NSS
nominating Bennett Lindenbaum, Wolfgang Schoellkopf and George R. Zoffinger for
election as directors. As management of NSS has not seen fit to include any of
the Nominees in their proposed slate for election, we determined to propose our
own slate and to proceed with the solicitation of proxies in favor of election
of the Nominees.

REASONS

We believe that a Board that includes the Nominees will better
represent the interests of the Company and of all the Company's shareholders
than a Board composed entirely of incumbents nominated by the Company's existing
management. The Nominees are both independent of NSS management and have not
been previously tied to NSS in any manner and therefore should be able to bring
new, unbiased ideas and fresh insights to NSS management and the Board. By
contrast, the three incumbent directors currently proposed by management for
re-election include Charles F. Howell, an officer and a director of NSS for

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<PAGE>

thirteen years and four years, respectively, and Herbert L. Jay and Alan R.
Staack, directors of NSS for ten years and four years, respectively.
Additionally, Mr. Jay is the President of H. L. Jay Associates, which arranges
advertising, assists in public relations and provides marketing consulting for
NSS. The other five incumbent directors, including Robert T. Judson, the
President and Chief Executive Officer of NSS, have also held their positions as
directors of NSS for at least thirteen years (excluding Brian A. Fitzgerald, who
has been a director for four years). Additionally, Donald St. John, the Chairman
of the Board, is a partner of Clifford St. John & Sons, which leases office
space to NSS. As you can see, at least half of the Board is composed of members
of management and other individuals who may have a real interest in making sure
that NSS continues to do business as usual.

We believe it is time for fresh faces and a new, impartial perspective!
We believe a balanced Board, with new and qualified members, will be able to
better guide NSS. Furthermore, Messrs. Schoellkopf and Zoffinger are truly
independent nominees in that neither is affiliated with Basswood or any of our
affiliates, nor is either committed to any agenda set by us.

The Nominees are successful businessmen with expertise in the financial
services industry who, we believe, can provide valuable insight and guidance in
a time of rapid evolution of the banking industry. Although the Nominees, if
elected, will not constitute a majority of the Board, we believe that their
expertise and guidance will contribute to, augment and beneficially influence
the ability of the Board to manage NSS in this time of rapid evolution. See
"NOMINEES". The Nominees are opposed to any programs, in general, which may
adversely affect shareholder value or serve to entrench management -- such as
staggered boards and golden parachutes -- and are committed to exploring all
strategic alternatives for the Company to enhance shareholder value, including
their openness to seeking buyers for NSS. If elected, we expect the Nominees to
focus on improving the operating efficiency and core profitability of NSS. For
these reasons, we believe that the election of the Nominees could enhance the
Company's financial and operational performance and ability to provide greater
value for shareholders.

We also believe that shareholders are in a position to take advantage
of the spectacular merger activity in the banking industry over the past several
years. Now is the time to act! This is an attractive time for the Company
legitimately to explore the possibilities of achieving the sale of the Company
in order to maximize shareholder value. There is no assurance that we will
continue to experience the rapid pace of merger activity we have seen in recent
years. Nor is there any assurance that the value of NSS stock will remain at or
exceed its current level if the opportunity to merge is missed. This is an ideal
opportunity for shareholders to maximize, as well as lock-in and secure the
recent appreciation of, the value of their NSS Shares. See "THE SHAREHOLDER
PROPOSAL".

THE NOMINEES

We recommend that you vote FOR electing the following Nominees: Bennett
Lindenbaum, Wolfgang Schoellkopf and George R. Zoffinger. Each Nominee is
independent of NSS and is committed to explore all strategic alternatives for
the Company to enhance shareholder value. Moreover, Messrs. Schoellkopf and
Zoffinger are truly independent nominees in that neither is affiliated with
Basswood or any of our affiliates, nor is either committed to any agenda set by
us.

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<PAGE>

The Nominees have furnished the following information below concerning
their principal occupations, employment history and other matters. Each of the
Nominees is a citizen of the United States. Please see Appendix A for further
information regarding the Nominees.

Bennett Lindenbaum is 35 years old and, from 1993 to present, has been
a money manager for Basswood Partners and the Vice President for
Basswood Management, Inc., a Delaware corporation ("Basswood
Management"), of which he and Matthew Lindenbaum are the sole
stockholders, directors and officers. Both Basswood Partners and
Basswood Management oversee and manage the investments of other
affiliates which primarily invest in banks, bank holding companies and
thrift institutions. Prior to that, Mr. Lindenbaum was the Vice
President of Investments for MGS Corporation, a company involved in
propane gas distribution. Additionally, Mr. Lindenbaum worked as a bank
analyst at SNL Securities and in Bankers Trust's Real Estate Finance
Group where he helped structure financing and sales of commercial real
estate. He also spent two years as a financial analyst in the
Investment Banking Group at Shearson Lehman Brothers. At Shearson, Mr.
Lindenbaum analyzed and structured acquisitions of commercial real
estate and operating companies in various industries, including one of
the first government assisted acquisitions of a failed savings and
loan. Bennett Lindenbaum graduated Phi Beta Kappa and Summa Cum Laude
from Brandeis University in 1986 and received his MBA in 1991 from the
Wharton Graduate School of Business of the University of Pennsylvania.

Wolfgang Schoellkopf is 65 years old and, from 1997 to present, has
been a principal of the Ramius Capital Group, LLC, an investment
management company. Mr. Schoellkopf is also currently a director of SLM
Holding Corporation (SallieMae). From 1996 to 1997, Mr. Schoellkopf was
Vice Chairman of First Union National Bank in Newark, New Jersey. From
1990 to 1996, he was Vice Chairman and Chief Financial Officer of First
Fidelity Bancorporation (which was merged into First Union Corporation
in 1996). Prior thereto, he was an Executive Vice President at Shearson
Lehman Hutton, Inc., Executive Vice President and Treasurer at Chase
Manhattan Bank, a Lecturer in Economics at Princeton University and an
Instructor in Economics at Cornell University. Mr. Schoellkopf is also
a member of the board of the Inner-City Scholarship Fund at MaryMount
University. He was educated at the University of California, Berkeley,
the University of Munich and Cornell University.

George R. Zoffinger is 50 years old and currently is the President and
Chief Executive Officer of Constellation Capital Corp., an investment
management company. From 1995 until 1998, Mr. Zoffinger served as
President and Chief Executive Officer of Value Property Trust, a
publicly owned real estate investment trust (REIT) trading on the New
York Stock Exchange which was recently sold to Wellsford Properties.
Mr. Zoffinger served as Chairman of CoreStates New Jersey National Bank
from 1994 to 1995, Mr. Zoffinger also served as President and Chief
Executive Officer of Constellation Bancorp and its principal
subsidiary, Constellation Bank, N.A. from 1991 through 1994, when
Constellation merged into CoreStates Financial Corp. Prior to assuming
the leadership of Constellation Bancorp, Mr. Zoffinger was appointed by
the Governor to serve as the Commissioner of Commerce and Economic
Development for the State of New Jersey. As Commissioner, he was
responsible for the State's Economic Development International Trade,
Small Business Development, Urban Revitalization, and Travel and
Tourism programs. In that capacity, Mr. Zoffinger served as Chairman of
the New Jersey Economic Development Authority, Chairman of the New
Jersey Council on Job Opportunities, and was a member of the New Jersey
Department of Banking Credit Crunch Task Force. During his tenure as
Commissioner, he spearheaded the

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<PAGE>

effort to bring the World Cup 1994 games to New Jersey. As a result of
his work to secure the games in New Jersey, Mr. Zoffinger was
appointed Chairman of New Jersey's Host Committee for the 1994 World
Cup Soccer games.

Mr. Zoffinger was appointed by President Clinton to serve as a delegate
to the White House Conference on Small Business. Also, Mr. Zoffinger
was appointed to the New Jersey Council of Economic Advisors (CEA), a
council which serves to advise the Governor on the course of New
Jersey's economy. He, currently, serves as Chairman of the New
Brunswick Development Corporation and is a board member of The
Multicare Companies Inc., New Jersey Resources Corporation, the New
Jersey Alliance for Action and the New Jersey World Trade Council. He
is also a member of the Board of Trustees of St. Peter's Medical
Center, Woodbridge Economic Development Corporation and the Public
Affairs Research Institute of New Jersey, Inc. (PARI). Mr. Zoffinger
was awarded a Master's degree in Finance from New York University in
1971 and was graduated with honors from the Pennsylvania State
University with a Bachelors degree in Business in 1970.

Except as set forth in this Proxy Statement or the Appendices hereto,
to the best of our knowledge, none of the persons participating in this
solicitation on our behalf, nor their respective associates, nor any of the
Nominees (i) owns beneficially, directly or indirectly, or has the right to
acquire, any securities of the Company or any parent or subsidiary of the
Company, (ii) owns any securities of the Company of record but not beneficially,
(iii) has purchased or sold any securities of the Company within the past two
years, (iv) has incurred indebtedness for the purpose of acquiring or holding
securities of the Company, (v) is or has been a party to any contract,
arrangement or understanding with respect to any securities of the Company
within the past year, (vi) has had or is to have a direct or indirect material
interest in any transaction with the Company since the beginning of the
Company's last fiscal year, or any proposed transaction, to which the Company or
any of its affiliates was or is a party, (vii) has been indebted to the Company
or any of its subsidiaries since the beginning of the Company's last fiscal year
or (viii) has any arrangement or understanding with respect to future employment
by the Company or with respect to any future transactions to which the Company
or any of its affiliates will or may be a party.

None of the corporations or other entities in which any of the Nominees
have conducted their principal occupations or employment was a parent,
subsidiary or other affiliate of the Company. None of the Nominees holds or has
held any position or office with the Company, has any family relationship with
any executive officer or director of the Company or each other, or has been
involved in any legal proceedings of the type required to be disclosed by the
rules governing this solicitation.

EACH OF THE NOMINEES HAS CONSENTED TO SERVE AS DIRECTOR AND HAS PLEDGED
TO REPRESENT THE INTERESTS OF THE COMPANY AND OF THE SHAREHOLDERS AS A WHOLE TO
THE EXTENT THE LAW ALLOWS. MESSRS. SCHOELLKOPF AND ZOFFINGER HAVE EACH BEEN PAID
A FEE OF APPROXIMATELY $10,000, IN THE FORM OF 220 SHARES, BY BASSWOOD AND ITS
AFFILIATES TO COMPENSATE THEM FOR THEIR TIME AND EFFORTS REQUIRED AS NOMINEES
FOR ELECTION AS DIRECTORS OF THE COMPANY. MESSRS. SCHOELLKOPF AND ZOFFINGER ARE
NOT AFFILIATED WITH BASSWOOD OR ANY OF OUR AFFILIATES, NOR IS EITHER COMMITTED
TO ANY AGENDA SET BY US.

BY INCLUDING THREE NOMINEES, WE HAVE ENABLED SHAREHOLDERS TO VOTE FOR A
FULL SLATE OF DIRECTORS BY SIGNING, DATING AND RETURNING ONLY THE WHITE PROXY
CARD ENCLOSED WITH THIS PROXY STATEMENT. BASSWOOD URGES YOU TO SUPPORT THE
ELECTION OF THE NOMINEES BY SIGNING, DATING AND RETURNING THE WHITE PROXY CARD.
YOU SHOULD NOT RETURN THE [COLOR] PROXY CARD PROVIDED BY MANAGEMENT IF YOU

-7-

<PAGE>

WISH TO SUPPORT THE NOMINEES. IF YOU HAVE ALREADY SENT A [COLOR] PROXY TO THE
BOARD OF NSS, YOU HAVE THE RIGHT TO REVOKE THAT PROXY AND VOTE FOR THE NOMINEES
BY SIGNING, DATING AND MAILING A LATER DATED WHITE PROXY CARD.

THE SHAREHOLDER PROPOSAL

Basswood is also soliciting the shareholders in favor of the
Shareholder Proposal, which we understand will be included in NSS's proxy
materials for the Annual Meeting. We have included a space for adopting the
Shareholder Proposal on our proxy card in the interest of simplifying the proxy
process for the shareholders. We recommend that you vote FOR the adoption of the
following resolution in addition to voting to elect the Nominees:

"RESOLVED, that the shareholders of NSS Bancorp, Inc. (the "Company")
hereby request that the Board of Directors immediately take the
necessary steps to achieve a sale, merger or other acquisition of the
Company on terms most favorable to shareholders."

We believe the Company's operating performance since its conversion to
public ownership has been unacceptable to investors and that any positive stock
performance has been due primarily to takeover speculation. Moreover, the
Company has not appropriately evaluated and pursued the possibility of a sale as
a means of promoting shareholder value.

In that light, we believe that at this time there are likely to be a
number of larger institutions that could have a serious interest in purchasing
the Company. Recent transactions throughout the nation, and specifically in
Connecticut, suggest that through a sale, the Company's shareholders would
likely receive a substantial premium over the current market price. For example,
on March 31, 1998, HUBCO Inc. agreed to acquire Dime Financial Corporation
("Dime"), a holding company for The Dime Savings Bank of Wallingford in
Connecticut, for approximately $201 million in stock, representing 2.56 times
Dime's tangible book value. Although price and other terms actually arrived at
in a transaction will depend on factors unique to the parties involved, applying
the ratio from the HUBCO Inc./Dime transaction to NSS's tangible book value per
share of $22.44 (reported as of December 31, 1997) would imply a price of $57.45
per share for NSS common stock.

BASSWOOD URGES YOU TO SUPPORT THE ADOPTION OF THE SHAREHOLDER PROPOSAL
BY SIGNING, DATING AND RETURNING THE WHITE PROXY CARD. YOU SHOULD NOT RETURN THE
[COLOR] PROXY CARD PROVIDED BY MANAGEMENT IF YOU WISH TO ADOPT THE SHAREHOLDER
PROPOSAL AND ELECT THE NOMINEES. IF YOU HAVE ALREADY SENT A [COLOR] PROXY TO THE
BOARD OF NSS, YOU HAVE THE RIGHT TO REVOKE THAT PROXY AND VOTE FOR THE ADOPTION
OF THE SHAREHOLDER PROPOSAL AND THE ELECTION OF THE NOMINEES BY SIGNING, DATING
AND MAILING A LATER DATED WHITE PROXY CARD.

We urge shareholders not to rely solely on the Shareholder Proposal,
for the Board may elect to ignore it, holding it to be a mere precatory
resolution. Therefore, to provide increased assurance that the Board will carry
into effect the will of the shareholders as expressed by the Shareholder
Proposal, you need to vote for the election of the Nominees as well. Please note
that neither Messrs. Schoellkopf or Zoffinger is committed to effect a sale of
the Company. They are committed to exploring all strategic alternatives to
enhance shareholder value, including a sale. Messrs. Schoellkopf and Zoffinger
are not affiliated with Basswood or any of our affiliates, nor is either
committed to any agenda set by us. However, Messrs.

-8-

<PAGE>

Schoellkopf and Zoffinger have confirmed to us that, if the Shareholder Proposal
is adopted, it is their intention as directors to effect the will of the
shareholders and put the Shareholder Proposal into operation.

INDEPENDENT AUDITOR

According to the Company's Annual Report on Form 10-K, as amended, for
the fiscal year ended December 31, 1997 (the "1997 Form 10-K"), Friedberg, Smith
& Co., P.C. audited the consolidated statements of financial condition of NSS
and its subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. Based on publicly
available information, there is no basis for us to believe otherwise than that
NSS management has appointed Friedberg, Smith & Co., P.C. as the independent
auditor for NSS for the ensuing year.

INFORMATION CONCERNING BASSWOOD
AND RELATED PERSONS

Basswood is a private investment partnership organized under Delaware
law. Its principal business is investing in securities. Basswood has its
principal place of business at 52 Forest Avenue, Paramus, New Jersey 07652. The
sole general partner of Basswood is Basswood Partners, a Delaware limited
partnership, the sole general partner of which is Basswood Management, of which
Matthew Lindenbaum and Bennett Lindenbaum are the sole stockholders, directors
and officers. Basswood Management is the investment manager of Basswood
International Fund, Inc., a Cayman Islands exempted company ("Basswood
International") the principal business of which is investing in securities for
its own account. Basswood Partners is the sole general partner of Whitewood
Financial Partners, L.P., a Delaware limited partnership ("Whitewood"), and
Basswood Supplemental Fund, L.P. ("Basswood Supplemental"), and a general
partner of Jet I, L.P. ("Jet"), the principal business of each of which is
investing in securities for its own account. Matthew Lindenbaum and Bennett
Lindenbaum are the sole trustees of 1994 Garden State Trust, a New Jersey trust
("Garden State" and, collectively with Basswood, Basswood International,
Whitewood, Jet and Basswood Supplemental, the "Basswood Companies"), which is a
family investment trust.

As of the date hereof, the Basswood Companies beneficially own 234,971
Shares, or approximately 9.81% of the outstanding Shares. In addition, Matthew
Lindenbaum owns 100 Shares in his own name. The Basswood Companies and Matthew
Lindenbaum intend to cause proxies to be executed on their behalf in favor of
election of the Nominees and the adoption of the Shareholder Proposal. They have
expressed no position on the ratification of the appointment of the independent
auditor.

Certain information concerning related parties of Basswood, the
Nominees and other participants who may solicit proxies from shareholders of NSS
is set forth in Appendix A hereto. Information concerning purchases and sales of
Shares in the past two years by the Basswood Companies, the Nominees and certain
related parties is set forth in Appendix B hereto. None of such persons has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) during the past ten years. None of such persons or any associates
of such persons has any arrangement or understanding with any person with
respect to any future employment by NSS or with respect to any future
transactions to which NSS or any of its affiliates will or may be a party.

-9-

<PAGE>

VOTING AND PROXY PROCEDURES

The Board has established [DATE], 1998 as the Record Date for the
Annual Meeting. We understand from the NSS 1997 Form 10-K, as amended, that the
total number of Shares outstanding as of April 27, 1998 was 2,395,071 (the
latest publicly available data). Only shareholders of record on the Record Date
will be entitled to vote at the Annual Meeting. If you sold Shares before the
Record Date, you may not vote such Shares. If you were a shareholder of record
on the Record Date, you will retain your voting rights in connection with the
Annual Meeting even if you sell or sold such Shares after the Record Date. Based
on publicly available information, we believe that the only outstanding class of
voting securities of NSS is the Shares. Each Share outstanding on the Record
Date is entitled to one vote. Shareholders are not currently entitled to
cumulative voting for directors.

According to the NSS by-laws, the presence in person or by proxy of the
holders of a majority of the issued and outstanding stock of NSS entitled to
vote at the Annual Meeting is necessary to constitute a quorum. Whether or not a
quorum is present in person or by proxy, the holders of a majority of the voting
power of the shares present, in person or by proxy, have the power to adjourn
the Annual Meeting to a future date as may be agreed. Notice of such adjournment
must be given to shareholders not present or represented by proxy at the Annual
Meeting. Additionally, whether or not a quorum is present in person or by proxy,
the holders of a majority of the voting power of the shares present, in person
or by proxy, have the power to recess the Annual Meeting to a future time to
resume no later than 48 hours after the time of recess for the sole purpose of
collecting and soliciting proxies. Notice of such recess need not be given to
shareholders not present or represented by proxy at the Annual Meeting. Section
33-712(a) of the Connecticut Business Corporation Act provides that the
directors to be elected at the Annual Meeting are to be elected by a plurality
of the votes cast by the shares entitled to vote at the Annual Meeting. Section
33-709(c) of the Connecticut Business Corporation Act provides that any other
action to be decided upon at the Annual Meeting, such as the adoption of the
Shareholder Proposal and the ratification of the appointment of the independent
auditor, is approved if the votes cast in favor of the action exceed the votes
cast in opposition of the action. Therefore, as long as the election of
directors, the adoption of the Shareholder Proposal and the ratification of the
appointment of the independent auditor are voted upon as such, valid and binding
action can be taken with respect to such matters. In that case, the three
nominees for director receiving the highest number of votes will be elected to
the Board. Furthermore, in order to adopt the Shareholder Proposal, more votes
would have to be voted in favor of the Shareholder Proposal than against it.
Accordingly, abstentions and broker non-votes will not have the effect of voting
for or against the election of the Nominees, any of the incumbent nominees, the
independent auditor or the adoption of the Shareholder Proposal.

Shares of NSS represented by WHITE proxy cards which are properly
signed and dated but on which no boxes are checked will, unless such proxies
have been previously revoked, be voted FOR the election of the Nominees and the
adoption of the Shareholder Proposal and will ABSTAIN with respect to election
of the independent auditors. Basswood is currently unaware of any other matters
which may come before the Annual Meeting. If any other matters do properly come
before the Annual Meeting or adjournments or postponements thereof, the persons
named as proxies on the enclosed WHITE proxy card (the "Named Proxies") will
have the discretionary authority to vote all proxies with respect to such
matters. The Named Proxies are the agents of the shareholders from whom WHITE
proxy cards are received and are not the agents of, or affiliated with,
Basswood.

-10-

<PAGE>

ONLY HOLDERS OF RECORD ON THE RECORD DATE ARE ELIGIBLE TO VOTE AT THE
ANNUAL MEETING. PERSONS OWNING SHARES BENEFICIALLY (BUT NOT OF RECORD), SUCH AS
PERSONS WHOSE OWNERSHIP OF SHARES IS THROUGH A BROKER, BANK OR OTHER FINANCIAL
INSTITUTION, SHOULD CONTACT SUCH BROKER, BANK OR FINANCIAL INSTITUTION AND
INSTRUCT SUCH PERSON TO EXECUTE THE WHITE PROXY CARD ON THEIR BEHALF OR TO HAVE
SUCH BROKER, BANK OR FINANCIAL INSTITUTION'S NOMINEE (FOR EXAMPLE, A CENTRAL
SECURITY DEPOSITORY SUCH AS CEDE & CO.) EXECUTE SUCH A PROXY CARD.

In order for the proxy solicited hereby to be voted at the Annual
Meeting, the enclosed WHITE proxy card must be signed, dated and returned to us
c/o Beacon Hill Partners, the proxy solicitation firm retained by us, in the
enclosed envelope (for which no postage is required if mailed in the United
States) in time to be voted at the Annual Meeting. Any holder of Shares may
revoke his or her proxy at any time prior to the voting of such proxy at the
Annual Meeting by delivering a written revocation of his or her proxy to the
Secretary of NSS or giving a duly executed proxy bearing a later date to
Basswood or by voting in person at the Annual Meeting. Attendance by a
shareholder at the Annual Meeting will not in itself revoke his or her proxy.
ONLY YOUR LATEST DATED, PROPERLY SIGNED PROXY WILL COUNT AT THE ANNUAL MEETING.
PLEASE MAKE CERTAIN THAT IT IS A WHITE CARD!

OWNERSHIP OF SHARES

According to the Company's by-laws, each Share is entitled to one vote,
and the Shares are the only class of securities of NSS currently entitled to
vote at the Annual Meeting. According to the NSS 1997 Form 10-K, there were
approximately 688 holders of record of Shares as of March 27, 1998 and there
were 2,395,071 Shares outstanding as of April 27, 1998.

Appendix C hereto sets forth information, to the extent known by us,
relating to ownership of Shares by certain beneficial owners of Shares and by
management of NSS.

SOLICITATION OF PROXIES

Proxies will be solicited by mail, telephone, telegraph, telex,
telecopier and advertisement and in person. Solicitation may be made by
Basswood, the Nominees and certain officers, personnel and other regular
employees of Basswood and its affiliates. No such employees will receive
additional compensation for such solicitation. See Appendix A hereto for a
listing of such persons.

BROKERS, CUSTODIANS, NOMINEES AND FIDUCIARIES WILL BE REQUESTED TO
FORWARD THE SOLICITATION MATERIALS TO BENEFICIAL OWNERS OF THE SHARES. WE WILL
REIMBURSE BROKERS, CUSTODIANS, NOMINEES AND FIDUCIARIES FOR THEIR REASONABLE
EXPENSES FOR SENDING THE SOLICITATION MATERIALS TO THE BENEFICIAL OWNERS OF
SHARES.

In addition, we have retained Beacon Hill Partners to assist and to
provide advisory services in connection with this proxy solicitation for which
Beacon Hill Partners will be paid a fee of not more than $20,000 and will be
reimbursed for reasonable out-of-pocket expenses. We have also agreed to
indemnify Beacon Hill Partners against certain liabilities and expenses in
connection with this proxy solicitation.

-11-

<PAGE>

The expenses related to this proxy solicitation will be borne by the
Basswood Companies. Basswood believes that its efforts and this solicitation
will enhance the value of all shareholder's investments in the Company. It
intends to seek reimbursement of the expenses related to this proxy solicitation
from NSS only to the extent permitted by law. Basswood does not intend to seek
shareholder approval of such reimbursement unless such approval is required by
law. Basswood estimates that the total amount of expenses to be incurred by the
Basswood Companies in this proxy solicitation will be approximately $150,000. No
expenses have been incurred as of the date of this Proxy Statement.

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

If you have any questions concerning this Proxy Solicitation or the
procedures to be followed to execute and deliver a proxy, please contact Beacon
Hill Partners at:

BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
Call Toll-Free: 1-800-755-5001
Call Collect: (212) 843-8500

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

YOUR PROXY AND PROMPT ACTION ARE IMPORTANT. YOU ARE URGED TO GRANT YOUR
PROXY BY SIGNING, DATING AND RETURNING THE ENCLOSED WHITE PROXY CARD TODAY.

INFORMATION REGARDING NSS

The information concerning NSS contained in this Proxy Statement
(including Appendix C hereto) has been taken from or is based upon documents and
records on file with the Commission and other publicly available information.
Basswood has no actual knowledge that would indicate that statements relating to
NSS contained in this Proxy Statement in reliance upon publicly available
information are inaccurate or incomplete in any material respect. Basswood,
however, has not had access to the books and records of NSS, was not involved in
the preparation of such information and statements, and is not in a position to
verify, or make any representation with respect to the accuracy of, any such
information or statements. The proxy statement of NSS management, when
distributed to you, will contain additional information concerning the Shares,
beneficial ownership of the Shares by and other information concerning directors
and officers, compensation paid to executive officers, and the principal holders
of Shares.

-12-

<PAGE>

SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING

In order for any shareholder proposal to be included in the NSS proxy
statement and proxy as an item of business for the 1999 annual meeting of
shareholders, it must be received at the principal executive offices of NSS no
later than [DATE].

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

As fellow shareholders with common interests, we thank you very much
for your consideration of our proposals.

BASSWOOD FINANCIAL PARTNERS, L.P.

[DATE], 1998

-13-

<PAGE>

APPENDIX A

INFORMATION CONCERNING THE NOMINEES, BASSWOOD
RELATED PARTIES AND OTHER PARTICIPANTS

The following table sets forth the name, business address, present
principal occupation and the number of Shares beneficially owned, as of the date
of this Proxy Statement, by each of (i) the Nominees, (ii) Basswood, (iii)
certain associates and related parties of Basswood, and (iv) other participants
in the solicitation (as defined in the rules and regulations under the Exchange
Act).

NO. OF
SHARES PERCENT
BENEFICIALLY OF
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OWNED CLASS
- ------------------------------- -------------------------------- ------------ -------
<S> <C> <C> <C>

Wolfgang Schoellkopf Principal, Ramius Capital Group, 220 *
757 Third Avenue, 17th Floor L.L.C., an investment manager
New York, New York 10017

George R. Zoffinger President and Chief Executive 420 *
120 Albany Street, 8th Floor Officer, Constellation Capital
New Brunswick, New Jersey 08901 Corp., an investment manager

Matthew Lindenbaum President, 235,071(1) 9.81
52 Forest Avenue Basswood Management, Inc.,
Paramus, New Jersey 07652 an investment manager

Bennett Lindenbaum Vice President, 234,971(2) 9.81
52 Forest Avenue Basswood Management, Inc.,
Paramus, New Jersey 07652 an investment manager

Basswood Partners, L.P. Money management 234,971(2) 9.81
52 Forest Avenue
Paramus, New Jersey 07652

Basswood Management, Inc. Money management 234,971(2) 9.81
52 Forest Avenue
Paramus, New Jersey 07652

Basswood Financial Partners, L.P. Investment fund 105,191 4.39
52 Forest Avenue
Paramus, New Jersey 07652

Basswood International Fund, Inc. Investment fund 36,809 1.54
c/o Hemisphere Fund Managers Ltd.
P.O. Box 30362, SMB 2nd Floor
Genesis Building
George Town Grand Cayman,
Cayman Islands

1994 Garden State Trust Family investment trust 7,905 *
52 Forest Avenue
Paramus, New Jersey 07652

Whitewood Financial Partners, L.P. Investment fund 1,956 *
52 Forest Avenue
Paramus, New Jersey 07652

A-1

<PAGE>

Basswood Supplemental Fund, L.P. Investment fund 75,315 3.14
52 Forest Avenue
Paramus, New Jersey 07652

Jet I, L.P. Investment fund 7,795 *
52 Forest Avenue
Paramus, New Jersey 07652

Debbie Coticchio Financial reporting 0 0

Marc Samit Financial reporting 0 0

Brian Jackelow Financial reporting 0 0

Raymond French Analyst 0 0

David Verlander Analyst 0 0

Claudine Blazina Clerical 0 0

Stella Kourkoulakos Clerical 0 0

<FN>
- --------------------
* Less than one percent of the outstanding Shares.

(1) Of such Shares, 100 Shares are held by Matthew Lindenbaum and 234,971
Shares are held by Basswood, Garden State, Basswood International,
Whitewood, Basswood Supplemental and Jet.

(2) Of such Shares, 234,971 Shares are held by Basswood, Garden State,
Basswood International, Whitewood, Basswood Supplemental and Jet.

</FN>
</TABLE>

A-2

<PAGE>

APPENDIX B

PURCHASES AND SALES OF SHARES

On April 20, Basswood transferred 220 Shares to Wolfgang Schoellkopf to
compensate him for his time and effort required as a nominee for election as
directors of the Company. Otherwise, Mr. Schoellkopf has not owned, directly or
indirectly, Shares during the past two years ending on May 8, 1998.

On February 5, 1996, George R. Zoffinger purchased 500 Shares using his
personal funds. On July 31, 1997, Mr. Zoffinger sold 300 Shares. On April 20,
Basswood transferred 220 Shares to Mr. Zoffinger to compensate him for his time
and effort required as a nominee for election as directors of the Company.

On November 4, 1997, Matthew Lindenbaum purchased 100 Shares using
personal funds.

The following table sets forth information with respect to all
purchases and sales (including cross-trades between the Basswood Companies) of
Shares by each of Basswood, Garden State, Basswood International, Whitewood,
Basswood Supplemental and Jet during the past two years ending on May 8, 1998.
Except as indicated in the accompanying notes, no part of such Shares is
represented by borrowed funds.

<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------------------------------------------------------------------
TYPE OF GARDEN BASSWOOD BASSWOOD
TRANSACTION DATE BASSWOOD 1/ STATE 2/ INTERNATIONAL 3/ WHITEWOOD 4/ SUPPLEMENTAL 5/ JET 6/
- ----------- ------------ ----------- --------- ---------------- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>

Sale July 1, 1996 1,906 -- 2,314 -- -- --

Sale July 1, 1996 750 -- -- -- -- --

Sale July 1, 1996 1,620 -- -- -- -- --

Sale July 1, 1996 9,200 -- -- -- -- --

Sale July 1, 1996 4,600 -- -- -- -- --

Sale July 1, 1996 4,182 -- -- -- -- --

Purchase July 1, 1996 -- 13,079 -- -- -- --

Purchase July 1, 1996 -- 706 -- -- -- --

Purchase July 1, 1996 -- 2,335 -- -- -- --

Purchase July 1, 1996 -- 80 -- -- -- --

Purchase July 1, 1996 -- 1 -- -- -- --

Purchase July 1, 1996 -- 484 -- -- -- --

Purchase July 1, 1996 -- 50 -- -- -- --

Purchase July 1, 1996 -- 8 -- -- -- --

Purchase July 1, 1996 -- 139 -- -- -- --

Purchase July 1, 1996 -- 795 -- -- -- --

B-1

<PAGE>

NUMBER OF SHARES
--------------------------------------------------------------------------------------
TYPE OF GARDEN BASSWOOD BASSWOOD
TRANSACTION DATE BASSWOOD 1/ STATE 2/ INTERNATIONAL 3/ WHITEWOOD 4/ SUPPLEMENTAL 5/ JET 6/
- ----------- ------------ ----------- --------- ---------------- ------------ --------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>

Purchase July 1, 1996 -- 222 -- -- -- --

Purchase July 1, 1996 -- 275 -- -- -- --

Purchase July 1, 1996 -- 990 -- -- -- --

Purchase July 1, 1996 -- 650 -- -- -- --

Purchase July 1, 1996 -- 202 -- -- -- --

Purchase July 1, 1996 -- 400 -- -- -- --

Purchase July 1, 1996 -- 54 -- -- -- --

Purchase July 1, 1996 -- 240 -- -- -- --

Purchase July 1, 1996 -- 210 -- -- -- --

Purchase July 1, 1996 -- 353 -- -- -- --

Purchase July 1, 1996 -- 33 -- -- -- --

Purchase July 1, 1996 -- 220 -- -- -- --

Purchase July 1, 1996 -- 620 -- -- -- --

Purchase July 1, 1996 -- 335 -- -- -- --

Purchase July 1, 1996 -- 56 -- -- -- --

Purchase July 1, 1996 -- 153 -- -- -- --

Purchase July 1, 1996 -- 417 -- -- -- --

Purchase July 1, 1996 -- 295 -- -- -- --

Purchase July 1, 1996 -- 210 -- -- -- --

Purchase July 1, 1996 -- 960 -- -- -- --

Sale October 2, 1996 737 -- -- -- -- --

Sale October 2, 1996 595 -- -- -- -- --

Purchase October 2, 1996 -- -- 1,332 -- -- --

Sale October 24, 1996 -- 6,630 -- -- -- --

Purchase October 24, 1996 5,255 -- 1,375 -- -- --

Sale December 6, 1996 1,906 -- 1,211 -- -- --

Sale December 6, 1996 3,349 -- 139 -- -- --

Purchase December 6, 1996 -- 6,630 -- -- -- --

Sale December 6, 1996 -- -- 25 -- -- --

Sale December 9, 1996 -- 1,435 600 -- -- --

B-2

<PAGE>

Purchase December 9, 1996 2,035 -- -- -- -- --

Sale January 3, 1997 1,199 845 -- -- -- --

Purchase January 3, 1997 -- -- 854 1,190 -- --

Purchase January 23, 1997 -- -- -- 105 -- --

Purchase February 27, 1997 1,780 220 475 25 -- --

Purchase March 4, 1997 -- -- -- 25 -- --

Sale March 10, 1997 -- 242 3 -- -- --

Purchase March 10, 1997 56 -- -- 189 -- --

Sale March 11, 1997 44 -- 10 -- -- --

Purchase March 11, 1997 -- -- -- 54 -- --

Purchase March 14, 1997 -- -- -- 16 -- --

Sale March 14, 1997 16 -- -- -- -- --

Sale March 18, 1997 24 8 9 -- -- --

Purchase March 18, 1997 -- -- -- 41 -- --

Sale April 3, 1997 -- 670 224 -- -- --

Sale April 3, 1997 -- -- 355 -- -- --

Sale April 3, 1997 -- -- 220 -- -- --

Purchase April 3, 1997 1,433 -- -- 36 -- --

Sale April 10, 1997 105 7 7 -- -- --

Purchase April 10, 1997 -- -- -- 119 -- --

Sale May 2, 1997 -- 105 255 -- -- --

Purchase May 2, 1997 230 -- -- 130 -- --

Sale May 15, 1997 125 -- 25 -- -- --

Purchase May 15, 1997 -- -- -- 150 -- --

Sale May 27, 1997 71 17 13 -- -- --

Sale May 27, 1997 -- -- 26 -- -- --

Purchase May 27, 1997 -- -- -- 127 -- --

Sale June 20, 1997 33 230 -- -- -- --

Sale June 20, 1997 424 -- -- -- -- --

Purchase June 20, 1997 -- -- 505 182 -- --

B-3

<PAGE>

Sale July 15, 1997 -- 2,068 254 38 -- --

Purchase July 15, 1997 2,360 -- -- -- -- --

Sale September 2, 1997 -- -- -- 130 -- --

Purchase September 2, 1997 130 -- -- -- -- --

Sale September 25, -- -- 505 -- -- --
1997

Sale September 25, -- -- 475 -- -- --
1997

Sale September 25, -- -- 854 -- -- --
1997

Sale September 25, -- -- 801 -- -- --
1997

Sale October 2, 1997 -- 220 574 52 -- --

Sale October 2, 1997 -- 875 1,332 43 -- --

Sale October 2, 1997 -- -- 649 -- -- --

Purchase October 2, 1997 3,745 -- -- -- -- --

Purchase November 3, 1997 -- -- -- -- -- 1,595

Sale November 5, 1997 130 -- -- -- -- --

Sale November 5, 1997 3,745 -- -- -- -- --

Sale November 5, 1997 2,325 -- -- -- -- --

Purchase November 5, 1997 -- -- -- -- -- 6,200

Sale November 12, 1997 -- 3,205 -- 40 -- --

Purchase November 12, 1997 1,835 -- 1,410 -- -- --

Sale January 6, 1998 -- 1,465 1,410 44 -- --

Sale January 6, 1998 -- -- -- 106 -- --

Sale January 6, 1998 -- -- 3,361 -- -- --

Sale January 6, 1998 -- -- 1,329 -- -- --

Purchase January 6, 1998 7,715 -- -- -- -- --

Purchase April 2, 1998 -- -- 3,125 50 -- --

Sale April 2, 1998 2,655 520 -- -- -- --

Purchase April 6, 1998 2,805 -- 1,045 40 -- --

Sale April 6, 1998 -- 3,890 -- -- -- --

B-4

<PAGE>

Transfer to April 20, 1998 440 -- -- -- -- --
Nominees

Sale May 1, 1998 2,175 1,085 2,670 70 -- --

<FN>

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

(1) The Shares purchased by Basswood were purchased with partnership funds
and the proceeds of margin borrowings. All Shares are held in
Basswood's margin account at Goldman, Sachs & Co. Such margin account
had a debit balance as of May 7, 1998 of approximately $217,861,298.

(2) The Shares purchased by Garden State were purchased with partnership
funds and the proceeds of margin borrowings. All Shares are held in
Garden State's margin account at Goldman, Sachs & Co. Such margin
account had a debit balance as of May 7, 1998 of approximately
$50,014,348.

(3) The Shares purchased by Basswood International were purchased with
partnership funds and the proceeds of margin borrowings. All Shares are
held in Basswood International's margin account at Goldman, Sachs & Co.
Such margin account had a debit balance as of May 7, 1998 of
approximately $2,028,649.

(4) The Shares purchased by Whitewood were purchased with partnership funds
and the proceeds of margin borrowings. All Shares are held in
Whitewood's margin account at Goldman, Sachs & Co. Such margin account
had a debit balance as of May 7, 1998 of approximately $1,735,275.

(5) The Shares purchased by Basswood Supplemental were purchased with trust
funds and the proceeds of margin borrowings. All Shares are held in
Basswood Supplemental's margin account at Goldman, Sachs & Co. Such
margin account had a debit balance as of May 7, 1998 of approximately
$445,017.

(6) The Shares purchased by Jet were purchased with partnership funds and
the proceeds of margin borrowings. All Shares are held in Jet's margin
account at Goldman, Sachs & Co. Such margin account had a debit balance
as of May 7, 1998 of approximately $3,453,696.

</FN>
</TABLE>

B-5

<PAGE>

APPENDIX C

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial owners of more than 5% of
the outstanding Shares based on publicly available information. Information
relating to Basswood and its related parties is provided as of the date of this
Proxy Statement. The information relating to Westport Asset Management Inc. and
Cramer Rosenthal McGlynn, LLC and Cramer Rosenthal McGlynn, Inc. are based
solely on their most recently filed Schedule 13G (filed on March 31, 1998) and
Schedule 13D (filed on March 31, 1998), respectively, and is not necessarily
indicative of their current holdings. In addition, the table sets forth
information concerning beneficial ownership of the Shares by all current
directors of the Company, by all executive officers of the Company and by all
directors and executive officers of the Company as a group. All such information
has been obtained solely from the NSS 1997 Form 10-K and is not necessarily
indicative of the current holdings of such persons listed below.

AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF THE
OF COMPANY'S COMMON PERCENT
BENEFICIAL OWNER STOCK(1) OF CLASS(2)
- ------------------- --------------------------- -----------
<S> <C> <C>

Basswood Partners, L.P. 234,971 Shares 9.81%
c/o Bennett Lindenbaum
52 Forest Avenue
Paramus, NJ 07652

Matthew Lindenbaum 235,071 Shares 9.81%
52 Forest Avenue
Paramus, NJ 07652

Westport Asset Management Inc. 243,600 Shares 10.17%
253 Riverside Avenue
Westport, Connecticut 06880

Cramer Rosenthal McGlynn, LLC 196,000 Shares 8.18%
Cramer Rosenthal McGlynn, Inc.
707 Westchester Avenue
White Plains, New York 10604

Directors
- ---------

Charles F. Howell 59,723(3) 2.49%

Herbert L. Jay 23,494(4) *

Alan R. Staack 21,853(5) *

Donald St. John 24,920(6) 1.04%

Robert T. Judson 86,499(7) 3.61%

Edward J. Kelley, D.D.S. 15,494(8) *

C-1

<PAGE>

Brian A. Fitzergerald 6,853(9) *

John L. Segall 24,494 1.02%

Named Officers
- --------------
Marcus I. Braverman 25,365(10) 1.06%

Jeremiah T. Dorney 26,276(11) 1.10%

Directors and Executive Officers of 14,971(12) 13.15%

NSS as a group (10 individuals)

<FN>
- ---------------------------

* Represents holdings of less than 1.0%.

(1) Beneficial ownership is direct except as otherwise indicated by footnote.
All persons shown in the table have sole voting and investment power
except as otherwise indicated.

(2) Based upon 2,395,071 Shares outstanding at April 27, 1998. No individual
director or nominee, other than as noted in the table, beneficially owns
more than 1% of the total number of outstanding Shares.

(3) Includes 36,201 option Shares, 3,558 Shares allocated to Mr. Howell's
ESOP account, and 2,000 Shares owned by his wife's IRA.

(4) Include 12,494 option Shares. Mr. Jay's Shares are owned jointly by him
and his wife.

(5) Includes 6,000 Shares owned jointly by Mr. Staack and his wife and 7,000
Shares owned by Mr. Staack's IRA.

(6) Includes 14,920 option Shares.

(7) Includes 51,267 option Shares, 30,000 Shares owned by Mr. Judson's IRA,
100 Shares owned jointly by him and his wife, and 3,792 Shares allocated
to his ESOP account.

(8) Dr. Kelly's Shares are owned jointly by him and his wife.

(9) Mr. Fitzgerald's Shares are owned jointly by him and his wife. Includes
5,853 option Shares.

(10) Includes 19,600 option Shares and 2,150 Shares allocated to his ESOP
account.

(11) Includes 22,634 option Shares and 2,926 Shares allocated to Mr. Dorney's
ESOP account.

(12) Includes 175,463 option Shares and 12,427 Shares allocated to ESOP
accounts.

</FN>
</TABLE>

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<PAGE>

APPENDIX D

PRELIMINARY COPY - SUBJECT TO COMPLETION
FORM OF PROXY CARD-WHITE

PROXY SOLICITED BY BASSWOOD FINANCIAL PARTNERS, L.P.
IN OPPOSITION TO THE PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
NSS BANCORP, INC.

Unless otherwise specified below, the undersigned, a holder of record
of shares of Common Stock, par value $.01 per share (the "Shares"), of NSS
Bancorp, Inc. ("NSS") on [Date], 1998 (the "Record Date"), hereby appoints
[NAME] OR [NAME], OR EITHER OF THEM, THE PROXY OR PROXIES OF THE UNDERSIGNED
(THE "PROXIES"), EACH WITH FULL POWER OF SUBSTITUTION, TO ATTEND THE ANNUAL
MEETING OF SHAREHOLDERS OF NSS TO BE HELD ON [DATE], 1998 AT WHICH HOLDERS OF
SHARES WILL BE VOTING ON THE ELECTION OF THREE DIRECTORS TO THE BOARD OF
DIRECTORS OF NSS, AND AT ANY ADJOURNMENTS, POSTPONEMENTS OR RESCHEDULINGS
THEREOF, AND TO VOTE AS SPECIFIED IN THIS PROXY ALL THE SHARES WHICH THE
UNDERSIGNED WOULD OTHERWISE BE ENTITLED TO VOTE IF PERSONALLY PRESENT. THE
UNDERSIGNED HEREBY REVOKES ANY PREVIOUS PROXIES WITH RESPECT TO THE MATTERS
COVERED IN THIS PROXY.

BASSWOOD FINANCIAL PARTNERS, L.P. ("BASSWOOD") RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES

AND A VOTE FOR THE ADOPTION OF THE SHAREHOLDER PROPOSAL

(IF SIGNED AND DATED BUT NOT MARKED, THIS PROXY CARD WILL VOTED BY THE
PROXIES IN THE FOLLOWING MANNER: (1) FOR THE ELECTION OF BENNETT LINDENBAUM,
WOLFGANG SCHOELLKOPF AND GEORGE R. ZOFFINGER, (2) FOR THE ADOPTION OF THE
SHAREHOLDER PROPOSAL AND (3) ABSTAIN ON THE RATIFICATION OF FRIEDBERG, SMITH &
CO., P.C. AS AUDITORS.)

1. Election of three nominees for Director: BENNETT LINDENBAUM, WOLFGANG
SCHOELLKOPF AND GEORGE R. ZOFFINGER

|_| FOR ALL NOMINEES |_| WITHHOLD AUTHORITY FOR ALL NOMINEES

(INSTRUCTION: To withhold authority to vote for one of the foregoing nominees,
check the box marked "FOR" directly above and print the name of the person with
respect to whom you wish to withhold authority
here:_____________________________)

2. Adoption of the following shareholder proposal:

RESOLVED, that the shareholders of NSS Bancorp, Inc. (the "Company")
hereby request that the Board of Directors immediately take the
necessary steps to achieve a sale, merger or other acquisition of the
Company on terms most favorable to shareholders.

|_| FOR |_| AGAINST |_| ABSTAIN

3. Ratification of the appointment of the firm of Friedberg, Smith & Co., P.C.
as independent auditors for the ensuing year.

|_| FOR |_| AGAINST |_| ABSTAIN

4. In their discretion, the Proxies are authorized to vote upon any other
matter that may properly come before the Annual Meeting or any
adjournment(s) or postponement(s) thereof.

IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT BEACON HILL
PARTNERS, INC. TOLL FREE AT (800) 755-5001 OR COLLECT AT (212) 843-8500.

Proxies can only be given by Shareholders of Record Date. Please sign
your name below exactly as it appears on your stock certificate(s) on the Record
Date or on the label affixed hereto. When Shares are held of record by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or authorized officer. If a
partnership, please sign in partnership name by authorized person.

Please sign exactly as shown below:
Dated: _____________________, 1998

--------------------------------
Signature (Title, if any)

--------------------------------
Signature if held jointly

PLEASE SIGN, DATE AND RETURN PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
- -------------------------------------------------------------------------------
<PAGE>

IMPORTANT

BY INCLUDING THREE NOMINEES ON OUR SLATE, WE HAVE ENABLED SHAREHOLDERS
TO VOTE FOR A FULL SLATE OF DIRECTORS BY RETURNING ONLY THE WHITE PROXY CARD
ENCLOSED WITH THIS PROXY STATEMENT. IF YOU SUPPORT THE ELECTION OF THE NOMINEES,
YOU SHOULD NOT RETURN ANY [COLOR] PROXY CARD PROVIDED BY MANAGEMENT. INSTEAD,
PLEASE SIGN, DATE AND RETURN THE WHITE PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.

If your shares of common stock are held in the name of a bank or
brokerage firm, only that firm can vote a proxy card on your behalf. Please sign
and return the enclosed WHITE proxy card in the postage-paid envelope provided
OR contact the person responsible for your account and give instructions for a
WHITE proxy card to be voted FOR the Nominees.

If you have questions or need assistance in voting your shares, please
contact the firm assisting us in the solicitation of proxies:

BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004

TOLL FREE: 1-800-755-5001
COLLECT: (212) 843-8500