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The following is an excerpt from a 10-K SEC Filing, filed by WARWICK COMMUNITY BANCORP INC on 8/31/1998.
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WARWICK COMMUNITY BANCORP INC - 10-K - 19980831 - PART_II

PART II

ITEM 5. Market for the Registrant's Common Equity and Related Stockholders' Matters

The information required by this item appears under the caption "Market for Common Stock" on page 21 of the Registrant's Annual Report to Shareholders for the year ended May 31, 1998 and is incorporated herein by reference.

ITEM 6. Selected Financial Data

The information required by this item appears on pages 8 through 9, inclusive, of the Registrant's Annual Report to Shareholders for the year ended May 31, 1998 and is incorporated herein by reference.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The information required by this item appears on pages 10 through 21, inclusive, of the Registrant's Annual Report to Shareholders for the year ended May 31, 1998 and is incorporated herein by reference.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item appears on pages 11 through 13, inclusive, of the Registrant's Annual Report to Shareholders for the year ended May 31, 1998 and is incorporated herein by reference.

ITEM 8. Financial Statements and Supplementary Data

The information required by this item appears on pages 22 through 44, inclusive, of the Registrant's Annual Report to Shareholders for the year ended May 31, 1998 and is incorporated herein by reference.

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PART III

ITEM 10. Directors and Officers of the Registrant

The information required by this item appears under the caption "Election of Directors" on pages 5 through 9, inclusive, and under the caption "Compliance with Section 16(a) of the Exchange Act" on page 19 of the Registrant's Proxy Statement ("Proxy Statement") for its 1998 Annual Meeting of Shareholders to be held on September 22, 1998 and is incorporated herein by reference.

ITEM 11. Executive Compensation

The information required by this item appears on pages 13 through 19, inclusive, of the Registrant's Proxy Statement and is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item appears under the captions "Stock Ownership of Certain Beneficial Owners" on page 3 and "Stock Ownership of Management" on pages 4 and 5, inclusive, of the Registrant's Proxy Statement and is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions

The information required by this item appears under the caption "Certain Relationships and Related Transactions" on page 19 of the Registrant's Proxy Statement and is incorporated herein by reference.

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PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as a part of this report:

1. The following consolidated financial statements of the Registrant and its subsidiaries, and the independent auditors' report thereon, included on pages 22 through 44 of the Registrant's Annual Report to Shareholders for the fiscal year ended May 31, 1998, are incorporated herein by reference:

Consolidated Statements of Financial Condition as of May 31, 1998 and 1997;

Consolidated Statements of Income for Each of the Years in the Three-Year Period Ended May 31, 1998;

Consolidated Statements of Changes in Stockholders' Equity for Each of the Years in the Three-Year Period Ended May 31, 1998;

Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period Ended May 31, 1998;

Notes to Consolidated Financial Statements

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

2. All schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.

3. Exhibits

(a) The following exhibits are filed as part of this report, except as otherwise indicated.

3.1 Certificate of Incorporation of Warwick Community Bancorp, Inc.

(1)

3.2 Bylaws of Warwick Community Bancorp, Inc. (1)

4.1 Certificate of Incorporation of Warwick Community Bancorp, Inc.
(See Exhibit 3.1 hereto)

4.2 Bylaws of Warwick Community Bancorp, Inc. (See Exhibit 3.2 hereto)

4.3 Restated Organization Certificate of The Warwick Savings Bank (1)

4.4 Bylaws of The Warwick Savings Bank, as amended (1)

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4.5 Stock Certificate of Warwick Community Bancorp, Inc. (1)

10.1 Employment Agreement by and between Warwick Community Bancorp, Inc. and Timothy A. Dempsey

10.2 Employment Agreement by and between Warwick Community Bancorp, Inc. and Ronald J. Gentile

10.3 Employment Agreement by and between Warwick Community Bancorp, Inc. and Arthur W. Budich

10.4 Employment Agreement by and between Warwick Community Bancorp, Inc. and Nancy L. Sobotor-Littell

10.5 Employee Retention Agreement by and between The Warwick Savings Bank and Laurence D. Haggerty

10.6 Employee Retention Agreement by and between The Warwick Savings Bank and Donna M. Lyons

10.7 Employee Retention Agreement by and between The Warwick Savings Bank and Barbara A. Rudy

10.8 Employee Retention Agreement by and between The Warwick Savings Bank and Arthur S. Anderson

10.9 Recognition and Retention Plan of Warwick Community Bancorp, Inc.

(2)

10.10 Trust Agreement between Warwick Community Bancorp, Inc. and Orange County Trust Company for the Recognition and Retention Plan of Warwick Community Bancorp, Inc.

10.11 Stock Option Plan of Warwick Community Bancorp, Inc.(2)

10.12 Warwick Community Bancorp, Inc. Employee Stock Ownership Plan

(1)

10.13 Trust Agreement between Warwick Community Bancorp, Inc. and Marine Midland Bank for the Warwick Community Bancorp, Inc. Employee Stock Ownership Plan

10.14 Loan Agreement by and between the Warwick Community Bancorp, Inc. Employee Stock Ownership Trust and Warwick Community Bancorp, Inc.

10.15 Benefit Restoration Plan of The Warwick Savings Bank (1)

10.16 Grantor Trust Agreement by and between The Warwick Savings Bank and Marine Midland Bank for the Benefit Restoration Plan of The Warwick Savings Bank

10.17 The Warwick Savings Bank 401(k) Savings Plan (1)

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10.18 Trust Agreement between The Warwick Savings Bank and Marine Midland Bank for The Warwick Savings Bank 401(k) Savings Plan Employer Stock Fund

11.1 Statement re: Computation of per share earnings

13.1 1998 Annual Report to Shareholders

21.1 Subsidiaries of the Registrant

27.1 Financial Data Schedule (EDGAR filing only)

99.1 Proxy Statement for the 1998 Annual Meeting of Shareholders


(1) Incorporated herein by reference to the Exhibits to the Registrant's Registration Statement on Form S-1, filed on September 19, 1997, Registration No. 333-36021.

(2) Incorporated herein by reference to the Registrant's definitive Proxy Statement for the Special Meeting of Stockholders held on June 24, 1998.

(b) No reports on Form 8-K have been filed during the last quarter of the period covered by this report.

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

WARWICK COMMUNITY BANCORP, INC.

Dated: August 31, 1998            BY:  /s/ Timothy A. Dempsey
                                      ------------------------------------
                                           Timothy A. Dempsey
                                           President and Chief Executive Officer




                                  BY: /s/ Arthur W. Budich
                                      ------------------------------------
                                          Arthur W. Budich
                                          Senior Vice President, Treasurer
                                          and Chief Financial Officer

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Pursuant to the requirements of the Securities 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 date indicated.

Signature                          Title                                        Date
---------                          -----                                        ----
/s/ Timothy A. Dempsey             President and Chief Executive Officer and    August 31, 1998
----------------------------       Director
Timothy A. Dempsey

/s/ Ronald J. Gentile              Executive Vice President and Chief           August 31, 1998
----------------------------       Operating Officer and Director
Ronald J. Gentile

/s/ Frances M. Gorish              Director                                     August 31, 1998
----------------------------
Frances M. Gorish

/s/ R. Michael Kennedy             Director                                     August 31, 1998
----------------------------
R. Michael Kennedy

/s/ Fred M. Knipp                  Director                                     August 31, 1998
----------------------------
Fred M. Knipp

/s/ Emil R. Krahulik               Director                                     August 31, 1998
----------------------------
Emil R. Krahulik

/s/ Thomas F. Lawrence, Jr.        Director                                     August 31, 1998
----------------------------
Thomas F. Lawrence, Jr.

/s/ Henry L. Nielsen, Jr.          Director                                     August 31, 1998
----------------------------
Henry L. Nielsen, Jr.

/s/ John W. Sanford III            Director                                     August 31, 1998
----------------------------
John W. Sanford III

/s/ Robert N. Smith                Director                                     August 31, 1998
----------------------------
Robert N. Smith

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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of December 23, 1997 by and between WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and having an office at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company") and TIMOTHY A. DEMPSEY, an individual residing at 36 Waterbury Road, Warwick, New York 10990 ("Executive").

W I T N E S S E T H :

WHEREAS, the Executive currently serves as the President and Chief Executive Officer of the Company and as the President and Chief Executive Officer of The Warwick Savings Bank ("Bank") and effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become the wholly owned subsidiary of the Company; and

WHEREAS, the Company desires to assure for itself, the Bank and their respective subsidiaries and affiliates the continued availability of the Executive's services as provided in this Agreement and the ability of the Executive to perform such services with a minimum of personal distraction in the event of a pending or threatened Change of Control (as hereinafter defined); and

WHEREAS, the Executive is willing to continue to serve the Company, the Bank and their respective subsidiaries and affiliates on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions hereinafter set forth, the Company, the Bank and the Executive hereby agree as follows:

SECTION 1. EMPLOYMENT.

The Company and the Bank agree to continue to employ the Executive, and the Executive hereby agrees to such continued employment, during the period and upon the terms and conditions set forth in this Agreement.

SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.

(a) The terms and conditions of this Agreement shall be and remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of three years beginning on the date of this Agreement and ending on the third anniversary date of this Agreement (each, an "Anniversary Date"), plus such extensions, if any, as are provided pursuant to section 2(b).

(b) Except as provided in section 2(c) and subject to section
11(b), beginning on the date of this Agreement, the Employment Period shall automatically be extended for one


additional day each day, unless either the Company or the Executive elects not to extend the Agreement further by giving written notice thereof to the other party, in which case the Employment Period shall end on the third anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Employment Period shall end on the last day of the month in which the Executive attains the age of 68. For all purposes of this Agreement, the term "Remaining Unexpired Employment Period" as of any date shall mean the period beginning on such date and ending on the last day of the Employment Period taking into account any extensions under this section 2(b). Upon termination of the Executive's employment with the Company or the Bank for any reason whatsoever, any daily extensions provided pursuant to this section
2(b), if not theretofore discontinued, shall automatically cease.

(c) Nothing in this Agreement shall be deemed to prohibit the Company or the Bank at any time from terminating the Executive's employment during the Employment Period with or without notice for any reason; PROVIDED, HOWEVER, that the relative rights and obligations of the Company and the Executive in the event of any such termination shall be determined under this Agreement.

SECTION 3. DUTIES.

The Executive shall serve as President and Chief Executive Officer of the Company and as President and Chief Executive Officer of the Bank, having such power, authority and responsibility and performing such duties as are prescribed by or under the By-Laws of the Company and as are customarily associated with such position. The Executive shall devote his full business time and attention (other than during weekends, holidays, approved vacation periods, and periods of illness or approved leaves of absence) to the business and affairs of the Company and shall use his best efforts to advance the interests of the Company.

SECTION 4. CASH COMPENSATION.

In consideration for the services to be rendered by the Executive hereunder, the Company shall pay to him a salary at an initial annual rate of two hundred thousand dollars ($200,000), payable in approximately equal installments in accordance with the Company's customary payroll practices for senior officers. The Board shall review the Executive's annual rate of salary at such times during the Employment Period as it deems appropriate, but not less frequently than once every twelve months, and may, in its discretion, approve an increase therein. In addition to salary, the Executive may receive other cash compensation from the Company or the Bank for services hereunder at such times, in such amounts and on such terms and conditions as the Board may determine from time to time.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

During the Employment Period, the Executive shall be treated as an employee of the Company and the Bank and shall be entitled to participate in and receive benefits under any and all qualified or non-qualified retirement, pension, savings, profit-sharing or stock bonus plans, any and all group life, health (including hospitalization, medical and major medical), dental,

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accident and long term disability insurance plans, and any other employee benefit and compensation plans (including, but not limited to, any incentive compensation plans or programs, stock option and appreciation rights plans and restricted stock plans) as may from time to time be maintained by, or cover employees of, the Company and the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and consistent with the Company's and the Bank's customary practices.

SECTION 6. INDEMNIFICATION AND INSURANCE.

(a) During the Employment Period and for a period of six years thereafter, the Company or the Bank shall cause the Executive to be covered by and named as an insured under any policy or contract of insurance obtained by it to insure its directors and officers against personal liability for acts or omissions in connection with service as an officer or director of the Company, the Bank or service in other capacities at the request of the Company. The coverage provided to the Executive pursuant to this section 6 shall be of the same scope and on the same terms and conditions as the coverage (if any) provided to other officers or directors of the Company and the Bank.

(b) To the maximum extent permitted under applicable law, during the Employment Period and for a period of six years thereafter, the Company and the Bank shall indemnify the Executive against and hold him harmless from any costs, liabilities, losses and exposures to the fullest extent and on the most favorable terms and conditions that similar indemnification is offered to any director or officer of the Company and the Bank or any subsidiary or affiliate thereof.

SECTION 7. OUTSIDE ACTIVITIES.

The Executive may serve as a member of the boards of directors of such business, community and charitable organizations as he may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of his duties under this Agreement. The Executive may also engage in personal business and investment activities which do not materially interfere with the performance of his duties hereunder; PROVIDED, HOWEVER, that such activities are not prohibited under any code of conduct or investment or securities trading policy established by the Company or the Bank and generally applicable to all similarly situated Executives. The Executive may also serve as an officer or director of the Bank on such terms and conditions as the Company and the Bank may mutually agree upon, and such service shall not be deemed to materially interfere with the Executive's performance of his duties hereunder or otherwise result in a material breach of this Agreement. If the Executive is discharged or suspended, or is subject to any regulatory prohibition or restriction with respect to participation in the affairs of the Bank, he shall continue to perform services for the Company in accordance with this Agreement but shall not directly or indirectly provide services to or participate in the affairs of the Bank in a manner inconsistent with the terms of such discharge or suspension or any applicable regulatory order.

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SECTION 8. WORKING FACILITIES AND EXPENSES.

The Executive's principal place of employment shall be at the Company's and the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Company shall maintain its principal executive offices, or at such other location as the Company and the executive may mutually agree upon. The Company shall provide the Executive at his principal place of employment with a private office, secretarial services and other support services and facilities suitable to his position with the Company and the Bank and necessary or appropriate in connection with the performance of his assigned duties under this Agreement. The Company shall reimburse the Executive for his ordinary and necessary business expenses, including, without limitation, the Executive's travel and entertainment expenses incurred in connection with the performance of his duties under this Agreement, in each case upon presentation to the Company of an itemized account of such expenses in such form as the Company may reasonably require.

SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.

(a) The Executive's shall be entitled to the severance benefits described in section 9(b) in the event that:

(i) his employment with the Company or the Bank terminates during the Employment Period as a result of the Executive's voluntary resignation within 90 days following:

(A) the failure of the Board or the Board of Directors of the Bank ("Bank Board") as the case may be, to appoint or re-appoint or elect or re-elect the Executive to the position with the Company or the Bank stated in section 3 of this Agreement (or a more senior office);

(B) if the Executive is a member of the Board or the Bank Board as the case may be, the failure of the shareholders of the Company or the Bank to elect or re-elect the Executive to the Board or the Bank Board or the failure of the Board or the Bank Board (or the nominating committee thereof) to nominate the Executive for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material failure, whether by amendment of the Company's Certificate of Incorporation, the Bank's Restated Organization Certificate, the Company's By-Laws or the Bank's By-Laws, action of the Board or the Bank Board or the Company's shareholders or the Bank's shareholders or otherwise, to vest in the Executive the functions, duties, or responsibilities prescribed in section 3 of this Agreement, unless, during such 30-day period, the Company or the Bank cures such failure; or

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(D) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material breach of any term, condition or covenant contained in this Agreement (including, without limitation any reduction of the Executive's rate of base salary in effect from time to time and any change in the terms and conditions of any compensation or benefit program in which the Executive participates which, either individually or together with other changes, has a material adverse effect on the aggregate value of his total compensation package), unless, during such 30-day period, the Company or the Bank cures such failure;

(F) a change in the Executive's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Executive's employment with the Company or the Bank is terminated by the Company or the Bank for any reason other than for "cause" as provided in section 10(a); or

(iii) a Change of Control as defined in section 11 has occurred.

(b) Upon the occurrence of any of the events described in section 9(a) of this Agreement, the Company shall pay and provide to the Executive (or, in the event of his death, to his estate):

(i) his earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
9(b)) as of the date of the termination of his employment with the Company and the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

(ii) the benefits, if any, to which he is entitled as a former employee under the employee benefit plans and programs and compensation plans and pro grams maintained for the benefit of the Company's and the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Executive, for the Remaining Unexpired Employment Period, coverage equivalent to the coverage to which he would have been entitled under such plans (as in effect on the date of his termination of employment, or, if his termination of employment occurs after a Change of Control, on the date of such

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Change of Control, whichever benefits are greater), if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period;

(iv) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment, in an amount equal to the present value of the salary (excluding any additional payments made to the Executive in lieu of the use of an automobile) that the Executive would have earned if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period, where such present value is to be determined using a dis count rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Company's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which he would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Company or the Bank, if he were 100% vested thereunder and had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period; over

(B) the present value of the benefits to which he is actually entitled under such defined benefit pension plans as of the date of his termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Executive's termination of employment occurs ("Applicable PBGC Rate");

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(vi) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which he would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Company or the Bank, as if he were 100% vested thereunder and had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period and making the maximum amount of em ployee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Executive under any cash or stock bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Company or the Bank if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period and had earned the maximum bonus or incentive award in each calendar year that ends during the Remaining Unexpired Employment Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Executive under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Executive during each such calendar year at the highest annual rate of salary achieved during the Employment Period;

such payments to be made (without discounting for early payment) within 30 days following the Executive's termination of employment;

(viii) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of options or appreciation rights issued to the Executive under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the

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exercise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 9(b)(viii), the Executive shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, even if he is not vested under such plan or program; and

(ix) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of any shares awarded to the Executive under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Executive's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 9(b)(ix), the Executive shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, even if he is not vested under such plan.

The Company and the Executive hereby stipulate that the damages which may be incurred by the Executive following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 9(b) constitute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Executive's efforts, if any, to mitigate damages. The Company and the Executive further agree that the Company may condition the payments and benefits (if any) due under sections 9(b)(iii),
(iv), (v), (vi) and (vi) on the receipt of the Executive's resignation from any and all positions which he holds as an officer, director or committee member with respect to the Company, the Bank or any subsidiary or affiliate of either of them.

SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY. In the event that the Executive's employment with the Company shall terminate during the Employment Period on account of:

(a) the discharge of the Executive for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board and the Bank Board determine that the Executive: (i) has willfully and intentionally failed to perform his assigned duties under

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this Agreement (including for these purposes, the Executive's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with his performance of services for the Company or the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to his performance of services for the Company or the Bank, as determined by the Board and the Bank Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Executive engages in any of the acts described in section 10(a)(i) or
(a)(iv) above, the Company shall provide the Executive with written notice of its intent to discharge the Executive for cause, and the Executive shall have 30 days from the date on which the Executive receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 10 shall require the affirmative vote of at least three-fourths of the members of the Board and the Bank Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board and the Bank Board shall, by written notice to the Executive, furnish to him a statement of its grounds for proposing to make such determination, during which period the Executive shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board and the Bank Board, and to be represented by his legal counsel at such presentations, to refute the grounds for the pro posed determination;

(b) the Executive's voluntary resignation from employment with the Company and the Bank for reasons other than those specified in section 9(a)(i); or

(c) the death of the Executive while employed by the Company or the termination of the Executive's employment because of "total and permanent disability" within the meaning of the Company's long-term disability plan for employees;

then the Company shall have no further obligations under this Agreement, other than the payment to the Executive of his earned but unpaid salary as of the date of the termination of his employment and the provision of such other benefits, if any, to which he is entitled as a former employee under the Company's and the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 10, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company and the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board and the Bank Board or based upon the written advice of counsel for the Company or the Bank shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company and the Bank. The cessation of employment of the Executive shall not be deemed to be for "cause" within the meaning of section 10(a) unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board and the Bank Board at a meeting of the Board and the Bank Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive

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is given an opportunity, together with counsel, to be heard before the Board and the Bank Board), finding that, in the good faith opinion of the Board and the Bank Board, the Executive is guilty of the conduct described in section 10(a) above, and specifying the particulars thereof in detail.

SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.

(a) A Change of Control of the Company ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Company with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

(ii) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert;

(iii) a complete liquidation or dissolution of the Company;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

(A) individuals who were members of the Board on the date of this Agreement; or

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(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such board, or of a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the board of directors of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Company; or

(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term "Company" therein and the term "Bank Board" were substituted for the term "Board" therein.

In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this section 11(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In the event of a Change of Control, the Executive shall be entitled to the payments and benefits described in section 9(b), regardless of whether his employment terminates; PROVIDED, HOWEVER, that the term "Remaining Unexpired Employment Period" shall mean three years beginning on the effective date of the Change of Control, even if such three-year period extends beyond the date the Executive attains age 68.

SECTION 12. TAX INDEMNIFICATION.

(a) This section 12 shall apply if the Executive's employment is terminated upon or following (i) a Change of Control (as defined in section 11 of this Agreement); or (ii) a change "in the ownership or effective control" of the Company or the Bank or "in the ownership of a substantial portion of the assets" of the Company or the Bank within the meaning of section 280G of the Code. If this section 12 applies, then, if for any taxable year, the Executive shall be liable for the payment of an excise tax under section 4999 of the Code with respect to any payment in

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the nature of compensation made by the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank to (or for the benefit of) the Executive, the Company shall pay to the Executive an amount equal to X determined under the following formula:

X   =                E x P
       ------------------------------------
       1 - [(FI x (1 - SLI)) + SLI + E + M]

where

E =      the rate at which the excise tax is assessed under
         section 4999 of the Code;

P =      the amount with respect to which such excise tax is
         assessed, determined without regard to this section
         12;

FI =     the highest marginal rate of income tax applicable to
         the Executive under the Code for the taxable year in
         question;

SLI =    the sum of the highest marginal rates of income tax
         applicable to the Executive under all applicable
         state and local laws for the taxable year in
         question; and

M =      the highest marginal rate of Medicare tax
         applicable to the Executive under the Code for the
         taxable year in question.

With respect to any payment in the nature of compensation that is made to (or for the benefit of) the Executive under the terms of this Agreement, or otherwise, and on which an excise tax under section 4999 of the Code will be assessed, the payment determined under this 12(a) shall be made to the Executive on the earlier of (i) the date the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank is required to withhold such tax, or (ii) the date the tax is required to be paid by the Executive.

(b) Notwithstanding anything in this section 12 to the contrary, in the event that the Executive's liability for the excise tax under section 4999 of the Code for a taxable year is subsequently determined to be different than the amount determined by the formula (X + P) x E, where X, P and E have the meanings provided in section 12(a), the Executive or the Company, as the case may be, shall pay to the other party at the time that the amount of such excise tax is finally determined, an appropriate amount, plus interest, such that the payment made under section 12(a), when increased by the amount of the payment made to the Executive under this section 12(b) by the Company, or when reduced by the amount of the payment made to the Company under this section 12(b) by the Executive, equals the amount that should have properly been paid to the Executive under section 12(a). The interest paid under this section 12(b) shall be determined at the rate provided under section 1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid to the Executive under this section 12, the Executive shall furnish to the Company a copy of each tax return which reflects a liability for an excise tax payment made

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by the Company, at least 20 days before the date on which such return is required to be filed with the Internal Revenue Service.

SECTION 13. COVENANT NOT TO COMPETE.

The Executive hereby covenants and agrees that, in the event of his termination of employment with the Company prior to the expiration of the Employment Period, for a period of one year following the date of his termination of employment with the Company or the Bank (or, if less, for the Remaining Unexpired Employment Period), he shall not, without the written con sent of the Company, become an officer, employee, consultant, director or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding com pany, or any direct or indirect subsidiary or affiliate of any such entity, that entails working within Orange, Dutchess, Rockland or Putnam counties or any other county in which the Company or the Bank maintains an office; PROVIDED, HOWEVER, that this section 13 shall not apply if the Executive's employment is terminated for the reasons set forth in section 9(a).

SECTION 14. CONFIDENTIALITY.

Unless he obtains the prior written consent of the Company, the Executive shall keep confidential and shall refrain from using for the benefit of himself, or any person or entity other than the Company or any entity which is a subsidiary of the Company or of which the Company is a subsidiary, any material document or information obtained from the Company, or from its parent or subsidiaries, in the course of his employment with any of them concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of his own) until the same ceases to be material (or becomes so ascertainable or available); PROVIDED, HOWEVER, that nothing in this section 14 shall prevent the Executive, with or without the Company's consent, from participating in or disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceed ing to the extent that such participation or disclosure is required under applicable law.

SECTION 15. SOLICITATION.

The Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Company or the Bank, he shall not, without the written consent of the Company and the Bank, either directly or indirectly:

(a) solicit, offer employment to, or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged

-13-

in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(b) provide any information, advice or recommendation with respect to any such officer or employee of any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13; that is intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank, or any of their respective subsidiaries or affiliates to terminate his employment and accept employment or become affiliated with, or provide services for compensation in any capacity what soever to, any savings bank, savings and loan association, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(c) solicit, provide any information, advice or recommendation or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any customer of the Company to terminate an existing business or commercial relationship with the Company.

SECTION 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Executive's employment during the term of this Agreement or thereafter, whether by the Company, by the Bank or by the Executive, shall have no effect on the rights and obligations of the parties hereto under the Company's or the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term dis ability insurance plans or such other employee benefit plans or programs, or compensation plans or programs, as may be maintained by, or cover employees of, the Company or the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Executive to which the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 17. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Executive, his legal representatives and testate or intestate distributees, and the Company and the Bank and their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company may be sold or otherwise transferred. Failure of the Company to obtain from any successor its express written assumption of the Company's obligations

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hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 18. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Executive:

Timothy A. Dempsey
36 Waterbury Road
Warwick, New York 10990

If to the Company or the Bank:

Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGLAS J. MCCLINTOCK, ESQ.

SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.

(a) The Company shall indemnify, hold harmless and defend the Executive against reasonable costs, including legal fees and expenses, incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved, as a result of his efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Company's or the Bank's obligations hereunder shall be conclusive evidence of the Executive's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

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(b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. Unless it is determined that a claim made by the Executive was either frivolous or made in bad faith, the Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of or in connection with his consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Company, the Executive or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of the Code. This section 19(b) shall apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 20. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 21. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 22. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 23. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

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SECTION 24. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 25. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

SECTION 26. NON-DUPLICATION.

In the event that the Executive shall perform services for the Bank or any other direct or indirect subsidiary or affiliate of the Company or the Bank, any compensation or benefits provided to the Executive by such other employer shall be applied to offset the obligations of the Company hereunder, it being intended that this Agreement set forth the aggregate compensation and benefits payable to the Executive for all services to the Company, the Bank and all of their respective direct or indirect subsidiaries and affiliates.

SECTION 27. REQUIRED REGULATORY PROVISIONS.

Notwithstanding anything herein contained to the contrary, any payments to the Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and the Executive has hereunto set his hand, all as of the day and year first above written.

                                          /s/ Timothy A. Dempsey
                                          ------------------------------------
                                          TIMOTHY A. DEMPSEY



                                          WARWICK COMMUNITY BANCORP, INC.

Attest:

By /s/ Nancy L. Sobotor-Littell           By /s/ Thomas F. Lawrence, Jr.
   --------------------------------          ---------------------------------
       Nancy L. Sobotor-Littell                  Thomas F. Lawrence, Jr.
       Corporate Secretary                       Director

[Seal]

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STATE OF NEW YORK     )
                      : ss.:
COUNTY OF ORANGE      )

On this 22nd day of December 1997, before me personally came Timothy A. Dempsey, to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at the address set forth in said instrument, and that he signed his name to the foregoing instrument.

/s/ Lisette D. Cuba
----------------------------
    Notary Public

STATE OF NEW YORK   )
                    : ss.:
COUNTY OF ORANGE    )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order.

/s/ Lisette D. Cuba
----------------------------
    Notary Public

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Exhibit 10.2
EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of December 23, 1997 by and between WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and having an office at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company") and RONALD J. GENTILE, an individual residing at 30 Newport Bridge Road, Warwick, New York 10990 ("Executive").

W I T N E S S E T H :

WHEREAS, the Executive currently serves as the Executive Vice President and Chief Operating Officer of the Company and as the Executive Vice President and Chief Operating Officer of The Warwick Savings Bank ("Bank") and effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become the wholly owned subsidiary of the Company; and

WHEREAS, the Company desires to assure for itself, the Bank and their respective subsidiaries and affiliates the continued availability of the Executive's services as provided in this Agreement and the ability of the Executive to perform such services with a minimum of personal distraction in the event of a pending or threatened Change of Control (as hereinafter defined); and

WHEREAS, the Executive is willing to continue to serve the Company, the Bank and their respective subsidiaries and affiliates on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions hereinafter set forth, the Company, the Bank and the Executive hereby agree as follows:

SECTION 1. EMPLOYMENT.

The Company and the Bank agree to continue to employ the Executive, and the Executive hereby agrees to such continued employment, during the period and upon the terms and conditions set forth in this Agreement.

SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.

(a) The terms and conditions of this Agreement shall be and remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of three years beginning on the date of this Agreement and ending on the third anniversary date of this Agreement (each, an "Anniversary Date"), plus such extensions, if any, as are provided pursuant to section 2(b).

(b) Except as provided in section 2(c) and subject to section
11(b), beginning on the date of this Agreement, the Employment Period shall automatically be extended for one additional day each day, unless either the Company or the Executive elects not to extend the


Agreement further by giving written notice thereof to the other party, in which case the Employment Period shall end on the third anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Employment Period shall end on the last day of the month in which the Executive attains the age of 68. For all purposes of this Agreement, the term "Remaining Unexpired Employment Period" as of any date shall mean the period beginning on such date and ending on the last day of the Employment Period taking into account any extensions under this section 2(b). Upon termination of the Executive's employment with the Company or the Bank for any reason whatsoever, any daily extensions provided pursuant to this section 2(b), if not theretofore discontinued, shall automatically cease.

(c) Nothing in this Agreement shall be deemed to prohibit the Company or the Bank at any time from terminating the Executive's employment during the Employment Period with or without notice for any reason; PROVIDED, HOWEVER, that the relative rights and obligations of the Company and the Executive in the event of any such termination shall be determined under this Agreement.

SECTION 3. DUTIES.

The Executive shall serve as Executive Vice President and Chief Operating Officer of the Company and as Executive Vice President and Chief Operating Officer of the Bank, having such power, authority and responsibility and performing such duties as are prescribed by or under the By-Laws of the Company and as are customarily associated with such position. The Executive shall devote his full business time and attention (other than during weekends, holidays, approved vacation periods, and periods of illness or approved leaves of absence) to the business and affairs of the Company and shall use his best efforts to advance the interests of the Company.

SECTION 4. CASH COMPENSATION.

In consideration for the services to be rendered by the Executive hereunder, the Company shall pay to him a salary at an initial annual rate of one hundred twenty-five thousand dollars ($125,000), payable in approximately equal installments in accordance with the Company's customary payroll practices for senior officers. The Board shall review the Executive's annual rate of salary at such times during the Employment Period as it deems appropriate, but not less frequently than once every twelve months, and may, in its discretion, approve an increase therein. In addition to salary, the Executive may receive other cash compensation from the Company or the Bank for services hereunder at such times, in such amounts and on such terms and conditions as the Board may determine from time to time.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

During the Employment Period, the Executive shall be treated as an employee of the Company and the Bank and shall be entitled to participate in and receive benefits under any and all qualified or non-qualified retirement, pension, savings, profit-sharing or stock bonus plans, any and all group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans, and any other employee benefit and

-2-

compensation plans (including, but not limited to, any incentive compensation plans or programs, stock option and appreciation rights plans and restricted stock plans) as may from time to time be maintained by, or cover employees of, the Company and the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and consistent with the Company's and the Bank's customary practices.

SECTION 6. INDEMNIFICATION AND INSURANCE.

(a) During the Employment Period and for a period of six years thereafter, the Company or the Bank shall cause the Executive to be covered by and named as an insured under any policy or contract of insurance obtained by it to insure its directors and officers against personal liability for acts or omissions in connection with service as an officer or director of the Company, the Bank or service in other capacities at the request of the Company. The coverage provided to the Executive pursuant to this section 6 shall be of the same scope and on the same terms and conditions as the coverage (if any) provided to other officers or directors of the Company and the Bank.

(b) To the maximum extent permitted under applicable law, during the Employment Period and for a period of six years thereafter, the Company and the Bank shall indemnify the Executive against and hold him harmless from any costs, liabilities, losses and exposures to the fullest extent and on the most favorable terms and conditions that similar indemnification is offered to any director or officer of the Company and the Bank or any subsidiary or affiliate thereof.

SECTION 7. OUTSIDE ACTIVITIES.

The Executive may serve as a member of the boards of directors of such business, community and charitable organizations as he may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of his duties under this Agreement. The Executive may also engage in personal business and investment activities which do not materially interfere with the performance of his duties hereunder; PROVIDED, HOWEVER, that such activities are not prohibited under any code of conduct or investment or securities trading policy established by the Company or the Bank and generally applicable to all similarly situated Executives. The Executive may also serve as an officer or director of the Bank on such terms and conditions as the Company and the Bank may mutually agree upon, and such service shall not be deemed to materially interfere with the Executive's performance of his duties hereunder or otherwise result in a material breach of this Agreement. If the Executive is discharged or suspended, or is subject to any regulatory prohibition or restriction with respect to participation in the affairs of the Bank, he shall continue to perform services for the Company in accordance with this Agreement but shall not directly or indirectly provide services to or participate in the affairs of the Bank in a manner inconsistent with the terms of such discharge or suspension or any applicable regulatory order.

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SECTION 8. WORKING FACILITIES AND EXPENSES.

The Executive's principal place of employment shall be at the Company's and the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Company shall maintain its principal executive offices, or at such other location as the Company and the executive may mutually agree upon. The Company shall provide the Executive at his principal place of employment with a private office, secretarial services and other support services and facilities suitable to his position with the Company and the Bank and necessary or appropriate in connection with the performance of his assigned duties under this Agreement. The Company shall reimburse the Executive for his ordinary and necessary business expenses, including, without limitation, the Executive's travel and entertainment expenses incurred in connection with the performance of his duties under this Agreement, in each case upon presentation to the Company of an itemized account of such expenses in such form as the Company may reasonably require.

SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.

(a) The Executive's shall be entitled to the severance benefits described in section 9(b) in the event that:

(i) his employment with the Company or the Bank terminates during the Employment Period as a result of the Executive's voluntary resignation within 90 days following:

(A) the failure of the Board or the Board of Directors of the Bank ("Bank Board") as the case may be, to appoint or re-appoint or elect or re-elect the Executive to the position with the Company or the Bank stated in section 3 of this Agreement (or a more senior office);

(B) if the Executive is a member of the Board or the Bank Board as the case may be, the failure of the shareholders of the Company or the Bank to elect or re-elect the Executive to the Board or the Bank Board or the failure of the Board or the Bank Board (or the nominating committee thereof) to nominate the Executive for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material failure, whether by amendment of the Company's Certificate of Incorporation, the Bank's Restated Organization Certificate, the Company's By-Laws or the Bank's By-Laws, action of the Board or the Bank Board or the Company's shareholders or the Bank's shareholders or otherwise, to vest in the Executive the functions, duties, or responsibilities prescribed in section 3 of this Agreement, unless, during such 30-day period, the Company or the Bank cures such failure; or

-4-

(D) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material breach of any term, condition or covenant contained in this Agreement (including, without limitation any reduction of the Executive's rate of base salary in effect from time to time and any change in the terms and conditions of any compensation or benefit program in which the Executive participates which, either individually or together with other changes, has a material adverse effect on the aggregate value of his total compensation package), unless, during such 30-day period, the Company or the Bank cures such failure;

(F) a change in the Executive's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Executive's employment with the Company or the Bank is terminated by the Company or the Bank for any reason other than for "cause" as provided in section 10(a); or

(iii) a Change of Control as defined in section 11 has occurred.

(b) Upon the occurrence of any of the events described in section 9(a) of this Agreement, the Company shall pay and provide to the Executive (or, in the event of his death, to his estate):

(i) his earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
9(b)) as of the date of the termination of his employment with the Company and the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

(ii) the benefits, if any, to which he is entitled as a former employee under the employee benefit plans and programs and compensation plans and pro grams maintained for the benefit of the Company's and the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Executive, for the Remaining Unexpired Employment Period, coverage equivalent to the coverage to which he would have been entitled under such plans (as in effect on the date of his termination of employment, or, if his termination of employment occurs after a Change of Control, on the date of such

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Change of Control, whichever benefits are greater), if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period;

(iv) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment, in an amount equal to the present value of the salary (excluding any additional payments made to the Executive in lieu of the use of an automobile) that the Executive would have earned if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period, where such present value is to be determined using a dis count rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Company's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which he would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Company or the Bank, if he were 100% vested thereunder and had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period; over

(B) the present value of the benefits to which he is actually entitled under such defined benefit pension plans as of the date of his termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Executive's termination of employment occurs ("Applicable PBGC Rate");

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(vi) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which he would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Company or the Bank, as if he were 100% vested thereunder and had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period and making the maximum amount of em ployee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Executive under any cash or stock bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Company or the Bank if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period and had earned the maximum bonus or incentive award in each calendar year that ends during the Remaining Unexpired Employment Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Executive under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Executive during each such calendar year at the highest annual rate of salary achieved during the Employment Period;

such payments to be made (without discounting for early payment) within 30 days following the Executive's termination of employment;

(viii) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of options or appreciation rights issued to the Executive under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the

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exercise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 9(b)(viii), the Executive shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, even if he is not vested under such plan or program; and

(ix) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of any shares awarded to the Executive under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Executive's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 9(b)(ix), the Executive shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, even if he is not vested under such plan.

The Company and the Executive hereby stipulate that the damages which may be incurred by the Executive following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 9(b) constitute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Executive's efforts, if any, to mitigate damages. The Company and the Executive further agree that the Company may condition the payments and benefits (if any) due under sections 9(b)(iii),
(iv), (v), (vi) and (vi) on the receipt of the Executive's resignation from any and all positions which he holds as an officer, director or committee member with respect to the Company, the Bank or any subsidiary or affiliate of either of them.

SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY. In the event that the Executive's employment with the Company shall terminate during the Employment Period on account of:

(a) the discharge of the Executive for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board and the Bank Board determine that the Executive: (i) has willfully and intentionally failed to perform his assigned duties under

-8-

this Agreement (including for these purposes, the Executive's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with his performance of services for the Company or the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to his performance of services for the Company or the Bank, as determined by the Board and the Bank Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Executive engages in any of the acts described in section 10(a)(i) or
(a)(iv) above, the Company shall provide the Executive with written notice of its intent to discharge the Executive for cause, and the Executive shall have 30 days from the date on which the Executive receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 10 shall require the affirmative vote of at least three-fourths of the members of the Board and the Bank Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board and the Bank Board shall, by written notice to the Executive, furnish to him a statement of its grounds for proposing to make such determination, during which period the Executive shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board and the Bank Board, and to be represented by his legal counsel at such presentations, to refute the grounds for the pro posed determination;

(b) the Executive's voluntary resignation from employment with the Company and the Bank for reasons other than those specified in section 9(a)(i); or

(c) the death of the Executive while employed by the Company or the termination of the Executive's employment because of "total and permanent disability" within the meaning of the Company's long-term disability plan for employees;

then the Company shall have no further obligations under this Agreement, other than the payment to the Executive of his earned but unpaid salary as of the date of the termination of his employment and the provision of such other benefits, if any, to which he is entitled as a former employee under the Company's and the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 10, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company and the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board and the Bank Board or based upon the written advice of counsel for the Company or the Bank shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company and the Bank. The cessation of employment of the Executive shall not be deemed to be for "cause" within the meaning of section 10(a) unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board and the Bank Board at a meeting of the Board and the Bank Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive

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is given an opportunity, together with counsel, to be heard before the Board and the Bank Board), finding that, in the good faith opinion of the Board and the Bank Board, the Executive is guilty of the conduct described in section 10(a) above, and specifying the particulars thereof in detail.

SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.

(a) A Change of Control of the Company ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Company with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

(ii) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert;

(iii) a complete liquidation or dissolution of the Company;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

(A) individuals who were members of the Board on the date of this Agreement; or

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(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such board, or of a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the board of directors of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Company; or

(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term "Company" therein and the term "Bank Board" were substituted for the term "Board" therein.

In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this section 11(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In the event of a Change of Control, the Executive shall be entitled to the payments and benefits described in section 9(b), regardless of whether his employment terminates; PROVIDED, HOWEVER, that the term "Remaining Unexpired Employment Period" shall mean three years beginning on the effective date of the Change of Control, even if such three-year period extends beyond the date the Executive attains age 68.

SECTION 12. TAX INDEMNIFICATION.

(a) This section 12 shall apply if the Executive's employment is terminated upon or following (i) a Change of Control (as defined in section 11 of this Agreement); or (ii) a change "in the ownership or effective control" of the Company or the Bank or "in the ownership of a substantial portion of the assets" of the Company or the Bank within the meaning of section 280G of the Code. If this section 12 applies, then, if for any taxable year, the Executive shall be liable for the payment of an excise tax under section 4999 of the Code with respect to any payment in

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the nature of compensation made by the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank to (or for the benefit of) the Executive, the Company shall pay to the Executive an amount equal to X determined under the following formula:

X   =            E x P
------------------------------------------------
       1 - [(FI x (1 - SLI)) + SLI + E + M]

where

E =      the rate at which the excise tax is assessed under
         section 4999 of the Code;

P =      the amount with respect to which such excise tax is
         assessed, determined without regard to this section
         12;

FI =     the highest marginal rate of income tax applicable to
         the Executive under the Code for the taxable year in
         question;

SLI =    the sum of the highest marginal rates of income tax
         applicable to the Executive under all applicable
         state and local laws for the taxable year in
         question; and

M =      the highest marginal rate of Medicare tax
         applicable to the Executive under the Code for the
         taxable year in question.

With respect to any payment in the nature of compensation that is made to (or for the benefit of) the Executive under the terms of this Agreement, or otherwise, and on which an excise tax under section 4999 of the Code will be assessed, the payment determined under this 12(a) shall be made to the Executive on the earlier of (i) the date the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank is required to withhold such tax, or (ii) the date the tax is required to be paid by the Executive.

(b) Notwithstanding anything in this section 12 to the contrary, in the event that the Executive's liability for the excise tax under section 4999 of the Code for a taxable year is subsequently determined to be different than the amount determined by the formula (X + P) x E, where X, P and E have the meanings provided in section 12(a), the Executive or the Company, as the case may be, shall pay to the other party at the time that the amount of such excise tax is finally determined, an appropriate amount, plus interest, such that the payment made under section 12(a), when increased by the amount of the payment made to the Executive under this section 12(b) by the Company, or when reduced by the amount of the payment made to the Company under this section 12(b) by the Executive, equals the amount that should have properly been paid to the Executive under section 12(a). The interest paid under this section 12(b) shall be determined at the rate provided under section 1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid to the Executive under this section 12, the Executive shall furnish to the Company a copy of each tax return which reflects a liability for an excise tax payment made

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by the Company, at least 20 days before the date on which such return is required to be filed with the Internal Revenue Service.

SECTION 13. COVENANT NOT TO COMPETE.

The Executive hereby covenants and agrees that, in the event of his termination of employment with the Company prior to the expiration of the Employment Period, for a period of one year following the date of his termination of employment with the Company or the Bank (or, if less, for the Remaining Unexpired Employment Period), he shall not, without the written con sent of the Company, become an officer, employee, consultant, director or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding com pany, or any direct or indirect subsidiary or affiliate of any such entity, that entails working within Orange, Dutchess, Rockland or Putnam counties or any other county in which the Company or the Bank maintains an office; PROVIDED, HOWEVER, that this section 13 shall not apply if the Executive's employment is terminated for the reasons set forth in section 9(a).

SECTION 14. CONFIDENTIALITY.

Unless he obtains the prior written consent of the Company, the Executive shall keep confidential and shall refrain from using for the benefit of himself, or any person or entity other than the Company or any entity which is a subsidiary of the Company or of which the Company is a subsidiary, any material document or information obtained from the Company, or from its parent or subsidiaries, in the course of his employment with any of them concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of his own) until the same ceases to be material (or becomes so ascertainable or available); PROVIDED, HOWEVER, that nothing in this section 14 shall prevent the Executive, with or without the Company's consent, from participating in or disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceed ing to the extent that such participation or disclosure is required under applicable law.

SECTION 15. SOLICITATION.

The Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Company or the Bank, he shall not, without the written consent of the Company and the Bank, either directly or indirectly:

(a) solicit, offer employment to, or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged

-13-

in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(b) provide any information, advice or recommendation with respect to any such officer or employee of any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13; that is intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank, or any of their respective subsidiaries or affiliates to terminate his employment and accept employment or become affiliated with, or provide services for compensation in any capacity what soever to, any savings bank, savings and loan association, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(c) solicit, provide any information, advice or recommendation or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any customer of the Company to terminate an existing business or commercial relationship with the Company.

SECTION 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Executive's employment during the term of this Agreement or thereafter, whether by the Company, by the Bank or by the Executive, shall have no effect on the rights and obligations of the parties hereto under the Company's or the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term dis ability insurance plans or such other employee benefit plans or programs, or compensation plans or programs, as may be maintained by, or cover employees of, the Company or the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Executive to which the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 17. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Executive, his legal representatives and testate or intestate distributees, and the Company and the Bank and their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company may be sold or otherwise transferred. Failure of the Company to obtain from any successor its express written assumption of the Company's obligations

-14-

hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 18. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Executive:

Ronald J. Gentile
30 Newport Bridge Road
Warwick, New York 10990

If to the Company or the Bank:

Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGLAS J. MCCLINTOCK, ESQ.

SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.

(a) The Company shall indemnify, hold harmless and defend the Executive against reasonable costs, including legal fees and expenses, incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved, as a result of his efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Company's or the Bank's obligations hereunder shall be conclusive evidence of the Executive's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

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(b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. Unless it is determined that a claim made by the Executive was either frivolous or made in bad faith, the Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of or in connection with his consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Company, the Executive or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of the Code. This section 19(b) shall apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 20. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 21. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 22. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 23. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

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SECTION 24. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 25. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

SECTION 26. NON-DUPLICATION.

In the event that the Executive shall perform services for the Bank or any other direct or indirect subsidiary or affiliate of the Company or the Bank, any compensation or benefits provided to the Executive by such other employer shall be applied to offset the obligations of the Company hereunder, it being intended that this Agreement set forth the aggregate compensation and benefits payable to the Executive for all services to the Company, the Bank and all of their respective direct or indirect subsidiaries and affiliates.

SECTION 27. REQUIRED REGULATORY PROVISIONS.

Notwithstanding anything herein contained to the contrary, any payments to the Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and the Executive has hereunto set his hand, all as of the day and year first above written.

                                          /s/Ronald J. Gentile
                                          --------------------------------------
                                          RONALD J. GENTILE



                                          WARWICK COMMUNITY BANCORP, INC.

Attest:

By /s/Nancy L. Sobotor-Littell            By /s/Thomas F. Lawrence, Jr.
--------------------------------------    --------------------------------------
         Nancy L. Sobotor-Littell                  Thomas F. Lawrence, Jr.
         Corporate Secretary                       Director

[Seal]

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STATE OF NEW YORK                   )
                                            : ss.:
COUNTY OF ORANGE                    )

On this 22nd day of December, 1997, before me personally came Ronald J. Gentile, to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at the address set forth in said instrument, and that he signed his name to the foregoing instrument.

/s/Lisette D. Cuba
--------------------------------------
           Notary Public

STATE OF NEW YORK                   )
                                            : ss.:
COUNTY OF ORANGE                    )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order.

/s/Lisette D. Cuba
--------------------------------------
           Notary Public

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Exhibit 10.3

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of December 23, 1997 by and between WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and having an office at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company") and ARTHUR W. BUDICH, an individual residing at 34 Post Road, Monroe, New York 10950 ("Executive").

W I T N E S S E T H :

WHEREAS, the Executive currently serves as the Senior Vice President, Treasurer and Chief Financial Officer of the Company and as the Senior Vice President, Treasurer and Chief Financial Officer of The Warwick Savings Bank ("Bank") and effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become the wholly owned subsidiary of the Company; and

WHEREAS, the Company desires to assure for itself, the Bank and their respective subsidiaries and affiliates the continued availability of the Executive's services as provided in this Agreement and the ability of the Executive to perform such services with a minimum of personal distraction in the event of a pending or threatened Change of Control (as hereinafter defined); and

WHEREAS, the Executive is willing to continue to serve the Company, the Bank and their respective subsidiaries and affiliates on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions hereinafter set forth, the Company, the Bank and the Executive hereby agree as follows:

SECTION 1. EMPLOYMENT.

The Company and the Bank agree to continue to employ the Executive, and the Executive hereby agrees to such continued employment, during the period and upon the terms and conditions set forth in this Agreement.

SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.

(a) The terms and conditions of this Agreement shall be and remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of three years beginning on the date of this Agreement and ending on the third anniversary date of this Agreement (each, an "Anniversary Date"), plus such extensions, if any, as are provided pursuant to section 2(b).

(b) Except as provided in section 2(c) and subject to section
11(b), beginning on the date of this Agreement, the Employment Period shall automatically be extended for one additional day each day, unless either the Company or the Executive elects not to extend the


Agreement further by giving written notice thereof to the other party, in which case the Employment Period shall end on the third anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Employment Period shall end on the last day of the month in which the Executive attains the age of 68. For all purposes of this Agreement, the term "Remaining Unexpired Employment Period" as of any date shall mean the period beginning on such date and ending on the last day of the Employment Period taking into account any extensions under this section 2(b). Upon termination of the Executive's employment with the Company or the Bank for any reason whatsoever, any daily extensions provided pursuant to this section 2(b), if not theretofore discontinued, shall automatically cease.

(c) Nothing in this Agreement shall be deemed to prohibit the Company or the Bank at any time from terminating the Executive's employment during the Employment Period with or without notice for any reason; PROVIDED, HOWEVER, that the relative rights and obligations of the Company and the Executive in the event of any such termination shall be determined under this Agreement.

SECTION 3. DUTIES.

The Executive shall serve as Senior Vice President, Treasurer and Chief Financial Officer of the Company and as Senior Vice President, Treasurer and Chief Financial Officer of the Bank, having such power, authority and responsibility and performing such duties as are prescribed by or under the By-Laws of the Company and as are customarily associated with such position. The Executive shall devote his full business time and attention (other than during weekends, holidays, approved vacation periods, and periods of illness or approved leaves of absence) to the business and affairs of the Company and shall use his best efforts to advance the interests of the Company.

SECTION 4. CASH COMPENSATION.

In consideration for the services to be rendered by the Executive hereunder, the Company shall pay to him a salary at an initial annual rate of eighty-five thousand dollars ($85,000), payable in approximately equal installments in accordance with the Company's customary payroll practices for senior officers. The Board shall review the Executive's annual rate of salary at such times during the Employment Period as it deems appropriate, but not less frequently than once every twelve months, and may, in its discretion, approve an increase therein. In addition to salary, the Executive may receive other cash compensation from the Company or the Bank for services hereunder at such times, in such amounts and on such terms and conditions as the Board may determine from time to time.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

During the Employment Period, the Executive shall be treated as an employee of the Company and the Bank and shall be entitled to participate in and receive benefits under any and all qualified or non-qualified retirement, pension, savings, profit-sharing or stock bonus plans, any and all group life, health (including hospitalization, medical and major medical), dental,

-2-

accident and long term disability insurance plans, and any other employee benefit and compensation plans (including, but not limited to, any incentive compensation plans or programs, stock option and appreciation rights plans and restricted stock plans) as may from time to time be maintained by, or cover employees of, the Company and the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and consistent with the Company's and the Bank's customary practices.

SECTION 6. INDEMNIFICATION AND INSURANCE.

(a) During the Employment Period and for a period of six years thereafter, the Company or the Bank shall cause the Executive to be covered by and named as an insured under any policy or contract of insurance obtained by it to insure its directors and officers against personal liability for acts or omissions in connection with service as an officer or director of the Company, the Bank or service in other capacities at the request of the Company. The coverage provided to the Executive pursuant to this section 6 shall be of the same scope and on the same terms and conditions as the coverage (if any) provided to other officers or directors of the Company and the Bank.

(b) To the maximum extent permitted under applicable law, during the Employment Period and for a period of six years thereafter, the Company and the Bank shall indemnify the Executive against and hold him harmless from any costs, liabilities, losses and exposures to the fullest extent and on the most favorable terms and conditions that similar indemnification is offered to any director or officer of the Company and the Bank or any subsidiary or affiliate thereof.

SECTION 7. OUTSIDE ACTIVITIES.

The Executive may serve as a member of the boards of directors of such business, community and charitable organizations as he may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of his duties under this Agreement. The Executive may also engage in personal business and investment activities which do not materially interfere with the performance of his duties hereunder; PROVIDED, HOWEVER, that such activities are not prohibited under any code of conduct or investment or securities trading policy established by the Company or the Bank and generally applicable to all similarly situated Executives. The Executive may also serve as an officer or director of the Bank on such terms and conditions as the Company and the Bank may mutually agree upon, and such service shall not be deemed to materially interfere with the Executive's performance of his duties hereunder or otherwise result in a material breach of this Agreement. If the Executive is discharged or suspended, or is subject to any regulatory prohibition or restriction with respect to participation in the affairs of the Bank, he shall continue to perform services for the Company in accordance with this Agreement but shall not directly or indirectly provide services to or participate in the affairs of the Bank in a manner inconsistent with the terms of such discharge or suspension or any applicable regulatory order.

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SECTION 8. WORKING FACILITIES AND EXPENSES.

The Executive's principal place of employment shall be at the Company's and the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Company shall maintain its principal executive offices, or at such other location as the Company and the executive may mutually agree upon. The Company shall provide the Executive at his principal place of employment with a private office, secretarial services and other support services and facilities suitable to his position with the Company and the Bank and necessary or appropriate in connection with the performance of his assigned duties under this Agreement. The Company shall reimburse the Executive for his ordinary and necessary business expenses, including, without limitation, the Executive's travel and entertainment expenses incurred in connection with the performance of his duties under this Agreement, in each case upon presentation to the Company of an itemized account of such expenses in such form as the Company may reasonably require.

SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.

(a) The Executive's shall be entitled to the severance benefits described in section 9(b) in the event that:

(i) his employment with the Company or the Bank terminates during the Employment Period as a result of the Executive's voluntary resignation within 90 days following:

(A) the failure of the Board or the Board of Directors of the Bank ("Bank Board") as the case may be, to appoint or re-appoint or elect or re-elect the Executive to the position with the Company or the Bank stated in section 3 of this Agreement (or a more senior office);

(B) if the Executive is a member of the Board or the Bank Board as the case may be, the failure of the shareholders of the Company or the Bank to elect or re-elect the Executive to the Board or the Bank Board or the failure of the Board or the Bank Board (or the nominating committee thereof) to nominate the Executive for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material failure, whether by amendment of the Company's Certificate of Incorporation, the Bank's Restated Organization Certificate, the Company's By-Laws or the Bank's By-Laws, action of the Board or the Bank Board or the Company's shareholders or the Bank's shareholders or otherwise, to vest in the Executive the functions, duties, or responsibilities prescribed in section 3 of this Agreement, unless, during such 30-day period, the Company or the Bank cures such failure; or

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(D) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material breach of any term, condition or covenant contained in this Agreement (including, without limitation any reduction of the Executive's rate of base salary in effect from time to time and any change in the terms and conditions of any compensation or benefit program in which the Executive participates which, either individually or together with other changes, has a material adverse effect on the aggregate value of his total compensation package), unless, during such 30-day period, the Company or the Bank cures such failure;

(F) a change in the Executive's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Executive's employment with the Company or the Bank is terminated by the Company or the Bank for any reason other than for "cause" as provided in section 10(a); or

(iii) a Change of Control as defined in section 11 has occurred.

(b) Upon the occurrence of any of the events described in section 9(a) of this Agreement, the Company shall pay and provide to the Executive (or, in the event of his death, to his estate):

(i) his earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
9(b)) as of the date of the termination of his employment with the Company and the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

(ii) the benefits, if any, to which he is entitled as a former employee under the employee benefit plans and programs and compensation plans and pro grams maintained for the benefit of the Company's and the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Executive, for the Remaining Unexpired Employment Period, coverage equivalent to the coverage to which he would have been entitled under such plans (as in effect on the date of his termination of employment, or, if his termination of employment occurs after a Change of Control, on the date of such

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Change of Control, whichever benefits are greater), if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period;

(iv) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment, in an amount equal to the present value of the salary (excluding any additional payments made to the Executive in lieu of the use of an automobile) that the Executive would have earned if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period, where such present value is to be determined using a dis count rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Company's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which he would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Company or the Bank, if he were 100% vested thereunder and had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period; over

(B) the present value of the benefits to which he is actually entitled under such defined benefit pension plans as of the date of his termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Executive's termination of employment occurs ("Applicable PBGC Rate");

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(vi) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which he would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Company or the Bank, as if he were 100% vested thereunder and had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period and making the maximum amount of em ployee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Executive under any cash or stock bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Company or the Bank if he had continued working for the Company and the Bank during the Remaining Unexpired Employment Period and had earned the maximum bonus or incentive award in each calendar year that ends during the Remaining Unexpired Employment Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Executive under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Executive during each such calendar year at the highest annual rate of salary achieved during the Employment Period;

such payments to be made (without discounting for early payment) within 30 days following the Executive's termination of employment;

(viii) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of options or appreciation rights issued to the Executive under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the

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exercise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 9(b)(viii), the Executive shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, even if he is not vested under such plan or program; and

(ix) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of any shares awarded to the Executive under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Executive's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 9(b)(ix), the Executive shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, even if he is not vested under such plan.

The Company and the Executive hereby stipulate that the damages which may be incurred by the Executive following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 9(b) constitute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Executive's efforts, if any, to mitigate damages. The Company and the Executive further agree that the Company may condition the payments and benefits (if any) due under sections 9(b)(iii),
(iv), (v), (vi) and (vi) on the receipt of the Executive's resignation from any and all positions which he holds as an officer, director or committee member with respect to the Company, the Bank or any subsidiary or affiliate of either of them.

SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY. In the event that the Executive's employment with the Company shall terminate during the Employment Period on account of:

(a) the discharge of the Executive for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board and the Bank Board determine that the Executive: (i) has willfully and intentionally failed to perform his assigned duties under

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this Agreement (including for these purposes, the Executive's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with his performance of services for the Company or the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to his performance of services for the Company or the Bank, as determined by the Board and the Bank Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Executive engages in any of the acts described in section 10(a)(i) or
(a)(iv) above, the Company shall provide the Executive with written notice of its intent to discharge the Executive for cause, and the Executive shall have 30 days from the date on which the Executive receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 10 shall require the affirmative vote of at least three-fourths of the members of the Board and the Bank Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board and the Bank Board shall, by written notice to the Executive, furnish to him a statement of its grounds for proposing to make such determination, during which period the Executive shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board and the Bank Board, and to be represented by his legal counsel at such presentations, to refute the grounds for the pro posed determination;

(b) the Executive's voluntary resignation from employment with the Company and the Bank for reasons other than those specified in section 9(a)(i); or

(c) the death of the Executive while employed by the Company or the termination of the Executive's employment because of "total and permanent disability" within the meaning of the Company's long-term disability plan for employees;

then the Company shall have no further obligations under this Agreement, other than the payment to the Executive of his earned but unpaid salary as of the date of the termination of his employment and the provision of such other benefits, if any, to which he is entitled as a former employee under the Company's and the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 10, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company and the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board and the Bank Board or based upon the written advice of counsel for the Company or the Bank shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company and the Bank. The cessation of employment of the Executive shall not be deemed to be for "cause" within the meaning of section 10(a) unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board and the Bank Board at a meeting of the Board and the Bank Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive

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is given an opportunity, together with counsel, to be heard before the Board and the Bank Board), finding that, in the good faith opinion of the Board and the Bank Board, the Executive is guilty of the conduct described in section 10(a) above, and specifying the particulars thereof in detail.

SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.

(a) A Change of Control of the Company ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Company with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

(ii) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert;

(iii) a complete liquidation or dissolution of the Company;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

(A) individuals who were members of the Board on the date of this Agreement; or

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(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such board, or of a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the board of directors of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Company; or

(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term "Company" therein and the term "Bank Board" were substituted for the term "Board" therein.

In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this section 11(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In the event of a Change of Control, the Executive shall be entitled to the payments and benefits described in section 9(b), regardless of whether his employment terminates; PROVIDED, HOWEVER, that the term "Remaining Unexpired Employment Period" shall mean three years beginning on the effective date of the Change of Control, even if such three-year period extends beyond the date the Executive attains age 68.

SECTION 12. TAX INDEMNIFICATION.

(a) This section 12 shall apply if the Executive's employment is terminated upon or following (i) a Change of Control (as defined in section 11 of this Agreement); or (ii) a change "in the ownership or effective control" of the Company or the Bank or "in the ownership of a substantial portion of the assets" of the Company or the Bank within the meaning of section 280G of the Code. If this section 12 applies, then, if for any taxable year, the Executive shall be liable for the payment of an excise tax under section 4999 of the Code with respect to any payment in

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the nature of compensation made by the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank to (or for the benefit of) the Executive, the Company shall pay to the Executive an amount equal to X determined under the following formula:

X   =                         E x P
                ------------------------------------
                1 - [(FI x (1 - SLI)) + SLI + E + M]
where

E =      the rate at which the excise tax is assessed under
         section 4999 of the Code;

P =      the amount with respect to which such excise tax is
         assessed, determined without regard to this section
         12;

FI =     the highest marginal rate of income tax applicable to
         the Executive under the Code for the taxable year in
         question;

SLI =    the sum of the highest marginal rates of income tax
         applicable to the Executive under all applicable
         state and local laws for the taxable year in
         question; and

M =      the highest marginal rate of Medicare tax
         applicable to the Executive under the Code for the
         taxable year in question.

With respect to any payment in the nature of compensation that is made to (or for the benefit of) the Executive under the terms of this Agreement, or otherwise, and on which an excise tax under section 4999 of the Code will be assessed, the payment determined under this 12(a) shall be made to the Executive on the earlier of (i) the date the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank is required to withhold such tax, or (ii) the date the tax is required to be paid by the Executive.

(b) Notwithstanding anything in this section 12 to the contrary, in the event that the Executive's liability for the excise tax under section 4999 of the Code for a taxable year is subsequently determined to be different than the amount determined by the formula (X + P) x E, where X, P and E have the meanings provided in section 12(a), the Executive or the Company, as the case may be, shall pay to the other party at the time that the amount of such excise tax is finally determined, an appropriate amount, plus interest, such that the payment made under section 12(a), when increased by the amount of the payment made to the Executive under this section 12(b) by the Company, or when reduced by the amount of the payment made to the Company under this section 12(b) by the Executive, equals the amount that should have properly been paid to the Executive under section 12(a). The interest paid under this section 12(b) shall be determined at the rate provided under section 1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid to the Executive under this section 12, the Executive shall furnish to the Company a copy of each tax return which reflects a liability for an excise tax payment made

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by the Company, at least 20 days before the date on which such return is required to be filed with the Internal Revenue Service.

SECTION 13. COVENANT NOT TO COMPETE.

The Executive hereby covenants and agrees that, in the event of his termination of employment with the Company prior to the expiration of the Employment Period, for a period of one year following the date of his termination of employment with the Company or the Bank (or, if less, for the Remaining Unexpired Employment Period), he shall not, without the written con sent of the Company, become an officer, employee, consultant, director or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding com pany, or any direct or indirect subsidiary or affiliate of any such entity, that entails working within Orange, Dutchess, Rockland or Putnam counties or any other county in which the Company or the Bank maintains an office; PROVIDED, HOWEVER, that this section 13 shall not apply if the Executive's employment is terminated for the reasons set forth in section 9(a).

SECTION 14. CONFIDENTIALITY.

Unless he obtains the prior written consent of the Company, the Executive shall keep confidential and shall refrain from using for the benefit of himself, or any person or entity other than the Company or any entity which is a subsidiary of the Company or of which the Company is a subsidiary, any material document or information obtained from the Company, or from its parent or subsidiaries, in the course of his employment with any of them concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of his own) until the same ceases to be material (or becomes so ascertainable or available); PROVIDED, HOWEVER, that nothing in this section 14 shall prevent the Executive, with or without the Company's consent, from participating in or disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceed ing to the extent that such participation or disclosure is required under applicable law.

SECTION 15. SOLICITATION.

The Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Company or the Bank, he shall not, without the written consent of the Company and the Bank, either directly or indirectly:

(a) solicit, offer employment to, or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged

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in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(b) provide any information, advice or recommendation with respect to any such officer or employee of any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13; that is intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank, or any of their respective subsidiaries or affiliates to terminate his employment and accept employment or become affiliated with, or provide services for compensation in any capacity what soever to, any savings bank, savings and loan association, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(c) solicit, provide any information, advice or recommendation or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any customer of the Company to terminate an existing business or commercial relationship with the Company.

SECTION 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Executive's employment during the term of this Agreement or thereafter, whether by the Company, by the Bank or by the Executive, shall have no effect on the rights and obligations of the parties hereto under the Company's or the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term dis ability insurance plans or such other employee benefit plans or programs, or compensation plans or programs, as may be maintained by, or cover employees of, the Company or the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Executive to which the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 17. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Executive, his legal representatives and testate or intestate distributees, and the Company and the Bank and their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company may be sold or otherwise transferred. Failure of the Company to obtain from any successor its express written assumption of the Company's obligations

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hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 18. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Executive:

Arthur W. Budich
34 Post Road
Monroe, New York 10950

If to the Company or the Bank:

Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGLAS J. MCCLINTOCK, ESQ.

SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.

(a) The Company shall indemnify, hold harmless and defend the Executive against reasonable costs, including legal fees and expenses, incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved, as a result of his efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Company's or the Bank's obligations hereunder shall be conclusive evidence of the Executive's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

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(b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. Unless it is determined that a claim made by the Executive was either frivolous or made in bad faith, the Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of or in connection with his consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Company, the Executive or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of the Code. This section 19(b) shall apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 20. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 21. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 22. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 23. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

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SECTION 24. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 25. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

SECTION 26. NON-DUPLICATION.

In the event that the Executive shall perform services for the Bank or any other direct or indirect subsidiary or affiliate of the Company or the Bank, any compensation or benefits provided to the Executive by such other employer shall be applied to offset the obligations of the Company hereunder, it being intended that this Agreement set forth the aggregate compensation and benefits payable to the Executive for all services to the Company, the Bank and all of their respective direct or indirect subsidiaries and affiliates.

SECTION 27. REQUIRED REGULATORY PROVISIONS.

Notwithstanding anything herein contained to the contrary, any payments to the Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and the Executive has hereunto set his hand, all as of the day and year first above written.

                                        /s/Arthur W. Budich
                                        ----------------------------------------
                                           ARTHUR W. BUDICH



                                        WARWICK COMMUNITY BANCORP, INC.

Attest:

By/s/Nancy L. Sobotor-littell           By/s/Thomas F. Lawrence, Jr.
----------------------------------      ----------------------------------------
       Nancy L. Sobotor-Littell              Thomas F. Lawrence, Jr.
         Corporate Secretary                   Director

[Seal]

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STATE OF NEW YORK                   )
                                            : ss.:
COUNTY OF ORANGE                    )

On this 22nd day of December, 1997, before me personally came Arthur W. Budich, to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at the address set forth in said instrument, and that he signed his name to the foregoing instrument.

/s/Lisette D. Cuba
----------------------------------------
         Notary Public

STATE OF NEW YORK                   )
                                            : ss.:
COUNTY OF ORANGE                    )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order.

/s/Lisette D. Cuba
----------------------------------------
         Notary Public

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EXHIBIT 10.4

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of December 23, 1997 by and between WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and having an office at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company") and NANCY L. SOBOTOR- LITTELL, an individual residing at 76 Maple Avenue, Warwick, New York 10990 ("Executive").

W I T N E S S E T H :

WHEREAS, the Executive currently serves as the Corporate Secretary and Director of Human Resources of the Company and as the Corporate Secretary and Director of Human Resources of The Warwick Savings Bank ("Bank") and effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become the wholly owned subsidiary of the Company; and

WHEREAS, the Company desires to assure for itself, the Bank and their respective subsidiaries and affiliates the continued availability of the Executive's services as provided in this Agreement and the ability of the Executive to perform such services with a minimum of personal distraction in the event of a pending or threatened Change of Control (as hereinafter defined); and

WHEREAS, the Executive is willing to continue to serve the Company, the Bank and their respective subsidiaries and affiliates on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions hereinafter set forth, the Company, the Bank and the Executive hereby agree as follows:

SECTION 1. EMPLOYMENT.

The Company and the Bank agree to continue to employ the Executive, and the Executive hereby agrees to such continued employment, during the period and upon the terms and conditions set forth in this Agreement.

SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.

(a) The terms and conditions of this Agreement shall be and remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of three years beginning on the date of this Agreement and ending on the third anniversary date of this Agreement (each, an "Anniversary Date"), plus such extensions, if any, as are provided pursuant to section 2(b).

(b) Except as provided in section 2(c) and subject to section
11(b), beginning on the date of this Agreement, the Employment Period shall automatically be extended for one additional day each day, unless either the Company or the Executive elects not to extend the


Agreement further by giving written notice thereof to the other party, in which case the Employment Period shall end on the third anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Employment Period shall end on the last day of the month in which the Executive attains the age of 68. For all purposes of this Agreement, the term "Remaining Unexpired Employment Period" as of any date shall mean the period beginning on such date and ending on the last day of the Employment Period taking into account any extensions under this section 2(b). Upon termination of the Executive's employment with the Company or the Bank for any reason whatsoever, any daily extensions provided pursuant to this section 2(b), if not theretofore discontinued, shall automatically cease.

(c) Nothing in this Agreement shall be deemed to prohibit the Company or the Bank at any time from terminating the Executive's employment during the Employment Period with or without notice for any reason; PROVIDED, HOWEVER, that the relative rights and obligations of the Company and the Executive in the event of any such termination shall be determined under this Agreement.

SECTION 3. DUTIES.

The Executive shall serve as Corporate Secretary and Director of Human Resources of the Company and as Corporate Secretary and Director of Human Resources of the Bank, having such power, authority and responsibility and performing such duties as are prescribed by or under the By-Laws of the Company and as are customarily associated with such position. The Executive shall devote her full business time and attention (other than during weekends, holidays, approved vacation periods, and periods of illness or approved leaves of absence) to the business and affairs of the Company and shall use her best efforts to advance the interests of the Company.

SECTION 4. CASH COMPENSATION.

In consideration for the services to be rendered by the Executive hereunder, the Company shall pay to her a salary at an initial annual rate of sixty-three thousand dollars ($63,000), payable in approximately equal installments in accordance with the Company's customary payroll practices for senior officers. The Board shall review the Executive's annual rate of salary at such times during the Employment Period as it deems appropriate, but not less frequently than once every twelve months, and may, in its discretion, approve an increase therein. In addition to salary, the Executive may receive other cash compensation from the Company or the Bank for services hereunder at such times, in such amounts and on such terms and conditions as the Board may determine from time to time.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

During the Employment Period, the Executive shall be treated as an employee of the Company and the Bank and shall be entitled to participate in and receive benefits under any and all qualified or non-qualified retirement, pension, savings, profit-sharing or stock bonus plans, any and all group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans, and any other employee benefit and

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compensation plans (including, but not limited to, any incentive compensation plans or programs, stock option and appreciation rights plans and restricted stock plans) as may from time to time be maintained by, or cover employees of, the Company and the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and consistent with the Company's and the Bank's customary practices.

SECTION 6. INDEMNIFICATION AND INSURANCE.

(a) During the Employment Period and for a period of six years thereafter, the Company or the Bank shall cause the Executive to be covered by and named as an insured under any policy or contract of insurance obtained by it to insure its directors and officers against personal liability for acts or omissions in connection with service as an officer or director of the Company, the Bank or service in other capacities at the request of the Company. The coverage provided to the Executive pursuant to this section 6 shall be of the same scope and on the same terms and conditions as the coverage (if any) provided to other officers or directors of the Company and the Bank.

(b) To the maximum extent permitted under applicable law, during the Employment Period and for a period of six years thereafter, the Company and the Bank shall indemnify the Executive against and hold her harmless from any costs, liabilities, losses and exposures to the fullest extent and on the most favorable terms and conditions that similar indemnification is offered to any director or officer of the Company and the Bank or any subsidiary or affiliate thereof.

SECTION 7. OUTSIDE ACTIVITIES.

The Executive may serve as a member of the boards of directors of such business, community and charitable organizations as her may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of her duties under this Agreement. The Executive may also engage in personal business and investment activities which do not materially interfere with the performance of her duties hereunder; PROVIDED, HOWEVER, that such activities are not prohibited under any code of conduct or investment or securities trading policy established by the Company or the Bank and generally applicable to all similarly situated Executives. The Executive may also serve as an officer or director of the Bank on such terms and conditions as the Company and the Bank may mutually agree upon, and such service shall not be deemed to materially interfere with the Executive's performance of her duties hereunder or otherwise result in a material breach of this Agreement. If the Executive is discharged or suspended, or is subject to any regulatory prohibition or restriction with respect to participation in the affairs of the Bank, her shall continue to perform services for the Company in accordance with this Agreement but shall not directly or indirectly provide services to or participate in the affairs of the Bank in a manner inconsistent with the terms of such discharge or suspension or any applicable regulatory order.

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SECTION 8. WORKING FACILITIES AND EXPENSES.

The Executive's principal place of employment shall be at the Company's and the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Company shall maintain its principal executive offices, or at such other location as the Company and the executive may mutually agree upon. The Company shall provide the Executive at her principal place of employment with a private office, secretarial services and other support services and facilities suitable to her position with the Company and the Bank and necessary or appropriate in connection with the performance of her assigned duties under this Agreement. The Company shall reimburse the Executive for her ordinary and necessary business expenses, including, without limitation, the Executive's travel and entertain ment expenses incurred in connection with the performance of her duties under this Agreement, in each case upon presentation to the Company of an itemized account of such expenses in such form as the Company may reasonably require.

SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.

(a) The Executive's shall be entitled to the severance benefits described in section 9(b) in the event that:

(i) her employment with the Company or the Bank terminates during the Employment Period as a result of the Executive's voluntary resignation within 90 days following:

(A) the failure of the Board or the Board of Directors of the Bank ("Bank Board") as the case may be, to appoint or re-appoint or elect or re-elect the Executive to the position with the Company or the Bank stated in section 3 of this Agreement (or a more senior office);

(B) if the Executive is a member of the Board or the Bank Board as the case may be, the failure of the shareholders of the Company or the Bank to elect or re-elect the Executive to the Board or the Bank Board or the failure of the Board or the Bank Board (or the nominating committee thereof) to nominate the Executive for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material failure, whether by amendment of the Company's Certificate of Incorporation, the Bank's Restated Organization Certificate, the Company's By-Laws or the Bank's By-Laws, action of the Board or the Bank Board or the Company's shareholders or the Bank's shareholders or otherwise, to vest in the Executive the functions, duties, or responsibilities prescribed in section 3 of this Agreement, unless, during such 30-day period, the Company or the Bank cures such failure; or

-4-

(D) the expiration of a 30-day period following the date on which the Executive gives written notice to the Company of its or the Bank's material breach of any term, condition or covenant contained in this Agreement (including, without limitation any reduction of the Executive's rate of base salary in effect from time to time and any change in the terms and conditions of any compensation or benefit program in which the Executive participates which, either individually or together with other changes, has a material adverse effect on the aggregate value of her total compensation package), unless, during such 30-day period, the Company or the Bank cures such failure;

(F) a change in the Executive's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Executive's employment with the Company or the Bank is terminated by the Company or the Bank for any reason other than for "cause" as provided in section 10(a); or

(iii) a Change of Control as defined in section 11 has occurred.

(b) Upon the occurrence of any of the events described in section 9(a) of this Agreement, the Company shall pay and provide to the Executive (or, in the event of her death, to her estate):

(i) her earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
9(b)) as of the date of the termination of her employment with the Company and the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

(ii) the benefits, if any, to which her is entitled as a former employee under the employee benefit plans and programs and compensation plans and pro grams maintained for the benefit of the Company's and the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Executive, for the Remaining Unexpired Employment Period, coverage equivalent to the coverage to which her would have been entitled under such plans (as in effect on the date of her termination of employment, or, if her termination of employment occurs after a Change of Control, on the date of such

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Change of Control, whichever benefits are greater), if her had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period;

(iv) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment, in an amount equal to the present value of the salary (excluding any additional payments made to the Executive in lieu of the use of an automobile) that the Executive would have earned if her had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period, where such present value is to be determined using a dis count rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Company's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which her would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Company or the Bank, if her were 100% vested thereunder and had con tinued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period; over

(B) the present value of the benefits to which her is actually entitled under such defined benefit pension plans as of the date of her termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Executive's termination of employment occurs ("Applicable PBGC Rate");

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(vi) within 30 days following the Executive's termination of employment with the Company or the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which her would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Company or the Bank, as if her were 100% vested thereunder and had continued working for the Company and the Bank during the Remaining Unexpired Employment Period at the highest annual rate of salary achieved during the Employment Period and making the maximum amount of em ployee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Executive under any cash or stock bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Company or the Bank if her had continued working for the Company and the Bank during the Remaining Unexpired Employment Period and had earned the maximum bonus or incentive award in each calendar year that ends during the Remaining Unexpired Employment Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Executive under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Executive during each such calendar year at the highest annual rate of salary achieved during the Employment Period;

such payments to be made (without discounting for early payment) within 30 days following the Executive's termination of employment;

(viii) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of options or appreciation rights issued to the Executive under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the

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exercise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 9(b)(viii), the Executive shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Company or the Bank, even if her is not vested under such plan or program; and

(ix) at the election of the Company made within 30 days following the occurrence of the event described in section 9(a), upon the surrender of any shares awarded to the Executive under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Executive's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 9(b)(ix), the Executive shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Company or the Bank, even if her is not vested under such plan.

The Company and the Executive hereby stipulate that the damages which may be incurred by the Executive following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 9(b) constitute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Executive's efforts, if any, to mitigate damages. The Company and the Executive further agree that the Company may condition the payments and benefits (if any) due under sections 9(b)(iii),
(iv), (v), (vi) and (vi) on the receipt of the Executive's resignation from any and all positions which her holds as an officer, director or committee member with respect to the Company, the Bank or any subsidiary or affiliate of either of them.

SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY. In the event that the Executive's employment with the Company shall terminate during the Employment Period on account of:

(a) the discharge of the Executive for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board and the Bank Board determine that the Executive: (i) has willfully and intentionally failed to perform her assigned duties under

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this Agreement (including for these purposes, the Executive's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with her performance of services for the Company or the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to her performance of services for the Company or the Bank, as determined by the Board and the Bank Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Executive engages in any of the acts described in section 10(a)(i) or
(a)(iv) above, the Company shall provide the Executive with written notice of its intent to discharge the Executive for cause, and the Executive shall have 30 days from the date on which the Executive receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 10 shall require the affirmative vote of at least three-fourths of the members of the Board and the Bank Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board and the Bank Board shall, by written notice to the Executive, furnish to her a statement of its grounds for proposing to make such determination, during which period the Executive shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board and the Bank Board, and to be represented by her legal counsel at such presentations, to refute the grounds for the pro posed determination;

(b) the Executive's voluntary resignation from employment with the Company and the Bank for reasons other than those specified in section 9(a)(i); or

(c) the death of the Executive while employed by the Company or the termination of the Executive's employment because of "total and permanent disability" within the meaning of the Company's long-term disability plan for employees;

then the Company shall have no further obligations under this Agreement, other than the payment to the Executive of her earned but unpaid salary as of the date of the termination of her employment and the provision of such other benefits, if any, to which her is entitled as a former employee under the Company's and the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 10, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company and the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board and the Bank Board or based upon the written advice of counsel for the Company or the Bank shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company and the Bank. The cessation of employment of the Executive shall not be deemed to be for "cause" within the meaning of section 10(a) unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board and the Bank Board at a meeting of the Board and the Bank Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive

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is given an opportunity, together with counsel, to be heard before the Board and the Bank Board), finding that, in the good faith opinion of the Board and the Bank Board, the Executive is guilty of the conduct described in section 10(a) above, and specifying the particulars thereof in detail.

SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.

(a) A Change of Control of the Company ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Company with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

(ii) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert;

(iii) a complete liquidation or dissolution of the Company;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

(A) individuals who were members of the Board on the date of this Agreement; or

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(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such board, or of a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the board of directors of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Company; or

(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term "Company" therein and the term "Bank Board" were substituted for the term "Board" therein.

In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this section 11(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In the event of a Change of Control, the Executive shall be entitled to the payments and benefits described in section 9(b), regardless of whether her employment terminates; PROVIDED, HOWEVER, that the term "Remaining Unexpired Employment Period" shall mean three years beginning on the effective date of the Change of Control, even if such three-year period extends beyond the date the Executive attains age 68.

SECTION 12. TAX INDEMNIFICATION.

(a) This section 12 shall apply if the Executive's employment is terminated upon or following (i) a Change of Control (as defined in section 11 of this Agreement); or (ii) a change "in the ownership or effective control" of the Company or the Bank or "in the ownership of a substantial portion of the assets" of the Company or the Bank within the meaning of section 280G of the Code. If this section 12 applies, then, if for any taxable year, the Executive shall be liable for the payment of an excise tax under section 4999 of the Code with respect to any payment in

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the nature of compensation made by the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank to (or for the benefit of) the Executive, the Company shall pay to the Executive an amount equal to X determined under the following formula:

X   =                 E x P
       ------------------------------------
       1 - [(FI x (1 - SLI)) + SLI + E + M]

where

E =      the rate at which the excise tax is assessed under
         section 4999 of the Code;

P =      the amount with respect to which such excise tax is
         assessed, determined without regard to this section
         12;

FI =     the highest marginal rate of income tax applicable to
         the Executive under the Code for the taxable year in
         question;

SLI =    the sum of the highest marginal rates of income tax
         applicable to the Executive under all applicable
         state and local laws for the taxable year in
         question; and

M =      the highest marginal rate of Medicare tax
         applicable to the Executive under the Code for the
         taxable year in question.

With respect to any payment in the nature of compensation that is made to (or for the benefit of) the Executive under the terms of this Agreement, or otherwise, and on which an excise tax under section 4999 of the Code will be assessed, the payment determined under this 12(a) shall be made to the Executive on the earlier of (i) the date the Company, the Bank or any direct or indirect subsidiary or affiliate of the Company or the Bank is required to withhold such tax, or (ii) the date the tax is required to be paid by the Executive.

(b) Notwithstanding anything in this section 12 to the contrary, in the event that the Executive's liability for the excise tax under section 4999 of the Code for a taxable year is subsequently determined to be different than the amount determined by the formula (X + P) x E, where X, P and E have the meanings provided in section 12(a), the Executive or the Company, as the case may be, shall pay to the other party at the time that the amount of such excise tax is finally determined, an appropriate amount, plus interest, such that the payment made under section 12(a), when increased by the amount of the payment made to the Executive under this section 12(b) by the Company, or when reduced by the amount of the payment made to the Company under this section 12(b) by the Executive, equals the amount that should have properly been paid to the Executive under section 12(a). The interest paid under this section 12(b) shall be determined at the rate provided under section 1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid to the Executive under this section 12, the Executive shall furnish to the Company a copy of each tax return which reflects a liability for an excise tax payment made

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by the Company, at least 20 days before the date on which such return is required to be filed with the Internal Revenue Service.

SECTION 13. COVENANT NOT TO COMPETE.

The Executive hereby covenants and agrees that, in the event of her termination of employment with the Company prior to the expiration of the Employment Period, for a period of one year following the date of her termination of employment with the Company or the Bank (or, if less, for the Remaining Unexpired Employment Period), her shall not, without the written con sent of the Company, become an officer, employee, consultant, director or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding com pany, or any direct or indirect subsidiary or affiliate of any such entity, that entails working within Orange, Dutchess, Rockland or Putnam counties or any other county in which the Company or the Bank maintains an office; PROVIDED, HOWEVER, that this section 13 shall not apply if the Executive's employment is terminated for the reasons set forth in section 9(a).

SECTION 14. CONFIDENTIALITY.

Unless her obtains the prior written consent of the Company, the Executive shall keep confidential and shall refrain from using for the benefit of herself, or any person or entity other than the Company or any entity which is a subsidiary of the Company or of which the Company is a subsidiary, any material document or information obtained from the Company, or from its parent or subsidiaries, in the course of her employment with any of them concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of her own) until the same ceases to be material (or becomes so ascertainable or available); PROVIDED, HOWEVER, that nothing in this section 14 shall prevent the Executive, with or without the Company's consent, from participating in or disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceed ing to the extent that such participation or disclosure is required under applicable law.

SECTION 15. SOLICITATION.

The Executive hereby covenants and agrees that, for a period of one year following her termination of employment with the Company or the Bank, her shall not, without the written consent of the Company and the Bank, either directly or indirectly:

(a) solicit, offer employment to, or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank or any of their respective subsidiaries or affiliates to terminate her or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged

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in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(b) provide any information, advice or recommendation with respect to any such officer or employee of any savings bank, savings and loan Bank, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13; that is intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of the Company, the Bank, or any of their respective subsidiaries or affiliates to terminate her employment and accept employment or become affiliated with, or provide services for compensation in any capacity what soever to, any savings bank, savings and loan association, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the counties specified in section 13;

(c) solicit, provide any information, advice or recommendation or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any customer of the Company to terminate an existing business or commercial relationship with the Company.

SECTION 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Executive's employment during the term of this Agreement or thereafter, whether by the Company, by the Bank or by the Executive, shall have no effect on the rights and obligations of the parties hereto under the Company's or the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term dis ability insurance plans or such other employee benefit plans or programs, or compensation plans or programs, as may be maintained by, or cover employees of, the Company or the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Executive to which the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 17. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Executive, her legal representatives and testate or intestate distributees, and the Company and the Bank and their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company may be sold or otherwise transferred. Failure of the Company to obtain from any successor its express written assumption of the Company's obligations

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hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 18. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Executive:

Nancy L. Sobotor-Littell
76 Maple Avenue
Warwick, New York 10990

If to the Company or the Bank:

Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGLAS J. MCCLINTOCK, ESQ.

SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.

(a) The Company shall indemnify, hold harmless and defend the Executive against reasonable costs, including legal fees and expenses, incurred by her in connection with or arising out of any action, suit or proceeding in which her may be involved, as a result of her efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Company's or the Bank's obligations hereunder shall be conclusive evidence of the Executive's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

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(b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. Unless it is determined that a claim made by the Executive was either frivolous or made in bad faith, the Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of or in connection with her consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Company, the Executive or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of the Code. This section 19(b) shall apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 20. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 21. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 22. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 23. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

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SECTION 24. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 25. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

SECTION 26. NON-DUPLICATION.

In the event that the Executive shall perform services for the Bank or any other direct or indirect subsidiary or affiliate of the Company or the Bank, any compensation or benefits provided to the Executive by such other employer shall be applied to offset the obligations of the Company hereunder, it being intended that this Agreement set forth the aggregate compensation and benefits payable to the Executive for all services to the Company, the Bank and all of their respective direct or indirect subsidiaries and affiliates.

SECTION 27. REQUIRED REGULATORY PROVISIONS.

Notwithstanding anything herein contained to the contrary, any payments to the Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and the Executive has hereunto set her hand, all as of the day and year first above written.

                                                /s/ Nancy L. Sobotor-Littell
                                                ----------------------------
                                                    NANCY L. SOBOTOR-LITTELL



                                                WARWICK COMMUNITY BANCORP, INC.

Attest:

By /s/ Lois E. Ulatowski                        By /s/ Henry L. Nielsen, Jr.
   -------------------------                       -------------------------
       Lois E. Ulatowski                               Henry L. Nielsen, Jr.
       Assistant Secretary                             Director

[Seal]

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STATE OF NEW YORK                   )
                                            : ss.:
COUNTY OF ORANGE                    )

On this 22nd day of December, 1997, before me personally came Nancy L. Sobotor- -Littell, to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that she resides at the address set forth in said instrument, and that her signed her name to the foregoing instrument.

/s/ Lisette D. Cuba
--------------------------
    Notary Public

STATE OF NEW YORK         )
                          : ss.:
COUNTY OF ORANGE          )

On this 22nd day of December, 1997, before me personally came Henry L. Nielsen, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 85 Kings Highway, P.O. Box 848, Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order.

/s/ Lisette D. Cuba
--------------------------
    Notary Public

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EXHIBIT 10.5

EMPLOYEE RETENTION AGREEMENT

This EMPLOYEE RETENTION AGREEMENT ("Agreement") is made and entered into as of December 23, 1997, by and among THE WARWICK SAVINGS BANK, a stock savings bank organized and existing under the laws of the state of New York and having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Bank"), WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and also having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company"), and LAURENCE D. HAGGERTY, an individual residing at 198 West Shore Trail, Sparta, New Jersey 07871 ("Officer").

W I T N E S S E T H :

WHEREAS, effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become a wholly owned subsidiary of the Company; and

WHEREAS, the Officer currently serves as the Senior Vice President of the Bank and the Bank desires to assure for itself the continued availability of the Officer's services and the ability of the Officer to perform such services with a minium of distraction in the event of a pending or threatened Change of Control (as defined herein); and

WHEREAS, for purposes of securing the Officer's services for the Bank, the Board of Directors of the Bank ("Board") has authorized the proper officers of the Bank to enter into an employee retention agreement with the Officer on the terms and conditions set forth herein, and the Board of Directors of the Company has authorized the Company to guarantee the Bank's obligations under such an employee retention agreement; and

WHEREAS, the Officer is willing to continue to serve the Bank on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the Bank, the Company and the Officer hereby agree as follows:

SECTION 1. EFFECTIVE DATE.

(a) This Agreement shall be effective as of the date first above written and shall remain in effect during the term of this Agreement which shall be for a period of one year commencing on the date of this Agreement, plus such extensions, if any, as are provided pursuant to section 1(b); PROVIDED, HOWEVER, that if the term of this Agreement has not otherwise terminated, the term of this Agreement will terminate on the date of the Officer's termination of employment with the Bank; and PROVIDED, FURTHER, that the obligations under section 8 of this Agreement shall survive the term of this Agreement if payments become due hereunder.


(b) Except as provided in section 1(c) and subject to section
10(c), beginning on the date of this Agreement, the term of this Agreement shall automatically be extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Agreement further by giving written notice thereof to the other party, in which case the term of this Agreement shall end on the first anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the term of this Agreement shall end on the last day of the month in which the Officer attains the age of 68. Upon termination of the Officer's employment with the Bank for any reason whatsoever, any daily extensions provided pursuant to this section
1(b), if not theretofore discontinued, shall automatically cease.

(c) Notwithstanding anything herein contained to the contrary:
(i) nothing in this Agreement shall be deemed to prohibit the Bank at any time from terminating the Officer's employment at any time, subject to the terms and conditions of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a continuation of the Officer's employment following the expiration of the Assurance Period upon such terms and conditions as the Bank and the Officer may mutually agree upon.

SECTION 2. ASSURANCE PERIOD.

(a) The assurance period ("Assurance Period") shall be for a period commencing on the date of a Change of Control, as defined in section 10 of this Agreement, and ending on the first anniversary of the date on which the Assurance Period commences, plus such extensions as are provided pursuant to the following sentence. The Assurance Period shall be automatically extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Assurance Period further by giving written notice to the other party, in which case the Assurance Period shall become fixed and shall end on the first anniversary of the date on which such written notice is given.

(b) Upon termination of the Officer's employment with the Bank, any daily extensions provided pursuant to the preceding sentence, if not theretofore discontinued, shall cease and the remaining unexpired Assurance Period under this Agreement shall be a fixed period ending on the later of the first anniversary of the date of the Change of Control, as defined in section 10 of this Agreement, or the first anniversary of the date on which the daily extensions were discontinued.

SECTION 3. DUTIES.

During the period of the Officer's employment that falls within the Assurance Period, the Officer shall: (a) except to the extent allowed under section 6 of this Agreement, devote his full business time and attention (other than during weekends, holidays, vacation per iods, and periods of illness, disability or approved leave of absence) to the business and affairs of the Bank and use his best efforts to advance the Bank's interests; (b) serve in the position to which the Officer is appointed by the Bank, which, during the Assurance Period, shall be the position that the Officer held on the day before the Assurance Period commenced or any higher office at the Bank to which he may subsequently be appointed; and (c) subject to the direction of the Board

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and the By-Laws of the Bank, have such functions, duties, responsibilities and authority commonly associated with such position.

SECTION 4. COMPENSATION.

In consideration for the services rendered by the Officer during the Assurance Period, the Bank shall pay to the Officer during the Assurance Period a salary at an annual rate equal to the greater of:

(a) the annual rate of salary in effect for the Officer on the day before the Assurance Period commenced; or

(b) such higher annual rate as may be prescribed by or under the authority of the Board;

PROVIDED, HOWEVER, that in no event shall the Officer's annual rate of salary under this Agreement in effect at a particular time during the Assurance Period be reduced without the Officer's prior written consent. The annual salary payable under this section 4 shall be subject to review at least once annually and shall be paid in approximately equal installments in accordance with the Bank's customary payroll practices. Nothing in this section 4 shall be deemed to prevent the Officer from receiving additional compensation other than salary for his services to the Bank, or additional compensation for his services to the Company, upon such terms and conditions as may be prescribed by or under the authority of the Board or the Board of Directors of the Company.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

Except as otherwise provided in this Agreement, the Officer shall, during the Assurance Period, be treated as an employee of the Bank and be eligible to participate in and re ceive benefits under group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans, and such other employee benefit plans and programs, including, but not limited to, any incentive compensation plans or programs (whether or not employee benefit plans or programs), any stock option and appreciation rights plan, employee stock ownership plan and restricted stock plan, as may from time to time be maintained by, or cover employees of, the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and with the Bank's customary practices.

SECTION 6. BOARD MEMBERSHIPS.

The Officer may serve as a member of the boards of directors of such business, community and charitable organizations as he may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of his duties under this Agreement. The Officer may also engage in personal business and investment activities which do not materially interfere with the performance of his duties hereunder; PROVIDED, HOWEVER, that such activities are

-3-

not prohibited under any code of conduct or investment or securities trading policy established by the Bank and generally applicable to all similarly situated Officers.

SECTION 7. WORKING FACILITIES AND EXPENSES.

During the Assurance Period, the Officer's principal place of employment shall be at the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Bank shall maintain its principal executive offices, or at such other location as the Bank and the Officer may mutually agree upon. The Bank shall provide the Officer, at his principal place of employment, with a private office, stenographic services and oth er support services and facilities suitable to his position with the Bank and necessary or appropri ate in connection with the performance of his assigned duties under this Agreement. The Bank shall reimburse the Officer for his ordinary and necessary business expenses, including, without limitation, the Officer's travel and entertainment expenses, incurred in connection with the perfor mance of the Officer's duties under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require.

SECTION 8. TERMINATION OF EMPLOYMENT WITH BANK LIABILITY.

(a) In the event that the Officer's employment with the Bank shall terminate either during the Assurance Period, or prior to the commencement of the Assurance Period but within three months of a Change of Control (as defined in section 10 of this Agreement); PROVIDED, HOWEVER, that if the Officer's employment is terminated prior to the commencement of the Assurance Period, it is reasonably demonstrated by the Officer that such termination of employment was at the request of a third party who has taken steps reasonably calculated to effect such Change of Control or otherwise arose in connection with or anticipation of such Change of Control, on account of:

(i) The Officer's voluntary resignation from employment with the Bank within 90 days following:

(A) the failure of the Board to appoint or re-appoint or elect or re-elect the Officer to serve in the same position in which the Officer was serving on the day before the Assurance Period commenced (or a more senior office);

(B) if the Officer is a member of the Board on the day before the Assurance Period commenced, the failure of the shareholders of the Bank to elect or re-elect the Officer as a member of the Board or the failure of the Board (or the nominating committee thereof) to nominate the Officer for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Officer gives written notice to the Bank of its material failure, whether by amendment of the Bank's Organization Certificate or By-Laws, action

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of the Board or the Bank's shareholders or otherwise, to vest in the Officer the functions, duties, or responsibilities vested in the Officer on the day before the Assurance Period commenced (or the functions, duties and responsibilities of a more senior office to which the Officer may be appointed), unless during such 30-day period, the Bank fully cures such failure;

(D) the failure of the Bank to cure a material breach of this Agreement by the Bank, within 30 days following written notice from the Officer of such material breach;

(E) a reduction in the salary provided to the Officer, or a material reduction in the benefits provided to the Officer under the Bank's program of employee benefits, other than in connection with an across-the-board reduction in salary and benefits uniformly applied to all employees of the Bank and all subsidiaries and affiliates of the Bank, compared with the salary and benefits that were provided to the Officer on the day before the Assurance Period commenced;

(F) a change in the Officer's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Officer's employment with the Bank is terminated by the Bank for any reason other than for "cause" as provided in section 9(a);

then, subject to section 21, the Bank shall provide the benefits and pay to the Officer the amounts described in section 8(b) of this Agreement; PROVIDED, HOWEVER, that if benefits or payments become due hereunder as a result of the Officer's termination of employment prior to the commencement of the Assurance Period, the benefits and payments provided for under section 8(b) of this Agreement shall be determined as though the Officer had remained in the service of the Bank (upon the terms and conditions in effect at the time of his actual termination of service) and had not terminated employment with the Bank until the date on which the Officer's Assurance Period would have commenced.

(b) Upon the termination of the Officer's employment with the Bank under circumstances described in section 8(a) of this Agreement, the Bank shall pay and provide to the Officer (or, in the event of the Officer's death, to the Officer's estate):

(i) the Officer's earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
8(b)) as of the date of the termination of the Officer's employment with the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

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(ii) the benefits, if any, to which the Officer is entitled as a former employee under the employee benefit plans and programs and compensation plans and programs maintained for the benefit of the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
8(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Officer, for the remaining unexpired Assurance Period, coverage equivalent to the coverage to which the Officer would have been entitled under such plans (as in effect on the date of his termination of employment, or, if his termination of employment occurs after a Change of Control, on the date of such Change of Control, whichever benefits are greater) if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employ ment with the Bank;

(iv) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment, in an amount equal to the present value of the salary (which, in the case of an Officer who is compensated in the form of both salary and commissions, shall be equal to the annual average of the total salary and commissions paid to such Officer during the two calendar years prior to such Officer's termination of employment) that the Officer would have earned if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employment with the Bank, where such present value is to be de termined using a discount rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Bank's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which he would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Bank, if the Officer were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period; over

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(B) the present value of the benefits to which he is actually entitled under such defined benefit pension plans as of the date of his termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Officer's termination of employment occurs ("Applicable PBGC Rate");

(vi) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which he would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Bank, as if he were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period and making the maximum amount of employee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Officer under any cash bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Bank if he had continued working for the Bank during the remaining unexpired Assurance Period and had earned the maximum bonus or incentive award in each calendar year that ends during the remaining unexpired Assurance Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Officer under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Officer during each such calendar year at the highest annual rate of salary achieved during the Assurance Period;

such payments to be made (without discounting for early payment) within 30 days following the Officer's termination of employment;

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(viii) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of options or appreciation rights issued to the Officer under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the exer cise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 8(b)(viii), the Officer shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Bank, even if he is not vested under such plan or program; and

(ix) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of any shares awarded to the Officer under any restricted stock plan maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Officer's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 8(b)(ix), the Officer shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Bank, even if he is not vested under such plan.

The Bank and the Officer hereby stipulate that the damages which may be incurred by the Officer following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 8(b) consti tute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Officer's efforts, if any, to mitigate damages. The Bank and the Officer further agree that the Bank may condition the payments and benefits (if any) due under sections 8(b)(iii), (iv), (v), (vi) and
(vi) on the receipt of the Officer's resignation from any and all positions which he holds as an officer, director or committee member with respect to the Bank or any subsidiary or affiliate of the Bank.

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SECTION 9. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.

In the event that the Officer's employment with the Bank shall terminate during the Assurance Period on account of:

(a) the discharge of the Officer for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board determine that the Officer: (i) has willfully and intentionally failed to perform his assigned duties under this Agreement (including for these purposes, the Officer's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with his performance of services for the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to his performance of services for the Bank, as determined by the Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Officer engages in any of the acts described in section 9(a)(i) or (a)(iv) above, the Bank shall provide the Officer with written notice of its intent to discharge the Officer for cause, and the Executive shall have 30 days from the date on which the Officer receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 9 shall require the affirmative vote of at least three-fourths of the members of the Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board shall, by written notice to the Officer, furnish to him a statement of its grounds for proposing to make such determination, during which period the Officer shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board, and to be represented by his legal counsel at such presentations, to refute the grounds for the proposed determination;

(b) the Officer's voluntary resignation from employment with the Bank for reasons other than those specified in section 8(a)(i); or

(c) the death of the Officer while employed by the Bank or the termination of the Officer's employment because of "total and permanent disability" within the meaning of the Bank's long-term disability plan for employees;

then the Bank shall have no further obligations under this Agreement, other than the payment to the Officer of his earned but unpaid salary as of the date of the termination of his employment and the provision of such other benefits, if any, to which he is entitled as a former employee under the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 9, no act or failure to act, on the part of the Officer, shall be considered "willful" unless it is done, or omitted to be done, by the Officer in bad faith or without reasonable belief that the Officer's action or omission was in the best interests of the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the written advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by the Officer in good faith and in the best interests of the Bank. The cessation of

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employment of the Officer shall not be deemed to be for "cause" within the meaning of section 9(a) unless and until there shall have been delivered to the Officer a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Officer and the Officer is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Officer is guilty of the conduct described in section 9(a) above, and specifying the particulars thereof in detail.

SECTION 10. CHANGE OF CONTROL.

(a) A Change of Control of the Bank ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Bank with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Bank; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Bank;

(ii) the acquisition of substantially all of the assets of the Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Bank entitled to vote generally in the election of directors by any person or by any persons acting in concert; or

(iii) a complete liquidation or dissolution of the Bank;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

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(A) individuals who were members of the Board on the date of this Agreement; or

(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such Board, or a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Bank;

(v) any event which would be described in section 10(a)(i),
(ii), (iii) or (iv) if the term "Company" were substituted for the term "Bank" therein and the term "Board of Directors of the Company" were substituted for the term "Board" therein.

For purposes of this section 10(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or any subsidiary of either of them, by the Company, the Bank or any subsidiary of either of them, or by any employee benefit plan maintained by any of them.

(c) In the event of a Change of Control, the term "remaining unexpired Assurance Period" shall mean one year beginning on the effective date of such Change of Control, even if such one-year period extends beyond the date the Officer attains age 68.

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SECTION 11. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Officer's employment during the Assurance Period or thereafter, whether by the Bank or by the Officer, shall have no effect on the rights and obligations of the parties hereto under the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans or such other employee benefit plans or programs, or compensation plans or programs (whether or not employee benefit plans or programs), as may be maintained by, or cover employees of, the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Officer to which the Bank or the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 12. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Officer, his legal representatives and testate or intestate distributees, and the Bank and the Company, their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the respective assets and business of the Bank or the Company may be sold or otherwise transferred. Failure of the Bank to obtain from any successor its express written assumption of the Bank's obligations hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 13. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Officer:

Laurence D. Haggerty
198 West Shore Trail
Sparta, New Jersey 07871

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If to the Bank or the Company:

The Warwick Savings Bank
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGALS J. MCCLINTOCK, ESQ.

SECTION 14. INDEMNIFICATION AND ATTORNEYS' FEES.

(a) To the extent permitted by the Banking Law of the State of New York, the Bank shall indemnify, hold harmless and defend the Officer against reasonable costs, including legal fees, incurred by the Officer in connection with or arising out of any action, suit or proceed ing in which the Officer may be involved, as a result of the Officer's efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Bank's obligations hereunder shall be conclusive evidence of the Officer's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

(b) The Bank's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against the Officer or others. In no event shall the Officer be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Officer under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Officer obtains other employment. Unless it is determined that a claim made by the Officer was either frivolous or made in bad faith, the Bank agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Officer may reasonably incur as a result of or in connection with his consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Bank, the Officer or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Officer about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable federal rate provided for in section 7872(f)(2)(A) of the Code. This section 14(b) shall

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apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 15. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 16. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 17. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 18. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

SECTION 19. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 20. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

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SECTION 21. REQUIRED REGULATORY PROVISIONS.

The following provisions are included for the purposes of complying with various laws, rules and regulations applicable to the Bank:

(a) Notwithstanding anything herein contained to the contrary, in no event shall the aggregate amount of compensation payable to the Officer under section 8(b) hereof (exclusive of amounts described in section 8(b)(i)) exceed the three times the Officer's average annual total compensation for the last five consecutive calendar years to end prior to his termination of employment with the Bank (or for his entire period of employment with the Bank if less than five calendar years).

(b) Notwithstanding anything herein contained to the contrary, any payments to the Officer by the Bank, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

(c) Notwithstanding anything herein contained to the contrary, if the Officer is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Bank pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in such notice are dismissed, the Bank, in its discretion, may (i) pay to the Officer all or part of the compensation withheld while the Bank's obligations hereunder were suspended and (ii) reinstate, in whole or in part, any of the obligations which were suspended.

(d) Notwithstanding anything herein contained to the contrary, if the Officer is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(4) or (g)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights and obligations of the Bank and the Officer shall not be affected.

(e) Notwithstanding anything herein contained to the contrary, if the Bank is in default (within the meaning of section 3(x)(1) of the FDI Act, 12 U.S.C. ss.1813(x)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the date of default, but vested rights and obligations of the Bank and the Officer shall not be affected.

(f) Notwithstanding anything herein contained to the contrary, all prospective obligations of the Bank hereunder shall be terminated, except to the extent that a continuation of this Agreement is necessary for the continued

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operation of the Bank: (i) by the Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in section 13(c) of the FDI Act, 12 U.S.C. ss.1823(c); (ii) by the FDIC or its designee at the time the FDIC or its designee approves a supervisory merger to resolve problems related to the operation of the Bank or when the Bank is determined by the FDIC to be in an unsafe or unsound condition. The vested rights and obligations of the parties shall not be affected.

SECTION 22. GUARANTY.

The Company hereby irrevocably and unconditionally guarantees to the Officer the payment of all amounts, and the performance of all other obligations, due from the Bank in accordance with the terms of this Agreement as and when due without any requirement of presentment, demand of payment, protest or notice of dishonor or nonpayment.

IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed and the Officer has hereunto set his hand, all as of the day and year first above written.

                                             /s/ Laurence D. Haggerty
                                             -------------------------------
                                                 LAURENCE D. HAGGERTY


                                             THE WARWICK SAVINGS BANK

Attest:

By /s/ Nancy L. Sobotor-Littell              By /s/ Thomas F. Lawrence, Jr.
   ----------------------------                 ---------------------------
       Nancy L. Sobotor-Littell                     Thomas F. Lawrence, Jr.
       Corporate Secretary                          Director

[Seal]

                                             WARWICK COMMUNITY BANCORP, INC..

Attest:

By /s/ Nancy L. Sobotor-Littell              By /s/ Thomas F. Lawrence, JR.
   ----------------------------              ------------------------------
       Nancy L. Sobotor-Littell                     Thomas F. Lawrence, Jr.
       Corporate Secretary                          Director

[Seal]

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STATE OF NEW YORK     )
                      : ss.:
COUNTY OF ORANGE      )

On this 22nd day of December, 1997, before me personally came Laurence D. Haggerty, to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at the address set forth in said instrument, and that he signed his name to the foregoing instrument.

/s/ Lisette D. Cuba
--------------------------
    Notary Public

STATE OF NEW YORK     )
                      : ss.:
COUNTY OF ORANGE      )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of THE WARWICK SAVINGS BANK, the savings bank described in and which executed the foregoing instrument; that he knows the seal of said savings bank; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Directors of said savings bank; and that he signed his name thereto by like authority.

/s/ Lisette D. Cuba
--------------------------
    Notary Public

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order.

/s/ Lisette D. Cuba
--------------------------
    Notary Public

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EXHIBIT 10.6

EMPLOYEE RETENTION AGREEMENT

This EMPLOYEE RETENTION AGREEMENT ("Agreement") is made and entered into as of December 23, 1997, by and among THE WARWICK SAVINGS BANK, a stock savings bank organized and existing under the laws of the state of New York and having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Bank"), WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and also having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company"), and DONNA M. LYONS, an individual residing at 2353 Route 44-55, P.O. Box 16, Gardiner, New York 12525 ("Officer").

W I T N E S S E T H :

WHEREAS, effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become a wholly owned subsidiary of the Company; and

WHEREAS, the Officer currently serves as the Senior Vice President and Auditor of the Bank and the Bank desires to assure for itself the continued availability of the Officer's services and the ability of the Officer to perform such services with a minium of distraction in the event of a pending or threatened Change of Control (as defined herein); and

WHEREAS, for purposes of securing the Officer's services for the Bank, the Board of Directors of the Bank ("Board") has authorized the proper officers of the Bank to enter into an employee retention agreement with the Officer on the terms and conditions set forth herein, and the Board of Directors of the Company has authorized the Company to guarantee the Bank's obligations under such an employee retention agreement; and

WHEREAS, the Officer is willing to continue to serve the Bank on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the Bank, the Company and the Officer hereby agree as follows:

SECTION 1. EFFECTIVE DATE.

(a) This Agreement shall be effective as of the date first above written and shall remain in effect during the term of this Agreement which shall be for a period of one year commencing on the date of this Agreement, plus such extensions, if any, as are provided pursuant to section 1(b); PROVIDED, HOWEVER, that if the term of this Agreement has not otherwise terminated, the term of this Agreement will terminate on the date of the Officer's termination of employment with the Bank; and PROVIDED, FURTHER, that the obligations under section 8 of this Agreement shall survive the term of this Agreement if payments become due hereunder.


(b) Except as provided in section 1(c) and subject to section
10(c), beginning on the date of this Agreement, the term of this Agreement shall automatically be extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Agreement further by giving written notice thereof to the other party, in which case the term of this Agreement shall end on the first anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the term of this Agreement shall end on the last day of the month in which the Officer attains the age of 68. Upon termination of the Officer's employment with the Bank for any reason whatsoever, any daily extensions provided pursuant to this section
1(b), if not theretofore discontinued, shall automatically cease.

(c) Notwithstanding anything herein contained to the contrary:
(i) nothing in this Agreement shall be deemed to prohibit the Bank at any time from terminating the Officer's employment at any time, subject to the terms and conditions of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a continuation of the Officer's employment following the expiration of the Assurance Period upon such terms and conditions as the Bank and the Officer may mutually agree upon.

SECTION 2. ASSURANCE PERIOD.

(a) The assurance period ("Assurance Period") shall be for a period commencing on the date of a Change of Control, as defined in section 10 of this Agreement, and ending on the first anniversary of the date on which the Assurance Period commences, plus such extensions as are provided pursuant to the following sentence. The Assurance Period shall be automatically extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Assurance Period further by giving written notice to the other party, in which case the Assurance Period shall become fixed and shall end on the first anniversary of the date on which such written notice is given.

(b) Upon termination of the Officer's employment with the Bank, any daily extensions provided pursuant to the preceding sentence, if not theretofore discontinued, shall cease and the remaining unexpired Assurance Period under this Agreement shall be a fixed period ending on the later of the first anniversary of the date of the Change of Control, as defined in section 10 of this Agreement, or the first anniversary of the date on which the daily extensions were discontinued.

SECTION 3. DUTIES.

During the period of the Officer's employment that falls within the Assurance Period, the Officer shall: (a) except to the extent allowed under section 6 of this Agreement, devote her full business time and attention (other than during weekends, holidays, vacation per iods, and periods of illness, disability or approved leave of absence) to the business and affairs of the Bank and use her best efforts to advance the Bank's interests; (b) serve in the position to which the Officer is appointed by the Bank, which, during the Assurance Period, shall be the position that the Officer held on the day before the Assurance Period commenced or any higher office at the Bank to which he may subsequently be appointed; and (c) subject to the direction of the Board

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and the By-Laws of the Bank, have such functions, duties, responsibilities and authority commonly associated with such position.

SECTION 4. COMPENSATION.

In consideration for the services rendered by the Officer during the Assurance Period, the Bank shall pay to the Officer during the Assurance Period a salary at an annual rate equal to the greater of:

(a) the annual rate of salary in effect for the Officer on the day before the Assurance Period commenced; or

(b) such higher annual rate as may be prescribed by or under the authority of the Board;

PROVIDED, HOWEVER, that in no event shall the Officer's annual rate of salary under this Agreement in effect at a particular time during the Assurance Period be reduced without the Officer's prior written consent. The annual salary payable under this section 4 shall be subject to review at least once annually and shall be paid in approximately equal installments in accordance with the Bank's customary payroll practices. Nothing in this section 4 shall be deemed to prevent the Officer from receiving additional compensation other than salary for her services to the Bank, or additional compensation for her services to the Company, upon such terms and conditions as may be prescribed by or under the authority of the Board or the Board of Directors of the Company.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

Except as otherwise provided in this Agreement, the Officer shall, during the Assurance Period, be treated as an employee of the Bank and be eligible to participate in and re ceive benefits under group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans, and such other employee benefit plans and programs, including, but not limited to, any incentive compensation plans or programs (whether or not employee benefit plans or programs), any stock option and appreciation rights plan, employee stock ownership plan and restricted stock plan, as may from time to time be maintained by, or cover employees of, the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and with the Bank's customary practices.

SECTION 6. BOARD MEMBERSHIPS.

The Officer may serve as a member of the boards of directors of such business, community and charitable organizations as she may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of her duties under this Agreement. The Officer may also engage in personal business and investment activities which do not materially interfere with the performance of her duties hereunder; PROVIDED, HOWEVER, that such activities are

-3-

not prohibited under any code of conduct or investment or securities trading policy established by the Bank and generally applicable to all similarly situated Officers.

SECTION 7. WORKING FACILITIES AND EXPENSES.

During the Assurance Period, the Officer's principal place of employment shall be at the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Bank shall maintain its principal executive offices, or at such other location as the Bank and the Officer may mutually agree upon. The Bank shall provide the Officer, at her principal place of employment, with a private office, stenographic services and other support services and facilities suitable to her position with the Bank and necessary or appropriate in connection with the performance of her assigned duties under this Agreement. The Bank shall reimburse the Officer for her ordinary and necessary business expenses, including, without limitation, the Officer's travel and entertainment expenses, incurred in connection with the performance of the Officer's duties under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require.

SECTION 8. TERMINATION OF EMPLOYMENT WITH BANK LIABILITY.

(a) In the event that the Officer's employment with the Bank shall terminate either during the Assurance Period, or prior to the commencement of the Assurance Period but within three months of a Change of Control (as defined in section 10 of this Agreement); PROVIDED, HOWEVER, that if the Officer's employment is terminated prior to the commencement of the Assurance Period, it is reasonably demonstrated by the Officer that such termination of employment was at the request of a third party who has taken steps reasonably calculated to effect such Change of Control or otherwise arose in connection with or anticipation of such Change of Control, on account of:

(i) The Officer's voluntary resignation from employment with the Bank within 90 days following:

(A) the failure of the Board to appoint or re-appoint or elect or re-elect the Officer to serve in the same position in which the Officer was serving on the day before the Assurance Period commenced (or a more senior office);

(B) if the Officer is a member of the Board on the day before the Assurance Period commenced, the failure of the shareholders of the Bank to elect or re-elect the Officer as a member of the Board or the failure of the Board (or the nominating committee thereof) to nominate the Officer for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Officer gives written notice to the Bank of its material failure, whether by amendment of the Bank's Organization Certificate or By-Laws, action

-4-

of the Board or the Bank's shareholders or otherwise, to vest in the Officer the functions, duties, or responsibilities vested in the Officer on the day before the Assurance Period commenced (or the functions, duties and responsibilities of a more senior office to which the Officer may be appointed), unless during such 30-day period, the Bank fully cures such failure;

(D) the failure of the Bank to cure a material breach of this Agreement by the Bank, within 30 days following written notice from the Officer of such material breach;

(E) a reduction in the salary provided to the Officer, or a material reduction in the benefits provided to the Officer under the Bank's program of employee benefits, other than in connection with an across-the-board reduction in salary and benefits uniformly applied to all employees of the Bank and all subsidiaries and affiliates of the Bank, compared with the salary and benefits that were provided to the Officer on the day before the Assurance Period commenced;

(F) a change in the Officer's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Officer's employment with the Bank is terminated by the Bank for any reason other than for "cause" as provided in section 9(a);

then, subject to section 21, the Bank shall provide the benefits and pay to the Officer the amounts described in section 8(b) of this Agreement; PROVIDED, HOWEVER, that if benefits or payments become due hereunder as a result of the Officer's termination of employment prior to the commencement of the Assurance Period, the benefits and payments provided for under section 8(b) of this Agreement shall be determined as though the Officer had remained in the service of the Bank (upon the terms and conditions in effect at the time of her actual termination of service) and had not terminated employment with the Bank until the date on which the Officer's Assurance Period would have commenced.

(b) Upon the termination of the Officer's employment with the Bank under circumstances described in section 8(a) of this Agreement, the Bank shall pay and provide to the Officer (or, in the event of the Officer's death, to the Officer's estate):

(i) the Officer's earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
8(b)) as of the date of the termination of the Officer's employment with the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

-5-

(ii) the benefits, if any, to which the Officer is entitled as a former employee under the employee benefit plans and programs and compensation plans and programs maintained for the benefit of the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
8(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Officer, for the remaining unexpired Assurance Period, coverage equivalent to the coverage to which the Officer would have been entitled under such plans (as in effect on the date of her termination of employment, or, if her termination of employment occurs after a Change of Control, on the date of such Change of Control, whichever benefits are greater) if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employ ment with the Bank;

(iv) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment, in an amount equal to the present value of the salary (which, in the case of an Officer who is compensated in the form of both salary and commissions, shall be equal to the annual average of the total salary and commissions paid to such Officer during the two calendar years prior to such Officer's termination of employment) that the Officer would have earned if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employment with the Bank, where such present value is to be de termined using a discount rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Bank's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which she would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Bank, if the Officer were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period; over

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(B) the present value of the benefits to which she is actually entitled under such defined benefit pension plans as of the date of her termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Officer's termination of employment occurs ("Applicable PBGC Rate");

(vi) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which she would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Bank, as if she were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period and making the maximum amount of employee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Officer under any cash bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Bank if she had continued working for the Bank during the remaining unexpired Assurance Period and had earned the maximum bonus or incentive award in each calendar year that ends during the remaining unexpired Assurance Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Officer under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Officer during each such calendar year at the highest annual rate of salary achieved during the Assurance Period;

such payments to be made (without discounting for early payment) within 30 days following the Officer's termination of employment;

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(viii) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of options or appreciation rights issued to the Officer under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the exer cise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 8(b)(viii), the Officer shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Bank, even if she is not vested under such plan or program; and

(ix) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of any shares awarded to the Officer under any restricted stock plan maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Officer's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 8(b)(ix), the Officer shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Bank, even if she is not vested under such plan.

The Bank and the Officer hereby stipulate that the damages which may be incurred by the Officer following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 8(b) consti tute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Officer's efforts, if any, to mitigate damages. The Bank and the Officer further agree that the Bank may condition the payments and benefits (if any) due under sections 8(b)(iii), (iv), (v), (vi) and
(vi) on the receipt of the Officer's resignation from any and all positions which she holds as an officer, director or committee member with respect to the Bank or any subsidiary or affiliate of the Bank.

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SECTION 9. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.

In the event that the Officer's employment with the Bank shall terminate during the Assurance Period on account of:

(a) the discharge of the Officer for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board determine that the Officer: (i) has willfully and intentionally failed to perform her assigned duties under this Agreement (including for these purposes, the Officer's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with her performance of services for the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to her performance of services for the Bank, as determined by the Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Officer engages in any of the acts described in section 9(a)(i) or (a)(iv) above, the Bank shall provide the Officer with written notice of its intent to discharge the Officer for cause, and the Executive shall have 30 days from the date on which the Officer receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 9 shall require the affirmative vote of at least three-fourths of the members of the Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board shall, by written notice to the Officer, furnish to her a statement of its grounds for proposing to make such determination, during which period the Officer shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board, and to be represented by her legal counsel at such presentations, to refute the grounds for the proposed determination;

(b) the Officer's voluntary resignation from employment with the Bank for reasons other than those specified in section 8(a)(i); or

(c) the death of the Officer while employed by the Bank or the termination of the Officer's employment because of "total and permanent disability" within the meaning of the Bank's long-term disability plan for employees;

then the Bank shall have no further obligations under this Agreement, other than the payment to the Officer of her earned but unpaid salary as of the date of the termination of her employment and the provision of such other benefits, if any, to which she is entitled as a former employee under the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 9, no act or failure to act, on the part of the Officer, shall be considered "willful" unless it is done, or omitted to be done, by the Officer in bad faith or without reasonable belief that the Officer's action or omission was in the best interests of the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the written advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by the Officer in good faith and in the best interests of the Bank. The

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cessation of employment of the Officer shall not be deemed to be for "cause" within the meaning of section 9(a) unless and until there shall have been delivered to the Officer a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Officer and the Officer is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Officer is guilty of the conduct described in section 9(a) above, and specifying the particulars thereof in detail.

SECTION 10. CHANGE OF CONTROL.

(a) A Change of Control of the Bank ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Bank with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Bank; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Bank;

(ii) the acquisition of substantially all of the assets of the Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Bank entitled to vote generally in the election of directors by any person or by any persons acting in concert; or

(iii) a complete liquidation or dissolution of the Bank;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

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(A) individuals who were members of the Board on the date of this Agreement; or

(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such Board, or a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Bank;

(v) any event which would be described in section 10(a)(i),
(ii), (iii) or (iv) if the term "Company" were substituted for the term "Bank" therein and the term "Board of Directors of the Company" were substituted for the term "Board" therein.

For purposes of this section 10(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or any subsidiary of either of them, by the Company, the Bank or any subsidiary of either of them, or by any employee benefit plan maintained by any of them.

(c) In the event of a Change of Control, the term "remaining unexpired Assurance Period" shall mean one year beginning on the effective date of such Change of Control, even if such one-year period extends beyond the date the Officer attains age 68.

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SECTION 11. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Officer's employment during the Assurance Period or thereafter, whether by the Bank or by the Officer, shall have no effect on the rights and obligations of the parties hereto under the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans or such other employee benefit plans or programs, or compensation plans or programs (whether or not employee benefit plans or programs), as may be maintained by, or cover employees of, the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Officer to which the Bank or the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 12. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Officer, her legal representatives and testate or intestate distributees, and the Bank and the Company, their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the respective assets and business of the Bank or the Company may be sold or otherwise transferred. Failure of the Bank to obtain from any successor its express written assumption of the Bank's obligations hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 13. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Officer:

Donna M. Lyons
P.O. Box 16
Gardiner, New York 12525

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If to the Bank or the Company:

The Warwick Savings Bank
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGLAS J. MCCLINTOCK, ESQ.

SECTION 14. INDEMNIFICATION AND ATTORNEYS' FEES.

(a) To the extent permitted by the Banking Law of the State of New York, the Bank shall indemnify, hold harmless and defend the Officer against reasonable costs, including legal fees, incurred by the Officer in connection with or arising out of any action, suit or proceed ing in which the Officer may be involved, as a result of the Officer's efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Bank's obligations hereunder shall be conclusive evidence of the Officer's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

(b) The Bank's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against the Officer or others. In no event shall the Officer be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Officer under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Officer obtains other employment. Unless it is determined that a claim made by the Officer was either frivolous or made in bad faith, the Bank agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Officer may reasonably incur as a result of or in connection with her consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Bank, the Officer or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Officer about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable federal rate provided for in section 7872(f)(2)(A) of the Code. This section 14(b) shall

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apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 15. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 16. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 17. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 18. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

SECTION 19. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 20. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

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SECTION 21. REQUIRED REGULATORY PROVISIONS.

The following provisions are included for the purposes of complying with various laws, rules and regulations applicable to the Bank:

(a) Notwithstanding anything herein contained to the contrary, in no event shall the aggregate amount of compensation payable to the Officer under section 8(b) hereof (exclusive of amounts described in section 8(b)(i)) exceed the three times the Officer's average annual total compensation for the last five consecutive calendar years to end prior to her termination of employment with the Bank (or for her entire period of employment with the Bank if less than five calendar years).

(b) Notwithstanding anything herein contained to the contrary, any payments to the Officer by the Bank, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

(c) Notwithstanding anything herein contained to the contrary, if the Officer is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Bank pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in such notice are dismissed, the Bank, in its discretion, may (i) pay to the Officer all or part of the compensation withheld while the Bank's obligations hereunder were suspended and (ii) reinstate, in whole or in part, any of the obligations which were suspended.

(d) Notwithstanding anything herein contained to the contrary, if the Officer is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(4) or (g)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights and obligations of the Bank and the Officer shall not be affected.

(e) Notwithstanding anything herein contained to the contrary, if the Bank is in default (within the meaning of section 3(x)(1) of the FDI Act, 12 U.S.C. ss.1813(x)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the date of default, but vested rights and obligations of the Bank and the Officer shall not be affected.

(f) Notwithstanding anything herein contained to the contrary, all prospective obligations of the Bank hereunder shall be terminated, except to the extent that a continuation of this Agreement is necessary for the continued

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operation of the Bank: (i) by the Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in section 13(c) of the FDI Act, 12 U.S.C. ss.1823(c); (ii) by the FDIC or its designee at the time the FDIC or its designee approves a supervisory merger to resolve problems related to the operation of the Bank or when the Bank is determined by the FDIC to be in an unsafe or unsound condition. The vested rights and obligations of the parties shall not be affected.

SECTION 22. GUARANTY.

The Company hereby irrevocably and unconditionally guarantees to the Officer the payment of all amounts, and the performance of all other obligations, due from the Bank in accordance with the terms of this Agreement as and when due without any requirement of presentment, demand of payment, protest or notice of dishonor or nonpayment.

IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed and the Officer has hereunto set her hand, all as of the day and year first above written.

                                               /s/ Donna M. Lyons
                                               -------------------------------
                                                   DONNA M. LYONS


                                               THE WARWICK SAVINGS BANK

Attest:

By /s/ Nancy L. Sobotor-Littell                By /s/ Thomas F. Lawrence, Jr.
   ----------------------------                   ----------------------------
       Nancy L. Sobotor-Littell                       Thomas F. Lawrence, Jr.
       Corporate Secretary                            Director

[Seal]

                                               WARWICK COMMUNITY BANCORP, INC.

Attest:

By /s/ Nancy L. Sobotor-Littell                By /s/ Thomas F. Lawrence, Jr.
   ----------------------------                   ----------------------------
       Nancy L. Sobotor-Littell                   Thomas F. Lawrence, Jr.
       Corporate Secretary                        Director

[Seal]

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STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 22nd day of December, 1997, before me personally came Donna M. Lyons, to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that she resides at the address set forth in said instrument, and that she signed her name to the foregoing instrument.

/s/ Lisette D. Cuba
----------------------------
    Notary Public

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr. to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of THE WARWICK SAVINGS BANK, the savings bank described in and which executed the foregoing instrument; that he knows the seal of said savings bank; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Directors of said savings bank; and that he signed his name thereto by like authority.

/s/ Lisette D. Cuba
----------------------------
    Notary Public

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order.

/s/ Lisette D. Cuba
----------------------------
    Notary Public

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EXHIBIT 10.7

EMPLOYEE RETENTION AGREEMENT

This EMPLOYEE RETENTION AGREEMENT ("Agreement") is made and entered into as of December 23, 1997, by and among THE WARWICK SAVINGS BANK, a stock savings bank organized and existing under the laws of the state of New York and having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Bank"), WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and also having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company"), and BARBARA A. RUDY, an individual residing at 23 Olde Wagon Road, Warwick, New York 10990 ("Officer").

W I T N E S S E T H :

WHEREAS, effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become a wholly owned subsidiary of the Company; and

WHEREAS, the Officer currently serves as the Senior Vice President of the Bank and the Bank desires to assure for itself the continued availability of the Officer's services and the ability of the Officer to perform such services with a minium of distraction in the event of a pending or threatened Change of Control (as defined herein); and

WHEREAS, for purposes of securing the Officer's services for the Bank, the Board of Directors of the Bank ("Board") has authorized the proper officers of the Bank to enter into an employee retention agreement with the Officer on the terms and conditions set forth herein, and the Board of Directors of the Company has authorized the Company to guarantee the Bank's obligations under such an employee retention agreement; and

WHEREAS, the Officer is willing to continue to serve the Bank on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the Bank, the Company and the Officer hereby agree as follows:

SECTION 1. EFFECTIVE DATE.

(a) This Agreement shall be effective as of the date first above written and shall remain in effect during the term of this Agreement which shall be for a period of one year commencing on the date of this Agreement, plus such extensions, if any, as are provided pursuant to section 1(b); PROVIDED, HOWEVER, that if the term of this Agreement has not otherwise terminated, the term of this Agreement will terminate on the date of the Officer's termination of employment with the Bank; and PROVIDED, FURTHER, that the obligations under section 8 of this Agreement shall survive the term of this Agreement if payments become due hereunder.


(b) Except as provided in section 1(c) and subject to section
10(c), beginning on the date of this Agreement, the term of this Agreement shall automatically be extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Agreement further by giving written notice thereof to the other party, in which case the term of this Agreement shall end on the first anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the term of this Agreement shall end on the last day of the month in which the Officer attains the age of 68. Upon termination of the Officer's employment with the Bank for any reason whatsoever, any daily extensions provided pursuant to this section
1(b), if not theretofore discontinued, shall automatically cease.

(c) Notwithstanding anything herein contained to the contrary:
(i) nothing in this Agreement shall be deemed to prohibit the Bank at any time from terminating the Officer's employment at any time, subject to the terms and conditions of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a continuation of the Officer's employment following the expiration of the Assurance Period upon such terms and conditions as the Bank and the Officer may mutually agree upon.

SECTION 2. ASSURANCE PERIOD.

(a) The assurance period ("Assurance Period") shall be for a period commencing on the date of a Change of Control, as defined in section 10 of this Agreement, and ending on the first anniversary of the date on which the Assurance Period commences, plus such extensions as are provided pursuant to the following sentence. The Assurance Period shall be automatically extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Assurance Period further by giving written notice to the other party, in which case the Assurance Period shall become fixed and shall end on the first anniversary of the date on which such written notice is given.

(b) Upon termination of the Officer's employment with the Bank, any daily extensions provided pursuant to the preceding sentence, if not theretofore discontinued, shall cease and the remaining unexpired Assurance Period under this Agreement shall be a fixed period ending on the later of the first anniversary of the date of the Change of Control, as defined in section 10 of this Agreement, or the first anniversary of the date on which the daily extensions were discontinued.

SECTION 3. DUTIES.

During the period of the Officer's employment that falls within the Assurance Period, the Officer shall: (a) except to the extent allowed under section 6 of this Agreement, devote her full business time and attention (other than during weekends, holidays, vacation per iods, and periods of illness, disability or approved leave of absence) to the business and affairs of the Bank and use her best efforts to advance the Bank's interests; (b) serve in the position to which the Officer is appointed by the Bank, which, during the Assurance Period, shall be the position that the Officer held on the day before the Assurance Period commenced or any higher office at the Bank to which she may subsequently be appointed; and (c) subject to the direction of the Board

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and the By-Laws of the Bank, have such functions, duties, responsibilities and authority commonly associated with such position.

SECTION 4. COMPENSATION.

In consideration for the services rendered by the Officer during the Assurance Period, the Bank shall pay to the Officer during the Assurance Period a salary at an annual rate equal to the greater of:

(a) the annual rate of salary in effect for the Officer on the day before the Assurance Period commenced; or

(b) such higher annual rate as may be prescribed by or under the authority of the Board;

PROVIDED, HOWEVER, that in no event shall the Officer's annual rate of salary under this Agreement in effect at a particular time during the Assurance Period be reduced without the Officer's prior written consent. The annual salary payable under this section 4 shall be subject to review at least once annually and shall be paid in approximately equal installments in accordance with the Bank's customary payroll practices. Nothing in this section 4 shall be deemed to prevent the Officer from receiving additional compensation other than salary for her services to the Bank, or additional compensation for her services to the Company, upon such terms and conditions as may be prescribed by or under the authority of the Board or the Board of Directors of the Company.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

Except as otherwise provided in this Agreement, the Officer shall, during the Assurance Period, be treated as an employee of the Bank and be eligible to participate in and re ceive benefits under group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans, and such other employee benefit plans and programs, including, but not limited to, any incentive compensation plans or programs (whether or not employee benefit plans or programs), any stock option and appreciation rights plan, employee stock ownership plan and restricted stock plan, as may from time to time be maintained by, or cover employees of, the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and with the Bank's customary practices.

SECTION 6. BOARD MEMBERSHIPS.

The Officer may serve as a member of the boards of directors of such business, community and charitable organizations as she may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of her duties under this Agreement. The Officer may also engage in personal business and investment activities which do not materially interfere with the performance of her duties hereunder; PROVIDED, HOWEVER, that such activities are

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not prohibited under any code of conduct or investment or securities trading policy established by the Bank and generally applicable to all similarly situated Officers.

SECTION 7. WORKING FACILITIES AND EXPENSES.

During the Assurance Period, the Officer's principal place of employment shall be at the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Bank shall maintain its principal executive offices, or at such other location as the Bank and the Officer may mutually agree upon. The Bank shall provide the Officer, at her principal place of employment, with a private office, stenographic services and oth er support services and facilities suitable to her position with the Bank and necessary or appropri ate in connection with the performance of her assigned duties under this Agreement. The Bank shall reimburse the Officer for her ordinary and necessary business expenses, including, without limitation, the Officer's travel and entertainment expenses, incurred in connection with the perfor mance of the Officer's duties under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require.

SECTION 8. TERMINATION OF EMPLOYMENT WITH BANK LIABILITY.

(a) In the event that the Officer's employment with the Bank shall terminate either during the Assurance Period, or prior to the commencement of the Assurance Period but within three months of a Change of Control (as defined in section 10 of this Agreement); PROVIDED, HOWEVER, that if the Officer's employment is terminated prior to the commencement of the Assurance Period, it is reasonably demonstrated by the Officer that such termination of employment was at the request of a third party who has taken steps reasonably calculated to effect such Change of Control or otherwise arose in connection with or anticipation of such Change of Control, on account of:

(i) The Officer's voluntary resignation from employment with the Bank within 90 days following:

(A) the failure of the Board to appoint or re-appoint or elect or re-elect the Officer to serve in the same position in which the Officer was serving on the day before the Assurance Period commenced (or a more senior office);

(B) if the Officer is a member of the Board on the day before the Assurance Period commenced, the failure of the shareholders of the Bank to elect or re-elect the Officer as a member of the Board or the failure of the Board (or the nominating committee thereof) to nominate the Officer for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Officer gives written notice to the Bank of its material failure, whether by amendment of the Bank's Organization Certificate or By-Laws, action

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of the Board or the Bank's shareholders or otherwise, to vest in the Officer the functions, duties, or responsibilities vested in the Officer on the day before the Assurance Period commenced (or the functions, duties and responsibilities of a more senior office to which the Officer may be appointed), unless during such 30-day period, the Bank fully cures such failure;

(D) the failure of the Bank to cure a material breach of this Agreement by the Bank, within 30 days following written notice from the Officer of such material breach;

(E) a reduction in the salary provided to the Officer, or a material reduction in the benefits provided to the Officer under the Bank's program of employee benefits, other than in connection with an across-the-board reduction in salary and benefits uniformly applied to all employees of the Bank and all subsidiaries and affiliates of the Bank, compared with the salary and benefits that were provided to the Officer on the day before the Assurance Period commenced;

(F) a change in the Officer's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Officer's employment with the Bank is terminated by the Bank for any reason other than for "cause" as provided in section 9(a);

then, subject to section 21, the Bank shall provide the benefits and pay to the Officer the amounts described in section 8(b) of this Agreement; PROVIDED, HOWEVER, that if benefits or payments become due hereunder as a result of the Officer's termination of employment prior to the commencement of the Assurance Period, the benefits and payments provided for under section 8(b) of this Agreement shall be determined as though the Officer had remained in the service of the Bank (upon the terms and conditions in effect at the time of her actual termination of service) and had not terminated employment with the Bank until the date on which the Officer's Assurance Period would have commenced.

(b) Upon the termination of the Officer's employment with the Bank under circumstances described in section 8(a) of this Agreement, the Bank shall pay and provide to the Officer (or, in the event of the Officer's death, to the Officer's estate):

(i) the Officer's earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
8(b)) as of the date of the termination of the Officer's employment with the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

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(ii) the benefits, if any, to which the Officer is entitled as a former employee under the employee benefit plans and programs and compensation plans and programs maintained for the benefit of the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
8(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Officer, for the remaining unexpired Assurance Period, coverage equivalent to the coverage to which the Officer would have been entitled under such plans (as in effect on the date of her termination of employment, or, if her termination of employment occurs after a Change of Control, on the date of such Change of Control, whichever benefits are greater) if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employ ment with the Bank;

(iv) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment, in an amount equal to the present value of the salary (which, in the case of an Officer who is compensated in the form of both salary and commissions, shall be equal to the annual average of the total salary and commissions paid to such Officer during the two calendar years prior to such Officer's termination of employment) that the Officer would have earned if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employment with the Bank, where such present value is to be de termined using a discount rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Bank's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which she would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Bank, if the Officer were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period; over

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(B) the present value of the benefits to which she's actually entitled under such defined benefit pension plans as of the date of her termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Officer's termination of employment occurs ("Applicable PBGC Rate");

(vi) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which she would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Bank, as if she were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period and making the maximum amount of employee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Officer under any cash bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Bank if she had continued working for the Bank during the remaining unexpired Assurance Period and had earned the maximum bonus or incentive award in each calendar year that ends during the remaining unexpired Assurance Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Officer under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Officer during each such calendar year at the highest annual rate of salary achieved during the Assurance Period;

such payments to be made (without discounting for early payment) within 30 days following the Officer's termination of employment;

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(viii) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of options or appreciation rights issued to the Officer under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the exer cise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 8(b)(viii), the Officer shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Bank, even if she's not vested under such plan or program; and

(ix) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of any shares awarded to the Officer under any restricted stock plan maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Officer's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 8(b)(ix), the Officer shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Bank, even if she's not vested under such plan.

The Bank and the Officer hereby stipulate that the damages which may be incurred by the Officer following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 8(b) consti tute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Officer's efforts, if any, to mitigate damages. The Bank and the Officer further agree that the Bank may condition the payments and benefits (if any) due under sections 8(b)(iii), (iv), (v), (vi) and
(vi) on the receipt of the Officer's resignation from any and all positions which she holds as an officer, director or committee member with respect to the Bank or any subsidiary or affiliate of the Bank.

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SECTION 9. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.

In the event that the Officer's employment with the Bank shall terminate during the Assurance Period on account of:

(a) the discharge of the Officer for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board determine that the Officer: (i) has willfully and intentionally failed to perform her assigned duties under this Agreement (including for these purposes, the Officer's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with her performance of services for the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to her performance of services for the Bank, as determined by the Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Officer engages in any of the acts described in section 9(a)(i) or (a)(iv) above, the Bank shall provide the Officer with written notice of its intent to discharge the Officer for cause, and the Executive shall have 30 days from the date on which the Officer receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 9 shall require the affirmative vote of at least three-fourths of the members of the Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board shall, by written notice to the Officer, furnish to her a statement of its grounds for proposing to make such determination, during which period the Officer shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board, and to be represented by her legal counsel at such presentations, to refute the grounds for the proposed determination;

(b) the Officer's voluntary resignation from employment with the Bank for reasons other than those specified in section 8(a)(i); or

(c) the death of the Officer while employed by the Bank or the termination of the Officer's employment because of "total and permanent disability" within the meaning of the Bank's long-term disability plan for employees;

then the Bank shall have no further obligations under this Agreement, other than the payment to the Officer of her earned but unpaid salary as of the date of the termination of her employment and the provision of such other benefits, if any, to which she's entitled as a former employee under the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 9, no act or failure to act, on the part of the Officer, shall be considered "willful" unless it is done, or omitted to be done, by the Officer in bad faith or without reasonable belief that the Officer's action or omission was in the best interests of the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the written advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by the Officer in good faith and in the best interests of the Bank. The

-9-

cessation of employment of the Officer shall not be deemed to be for "cause" within the meaning of section 9(a) unless and until there shall have been delivered to the Officer a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Officer and the Officer is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Officer is guilty of the conduct described in section 9(a) above, and specifying the particulars thereof in detail.

SECTION 10. CHANGE OF CONTROL.

(a) A Change of Control of the Bank ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Bank with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Bank; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Bank;

(ii) the acquisition of substantially all of the assets of the Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Bank entitled to vote generally in the election of directors by any person or by any persons acting in concert; or

(iii) a complete liquidation or dissolution of the Bank;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

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(A) individuals who were members of the Board on the date of this Agreement; or

(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such Board, or a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Bank;

(v) any event which would be described in section 10(a)(i),
(ii), (iii) or (iv) if the term "Company" were substituted for the term "Bank" therein and the term "Board of Directors of the Company" were substituted for the term "Board" therein.

For purposes of this section 10(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or any subsidiary of either of them, by the Company, the Bank or any subsidiary of either of them, or by any employee benefit plan maintained by any of them.

(c) In the event of a Change of Control, the term "remaining unexpired Assurance Period" shall mean one year beginning on the effective date of such Change of Control, even if such one-year period extends beyond the date the Officer attains age 68.

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SECTION 11. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Officer's employment during the Assurance Period or thereafter, whether by the Bank or by the Officer, shall have no effect on the rights and obligations of the parties hereto under the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans or such other employee benefit plans or programs, or compensation plans or programs (whether or not employee benefit plans or programs), as may be maintained by, or cover employees of, the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Officer to which the Bank or the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 12. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Officer, her legal representatives and testate or intestate distributees, and the Bank and the Company, their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the respective assets and business of the Bank or the Company may be sold or otherwise transferred. Failure of the Bank to obtain from any successor its express written assumption of the Bank's obligations hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 13. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Officer:

Barbara A. Rudy
23 Olde Wagon Road
Warwick, New York 10990

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If to the Bank or the Company:

The Warwick Savings Bank
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGALS J. MCCLINTOCK, ESQ.

SECTION 14. INDEMNIFICATION AND ATTORNEYS' FEES.

(a) To the extent permitted by the Banking Law of the State of New York, the Bank shall indemnify, hold harmless and defend the Officer against reasonable costs, including legal fees, incurred by the Officer in connection with or arising out of any action, suit or proceed ing in which the Officer may be involved, as a result of the Officer's efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Bank's obligations hereunder shall be conclusive evidence of the Officer's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

(b) The Bank's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against the Officer or others. In no event shall the Officer be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Officer under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Officer obtains other employment. Unless it is determined that a claim made by the Officer was either frivolous or made in bad faith, the Bank agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Officer may reasonably incur as a result of or in connection with her consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Bank, the Officer or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Officer about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable federal rate provided for in section 7872(f)(2)(A) of the Code. This section 14(b) shall

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apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 15. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 16. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 17. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 18. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

SECTION 19. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 20. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

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SECTION 21. REQUIRED REGULATORY PROVISIONS.

The following provisions are included for the purposes of complying with various laws, rules and regulations applicable to the Bank:

(a) Notwithstanding anything herein contained to the contrary, in no event shall the aggregate amount of compensation payable to the Officer under section 8(b) hereof (exclusive of amounts described in section 8(b)(i)) exceed the three times the Officer's average annual total compensation for the last five consecutive calendar years to end prior to her termination of employment with the Bank (or for her entire period of employment with the Bank if less than five calendar years).

(b) Notwithstanding anything herein contained to the contrary, any payments to the Officer by the Bank, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

(c) Notwithstanding anything herein contained to the contrary, if the Officer is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Bank pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in such notice are dismissed, the Bank, in its discretion, may (i) pay to the Officer all or part of the compensation withheld while the Bank's obligations hereunder were suspended and (ii) reinstate, in whole or in part, any of the obligations which were suspended.

(d) Notwithstanding anything herein contained to the contrary, if the Officer is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(4) or (g)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights and obligations of the Bank and the Officer shall not be affected.

(e) Notwithstanding anything herein contained to the contrary, if the Bank is in default (within the meaning of section 3(x)(1) of the FDI Act, 12 U.S.C. ss.1813(x)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the date of default, but vested rights and obligations of the Bank and the Officer shall not be affected.

(f) Notwithstanding anything herein contained to the contrary, all prospective obligations of the Bank hereunder shall be terminated, except to the extent that a continuation of this Agreement is necessary for the continued

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operation of the Bank: (i) by the Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in section 13(c) of the FDI Act, 12 U.S.C. ss.1823(c); (ii) by the FDIC or its designee at the time the FDIC or its designee approves a supervisory merger to resolve problems related to the operation of the Bank or when the Bank is determined by the FDIC to be in an unsafe or unsound condition. The vested rights and obligations of the parties shall not be affected.

SECTION 22. GUARANTY.

The Company hereby irrevocably and unconditionally guarantees to the Officer the payment of all amounts, and the performance of all other obligations, due from the Bank in accordance with the terms of this Agreement as and when due without any requirement of presentment, demand of payment, protest or notice of dishonor or nonpayment.

IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed and the Officer has hereunto set her hand, all as of the day and year first above written.

                                              /s/ Barbara A. Rudy
                                              -------------------------------
                                                  BARBARA A. RUDY


                                              THE WARWICK SAVINGS BANK

Attest:

By /s/ Nancy L. Sobotor-Littell               By /s/ Thomas F. Lawrence, Jr.
   ----------------------------                  ---------------------------
       Nancy L. Sobotor-Littell                      Thomas F. Lawrence, Jr.
       Corporate Secretary                           Director

[Seal]

                                              WARWICK COMMUNITY BANCORP, INC..

Attest:

By /s/ Nancy L. Sobotor-Littell               By /s/ Thomas F. Lawrence, Jr.
   ----------------------------                  ---------------------------
       Nancy L. Sobotor-Littell                      Thomas F. Lawrence, Jr.
       Corporate Secretary                           Director

[Seal]

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STATE OF NEW YORK    )
                     : ss.:
COUNTY OF ORANGE     )

On this 22nd day of December, 1997, before me personally came Barbara A. Rudy, to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that she resides at the address set forth in said instrument, and that she signed her name to the foregoing instrument.

/s/ Lisette D. Cuba
-------------------------
    Notary Public

STATE OF NEW YORK     )
                      : ss.:
COUNTY OF ORANGE      )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of THE WARWICK SAVINGS BANK, the savings bank described in and which executed the foregoing instrument; that he knows the seal of said savings bank; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Directors of said savings bank; and that he signed his name thereto by like authority.

/s/ Lisette D. Cuba
-------------------------
    Notary Public

STATE OF NEW YORK     )
                      : ss.:
COUNTY OF ORANGE      )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order.

/s/ Lisette D. Cuba
-------------------------
    Notary Public

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EXHIBIT 10.8

EMPLOYEE RETENTION AGREEMENT

This EMPLOYEE RETENTION AGREEMENT ("Agreement") is made and entered into as of December 23, 1997, by and among THE WARWICK SAVINGS BANK, a stock savings bank organized and existing under the laws of the state of New York and having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Bank"), WARWICK COMMUNITY BANCORP, INC., a business corporation organized and existing under the laws of the State of Delaware and also having its executive offices at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Company"), and ARTHUR S. ANDERSON, an individual residing at 3 Lester Road, Newburgh, New York 12550 ("Officer").

W I T N E S S E T H :

WHEREAS, effective as of the date of this Agreement, the Bank has converted from a mutual savings bank to a stock savings bank and has become a wholly owned subsidiary of the Company; and

WHEREAS, the Officer currently serves as the Executive Director, Mortgage Department of the Bank and the Bank desires to assure for itself the continued availability of the Officer's services and the ability of the Officer to perform such services with a minium of distraction in the event of a pending or threatened Change of Control (as defined herein); and

WHEREAS, for purposes of securing the Officer's services for the Bank, the Board of Directors of the Bank ("Board") has authorized the proper officers of the Bank to enter into an employee retention agreement with the Officer on the terms and conditions set forth herein, and the Board of Directors of the Company has authorized the Company to guarantee the Bank's obligations under such an employee retention agreement; and

WHEREAS, the Officer is willing to continue to serve the Bank on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the Bank, the Company and the Officer hereby agree as follows:

SECTION 1. EFFECTIVE DATE.

(a) This Agreement shall be effective as of the date first above written and shall remain in effect during the term of this Agreement which shall be for a period of one year commencing on the date of this Agreement, plus such extensions, if any, as are provided pursuant to section 1(b); PROVIDED, HOWEVER, that if the term of this Agreement has not otherwise terminated, the term of this Agreement will terminate on the date of the Officer's termination of employment with the Bank; and PROVIDED, FURTHER, that the obligations under section 8 of this Agreement shall survive the term of this Agreement if payments become due hereunder.


(b) Except as provided in section 1(c) and subject to section
10(c), beginning on the date of this Agreement, the term of this Agreement shall automatically be extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Agreement further by giving written notice thereof to the other party, in which case the term of this Agreement shall end on the first anniversary of the date on which such written notice is given; PROVIDED, HOWEVER, that notwithstanding the foregoing, the term of this Agreement shall end on the last day of the month in which the Officer attains the age of 68. Upon termination of the Officer's employment with the Bank for any reason whatsoever, any daily extensions provided pursuant to this section
1(b), if not theretofore discontinued, shall automatically cease.

(c) Notwithstanding anything herein contained to the contrary:
(i) nothing in this Agreement shall be deemed to prohibit the Bank at any time from terminating the Officer's employment at any time, subject to the terms and conditions of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a continuation of the Officer's employment following the expiration of the Assurance Period upon such terms and conditions as the Bank and the Officer may mutually agree upon.

SECTION 2. ASSURANCE PERIOD.

(a) The assurance period ("Assurance Period") shall be for a period commencing on the date of a Change of Control, as defined in section 10 of this Agreement, and ending on the first anniversary of the date on which the Assurance Period commences, plus such extensions as are provided pursuant to the following sentence. The Assurance Period shall be automatically extended for one additional day each day, unless either the Bank or the Officer elects not to extend the Assurance Period further by giving written notice to the other party, in which case the Assurance Period shall become fixed and shall end on the first anniversary of the date on which such written notice is given.

(b) Upon termination of the Officer's employment with the Bank, any daily extensions provided pursuant to the preceding sentence, if not theretofore discontinued, shall cease and the remaining unexpired Assurance Period under this Agreement shall be a fixed period ending on the later of the first anniversary of the date of the Change of Control, as defined in section 10 of this Agreement, or the first anniversary of the date on which the daily extensions were discontinued.

SECTION 3. DUTIES.

During the period of the Officer's employment that falls within the Assurance Period, the Officer shall: (a) except to the extent allowed under section 6 of this Agreement, devote his full business time and attention (other than during weekends, holidays, vacation per iods, and periods of illness, disability or approved leave of absence) to the business and affairs of the Bank and use his best efforts to advance the Bank's interests; (b) serve in the position to which the Officer is appointed by the Bank, which, during the Assurance Period, shall be the position that the Officer held on the day before the Assurance Period commenced or any higher office at the Bank to which he may subsequently be appointed; and (c) subject to the direction of the Board

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and the By-Laws of the Bank, have such functions, duties, responsibilities and authority commonly associated with such position.

SECTION 4. COMPENSATION.

In consideration for the services rendered by the Officer during the Assurance Period, the Bank shall pay to the Officer during the Assurance Period a salary at an annual rate equal to the greater of:

(a) the annual rate of salary in effect for the Officer on the day before the Assurance Period commenced; or

(b) such higher annual rate as may be prescribed by or under the authority of the Board;

PROVIDED, HOWEVER, that in no event shall the Officer's annual rate of salary under this Agreement in effect at a particular time during the Assurance Period be reduced without the Officer's prior written consent. The annual salary payable under this section 4 shall be subject to review at least once annually and shall be paid in approximately equal installments in accordance with the Bank's customary payroll practices. Nothing in this section 4 shall be deemed to prevent the Officer from receiving additional compensation other than salary for his services to the Bank, or additional compensation for his services to the Company, upon such terms and conditions as may be prescribed by or under the authority of the Board or the Board of Directors of the Company.

SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

Except as otherwise provided in this Agreement, the Officer shall, during the Assurance Period, be treated as an employee of the Bank and be eligible to participate in and re ceive benefits under group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans, and such other employee benefit plans and programs, including, but not limited to, any incentive compensation plans or programs (whether or not employee benefit plans or programs), any stock option and appreciation rights plan, employee stock ownership plan and restricted stock plan, as may from time to time be maintained by, or cover employees of, the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and with the Bank's customary practices.

SECTION 6. BOARD MEMBERSHIPS.

The Officer may serve as a member of the boards of directors of such business, community and charitable organizations as he may disclose to and as may be approved by the Board (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such service shall not materially interfere with the performance of his duties under this Agreement. The Officer may also engage in personal business and investment activities which do not materially interfere with the performance of his duties hereunder; PROVIDED, HOWEVER, that such activities are

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not prohibited under any code of conduct or investment or securities trading policy established by the Bank and generally applicable to all similarly situated Officers.

SECTION 7. WORKING FACILITIES AND EXPENSES.

During the Assurance Period, the Officer's principal place of employment shall be at the Bank's executive offices at the address first above written, or at such other location within 50 miles of the address at which the Bank shall maintain its principal executive offices, or at such other location as the Bank and the Officer may mutually agree upon. The Bank shall provide the Officer, at his principal place of employment, with a private office, stenographic services and oth er support services and facilities suitable to his position with the Bank and necessary or appropri ate in connection with the performance of his assigned duties under this Agreement. The Bank shall reimburse the Officer for his ordinary and necessary business expenses, including, without limitation, the Officer's travel and entertainment expenses, incurred in connection with the perfor mance of the Officer's duties under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require.

SECTION 8. TERMINATION OF EMPLOYMENT WITH BANK LIABILITY.

(a) In the event that the Officer's employment with the Bank shall terminate either during the Assurance Period, or prior to the commencement of the Assurance Period but within three months of a Change of Control (as defined in section 10 of this Agreement); PROVIDED, HOWEVER, that if the Officer's employment is terminated prior to the commencement of the Assurance Period, it is reasonably demonstrated by the Officer that such termination of employment was at the request of a third party who has taken steps reasonably calculated to effect such Change of Control or otherwise arose in connection with or anticipation of such Change of Control, on account of:

(i) The Officer's voluntary resignation from employment with the Bank within 90 days following:

(A) the failure of the Board to appoint or re-appoint or elect or re-elect the Officer to serve in the same position in which the Officer was serving on the day before the Assurance Period commenced (or a more senior office);

(B) if the Officer is a member of the Board on the day before the Assurance Period commenced, the failure of the shareholders of the Bank to elect or re-elect the Officer as a member of the Board or the failure of the Board (or the nominating committee thereof) to nominate the Officer for such election or re-election;

(C) the expiration of a 30-day period following the date on which the Officer gives written notice to the Bank of its material failure, whether by amendment of the Bank's Organization Certificate or By-Laws, action

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of the Board or the Bank's shareholders or otherwise, to vest in the Officer the functions, duties, or responsibilities vested in the Officer on the day before the Assurance Period commenced (or the functions, duties and responsibilities of a more senior office to which the Officer may be appointed), unless during such 30-day period, the Bank fully cures such failure;

(D) the failure of the Bank to cure a material breach of this Agreement by the Bank, within 30 days following written notice from the Officer of such material breach;

(E) a reduction in the salary provided to the Officer, or a material reduction in the benefits provided to the Officer under the Bank's program of employee benefits, other than in connection with an across-the-board reduction in salary and benefits uniformly applied to all employees of the Bank and all subsidiaries and affiliates of the Bank, compared with the salary and benefits that were provided to the Officer on the day before the Assurance Period commenced;

(F) a change in the Officer's principal place of employment for a distance in excess of 50 miles from the Bank's principal office in Warwick, New York; or

(ii) the Officer's employment with the Bank is terminated by the Bank for any reason other than for "cause" as provided in section 9(a);

then, subject to section 21, the Bank shall provide the benefits and pay to the Officer the amounts described in section 8(b) of this Agreement; PROVIDED, HOWEVER, that if benefits or payments become due hereunder as a result of the Officer's termination of employment prior to the commencement of the Assurance Period, the benefits and payments provided for under section 8(b) of this Agreement shall be determined as though the Officer had remained in the service of the Bank (upon the terms and conditions in effect at the time of his actual termination of service) and had not terminated employment with the Bank until the date on which the Officer's Assurance Period would have commenced.

(b) Upon the termination of the Officer's employment with the Bank under circumstances described in section 8(a) of this Agreement, the Bank shall pay and provide to the Officer (or, in the event of the Officer's death, to the Officer's estate):

(i) the Officer's earned but unpaid salary (including, without limitation, all items which constitute wages under applicable law and the payment of which is not otherwise provided for in this section
8(b)) as of the date of the termination of the Officer's employment with the Bank, such payment to be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than 30 days after termination of employment;

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(ii) the benefits, if any, to which the Officer is entitled as a former employee under the employee benefit plans and programs and compensation plans and programs maintained for the benefit of the Bank's officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance benefits, in addition to that provided pursuant to section
8(b)(ii), and after taking into account the coverage provided by any subsequent employer, if and to the extent necessary to provide for the Officer, for the remaining unexpired Assurance Period, coverage equivalent to the coverage to which the Officer would have been entitled under such plans (as in effect on the date of his termination of employment, or, if his termination of employment occurs after a Change of Control, on the date of such Change of Control, whichever benefits are greater) if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employ ment with the Bank;

(iv) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment, in an amount equal to the present value of the salary (which, in the case of an Officer who is compensated in the form of both salary and commissions, shall be equal to the annual average of the total salary and commissions paid to such Officer during the two calendar years prior to such Officer's termination of employment) that the Officer would have earned if the Officer had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Officer's period of actual employment with the Bank, where such present value is to be de termined using a discount rate equal to the applicable short-term federal rate prescribed under section 1274(d) of the Internal Revenue Code of 1986, as amended ("Code"), compounded using the compounding periods corresponding to the Bank's regular payroll periods for its officers, such lump sum to be paid in lieu of all other payments of salary provided for under this Agreement in respect of the period following any such termination;

(v) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the excess, if any, of:

(A) the present value of the aggregate benefits to which he would be entitled under The Warwick Savings Bank Defined Benefit Pension Plan (together with the defined benefit portion of the Benefit Restoration Plan of The Warwick Savings Bank and any other supplemental defined benefit plan) and any and all other qualified and non-qualified defined benefit pension plans maintained by, or covering employees of, the Bank, if the Officer were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period; over

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(B) the present value of the benefits to which he is actually entitled under such defined benefit pension plans as of the date of his termination;

where such present values are to be determined using the mortality tables prescr ibed under section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly equal to the annualized rate of interest prescribed by the Pension Benefit Guaranty Corporation for the valuation of immediate annuities payable under terminating single-employer defined benefit plans for the month in which the Officer's termination of employment occurs ("Applicable PBGC Rate");

(vi) within 30 days following the Officer's termination of employment with the Bank, a lump sum payment in an amount equal to the present value of the additional employer contributions to which he would have been entitled under The Warwick Savings Bank 401(k) Savings Plan, the Employee Stock Ownership Plan of Warwick Community Bancorp, Inc. (together with the defined contribution portion of the Benefit Restoration Plan of The Warwick Savings Bank or any other supplemental defined contribution plan) and any and all other qualified and non-qualified defined contribution plans maintained by, or covering employees of, the Bank, as if he were 100% vested thereunder and had continued working for the Bank during the remaining unexpired Assurance Period at the highest annual rate of salary achieved during the Assurance Period and making the maximum amount of employee contributions, if any, required under such plan or plans, such present value to be determined on the basis of a discount rate, compounded using the compounding period that corresponds to the frequency with which employer contributions are made to the relevant plan, equal to the Applicable PBGC Rate;

(vii) the payments that would have been made to the Officer under any cash bonus or long-term or short-term cash incentive compensation plan maintained by, or covering employees of, the Bank if he had continued working for the Bank during the remaining unexpired Assurance Period and had earned the maximum bonus or incentive award in each calendar year that ends during the remaining unexpired Assurance Period, such payments to be equal to the product of:

(A) the maximum percentage rate at which an award was ever available to the Officer under such incentive compensation plan; multiplied by

(B) the salary that would have been paid to the Officer during each such calendar year at the highest annual rate of salary achieved during the Assurance Period;

such payments to be made (without discounting for early payment) within 30 days following the Officer's termination of employment;

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(viii) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of options or appreciation rights issued to the Officer under any stock option and appreciation rights plan or program maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the excess of (I) the fair market value of a share of stock of the same class as the stock subject to the option or appreciation right, determined as of the date of termination of employment, over (II) the exer cise price per share for such option or appreciation right, as specified in or under the relevant plan or program; multiplied by

(B) the number of shares with respect to which options or appreciation rights are being surrendered.

For purposes of this section 8(b)(viii), the Officer shall be deemed fully vested in all options and appreciation rights under any stock option or appreciation rights plan or program maintained by, or covering employees of, the Bank, even if he is not vested under such plan or program; and

(ix) at the election of the Bank made within 30 days following the occurrence of the event described in section 8(a), upon the surrender of any shares awarded to the Officer under any restricted stock plan maintained by, or covering employees of, the Bank, a lump sum payment in an amount equal to the product of:

(A) the fair market value of a share of stock of the same class of stock granted under such plan, determined as of the date of the Officer's termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 8(b)(ix), the Officer shall be deemed fully vested in all shares awarded under any restricted stock plan maintained by, or covering employees of, the Bank, even if he is not vested under such plan.

The Bank and the Officer hereby stipulate that the damages which may be incurred by the Officer following any such termination of employment are not capable of accurate measurement as of the date first above written and that the payments and benefits contemplated by this section 8(b) consti tute reasonable damages under the circumstances and shall be payable without any requirement of proof of actual damage and without regard to the Officer's efforts, if any, to mitigate damages. The Bank and the Officer further agree that the Bank may condition the payments and benefits (if any) due under sections 8(b)(iii), (iv), (v), (vi) and
(vi) on the receipt of the Officer's resignation from any and all positions which he holds as an officer, director or committee member with respect to the Bank or any subsidiary or affiliate of the Bank.

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SECTION 9. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.

In the event that the Officer's employment with the Bank shall terminate during the Assurance Period on account of:

(a) the discharge of the Officer for "cause," which, for purposes of this Agreement, shall mean a discharge because the Board determine that the Officer: (i) has willfully and intentionally failed to perform his assigned duties under this Agreement (including for these purposes, the Officer's inability to perform such duties as a result of drug or alcohol dependency); (ii) has willfully and intentionally engaged in dishonest or illegal conduct in connection with his performance of services for the Bank or has been convicted of a felony; (iii) has willfully violated, in any material respect, any law, rule, regulation, written agreement or final cease-and-desist order with respect to his performance of services for the Bank, as determined by the Board; or (iv) has willfully and intentionally breached the material terms of this Agreement; PROVIDED, HOWEVER, that, if the Officer engages in any of the acts described in section 9(a)(i) or (a)(iv) above, the Bank shall provide the Officer with written notice of its intent to discharge the Officer for cause, and the Executive shall have 30 days from the date on which the Officer receives such notice to cure any such acts; AND PROVIDED, FURTHER, that on and after the date that a Change of Control occurs, a determination under this section 9 shall require the affirmative vote of at least three-fourths of the members of the Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board shall, by written notice to the Officer, furnish to him a statement of its grounds for proposing to make such determination, during which period the Officer shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board, and to be represented by his legal counsel at such presentations, to refute the grounds for the proposed determination;

(b) the Officer's voluntary resignation from employment with the Bank for reasons other than those specified in section 8(a)(i); or

(c) the death of the Officer while employed by the Bank or the termination of the Officer's employment because of "total and permanent disability" within the meaning of the Bank's long-term disability plan for employees;

then the Bank shall have no further obligations under this Agreement, other than the payment to the Officer of his earned but unpaid salary as of the date of the termination of his employment and the provision of such other benefits, if any, to which he is entitled as a former employee under the Bank's employee benefit plans and programs and compensation plans and programs. For purposes of this section 9, no act or failure to act, on the part of the Officer, shall be considered "willful" unless it is done, or omitted to be done, by the Officer in bad faith or without reasonable belief that the Officer's action or omission was in the best interests of the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the written advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by the Officer in good faith and in the best interests of the Bank. The cessation of

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employment of the Officer shall not be deemed to be for "cause" within the meaning of section 9(a) unless and until there shall have been delivered to the Officer a copy of a resolution duly adopted by the affirmative vote of three-fourths of the members of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Officer and the Officer is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Officer is guilty of the conduct described in section 9(a) above, and specifying the particulars thereof in detail.

SECTION 10. CHANGE OF CONTROL.

(a) A Change of Control of the Bank ("Change of Control") shall be deemed to have occurred upon the happening of any of the following events:

(i) the reorganization, merger or consolidation of the Bank with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Bank; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Bank;

(ii) the acquisition of substantially all of the assets of the Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Bank entitled to vote generally in the election of directors by any person or by any persons acting in concert; or

(iii) a complete liquidation or dissolution of the Bank;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

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(A) individuals who were members of the Board on the date of this Agreement; or

(B) individuals who first became members of the Board after the date of this Agreement either:

(1) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such Board, or a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Bank;

(v) any event which would be described in section 10(a)(i),
(ii), (iii) or (iv) if the term "Company" were substituted for the term "Bank" therein and the term "Board of Directors of the Company" were substituted for the term "Board" therein.

For purposes of this section 10(a), the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or any subsidiary of either of them, by the Company, the Bank or any subsidiary of either of them, or by any employee benefit plan maintained by any of them.

(c) In the event of a Change of Control, the term "remaining unexpired Assurance Period" shall mean one year beginning on the effective date of such Change of Control, even if such one-year period extends beyond the date the Officer attains age 68.

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SECTION 11. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Officer's employment during the Assurance Period or thereafter, whether by the Bank or by the Officer, shall have no effect on the rights and obligations of the parties hereto under the Bank's qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans or such other employee benefit plans or programs, or compensation plans or programs (whether or not employee benefit plans or programs), as may be maintained by, or cover employees of, the Bank from time to time; PROVIDED, HOWEVER, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Officer to which the Bank or the Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

SECTION 12. SUCCESSORS AND ASSIGNS.

This Agreement will inure to the benefit of and be binding upon the Officer, his legal representatives and testate or intestate distributees, and the Bank and the Company, their respective successors and assigns, including any successor by merger or consolidation or a statu tory receiver or any other person or firm or corporation to which all or substantially all of the respective assets and business of the Bank or the Company may be sold or otherwise transferred. Failure of the Bank to obtain from any successor its express written assumption of the Bank's obligations hereunder at least 60 days in advance of the scheduled effective date of any such succession shall be deemed a material breach of this Agreement.

SECTION 13. NOTICES.

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one such party may by written notice specify to the other party:

If to the Officer:

Arthur S. Anderson
3 Lester Road
Newburgh, New York 12550

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If to the Bank or the Company:

The Warwick Savings Bank
18 Oakland Avenue
Warwick, New York 10990-0591

Attention: PRESIDENT

WITH A COPY TO:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048

Attention: DOUGALS J. MCCLINTOCK, ESQ.

SECTION 14. INDEMNIFICATION AND ATTORNEYS' FEES.

(a) To the extent permitted by the Banking Law of the State of New York, the Bank shall indemnify, hold harmless and defend the Officer against reasonable costs, including legal fees, incurred by the Officer in connection with or arising out of any action, suit or proceed ing in which the Officer may be involved, as a result of the Officer's efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Bank's obligations hereunder shall be conclusive evidence of the Officer's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise.

(b) The Bank's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against the Officer or others. In no event shall the Officer be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Officer under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Officer obtains other employment. Unless it is determined that a claim made by the Officer was either frivolous or made in bad faith, the Bank agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Officer may reasonably incur as a result of or in connection with his consultation with legal counsel or arising out of any action, suit, proceeding or contest (regardless of the outcome thereof) by the Bank, the Officer or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Officer about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable federal rate provided for in section 7872(f)(2)(A) of the Code. This section 14(b) shall

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apply whether such consultation, action, suit, proceeding or contest arises before, on, after or as a result of a Change of Control.

SECTION 15. SEVERABILITY.

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

SECTION 16. WAIVER.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

SECTION 17. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

SECTION 18. GOVERNING LAW.

Except to the extent preempted by federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and to be performed entirely within the State of New York.

SECTION 19. HEADINGS AND CONSTRUCTION.

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

SECTION 20. ENTIRE AGREEMENT; MODIFICATIONS.

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or rep resentations relating to the subject matter hereof. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

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SECTION 21. REQUIRED REGULATORY PROVISIONS.

The following provisions are included for the purposes of complying with various laws, rules and regulations applicable to the Bank:

(a) Notwithstanding anything herein contained to the contrary, in no event shall the aggregate amount of compensation payable to the Officer under section 8(b) hereof (exclusive of amounts described in section 8(b)(i)) exceed the three times the Officer's average annual total compensation for the last five consecutive calendar years to end prior to his termination of employment with the Bank (or for his entire period of employment with the Bank if less than five calendar years).

(b) Notwithstanding anything herein contained to the contrary, any payments to the Officer by the Bank, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.

(c) Notwithstanding anything herein contained to the contrary, if the Officer is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Bank pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in such notice are dismissed, the Bank, in its discretion, may (i) pay to the Officer all or part of the compensation withheld while the Bank's obligations hereunder were suspended and (ii) reinstate, in whole or in part, any of the obligations which were suspended.

(d) Notwithstanding anything herein contained to the contrary, if the Officer is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. ss.1818(e)(4) or (g)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights and obligations of the Bank and the Officer shall not be affected.

(e) Notwithstanding anything herein contained to the contrary, if the Bank is in default (within the meaning of section 3(x)(1) of the FDI Act, 12 U.S.C. ss.1813(x)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the date of default, but vested rights and obligations of the Bank and the Officer shall not be affected.

(f) Notwithstanding anything herein contained to the contrary, all prospective obligations of the Bank hereunder shall be terminated, except to the extent that a continuation of this Agreement is necessary for the continued

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operation of the Bank: (i) by the Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in section 13(c) of the FDI Act, 12 U.S.C. ss.1823(c); (ii) by the FDIC or its designee at the time the FDIC or its designee approves a supervisory merger to resolve problems related to the operation of the Bank or when the Bank is determined by the FDIC to be in an unsafe or unsound condition. The vested rights and obligations of the parties shall not be affected.

SECTION 22. GUARANTY.

The Company hereby irrevocably and unconditionally guarantees to the Officer the payment of all amounts, and the performance of all other obligations, due from the Bank in accordance with the terms of this Agreement as and when due without any requirement of presentment, demand of payment, protest or notice of dishonor or nonpayment.

IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed and the Officer has hereunto set his hand, all as of the day and year first above written.

                                               /s/ Arthur S. Anderson
                                               --------------------------------
                                                   ARTHUR S. ANDERSON


                                               THE WARWICK SAVINGS BANK

Attest:

By /s/ Nancy L. Sobotor-Littell                By /s/ Thomas F. Lawrence, Jr.
   ----------------------------                   -----------------------------
       Nancy L. Sobotor-Littell                       Thomas F. Lawrence, Jr.
       Corporate Secretary                            Director

[Seal]

                                               WARWICK COMMUNITY BANCORP, INC..

Attest:

By /s/ Nancy L. Sobotor-Littell                By /s/ Thomas F. Lawrence, Jr.
   ----------------------------                   -----------------------------
       Nancy L. Sobotor-Littell                       Thomas F. Lawrence, Jr.
       Corporate Secretary                            Director

[Seal]

-16-

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 22nd day of December, 1997, before me personally came Arthur S. Anderson to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at the address set forth in said instrument, and that he signed his name to the foregoing instrument.

/s/ Lisette D. Cuba
---------------------------
    Notary Public

STATE OF NEW YORK       )
                        : ss.:
COUNTY OF ORANGE        )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., to me known, who, being by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of THE WARWICK SAVINGS BANK, the savings bank described in and which executed the foregoing instrument; that he knows the seal of said savings bank; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Directors of said savings bank; and that he signed his name thereto by like authority.

/s/ Lisette D. Cuba
---------------------------
    Notary Public

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 22nd day of December, 1997, before me personally came Thomas F. Lawrence, Jr., by me duly sworn, did depose and say that he resides at 82 Maple Avenue, Warwick, New York 10990, that he is a member of the Board of Directors of WARWICK COMMUNITY BANCORP, INC., the Delaware corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corpora tion; and that he signed his name thereto by like order.

/s/ Lisette D. Cuba
---------------------------
    Notary Public

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TRUST AGREEMENT

BETWEEN

WARWICK COMMUNITY BANCORP, INC.

AND

ORANGE COUNTY TRUST COMPANY

FOR THE

RECOGNITION AND RETENTION PLAN
OF WARWICK COMMUNITY BANCORP, INC.


ENTERED INTO AS OF JUNE 24, 1998


TABLE OF CONTENTS

                                                                      Page
                                                                      ----
                              ARTICLE I

                             TRUST FUND

SECTION 1.1       TRUST FUND.............................................1
SECTION 1.2       COLLECTION OF CONTRIBUTIONS............................2
SECTION 1.3       NON-DIVERSION OF FUNDS.................................2

                          ARTICLE II

                 INVESTMENT AND ADMINISTRATION

SECTION 2.1       IN GENERAL.............................................2
SECTION 2.2       LIQUIDITY..............................................2
SECTION 2.3       TRUSTEE'S ADMINISTRATIVE AUTHORITY.....................3
SECTION 2.4       INVESTMENT DECISIONS...................................4
SECTION 2.5       EXERCISE OF VOTING RIGHTS WITH RESPECT TO SHARES.......5
SECTION 2.6       RESPONSE TO TENDER OFFERS AND SIMILAR EVENTS...........5

                          ARTICLE III

                     TRUSTEE AND COMMITTEE

SECTION 3.1       COMMITTEE..............................................6
SECTION 3.2       TRUSTEE'S RELIANCE.....................................6
SECTION 3.3       LEGAL COUNSEL..........................................6
SECTION 3.4       LIABILITY UNDER THE PLAN...............................7
SECTION 3.5       INDEMNIFICATION........................................7

                          ARTICLE IV

               DISTRIBUTIONS FROM THE TRUST FUND

SECTION 4.1       IN GENERAL.............................................7
SECTION 4.2       DIRECTION BY THE COMMITTEE.............................7
SECTION 4.3       METHOD OF PAYMENT......................................8

ARTICLE V

TRUSTEE'S ACCOUNTS

SECTION 5.1 ACCOUNTS...............................................8

(i)

                                                                      Page
                                                                      ----

SECTION 5.2       VALUATION OF TRUST FUND................................8
SECTION 5.3       REPORTS TO THE COMMITTEE...............................8
SECTION 5.4       RIGHT OF JUDICIAL SETTLEMENT...........................9
SECTION 5.5       ENFORCEMENT OF AGREEMENT...............................9

                          ARTICLE VI

                TAXES; COMPENSATION OF TRUSTEE

SECTION 6.1       TAXES.................................................10
SECTION 6.2       COMPENSATION OF TRUSTEE; EXPENSES.....................10

                          ARTICLE VII

              RESIGNATION AND REMOVAL OF TRUSTEE

SECTION 7.1       RESIGNATION OR REMOVAL OF TRUSTEE.....................10
SECTION 7.2       APPOINTMENT OF SUCCESSOR..............................10
SECTION 7.3       SUCCESSION............................................11
SECTION 7.4       SUCCESSOR BOUND BY AGREEMENT..........................11

                         ARTICLE VIII

                   AMENDMENT AND TERMINATION

SECTION 8.1       AMENDMENT AND TERMINATION.............................11

                          ARTICLE IX

                         MISCELLANEOUS

SECTION 9.1       BINDING EFFECT; ASSIGNABILITY.........................12
SECTION 9.2       GOVERNING LAW.........................................12
SECTION 9.3       NOTICES...............................................12
SECTION 9.4       SEVERABILITY..........................................13
SECTION 9.5       WAIVER................................................13
SECTION 9.6       NON-ALIENATION........................................13
SECTION 9.7       COMPLIANCE WITH SECURITIES LAWS.......................13
SECTION 9.8       HEADINGS..............................................14
SECTION 9.9       CONSTRUCTION OF LANGUAGE..............................14
SECTION 9.10      COUNTERPARTS..........................................14

(ii)

TRUST AGREEMENT

FOR THE

RECOGNITION AND RETENTION PLAN
OF WARWICK COMMUNITY BANCORP, INC.

This TRUST AGREEMENT ("Agreement") is made as of June 24, 1998, by and between WARWICK COMMUNITY BANCORP, INC., a business corporation organized under the laws of the State of Delaware and having its executive offices at 18 Oakland Avenue, Warwick, New York 10991-0591 ("Company"), and ORANGE COUNTY TRUST COMPANY, a New York chartered banking corporation with a principal place of business at 75 North Street, Middletown, New York 10940 ("Trustee").

W I T N E S S E T H :

WHEREAS, the Company has, by action of its Board of Directors, adopted the Recognition and Retention Plan of Warwick Community Bancorp, Inc. (the "Plan") to promote the growth and profitability of the Company and to provide certain key executives and directors ("Participants") of the Company with an incentive to achieve corporate objectives, to attract and retain key executives and directors of outstanding competence and to provide such executives and directors with an equity interest in the Company; and

WHEREAS, the Company has, in accordance with the terms of the Plan, appointed a Compensation Committee ("Committee") to administer the Plan; and

WHEREAS, the Plan contemplates the establishment and continuance of a trust so long as the Plan remains in effect, to which contributions will be made from time to time, to be accepted, invested and maintained in accordance with this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Trustee hereby agree as follows:

ARTICLE I

TRUST FUND

SECTION 1.1 TRUST FUND.

The Company hereby establishes with the Trustee a trust, pursuant to the Plan, in which shall be deposited such common stock, par value $0.01 per share, of Warwick Community Bancorp, Inc. ("Shares") and such sums of money as shall from time to time be paid or delivered to or deposited with the Trustee by or with the approval of the Company in accordance with terms of the Plan. All such Shares and all such sums of money, all investments and reinvestments


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thereof and all earnings, appreciation and additions allocable thereto, less losses, depreciation and expenses allocable thereto and any payments made therefrom as authorized under the Plan or this Agreement shall constitute the "Trust Fund." The Trust Fund shall be held, managed and admini stered by the Trustee, IN TRUST, and dealt with in accordance with the provisions of this Agree ment and in accordance with any funding policy or guidelines established under the Plan that are communicated in writing to the Trustee.

SECTION 1.2 COLLECTION OF CONTRIBUTIONS.

The Trustee shall have no authority over and shall have no responsibility for the administration of the Plan or for the collection of any contributions to the Trust Fund required under the Plan, nor shall it have any authority to bring any action or proceeding to enforce the collection of any such amount or to make inquiry as to whether any such contributions received by it were properly collected or computed in accordance with the terms of the Plan.

SECTION 1.3 NON-DIVERSION OF FUNDS.

Notwithstanding anything to the contrary contained in this Agreement or any amendment hereto, no part of the Trust Fund other than such part as may be used to defray expenses and taxes properly charged to the Trust Fund under the Plan or this Agreement shall be used for or diverted to purposes other than for the exclusive benefit of Participants and their beneficiaries prior to the satisfaction of all of the Company's liabilities under the Plan.

ARTICLE II

INVESTMENT AND ADMINISTRATION

SECTION 2.1 IN GENERAL.

The Trust Fund shall be held by the Trustee and shall be invested and reinvested as hereinafter provided in this Article II, without distinction between principal and income and without regard to the restrictions of the laws of the State of New York, or of any other jurisdiction, relating to the investment of trust funds. The Trust Fund shall be invested pursuant to directions given in accordance with section 2.4.

SECTION 2.2 LIQUIDITY.

Notwithstanding any provisions of this Article II to the contrary, the Trustee, in its sole discretion or as the Committee shall request, may retain uninvested cash or cash balances, and sell, to provide cash or cash balances, such investments in whatever portion of the Trust Fund that it may deem advisable, without being required to pay interest thereon. Pending investment, the Trustee, in its sole discretion, may temporarily invest any funds held or received by it for invest ment in investment grade commercial paper rated A-1 or P-1 or in obligations of, or guaranteed by, the United States government or any of its agencies.


-3-

SECTION 2.3 TRUSTEE'S ADMINISTRATIVE AUTHORITY.

(a) In addition to and not by way of limitation of any other powers conferred upon the Trustee by law or by other provisions of this Agreement, but subject to the provisions of section 1.3 and this Article II, the Trustee is authorized and empowered:

(i) to sell, exchange, convey, transfer or dispose of and also to grant options with respect to any property, whether real or personal, at any time held by it, and any sale may be made by private contract or by public auction, and for cash or upon credit, or partly for cash and partly upon credit, and no person dealing with the Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency or propriety of any such sale or other disposition;

(ii) to retain, manage, operate, repair and rehabilitate and to mortgage or lease for any period any real estate held by it and, in its discretion, cause to be formed any corporation or trust to hold title to any such real property;

(iii) unless otherwise agreed to and subject to section 2.5, to vote in person or by proxy on any stocks, bonds, or other securities held by it, to exercise any options appurtenant to any stocks, bonds or other securities for the conversion thereof into other stocks, bonds or securities, or to exercise any rights to subscribe for additional stocks, bonds or other securities and to make any and all necessary payment therefor and to enter into any voting trust;

(iv) with respect to any investment, to join in, dissent from, or oppose any action or inaction of any corporation, or of the directors, officers or stockholders of any corporation, including, without limitation, any reorganization, recapitalization, consolidation, liquidation, sale or merger;

(v) to settle, adjust, compromise, or submit to arbitration any claims, debts or damages due or owing to or from the Trust Fund; and

(vi) to deposit any property with any protective, reorganization or similar committee, to delegate power thereto and to pay and agree to pay part of its expenses and compensation and any assessments levied with respect to any property so deposited.

In exercising such powers with respect to any portion of the Trust Fund that is invested in the discretion of the Trustee pursuant to section 2.2, the Trustee shall act in its discretion.


-4-

(b) In addition to and not by way of limitation of any other powers conferred upon the Trustee by law or other provisions of this Agreement, but subject to section 1.3 and this Article II, the Trustee is authorized and empowered, in its discretion:

(i) to commence or defend suits or legal proceedings, and to represent the Trust Fund in all suits or legal proceedings in any court or before any other body or tribunal;

(ii) to register securities in its name or in the name of any nominee or nominees with or without indication of the capacity in which the securities shall be held, or to hold securities in bearer form, but the books and records of the Trustee shall at all times show that such investments are part of the Trust Fund;

(iii) to borrow or raise moneys for the purposes of the Trust Fund from any lender, except the Trustee in its individual capacity, and for any sum so borrowed to issue its promissory note as Trustee and to secure the repayment thereof by pledging all or any part of the Trust Fund, and no person lending money to the Trustee shall be bound to see the application of the money loaned or to inquire into the validity, expediency or propriety of any such borrowing;

(iv) to make distributions in cash or in Shares upon the direction of the Committee;

(v) to employ such agents, counsel and accountants as the Trustee shall deem advisable and to pay their reasonable expenses and compensation;

(vi) to make, execute, acknowledge, and deliver any and all deeds, leases, assignments and instruments; and

(vii) generally to do all acts which the Trustee may deem necessary or desirable for the administration and protection of the Trust Fund.

SECTION 2.4 INVESTMENT DECISIONS.

The Trustee shall invest and reinvest the Trust Fund in accordance with the directions of the Committee. The Trustee shall be under no duty or obligation to review any investment to be acquired, held or disposed of pursuant to directions of the Committee nor to make any recommendation with respect to the disposition or continued retention of any such investment. The Trustee shall have no liability or responsibility for its actions or inaction pursuant to the direction of, or its failure to act in the absence of directions from, the Committee. The Company hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim


-5-

or liability which may be asserted against the Trustee by reason of any action or inaction by it pursuant to a direction by the Committee or failing to act in the absence of any such direction. To the extent that the Committee does not furnish directions as to the investment of any portion of the Trust Fund that is subject to its direction, the Trustee shall invest and reinvest the Trust Fund
(a) in Shares and (b) to the extent that it is not practicable to invest and reinvest the Trust Fund in Shares, in any savings account, time or other interest bearing deposit or in any other interest bearing obligation of any one or more savings banks, savings and loan associations, banks and other financial institutions, or any of them, including the Trustee and any subsidiary of the Company.

SECTION 2.5 EXERCISE OF VOTING RIGHTS WITH RESPECT TO SHARES.

(a) Except to the extent provided in section 2.5(b), the Committee shall direct the Trustee as to the manner of exercise of voting rights appurtenant to Shares held in the Trust Fund. The Trustee shall act in accordance with the directions that it receives from the Committee for each matter as to which voting rights are to be exercised and shall refrain from exercising the voting rights appurtenant to Shares held in the Trust Fund in the absence of such directions. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with such directions, or for its failure to exercise such voting rights in the absence of such directions.

(b) Notwithstanding section 2.5(a), if and to the extent requested in writing by the Committee, the Trustee shall solicit and accept directly from Participants directions as to the manner of exercise of any voting rights in connection with Shares held in the Trust Fund. In such event, the Trustee shall act in accordance with the directions that it receives from each Participant for each matter as to which voting rights are to be exercised and shall refrain from exercising such voting rights in the absence of directions as to how to exercise such voting rights. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with such directions, or for its failure to exercise such voting rights in the absence of such directions.

SECTION 2.6 RESPONSE TO TENDER OFFERS AND SIMILAR EVENTS.

(a) Except to the extent provided in section 2.6(b), the Committee shall direct the Trustee as to the manner of exercise of any rights to tender Shares held in the Trust Fund or otherwise act in response to any tender offer with respect to Shares or any other offer to purchase, exchange, redeem or otherwise transfer such Shares. The Trustee shall act in accordance with the directions that it receives from the Committee for each matter as to which such rights are to be exercised and shall refrain from taking any action in response to such an offer in the absence of such directions. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with such directions, or for its failure to exercise such rights in the absence of such directions.

(b) Notwithstanding section 2.6(a), if and to the extent requested in writing by the Committee, the Trustee shall solicit and accept directly from Participants directions as to the


-6-

manner of exercise of any rights to tender Shares held in the Trust Fund or otherwise act in response to any tender offer with respect to such Shares or any other offer to purchase, exchange, redeem or otherwise transfer such Shares. In such event, the Trustee shall act in accordance with the directions that it receives from each Participant for each matter as to which rights are to be exercised and shall refrain from taking any actions in response to such an offer in the absence of such directions. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with such directions, or for its failure to exercise such rights in the absence of such directions.

ARTICLE III

TRUSTEE AND COMMITTEE

SECTION 3.1 COMMITTEE.

The Company shall certify to the Trustee the names and specimen signatures of the members of the Committee appointed by the Company to administer the Plan and give directions to the Trustee. Such certification shall include directions as to the number of signatures required for any communication or direction to the Trustee. The Company shall promptly give notice to the Trustee of changes in the identity of the membership of the Committee. The Committee may also certify to the Trustee the name of any person, together with a specimen signature of any such person, authorized to act for it in relation to the Trustee. The Committee shall promptly give notice to the Trustee of any change in any person authorized to act on behalf of it. For all purposes under this Agreement, until any such notice is received by the Trustee, the Trustee shall be fully protected in assuming that the membership of the Committee and the authority of any person certified to act in its behalf remain unchanged.

SECTION 3.2 TRUSTEE'S RELIANCE.

The Trustee may rely and act upon any certificate, notice or direction of the Committee, or of a person authorized to act on its behalf, or of the Company which the Trustee believes to be genuine and to have been signed by the person or persons duly authorized to sign such certificate, notice, or direction.

SECTION 3.3 LEGAL COUNSEL.

The Trustee may consult with legal counsel (who may be counsel to the Company) concerning any question which may arise under this Agreement, and the opinion of such counsel shall be full and complete protection with respect to any action taken, or omitted, by the Trustee hereunder in good faith in accordance with the opinion of such counsel.


-7-

SECTION 3.4 LIABILITY UNDER THE PLAN.

The duties and obligations of the Trustee shall be limited to those expressly set forth in this Agreement, notwithstanding any reference herein to the Plan. The Trustee shall not be obliged to take or defend any action or participate in or proceed with any suit or legal or administrative proceeding which might subject it to substantial cost or expense or liability unless first indemnified by the Company in an amount and by security satisfactory to it against all losses, costs, damages and expenses which may result therefrom or be occasioned thereby.

SECTION 3.5 INDEMNIFICATION.

The Company shall pay and shall protect, indemnify and save harmless the Trustee and its officers, employees and agents from and against any and all losses, liabilities (including liabilities for penalties), actions, suits, judgments, demands, damages, costs and expenses (including reasonable attorneys' fees and expenses) of any nature arising from or relating to any action or any failure to act by the Trustee, its officers, employees and agents with respect to the transactions contemplated by this Trust Agreement, including any claim made by the Company or its successors that this Trust Agreement is invalid or ultra vires, except to the extent that any such loss, liability, action, suit, judgment, demand, damage, cost or expense is the result of the gross negligence of the Trustee (determined by reference to customary trust company standards) or willful misconduct of the Trustee, its officers, employees or agents. The Trust assumes no obligation or responsibility with respect to any action required by this Trust Agreement on the part of the Company.

ARTICLE IV

DISTRIBUTIONS FROM THE TRUST FUND

SECTION 4.1 IN GENERAL.

The Trustee shall make distributions from the Trust Fund in such amounts, at such times, and to such persons as the Committee may, from time to time, direct.

SECTION 4.2 DIRECTION BY THE COMMITTEE.

(a) A direction by the Committee to make a distribution from the Trust Fund shall:

(i) be made in writing;

(ii) specify the amount of the payment or the number of Shares to be distributed, the date such payment is to be made, the person to whom payment is to be made, and the address to which the payment is to be sent; and


-8-

(iii) be deemed to certify to the Trustee that such direction and any payment pursuant thereto are authorized under the terms of the Plan.

(b) The Trustee shall be entitled to rely conclusively on the Committee's certification of its authority to direct a payment without independent investigation. The Trustee shall have no liability to any person with respect to payments made in accordance with the provisions of this Article IV.

SECTION 4.3 METHOD OF PAYMENT.

Payments of money by the Trustee may be made by its check payable to the order of the payee designated by the Committee and mailed to the payee in care of the Company. Distributions of Shares shall be made by causing the Company, or its transfer agent, to issue to the distributee a stock certificate evidencing ownership of the designated number of Shares. To the extent that any distribution of Shares to any person requires the registration of such Shares under the securities or blue sky laws of the United States or any state, or otherwise requires any governmental approvals, the Company shall undertake to complete such registration or obtain such approvals at its sole expense.

ARTICLE V

TRUSTEE'S ACCOUNTS

SECTION 5.1 ACCOUNTS.

The Trustee shall keep accurate and detailed accounts of all investments, reinvestments, receipts and disbursements, and other transactions hereunder, and all such accounts and the books and records relating thereto shall be open to inspection at all reasonable times by the Company or the Committee or persons designated by them. The Trustee may rely and act upon any direction by the Committee with respect to the allocation of Shares in accordance with section 3.2.

SECTION 5.2 VALUATION OF TRUST FUND.

The Trustee shall value or cause to be valued the Trust Fund as of the last business day of each fiscal year of the Company ("Valuation Date"), and shall report to the Committee the value of the Trust Fund as of such date, within a reasonable time after the first day of the month next succeeding each Valuation Date.

SECTION 5.3 REPORTS TO THE COMMITTEE.

(a) Within seventy-five (75) days following the last day of each fiscal year of the trust, and within seventy-five (75) days following the effective date of the resignation or removal of the Trustee as provided in section 8.1, the Trustee shall render to the


-9-

Committee a written account setting forth all investments, receipts, disbursements and other transactions affecting the Trust Fund, which account shall be signed by the Trustee and mailed to the Committee.

(b) The Committee shall notify the Trustee in writing of any objection or exception to an account so rendered not later than sixty
(60) days following the date on which the Account was mailed to the Committee, whereupon the Committee and the Trustee shall cooperate in resolving such objection or exception.

(c) If the Committee has not communicated in writing to the Trustee within sixty (60) days following the mailing of the account to the Committee any exception or objection to the account, the account shall become an account stated at the end of such sixty (60) day period. If the Committee does communicate such an exception or objection, as to which it later becomes satisfied, the Committee shall thereupon indicate in writing its approval of the account, or of the account as amended, and the account shall thereupon become an account stated.

(d) Whenever an account shall have become an account stated as aforesaid, such account shall be deemed to be finally settled and shall be conclusive upon the Trustee, the Company and all persons having or claiming to have any interest in the Trust Fund or under the Plan, and the Trustee shall be fully and completely discharged and released to the same extent as if the account had been settled and allowed by a judgment or decree of a court of competent jurisdiction in an action or proceeding in which the Trustee, the Company, and all persons having or claiming to have any interest in the Trust Fund or under the Plan were parties.

SECTION 5.4 RIGHT OF JUDICIAL SETTLEMENT.

Notwithstanding the provisions of section 5.3, the Trustee, the Committee, and the Company, or any of them, shall have the right to apply at any time to a court of competent jurisdiction for the judicial settlement of the Trustee's account. In any such case, it shall be necessary to join as parties thereto only the Trustee, the Committee and the Company; and any judgment or decree which may be entered therein shall be conclusive upon all persons having or claiming to have any interest in the Trust Fund or under the Plan.

SECTION 5.5 ENFORCEMENT OF AGREEMENT.

To protect the Trust Fund from expenses which might otherwise be incurred, the Company and the Committee shall have authority, either jointly or severally, to enforce this Agreement on behalf of all persons claiming any interest in the Trust Fund or under the Plan, and no other person may institute or maintain any action or proceeding against the Trustee or the Trust Fund in the absence of written authority from the Committee or a judgment of a court of competent jurisdiction that in refusing authority the Committee acted fraudulently or in bad faith.


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ARTICLE VI

TAXES; COMPENSATION OF TRUSTEE

SECTION 6.1 TAXES.

Any taxes that may be imposed upon the Trust Fund or the income therefrom shall be deducted from and charged against the Trust Fund.

SECTION 6.2 COMPENSATION OF TRUSTEE; EXPENSES.

The Trustee shall receive for its services hereunder such compensation as may be agreed upon in writing from time to time by the Company and the Trustee and shall be reimbursed for its reasonable expenses, including counsel fees, incurred in the performance of its duties hereunder. The Trustee shall deduct from and charge against the Trust Fund such compensation and all such expenses unless previously paid by the Company. Any such deduction and charge shall be applied first to any assets of the Trust Fund that have not been allocated to any employee under the terms of the Plan, and second, if and to the extent necessary proportionately to the assets allocated to employees under the terms of the Plan.

ARTICLE VII

RESIGNATION AND REMOVAL OF TRUSTEE

SECTION 7.1 RESIGNATION OR REMOVAL OF TRUSTEE.

The Trustee may resign as trustee hereunder at any time by giving sixty (60) days prior written notice to the Company. The Company may remove the Trustee as trustee hereunder at any time by giving the Trustee prior written notice of such removal, which shall include notice of the appointment of a successor trustee. Such removal shall take effect not earlier than sixty (60) days following receipt of such notice by the Trustee unless otherwise agreed upon by the Trustee and the Company.

SECTION 7.2 APPOINTMENT OF SUCCESSOR.

In the event of the resignation or removal of the Trustee, a successor trustee shall be appointed by the Company. Except as is otherwise provided in section 8.l, such appointment shall take effect upon delivery to the Trustee of an instrument so appointing the successor and an instrument of acceptance executed by such successor, both of which instruments shall be duly acknowledged before a notary public. If within sixty (60) days after notice of resignation shall have been given by the Trustee a successor shall not have been appointed as aforesaid, the Trustee may apply to any court of competent jurisdiction for the appointment of such successor.


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SECTION 7.3 SUCCESSION.

(a) Upon the appointment of a successor, the Trustee shall transfer and deliver the Trust Fund to such successor; provided, however, that the Trustee may reserve such sum of money as it shall in its sole discretion deem advisable for payment of its fees and all expenses in connection with the settlement of its account, and any balance of such reserve remaining after the payment of such charges shall be paid over to the successor trustee. If such reserve shall be insufficient to pay such charges, the Trustee shall be entitled to recover the amount of any deficiency from the Company, from the successor trustee, or from both.

(b) Upon the completion of the succession and the rendering of its final accounts, the Trustee shall have no further responsibilities whatsoever under this Agreement.

SECTION 7.4 SUCCESSOR BOUND BY AGREEMENT.

All the provisions of this Agreement shall apply to any successor trustee with the same force and effect as if such successor had been originally named herein as the trustee hereun der.

ARTICLE VIII

AMENDMENT AND TERMINATION

SECTION 8.1 AMENDMENT AND TERMINATION.

(a) The Company may, at any time and from time to time, by instrument in writing executed pursuant to authorization of its Board of Directors, (i) amend in whole or in part any or all of the provisions of this Agreement, or (ii) terminate this Agreement and the trust created hereby; provided, however, that no amendment which affects the rights, duties or responsibilities of the Trustee may be made without the Trustee's consent.

(b) Any such amendment shall become effective upon receipt by the Trustee of the instrument of amendment and endorsement thereon by the Trustee of its consent thereto, if such consent is required. Any such termination shall become effective upon the receipt by the Trustee of the instrument of termination; thereafter the Trustee, upon the direction of the Committee, shall liquidate the Trust Fund to the extent required for distri bution and, after the final account of the Trustee has been approved or settled, shall distribute any Shares (and any related dividends or other related proceeds) allocated to Participants to such Participants and shall distribute the remaining balance of the Trust Fund in its hands to the Company.


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ARTICLE IX

MISCELLANEOUS

SECTION 9.1 BINDING EFFECT; ASSIGNABILITY.

This Agreement shall be binding upon, and the powers granted to the Company and the Trustee, respectively, shall be exercisable by the respective successors and assigns of the Company and the Trustee. Any corporation which shall, by merger, consolidation, purchase, or otherwise, succeed to substantially all the trust business of the Trustee shall, upon such succession and without any appointment or other action by the Company, be and become successor trustee hereunder.

SECTION 9.2 GOVERNING LAW.

Except to the extent that the federal law of the United States of America is applicable, this Agreement and the trust created and the Trust Fund held hereunder shall be inter preted, construed and administered in accordance with the law of the State of New York without giving effect to the conflict of law provisions thereof. All contributions to the Trust Fund shall be deemed to take place in the State of New York.

SECTION 9.3 NOTICES.

Any communication requested or permitted to be given under this Agreement, including any notice, direction, designation, certification, order, instruction, or objection shall be in writing and signed by the person authorized under the Plan to give the communication. The person receiving such a communication shall be fully protected in acting in accordance therewith. Any notice required or permitted to be given to a party hereunder shall be deemed given if in writing and hand delivered or mailed, postage prepaid, certified mail, return receipt requested, to such party at the following address or at such other address as such party may by notice specify:

If to the Company:

         Warwick Community Bancorp, Inc.
         18 Oakland Avenue
         Warwick, New York  10990-0591

         Attention:     Timothy A. Dempsey
                        President and Chief Executive Officer


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If to the Trustee:

         Orange County Trust Company
         212 Dolson Avenue
         Middletown, New York  10940

         Attention:   Thomas A. Varley
                      Vice President and Senior Trust Officer

SECTION 9.4 SEVERABILITY.

The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the remaining provisions.

SECTION 9.5 WAIVER.

Failure of any party to insist at any time or times upon strict compliance with any provision of this Agreement shall not be a waiver of such provision at such time or any later time unless in a writing designated as a waiver and signed by or on behalf of the party against whom enforcement of the waiver is sought.

SECTION 9.6 NON-ALIENATION.

No interest, right or claim in or to any part of the Trust Fund or any payment therefrom shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution, or levy of any kind, and the Trustee and the Committee shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate the same, except to the extent required by law.

SECTION 9.7 COMPLIANCE WITH SECURITIES LAWS.

In the event that the Plan or any portion thereof, or any interest therein, by virtue of investments made in Shares, shall be deemed to be a "security" for purposes of the Securities Act of 1933, the Securities Exchange Act of 1934 or any other federal or state law, for which there is no exemption from the registration, reporting, blue sky or other requirements applicable to securities under such laws, the Company shall, at its sole cost and expense, take all such actions as are necessary or appropriate to comply with the requirements of such laws. The Company hereby agrees to indemnify the Trustee and hold it harmless from and against any claim or liability, including any and all fees, costs and expenses arising from the registration and continuing registration of the Plan, any portion thereof or any interest therein, which may be asserted against the Trustee by reason of any determination that the Plan or any portion thereof, or any interest therein, constitutes such a security.


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SECTION 9.8 HEADINGS.

The headings of Articles and sections are included solely for convenience of reference. If there is any conflict between such headings and the text of the Agreement, the text shall control.

SECTION 9.9 CONSTRUCTION OF LANGUAGE.

Whenever appropriate in this Agreement, words used in the singular may be read in the plural; words used in the plural may be read in the singular; and words importing the masculine gender shall be deemed equally to refer to the female gender or the neuter. Any reference to a section number shall refer to a section of this Agreement, unless otherwise indicated.

SECTION 9.10 COUNTERPARTS.

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company and the Trustee, respectively, have caused this Agreement to be executed in their corporate names and their corporate seals to be hereunto affixed and duly attested, all as of the date first above written.

WARWICK COMMUNITY BANCORP, INC.

                                   By /s/ Ronald J. Gentile
                                     ---------------------------------------
                                            Ronald J. Gentile
                                            Executive Vice President and
                                              Chief Operating Officer
Attest:

/s/ Nancy L. Sobotor-Littell
-----------------------------
             Secretary

[Seal]

ORANGE COUNTY TRUST COMPANY

                                   By  /s/ Thomas A. Varley
                                     ---------------------------------------
                                            Thomas A. Varley
                                            Vice President and Senior
Attest:                                     Trust Officer


Secretary
[Seal]


STATE OF NEW YORK                   )
                                          : ss.:
COUNTY OF ORANGE                    )

On this 16th day of June, 1998, before me personally came RONALD J. GENTILE, to me known, who, being by me duly sworn, did depose and say that he resides at 30 Newport Bridge Road, Warwick, New York 10990; that he is the Executive Vice President and Chief Operating Officer of WARWICK COMMUNITY BANCORP, INC., the business corporation described in and which executed the foregoing instrument; that he knows the seal of said business corporation; that the seal affixed to said instrument is such business corporation's seal; that it was so affixed by order of the Board of Directors of said business corporation; and that he signed his name thereto by like order.

/s/ Mary K. Serringer
---------------------------------------
                 Notary Public

STATE OF NEW YORK                   )
                                          : ss.:
COUNTY OF ORANGE                    )

On this 23rd day of June, 1998, before me personally came THOMAS A. VARLEY, to me known, who, being by me duly sworn, did depose and say that he resides at 38 Mill Pond Road, Otisville, New York 10963, that he is a Vice President and Senior Trust Officer of ORANGE COUNTY TRUST COMPANY, the banking corporation described in and which executed the foregoing instrument; that he knows the seal of said banking corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said banking corporation; and that he signed his name thereto by like order.

/s/ Jean M. Hoag
---------------------------------------
                Notary Public


Exhibit 10.13

TRUST AGREEMENT

BETWEEN

WARWICK COMMUNITY BANCORP, INC.

AND

MARINE MIDLAND BANK

FOR THE

WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN


Entered into as of December 9, 1997


TABLE OF CONTENTS

                                                                      Page
                                                                      ----

                              ARTICLE I

                             TRUST FUND

SECTION 1.1       TRUST FUND.............................................2
SECTION 1.2       COLLECTION OF CONTRIBUTIONS............................2
SECTION 1.3       NON-DIVERSION OF FUNDS.................................2

                          ARTICLE II

                 INVESTMENT AND ADMINISTRATION

SECTION 2.1       IN GENERAL.............................................2
SECTION 2.2       INVESTMENT FUNDS.......................................3
SECTION 2.3       APPOINTMENT OF INVESTMENT MANAGER......................3
SECTION 2.4       INVESTMENT DECISIONS...................................4
SECTION 2.5       INVESTMENT IN COMMINGLED FUNDS.........................5
SECTION 2.6       LIQUIDITY..............................................5
SECTION 2.7       INVESTMENT DIRECTIONS BY PARTICIPANTS..................6
SECTION 2.8       TRUSTEE'S ADMINISTRATIVE AUTHORITY.....................6
SECTION 2.9       EXERCISE OF VOTING RIGHTS WITH RESPECT TO SHARES.......8
SECTION 2.10      RESPONSE TO TENDER OFFERS AND SIMILAR EVENTS...........8
SECTION 2.11      DISSENT AND APPRAISAL RIGHTS...........................8
SECTION 2.12      SHARE ACQUISITION LOANS................................9

ARTICLE III

TRUSTEE, PLAN ADMINISTRATOR AND COMMITTEE

SECTION 3.1       COMMITTEE AND PLAN ADMINISTRATOR......................10
SECTION 3.2       TRUSTEE'S RELIANCE....................................10
SECTION 3.3       RETENTION OF ADVISORS.................................11
SECTION 3.4       LIABILITY UNDER THE PLAN..............................11
SECTION 3.5       INDEMNIFICATION.......................................11
SECTION 3.6       BENEFIT CLAIMS LIMITED TO THE TRUST FUND..............11

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                          ARTICLE IV

               DISTRIBUTIONS FROM THE TRUST FUND

SECTION 4.1       IN GENERAL............................................12
SECTION 4.2       DIRECTION BY THE PLAN ADMINISTRATOR...................12
SECTION 4.3       METHOD OF PAYMENT.....................................12
SECTION 4.4       DISPUTES..............................................13


                           ARTICLE V

                       RESPONSIBILITIES

SECTION 5.2       NO LIABILITY FOR ACTS OF OTHERS.......................13
SECTION 5.3       COMPLIANCE WITH ERISA.................................14


                          ARTICLE VI

                      TRUSTEE'S ACCOUNTS

SECTION 6.1       ACCOUNTS..............................................14
SECTION 6.2       VALUATION OF TRUST FUND...............................15
SECTION 6.3       REPORTS TO THE PLAN ADMINISTRATOR.....................15
SECTION 6.4       RIGHT OF JUDICIAL SETTLEMENT..........................15
SECTION 6.5       ENFORCEMENT OF AGREEMENT..............................16


                          ARTICLE VII

                TAXES; COMPENSATION OF TRUSTEE

SECTION 7.1       TAXES.................................................16
SECTION 7.2       COMPENSATION OF TRUSTEE; EXPENSES.....................16

                         ARTICLE VIII

              RESIGNATION AND REMOVAL OF TRUSTEE

SECTION 8.1       RESIGNATION OR REMOVAL OF TRUSTEE.....................17
SECTION 8.2       APPOINTMENT OF SUCCESSOR..............................17
SECTION 8.3       SUCCESSION............................................17
SECTION 8.4       SUCCESSOR BOUND BY AGREEMENT..........................18

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ARTICLE IX

AMENDMENT AND TERMINATION

SECTION 9.1 AMENDMENT AND TERMINATION.............................18

                           ARTICLE X

                         MISCELLANEOUS

SECTION 10.1      BINDING EFFECT; ASSIGNABILITY.........................19
SECTION 10.2      GOVERNING LAW.........................................19
SECTION 10.3      NOTICES...............................................19
SECTION 10.4      SEVERABILITY..........................................20
SECTION 10.5      WAIVER................................................20
SECTION 10.6      NON-ALIENATION........................................20
SECTION 10.7      QUALIFIED PLAN AND TRUST..............................21
SECTION 10.8      RETURN OF CONTRIBUTIONS...............................21
SECTION 10.9      COMPLIANCE WITH SECURITIES LAWS.......................21
SECTION 10.10     HEADINGS..............................................22
SECTION 10.11     PARTY IN INTEREST INFORMATION.........................22
SECTION 10.12     CONSTRUCTION OF LANGUAGE..............................22
SECTION 10.13     COUNTERPARTS..........................................22

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TRUST AGREEMENT

FOR THE

WARWICK COMMUNITY BANCORP, INC.

EMPLOYEE STOCK OWNERSHIP PLAN

This AGREEMENT ("Agreement") is made as of December 9, 1997, by and between WARWICK COMMUNITY BANCORP, INC., a corporation organized under the laws of the State of Delaware and having its executive offices at 18 Oakland Avenue, Warwick , New York 10990 ("Company"), and MARINE MIDLAND BANK, a banking corporation organized under the laws of the state of New York and having an office at 250 Park Avenue, New York, New York 10177 ("Trustee").

W I T N E S S E T H :

WHEREAS, the Company has, by action of its Board of Directors, adopted an Employee Stock Ownership Plan ("Plan") to be qualified under section 401(a) of the Internal Revenue Code of 1986, as amended ("Code"), for the exclusive benefit of its eligible employees ("Participants") and their beneficiaries; and

WHEREAS, the Company has, in accordance with the terms of the Plan, appointed a Plan Administrator ("Plan Administrator") and a Committee ("Committee") to administer the Plan; and

WHEREAS, the Plan contemplates the establishment and continuance of a trust so long as it remains in effect to be and to remain qualified for tax exempt status under section 501(a) of the Code, to which contributions will be made from time to time, to be accepted, invested and maintained in accordance with this Agreement; and

WHEREAS, the Plan provides for the assets of such trust to be invested primarily in shares of common stock of the Company ("Shares") and for the assumption of debt for the purpose of purchasing Shares;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Trustee hereby agree as follows:

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ARTICLE I

TRUST FUND

SECTION 1.1 TRUST FUND.

The Company hereby establishes with the Trustee a trust, pursuant to the Plan, in which shall be deposited such Shares and such sums of money as shall from time to time be paid or delivered to or deposited with the Trustee by or with the approval of the Company in accordance with terms of the Plan and this Trust Agreement. All such Shares and all such sums of money, all investments and reinvestments thereof and all earnings, appreciation and additions allocable thereto, less losses, depreciation and expenses allocable thereto and any payments made therefrom as authorized under the Plan or this Agreement shall constitute the "Trust Fund". The Trust Fund shall be held, managed and administered by the Trustee, IN TRUST, and dealt with in accordance with the provisions of this Agreement and in accordance with any funding policy or guidelines established under the Plan that are communicated in writing to the Trustee.

SECTION 1.2 COLLECTION OF CONTRIBUTIONS.

The Trustee shall have no authority over and shall have no responsibility for the administration of the Plan or for the collection of any contributions to the Trust Fund required under the Plan, nor shall it have any authority to bring any action or proceeding to enforce the collection of any such amount or to make inquiry as to whether any such contributions received by it were properly collected or computed in accordance with the terms of the Plan.

SECTION 1.3 NON-DIVERSION OF FUNDS.

Notwithstanding anything to the contrary contained in this Agreement or any amendment hereto, no part of the Trust Fund other than such expenses and taxes properly charged to the Trust Fund under the Plan or this Agreement shall be used for or diverted to purposes other than for the exclusive benefit of Plan Participants and their beneficiaries (including any alternate payee entitled to benefits under the Plan pursuant to a qualified domestic relations order described in section 414(p) of the Code ("Alternate Payee")).

ARTICLE II

INVESTMENT AND ADMINISTRATION

SECTION 2.1 IN GENERAL.

The Trust Fund shall be held by the Trustee and shall be invested and reinvested as hereinafter provided in this Article II, without distinction between principal and income and

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without regard to the restrictions of the laws of the State of New York, or of any other jurisdiction relating to the investment of trust funds. Subject to section 2.7, the Trust Fund shall be invested at all times, pursuant to directions given in accordance with section 2.4, primarily in Shares.

SECTION 2.2 INVESTMENT FUNDS.

(a) The Trustee shall establish and maintain, for the investment of the Trust Fund, such separate investment funds (individually, an "Investment Fund") as the Company may request by written notice to the Trustee. In the absence of such notice, the Trust Fund shall consist of a single Investment Fund.

(b) To the extent directed to do so pursuant to section 2.4, the Trustee shall hold and invest amounts paid over to it pursuant to this Agreement in such Investment Funds as shall have been established in accordance with section 2.2(a), and shall allocate amounts paid over to it among the Investment Funds in the manner and in the proportion designated by the Plan Administrator pursuant to the terms of the Plan. The Trustee shall also credit to each such Investment Fund all earnings and appreciation allocable thereto and shall charge against each such fund any depreciation, losses, expenses, payments and distributions allocable thereto.

(c) The Trustee shall invest and reinvest amounts allocated to each Investment Fund in accordance with such written investment criteria as shall be established by the Committee and communicated in writing to the Trustee. Notwithstanding any such investment criteria, the Trustee is authorized to retain in an Investment Fund, for as long as it is deemed advisable by the person responsible for directing the investment of the particular Investment Fund, (i) any securities or other property received by means of a dividend, distribution, exchange, conversion, liquidation or otherwise than by initial purchase; and (ii) any investments which were authorized hereunder when made by the Trustee.

SECTION 2.3 APPOINTMENT OF INVESTMENT MANAGER.

(a) The Committee may, in its discretion, appoint an investment manager ("Investment Manager") to direct the investment and reinvestment of all or any portion of the Trust Fund. Any such Investment Manager shall either (i) be registered as an investment adviser under the Investment Advisers Act of 1940, as amended ("Investment Advisers Act"); (ii) be a bank, as defined in the Investment Advisers Act; or (iii) be an insurance company qualified to perform investment services under the laws of more than one state.

(b) The Plan Administrator shall give written notice to the Trustee of the appointment of an Investment Manager pursuant to section 2.3(a). Such notice shall include: (i) a specification of the portion of the Trust Fund to which the appointment applies; (ii) a certification by the Plan Administrator that the Investment Manager satisfies the requirements of section 2.3(a)(i),
(ii) or (iii); (iii) a copy of the instruments appointing the Investment Manager and evidencing the Investment Manager's acceptance of the appointment; (iv) directions as to the manner in which the Investment Manager is authorized to give instructions to the Trustee,

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including the persons authorized to give instructions and the number of signatures required for any written instruction; (v) an acknowledgment by the Investment Manager that it is a fiduciary of the Plan; and (vi) if applicable, a certificate evidencing the Investment Manager's current registration under the Investment Advisers Act. For purposes of this Agreement, the appointment of an Investment Manager pursuant to this section 2.3 shall become effective as of the effective date specified in such notice, or, if later, as of the date on which the Trustee receives proper notice of such appointment.

(c) The Plan Administrator shall give written notice to the Trustee of the resignation or removal of an Investment Manager previously appointed pursuant to this section 2.3. From and after the date on which the Trustee receives such notice, or, if later, the effective date of the resignation or removal specified in such notice, the Committee shall be responsible, in accordance with this section 2.3, for the investment and reinvestment of the portion of the Trust Fund theretofore managed by such Investment Manager, until such time as a successor Investment Manager has been duly appointed pursuant to this section 2.3.

SECTION 2.4 INVESTMENT DECISIONS.

(a) The Trustee shall invest and reinvest the Trust Fund as follows:

(i) in accordance with the directions of the Committee; or

(ii) to the extent that an Investment Manager is appointed to direct the investment of any Investment Fund, in accordance with the directions of such Investment Manager.

The Trustee shall be under no duty or obligation to review any investment to be acquired, held or disposed of pursuant to directions of the Committee or any Investment Manager nor to make any recommendation with respect to the disposition or continued retention of any such investment. To the extent that the Trustee is subject to direction by the Committee or an Investment Manager, the Trustee shall have no liability or responsibility for its actions or inaction pursuant to the direction of, or its failure to act in the absence of directions from, the Committee or an Investment Manager, except to the extent provided in section 5.2. To the extent that the Trustee is subject to direction by the Committee or an Investment Manager, the Company hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim or liability which may be asserted against the Trustee by reason of any action or inaction by it pursuant to a direction by the Committee or by an Investment Manager or failing to act in the absence of any such direction.

(b) The Committee or an Investment Manager appointed pursuant to section 2.3 shall, from time to time, issue orders for the purchase or sale of securities directly to a broker. Written notification of the issuance of each such order shall be given promptly to the Trustee by the Committee or the Investment Manager, and the execution of each such order shall be confirmed by written advice to the Trustee by the broker. Such notification shall be authority for

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the Trustee to pay for securities purchased against receipt thereof and to deliver securities sold against payment therefor, as the case may be.

(c) To the extent that neither the Committee nor an Investment Manager furnishes directions as to the investment of any portion of the Trust Fund that is subject to its direction, the Trustee shall invest and reinvest the Trust Fund (i) in Shares and (ii) to the extent that it is not practicable to invest and reinvest the Trust Fund in Shares, in any savings account, time or other interest bearing deposit or in any other interest bearing obligation of any one or more savings banks, savings and loan associations, banks and other financial institutions, or any of them, including the Trustee or any subsidiary of the Company, or, subject to section 2.5, in any commingled, common or group trust fund at least 75% of the assets of which are invested in such savings accounts, time or other interest bearing deposits or other interest bearing obligations.

(d) Subject to the preceding provisions of this Section 2.4, the Trustee shall have the power and authority to be exercised in its sole discretion at any time and from time to time to issue and place orders for the purchase or sale of securities directly with qualified brokers or dealers. Such orders may be placed with such qualified brokers and/or dealers who also provide investment information or other research or statistical services to the Trustee in its capacity as a fiduciary or investment manager for other clients.

SECTION 2.5 INVESTMENT IN COMMINGLED FUNDS.

The Trustee may, if directed to do so by the Committee or an Investment Manager or if authorized to do so pursuant to section 2.4, invest any amounts, other than Shares, held by it under this Agreement in any commingled or group trust fund described in section 401(a) of the Code and exempt under section 501(a) of the Code or in any common trust fund exempt under section 584 of the Code, provided that such trust fund satisfies the requirements of this Agreement applicable to such amounts and that the Trustee serves as trustee of such commingled, group or common trust fund. To the extent that the Trust Fund is at any time invested in any commingled, group or common trust fund, the declaration of trust or other instrument pertaining to such fund and any amendments thereto are hereby adopted as part of this Agreement and deemed to form a part of the Plan. If there is any conflict between the provisions of this Agreement and such declaration of trust or other instrument, then the terms of the declaration of trust or other instrument of the commingled, group or common trust fund shall govern.

SECTION 2.6 LIQUIDITY.

Notwithstanding any provisions of this Article II to the contrary, the Trustee, in its sole discretion or as the Plan Administrator shall request, may retain uninvested cash or cash balances, and sell, to provide cash or cash balances, such investments in whatever portion of the Trust Fund that it may deem advisable, without being required to pay interest thereon. Pending investment, the Trustee, in its sole discretion, may temporarily invest any funds held or received by it for investment in an investment fund established hereunder in commercial paper or in obligations of, or guaranteed by, the United States government or any of its agencies.

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SECTION 2.7 INVESTMENT DIRECTIONS BY PARTICIPANTS.

Each Participant entitled thereto under the terms of the Plan ("Qualified Participant") shall have the right to direct the allocation to the various Investment Funds established hereunder to be made by the Trustee for a portion of such Qualified Participant's account under the Plan. The Plan Administrator shall by written notice furnish the Trustee with the investment directions for each Qualified Participant's account in the Plan. The Trustee shall act in accordance with the most recent directions it has received from the Plan Administrator for each account and shall have no discretion over or responsibility or liability for its actions taken in accordance with such directions. The Company hereby agrees to indemnify and defend the Trustee and hold it harmless from and against any claim asserted against or liability imposed on the Trustee by reason of its having acted on any direction given by a Qualified Participant with respect to his own account.

SECTION 2.8 TRUSTEE'S ADMINISTRATIVE AUTHORITY.

(a) In addition to and not by way of limitation of any other powers conferred upon the Trustee by law or by other provisions of this Agreement, but subject to the provisions of section 1.3 and this Article II, the Trustee is authorized and empowered:

(i) subject to section 2.10, to sell, exchange, convey, transfer or dispose of and also to grant options with respect to any property, whether real or personal, at any time held by it, and any sale may be made by private contract or by public auction, and for cash or upon credit, or partly for cash and partly upon credit, and no person dealing with the Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency or propriety of any such sale or other disposition;

(ii) to retain, manage, operate, repair and rehabilitate and to mortgage or lease for any period any real estate held by it and, in its discretion, cause to be formed any corporation or trust to hold title to any such real property;

(iii) unless otherwise agreed to and subject to sections 2.9 and 2.10, to vote in person or by proxy on any stocks, bonds, or other securities held by it, to exercise any options appurtenant to any stocks, bonds or other securities for the conversion thereof into other stocks, bonds or securities, or to exercise any rights to subscribe for additional stocks, bonds or other securities and to make any and all necessary payment therefor and to enter into any voting trust;

(iv) with respect to any investment, subject to section 2.12, to join in, dissent from, or oppose any action or inaction of any corporation, or of the directors, officers or stockholders of any corporation, including, without limitation, any reorganization, recapitalization, consolidation, liquidation, sale or merger;

-6-

(v) to settle, adjust, compromise, or submit to arbitration any claims, debts or damages due or owing to or from the Trust Fund; and

(vi) to deposit any property with any protective, reorganization or similar committee, to delegate power thereto and to pay and agree to pay part of its ex penses and compensation and any assessments levied with respect to any property so deposited.

In exercising such powers with respect to any portion of the Trust Fund that is invested in the discretion of the Trustee or pursuant to section 2.4(c), the Trustee shall act in its discretion. In exercising such powers with respect to any portion of the Trust Fund that is invested pursuant to directions of the Committee or of an Investment Manager, the Trustee shall act in accordance with directions provided by the Committee or Investment Manager. The Trustee shall be under no duty or obligation to review any action to be taken, nor to recommend any action, pursuant to this section 2.8(a) with respect to any portion of the Trust Fund that is under the direction of the Committee or an Investment Manager. The Trustee shall have no liability or responsibility for its actions or inaction pursuant to the direction of, or its failure to act in the absence of directions from, the Committee or an Investment Manager, except to the extent provided in section 5.2.

(b) In addition to and not by way of limitation of any other powers conferred upon the Trustee by law or other provisions of this Agreement, but subject to section 1.3 and this Article II, the Trustee is authorized and empowered, in its discretion:

(i) to commence or defend suits or legal proceedings, and to represent the Trust Fund in all suits or legal proceedings in any court or before any other body or tribunal;

(ii) to register securities in its name or in the name of any nominee or nominees with or without indication of the capacity in which the securities shall be held, or to hold securities in bearer form, but the books and records of the Trustee shall at all times show that such investments are part of the Trust Fund;

(iii) subject to section 2.11, to borrow or raise moneys for the purposes of the Trust Fund from any lender, except the Trustee in its individual capacity, and for any sum so borrowed to issue its promissory note as Trustee and to secure the repayment thereof by pledging all or any part of the Trust Fund, and no person lending money to the Trustee shall be bound to see the application of the money loaned or to inquire into the validity, expediency or propriety of any such borrow ing;

(iv) to make distributions in cash or in Shares upon the direction of the Committee and to make transfers of funds into and out of the Investment Funds for value or upon the direction of the Plan Administrator;

-7-

(v) to employ such agents, counsel and accountants as the Trustee shall deem advisable and to pay their reasonable expenses and compensation from the Trust Fund;

(vi) to make, execute, acknowledge, and deliver any and all deeds, leases, assignments and instruments; and

(vii) generally to do all acts, whether or not expressly authorized, which the Trustee may deem necessary or desirable for the administration and protection of the Trust Fund.

SECTION 2.9 EXERCISE OF VOTING RIGHTS WITH RESPECT TO SHARES.

The Committee shall direct the Trustee as to the manner of exercise of voting rights appurtenant to Shares held in the Trust Fund. The Trustee shall act in accordance with the directions that it receives from the Committee for each matter as to which voting rights are to be exercised and shall refrain from exercising the voting rights appurtenant to Shares held in the Trust Fund in the absence of such directions. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with such directions, or for its failure to exercise such voting rights in the absence of such directions. The Company hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim asserted against or liability imposed on the Trustee by reason of its having acted on any direction given by the Committee in accordance with this section 2.9 or failing to act in the absence of any such direction.

SECTION 2.10 RESPONSE TO TENDER OFFERS AND SIMILAR EVENTS.

The Committee shall direct the Trustee as to the manner of exercise of any rights to tender Shares held in the Trust Fund or otherwise act in response to any tender offer with respect to Shares or any other offer to purchase, exchange, redeem or otherwise transfer such Shares. The Trustee shall act in accordance with the directions that it receives from the Committee for each matter as to which such rights are to be exercised and shall refrain from taking any action in response to such an offer in the absence of such directions. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with such direc tions, or for its failure to exercise such rights in the absence of such directions. The Company hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim asserted against or liability imposed on the Trustee by reason of its having acted on any direction given by the Committee in accordance with this section 2.10 or failing to act in the absence of any such direction.

SECTION 2.11 DISSENT AND APPRAISAL RIGHTS.

The Committee shall direct the Trustee as to the manner of exercise of any dissent and appraisal rights appurtenant to Shares held in the Trust Fund. The Trustee shall act in accordance with the directions that it receives from the Committee for each matter as to which such rights are to be exercised and shall refrain from taking any action in the absence of such

-8-

directions. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with such directions, or for its failure to exercise such rights in the absence of such directions. The Company hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim asserted against or liability imposed on the Trustee by reason of its having acted on any direction given by the Committee in accordance with this section 2.11 or failing to act in the absence of any such direction.

SECTION 2.12 SHARE ACQUISITION LOANS.

(a) To the extent permitted by ERISA (including, without limitation, Section 4975 of the Code) and by any regulations promulgated thereunder, the Trustee shall, if directed to do so by the Committee, obtain a loan ("Share Acquisition Loan") on behalf of the Plan and shall apply the proceeds of such Share Acquisition Loan in the proportions directed by the Committee:

(i) to purchase Shares; or

(ii) to make payments of principal or interest, or a combination of principal and interest, with respect to such Share Acquisition Loan; or

(iii) to make payments of principal and interest, or a combination of principal and interest, with respect to a previously obtained Share Acquisition Loan that is then outstanding.

Any such Share Acquisition Loan shall be on such terms and conditions as the Committee may determine, and the Trustee shall have no duty or obligation to inquire as to the expediency or propriety of any such Share Acquisition Loan or any of the terms and conditions thereof.

(b) If directed to do so by the Committee, the Trustee shall execute a promissory note, in its capacity as Trustee, evidencing the obligation of the Plan to repay a Share Acquisition Loan and shall pledge, in such proportions as the Committee may direct, the following assets of the Plan as collateral for such Share Acquisition Loan:

(i) any Shares purchased with the proceeds of such Share Acquisition Loan; and

(ii) any Shares purchased with the proceeds of a previous Share Acquisition Loan, provided that such previous Share Acquisition Loan is repaid with the proceeds of the Share Acquisition Loan for which such Shares are pledged.

Any Share Acquisition Loan shall be without recourse against the Plan or the Trustee, and, except as specifically provided in this section 2.12, no assets of the Plan shall be pledged as collateral for a Share Acquisition Loan.

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(c) The Company shall contribute under the Plan amounts sufficient to pay each installment of principal and interest on all Share Acquisition Loans payable by the Trust pursuant to this Section and any loan agreement pertaining to the Share Acquisition Loan on or before the date such installment is due and to meet the obligations of the Trustee under the loan. The Trustee shall apply the Company's contributions to the Trust Fund, the earnings on such contributions, and the earnings with respect to Shares that shall have been pledged as collateral for a Share Acquisition Loan, in such proportions as the Committee may direct, to the payment of principal and interest with respect to such Share Acquisition Loan.

(d) All Shares purchased with any Share Acquisition Loan shall be credited to and held in a suspense account under the Trust until they shall be released from such suspense account and allocated to the accounts of Plan Participants in accordance with the Plan. The Plan Administrator shall at least annually advise the Trustee of the number of Shares to be released from such suspense account, as determined in accordance with the Plan.

ARTICLE III

TRUSTEE, PLAN ADMINISTRATOR AND COMMITTEE

SECTION 3.1 COMMITTEE AND PLAN ADMINISTRATOR.

The Company shall certify to the Trustee the names and specimen signatures of the Plan Administrator and of the members of the Committee appointed by the Company to administer the Plan and give directions to the Trustee. Such certification shall include directions as to the number of signatures required for any communication or direction to the Trustee. The Company shall promptly give notice to the Trustee of changes in the identity of the Plan Administrator or in the membership of the Committee. The Plan Administrator or the Committee may also certify to the Trustee the name of any person, together with a specimen signature of any such person, authorized to act for it in relation to the Trustee. The Plan Administrator or the Committee shall promptly give notice to the Trustee of any change in any person authorized to act on behalf of it. For all purposes under this Agreement, until any such notice is received by the Trustee, the Trustee shall be fully protected in assuming that the identity of the Plan Administrator, the membership of the Committee and the authority of any person certified to act in its behalf remain unchanged.

SECTION 3.2 TRUSTEE'S RELIANCE.

The Trustee may rely and act upon any certificate, notice or direction of the Plan Administrator or the Committee, or of a person authorized to act on its behalf, or of the Company or of an Investment Manager which the Trustee believes to be genuine and to have been signed by the person or persons duly authorized to sign such certificate, notice, or direction.

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SECTION 3.3 RETENTION OF ADVISORS.

The Trustee may consult with legal counsel and other professional advisors who may, but need not, be its counsel or advisors or counsel or advisors to the Company, the Plan Administrator, the Committee, or any Plan Participant or beneficiary, with respect to the meaning and construction of this Agreement or its powers, obligations, and conduct hereunder. The Trustee shall be entitled to reasonable reimbursement from the Trust Fund for such legal counsel's and other professional advisors' fees. The Trustee shall not be deemed imprudent, and shall be fully and completely protected, by reason of its taking or refraining form taking any action in accordance with the opinion of counsel.

SECTION 3.4 LIABILITY UNDER THE PLAN.

The duties and obligations of the Trustee shall be limited to those expressly set forth in this Agreement, notwithstanding any reference herein to the Plan. The Trustee shall not be obliged to take or defend any action or participate in or proceed with any suit or legal or administrative proceeding which might subject it to substantial cost or expense or liability unless first indemnified by the Company in an amount and by security satisfactory to it against all losses, costs, damages and expenses which may result therefrom or be occasioned thereby.

SECTION 3.5 INDEMNIFICATION.

The Company shall pay and shall protect, indemnify and save harmless the Trustee and its officers, employees and agents from and against any and all losses, liabilities (including liabilities for penalties), actions, suits, judgments, demands, damages, costs and expenses (including reasonable attorneys' fees and expenses) of any nature arising from or relating to any action or any failure to act by the Trustee, its officers, employees and agents with respect to the transactions contemplated by this Trust Agreement, including any claim made by the Company or its successors that this Trust Agreement is invalid or ultra vires, except to the extent that any such loss, liability, action, suit, judgment, demand, damage, cost or expense is the result of the gross negligence of the Trustee (determined by reference to customary trust company standards) /or willful misconduct of the Trustee, its officers, employees or agents. The Trust assumes no obligation or responsibility with respect to any action required by this Trust Agreement on the part of the Company. The Company and the Trustee may, by separate agreement, agree on terms by which the Company shall indemnify the Trustee in connection with the Trustee's carrying out of its duties hereunder.

SECTION 3.6 BENEFIT CLAIMS LIMITED TO THE TRUST FUND.

The Trustee in its corporate capacity shall not be liable for claims for benefits under the Plan; such claims shall be limited to the Trust Fund. The Trust shall not be liable to make distributions or payments of any kind unless sufficient funds are available therefor in the Trust Fund. The Trustee shall be responsible only for such money and other property as are received by it as Trustee under this Agreement.

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ARTICLE IV

DISTRIBUTIONS FROM THE TRUST FUND

SECTION 4.1 IN GENERAL.

The Trustee shall make payments from the Trust Fund in such amounts, at such times, and to such persons as the Plan Administrator may, from time to time, direct.

SECTION 4.2 DIRECTION BY THE PLAN ADMINISTRATOR.

(a) A direction by the Plan Administrator to make a distribution from the Trust Fund shall:

(i) be made in writing;

(ii) specify the amount of the payment or the number of Shares to be distributed, the date such payment is to be made, the person to whom payment is to be made, and the address to which the payment is to be sent; and

(iii) be deemed to certify to the Trustee that such direction and any payment pursuant thereto are authorized under the terms of the Plan and applicable law.

(b) The Trustee shall be entitled to rely conclusively on the Plan Administrator's certification of its authority to direct a payment without independent investigation. The Trustee shall have no liability to any person with respect to payments made in accordance with the provisions of this Article IV.

SECTION 4.3 METHOD OF PAYMENT.

Payments of money by the Trustee may be made by its check payable to the order of the payee designated by the Plan Administrator and mailed to the payee's address last furnished to the Trustee by the Plan Administrator, or, if no such address has been so furnished, to the payee in care of the Company. Distributions of Shares shall be made by causing the Company, or its transfer agent, to issue to the distributee a stock certificate evidencing ownership of the designated number of Shares. To the extent that any distribution of Shares to any person requires the registration of such Shares under the securities or blue sky laws of the United States or any state, or otherwise requires any governmental approvals, the Company shall undertake to complete such registration or obtain such approvals at its sole expense.

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SECTION 4.4 DISPUTES.

If a dispute arises as to the payment of any funds or delivery of any assets by the Trustee, the Trustee may withhold such payment or delivery until the dispute is determined by a court of competent jurisdiction or finally settled in writing by the parties concerned.

ARTICLE V

RESPONSIBILITIES

SECTION 5.1 GENERAL STANDARD OF CARE.

The Trustee, the Plan Administrator, the members of the Committee and any Investment Manager shall at all times discharge their duties with respect to the Trust Fund solely in the interest of the Plan Participants and their beneficiaries (including any Alternate Payee) and with the care, skill, prudence, and diligence that, under the circumstances prevailing, a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

SECTION 5.2 NO LIABILITY FOR ACTS OF OTHERS.

(a) Subject to section 5.2(b), no "fiduciary" (as such term is defined in section 3(21) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) under this Agreement shall be liable for an act or omission of another person in carrying out any fiduciary responsibility where such fiduciary responsibility is allocated to such other person by this Agreement or pursuant to a procedure established in this Agreement except to the extent that:

(i) such fiduciary participated knowingly in, or knowingly undertook to conceal, an act or omission of such other person, knowing such act or omission to be a breach of fiduciary responsibility;

(ii) such fiduciary, by his failure to comply with section 404(a)(1) of ERISA in the administration of his specific responsibilities which give rise to his status as a fiduciary, has enabled such other person to commit a breach of fiduciary responsibility;

(iii) such fiduciary has knowledge of a breach of fiduciary responsibility by such other person, unless he makes reasonable efforts under the circumstances to remedy the breach; or

-13-

(iv) such fiduciary is a "named fiduciary" (as such term is defined in section 402(a)(2) of ERISA) and has violated his duties under section 404(a)(1) of ERISA:

(A) with respect to the allocation of fiduciary responsibilities among named fiduciaries or the designation of persons other than named fiduciaries to carry out fiduciary responsibilities under this Agreement;

(B) with respect to the establishment or implementation of procedures for allocating fiduciary responsibilities among named fiduciaries or for designating persons other than named fiduciaries to carry out fiduciary responsibilities under this Agreement; or

(C) in continuing the allocation of fiduciary responsibilities among named fiduciaries or the designation of persons other than named fiduciaries to carry out fiduciary responsibilities under this Agreement.

(b) Notwithstanding anything in this Agreement to the contrary, the Trustee shall have no liability or responsibility for an act or omission of an Investment Manager appointed pursuant to section 2.3 in carrying out its fiduciary responsibilities with respect to the Plan, unless the Trustee
(i) by its failure to comply with section 404(a)(1) of ERISA in the administration of its specific responsibilities which give rise to its status as a fiduciary, has enabled such Investment Manager to commit a breach of fiduciary responsibility, or (ii) participated knowingly in, or knowingly undertook to conceal, an act or omission of such Investment Manager, knowing such act or omission to be a breach of fiduciary responsibility.

SECTION 5.3 COMPLIANCE WITH ERISA.

Notwithstanding anything in this Agreement, as amended from time to time, to the contrary, no provision of this Agreement shall be construed so as to violate the requirements of ERISA.

ARTICLE VI

TRUSTEE'S ACCOUNTS

SECTION 6.1 ACCOUNTS.

The Trustee shall keep accurate and detailed accounts of all investments, reinvestments, receipts and disbursements, and other transactions hereunder, and all such accounts and the books and records relating thereto shall be open to inspection at all reasonable times by the Company or the Plan Administrator or persons designated by them.

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SECTION 6.2 VALUATION OF TRUST FUND.

The Trustee shall value or cause to be valued the Trust Fund and any Investment Fund that has been established hereunder as of the last business day of each calendar quarter ("Valuation Date"), and shall report to the Plan Administrator the value of the Trust Fund and each Investment Fund as of such date, within a reasonable time after the first day of the month next succeeding each Valuation Date.

SECTION 6.3 REPORTS TO THE PLAN ADMINISTRATOR.

(a) Within 75 days following the last day of each fiscal year of the trust, and within 75 days following the effective date of the resignation or removal of the Trustee as provided in section 8.1, the Trustee shall render to the Plan Administrator a written account setting forth all investments, receipts, disbursements and other transactions affecting the Trust Fund or any Investment Fund, which account shall be signed by the Trustee and mailed to the Plan Administrator.

(b) The Plan Administrator shall notify the Trustee in writing of any objection or exception to an account so rendered not later than 60 days following the date on which the Account was mailed to the Plan Administrator, whereupon the Plan Administrator and the Trustee shall cooperate in resolving such objection or exception.

(c) If the Plan Administrator has not communicated in writing to the Trustee within 60 days following the mailing of the account to the Plan Administrator any exception or objection to the account, the account shall become an account stated at the end of such 60 day period. If the Plan Administrator does communicate such an exception or objection, as to which it later becomes satisfied, the Plan Administrator shall thereupon indicate in writing its approval of the account, or of the account as amended, and the account shall thereupon become an account stated.

(d) Whenever an account shall have become an account stated as aforesaid, such account shall be deemed to be finally settled and shall be conclusive upon the Trustee, the Company and all persons having or claiming to have any interest in the Trust Fund or under the Plan, and the Trustee shall be fully and completely discharged and released to the same extent as if the account had been settled and allowed by a judgment or decree of a court of competent jurisdiction in an action or proceeding in which the Trustee, the Company, and all persons having or claiming to have any interest in the Trust Fund or under the Plan were parties.

SECTION 6.4 RIGHT OF JUDICIAL SETTLEMENT.

Notwithstanding the provisions of section 6.3, the Trustee, the Plan Administrator, and the Company, or any of them, shall have the right to apply at any time to a court of competent jurisdiction for the judicial settlement of the Trustee's account. In any such case, it shall be necessary to join as parties thereto only the Trustee, the Plan Administrator and the Company; and

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any judgment or decree which may be entered therein shall be conclusive upon all persons having or claiming to have any interest in the Trust Fund or under the Plan.

SECTION 6.5 ENFORCEMENT OF AGREEMENT.

To protect the Trust Fund from expenses which might otherwise be incurred, the Company and the Plan Administrator shall have authority, either jointly or severally, to enforce this Agreement on behalf of all persons claiming any interest in the Trust Fund or under the Plan, and no other person may institute or maintain any action or proceeding against the Trustee or the Trust Fund in the absence of written authority from the Plan Administrator or a judgment of a court of competent jurisdiction that in refusing authority the Plan Administrator acted fraudulently or in bad faith.

ARTICLE VII

TAXES; COMPENSATION OF TRUSTEE

SECTION 7.1 TAXES.

Any taxes that may be imposed upon the Trust Fund or the income therefrom shall be deducted from and charged against the Trust Fund or to the particular Investment Funds to which such taxes are applicable. The Trustee shall notify the Committee of any proposed or final assessments of taxes and may assume that any such taxes are lawfully levied or assessed unless the Committee advises it in writing to the contrary within fifteen days after receiving the above notice from the Trustee. In such case, the Trustee, if requested by the Committee in writing, shall contest the validity of such taxes in any manner deemed appropriate by the Committee; the Company may itself contest the validity of any such taxes, in which case the Committee shall so notify the Trustee and the Trustee shall have no responsibility or liability respecting such contest. If either party to this Agreement contests any such proposed levy or assessments, the other party shall provide such information and cooperation as the party conducting the contest shall reasonably request.

SECTION 7.2 COMPENSATION OF TRUSTEE; EXPENSES.

The Trustee shall receive for its services hereunder such compensation as may be agreed upon in writing from time to time by the Company and the Trustee and shall be reimbursed for its reasonable expenses, including counsel fees, incurred in the performance of its duties hereunder. The Trustee shall deduct from and charge against the Trust Fund such compensation and all such expenses unless previously paid by the Company, except that all commissions paid in connection with the acquisition or sale of Shares shall be paid by the Company. Expenses of the Trust Fund, as well as compensation of the Trustee, that are not paid by the Company and that are general in nature and not directly related to a particular Investment Fund shall be charged to

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the Trust Fund and allocated to each of the Investment Funds in the same proportion that the value of each such Investment Fund bears to the value of the Trust Fund on the Valuation Date next preceding the date of such payments. Any expenses directly related to a particular Investment Fund that are not paid by the Company shall be charged to such Investment Fund.

ARTICLE VIII

RESIGNATION AND REMOVAL OF TRUSTEE

SECTION 8.1 RESIGNATION OR REMOVAL OF TRUSTEE.

The Trustee may resign as trustee hereunder at any time by giving sixty (60) days prior written notice to the Company. The Company may remove the Trustee as trustee hereunder at any time by giving the Trustee prior written notice of such removal, which shall include notice of the appointment of a successor trustee. Such removal shall take effect not earlier than sixty (60) days following receipt of such notice by the Trustee unless otherwise agreed upon by the Trustee and the Company.

SECTION 8.2 APPOINTMENT OF SUCCESSOR.

In the event of the resignation or removal of the Trustee, a successor trustee shall be appointed by the Company. Except as is otherwise provided in section 8.1, such appointment shall take effect upon delivery to the Trustee of an instrument so appointing the successor and an instrument of acceptance executed by such successor, both of which instruments shall be duly acknowledged before a notary public. If within 60 days after notice of resignation shall have been given by the Trustee a successor shall not have been appointed as aforesaid, the Trustee may apply to any court of competent jurisdiction for the appointment of such successor.

SECTION 8.3 SUCCESSION.

(a) Upon the appointment of a successor, the Trustee shall transfer and deliver the Trust Fund to such successor; provided, however, that the Trustee may reserve such sum of money as it shall in its sole discretion deem advisable for payment of its fees and all expenses in connection with the settlement of its account, and any balance of such reserve remaining after the payment of such charges shall be paid over to the successor trustee. If such reserve shall be insufficient to pay such charges, the Trustee shall be entitled to recover the amount of any deficiency from the Company, from the successor trustee, or from both.

(b) Upon the completion of the succession and the rendering of its final accounts, the Trustee shall have no further responsibilities whatsoever under this Agreement.

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SECTION 8.4 SUCCESSOR BOUND BY AGREEMENT.

All the provisions of this Agreement shall apply to any successor trustee with the same force and effect as if such successor had been originally named herein as the trustee hereun der.

ARTICLE IX

AMENDMENT AND TERMINATION

SECTION 9.1 AMENDMENT AND TERMINATION.

(a) The Company may, at any time and from time to time, by instrument in writing executed pursuant to authorization of its Board of Directors, (i) amend in whole or in part any or all of the provisions of this Agreement, or (ii) terminate this Agreement and the trust created hereby; provided, however, that no amendment which affects the rights, duties or responsibilities of the Trustee may be made without the Trustee's consent; and provided further that no such amendment shall divert any part of the Trust Fund to purposes other than for the exclusive benefit of the Plan Participants or their beneficiaries (including any Alternate Payee) at any time prior to the satisfaction of all liabilities with respect to such Participants and their beneficiaries under the Plan and this Agreement.

(b) Any such amendment shall become effective upon receipt by the Trustee of the instrument of amendment and endorsement thereon by the Trustee of its consent thereto, if such consent is required. Any such termination shall become effective upon the receipt by the Trustee of the instrument of termination; thereafter the Trustee, upon the direction of the Plan Administrator, shall liquidate the Trust Fund to the extent required for distribution and, after the final account of the Trustee has been approved or settled, shall distribute the balance of the Trust Fund remaining in its hands as directed by the Plan Administrator, or in the absence of such direction, as may be directed by a judgment or decree of a court of competent jurisdiction. Following any such termination, the powers of the Trustee hereunder shall continue as long as any of the Trust Fund remains in its hands.

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ARTICLE X

MISCELLANEOUS

SECTION 10.1 BINDING EFFECT; ASSIGNABILITY.

This Agreement shall be binding upon, and the powers granted to the Company and the Trustee, respectively, shall be exercisable by the respective successors and assigns of the Company and the Trustee. Any corporation which shall, by merger, consolidation, purchase, or otherwise, succeed to substantially all the trust business of the Trustee shall, upon such succession and without any appointment or other action by the Company, be and become successor trustee hereunder.

SECTION 10.2 GOVERNING LAW.

Except to the extent that the federal law of the United States of America is applicable, this Agreement and the trust created and the Trust Fund held hereunder shall be inter preted, construed and administered in accordance with the law of the State of New York applicable to contracts to be performed entirely within the State of New York and between parties all of whom are citizens and residents of such state. All contributions to the Trust Fund shall be deemed to take place in the State of New York.

SECTION 10.3 NOTICES.

Any communication requested or permitted to be given under this Agreement, including any notice, direction, designation, certification, order, instruction, or objection shall be in writing and signed by the person authorized under the Plan to give the communication. The person receiving such a communication shall be fully protected in acting in accordance therewith. Any notice required or permitted to be given to a party hereunder shall be deemed given if in writing and hand delivered or mailed, postage prepaid, certified mail, return receipt requested, to such party at the following address or at such other address as such party may by written notice specify:

If to the Company:

Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 10990

Attention: PRESIDENT

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WITH COPIES TO:

Thacher Proffitt & Wood
2 World Trade Center
38th Floor
New York, New York 10048

Attention: DOUGLAS J. MCCLINTOCK, ESQ.

If to the Trustee:

Marine Midland Bank
250 Park Avenue
New York, New York 10177

Attention: MR. RICHARD A. GLOVER

WITH COPIES TO:

Helm, Shapiro, Anito & McCale, P.C.
20 Corporate Woods Boulevard
Albany, New York 12211

Attention: BRIAN P. GOLDSTEIN, ESQ.

SECTION 10.4 SEVERABILITY.

The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the remaining provisions.

SECTION 10.5 WAIVER.

Failure of any party to insist at any time or times upon strict compliance with any provision of this Agreement shall not be a waiver of such provision at such time or any later time unless in a writing designated as a waiver and signed by or on behalf of the party against whom enforcement of the waiver is sought.

SECTION 10.6 NON-ALIENATION.

No interest, right or claim in or to any part of the Trust Fund or any payment therefrom shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution, or levy of any kind, and the Trustee and the Plan Administrator shall not recognize any attempt to assign, transfer, sell,

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mortgage, pledge, hypothecate, commute, or anticipate the same, except to the extent required by law.

SECTION 10.7 QUALIFIED PLAN AND TRUST.

This Agreement and the trust hereby created are part of an employee benefit plan which the Company intends shall be qualified under section 401(a) of the Code and until advised to the contrary, the Trustee may assume that the Plan so qualifies and that the trust is exempt from tax under section 501(a) of the Code. However, any taxes that may be assessed on or in respect of the Trust Fund shall be a charge against the Trust Fund. All contributions made prior to the receipt by the Company of a determination from the Internal Revenue Service to the effect that the trust forming part of the Plan is a qualified trust under section 401(a) of the Code and that the trust is exempt from federal income tax under section 501(a) of the Code shall be made on the express condition that such a determination is received, and in the event that the Internal Revenue Service determines that the trust and Plan are not so qualified, all contributions made prior to the date of the receipt of such determination, after giving effect to any income, gain or loss, less any compensation and expenses properly chargeable thereto, shall be returned to the Company.

SECTION 10.8 RETURN OF CONTRIBUTIONS.

(a) In the event that any contribution to the Trust Fund by the Company shall be the result of a mistake of fact, such contribution (after giving effect to any income gain or loss, less any compensation or expenses properly chargeable thereto) shall be returned to the Company promptly upon discovery of the mistake of fact; PROVIDED, HOWEVER, that no such return shall be made after the first anniversary of the date of the contribution.

(b) In the event that a contribution to the Trust Fund by the Company shall be conditioned upon its deductibility under the Code, the amount of such contribution which shall have been disallowed as a deduction shall be returned to the Company within one (1) year after the date on which it is disallowed.

SECTION 10.9 COMPLIANCE WITH SECURITIES LAWS.

In the event that the Plan or any portion thereof, or any interest therein, by virtue of investments made in Shares, shall be deemed to be a "security" for purposes of the Securities Act of 1933, the Securities Exchange Act of 1934 or any other federal or state law, for which there is no exemption from the registration, reporting, blue sky or other requirements applicable to securities under such laws, the Company shall, at its sole cost and expense, take all such actions as are necessary or appropriate to comply with the requirements of such laws. The Company hereby agrees to indemnify the Trustee and hold it harmless from and against any claim or liability which may be asserted against the Trustee by reason of any determination that the Plan or any portion thereof, or any interest therein, constitutes such a security.

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SECTION 10.10 HEADINGS.

The headings of Articles and sections are included solely for convenience of reference. If there is any conflict between such headings and the text of the Agreement, the text shall control.

SECTION 10.11 PARTY IN INTEREST INFORMATION.

The Company shall provide the Trustee with such information concerning the relationship between any person or organization and the Plan as the Trustee reasonably requests in order to determine whether such person or organization is a party in interest with respect to the Plan within the meaning of Section 3(14) of ERISA.

SECTION 10.12 CONSTRUCTION OF LANGUAGE.

Whenever appropriate in this Agreement, words used in the singular may be read in the plural; words used in the plural may be read in the singular; and words importing the masculine gender shall be deemed equally to refer to the female gender or the neuter. Any reference to a section number shall refer to a section of this Agreement, unless otherwise indicated.

SECTION 10.13 COUNTERPARTS.

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the Company and the Trustee, respectively, have caused this Agreement to be executed in their corporate names and their corporate seals to be hereunto affixed and duly attested, on the dates indicated below their respective signatures.

WARWICK COMMUNITY BANCORP, INC.

                                      By /s/ Timothy A. Dempsey
                                         ---------------------------------------
                                             Timothy A. Dempsey

                                      Title: President and Chief Executive
                                             Officer

                                      Date:  December 11, 1997
                                            ------------------------------------


ATTEST:


 /s/ Nancy L. Sobotor-Littell
---------------------------------------
            Secretary

[Seal]

MARINE MIDLAND BANK

                                      By /s/ Richard A. Glover
                                         ---------------------------------------
                                             Richard A. Glover

                                      Title: Vice President and Trust Officer

                                      Date:  December 9, 1997
                                           -------------------------------------

ATTEST:


/s/ Mindy F. Smith
---------------------------------------
     Secretary

[Seal]

-23-

STATE OF NEW YORK                   )
                                            : ss.:
COUNTY OF ORANGE                    )

On this 11th day of December, 1997, before me personally came TIMOTHY A. DEMPSEY, to me known, who, being by me duly sworn, did depose and say that he resides at 36 Waterbury Road, Warwick, New York 10990; that he is the President and Chief Executive Officer of WARWICK COMMUNITY BANCORP, INC., the business corporation described in and which executed the foregoing instrument; that he knows the seal of said business corporation; that the seal affixed to said instrument is such business corporation's seal; that it was so affixed by order of the Board of Directors of said business corporation; and that he signed his name thereto by like order.

/s/ Barbara Destafeno
---------------------------------------
            Notary Public

STATE OF NEW YORK                   )
                                            : ss.:
COUNTY OF NEW YORK                  )

On this 9th day of December, 1997, before me personally came RICHARD A. GLOVER, to me known, who, being by me duly sworn, did depose and say that he resides at 5 Windward Court, Dix Hills, New York, that he is Vice President and Trust Officer of MARINE MIDLAND BANK, the banking corporation described in and which executed the foregoing instru ment; that he knows the seal of said banking corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said banking corporation; and that he signed his name thereto by like order.

/s/ Mindy F. Smith
---------------------------------------
             Notary Public

-24-

Exhibit 10.14

LOAN AGREEMENT

BY AND BETWEEN

WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

AND

WARWICK COMMUNITY BANCORP, INC.

MADE AND ENTERED INTO AS OF
DECEMBER 23, 1997


TABLE OF CONTENTS

                                                                         Page
                                                                         ----

                                  ARTICLE I

                                 DEFINITIONS

SECTION 1.1       BUSINESS DAY..............................................1
SECTION 1.2       CODE......................................................1
SECTION 1.3       DEFAULT...................................................2
SECTION 1.4       ERISA.....................................................2
SECTION 1.5       EVENT OF DEFAULT..........................................2
SECTION 1.6       INDEPENDENT COUNSEL.......................................2
SECTION 1.7       LOAN......................................................2
SECTION 1.8       LOAN DOCUMENTS............................................2
SECTION 1.9       PLAN YEAR.................................................2
SECTION 1.10      PLEDGE AGREEMENT..........................................2
SECTION 1.11      PRINCIPAL AMOUNT..........................................2
SECTION 1.12      PROMISSORY NOTE...........................................2
SECTION 1.13      REGISTER..................................................2


                          ARTICLE II

                  THE LOAN; PRINCIPAL AMOUNT;
              INTEREST; SECURITY; INDEMNIFICATION

SECTION 2.1       THE LOAN; PRINCIPAL AMOUNT................................2
SECTION 2.2       INTEREST..................................................3
SECTION 2.3       PROMISSORY NOTE...........................................4
SECTION 2.4       PAYMENT OF TRUST LOAN.....................................4
SECTION 2.5       PREPAYMENT................................................5
SECTION 2.6       METHOD OF PAYMENTS........................................5
SECTION 2.7       USE OF PROCEEDS OF LOAN...................................6
SECTION 2.8       SECURITY..................................................6
SECTION 2.9       REGISTRATION OF THE PROMISSORY NOTE.......................7

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

SECTION 3.1       POWER, AUTHORITY, CONSENTS................................7
SECTION 3.2       DUE EXECUTION, VALIDITY, ENFORCEABILITY...................7
SECTION 3.3       PROPERTIES, PRIORITY OF LIENS.............................7
SECTION 3.4       NO DEFAULTS, COMPLIANCE WITH LAWS.........................8
SECTION 3.5       PURCHASES OF COMMON STOCK.................................8

(i)

Page

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE LENDER

SECTION 4.1       POWER, AUTHORITY, CONSENTS................................8
SECTION 4.2       DUE EXECUTION, VALIDITY, ENFORCEABILITY...................9
SECTION 4.3       ESOP; CONTRIBUTIONS.......................................9
SECTION 4.4       TRUSTEE; COMMITTEE........................................9
SECTION 4.5       COMPLIANCE WITH LAWS; ACTIONS.............................9
SECTION 4.6       EXEMPT LOAN RULES.........................................9

                           ARTICLE V
                       EVENTS OF DEFAULT
SECTION 5.1       EVENTS OF DEFAULT UNDER LOAN AGREEMENT...................10
SECTION 5.2       LENDER'S RIGHTS UPON EVENT OF DEFAULT....................10

                          ARTICLE VI

                   MISCELLANEOUS PROVISIONS

SECTION 6.1       PAYMENTS DUE TO THE LENDER...............................11
SECTION 6.2       PAYMENTS.................................................11
SECTION 6.3       SURVIVAL.................................................11
SECTION 6.4       MODIFICATIONS, CONSENTS AND WAIVERS; ENTIRE AGREEMENT....11
SECTION 6.5       REMEDIES CUMULATIVE......................................12
SECTION 6.6       FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS............12
SECTION 6.7       NOTICES..................................................12
SECTION 6.8       COUNTERPARTS.............................................13
SECTION 6.9       CONSTRUCTION; GOVERNING LAW..............................14
SECTION 6.10      SEVERABILITY.............................................14
SECTION 6.11      BINDING EFFECT; NO ASSIGNMENT OR DELEGATION..............14

EXHIBIT A FORM OF PROMISSORY NOTE.........................................A-1 EXHIBIT B FORM OF PLEDGE AGREEMENT........................................B-1 EXHIBIT C FORM OF ASSIGNMENT..............................................C-1 EXHIBIT D FORM OF IRREVOCABLE PROXY.......................................D-1

(ii)

LOAN AGREEMENT

This LOAN AGREEMENT ("Loan Agreement") is made and entered into as of the 23rd day of December, 1997, by and between the WARWICK COMMUNITY BANCORP, INC. EMPLOYEE STOCK OWNERSHIP PLAN TRUST ("Borrower"), a trust forming part of the Warwick Community Bancorp, Inc. Employee Stock Ownership Plan ("ESOP"), acting through and by its Trustee, MARINE MIDLAND BANK ("Trustee"), a banking corporation organized under the laws of the State of New York and having an office at 140 Broadway, New York, New York 10005; and WARWICK COMMUNITY BANCORP, INC. ("Lender"), a corporation organized and existing under the laws of the state of Delaware, having an office at 18 Oakland Avenue, Warwick, New York 10990-0591.

W I T N E S S E T H :

WHEREAS, in the Combined Certificate of Directions dated as of December 11, 1997, the Lender, the ESOP Plan Administrator and the ESOP Committee ("Committee") has certified that the Trustee, as Trustee of the ESOP, has been directed to acquire, through open market purchases, if necessary, 528,523 shares of common stock of the Lender ("Common Stock"), which is equal to 8% of the shares of Common Stock issued by the Lender in connection with the conversion of The Warwick Savings Bank ("Conversion"), including the number of shares to be issued to The Warwick Savings Foundation ("Foundation"), and to borrow funds from the Lender for the purpose of financing authorized purchases of Common Stock; and

WHEREAS, the Lender is willing to make a loan to the Borrower for such purpose;

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

The following definitions shall apply for purposes of this Loan Agreement, except to the extent that a different meaning is plainly indicated by the context:

SECTION 1.1 BUSINESS DAY means any day other than a Saturday, Sunday or other day on which banks are authorized or required to close under federal law or the laws of the State of New York.

SECTION 1.2 CODE means the Internal Revenue Code of 1986 (including the cor responding provisions of any succeeding law).

SECTION 1.3 DEFAULT means an event or condition which would constitute an Event of Default. The determination as to whether an event or condition would constitute an Event of Default shall be determined without regard to any applicable requirement of notice or lapse of time.

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SECTION 1.4 ERISA means the Employee Retirement Income Security Act of 1974, as amended (including the corresponding provisions of any succeeding law).

SECTION 1.5 EVENT OF DEFAULT means an event or condition described in Article 5.

SECTION 1.6 INDEPENDENT COUNSEL means Thacher Proffitt & Wood or other counsel mutually satisfactory to both the Lender and the Borrower.

SECTION 1.7 LOAN means the loan described in section 2.1.

SECTION 1.8 LOAN DOCUMENTS means, collectively, this Loan Agreement, the Promissory Note and the Pledge Agreement and all other documents now or hereafter executed and delivered in connection with such documents, including all amendments, modifications and supplements of or to all such documents.

SECTION 1.9 PLAN YEAR means the calendar year, beginning with the calendar year ending December 31, 1997.

SECTION 1.10 PLEDGE AGREEMENT means the agreement described in section 2.8(a).

SECTION 1.11 PRINCIPAL AMOUNT means the face amount of the Promissory Note, determined as set forth in section 2.1(c).

SECTION 1.12 PROMISSORY NOTE means the promissory note described in section 2.3.

SECTION 1.13 REGISTER means the register described in section 2.9.

ARTICLE II

THE LOAN; PRINCIPAL AMOUNT;
INTEREST; SECURITY; INDEMNIFICATION

SECTION 2.1 THE LOAN; PRINCIPAL AMOUNT.

(a) The Lender hereby agrees to lend to the Borrower such amounts, and at such times, as shall be determined under this section 2.1; PROVIDED, HOWEVER, that in no event shall the aggregate amount lent under this Loan Agreement from time to time exceed an amount sufficient to permit the Borrower to purchase 528,523 shares of Common Stock, which is equal to 8% of the number of shares of Common Stock issued by the Lender in the Conversion, including the number of shares of Common Stock issued to the Foundation.

(b) Subject to the limitations of section 2.1(a), the Borrower shall determine the amounts borrowed under this Agreement, and the times at which such borrowings are effected. Each such determination shall be evidenced in a writing which shall set forth the amount to be borrowed and the date on which the Lender shall disburse such amount, and such writing shall be

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furnished to the Lender by notice from the Borrower. The Lender shall disburse to the Borrower the amount specified in each such notice on the date specified therein or, if later, as promptly as practicable following the Lender's receipt of such notice; PROVIDED, HOWEVER, that the Lender shall have no obligation to disburse funds pursuant to this Agreement following the occurrence of a Default or an Event of Default until such time as such Default or Event of Default shall have been cured.

(c) For all purposes of this Loan Agreement, the Principal Amount on any date shall be equal to the excess, if any, of:

(i) the aggregate amount disbursed by the Lender pursuant to section 2.1(b) on or before such date; over

(ii) the aggregate amount of any repayments of such amounts made before such date.

The Lender shall maintain on the Register a record of, and shall record on the Promissory Note, the Principal Amount, any changes in the Principal Amount and the effective date of any changes in the Principal Amount.

SECTION 2.2 INTEREST.

(a) The Borrower shall pay to the Lender interest on the Principal Amount, for the period commencing on the date of this Loan Agreement and continuing until the Principal Amount shall be paid in full at the rate of eight percent (8%) per annum. Interest payable under this Agreement shall be computed on the basis of a year of 365 days and actual days elapsed (including the first day but excluding the last) occurring in the period to which the computation relates.

(b) Except as otherwise provided in this section 2.2(b), accrued interest on the Principal Amount shall be payable by the Borrower quarterly in arrears commencing on the last Business Day of the first calendar quarter to end following the date of this Agreement and continu ing on the last Business Day of each calendar quarter thereafter and upon the payment or prepay ment of such Loan. All interest on the Principal Amount shall be paid by the Borrower in immediately available funds. The Lender shall remit to the Borrower, at least three (3) Business Days before the end of each calendar quarter, a statement of the interest payment due under section 2.2(a) for such quarter; PROVIDED, HOWEVER, that a delay or failure by the Lender in providing the Borrower with such statement shall not alter the Borrower's obligation to make such payment.

(c) Anything in this Loan Agreement or the Promissory Note to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender's receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payment referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the

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laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.

SECTION 2.3 PROMISSORY NOTE.

The Loan shall be evidenced by a Promissory Note of the Borrower in substantially the form of Exhibit A attached hereto, dated the date hereof, payable to the order of the Lender in the Principal Amount and otherwise duly completed.

SECTION 2.4 PAYMENT OF TRUST LOAN.

(a) The Principal Amount of the Loan shall be repaid in annual installments payable on the last Business Day of each Plan Year ending after the date of this Agreement. The amount of each such annual installment shall be equal to a fraction of the Principal Amount on the due date of such installment, determined in accordance with the following schedule:

 INSTALLMENT DUE ON                FRACTION OF OUTSTANDING
LAST BUSINESS DAY OF                  PRINCIPAL AMOUNT
     DECEMBER:                        ----------------
     ---------
        1997                                 1/10
        1998                                 1/10
        1999                                 1/10
        2000                                 1/10
        2001                                 1/10
        2002                                 1/10
        2003                                 1/10
        2004                                 1/10
        2005                                 1/10
        2006                                 1/10

PROVIDED, HOWEVER, that the Borrower shall not be required to make any payment of principal due to be made in any Plan Year to the extent that (i) following such payment, the consolidated return on average assets of Warwick Community Bancorp. Inc. for such Plan Year, excluding the contribution by Warwick Community Bancorp, Inc. to the Foundation, would be less than one-half of one percent (0.5%) or the consolidated return on average equity for such Plan Year, excluding the contribution by Warwick Community Bancorp, Inc. to the Foundation, would be less than four percent (4%) or (ii) such payment would not be deductible for federal income tax purposes for such Plan Year under section 404 of the Code. Notwithstanding anything contained herein to the contrary, a reduction in regularly scheduled principal payments shall not be permitted pursuant to the preceding sentence if such reduction would, in the sole discretion of the Trustee, based on the opinion of its counsel, violate the exempt loan rules described in section 4.6 hereof.

(b) Any payment not required to made pursuant to the clause
(i) of the proviso in section 2.4(a) shall be deferred to and be payable on the earlier of the tenth (10th) anniversary of the loan origination date or the last day of the first Plan Year in which such proviso would not

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apply to alleviate a requirement of payment; and payment not required to be made pursuant to clause (ii) of section 2.4(a) shall be deferred to and be payable on the last day of the first Plan Year in which such payment may be made on a tax deductible basis.

SECTION 2.5 PREPAYMENT.

The Borrower shall be entitled to prepay the Loan in whole or in part, at any time and from time to time; PROVIDED, HOWEVER, that the Borrower shall give notice to the Lender of any such prepayment; and provided, further, that any partial prepayment of the Loan shall be in an amount not less than TEN THOUSAND DOLLARS ($10,000.00). Any such prepayment shall be: (a) permanent and irrevocable: (b) accompanied by all accrued interest through the date of such prepayment; (c) made without premium or penalty; and (d) applied in the inverse order of the maturity of the installments thereof unless the Lender and the Borrower agree to apply such prepayments in some other order.

SECTION 2.6 METHOD OF PAYMENTS.

(a) All payments of principal, interest, other charges (including indemnities) and other amounts payable by the Borrower hereunder shall be made in lawful money of the United States, in immediately available funds, to the Lender at the address specified in or pursuant to this Loan Agreement for notices to the Lender, not later than 3:00 P.M., New York time, on the date on which such payment shall become due. Any such payment made on such date but after such time shall, if the amount paid bears interest, and except as expressly provided to the contrary herein, be deemed to have been made on, and interest shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and when paid, such payment shall include interest to the day on which such payment is in fact made.

(b) Notwithstanding anything to the contrary contained in this Loan Agreement or the Promissory Note, neither the Borrower nor the Trustee shall be obligated to make any payment, repayment or prepayment on the Promissory Note or take or refrain from taking any other action hereunder or under the Promissory Note if doing so would cause the ESOP to cease to be an employee stock ownership plan within the meaning of section 4975(e)(7) of the Code or qualified under section 401(a) of the Code or cause the Borrower to cease to be a tax exempt trust under section 501(a) of the Code or if such act or failure to act would cause the Borrower or the Trustee to engage in any "prohibited transaction" as such term is defined in section 4975(c) of the Code and the regulations promulgated thereunder which is not exempted by section 4975(c)(2) or (d) of the Code and the regulations promulgated thereunder or in section 406 of ERISA and the regulations promulgated thereunder which is not exempted by section 408(b) of ERISA and the regulations promulgated thereunder; PROVIDED, HOWEVER, that in each case, the Borrower or the Trustee or both, as the case may be, may act or refrain from acting pursuant to this section 2.6(b) on the basis of an opinion of Independent Counsel. The Borrower and the Trustee may consult with Independent Counsel, and any opinion of such Independent Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such opinion of Independent Counsel. Nothing contained in this section 2.6(b) shall be construed as imposing a duty on either the Borrower or the Trustee to

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consult with Independent Counsel. Any obligation of the Borrower or the Trustee to make any payment, repayment or prepayment on the Promissory Note or to take or refrain from taking any other act hereunder or under the Promissory Note which is excused pursuant to this section 2.6(b) shall be considered a binding obligation of the Borrower or the Trustee, or both, as the case may be, for the purposes of determining whether a Default or Event of Default has occurred hereunder or under the Promissory Note and nothing in this section 2.6(b) shall be construed as providing a defense to any remedies otherwise available upon a Default or an Event of Default hereunder (other than the remedy of specific performance).

SECTION 2.7 USE OF PROCEEDS OF LOAN.

The entire proceeds of the Loan shall be used solely for acquiring shares of Common Stock, and for no other purpose whatsoever.

SECTION 2.8 SECURITY.

(a) In order to secure the due payment and performance by the Borrower of all of its obligations under this Loan Agreement, simultaneously with the execution and delivery of this Loan Agreement by the Borrower, the Borrower shall:

(i) pledge to the Lender as Collateral (as defined in the Pledge Agreement), and grant to the Lender a first priority lien on and security interest in, the Common Stock purchased with the Principal Amount, by the execution and delivery to the Lender of a Pledge Agreement in the form attached hereto as Exhibit B; and

(ii) execute and deliver, or cause to be executed and delivered, such other agreements, instruments and documents as the Lender may reasonably require in order to effect the purposes of the Pledge Agreement and this Loan Agreement.

(b) The Lender shall release from encumbrance under the Pledge Agreement and transfer to the Borrower, as of the date on which any payment or prepayment of the Principal Amount is made, a number of shares of Common Stock held as Collateral pursuant to section 6.4 of the ESOP.

SECTION 2.9 REGISTRATION OF THE PROMISSORY NOTE.

(a) The Lender shall maintain a Register providing for the registration of the Principal Amount and any stated interest and of transfer and exchange of the Promissory Note. Transfer of the Promissory Note may be effected only by the surrender of the old instrument and either the reissuance by the Borrower of the old instrument to the new holder or the issuance by the Borrower of a new instrument to the new holder. The old Promissory Note so surrendered shall be cancelled by the Lender and returned to the Borrower after such cancellation.

(b) Any new Promissory Note issued pursuant to section 2.9(a) shall carry the same rights to interest (unpaid and to accrue) carried by the Promissory Note so transferred or ex changed so that there will not be any loss or gain of interest on the note surrendered. Such new

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Promissory Note shall be subject to all of the provisions and entitled to all of the benefits of this Agreement. Prior to due presentment for registration or transfer, the Borrower may deem and treat the registered holder of any Promissory Note as the holder thereof for purposes of payment and all other purposes. A notation shall be made on each new Promissory Note of the amount of all payments of principal and interest theretofore paid.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

The Borrower hereby represents and warrants to the Lender as follows:

SECTION 3.1 POWER, AUTHORITY, CONSENTS.

The Borrower has the power to execute, deliver and perform this Loan Agreement, the Promissory Note and the Pledge Agreement, all of which have been duly authorized by all necessary and proper corporate or other action.

SECTION 3.2 DUE EXECUTION, VALIDITY, ENFORCEABILITY.

Each of the Loan Documents, including, without limitation, this Loan Agreement, the Promissory Note and the Pledge Agreement, have been duly executed and delivered by the Borrower; and each constitutes the valid and legally binding obligation of the Borrower, enforceable in accordance with its terms.

SECTION 3.3 PROPERTIES, PRIORITY OF LIENS.

The liens which have been created and granted by the Pledge Agreement constitute valid, first liens on the properties and assets covered by the Pledge Agreement, subject to no prior or equal lien.

SECTION 3.4 NO DEFAULTS, COMPLIANCE WITH LAWS.

The Borrower is not, to the actual knowledge of the Trustee, in default in any material respect under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it is materially affected.

SECTION 3.5 PURCHASES OF COMMON STOCK.

Upon consummation of any purchase of Common Stock by the Borrower with the proceeds of the Loan, the Borrower shall acquire valid, legal and marketable title to all of the Common Stock so purchased, free and clear of any liens, other than a pledge to the Lender of the Common Stock so purchased pursuant to the Pledge Agreement. To the actual knowledge of the

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Trustee, (a) neither the execution and delivery of the Loan Documents nor the performance of any obligation thereunder violates any provision of law or conflicts with or results in a breach of or creates (with or without the giving of notice or lapse of time, or both) a default under any agreement to which the Borrower is a party or by which it is bound or any of its properties is affected, and (b) no consent of any federal, state or local governmental authority, agency or other regulatory body, the absence of which could have a materially adverse effect on the Borrower or the Trustee, is or was required to be obtained in connection with the execution, delivery or performance of the Loan Documents and the transactions contemplated therein or in connection therewith, including, without limitation, with respect to the transfer of the shares of Common Stock purchased with the proceeds of the Loan pursuant thereto.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE LENDER

The Lender hereby represents and warrants to the Borrower as follows:

SECTION 4.1 POWER, AUTHORITY, CONSENTS.

The Lender has the power to execute, deliver and perform this Loan Agreement, the Pledge Agreement and all documents executed by the Lender in connection with the Loan, all of which have been duly authorized by all necessary and proper corporate or other action. No consent, authorization or approval or other action by any governmental authority or regulatory body, and no notice by the Lender to, or filing by the Lender with, any governmental authority or regulatory body is required for the due execution, delivery and performance of this Loan Agreement.

SECTION 4.2 DUE EXECUTION, VALIDITY, ENFORCEABILITY.

This Loan Agreement and the Pledge Agreement have been duly executed and delivered by the Lender; and each constitutes a valid and legally binding obligation of the Lender, enforceable in accordance with its terms.

SECTION 4.3 ESOP; CONTRIBUTIONS.

The ESOP and the Borrower have been duly created, organized and maintained by the Lender in compliance with all applicable laws, regulations and rulings. The ESOP qualifies as an "employee stock ownership plan" as defined in section 4975(e)(7) the Code. The ESOP provides that the Lender may make contributions to the ESOP in an amount necessary to enable the Trustee to amortize the Loan in accordance with the terms of the Promissory Note and this Loan Agreement, and the Lender will make such contributions; PROVIDED, HOWEVER, that no such contributions shall be required if they would adversely affect the qualification of the ESOP under section 401(a) of the Code.

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SECTION 4.4 TRUSTEE; COMMITTEE.

The Lender has taken such action as is required to be taken by it to duly appoint the Trustee and the members of the Committee. The Lender expressly acknowledges and agrees that this Loan Agreement, the Promissory Note and the Pledge Agreement are being executed by the Trustee not in its individual capacity but solely as trustee of and on behalf of the Borrower.

SECTION 4.5 COMPLIANCE WITH LAWS; ACTIONS.

Neither the execution and delivery by the Lender of this Loan Agreement or any instruments required thereby, nor compliance with the terms and provisions of any such documents by the Lender, constitutes a violation of any provision of any law or any regulation, order, writ, injunction or decree or any court or governmental instrumentality, or an event of default under any agreement, to which the Lender is a party or by which the Lender is bound or to which the Lender is subject, which violation or event of default would have a material adverse effect on the Lender. There is no action or proceeding pending or threatened against either of the ESOP or the Borrower before any court or administrative agency.

SECTION 4.6 EXEMPT LOAN RULES.

The Loan will be an "exempt loan," as that phrase is defined in Treasury Regulation section 54.4975-7 and Department of Labor Regulation section 2550.408b-3, and the transactions contemplated by the Loan Documents are not nonexempt "prohibited transactions" under section 4975 of the Code and section 406 of ERISA.

ARTICLE V

EVENTS OF DEFAULT

SECTION 5.1 EVENTS OF DEFAULT UNDER LOAN AGREEMENT.

Each of the following events shall constitute an "Event of Default" hereunder:

(a) Failure to make any payment or mandatory prepayment of principal of the Promissory Note when due, or failure to make any payment of interest on the Promissory Note not later than five (5) Business Days after the date when due.

(b) Failure by the Borrower to perform or observe any term, condition or covenant of this Loan Agreement or of any of the other Loan Documents, including, without limitation, the Promissory Note and the Pledge Agreement; PROVIDED, HOWEVER, that such failure is not cured by the Borrower within five (5) Business Days after notice of such failure is provided to the Borrower by the Lender.

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(c) Any representation or warranty made in writing to the Lender in any of the Loan Documents or any certificate, statement or report made or delivered in compliance with this Loan Agreement, shall have been false or misleading in any material respect when made or delivered.

SECTION 5.2 LENDER'S RIGHTS UPON EVENT OF DEFAULT.

If an Event of Default under this Loan Agreement shall occur and be continuing, the Lender shall have no rights to assets of the Borrower other than: (a) contributions (other than contributions of Common Stock) that are made by the Lender to enable the Borrower to meet its obligations pursuant to this Loan Agreement and earnings attributable to the investment of such contributions and (b) "Eligible Collateral" (as defined in the Pledge Agreement); PROVIDED, HOWEVER, that: (i) the value of the Borrower's assets transferred to the Lender following an Event of Default in satisfaction of the due and unpaid amount of the Loan shall not exceed the amount in default (without regard to amounts owing solely as a result of any acceleration of the Loan); (ii) the Borrower's assets shall be transferred to the Lender following an Event of Default only to the extent of the failure of the Borrower to meet the payment schedule of the Loan; and (iii) all rights of the Lender to the Common Stock purchased with the proceeds of the Loan covered by the Pledge Agreement following an Event of Default shall be governed by the terms of the Pledge Agreement.

ARTICLE VI

MISCELLANEOUS PROVISIONS

SECTION 6.1 PAYMENTS DUE TO THE LENDER.

If any amount is payable by the Borrower to the Lender pursuant to any indemnity obligation contained herein, then the Borrower shall pay, at the time or times provided therefor, any such amount and shall indemnify the Lender against and hold it harmless from any loss or damage resulting from or arising out of the nonpayment or delay in payment of any such amount. If any amounts as to which the Borrower has so indemnified the Lender hereunder shall be assessed or levied against the Lender, the Lender may notify the Borrower and make immediate payment thereof, together with interest or penalties in connection therewith, and shall thereupon be entitled to and shall receive immediate reimbursement therefor from the Borrower, together with interest on each such amount as provided in section 2.2(c). Notwithstanding any other provision contained in this Loan Agreement, the covenants and agreements of the Borrower contained in this section 6.1 shall survive: (a) payment of the Promissory Note and (b) termination of this Loan Agreement.

SECTION 6.2 PAYMENTS.

All payments hereunder and under the Promissory Note shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments

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shall not be less than the amounts otherwise specified to be paid under this Loan Agreement and the Promissory Note, subject to any applicable tax withholding requirements. Upon payment in full of the Promissory Note, the Lender shall mark such Promissory Note "Paid" and return it to the Borrower.

SECTION 6.3 SURVIVAL.

All agreements, representations and warranties made herein shall survive the delivery of this Loan Agreement and the Promissory Note.

SECTION 6.4 MODIFICATIONS, CONSENTS AND WAIVERS; ENTIRE AGREEMENT.

No modification, amendment or waiver of or with respect to any provision of this Loan Agreement, the Promissory Note, the Pledge Agreement, or any of the other Loan Documents, nor consent to any departure from any of the terms or conditions thereof, shall in any event be effective unless it shall be in writing and signed by the party against whom enforcement thereof is sought. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on a party in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. This Loan Agreement embodies the entire agreement and understanding between the Lender and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof.

SECTION 6.5 REMEDIES CUMULATIVE.

Each and every right granted to the Lender hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Lender or the holder of the Promissory Note to exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof or the exercise of any other right. The due payment and performance of the obligations under the Loan Documents shall be without regard to any counterclaim, right of offset or any other claim whatsoever which the Borrower may have against the Lender and without regard to any other obligation of any nature whatsoever which the Lender may have to the Borrower, and no such counterclaim or offset shall be asserted by the Borrower in any action, suit or proceeding instituted by the Lender for payment or performance of such obligations.

SECTION 6.6 FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS.

At any time and from time to time, upon the request of the Lender, the Borrower shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Lender may reasonably request in order to fully effect the terms of this Loan Agreement, the Promissory Note, the Pledge Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto or in connection with the Loan.

SECTION 6.7 NOTICES.

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Except as otherwise specifically provided for herein, all notices, requests, reports and other communications pursuant to this Loan Agreement shall be in writing, either by letter (delivered by hand or commercial messenger service or sent by registered or certified mail, return receipt requested, except for routine reports delivered in compliance with Article VI hereof which may be sent by ordinary first-class mail) or telex or facsimile, addressed as follows:

(a) If to the Borrower:

Warwick Community Bancorp, Inc. Employee Stock Ownership Plan Trust c/o The Warwick Savings Bank 18 Oakland Avenue Warwick, New York 10990-0591 Attention: Mr. Timothy A. Dempsey President and Chief Executive Officer

with copies to:

                  Marine Midland Bank
                  140 Broadway
                  New York, New York  10005
                  Attention:  Mr. Richard A. Glover
                              Vice President

                  Thacher Proffitt & Wood
                  Two World Trade Center
                  New York, New York  10048
                  Attention:       Douglas J. Mcclintock, Esq.

                  Helm, Shapiro, Anito & McCale, P.C.
                  20 Corporate Woods Boulevard
                  Albany, New York  12211-2350
                  Attention:       Brian P. Goldstein, Esq.

(b)      If to the Lender:

                  Warwick Community Bancorp, Inc.
                  18 Oakland Avenue
                  Warwick, New York 10990-0591
                  Attention:       Mr. Timothy A. Dempsey
                                   President And Chief
                                   Executive Officer

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with a copy to:

Thacher Proffitt & Wood Two World Trade Center New York, New York 10048 Attention: Douglas J. McClintock, Esq.

Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or by commercial messenger service, or sent by telex or facsimile, to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; PROVIDED, HOWEVER, that any such notice shall be deemed to have been given only when actually received by the party to whom it is addressed.

SECTION 6.8 COUNTERPARTS.

This Loan Agreement may be signed in any number of counterparts which, when taken together, shall constitute one and the same document.

SECTION 6.9 CONSTRUCTION; GOVERNING LAW.

The headings used in the table of contents and in this Loan Agreement are for convenience only and shall not be deemed to constitute a part hereof. All uses herein of any gender or of singular or plural terms shall be deemed to include uses of the other genders or plural or singular terms, as the context may require. All references in this Loan Agreement to an Article or section shall be to an Article or section of this Loan Agreement, unless otherwise specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and the other Loan Documents shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

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SECTION 6.10 SEVERABILITY.

Wherever possible, each provision of this Loan Agreement shall be interpreted in such manner as to be effective and valid under applicable law; however, the provisions of this Loan Agreement are severable, and if any clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Loan Agreement in any jurisdiction. Each of the covenants, agreements and conditions contained in this Loan Agreement is independent, and compliance by a party with any of them shall not excuse non-compliance by such party with any other. The Borrower shall not take any action the effect of which shall constitute a breach or violation of any provision of this Loan Agreement.

SECTION 6.11 BINDING EFFECT; NO ASSIGNMENT OR DELEGATION.

This Loan Agreement shall be binding upon and inure to the benefit of the Borrower and its successors and the Lender and its successors and assigns. The rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Lender, and any purported assignment or delegation without such consent shall be void.

IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed as of the date first above written.

WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

BY: MARINE MIDLAND BANK, AS TRUSTEE

BY: /s/ Richard A. Glover
    -----------------------------------

TITLE: Vice President
      ---------------------------------

WARWICK COMMUNITY BANCORP, INC.

BY: /s/ Timothy A. Dempsey
    -----------------------------------
        Timothy A. Dempsey
        President and Chief Executive
        Officer

14

EXHIBIT A
TO LOAN AGREEMENT
BY AND BETWEEN
WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
WARWICK COMMUNITY BANCORP, INC.

FORM OF PROMISSORY NOTE

For the "Principal Amount," Warwick, New York as defined below December 23, 1997

FOR VALUE RECEIVED, the undersigned, Warwick Community Bancorp, Inc. Employee Stock Ownership Plan Trust ("Borrower"), acting by and through its Trustee, Marine Midland Bank ("Trustee"), hereby promises to pay to the order of Warwick Community Bancorp, Inc. ("Lender") the "Principal Amount," as determined under the Loan Agreement made and entered into between the Borrower and the Lender as of December 23, 1997 ("Loan Agreement") pursuant to which this Promissory Note is issued, payable in ten equal annual installments, commencing on the last Business Day of December, 1997 and continuing on the last Business Day of December of each subsequent calendar year until the last Business Day of December, 2006, at which time the entire Principal Amount then outstanding and all accrued interest shall become due and payable; PROVIDED, HOWEVER, that the Borrower shall not be required to make any payment of principal due to be made in any Plan Year to the extent that (i) following such payment, the consolidated return on average assets of Warwick Community Bancorp, Inc. for such Plan Year, excluding the contribution by Warwick Community Bancorp, Inc. to The Warwick Savings Foundation ("Foundation"), would be less than one-half of one percent (0.5%) or the consolidated return on average equity for such Plan Year, excluding the contribution by Warwick Community Bancorp, Inc. to the Foundation, would be less than four percent (4%) or (ii) such payment would not be deductible for federal income tax purposes for such Plan Year under section 404 of the Code. Any payment not required to be made pursuant to the clause (i) of the above provision shall be deferred to and be payable on the earlier of the tenth (10th) anniversary of the loan origination date or the last day of the first Plan Year in which such proviso would not apply to alleviate a requirement of payment; and payment not required to be made pursuant to clause (ii) of the above proviso shall be deferred to and be payable on the last day of the first Plan Year in which such payment may be made on a tax deductible basis.

This Promissory Note shall bear interest at the rate per annum set forth or established under the Loan Agreement, such interest to be payable quarterly in arrears, commenc ing on December 31, 1997 and thereafter on the last Business Day of each calendar quarter and upon payment or prepayment of this Promissory Note.


A-2

Anything herein to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender's receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payments of interest which are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.

Payments of both principal and interest on this Promissory Note are to be made at the principal office of the Lender at 18 Oakland Avenue, Warwick, New York 10990-0591 or such other place as the holder hereof shall designate to the Borrower in writing, in lawful money of the United States of America in immediately available funds.

Failure to make any payment of principal on this Promissory Note when due, or failure to make any payment of interest on this Promissory Note not later than five (5) Business Days after the date when due, shall constitute a default hereunder, whereupon the principal amount of and accrued interest on this Promissory Note shall immediately become due and payable in accordance with the terms of the Loan Agreement.

This Promissory Note is subject, in all respects, to the terms and provisions of the Loan Agreement, which is incorporated herein by this reference, and is secured by a Pledge Agreement between the Borrower and the Lender of even date herewith and is entitled to the benefits thereof.

WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

BY: MARINE MIDLAND BANK, AS TRUSTEE
AND NOT IN ANY OTHER CAPACITY

BY:

TITLE:

EXHIBIT B
TO LOAN AGREEMENT
BY AND BETWEEN
WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
WARWICK COMMUNITY BANCORP, INC.

FORM OF PLEDGE AGREEMENT

This PLEDGE AGREEMENT ("Pledge Agreement") is made as of the 23rd day of December, 1997, by and between the WARWICK COMMUNITY BANCORP, INC. EMPLOYEE STOCK OWNERSHIP PLAN TRUST, acting by and through its Trustee, MARINE MIDLAND BANK, a banking corporation organized under the laws of the State of New York and having office at 140 Broadway, New York, New York 10005 ("Pledgor"), and WARWICK COMMUNITY BANCORP, INC., corporation organized and existing under the laws of the State of New York, having an office at 18 Oakland Avenue, Warwick, New York 10990-0591 ("Pledgee").

W I T N E S S E T H :

WHEREAS, this Pledge Agreement is being executed and delivered to the Pledgee pursuant to the terms of a Loan Agreement of even date herewith ("Loan Agreement"), by and between the Pledgor and the Pledgee;

NOW, THEREFORE, in consideration of the mutual agreements contained herein and in the Loan Agreement, the parties hereto do hereby covenant and agree as follows:

SECTION 1. DEFINITIONS. The following definitions shall apply for purposes of this Pledge Agreement, except to the extent that a different meaning is plainly indicated by the context; all capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Loan Agreement:

(a) COLLATERAL shall mean the Pledged Shares and, subject to section 5 hereof, and to the extent permitted by applicable law, all rights with respect thereto, and all proceeds of such Pledged Shares and rights.

(b) EVENT OF DEFAULT shall mean an event so defined in the Loan Agreement.

(c) LIABILITIES shall mean all the obligations of the Pledgor to the Pledgee, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under the Loan Agreement and the Promissory Note.


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(d) PLEDGED SHARES shall mean all the shares of Common Stock of Warwick Community Bancorp, Inc. purchased by the Pledgor with the proceeds of the loan made by the Pledgee to the Pledgor pursuant to the Loan Agreement, but excluding any such shares previously released pursuant to section 4.

SECTION 2. PLEDGE. To secure the payment of and performance of all the Liabilities, the Pledgor hereby pledges to the Pledgee, and grants to the Pledgee a security interest in and lien upon, the Collateral.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PLEDGOR. The Pledgor represents, warrants, and covenants to the Pledgee as follows:

(a) the execution, delivery and performance of this Pledge Agreement and the pledging of the Collateral hereunder do not and will not conflict with, result in a violation of, or constitute a default under any agreement binding upon the Pledgor;

(b) the Pledged Shares are and will continue to be owned by the Pledgor free and clear of any liens or rights of any other person except the lien hereunder and under the Loan Agreement in favor of the Pledgee, and the security interest of the Pledgee in the Pledged Shares and the proceeds thereof is and will continue to be prior to and senior to the rights of all others;

(c) this Pledge Agreement is the legal, valid, binding and enforceable obligation of the Pledgor in accordance with its terms;

(d) the Pledgor shall, from time to time, upon request of the Pledgee, promptly deliver to the Pledgee such stock powers, proxies, and similar documents, satisfactory in form and substance to the Pledgee, with respect to the Collateral as the Pledgee may reasonably request; and

(e) subject to the first sentence of section 4(b), the Pledgor shall not, so long as any Liabilities are outstanding, sell, assign, exchange, pledge or otherwise transfer or encumber any of its rights in and to any of the Collateral.

SECTION 4. ELIGIBLE COLLATERAL.

(a) As used herein the term "Eligible Collateral" shall mean that amount of Collateral which has an aggregate fair market value equal to the amount by which the Pledgor is in default (without regard to any amounts owing solely as the result of an acceleration of the Loan Agreement) or such lesser amount of Collateral as may be required pursuant to section 2 of this Pledge Agreement.

(b) The Pledged Shares shall be released from this Pledge Agreement in a manner conforming to the requirements of Treasury Regulations
Section 54.4975-7(b)(8), as the same may be from time to time amended or supplemented, and section 6.4(a) of the ESOP. Subject to such Regulations, the Pledgee may from time to time, after any Default or Event of Default, and without prior notice to the Pledgor, transfer all or any part of the Eligible Collateral


B-3

into the name of the Pledgee or its nominee, with or without disclosing that such Eligible Collateral is subject to any rights of the Pledgor and may from time to time, whether before or after any of the Liabilities shall become due and payable, without notice to the Pledgor, take all or any of the following actions: (i) notify the parties obligated on any of the Eligible Collateral to make payment to the Pledgee of any amounts due or to become due thereunder, (ii) release or exchange all or any part of the Eligible Collateral, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, and (iii) take control of any proceeds of the Eligible Collateral.

SECTION 5. DELIVERY.

(a) The Pledgor shall deliver to the Pledgee upon execution of this Pledge Agreement (i) an assignment by the Pledgor of all the Pledgor's rights to and interest in the Pledged Shares and (ii) an irrevocable proxy, in form and substance satisfactory to the Pledgee, signed by the Pledgor with respect to the Pledged Shares.

(b) So long as no Default or Event of Default shall have occurred and be continu ing, (i) the Pledgor shall be entitled to exercise any and all voting and other rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement, and
(ii) the Pledgor shall be entitled to receive any and all cash dividends or other distributions paid in respect of the Collateral.

SECTION 6. EVENTS OF DEFAULT.

(a) If a Default or an Event of Default shall be existing, in addition to the rights it may have under the Loan Agreement, the Promissory Note and this Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may exercise, with respect to the Eligible Col lateral, from time to time any rights and remedies available to it under the Uniform Commercial Code as in effect from time to time in the State of New York or otherwise available to it and (ii) the Pledgee shall have the right, for and in the name, place and stead of the Pledgor, to execute endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Eligible Collateral. Written notification of intended disposition of any of the Eligible Collateral shall be given by the Pledgee to the Pledgor at least three (3) Business Days before such disposition. Subject to section 13 below, any proceeds of any disposition of Eligible Collateral may be applied by the Pledgee to the payment of expenses in connection with the Eligible Collateral, including, without limitation, reasonable attorneys' fees and legal expen ses, and any balance of such proceeds may be applied by the Pledgee toward the payment of such of the Liabilities as are in Default, and in such order of application, as the Pledgee may from time to time elect. No action of the Pledgee permitted hereunder shall impair or affect its rights in and to the Eligible Collateral. All rights and remedies of the Pledgee expressed hereunder are in addition to all other rights and remedies possessed by it, including, without limitation, those contained in the documents referred to in the definition of Liabilities in section 1 hereof.

(b) In any sale of any of the Eligible Collateral after a Default or an Event of Default shall have occurred, the Pledgee is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including, without limitation, compliance with such


B-4

procedures as may restrict the number of prospective bidders and purchasers or further restrict such prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Eligible Collateral), or in order to obtain such required approval of the sale or of the purchase by any governmental regulatory authority or official, and the Pledgor further agrees that such compliance shall not result in such sale's being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Pledgee be liable or accountable to the Pledgor for any discount allowed by reason of the fact that such Eligible Collateral is sold in compliance with any such limitation or restriction.

SECTION 7. PAYMENT IN FULL. Upon the payment in full of all outstanding Liabili ties, this Pledge Agreement shall terminate and the Pledgee shall forthwith assign, transfer and deliver to the Pledgor, against receipt and without recourse to the Pledgee, all Collateral then held by the Pledgee pursuant to this Pledge Agreement.

SECTION 8. NO WAIVER. No failure or delay on the part of the Pledgee in exercising any right or remedy hereunder or under any other document which confers or grants any rights in the Pledgee in respect of the Liabilities shall operate as a waiver thereof nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy of the Pledgee.

SECTION 9. BINDING EFFECT; NO ASSIGNMENT OR DELEGATION. This Pledge Agreement shall be binding upon and inure to the benefit of the Pledgor, the Pledgee and their respective suc cessors and assigns, except that the Pledgor may not assign or transfer its rights hereunder without the prior written consent of the Pledgee (which consent shall not unreasonably be withheld). Each duty or obligation of the Pledgor to the Pledgee pursuant to the provisions of this Pledge Agreement shall be performed in favor of any person or entity designated by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be performed by any other person or entity designated by the Pledgee.

SECTION 10. GOVERNING LAW. Except to the extent preempted by federal law, this Pledge Agreement shall be governed by and construed in accordance with the laws of the State of New York and interpreted without regard to conflicts of law principles.

SECTION 11. NOTICES. All notices, requests, instructions or documents hereunder shall be in writing and delivered personally or sent by United States mail, registered or certified, return receipt requested, with proper postage prepaid, as follows:

(a) If to the Pledgee:

Warwick Community Bancorp, Inc. 18 Oakland Avenue Warwick, New York 10990-0591 Attention: Mr. Timothy A. Dempsey President and Chief Executive Officer with a copy to:


B-5

Thacher Proffitt & Wood
Two World Trade Center, 38th Floor
New York, New York 10048
Attention: Douglas J. Mcclintock, Esq.

(b) If to the Pledgor:

Warwick Community Bancorp, Inc. Employee Stock Ownership Plan Trust c/o The Warwick Savings Bank 18 Oakland Avenue Warwick, New York 10990-0591 Attention: Mr. Timothy A. Dempsey President and Chief Executive Officer

with copies to:

Marine Midland Bank 149 Broadway New York, New York 10005 Attention: Mr. Richard A. Glover Vice President

Thacher Proffitt & Wood Two World Trade Center, 38th Floor New York, New York 10048 Attention: Douglas J. Mcclintock, Esq.

Helm, Shapiro, Anito & McCale, P.C.

20 Corporate Woods Boulevard
Albany, New York 12211-2350
Attention: Brian P. Goldstein, Esq.

Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or by commercial messenger service, or sent by telex or facsimile, to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; PROVIDED, HOWEVER, that any such notice shall be deemed to have been given only when actually received by the party to whom it is addressed.

SECTION 12. INTERPRETATION. Wherever possible each provision of this Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision hereof shall be prohibited by or invalid under such law, such provisions shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.


B-6

SECTION 13. CONSTRUCTION. All provisions hereof shall be construed so as to maintain (a) the ESOP as a qualified leveraged employee stock ownership plan under section 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the "Code"), (b) the Trust as exempt from taxation under section 501(a) of the Code and (c) the Trust Loan as an exempt loan under section 54.4975-7(b) of the Treasury Regulations and as described in Department of Labor Regulation section 2550.408b-3.

IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by the parties hereto as of the day and year first above written.

WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

BY: MARINE MIDLAND BANK, AS TRUSTEE
AND NOT IN ANY OTHER CAPACITY

BY:

TITLE:

WARWICK COMMUNITY BANCORP, INC.

BY:
TIMOTHY A. DEMPSEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER

EXHIBIT C
TO LOAN AGREEMENT
BY AND BETWEEN
WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
WARWICK COMMUNITY BANCORP, INC.

FORM OF ASSIGNMENT

In consideration of the loan made by Warwick Community Bancorp, Inc. ("Lender") to the Warwick Community Bancorp, Inc. Employee Stock Ownership Plan Trust ("Borrower") pursuant to the Loan Agreement of even date herewith between the Lender and the Borrower ("Loan Agreement") and pursuant to the Pledge Agreement between the Lender and the Borrower of even date herewith pertaining thereto, the undersigned Borrower hereby transfers, assigns and conveys to Lender, subject to the terms and provisions of the Loan Agreement, all its right, title and interest in and to those certain shares of common stock of the Lender which it shall purchase with the proceeds of the loan made pursuant to the Loan Agreement, and agrees to transfer and endorse to Lender the certificates representing such shares as and when required pursuant to the Loan Agreement or Pledge Agreement.

WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

BY: MARINE MIDLAND BANK, AS TRUSTEE
AND NOT IN ANY OTHER CAPACITY

BY:

TITLE:

DECEMBER 23, 1997


EXHIBIT D
TO LOAN AGREEMENT
BY AND BETWEEN
WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
WARWICK COMMUNITY BANCORP, INC.

FORM OF IRREVOCABLE PROXY

In consideration of the loan made by Warwick Community Bancorp, Inc. ("Lender") to the Warwick Community Bancorp, Inc. Employee Stock Ownership Plan Trust ("Borrower") pursuant to the Loan Agreement of even date herewith between the Lender and the Borrower ("Loan Agreement") and the Pledge Agreement between the Lender and the Borrower of even date herewith pertaining thereto, and subject to the terms and conditions of the Loan Agreement, the undersigned Borrower hereby appoints the Lender as its proxy, with power of substitution, to represent and to vote those certain shares of common stock of the Lender which it shall purchase with the proceeds of the loan made pursuant to the Loan Agreement. This proxy, when properly executed, shall be irrevocable and shall give the Lender full power and authority to vote on any and all matters for which other holders of shares of common stock of the Lender are entitled to vote.

WARWICK COMMUNITY BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

BY: MARINE MIDLAND BANK, AS TRUSTEE
AND NOT IN ANY OTHER CAPACITY

BY:

TITLE:

DECEMBER 23, 1997


EXHIBIT 10.16

GRANTOR TRUST AGREEMENT

FOR THE BENEFIT RESTORATION PLAN OF
THE WARWICK SAVINGS BANK

THIS AGREEMENT (hereinafter referred to as the "Trust Agreement"), made as of this 10th day of December 1997, by and between THE WARWICK SAVINGS BANK, a savings bank organized under the laws of the State of New York ("Bank") and having its principal offices at 18 Oakland Avenue, Warwick, New York 10990, and MARINE MIDLAND BANK, a bank organized under the laws of the State of New York and having an office at 140 Broadway, New York, New York 10005 ("Trustee"). Any references herein to the "Company" shall mean WARWICK COMMUNITY BANCORP, INC., the holding company of the Bank.

W I T N E S S E T H:

WHEREAS, the Bank has established the Benefit Restoration Plan of The Warwick Savings Bank ("Plan") for the benefit of certain management employees of the Bank and designated affiliates;

WHEREAS, the Trustee is not a party to the Plan and makes no representations with respect thereto, and all representations and recitals with respect to the Plan shall be deemed to be those of the Bank;

WHEREAS, the Bank wishes to establish a trust ("Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of the Bank's creditors in the event of the Bank's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan;

WHEREAS, it is the intention of the parties that the Trust shall constitute an unfunded arrangement and shall not affect the status of any Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); and

WHEREAS, it is the intention of the Bank to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan, provided that the assets of the Trust shall be subject to the claims of the Bank's creditors in the event of the Bank's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in the time and manner specified in the Plan;


NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows:

FIRST: ESTABLISHMENT OF THE TRUST.

(a) (i) The Bank hereby deposits with the Trustee in trust $100.00, which shall become the principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Trust Agreement.

(ii) The Trustee hereby accepts a trust consisting of the initial deposit referred to in the preceding sentence and such cash or other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "Fund").

(b) The Trust hereby established shall be irrevocable. The Bank may, but shall not be required to, apply for a Private Letter Ruling regarding the status of the Trust as a "grantor trust" under sections 671 through 679 of the Code from the Internal Revenue Service ("IRS") in accordance with Article FIFTEENTH hereof. In the event the Bank makes such a request, it shall furnish to the Trustee a copy of such Private Letter Ruling promptly upon the Bank's receipt thereof.

(c) The Trust is intended to be a grantor trust, of which the Bank is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended ("Code"), and shall be construed accordingly.

(d) The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of the Bank and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against the Bank. Any assets held by the Trust will be subject to the claims of the Bank's general creditors under federal and state law in the event of Insolvency, as defined in Article THIRD herein.

(e) The Bank, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. Neither the Trustee nor any Plan participant or beneficiary shall have any right to compel such additional deposits, or any other contribution to the Trust.

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(f) (i) Upon a Change of Control, the Bank shall, as soon as possible, but in no event longer than 30 days following the Change of Control, as defined herein, make an irrevocable contribution to the Trust in an amount that is sufficient to pay each Plan participant or beneficiary the benefits to which Plan participants or their beneficiaries would be entitled pursuant to the terms of the Plan as of the date on which the Change of Control occurred.

(ii) Within 30 days following the end of the Plan year(s) ending after the Trust has become irrevocable pursuant to subparagraph
(b) of Article FIRST hereof, the Bank shall be required to irrevocably deposit additional cash or other property to the Trust in an amount sufficient to pay each Plan participant or beneficiary the benefits payable pursuant to the terms of the Plan as of the close of the Plan year(s).

(iii) For purposes of this paragraph (f), no irrevocable contribution shall be required for any Plan year that ended before the occurrence of a Change in Control, as herein defined. In addition, any contribution required hereunder shall be deemed sufficient if the aggregate of such contributions and the other assets of the Fund, determined as of the date of the contributions, is at least equal to the actuarially determined value of the aggregate benefits accrued under the Plan, determined as of the same date. Any actuarial determination required under the preceding sentence shall be made by the Bank, in its sole discretion.

(iv) The Trustee shall have the right and power, but shall be under no duty, to determine whether the amount of any contribution is in accordance with any Plan or to collect or enforce payment of any contribution. The Trustee shall not be responsible for computing or collecting any contribution or other amounts due under the Plan or the Trust.

SECOND: PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES.

(a) (i) The Bank shall deliver to the Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule.

(ii) The Payment Schedule shall be delivered to the Trustee following the execution of this Trust Agreement and an updated Payment Schedule shall be furnished at least annually thereafter. Each such Payment Schedule shall include, without limitation, (A) the names, addresses, dates of birth, social security numbers and the amount and form of accrued benefit of each Plan participant and beneficiary in the Plan; (B) the amount and form of projected benefits under the Plan of each participant and beneficiary, assuming such participant would retire or die as of the last day of such calendar year;
(C) a schedule of the estimated yearly cash payments

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under the Plan; and (D) any other information regarding the Plan which the Trustee may reasonably request.

(b) (i) To the extent that amounts are paid under this Article SECOND by the Trustee directly to any Plan participant or beneficiary, such amounts shall be reduced by the Trustee in an amount equal to the income and employment tax withholding required by law with respect to such participant or beneficiary, as determined by the Bank and promptly communicated to the Trustee. The Trustee shall inform each Plan participant and beneficiary to whom payment is made of the amount withheld from payment and the purpose for withholding such amount. Such withheld amounts shall be paid by the Trustee to the Bank, which shall remit such withheld amounts to, and shall file the appropriate withholding reports with, the appropriate governmental agencies. In making any determination whether the Bank has properly determined, reported and/or withheld the appropriate taxes, the Trustee may rely on a written certification, under penalties of perjury, signed by the Chief Executive Officer of the Bank or by another officer of the Bank authorized by the Chief Executive Officer to sign such certification in his behalf.

(ii) To the extent that amounts are to be paid under this Article SECOND by the Trustee directly to any Plan participant or beneficiary and the Bank fails to direct the Trustee with respect to the appropriate amount to be withheld by the Trustee with respect to the applicable withholding requirements, the Trustee shall use its best efforts to determine, in its sole discretion, the appropriate amount of income and employment tax withholding required by law with respect to the payment to such participant or beneficiary, and shall reduce any payments by the amount of tax withholding required. The Trustee shall inform the Bank and each Plan participant or beneficiary to whom payment is made of the amount withheld and the purpose for withholding such amount. The amount withheld by the Trustee shall be paid by the Trustee to the Bank, and the Bank shall remit such withheld amounts to, and shall file the appropriate withholding reports with, the appropriate governmental agencies. Provided that the Trustee has withheld the amounts directed by the Bank or, in the absence of such direction from the Bank, used its best efforts to determine applicable withholding under this Article, it shall have no liability for failure to withhold amounts sufficient to meet applicable requirements, and shall be held harmless by the Bank against such liability.

(iii) Unless otherwise agreed to by the Trustee, the Bank shall be responsible for all tax information reporting with respect to payments made to Plan participants and beneficiaries hereunder.

(c) (i) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by the Bank or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan.

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(ii) The Trustee shall have no authority over or responsibility for the disposition of claims for benefits under the Plan and, in the absence of an order to the contrary of a court of competent jurisdiction, may rely conclusively on the most recent Payment Schedule furnished to it by the Bank in making or refraining from making payments from the Trust to individuals who are or purport to be Plan participants or their beneficiaries. The Trustee shall not make payments hereunder to any person until it receives instructions from the Bank in a form reasonably satisfactory to the Trustee.

(d) (i) The Bank may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. The Bank shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Plan participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, the Bank shall make the balance of each such payment as it falls due. The Trustee shall notify the Bank where principal and earnings are not sufficient.

(ii) The Trustee shall have no liability or responsibility for duplicate payments made prior to its receipt from the Bank of notice of the Bank's intention to make direct payment.

(e) The Bank may direct that payments be made before they would otherwise be due if, based on a change in the federal tax or revenue laws, a published ruling or similar announcement issued by the IRS, a regulation issued by the Secretary of the Treasury, a decision by a court of competent jurisdiction involving a Participant or a beneficiary, or a closing agreement made under section 7121 of the Code that is approved by the IRS and involves a Participant or a beneficiary, it determines that a Participant or beneficiary has or will recognize income for federal income tax purposes with respect to amounts that are or will be payable under the Plan before they are to be paid.

THIRD: TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN BANK IS INSOLVENT.

(a) (i) The Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the Bank is or becomes Insolvent. The Bank shall be considered "Insolvent" for purposes of this Trust Agreement if (A) the Bank is unable to pay its debts as they become due, (B) the Bank is subject to a pending proceeding as a debtor under the United States Bankruptcy Code or the equivalent thereof or (C) the Bank is subject to an order or regulation issued pursuant to section 18(k) of the Federal Deposit Insurance Act, as amended, prohibiting payments from the Plan.

(ii) For purposes of this Trust Agreement, a condition which results in the Bank's being Insolvent shall be referred to as the Bank's "Insolvency."

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(iii) While the Bank is Insolvent, the Trustee shall make payments from the Trust only to or for the benefit of the Bank's general creditors and only upon the direction of a court of competent jurisdiction or, in the event that a trustee, receiver, conservator or other similar official shall be appointed to oversee the Bank's affairs during a period of Insolvency, upon the direction of such trustee, receiver, conservator or other similar official.

(b) At all times during the continuance of this Trust Agreement, as provided in subparagraph (d) of Article FIRST hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Bank under federal and state law as set forth below:

(1) The Board of Directors of the Bank (the "Board") and the Chief Executive Officer of the Bank shall have the duty to inform the Trustee in writing of the Bank's Insolvency. If a person claiming to be a creditor of the Bank alleges in writing to the Trustee that the Bank has become Insolvent, the Trustee shall determine whether the Bank is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries.

(2) (i) Unless the Trustee has actual knowledge of the Bank's Insolvency, or has received notice from the Bank or a person claiming to be a creditor alleging that the Bank is Insolvent, the Trustee shall have no duty to inquire whether the Bank is Insolvent. The Trustee may in all events rely on such evidence concerning the Bank's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Bank's solvency.

(ii) The Trustee shall be deemed to have a reasonable basis for determining that the Bank is Insolvent if it has received (A) a certified copy of a bankruptcy or insolvency petition with respect to the Bank or a general assignment by the Bank for the benefit of its creditors, (B) a Certificate of Commencement of Case (or similar document) acknowledging either (I) that a petition for the commencement of a voluntary or involuntary case pursuant to Titles 7 or 11 of the United States Bankruptcy Code, as amended, was duly filed by or against the Bank with the United States Bankruptcy Court, or (II) the taking of possession of the Bank or all or all substantially all of its assets by a receiver, custodian, trustee or similar official, (C) a certified copy of an order pursuant to section 18(k) of the Federal Deposit Insurance Act, as amended, prohibiting payments pursuant to the Plan ("Regulatory Order"), or (D) a written certification, under penalties of perjury, signed by the Chief Executive Officer of the Bank or a majority of the members of the Board that the Bank is Insolvent.

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(3) If at any time the Trustee has determined that the Bank is Insolvent, the Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Bank's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of the Bank with respect to benefits due under the Plan or otherwise.

(4) (i) The Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Article SECOND of this Trust Agreement only after the Trustee has determined that the Bank is not Insolvent (or is no longer Insolvent).

(ii) The Trustee shall be deemed to have a reasonable basis for determining that the Bank is no longer Insolvent if it has received: (A) a judgment, decree or order of a court of competent jurisdiction dismissing a case filed with respect to the Bank under Title 7 or 11 of the United States Bankruptcy Code; or (B) a judgment, decree or order of a court of competent jurisdiction overturning a Regulatory Order; or (C) if the Trustee determined the Bank to be Insolvent based on a certification of the Chief Executive Officer or the Board, a subsequent written certification, under penalties of perjury, signed by the Chief Executive Officer of the Bank or a majority of the members of the Board that the Bank is no longer Insolvent.

(5) The Board and Chief Executive Officer of the Bank shall certify to the Trustee, at the Trustee's request, whether the Bank is Insolvent. Any such certification may be requested by the Trustee from time to time and at any time, and shall be made promptly by the Board or Chief Executive Officer under the penalties of perjury. Any certification received by the Trustee under this subparagraph shall also be deemed a reasonable basis from the Trustee's determination of Insolvency under this Article THIRD.

(c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to subparagraph (b) of Article THIRD hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by the Bank in lieu of the payments provided for hereunder during any such period of discontinuance. The Trustee shall have an obligation to offset payments hereunder by direct payments made to Plan participants and their beneficiaries by the Bank during the period of discontinuance described in the preceding sentence only to the extent the Bank directs the Trustee to make such offset.

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FOURTH: PAYMENTS TO THE BANK.

Except as provided in Article THIRD hereof, after the Trust has become irrevocable, the Bank shall have no right or power to direct the Trustee to return to the Bank or to divert to others any of the Trust assets before all payments of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan.

FIFTH: INVESTMENT AUTHORITY.

(a) Subject to paragraphs (b) and (c) of this Article FIFTH, the Trustee shall have exclusive authority and discretion to manage and control the assets of the Fund as specified in this Article FIFTH, and pursuant to such authority and discretion may exercise from time to time and at any time the power:

(i) To invest and reinvest the Fund, without distinction between principal and income, in the group, family, or class of mutual funds specified in writing by the Bank which shall constitute the exclusive permitted investments of the Fund;

(ii) To exercise, personally or by general or limited proxy, the right to vote any shares of such mutual funds held in the Fund; and to exercise, personally or by power of attorney, any other right appurtenant to mutual funds held by the Fund;

(iii) To exercise or sell any conversion or subscription or other rights appurtenant to any shares of mutual fund held in the Fund;

(iv) To invest and reinvest any property, real or personal, in the Fund in any other form or type of investment not specifically mentioned in this paragraph (a), so long as such form or type of investment is a form or type of investment approved by the Chief Financial Officer or Chief Executive Officer of the Bank and a direction is made by the Bank to invest in such property.

(b) (i) The Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by Warwick Community Bancorp, Inc. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or rest with Plan participants except that voting, tender, appraisal, dissenter and other similar rights with respect to Trust assets shall be exercised by the Bank. In the absence of timely directions from the Bank, the Trustee shall have no duty to exercise such rights, and shall have no liability for refraining from exercising such rights.

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(ii) Any investment by the Trustee in securities or obligations of the Company or the Bank shall be subject to prior written approval of the Bank.

(iii) The Bank shall have the right at anytime, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by the Bank in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity.

(c) The Trustee shall exercise its powers under this Article FIFTH in a manner consistent with such direction by the Bank and shall have no liability whatsoever for any loss, cost or expense occasioned by any investment in such group, class or family of mutual funds in accordance with this paragraph.

(d) To the extent permitted by law, the Trustee shall not be liable for any act or omission of the Bank hereunder and, except as set forth hereunder, the Trustee shall not be under any obligations to invest or otherwise manage the assets of the Plan. Without limiting the generality of the foregoing, the Trustee shall not be liable by reason of its taking or refraining from taking any action hereunder at the direction of the Bank; the Trustee shall be under no duty to question or to make inquiries as to any direction or order or failure to give direction or order by the Bank and the Trustee shall be under no duty to make any review of investments acquired for the Fund at the direction or order of the Bank and shall be under no duty at any time to make any recommendation with respect to disposing of or continuing to retain any such investment.

(e) Without limiting the generality of the provisions of Article EIGHTH hereof, the Bank agrees, to the extent permitted by law, to indemnify the Trustee and hold it harmless from and against any claim or liability that may be asserted against it, otherwise than on account of the Trustee's own gross negligence or willful misconduct or violation of any provision of law, by reason of the Trustee's taking or refraining from taking any action in accordance with this Article FIFTH.

(f) Subject to the other provisions of this Trust Agreement, the Trustee shall have the power and authority to be exercised in its sole discretion at any time and from time to time to issue and place orders for the purchase or sale of securities directly with qualified brokers or dealers. Such orders may be placed with such qualified brokers and/or dealers who also provide investment information or other research or statistical services to the Trustee in its capacity as a fiduciary or investment manager for other clients.

SIXTH: DISPOSITION OF INCOME.

During the term of this Trust Agreement, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.

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SEVENTH: ACCOUNTS.

(a) (i) The Trustee shall keep accurate and detailed accounts of all its receipts, investments and disbursements under this Agreement. Such person or persons as the Bank shall designate shall be allowed to inspect the books of account relating to the Fund upon request at any reasonable time during the business hours of the Trustee.

(ii) Within 120 days after the close of each calendar year, the Trustee shall transmit to the Bank, and certify the accuracy of, a written statement of the assets and liabilities of the Fund at the close of that calendar year, showing the current value of each asset at that date, and a written account of all the Trustee's transactions relating to the Fund during the period from the last previous accounting to the close of that calendar year. (For the purposes of this paragraph, the date of the Trustee's resignation or removal as provided in Article TENTH hereof or the date of termination of the Plan as provided in Article ELEVENTH hereof shall be deemed to be the close of a calendar year with respect to the Trustee's resignation or the terminated Plan, as the case may be.)

(iii) Unless the Bank shall have filed with the Trustee written exceptions or objections to any such statement and account within 180 days after receipt thereof, the Bank shall be deemed to have approved such statement and account; and in such case or upon the written approval by the Bank of any such statement and account the Trustee shall be forever released and discharged with respect to all matters and things expressly set forth in such statement and account as though it had been settled by decree of a court of competent jurisdiction in an action or proceeding to which the Bank and all persons having any beneficial interest in the Fund were parties.

(b) Nothing contained in this Agreement or in the Plan shall deprive the Trustee of the right to have a judicial settlement of its accounts. In any proceeding for a judicial settlement of the Trustee's accounts or for instructions in connection with the Fund, the only other necessary party thereto in addition to the Trustee shall be the Bank. If the Trustee so elects, it may bring in as a party or parties defendant any other person or persons. No person interested in the Fund, other than the Bank, shall have a right to compel an accounting, judicial or otherwise, by the Trustee, and each such person shall be bound by all accountings by the Trustee to the Bank, as herein provided, as if the account had been settled by decree of a court of competent jurisdiction in an action or proceeding to which such person was a party.

EIGHTH: RESPONSIBILITY OF THE TRUSTEE.

(a) The Trustee shall discharge its duties under this Agreement with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to any

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person for any action taken pursuant to a direction, request or approval given by any duly authorized person which is contemplated by, and in conformity with, the terms of the Plan or the Trust and is given in writing by the Bank. The duties and obligations of the Trustee shall be limited to those expressly imposed upon it by this Agreement notwithstanding any reference herein to the Plan.

(b) The Trustee shall have no duty to commence or defend any legal action arising in connection with the Trust unless it shall first have been indemnified, in manner and substance satisfactory to it, against its costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto.

(c) The Trustee may consult with counsel, who may be counsel for the Bank or for the Trustee in its individual capacity, and shall not be liable for any action taken or omitted in accordance with the opinion of counsel. The Bank agrees, to the extent permitted by law, to indemnify and hold the Trustee harmless from and against any liability that it may incur in connection with the Fund, unless arising from the Trustee's own grossly negligent or willful breach of the provisions of paragraph (a) above. The Trustee shall not be required to give any bond or any other security for the faithful performance of its duties under this Agreement, except as required by law. The Trustee in its corporate capacity shall not be liable for claims of any persons in any manner regarding the Plan; such claims shall be limited to the Trust Fund.

(d) (i) The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein; provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy.

(ii) The Trustee shall have, and in its sole and absolute discretion may exercise from time to time and at any time, the following administrative powers and authority with respect to the Fund consistent with the provisions of Article FIFTH:

(A) To continue to hold any property of the Fund whether or not productive of income; to reserve from investment and keep unproductive of income, without liability for interest, cash temporarily awaiting investment and such cash as it deems advisable or as the Bank from time to time may specify in order to meet the administrative expenses of the Fund or anticipated distributions therefrom;

(B) To hold property of the Fund in its own name or in the name of a nominee or nominees, without disclosure of the Trust, or in bearer form so that it will pass by delivery, but no such holding shall relieve the Trustee of its

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responsibility for the safe custody and disposition of the Fund in accordance with the provisions of this Agreement; the Trustee's books and records shall at all times show that such property is part of the Fund; and, subject to subsection (c) above, the Trustee shall be absolutely liable for any loss occasioned by the acts of its nominee or nominees with respect to securities registered in the name of the nominee or nominees;

(C) To employ in the management of the Fund suitable agents, without liability for any loss occasioned by any such agents selected by the Trustee with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

(D) To do all other acts that the Trustee may deem necessary or proper to carry out any of the powers set forth in Article FIFTH hereof or otherwise in the best interests of the Fund.

(e) Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give the Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code.

(f) Unless the Trustee participates knowingly in, or knowingly undertakes to conceal, an act or omission of the Bank or any other fiduciary, knowing such act or omission to be a breach of fiduciary responsibility, the Trustee shall be under no liability for any loss of any kind which may result by reason of such act or omission.

(g) If a dispute arises as to the payment of any funds or delivery of any assets by the Trustee, the Trustee may withhold such payment or delivery until the dispute is determined by a court of competent jurisdiction or finally settled in writing by the parties concerned.

NINTH: TAXES, COMPENSATION AND EXPENSES OF TRUSTEE.

(a) (i) The Bank shall pay any Federal, state, local or other taxes imposed or levied with respect to the corpus and/or income of the Fund or any part thereof under existing or future laws.

(ii) All taxes that may be levied or assessed upon or in respect of the Fund shall be paid from the Fund. The Trustee shall notify the Bank of any proposed or final assessments of taxes and may assume that any such taxes are lawfully levied or assessed unless the Bank advises it in writing to the contrary within fifteen days after receiving the above notice

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from the Trustee. In such case, the Trustee, if requested by the Bank in writing, shall contest the validity of such taxes in any manner deemed appropriate by the Bank; the Bank may itself contest the validity of any such taxes, in which case the Bank shall so notify the Trustee and the Trustee shall have no responsibility or liability respecting such contest. If either party to this Agreement contests any such proposed levy or assessments, the other party shall provide such information and cooperation as the party conducting the contest shall reasonably request.

(b) The Trustee, without direction from the Bank, shall pay from the Fund from time to time such reasonable compensation for its services as Trustee as shall be agreed upon with the Bank, the reasonable and necessary expenses and compensation of counsel and other agents employed or engaged by the Trustee pursuant to subparagraph (d)(ii)(C) of Article EIGHT, and all other reasonable and necessary expenses of managing and administering the Fund (which the Trustee, in its discretion, determines to be necessary or appropriate) that are not paid by the Bank.

TENTH: RESIGNATION AND REMOVAL OF THE TRUSTEE.

(a) The Trustee may resign at any time by written notice to the Bank, which shall be effective 60 days after receipt of such notice unless the Bank and the Trustee agree otherwise.

(b) The Bank, by action of its Board, may remove the Trustee at any time upon 60 days' written notice to the Trustee, or upon shorter notice if acceptable to the Trustee. In the event it resigns or is removed, the Trustee shall have a right to have its accounts settled as provided in Article SEVENTH hereof.

(c) (i) Upon resignation or removal of the Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 60 days after receipt of notice of resignation, removal or transfer, unless the Bank extends the time limit.

(ii) The Trustee may reserve such sums as the Trustee shall deem necessary to defray its expenses in settling its accounts, to pay any of its compensation due and unpaid and to discharge any obligation of the Fund for which the Trustee may be liable. If the sums so reserved are not sufficient for these purposes, the Trustee shall be entitled to recover the amount of any deficiency from either the Bank or the successor Trustee, or both. When the Fund shall have been transferred and delivered to the successor Trustee and the accounts of the Trustee have been settled as provided in Article SEVENTH hereof, the Trustee shall be released and discharged from all further accountability or liability for the Fund and shall not be responsible in any way for the further disposition of the Fund or any part thereof.

(d) (i) If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Article ELEVENTH, by the effective date of resignation or removal under

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paragraph (a) or (b) of this Article TENTH. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Any successor Trustee shall be an independent commercial bank or trust bank which is not affiliated with, controlled by, in control of, or under common control with the Bank.

(ii) Each successor Trustee shall have the powers and duties conferred upon the Trustee in this Trust Agreement, and the "Trustee" as used in this Agreement shall be deemed to include any successor Trustee.

ELEVENTH: APPOINTMENT OF SUCCESSOR.

In the event of the resignation or removal of the Trustee, a successor Trustee shall be appointed by the Bank. Except as otherwise provided herein, such appointment shall take effect upon delivery to the Trustee of an instrument so appointing the successor and an instrument of acceptance executed by such successor, both of which instruments shall be duly acknowledged before a notary public. The delivery of such instruments shall take place within sixty
(60) days after notice of resignation or removal, as applicable, of the Trustee shall have been given.

TWELFTH: AMENDMENT OR TERMINATION.

(a) This Trust Agreement may be amended by a written instrument duly executed and acknowledged by the Trustee and the Bank. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable after it has become irrevocable in accordance with subparagraph (b) of Article FIRST hereof.

(b) (i) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan. Upon termination of the Trust any assets remaining in the Trust shall be returned to the Bank.

(ii) Notwithstanding the foregoing, if not sooner terminated, the Trust shall terminate automatically on the twenty-first (21st) anniversary of the death of the last to die of all of the lineal descendants of Rose Fitzgerald Kennedy, daughter of John Francis Fitzgerald and Josephine Mary Hannon Fitzgerald, who are living and in being on the effective date of this Trust Agreement.

(iii) Notwithstanding the foregoing, until the Trust has become irrevocable as provided in subparagraph (b) of Article FIRST hereof, the Trust may be terminated at any time by the Bank.

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(iv) In case the Plan is terminated in whole or in part, the Trustee (subject to the provisions of Articles TENTH and ELEVENTH hereof and reserving such sums as the Trustee shall deem necessary in settling its accounts and to discharge any obligation of the Fund for which the Trustee may be liable) shall apply or distribute any subfund attributable to such terminating Plan in accordance with the written directions of the Bank. Upon such termination of Plan in whole or in part, the Trustee shall have a right to have its accounts settled as provided in Article SEVENTH hereof. When a subfund shall have been so applied or distributed and the accounts of the Trustee shall have been so settled, the Trustee shall be released and discharged from all further accountability or liability respecting such subfund, and shall not be responsible in any way for the further disposition of such subfund.

THIRTEENTH: MISCELLANEOUS.

(a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

(b) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.

(c) (i) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts to be performed wholly within the State of New York.

(ii) Nothing in this Agreement shall be construed to subject either the Trust created hereunder or the Plan to ERISA.

(iii) Any reference herein to ERISA or the Code shall include such law as in effect on the effective date hereof, subsequent amendment thereto and any succeeding law.

(d) The titles to Articles of this Agreement are placed herein for convenience of reference only, and the Agreement is not to be construed by reference thereto.

(e) This Agreement shall bind and inure to the benefit of the successors and assigns of the Bank and the Trustee, respectively.

(f) This Agreement may be executed in any number of counterparts, each of which shall be shall to be an original but all of which together shall constitute but one instrument, which may be sufficiently evidenced by any counterpart executed by all parties hereto.

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(g) Any corporation into which the Trustee is merged with or with which it is consolidated, or any corporation resulting from a merger, reorganization or consolidation, to which the Trustee is a party, or any corporation to which all or substantially all the trust business of the Trustee is transferred shall become the successor trustee under the Agreement without the execution or filing of any further instrument or the performance of any further act.

(h) The Bank or anyone acting on its behalf may at any time employ the Trustee in its corporate (and not in its fiduciary) capacity as agent to perform any act, keep any records or accounts, or make any computations required by the Bank. Any such agency relationship shall be established by a separate agreement between the Bank and the Trustee, and the existence of such agreement and any actions performed by the Trustee under such agreement shall not affect its responsibilities as Trustee under this Agreement.

FOURTEENTH: ADMINISTRATION OF THE PLAN; COMMUNICATIONS.

(a) The Bank shall administer the Plan as provided therein, and the Trustee shall not be responsible in any respect for administering such Plan nor shall the Trustee be responsible for the adequacy of the Fund to meet and discharge all payments and liabilities under such Plan. The Trustee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by an officer of the Bank duly authorized to give communications to the Trustee. The Bank from time to time shall furnish the Trustee with the names and specimen signatures of such duly authorized officers of the Bank and shall promptly notify the Trustee of the termination of office of any officer of the Bank and the appointment of a successor thereto. Until notified to the contrary, the Trustee shall be fully protected in relying upon the most recent list of such duly authorized officers of the Bank furnished to it by the Bank.

(b) Any action required by any provision of this Agreement to be taken by the Board shall be evidenced by a resolution of the Board, certified to the Trustee by the Secretary or an Assistant Secretary of the Bank under its corporate seal. The Trustee shall be fully protected in relying upon any resolution so certified to it. Unless other evidence with respect thereto has been specifically prescribed in this Agreement, any other action of the Bank under any provision of this Agreement, including any approval of or exceptions to the Trustee's accounts, shall be evidenced by a certificate signed by an officer of the Bank duly authorized to give communications to the Trustee, and the Trustee shall be fully protected in relying upon such certificate. The Trustee may accept a certificate signed by an officer of the Bank duly authorized to give communications to the Trustee as proof of any fact or matter than it deems necessary or desirable to have established in the administration of the Trust (unless other evidence of such fact or matter is expressly prescribed herein), and the Trustee shall be fully protected in relying upon the statements in the certificate.

(c) Notwithstanding anything contained herein to the contrary, the Trustee shall be entitled conclusively to rely upon any written notice, instruction, direction, certificate or other

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communication reasonably believed by it to be genuine and to be signed by the proper person or persons, and the Trustee shall be under no duty to make investigation or inquiry as to the truth or accuracy of any statement contained therein.

(d) Until notice be given to the contrary, communications to the Trustee shall be sent to it at its office at 140 Broadway, New York, New York 10005, Attention: RICHARD A. GLOVER, Vice President; communications to the Bank shall be sent to it at its office at 18 Oakland Avenue, Warwick, New York 10990, Attention: PRESIDENT AND CHIEF EXECUTIVE OFFICER.

FIFTEENTH: IRS RULING.

The Bank may apply for a Private Letter Ruling from the IRS with respect to the federal income tax consequences of the Trust. If the IRS, following a request by the Bank, declines to issue a favorable ruling to the effect that the Bank will be treated for Federal income tax purposes as the owner of the Fund pursuant to Sections 671 through 679 of the Code, that the income of the Fund will be treated as income of the Bank, and that the funding of, and realization of income by, the Fund will not result in income to the participants or beneficiaries prior to the date that such funds are actually distributed or made available to participants or beneficiaries hereunder, all of the assets then held in the Fund shall forthwith be returned to the Bank in kind and this Agreement shall be null and void and have no force and effect.

SIXTEENTH: DEFINITION OF CHANGE OF CONTROL.

(a) Change of Control means any of the following events:

(i) approval by the shareholders of the Bank of a transaction that would result and does result in the reorganization, merger or consolidation of the Bank, respectively, with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

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(ii) the acquisition of all or substantially all of the assets of the Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Bank entitled to vote generally in the election of directors by any person or by any persons acting in concert, or approval by the shareholders of the Bank of any transaction which would result in such an acquisition;

(iii) a complete liquidation or dissolution of the Bank, or approval by the shareholders of the Bank of a plan for such liquidation or dissolution;

(iv) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

(A) individuals who were members of the Board on the date of this Agreement; or

(B) individuals who first became members of the Board after the date of this Agreement either:

(I) upon election to serve as a member of the Board by affirmative vote of three-quarters of the members of such board, or of a nominating committee thereof, in office at the time of such first election; or

(II) upon election by the shareholders of the Board to serve as a member of the Board, but only if nominated for election by affirmative vote of three-quarters of the members of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

PROVIDED, HOWEVER, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the Board of the Company; or

(v) any event which would be described in (i), (ii),
(iii) or (iv) above if the term "Warwick Community Bancorp, Inc." was substituted for the term "Bank" therein and the term "Board of Directors of Warwick Community Bancorp, Inc." were substituted for the term "Board" therein.

In no event, however, shall a Change of Control be deemed to have occurred as a result of any acquisition of securities or assets of Warwick Community Bancorp, Inc., the Bank, or a subsidiary of either of them, by Warwick Community Bancorp, Inc., the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For

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purposes of this Article SIXTEENTH, the term "person" shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act. The Trustee may rely on an opinion of a reputable law firm selected by the Trustee, in its discretion, to determine whether a Change of Control has occurred. The Trustee may also request that the Bank furnish evidence to determine, or enable the Trustee to determine, whether a Change of Control has occurred.

(b) The Trustee shall not be responsible for determining whether a Change of Control occurs. Such determination shall be made solely by the Bank, and the Bank shall promptly notify the Trustee in writing in such an event. The Bank shall, under the penalties of perjury, promptly certify to the Trustee at any time and from time to time, at the Trustee's request, whether a Change of Control has been deemed to have occurred.

SEVENTEENTH: EFFECTIVE DATE.

The effective date of this Trust Agreement shall be December 23, 1997.

-19-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their respective names by their duly authorized officers under their corporate seals as
of the day and year first above written.

THE WARWICK SAVINGS BANK

                                      By: /s/ Timothy A. Dempsey
                                          -------------------------------------
                                              Timothy A. Dempsey
                                              Title:  President and Chief
                                                      Executive Officer

                                      Date: December 10, 1997
                                            -----------------------------------
ATTEST:


By: /s/ Nancy L. Sobotor-Littell
    ----------------------------
        Secretary

[seal]

MARINE MIDLAND BANK

                                      By: /s/ Richard A. Glover
                                          -------------------------------------
                                          Richard A. Glover
                                          Title:  Vice President

                                          Date: December 9, 1997
                                                -------------------------------
ATTEST:


By: /s/ Mindy F. Smith
    ----------------------------
    Secretary

[seal]

-20-

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 10th day of December, 1997, before me personally came TIMOTHY A. DEMPSEY, to me known, who, being by me duly sworn, did depose and say that he resides at 36 Waterbury Road, Warwick, New York 10990; that he is the President and Chief Executive Officer of THE WARWICK SAVINGS BANK, the savings bank described in and which executed the foregoing instrument; that he knows the seal of said savings bank; that the seal affixed to said instrument is such savings bank's seal; that it was so affixed by order of the Board of Directors of said savings bank; and that he signed his name thereto by like order.

/s/ Roseanna Nielsen
-------------------------------
    Notary Public

STATE OF NEW YORK       )
                        : ss.:
COUNTY OF NEW YORK      )

On this 9th day of December, 1997, before me personally came RICHARD A. GLOVER, to me known, who, being by me duly sworn, did depose and say that he resides at 5 Windward Court, Dix Hills, New York, that he is Vice President and Trust Officer of MARINE MIDLAND BANK, the banking corporation described in and which executed the foregoing instru ment; that he knows the seal of said banking corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said banking corporation; and that he signed his name thereto by like order.

/s/ Mindy F. Smith
--------------------------------
    Notary Public

-21-

EXHIBIT 10.18

TRUST AGREEMENT

BETWEEN

THE WARWICK SAVINGS BANK

AND

MARINE MIDLAND BANK

FOR THE

THE WARWICK SAVINGS BANK

401(K) SAVINGS PLAN EMPLOYER STOCK FUND


Entered into as of November 21, 1997


                                        TABLE OF CONTENTS
                                        -----------------

                                                                                                      PAGE

                                            Article I

                                           DEFINITIONS

Section 1.01      Specific Definitions.................................................................-1-


                                            Article II

                                    ESTABLISHMENT OF THE TRUST

Section 2.01      Establishment of Trust...............................................................-2-
Section 2.02      Purposes of Trust....................................................................-2-


                                           Article III

                                          ADMINISTRATION

Section 3.01      Appointment of Committee.............................................................-3-
Section 3.02      Action of the Committee..............................................................-3-
Section 3.03      Plan Administrator...................................................................-3-
Section 3.04      Duties of the Trustee................................................................-4-
Section 3.05      Trustee as Agent.....................................................................-4-


                                            Article IV

                                           INVESTMENTS

Section 4.01      General Investment Operations........................................................-4-
Section 4.02      Investment Funds.....................................................................-5-
Section 4.03      Appointment of Investment Manager....................................................-5-
Section 4.04      Investment Decisions.................................................................-6-
Section 4.05      Brokerage............................................................................-7-
Section 4.06      Investment in Collective Funds.......................................................-7-
Section 4.07      Liquidity............................................................................-7-

                                                                                                      PAGE


                                            Article V

                                        POWERS OF TRUSTEE

Section 5.01      Specific Powers......................................................................-8-
Section 5.02      Discretionary Powers.................................................................-9-


                                            Article VI

                                PAYMENTS OF BENEFITS AND EXPENSES

Section 6.01      Authorization by Plan Administrator.................................................-10-
Section 6.02      Representations by the Plan Administrator...........................................-11-
Section 6.03      Form of Payment.....................................................................-11-
Section 6.04      Fees and Expenses of Trustee........................................................-11-
Section 6.05      Taxes...............................................................................-11-


                                           Article VII

                                 VOTING RIGHTS AND TENDER OFFERS

Section 7.01      Exercise of Voting Rights...........................................................-12-
Section 7.02      Response to Tender Offers and Similar Events........................................-13-
Section 7.03      Dissent and Appraisal Rights........................................................-14-

                                           Article VIII

                                     LIABILITY OF THE TRUSTEE

Section 8.01      Contributions.......................................................................-15-
Section 8.02      Claims Limited to the Trust Fund....................................................-15-
Section 8.03      Retention of Advisors...............................................................-16-
Section 8.04      Qualification of Plan and Trust.....................................................-16-
Section 8.05      General Duties of Trustee...........................................................-16-
Section 8.06      No Liability for Acts of Others.....................................................-16-
Section 8.07      Indemnification.....................................................................-17-
Section 8.08      Communications......................................................................-19-
Section 8.09      Proof of Matters....................................................................-19-
Section 8.10      Party in Interest Information.......................................................-20-
Section 8.11      Disputes............................................................................-20-


                                               -ii-

                                                                                                      PAGE



                                            Article IX

                                    ACCOUNTING OF THE TRUSTEE

Section 9.01      Keeping of Accounts.................................................................-20-
Section 9.02      Rendering of Accounts...............................................................-20-
Section 9.03      Discharge of Trustee................................................................-21-
Section 9.04      Right to Judicial Settlement........................................................-21-


                                            Article X

                              REMOVAL AND RESIGNATION OF THE TRUSTEE

Section 10.01     Removal or Resignation..............................................................-21-
Section 10.02     Successor Trustee...................................................................-22-
Section 10.03     Delivery of Trust Fund..............................................................-22-


                                            Article XI

                                    AMENDMENT AND TERMINATION

Section 11.01     Amendment...........................................................................-22-
Section 11.02     Termination.........................................................................-22-


                                           Article XII

                                          MISCELLANEOUS

Section 12.01     Merger of Trustee...................................................................-23-
Section 12.02     Affiliated Companies................................................................-23-
Section 12.03     Alienation of Trust Fund............................................................-24-
Section 12.04     Applicable Law......................................................................-24-
Section 12.05     Headings Not Part of the Agreement..................................................-24-
Section 12.06     Multiple Copies.....................................................................-24-



                                              -iii-


TRUST AGREEMENT

FOR THE

THE WARWICK SAVINGS BANK

401(K) SAVINGS PLAN EMPLOYER STOCK FUND

This AGREEMENT ("Agreement") has been made as of the 21st day of November, 1997 between THE WARWICK SAVINGS BANK, a savings bank organized under the laws of the State of New York with its principal place of business at 18 Oakland Avenue, Warwick, New York 10990 ("Bank") and MARINE MIDLAND BANK, a bank organized under the laws of the State of New York, with a principal place of business at 140 Broadway, New York, New York 10005 ("Trustee").

W I T N E S S E T H :

WHEREAS, the Bank maintains The Warwick Savings Bank 401(k) Savings Plan ("Plan") for the exclusive benefit of certain of its employees and their beneficiaries; and

WHEREAS, the Plan contemplates the establishment of one or more trusts to hold, invest and administer amounts contributed under the Plan, and the Bank desires to establish an investment fund that will invest primarily in shares of common stock of Warwick Community Bancorp, Inc. ("Shares"); and

WHEREAS, the Trustee has agreed to hold, invest and administer the assets of the Plan that are held under this Trust Fund (as defined in
Section 1.01(g)) on the terms set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Bank and the Trustee hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 SPECIFIC DEFINITIONS.

The following terms as used in this Agreement have the meanings indicated unless the context requires otherwise:

(a) "Board" means the Board of Trustees of the Bank prior to the conversion of the Bank from mutual to stock form and the Board Directors of the Bank thereafter.


(b) "Committee" means the committee appointed by the Bank under Section 3.01 of this Agreement.

(c) "ERISA" means the Employee Retirement Income Security Act of 1974, as it has been and may be amended, and corresponding provisions of future laws, as they may be amended.

(d) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it has been and may be amended, and corresponding provisions of future laws, as they may be amended.

(e) "Participant" means a person for whose benefit contributions have been made to the Trust Fund under the Plan.

(f) "Prohibited Transaction" has the meaning of that term under ERISA and the Internal Revenue Code.

(g) "Trust Fund" means the assets held under this Trust by the Trustee, including contributions made under the Plan which are transferred to the Trustee by the Bank, a predecessor or co-trustee and any income and appreciation, and reinvestments attributable thereto.

ARTICLE II

ESTABLISHMENT OF THE TRUST

SECTION 2.01 ESTABLISHMENT OF TRUST.

The Bank hereby establishes with the Trustee a Trust for the purpose of holding and administering the Trust Fund in accordance with this Agreement. Such Trust shall continue for such time as may be necessary to accomplish the purpose for which it was created, subject to the provisions of Section 10.02.

SECTION 2.02 PURPOSES OF TRUST.

The Bank and the Trustee shall discharge their duties with respect to the Trust Fund for, and the Trust Fund shall be used solely for and not diverted from, the exclusive purpose of providing benefits to Participants and their beneficiaries who are entitled to benefits under the Plan, other than such part as is required to pay taxes and reasonable expenses of administering the Plan. Notwithstanding the preceding sentence, however, contributions may be returned to the Bank by the Trustee at the direction of the Committee as hereinafter provided, if the Committee certifies in writing to the Trustee that one or both of the following circumstances exist and that the Plan permits such repayments:

(a) If a contribution is made by the Bank by a mistake of fact, the contribution may be returned to the Bank within one year after it was paid to the Trustee;

-2-

(b) If a contribution is conditioned upon its deductibility under Section 404 of the Internal Revenue Code, the contribution, to the extent the deduction is disallowed by the Internal Revenue Service, may be returned to the Bank within one year after the disallowance or, if such disallowance is appealed to the courts, within one year after the date a court decision upholding such disallowance becomes final.

For purposes of this Section, the word "contribution" has the same meaning as it does in Section 403(c) of ERISA.

ARTICLE III

ADMINISTRATION

SECTION 3.01 APPOINTMENT OF COMMITTEE.

The Bank shall appoint a Committee of one or more persons to represent it in dealing with the Trustee under this Agreement. The Secretary or assistant Secretary of the Bank shall promptly give the Trustee a certified copy of each Board resolution appointing or removing a member of the Committee or approving any action with respect to this Agreement. Until it receives such written notice that a person is no longer a member of the Committee, the Trustee shall be fully protected in assuming that the person is still a member of the Committee. When the Secretary or Assistant Secretary delivers to the Trustee a certified copy of a resolution of the Board appointing a member of the Committee, he shall also deliver a specimen signature of that member. The members of the Committee shall be "named fiduciaries" within the meaning of
Section 402(a) of ERISA with respect to the Plan and the Trust. If at any time no members are currently serving as the Committee, or if no Committee is appointed, the Board shall be deemed to be the Committee.

SECTION 3.02 ACTION OF THE COMMITTEE.

The Bank shall certify to the Trustee the names and specimen signatures of the members of the Committee appointed by the Bank to give directions to the Trustee. Such certification shall include directions as to the number of signatures required for any communication or direction to the Trustee. The Bank shall promptly give notice to the Trustee of changes in the membership of the Committee. The Committee may also certify to the Trustee the name of any person, together with a specimen signature of any such person, authorized to act for it in relation to the Trustee. The Committee shall promptly give notice to the Trustee of any change in any person authorized to act on behalf of it. For all purposes under this Agreement, until any such notice is received by the Trustee, the Trustee shall be fully protected in assuming that the membership of the Committee and the authority of any person certified to act in its behalf remain unchanged.

SECTION 3.03 PLAN ADMINISTRATOR.

The Bank shall certify to the Trustee the name and specimen signature of the Plan Administrator appointed by the Bank to administer the Plan and give directions to the Trustee. Such

-3-

certification shall include directions as to the number of signatures required for any communication or direction to the Trustee. The Bank shall promptly give notice to the Trustee of changes in the identity of the Plan Administrator. The Plan Administrator may also certify to the Trustee the name of any person, together with a specimen signature of any such person, authorized to act for the Plan Administrator in relation to the Trustee. The Plan Administrator shall promptly give notice to the Trustee of any change in any person authorized to act on behalf of the Plan Administrator. For all purposes under this Agreement, until any such notice is received by the Trustee, the Trustee shall be fully protected in assuming that the identity of the Plan Administrator and the authority of any person certified to act on the Plan Administrator's behalf remain unchanged.

SECTION 3.04 DUTIES OF THE TRUSTEE.

The Trustee shall have only those duties specifically assumed by it in this Agreement. The Trustee shall have no responsibility to administer or interpret the Plan, to enforce payment of any contributions to the Trust Fund, or to see that the Trust Fund is adequate to meet liabilities under the Plan. The Trustee shall be fully protected in acting upon any instrument, certificate or paper reasonably believed by it to be genuine and to be signed or presented by the proper person or persons, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing but may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. The Trustee shall not be liable for the proper application of any part of the Trust Fund if payments are made in accordance with the written directions of the Committee or the Plan Administrator as herein provided. All persons dealing with the Trustee are released from inquiry into the decision or authority of the Trustee and from seeing to the application of any monies, securities or other property paid or delivered to the Trustee.

SECTION 3.05 TRUSTEE AS AGENT.

The Bank or anyone acting on its behalf may at any time employ the Trustee in its corporate (and not its fiduciary) capacity, in addition to its duties provided hereunder, as agent to perform any act, keep any records or accounts, or make any computations required by the Bank or the Committee. Any such agency relationship shall be established by a separate agreement between the Bank and the Trustee and the existence of such arrangement shall not affect its responsibilities as Trustee under this Agreement.

ARTICLE IV

INVESTMENTS

SECTION 4.01 GENERAL INVESTMENT OPERATIONS.

The Trust Fund shall be held by the Trustee and shall be invested and reinvested as hereinafter provided in this Article IV, without distinction between principal and income and without regard to the restrictions of the laws of the State of New York, or of any other jurisdiction, relating to the investment of trust funds.

-4-

SECTION 4.02 INVESTMENT FUNDS.

(a) The Trustee shall establish and maintain an investment fund, to be known as the Employer Stock Fund, which fund shall be invested in Shares and, only to the extent provided in Section 4.07 or pending investment in Shares, in cash and short-term investments.

(b) The Trustee shall establish and maintain, for the investment of the Trust Fund, such separate investment funds in addition to the Employer Stock Fund established pursuant to Section 4.02(a), (individually, the Employer Stock Fund and such other investment funds are referred to herein as an "Investment Fund"), as the Bank may request by written notice to the Trustee.

(c) To the extent directed to do so pursuant to Section 4.04, the Trustee shall hold and invest amounts paid over to it pursuant to this Agreement in such Investment Funds as shall have been established in accordance with Section 4.02(a) and 4.02(b), and shall allocate amounts paid over to it among the Investment Funds in the manner and in the proportion designated by the Committee or such other person or entity selected by the Committee. The Trustee shall also credit to each Investment Fund all earnings and appreciation allocable thereto and shall charge against each such fund any depreciation, losses, expenses, payments and distributions allocable thereto.

(d) The Trustee shall invest and reinvest amounts allocated to each Investment Fund in accordance with such written investment criteria as shall be established by the Committee and communicated in writing to the Trustee. Notwithstanding any such investment criteria, the Trustee is authorized to retain in an Investment Fund, for as long as it is deemed advisable by the person responsible for directing the investment of the particular Investment Fund, (i) any securities or other property received by means of a dividend, distribution, exchange, conversion, liquidation or otherwise than by initial purchase; and (ii) any investments which were authorized hereunder when made by the Trustee.

SECTION 4.03 APPOINTMENT OF INVESTMENT MANAGER.

(a) The Committee may, in its discretion, appoint an investment manager ("Investment Manager") to direct the investment and reinvestment of all or any portion of the Trust Fund. Any such Investment Manager shall either: (i) be registered as an investment adviser under the Investment Advisers Act of 1940, as amended ("Investment Advisers Act"); (ii) be a bank, as defined in the Investment Advisers Act; or (iii) be an insurance company qualified to perform investment services under the laws of more than one state.

(b) The Committee shall give written notice to the Trustee of the appointment of an Investment Manager pursuant to Section 4.03(a). Such notice shall include: (i) a specification of the portion of the Trust Fund to which the appointment applies; (ii) a certification by the Committee that the Investment Manager satisfies the requirements of Section 4.03(a)(i), (ii) or
(iii); (iii) a copy of the instruments appointing the Investment Manager and evidencing the Investment Manager's acceptance of the appointment; (iv) directions as to the manner in which the Investment Manager is authorized to give instructions to the Trustee, including the persons authorized to give

-5-

instructions and the number of signatures required for any written instruction;
(v) an acknowledgment by the Investment Manager that it is a fiduciary of the Plan; and (vi) if applicable, a certificate evidencing the Investment Manager's current registration under the Investment Advisers Act. For purposes of this Agreement, the appointment of an Investment Manager pursuant to this Section 4.03 shall become effective as of the effective date specified in such notice, or, if later, as of the date on which the Trustee receives proper notice of such appointment.

(c) The Committee shall give written notice to the Trustee of the resignation or removal of an Investment Manager previously appointed pursuant to this Section 4.03. From and after the date on which the Trustee receives such notice, or, if later, the effective date of the resignation or removal specified in such notice, the Committee shall be responsible, in accordance with this Section 4.03, for the investment and reinvestment of the portion of the Trust Fund theretofore managed by such Investment Manager, until such time as a successor Investment Manager has been duly appointed pursuant to this Section 4.03.

SECTION 4.04 INVESTMENT DECISIONS.

(a) The Trustee shall invest and reinvest the Trust Fund as follows:

(i) To the extent that any portion of the Trust Fund shall be allocated to an Investment Fund other than the Employer Stock Fund, such portion of the Trust fund shall be invested and reinvested:

(A) by the Trustee, in its discretion; or

(B) if an Investment Manager is appointed to direct the investment of amounts allocated to such Investment Fund, in accordance with the directions of such Investment Manager; and

(ii) to the extent that any portion of the Trust Fund is allocated to the Employer Stock Fund, such portion of the Trust Fund shall be invested and reinvested in Shares at such prices and at such times as the Trustee, in its discretion, may determine.

The Trustee shall be under no duty or obligation to review any investment to be acquired, held or disposed of pursuant to directions of the Committee, any Investment Manager nor to make any recommendation with respect to the disposition or continued retention of any such investment. To the extent that the Trustee is subject to direction by the Committee or an Investment Manager, or the Trustee is acting pursuant to Section 4.04(c), the Bank hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim or liability which may be asserted against the Trustee by reason of any action or inaction by it pursuant to a direction by the Committee or by an Investment Manager or failing to act in the absence of any such direction.

-6-

(b) The Committee or an Investment Manager appointed pursuant to Section 4.03 may, from time to time, issue orders for the purchase or sale of securities directly to a broker. Written notification of the issuance of each such order shall be given promptly to the Trustee by the Committee or the Investment Manager, and the execution of each such order shall be confirmed by written advice to the Trustee by the broker. Such notification shall be authority for the Trustee to pay for securities purchased against receipt thereof and to deliver securities sold against payment therefor, as the case may be.

(c) To the extent that neither the Committee nor an Investment Manager furnishes directions as to the investment of any portion of the Trust Fund that is subject to its direction, to the extent provided by ERISA, the Trustee shall invest and reinvest the Trust Fund in any savings account, time or other interest bearing deposit or in any other interest bearing obligation of any one or more banks, savings banks, savings and loan associations and other financial institutions, or any of them, including any subsidiary of the Bank, or, subject to Section 4.06, in any commingled, collective, common or group trust fund at least 75 % of the assets of which are invested in such savings accounts, time or other interest bearing deposits or other interest bearing obligations.

SECTION 4.05 BROKERAGE.

The Trustee shall have the power and authority to be exercised in its sole discretion at any time and from time to time to issue and place orders for the purchase or sale of securities directly with qualified brokers or dealers. Such orders may be placed with such qualified brokers and/or dealers who also provide investment information or other research or statistical services to the Trustee in its capacity as a fiduciary or investment manager for other clients.

SECTION 4.06 INVESTMENT IN COLLECTIVE FUNDS.

The Trustee may from time to time temporarily transfer any assets of the Trust Fund to, or withdraw the same from, any pooled investment fund or group or collective trusts maintained by a bank or trust company (which may be the Trustee or an affiliate of the Trustee) supervised by a state or federal agency, which has been determined by the Internal Revenue Service to be a qualified trust or fund exempt from federal income tax under Section 501(a) of the Internal Revenue Code, and which has been established to permit separate pension and profit sharing trusts qualified under Section 401(a) of the Internal Revenue Code to pool some or all of their funds for investment purposes. To the extent the Trust Fund is invested in such a pooled fund or group or collective trust, the terms of the instrument establishing such pooled fund or group or collective trust are made a part of this Agreement as fully as if set forth at length herein. The commingling of assets of this Trust with assets of other qualified participating trusts in such pooled funds or group or collective trusts is specifically authorized.

SECTION 4.07 LIQUIDITY.

Notwithstanding any provision of this Article IV to the contrary, the Trustee, in its sole discretion or as the Committee may request, may retain uninvested cash or cash balances, and sell, to provide cash or cash balances, such investments in whatever portion of the Trust Fund that

-7-

it may deem advisable without being required to pay interest thereon. Pending investment, the Trustee, in its sole discretion, may temporarily invest any funds held or received by it for investment in an investment fund established hereunder in commercial paper or in obligations or, or guaranteed by, the United States government or any of its agencies.

ARTICLE V

POWERS OF TRUSTEE

SECTION 5.01 SPECIFIC POWERS.

In addition to, and not in limitation of, the powers now, or which may later become, vested in it by law or by other provisions of this Agreement, but subject to Section 2.02, Section 4.04 and this Article V, the Trustee is authorized and empowered:

(a) to purchase, receive or subscribe for Shares (for which the Trustee shall pay no more than "adequate consideration," as defined in
Section 3(18) of ERISA and shall pay no commission), other securities or other property and to retain in trust such Shares, other securities or other property;

(b) to sell, exchange, redeem, transfer, and otherwise dispose of, by private agreement or public auction, any property held in the Trust Fund; and no person dealing with the Trustee need see to the application of the consideration paid therefor or inquire into the validity, expediency, or propriety of any such transaction;

(c) subject to the provisions of Article VII, to exercise voting rights either in person, by limited or general power of attorney, or by proxy, with respect to Shares and other stocks, securities or other property, and generally to exercise with respect to Trust Fund assets all rights, powers, and privileges that may be lawfully exercised by any person owning similar property in his own right;

(d) subject to the provisions of Article VII, to exercise any options, conversion rights, or rights to subscribe for additional Shares, stocks, bonds or other securities appurtenant to any Shares, stocks, bonds or other securities held by it, and to make any necessary payments in connection with such exercise; to join in, dissent from, and oppose the reorganization, consolidation, recapitalization, liquidation, merger, or sale, mortgage, pledge or lease, of corporate property with respect to any corporations or property in which it may be interested as Trustee; to deposit any property with any protective, reorganization or similar committee, and to pay or agree to pay part of the expenses and compensation of any committee and any assessments levied with respect to property so deposited; and

(e) to compromise, compound, submit to arbitration or settle any debt or obligation owing to or from it as Trustee; to reduce or increase the rate of interest on extension, or otherwise modify, foreclose upon default, or otherwise enforce any such obligation.

-8-

ln exercising such powers with respect to any portion of the Trust Fund that is invested in the discretion of the Trustee or pursuant to Section 4.04(c), the Trustee shall act in its discretion. In exercising such powers with respect to directions of the Committee or of an Investment Manager, the Trustee shall act in accordance with directions provided by the Committee or Investment Manager. The Trustee shall be under no duty or obligation to review any action to be taken, nor to recommend any action, pursuant to this Section 5.01 with respect to any portion of the Trust Fund that is under the direction of the Committee or an Investment Manager. The Trustee shall have no liability of responsibility for, and the Bank agrees to indemnify the Trustee and hold it harmless from and defend it against any claim or liability which may be asserted against the Trustee by reason of, its actions or inaction pursuant to the direction of, or its failure to act in the absence of directions from, the Committee, the Plan Administrator or an Investment Manager, except to the extent provided in Section 8.06.

SECTION 5.02 DISCRETIONARY POWERS.

In addition to and not by way of limitation of any other powers conferred upon the Trustee by law or other provisions of this Agreement, but subject to Section 2.02 and this Article V, the Trustee is authorized and empowered, in its discretion:

(a) to sue or defend suits or legal proceedings to protect or enforce any interest in the Trust and to represent the Trust in all suits or legal proceedings in any court or before any other administrative agency, body or tribunal, where it is advised by counsel that such action is required by applicable law;

(b) to organize corporations and/or partnerships or established ancillary or subsidiary trusts under the laws of any jurisdiction for the purpose of holding title to any property held in the Trust Fund;

(c) to borrow, subject to the provisions of Article VI and ERISA, for the purpose of the Trust from any person or persons, and for any sums so borrowed to issue its promissory note as Trustee and to secure the repayment thereof by pledging all or any part of the assets of the Trust fund; no person lending money to the Trustee shall be required to see to the application of the money lent or to inquire into the validity, expediency, or propriety of any such borrowing;

(d) to hold part of the Trust Fund uninvested in cash or cash balances for liquidity purposes and not be required to pay interest thereon;

(e) to hold any property at any place, except that it shall not maintain the indicia of ownership of any assets of the Trust Fund outside the jurisdiction of the district courts of the United States except as permitted by regulations issued by the Secretary of Labor of the United States under Section 404(b) or ERISA.

(f) to make, sign, acknowledge, and deliver deeds, leases, assignments, and other instruments;

-9-

(g) to cause any property to be registered in the name of its nominee, or to hold any such property in such form that it will pass by delivery and, in accordance with Sections 11-1.8 and 11-1.9 of the Estates, Powers and Trusts Law of the State of New York, to deposit or arrange for the deposit of any securities held by it with the Federal Reserve Bank of New York or in a clearing corporation (as defined in the New York State Uniform Commercial Code); provided, however, that the records of the Trustee shall at all times show that any such property held or registered in the name of another is part of the Trust Fund;

(h) to employ legal counsel, brothers, and other advisors, agents, or employees to perform services for the Trust Fund or to advise it with respect to its duties and obligations under this Agreement and in connection with the Trust, and to pay to them from the Trust Fund such compensation as it deems appropriate; and

(i) generally to do all acts, whether or not expressly authorized, which the Trustee may deem necessary or desirable for the protection of the Trust Fund.

ARTICLE VI

PAYMENTS OF BENEFITS AND EXPENSES

SECTION 6.01 AUTHORIZATION BY PLAN ADMINISTRATOR.

The Trustee shall pay benefits and administrative expenses under the Plan, transfer funds to any other trust fund established under the Plan or make direct transfers to other tax-qualified plans, only when it receives (and in accordance with) written instructions of the Plan Administrator indicating the amount of the payment and the name and address of the recipient. The Trustee need not inquire into whether any payment the Plan Administrator instructs it to make is consistent with the terms of the Plan or applicable law or otherwise proper. Any payment made by the Trustee in accordance with such instructions shall be a complete discharge and acquittance to the Trustee. If the Plan Administrator advises the Trustee that benefits have become payable with respect to a Participant's interest in the Trust Fund but does not instruct the Trustee as to the manner of payment, the Trustee shall hold the Participant's interest in the Trust until it receives written instructions from the Plan Administrator as to the manner of payment. The Trustee shall not pay benefits from the Trust Fund without such instructions, even though it may be informed from other sources, including, without limitation, a Participant or beneficiary, that benefits are payable under the Plan. The Trustee shall have no responsibility to determine when, to whom, or in what amount benefits and expenses are payable under the Plan. If the Plan Administrator so directs, the Trustee shall segregate amounts payable with respect to the interest in the Plan of any Participant and administer them separately from the rest of the Trust Fund in accordance with the Plan Administrator's instructions. The Plan Administrator shall certify to the Trustee that any such instructions are consistent with the Plan.

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SECTION 6.02 REPRESENTATIONS BY THE PLAN ADMINISTRATOR.

The Trustee may require the Plan Administrator to certify in writing that any payment of benefits or expenses it instructs the Trustee to make pursuant to Section 6.01 is: (a) in accordance with the terms of the Plan, and/or (b) one which the Plan Administrator is authorized by the Plan and any other applicable instruments to direct, and/or (c) made for the exclusive purpose of providing benefits to Participants and their beneficiaries, or defraying reasonable expenses of Plan administration, and/or (d) not made to a party in interest, within the meaning of Section 3(14) of ERISA or a disqualified person, within the meaning of Section 4975 of the Internal Revenue Code, and/or (e) not a Prohibited Transaction. If the Trustee requests, instructions to pay benefits shall be made by the Plan Administrator on forms prepared by the Trustee that include any or all of the above representations. The Trustee shall be fully protected in relying on the truth of any such representation by the Plan Administrator and shall have no duty to investigate whether such representations are correct or to see to the application of any amounts paid to the recipient. The Bank shall indemnify the Trustee and hold it harmless from any liability resulting from acts or omissions taken in reliance on such representations.

SECTION 6.03 FORM OF PAYMENT.

Payments of money by the Trustee for any benefit or expense under the Plan may be made by, when applicable, mailing its check for the amount thereof to the person designated by the Committee as entitled to receive such payment to such address as may have been last furnished to the Trustee by the Committee. If no such address has been furnished, benefits or expenses may be mailed by the Trustee to such person in care of the Committee or the Bank. To the extent permitted under the Plan, distributions of Shares shall be made by causing Warwick Community Bancorp, Inc., or its transfer agent, to issue to the distributee a stock certificate evidencing ownership of the designated number of Shares. To the extent that any distribution of Shares to any person requires the registration of such Shares under the securities or blue sky laws of the United States or any state, or otherwise requires any governmental approvals, the Bank shall undertake to complete such registration or obtain such approvals at its sole expense.

SECTION 6.04 FEES AND EXPENSES OF TRUSTEE.

The Trustee shall receive as reasonable compensation for its services as Trustee such amounts as may, from time to time, be agreed upon in writing between the Bank and the
Trustee.
Such fees and expenses may be charged directly to the Trust Fund unless paid by the Bank. The Trustee shall have a lien against the Trust Fund for the unpaid amount of any fees and disbursements due it and, in its discretion, may withdraw the same from the Trust Fund.

SECTION 6.05 TAXES.

All taxes that may be levied or assessed upon or in respect of the Trust Fund shall be paid from the Trust Fund. The Trustee shall notify the Committee of any proposed or final assessments of taxes and may assume that any such taxes are lawfully levied or assessed unless the Committee advises it in writing to the contrary within fifteen (15) days after receiving the above

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notice from the Trustee. In such case, the Trustee, if requested by the Committee in writing, shall contest the validity of such taxes in any manner deemed appropriate by the Committee; the Bank may itself contest the validity of any such taxes, in which case the Committee shall so notify the Trustee and the Trustee shall have no responsibility or liability respecting such contest. If either party to this Agreement contests any such proposed levy or assessments, the other party shall provide such information and cooperation as the party conducting the contest shall reasonably request.

ARTICLE VII

VOTING RIGHTS AND TENDER OFFERS

SECTION 7.01 EXERCISE OF VOTING RIGHTS.

(a) Each person with amounts invested in the Employer Stock Fund shall have the right to confidentially direct the exercise of voting rights appurtenant to Shares attributable to the portion of such person's account invested in the Employer Stock Fund; PROVIDED, however, that such person had investments in the Employer Stock Fund as of the most recent valuation date coincident with or immediately preceding the applicable record date for exercising such voting rights. Such person shall, for this purpose, be deemed a "named fiduciary" within the meaning of section 402(a)(2) of ERISA. Such direction shall be made by completing and filing with the inspector of elections, Trustee, or such other person who shall be independent of the issuer of Shares as the Committee shall designate, at least 10 days prior to the date of the meeting of holders of Shares at which such voting rights will be exercised, a written direction in the form and manner prescribed by the Committee. The inspector of elections, Trustee or such other person designated by the Committee shall tabulate the directions given on a strictly confidential basis and shall provide the Committee with only the final results of such tabulation. The final results of the tabulation shall be followed by the Committee or the Board in directing the Trustee as to the manner in which such voting rights shall be exercised. The Committee shall furnish, or cause to be furnished, to each person whose account is invested in the Employer Stock Fund all annual reports, proxy materials and other information known by the Committee to have been furnished by the issuer of the Shares or by any proxy solicitor to the holders of Shares.

(b) To the extent that any person with amounts invested in the Employer Stock Fund fails to give instructions with respect to the exercise of voting rights appurtenant to Shares attributable to the portion of such person's account invested in the Employer Stock Fund with respect to each matter to be voted upon:

(i) the Committee or the Board shall direct the Trustee to: (A) cast a number of affirmative votes equal to the product of (I) the number of Shares for which no written instructions have been given, multiplied by
(II) a fraction, the numerator of which is the number of Shares for which affirmative votes will be cast in accordance with written instructions given as provided in section 7.01(a) and the denominator of which is the aggregate number of affirmative and negative votes which will be cast in accordance with written

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instructions given as aforesaid, and (B) cast a number of negative votes equal to the excess (if any) of (I) the number of Shares for which no written instructions have been given over (II) the number of affirmative votes being cast with respect to such Shares pursuant to section 7.01(b)(i)(A); or

(ii) if the Committee or the Board shall determine that it may not, consistent with its fiduciary duties, direct the Trustee to vote the Shares for which no written instructions have been given in the manner described in section 7.01(b)(i), it shall direct the Trustee to vote such Shares in such manner as the Compensation Committee or the Board, in its discretion, may determine to be in the best interests of the persons to whom such Shares are attributable.

(c) To the extent permitted by applicable law, the Trustee shall act in accordance with the directions that it receives from the Committee for each matter as to which voting rights are to be exercised. If the Committee does not provide the Trustee with directions, then to the extent permitted by applicable law, the Trustee shall exercise the voting rights appurtenant to Shares held in the Employer Stock Fund in its discretion. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with the Committee's directions. The Bank hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim asserted against or liability imposed on the Trustee by reason of its having acted on any direction given by the Committee in accordance with this Section 7.01 or failing to act in the absence of such direction.

SECTION 7.02 RESPONSE TO TENDER OFFERS AND SIMILAR EVENTS.

(a) Each person with amounts invested in the Employer Stock Fund shall have the right to confidentially direct the response to a tender offer, or to any other offer, made to the holders of Shares generally, to purchase, exchange, redeem or otherwise transfer Shares, with respect to the Shares attributable to the portion of such person's account invested in the Employer Stock Fund; PROVIDED, HOWEVER, that such person had amounts invested in the Employer Stock Fund as of the most recent valuation date coincident with or immediately preceding the first day for delivering Shares or otherwise responding to such tender or other offer. Such person shall, for such purpose, be deemed a "named fiduciary" within the meaning of section 402(a)(2) of ERISA. Such direction shall be made by completing and filing with the Trustee, or such other person who shall be independent of the issuer of Shares as the Committee shall designate, at least 10 days prior to the last day for delivering Shares or otherwise responding to such tender or other offer, a written direction in the form and manner prescribed by the Committee. The Trustee or such other person designated by the Committee shall tabulate the directions given on a strictly confidential basis and shall provide the Committee with only the final results of such tabulation. The final results of the tabulation shall be followed by the Committee or the Board in directing the Trustee as to the number of Shares to be delivered in response to such tender or other offer. The Committee shall furnish or cause to be furnished, to each person whose account is invested in whole or in part in the Employer Stock Fund, all information concerning such tender or other offer

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known by the Committee to have been furnished by the issuer of Shares or furnished by or on behalf of the person making such tender or other offer.

(b) To the extent that any person with amounts invested in the Employer Stock Fund fails to give instructions with respect to Shares attributable to the portion of his account invested in the Employer Stock Fund:

(i) the Committee or the Board shall direct the Trustee to: (A) tender or otherwise offer for purchase, exchange or redemption a number of such Shares equal to the product of (I) the number of Shares for which no written instructions have been given, multiplied by (II) a fraction, the numerator of which is the number of Shares tendered or otherwise offered for purchase, exchange or redemption in accordance with written instructions given as provided in section 7.02(a) and the denominator of which is the aggregate number of Shares for which written instructions have been given as aforesaid, and (B) withhold a number of Shares equal to the excess (if any) of (I) the number of Shares for which no written instructions have been given over (II) the number of Shares being tendered or otherwise offered pursuant to section 7.02(b)(i)(A); or

(ii) if the Committee or the Board shall determine that it may not, consistent with its fiduciary duties, direct the Trustee to tender or otherwise offer for purchase, exchange or redemption Shares for which no written instructions have been given in the manner described in section 7.02(b)(i), it shall tender, or otherwise offer, or withhold such Shares in such manner as it, in its discretion, may determine to be in the best interests of the persons to whom such Shares are attributable.

(c) If the Committee does not provide the Trustee with directions with respect to a tender offer or other offer described in section 7.02(a), then to the extent permitted by applicable law, the Trustee shall take any action in response to such an offer in its discretion. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with the Committee's directions. The Bank hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim asserted against or liability imposed on the Trustee by reason of its having acted on any direction given by the Committee in accordance with this Section 7.02 or failing to act in the absence of any such direction.

SECTION 7.03 DISSENT AND APPRAISAL RIGHTS.

(a) Each person with amounts invested in the Employer Stock Fund shall have the right to confidentially direct the manner in which all dissent and appraisal rights appurtenant to Shares attributable to the portion of such person's account invested in the Employer Stock Fund will be exercised; PROVIDED, HOWEVER, that such person had amounts invested in the Employer Stock Fund as of the most recent valuation date coincident with or immediately preceding the applicable date for exercising such dissent or appraisal rights. Such individual shall, for such

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purpose, be deemed a "named fiduciary" within the meaning of section 402(a)(2) of ERISA. Such a direction shall be given by completing and filing with the Trustee or such other person designated by the Committee who shall be independent of the issuer of Shares at least 10 days prior to the latest date for exercising such dissent and appraisal rights a written direction in the form and manner prescribed by the Committee. The Trustee or other person designated by the Committee shall tabulate the directions given on a strictly confidently basis and shall provide the Committee with only the final results of such tabulation. The final results of the tabulation shall be followed by the Committee or the Board in directing the Trustee as to the manner in which such dissent and appraisal rights shall be exercised. The Committee shall furnish, or cause to be furnished, to each person whose account is invested in the Employer Stock Fund all information known by the Committee to have been furnished by the issuer of the Shares, or by or on behalf of any person, to the holders of Shares in connection with such dissent and appraisal rights.

(b) To the extent that any person with amounts invested in the Employer Stock Fund shall fails to give instructions with respect to dissent and appraisal rights appurtenant to Shares attributable to his interest, the Compensation Committee or the Board shall direct the Trustee to exercise dissent and appraisal rights as to those Shares in such manner as the Compensation Committee or the Board shall determine to be in the best interest of the person to whom such Shares are attributable.

(c) If the Committee does not provide the Trustee with directions with respect to dissent and appraisal rights, then to the extent permitted by applicable law, the Trustee shall take any action in response to such rights in its discretion. The Trustee shall have no discretion over or responsibility or liability for its actions taken in accordance with the Committee's directions. The Bank hereby agrees to indemnify the Trustee and hold it harmless from and defend it against any claim asserted against or liability imposed on the Trustee by reason of its having acted on any direction given by the Committee in accordance with this Section 7.03 or failing to act in the absence of any such direction.

ARTICLE VIII

LIABILITY OF THE TRUSTEE

SECTION 8.01 CONTRIBUTIONS.

The Trustee shall not be responsible for computing or collecting contributions due under the Plan.

SECTION 8.02 CLAIMS LIMITED TO THE TRUST FUND.

The Trustee in its individual or corporate capacity shall not be liable for claims of any persons in any manner regarding the Plan; such claims shall be limited to the Trust Fund. The Trustee shall not be liable to make distributions or payments of any kind unless sufficient funds are

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available therefor in the Trust Fund. The Trustee shall be responsible only for such money and other property as are received by it as Trustee under this Agreement.

SECTION 8.03 RETENTION OF ADVISORS.

The Trustee may consult legal counsel and other professional advisors who may, but need not, be its counsel or advisors or counsel or advisors to the Bank, the Committee, or any Participant or beneficiary, with respect to the meaning and construction of this Agreement or its powers, obligations, and conduct hereunder.

The Trustee shall be entitled to reasonable reimbursement from the Trust Fund for such legal counsel's and other professional advisors' fees. The Trustee shall not be deemed imprudent solely by reason of its taking or refraining from taking any action in accordance with the opinion of counsel.

SECTION 8.04 QUALIFICATION OF PLAN AND TRUST.

The Trustee shall be fully protected in assuming that the Plan and Trust meet the requirements of Sections 401 and 501 of the Internal Revenue Code and all the applicable provisions of ERISA unless it is advised to the contrary in writing by the Committee or a governmental agency.

SECTION 8.05 GENERAL DUTIES OF TRUSTEE.

The Trustee shall discharge its duties hereunder with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Trustee shall not be liable for any loss sustained by the Trust Fund by reason of the purchase, retention, sale or exchange of any investment in good faith and in accordance with the provisions of this Agreement and any applicable law. The Trustee's duties and obligations shall be limited to those expressly imposed upon it by this Agreement notwithstanding any reference herein to the Plan.

SECTION 8.06 NO LIABILITY FOR ACTS OF OTHERS.

(a) Subject to Section 8.06(b), no "fiduciary" (as such term is defined in Section 3(21) of ERISA) under this Agreement shall be liable for an act or omission of another person in carrying out any fiduciary responsibility where such fiduciary responsibility is allocated to such other person by this Agreement or pursuant to a procedure established in this Agreement except to the extent that:

(i) such fiduciary participated knowingly in, or knowingly undertook to conceal, an act or omission of such other person, knowing such act or omission to be a breach of fiduciary responsibility;

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(ii) such fiduciary, by his failure to comply with
Section 404(a)(1) of ERISA in the administration of his specific responsibilities which give rise to his status as a fiduciary, has enabled such other person to commit a breach of fiduciary, responsibility; or

(iii) such fiduciary has knowledge of a breach of fiduciary responsibility by such other person, unless he makes reasonable efforts under the circumstances to remedy the breach.

(b) Except as required by applicable law, the Trustee shall have no liability or responsibility for an act or omission of an Investment Manager appointed pursuant to Section 4.03 in carrying out its fiduciary responsibilities with respect to the Plan and no obligation to invest or otherwise manage any asset of the Plan which is subject to the management of such Investment Manager unless the Trustee: (i) by its failure to comply with
Section 404(a)(1) of ERISA in the administration of its specific responsibilities which give rise to its status as a fiduciary, has enabled such Investment Manager to commit a breach of fiduciary responsibility; or (ii) participated knowingly in, or knowingly undertook to conceal, an act or omission of such Investment Manager, knowing such act or omission to be a breach of fiduciary responsibility.

SECTION 8.07 INDEMNIFICATION.

(a) Subject to the relevant provisions of ERISA, the Bank hereby agrees to discharge, indemnify and hold Marine Midland Bank, ("Marine"), and its directors, officers and employees (hereinafter collectively referred to as the "Indemnitees") harmless from and against:

(i) any and all reasonable costs and expenses incurred by Marine in the enforcement of this Section 8.07 including, but not limited to, reasonable attorneys' fees and expenses and court costs; and

(ii) any and all losses, claims, damages, expenses, or liabilities (including, but not limited to, court costs, judgments, fines, excise taxes, time charged for personnel time of Marine related to litigation and the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, or claims) (hereinafter referred to as "Losses") incurred by any one or more of the Indemnitees in connection with actions, proceedings, or suits of any kind or nature whatsoever, whether civil under any statue or common law or otherwise, criminal, administrative or investigative arising from or in any way related to actions taken, or omitted to be taken, by one or more of the Indemnitees in connection with the engagement of Marine as Trustee of the Trust, including, but not limited to, any actions taken or omitted to be taken pursuant to directions or requests of the Bank, the Plan Administrator, the Committee, the Plan's Investment Manager, or their duly authorized agent or agents (such indemnification shall also include reasonable fees and expenses of Marine's legal counsel and financial advisors ("Litigation Expenses") which shall be paid within thirty (30) days of the date billed); provided, however, that upon a written determination of any court of competent jurisdiction ("Court") ,

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in an action in which the Bank and Marine are parties, concluding that a Loss resulted from the gross negligence or willful misconduct of one or more Indemnitees, the Bank shall not be obligated to pay Marine's Litigation Expenses within thirty (30) days of the date billed. Notwithstanding the foregoing, the provisions of this Section 8.07 (other than this sentence and the last sentence of this Section 8.07(a)) shall not apply to the extent that any Loss is found, in a final judgement ("Judgment") by a Court either (i) from which no appeal can be taken or (ii) from which no appeal is taken in a timely manner, to have resulted from the gross negligence or willful misconduct of one or more Indemnitees, in which case Marine shall reimburse the Bank for any Litigation Expenses and/or Losses paid by the Bank hereunder. However, if the Judgment does not indicate that the Loss resulted from the gross negligence or willful misconduct of one or more Indemnitees, the Bank shall pay all of Marine's outstanding Litigation Expenses and/or Losses within thirty (30) days. Any reimbursement or payment, as the case may be, required to be made hereunder after a Judgment shall include interest calculated in accordance with Marine's prime rate of interest as of the date the Bank or Marine, as the case may be, paid the litigation Expense or Loss.

(b) If notice of any action, claim, investigation or proceeding (hereinafter collectively referred to as "Proceeding") is received by one or more Indemnitees in respect to which indemnity may be sought against the Bank hereunder, such Indemnitee or Indemnitees shall promptly notify the Bank, in writing in no event later than thirty (30) days of the commencement thereof, but the omission to so notify the Bank shall not relieve the Bank from any liability to any one or more Indemnitees hereunder, except to the extent that such failure shall have actually prejudiced the defense of such action. The Bank, upon written notice to the Indemnitees within fifteen (15) days after receiving notice of commencement of the Proceeding, will be entitled to participate in any such Proceeding and to the extent that it may wish, assume the defense of the Proceeding with counsel satisfactory to the Indemnitees. After notice from the Bank to the Indemnitees of its election to assume the defense of any Proceeding, the Bank will pay all costs of defense of such Proceeding of every kind whatsoever. The Bank shall pay the Indemnitees' reasonable costs of investigation, of testifying in any hearing, of responding to discovery proceedings, or of consulting with the Bank or the Bank's attorneys. Indemnitees shall have the right to employ their own counsel in any Proceeding and the fees and expenses of such counsel shall be paid by the Bank, as they are incurred, if:

(i) Indemnitees have been advised by such counsel that there may be one or more legal defenses available to them which are different from or additional to defenses that are available to the Bank (in which case the Bank shall not have the right to assume the defense of the Proceeding on behalf of Indemnitees);

(ii) the Bank has not assumed the defense of the Proceeding and employed counsel satisfactory to Indemnitees within fifteen (15) days after notice of commencement of the Proceeding;

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(iii) the employment of such counsel has been authorized by the Bank in connection with the defense of the Proceeding; or

(iv) Indemnitees have been reasonably informed by such counsel that a conflict exists with counsel selected by the Bank.

(c) Neither termination, nor completion of the engagement of Marine or Indemnitees shall affect the provisions of this Section 8.07, which shall nevertheless remain operative and in full force and effect. The Bank hereby agrees that, in the event a Court holds that any payment or award of indemnification under the provisions of this Section 8.07 shall be unavailable to any one or more of the Indemnitees from the Bank for any reason, the Bank shall contribute to the aggregate Loss such amount as shall reflect the relative fault of the Bank.

(d) The provisions of this Section 8.07 shall be binding upon and inure to the benefit of the assigns, successors and legal representatives of the parties hereto.

(e) The parties agree that this Section 8.07 shall apply from the date Marine becomes Trustee of the Trust and shall remain in full force and effect with regard to any matters covered hereunder, irrespective of whether Marine is then serving as Trustee of the Trust.

(f) The parties agree that, in the event a Court holds that any part of this Section 8.07 is invalid or unenforceable, the remaining provisions of this Section 8.07 shall remain in full force and effect as if the provisions held invalid or unenforceable were never a part thereof.

SECTION 8.08 COMMUNICATIONS.

Communications to the Trustee shall be sent to the Trustee's principal office as stated in the preamble to this Agreement, to the attention of its Trust Department, or to such other address as the Trustee shall indicate in a written instrument delivered to the Committee.

Communication to the Committee, the Plan Administrator, the Bank or the Board shall be sent to the Bank's principal office as stated in the preamble to this Agreement, or to such other address as the Committee shall specify in a written instrument delivered to the Trustee. Communications shall be deemed to have been given at the time given personally, the day sent by facsimile transmission or by overnight courier or five (5) days after mailing postage prepaid or by registered or certified mail.

SECTION 8.09 PROOF OF MATTERS.

Whenever the Trustee shall deem it desirable for a matter to be proved or established before taking, permitting, or omitting any act, the matter (unless other evidence in respect thereof is specifically prescribed in this Agreement) may be deemed to be conclusively established by a certification signed by any two members of the Committee (or by the member of the Committee if the Committee has only one member) and delivered to the Trustee, and the Trustee shall be fully protected in relying on such an instrument.

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SECTION 8.10 PARTY IN INTEREST INFORMATION.

The Bank shall provide the Trustee with such information concerning the relationship between any person or organization and the Plan as the Trustee reasonably requests in order to determine whether such person or organization is a party in interest with respect to the Plan within the meaning of Section 3(14) of ERISA or a disqualified person with respect to the Plan within the meaning of section 4975 of the Internal Revenue Code.

SECTION 8.11 DISPUTES.

If a dispute arises as to the payment of any funds or delivery of any assets by the Trustee, the Trustee may withhold such payment or delivery until the dispute is determined by a court of competent jurisdiction or finally settled in writing by the parties concerned.

ARTICLE IX

ACCOUNTING OF THE TRUSTEE

SECTION 9.01 KEEPING OF ACCOUNTS.

The Trustee shall keep accurate and detailed accounts of all investments, reinvestments, receipts and disbursements and all other records of all its transactions under this Agreement. These accounts, books and records shall be open to inspection during regular business hours of the Trustee by the Committee or the Plan Administrator or any person or persons designated by the Committee or the Plan Administrator in a written instrument filed with the Trustee. The Trustee need not keep records of the interests in the Trust Fund of individual Participants and beneficiaries unless it agrees with the Committee or the Bank to keep such records under a separate agreement adopted under Section 3.05 of this Agreement.

SECTION 9.02 RENDERING OF ACCOUNTS.

Within ninety (90) days after the close of each fiscal year of the Plan, the Trustee's removal or resignation as Trustee hereunder, or the termination of the Plan or this Agreement, the Trustee shall file with the Committee an account setting forth all its transactions (including all receipts and disbursements) under the Agreement during such year, or during the period from the close of the last preceding fiscal year of the Plan to the effective date of its removal or resignation or the termination of the Plan or this Agreement, and showing property (including its cost and fair market value) held by it hereunder at the end of such accounting period. The Trustee shall certify in writing that the information in the accounting is accurate. The Committee and the Trustee may agree in writing that similar accounts will be prepared by the Trustee and filed with the Committee at more frequent intervals. No person or persons (including, without limitation, the Bank, the Board, and the Committee) shall be entitled to any further or different accounting by the Trustee, except as may be required by law.

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SECTION 9.03 DISCHARGE OF TRUSTEE.

Ninety (90) days after the filing of any account with the Committee under Section 9.02, the Trustee shall be forever released and discharged from any liability or accountability to anyone with respect to the transactions shown or reflected on the account, except with respect to any acts or transactions as to which the Committee, within such ninety-day period, files written objections with the Trustee. The written approval of the Committee of any account filed by the Trustee, or the Committee's failure to file written objections within ninety (90) days, shall be a settlement of such account as against all persons, and shall forever release and discharge the Trustee from any liability or accountability to anyone with respect to the transactions shown or reflected on such account.

If a statement of objections is filed by the Committee and the Committee is satisfied that its objections should be withdrawn or if the account is adjusted to its satisfaction, the Committee shall indicate its approval of the account in a written statement filed with the Trustee and the Trustee shall be forever released and discharged from all liability and accountability to anyone in accordance with the immediately preceding sentence. If an objection is not settled by the Committee and the Trustee, the Trustee, the Bank or the Committee may start a proceeding for a judicial settlement of the account in any court of competent jurisdiction; the only parties that need be joined in such a proceeding are the Trustee, the Committee, the Bank, and any other parties whose participation is required by law.

SECTION 9.04 RIGHT TO JUDICIAL SETTLEMENT.

Nothing in this Agreement shall prevent the Trustee, the Bank or the Committee from having the Trustee's account settled by a Court at any time. The only parties that need be joined in any such proceeding are the Bank, the Committee, the Trustee, and any other parties whose participation is required by law.

ARTICLE X

REMOVAL AND RESIGNATION OF THE TRUSTEE

SECTION 10.01 REMOVAL OR RESIGNATION.

The Trustee may resign as Trustee under this Agreement at any time by a written instrument delivered to the Committee giving notice of such resignation, which shall be effective sixty (60) days after receipt or at such other time as is agreed by the Committee and the Trustee. The Trustee may be removed at any time by the Board by a written resolution, certified by the Secretary or Assistant Secretary of the Bank and delivered to the Trustee, which shall be effective sixty (60) days after receipt or at such other time as is agreed between the Committee and the Trustee.

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SECTION 10.02 SUCCESSOR TRUSTEE.

If a vacancy in the office of trustee of the Trust occurs, the Board shall appoint a successor trustee and shall deliver to the Trustee copies of (a) a written instrument executed by the Bank appointing such successor, and
(b) a written instrument executed by the successor in which it accepts such appointment. Such instruments shall indicate their effective dates. The instrument of appointment shall be accompanied by certified copies of resolutions of the Board authorizing its adoption. Any such successor trustee or trustees shall have all the powers and duties of the original trustee.

SECTION 10.03 DELIVERY OF TRUST FUND.

If the Trustee resigns or is removed, it shall deliver any assets of the Trust Fund in its possession to a successor trustee as soon as it reasonably practicable after the settlement of its account or at such earlier time as shall be agreed on by the Bank, the Trustee, and the successor trustee. The Trustee may, however, reserve such amount of cash or property as it deems advisable for payment of its fees and expenses in connection with its administration of the Trust or the settlement of its account or for payment of all taxes that may be assessed on or in respect of the Trust Fund or the income thereof for the period before its removal or resignation. The Trustee shall pay over to the successor trustee any balance of such reserve remaining after the payment of such fees, expenses, and taxes. The delivery of assets of the Trust Fund to the successor trustee shall not be deemed a waiver by the Trustee of any lien or claim it may have on the Trust Fund for its fees or expenses.

ARTICLE XI

AMENDMENT AND TERMINATION

SECTION 11.01 AMENDMENT.

This Agreement may be amended at any time and from time to time by a written instrument signed by the Trustee and the Bank. The instrument of amendment must be approved by the Board and the Committee shall deliver to the Trustee a certified copy of resolutions adopted by the Board authorizing its adoption. The Bank shall certify to the Trustee that the amendment does not permit any part of the Trust Fund to be used for or diverted to purposes other than the exclusive benefit of Participants and their beneficiaries or the payment of reasonable expenses of administering the Plan and Trust, subject to
Section 2.02. The instrument of amendment shall specify its effective date and amendments may be made effective retroactively.

SECTION 11.02 TERMINATION.

If the Committee certifies to the Trustee that the Plan is or has been terminated, the Trustee shall hold and/or dispose of the Trust Fund in accordance with the Committee's written instructions, subject to the Trustee's right to receive a written or judicial settlement of its account and

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such evidence of governmental approval as it shall, in its sole discretion, require. The Committee shall certify in writing to the Trustee that the disposition directed: (a) does not result in any part of the Trust Fund being used for or diverted to purposes other than the exclusive benefit of Participants and their beneficiaries and the payment of reasonable expenses of administering the Plan and Trust, subject to Section 2.02, (b) is in accordance with ERISA and any other applicable laws, and (c) does not result in a Prohibited Transaction. The Trustee may, however, reserve such amount of cash or property as it deems advisable for payment of its fees and expenses in connection with its administration of the Trust or the settlement of its account or for payment of taxes that may be assessed on or in respect of the Trust or the income thereof.

ARTICLE XII

MISCELLANEOUS

SECTION 12.01 MERGER OF TRUSTEE.

Any corporation into which the Trustee is merged or with which it is consolidated, or any corporation resulting from a merger, reorganization, or consolidation, to which the Trustee is a party, or any corporation to which all or substantially all the trust business of the Trustee is transferred shall become the successor trustee under this Agreement without the execution or filing of any further instrument or the performance of any further act.

SECTION 12.02 AFFILIATED COMPANIES.

(a) Any other company which adopts the Plan in accordance with its terms may, with the written consent of the Trustee and Bank, become a party to this Agreement as an "Affiliated Company" by delivering a certified copy of a resolution of its board of directors to the effect that it agrees to adopt the Plan, to become a party to this Agreement and to be bound by all the terms and conditions of the Plan and this Agreement, as then in effect and as it may thereafter be amended. The Bank shall have the sole authority to enforce this Agreement on behalf of any such Affiliated Bank and the Trustee need not deal with any Affiliated Company except by dealing with the Bank or the Committee as its agent. The Trustee shall invest and administer the Trust Fund as a single fund for investment and accounting purposes without identification or allocation among the Bank and any Affiliated Companies or to any employee or group of employees or their beneficiaries, unless the Trustee, the Bank, and the Affiliated Companies concerned agree in writing to segregate funds.

(b) Any Affiliated Company may cease to be a party to this Agreement by delivering to the Trustee a certified copy of a resolution of its board of directors terminating its participation in the Plan or this Agreement. In such case, or in the event of the merger, consolidation, sale of property or stock, separation, reorganization or liquidation of any Affiliated Company, the Trustee, until directed otherwise by the Committee, shall continue to hold, in accordance with the provisions of this Agreement, that portion of the Trust Fund which it is advised by the Committee is attributable to the participation in the Plan of the employees and their beneficiaries affected by such termination or by such transaction.

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SECTION 12.03 ALIENATION OF TRUST FUND.

No right or claim in or to the Trust Fund or any assets thereof shall be assignable or subject to garnishment, attachment, execution, or levy of any kind except as otherwise provided under Section 414(p) of the Internal Revenue Code and Section 206(d)(3) of ERISA; any attempt to transfer, assign, or pledge the same shall be void and shall not be recognized by the Trustee except to such extent as may be legally required.

SECTION 12.04 APPLICABLE LAW.

This Agreement shall be administered, construed, and enforced in accordance with applicable federal law (including, but not limited to, the fiduciary requirements of Part 4 of Title I of ERISA) and, to the extent not preempted by federal law, the laws of the State of New York.

SECTION 12.05 HEADINGS NOT PART OF THE AGREEMENT.

Headings of Articles and Sections are inserted for convenience of reference. They are not part of this Agreement and shall not be considered in construing it.

SECTION 12.06 MULTIPLE COPIES.

This Agreement may be executed in any number of counterparts, each of which shall be considered an original even though no others are produced.

-24-

IN WITNESS WHEREOF, the Bank and the Trustee have caused this Agreement to be executed by their duly authorized officers and their respective corporate seals to be hereunto affixed
as of the day and year first above written.

THE WARWICK SAVINGS BANK

                                      By: /s/ Ronald J. Gentile
                                          ----------------------------------
                                              Ronald J. Gentile

                                      Title:   Executive Vice President
                                                 and Chief Operating Officer

                                      Date:   November 21, 1997
                                              ------------------------------
Attest:

By: Nancy L. Sobotor-Littell

Secretary

[seal]
MARINE MIDLAND BANK

                                      By: /s/ Richard A. Glover
                                          ----------------------------------
                                              Richard A. Glover

                                      Title: Vice President

                                      Date:   November 20, 1997
                                              ------------------------------

Attest:

By: James Chin

Vice President

[seal]

-25-

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF ORANGE       )

On this 21st day of November, 1997, before me personally came RONALD J. GENITLE to me known, who, being by me duly sworn, did depose and say that he resides at 30 Newport Bridge Road, Warwick, New York 10990; that he is the Executive Vice President and Chief Operating Officer of THE WARWICK SAVINGS BANK, the savings bank described in and which executed the foregoing instrument; that he knows the seal of said savings bank; that the seal affixed to said instrument is such savings bank's seal; that it was so affixed by order of the Board of Directors of said savings bank; and that he signed his name thereto by like order.

/s/ Mary K. Serriger
-------------------------
    Notary Public

STATE OF NEW YORK      )
                       : ss.:
COUNTY OF NEW YORK     )

On this 20th day of November, 1997, before me personally came RICHARD A. GLOVER, to me known, who, being by me duly sworn, did depose and say that he resides at 5 Windward Court, Dix Hills, New York, that he is Vice President and Trust Officer of MARINE MIDLAND BANK, the banking corporation described in and which executed the foregoing instru ment; that he knows the seal of said banking corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said banking corporation; and that he signed his name thereto by like order.

/s/ Doris Colon
-------------------------
    Notary Public

-26-

EXHIBIT 11.1

STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

For the Year Ended May 31, 1998

1. Net income (since December 23, 1997) $ 628,400

2. Total weighted average common shares outstanding 6,112,610

3. Basic earnings per share $ 0.10

4. Diluted earnings per share $ 0.10



Warwick Community Bancorp, Inc. Annual Report

[GRAPHIC]




[LOGO] Mission Statement

Our objective is to be a leading financial services organization offering a full range of consumer and commercial products and services. We endeavor to offer these products and services with a focus on our customers, while taking appropriate safety and soundness principles into consideration. As a public company, we strive to enhance profitability and ensure the long-term appreciation of shareholder value. We will conduct our business in such a manner as to exert a beneficial influence in the communities we serve, to be a good corporate citizen, and to offer equal employment opportunities to a competent and professional staff. The Company's directors, officers, and employees are proud of the long-standing values and traditions upheld by The Warwick Savings Bank for more than a century, and we are committed to remaining an independent, community bank.

[GRAPHIC]

The cover of this annual report features an architectural rendering of Warwick Savings' new branch office and Commercial Loan Headquarters in the town of Wallkill. This new facility includes new technology and greater conveniences for our customers. A focus on customer service is a hallmark of Warwick Savings and demonstrates the Bank's commitment as Orange County's premiere community bank.

1

[LOGO] The Board of Directors of Warwick Community Bancorp, Inc. and The Warwick Savings Bank

[PHOTO]

1st row (seated l to r): Wilbur L. Smith, Director Emeritus; John W. Sanford, Jr., Director Emeritus; Dr. Harry C. Sayre, Jr., Director Emeritus. 2nd row (standing l to r): Fred M. Knipp, President, Warwick Valley Telephone Co.; Emil R. Krahulik, Bank Counsel, Attorney, Beattie & Krahulik; Henry L. Nielsen, Jr., President, Nielsen Construction Co., Inc.; Timothy A. Dempsey, President & CEO, The Warwick Savings Bank; Thomas F. Lawrence, Jr., Retired President, Warwick Auto Co.; Frances M. Gorish, Retired Vice President & Corp. Sec., The Warwick Savings Bank. 3rd row (standing l to r): John W. Sanford, III, President, John W. Sanford & Son, Inc.; Robert N. Smith, President, Lazear-Smith Funeral Home, Inc.; R. Michael Kennedy, President, Kennedy Companies, Inc.; Ronald J. Gentile, Executive Vice President & COO, The Warwick Savings Bank.

The Warwick Savings Foundation Board of Directors

Peter H. Alberghini, Director of Development, Orange County Community College; Timothy A. Dempsey, President & CEO, The Warwick Savings Bank; Frances M. Gorish, Retired Vice President & Corp. Sec., The Warwick Savings Bank; Michael P. Hoffman, Executive Vice President, External Affairs, Franciscan Sisters of the Poor; Thomas F. Lawrence, Jr., Retired President, Warwick Auto Co.; Sr. Ann Sakac, President, Mount St. Mary's College; Robert N. Smith, President, Lazear-Smith Funeral Home, Inc.

2 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Corporate Highlights

July 1997

o Board of Trustees adopts Plan of Conversion to convert the Bank from a New York mutual savings bank to a New York stock savings bank.

October 1997

o Received approval from the New Jersey Department of Banking to establish WSB Mortgage Company of New Jersey, Inc., a mortgage banking subsidiary.

o Held ground breaking ceremony for new branch facility and Commercial Loan Headquarters, located at One Industrial Drive, in the Town of Wallkill.

December 1997

o Completed the conversion from a mutual savings bank to a New York stock savings bank.

o Began trading on The Nasdaq Stock Market(SM) under the symbol "WSBI."

o Announced the formation of The Warwick Savings Foundation, a charitable organization in service to the needs of our community.

April 1998

o Announced first earnings release as a public company.

June 1998

o Announced fiscal year-end results highlighting strong loan growth.

o Shareholders approve Stock Option Plan and Recognition and Retention Plan at Special Shareholders' meeting.

July 1998

o Opened new Wallkill branch office and Commercial Loan Headquarters.

                    Cassidy Vandervoort and her father,  Michael S. Vandervoort,
                    both of Westtown,  joined  Warwick  Savings  Executive  Vice
                    President and Chief Operating  Officer Ronald Gentile at the
[PHOTO]             Grand Opening  celebration of the Bank's new Wallkill Branch
                    Office.  A day of food,  fun, music and prizes for the whole
                    family culminated the week-long festivities at the facility,
                    which is also the new home of  Warwick  Savings'  Commercial
                    Loan Department.

3

President's Letter

[PHOTO]

To Our Shareholders, Customers & Friends:

I am pleased to report that The Warwick Savings Bank has continued on the path of growth and profitability that you have come to expect from this institution. Throughout our 123 year history, we have emphasized our commitment to anticipating and meeting the financial needs of the communities we serve. While news of bank consolidations and mergers dominate the headlines, Warwick Savings is committed to remaining a locally-managed, community-oriented financial institution. Given the challenges presented by competition from these mega-banks, our success is even more impressive. Balancing the delivery of personalized service with the implementation of new technology and innovative products and services has helped us address the changing needs of both consumer and commercial customers.

The Bank's conversion in December of 1997 from a mutual savings bank to a stock savings bank has been a catalyst for the outstanding performance documented in this, our first annual report to shareholders. This landmark event has enabled us to better address the core of the Bank's mission, to be a leading financial institution, to emphasize long-term profitability while maintaining appropriate safety and soundness principles, to ensure long-term appreciation of shareholder value, and to conduct our business in a manner that enables Warwick Savings to be a good corporate citizen.

The concurrent issuance and sale of all of the Bank's outstanding capital stock to the Company and the Company's sale of its common stock to the public at the time of the conversion raised $64 million in gross proceeds. A total of 6,414,125 shares of common stock were sold at the subscription price of $10.00 per share. The Company's common stock now trades on the Nasdaq Stock Market(SM) under the symbol "WSBI."

To underscore our commitment to the people of Orange County we established The Warwick Savings Foundation, a charitable organization in service to the needs of the community. The Company's contribution of 192,423 shares of common stock to the Foundation in connection with the Bank's conversion clearly demonstrates our leadership in this area and will enable the community at large to share in our continued success.

While details of the Company's financial performance will be discussed more fully later in this Annual Report, increases in total assets, total loans and shareholder value are all highlights. The hard work and dedication of everyone from the Bank's management team to our corporate and branch personnel have been major factors in these achievements, and my thanks and praise go out to each and every member of

4 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

the Warwick Savings' staff for their contributions.

An emphasis on service and convenience has long been an integral part of our approach to community banking, as we seek to attract and retain customers through extended office hours, low turnover of employees, and prompt, flexible and personalized production of a variety of loan and deposit products.

In furtherance of this commitment, it is our goal to increase market share in the communities we serve through the acquisition or establishment of branch offices and, if appropriate, the acquisition of smaller financial institutions.

Our new Wallkill Branch is a tangible example of our commitment to growth in accordance with the needs and demands of both consumer and commercial customers. This facility, which is also the new home of our commercial loan department, provides a wealth of new branch services including drive-up and ATM facilities. Its proximity to our former location at The Galleria at Crystal Run will ensure continued convenience for existing customers, while enabling the Bank to better serve both new and longtime customers alike.

The expansion of our mortgage banking operations and lending into several contiguous counties in northern New Jersey also demonstrates our strategy to enter new markets as we seek to enhance profitability and performance.

As technology continues to change the way we live in dramatic new ways, The Warwick Savings Bank will remain on the forward edge of innovation in the banking industry. We are also committed to ensuring Year 2000 compliance. In 1998, we will implement PC banking for commercial customers, along with an expansion in business products such as sweep accounts and small business banking.

As we approach the new millennium, I believe The Warwick Savings Bank is uniquely positioned to serve our expanding marketplace with the right products and services, excellent facilities, and the most service-oriented staff of any bank in our marketplace.

We anticipate continued success and growth as we strive to reinforce our position as the community bank in Orange County. On behalf of the Board of Directors and the entire Warwick Savings family, I want to thank you for your support.

/s/ TIMOTHY A. DEMPSEY

Timothy A. Dempsey
President and Chief Executive Officer

[LOGO] 5


[LOGO] The Executive Management Team of Warwick Community Bancorp, Inc. and The Warwick Savings Bank

Experience, expertise and a commitment to a personalized approach to banking are common characteristics of Warwick Savings' executive management team. The continued growth of the bank, in terms of both consumer and commercial products and services, is being overseen on a day-to-day basis by the executive management team, whose vision is helping to reinforce Warwick Savings' position as Orange County's community banking leader.

[PHOTO]

(l to r): Ronald J. Gentile, Executive Vice President & COO; Timothy A. Dempsey, President & CEO; Barbara A. Rudy, Senior Vice President; Arthur W. Budich, Senior Vice President & CFO; Nancy L. Sobotor-Littell, Corporate Secretary & Director of Human Resources. (Not pictured: Donna M. Lyons, Senior Vice President & Auditor; Laurence D. Haggerty, Senior Vice President, Commercial Loans).

6 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

                     Department of Mortgage Lending

[PHOTO]              Seated: Arthur S. Anderson, Executive Director.
                     Standing: (l to r) Beverly S. Bates, Chief Underwriter;
                     Kim Dando, Closing Supervisor;
                     Stephen A. Carle, Assistant Treasurer & Operations Manager.

[LOGO] The Warwick Savings Bank has traditionally been a leading mortgage lender in Orange County, and the Bank continues to expand in this area, including exploring new opportunities in New Jersey. Additionally, the Bank's expanding commercial lending activities are earning Warwick Savings a reputation as an important lending partner for the local business community.

                          Department of Commercial Lending

                Seated: C. Roland Newkirk, Vice President;               [PHOTO]
                   Kathryn Tiedemann, Assistant Treasurer.
          Standing: Jill Singer, Assistant Vice President;
                   Edward Lekis, Assistant Vice President.
Not pictured: Laurence D. Haggerty, Senior Vice President.

7

[LOGO] SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

                                                                                         At May 31,
                                                          -------------------------------------------------------------------------
                                                             1998            1997            1996           1995(7)         1994(7)
                                                          ---------       ---------       ---------       ---------       ---------
                                                                                       (In thousands)
Selected Financial Data:
    Total assets                                          $ 410,394       $ 286,545       $ 274,053       $ 258,679       $ 234,048
    Loans receivable, net (1)                               212,665         138,323         108,897         122,663         108,598
    Investment securities                                   170,749         126,393         144,284         110,333         105,433
    Real estate owned, net                                      409             224             330             493             306
    Deposits                                                222,722         221,211         232,965         229,011         207,527
    FHLB advances                                            62,850           5,250           3,600              --              --
    Securities sold
       under repurchase agreements                           27,190          23,090           4,700              --              --
    Stockholders' equity                                     86,150          28,114          24,770          23,076          21,910

                                                                                  For the year ended May 31,
                                                          -------------------------------------------------------------------------
                                                             1998            1997            1996           1995(7)         1994(7)
                                                          ---------       ---------       ---------       ---------       ---------
                                                                                       (In thousands)
Selected Operating Data:
    Interest income                                       $  23,777       $  20,691       $  18,333       $  16,253       $  15,786
    Interest expense                                          9,972           9,376           8,717           6,828           5,922
                                                          ---------       ---------       ---------       ---------       ---------
        Net interest income                                  13,805          11,315           9,616           9,425           9,864
        Less provision for loan losses                         (592)           (130)           (140)           (261)           (415)
                                                          ---------       ---------       ---------       ---------       ---------

        Net interest income after
           provision for loan losses                         13,213          11,185           9,476           9,164           9,449

    Other income
        Service and fee income                                2,134           1,915           1,768           1,369           1,996
        Securities transactions                                 742             816             356            (429)            845
        Loan transactions                                        94             137             119              14             123
        Other income (loss)                                     169             (89)           (159)            (79)            (17)
                                                          ---------       ---------       ---------       ---------       ---------
              Total other income, net                         3,139           2,779           2,084             875           2,947
                                                          ---------       ---------       ---------       ---------       ---------

    Other expense
        Salaries and employee benefits                        5,870           5,256           5,050           3,958           3,877
        ESOP benefits                                           730              --              --              --              --
        F.D.I.C. insurance                                       28              12              53             466             456
        Occupancy and equipment                               1,219           1,308           1,238           1,202           1,143
        Data processing                                         672             640             484             414             341
        Advertising                                             160             152             129             112              69
        Professional fees                                       583             240             325             222             270
        Contribution to
           The Warwick Savings Foundation                     1,924              --              --              --              --
        Other operating expenses                              2,001           1,735           1,791           1,722           1,606
                                                          ---------       ---------       ---------       ---------       ---------
              Total other expenses                           13,187           9,343           9,070           8,096           7,762

    Income before income tax
       expense and cumulative
       effect of change in
       accounting principle                                   3,165           4,621           2,490           1,943           4,634

    Income tax expense                                        1,304           1,756           1,024             794           2,115
                                                          ---------       ---------       ---------       ---------       ---------

    Income before cumulative effect
       of change in accounting principle                      1,861           2,865           1,466           1,149           2,519

    Cumulative effect of change
       in accounting principle                                   --              --              --            (645)             --
                                                          ---------       ---------       ---------       ---------       ---------

              Net income                                  $   1,861       $   2,865       $   1,466       $     504       $   2,519
                                                          =========       =========       =========       =========       =========

8 Warwick Community Bancorp, Inc. o Annual Report


                                                                                At or For the Year Ended May 31,
                                                               -----------------------------------------------------------------
                                                                1998           1997          1996           1995(7)       1994(7)
                                                               -----          -----         -----          --------      -------
Selected Financial Ratios and Other Data (2):
    Performance Ratios:
        Return on average assets                                0.57%          1.00%         0.56%          0.21%         1.11%
        Return on average
           retained earnings                                    3.72          11.02          6.29           2.32         12.11
        Average retained
           earnings to average assets                          15.40           9.12          8.94           9.18          9.14
        Retained earnings to
           total assets                                        20.99           9.81          9.04           8.92          9.36
        Core deposits to
           total deposits (3)                                  68.16          66.08         63.28          59.49         77.25
        Net interest spread (4)                                 3.58           3.62          3.48           3.84          3.92
        Net interest margin (5)                                 4.50           4.20          3.98           4.27          4.35
        Operating expense to
           average assets                                       4.06           3.28          3.48           3.42          3.41
        Average interest-earning assets to
           average interest-bearing liabilities                 1.28           1.17          1.14           1.14          1.16
        Efficiency ratio (6)                                   81.87          71.10         80.80          75.56         65.54

Regulatory Capital Ratios:
    Bank:
        Tangible capital                                       13.91           9.53          9.51           9.79          9.95
        Core capital                                           25.55          19.46         17.52          16.00         20.00
        Risk-based capital                                     26.27          20.33         18.45          16.00         20.00

    Company:
        Tangible capital                                       21.44             --            --             --            --
        Core capital                                           40.07             --            --             --            --
        Risk-based capital                                     40.78             --            --             --            --

    Asset Quality Ratios:
        Non-performing loans
           to total loans                                       0.47           1.02          0.78           1.78          2.02
        Non-performing loans
           to total assets                                      0.30           0.50          0.31           0.85          0.95
        Non-performing assets
           to total assets                                      0.35           0.58          0.44           1.04          1.08
        Allowance for loan losses
           to total loans                                       0.75           0.88          1.18           0.97          0.83
        Allowance for loan losses
           to non-performing loans                            123.61          86.09        151.22          54.77         41.06

Other Data:
    Branch Offices                                                 4              4             4              4             4


(1) Loans receivable, net represents total loans less net deferred loan fees and the allowance for loan losses.

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

(3) The Bank considers the following to be core deposits: checking accounts, passbook accounts, NOW accounts and money market accounts.

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

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

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

(7) The selected financial data of the Bank as of May 31, 1995 and 1994, and for the year ended May 31, 1994 are not derived from audited financial statements.

[LOGO] 9


[LOGO] MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Warwick Community Bancorp, Inc. (the "Company"), is a bank holding company incorporated in September 1997 under the laws of the State of Delaware and is registered under the Bank Holding Company Act of 1956, as amended. The Company was organized at the direction of The Warwick Savings Bank (the "Bank") for the purpose of acquiring all of the common stock of the Bank issued in connection with the conversion of the Bank from mutual to stock form ("Conversion"). On December 23, 1997, the Bank completed its Conversion, and the Company sold 6,414,125 shares of its common stock at a price of $10.00 per share in a subscription offering ("Offering") to certain depositors of the Bank. In connection with the Conversion and Offering, the Company established The Warwick Savings Foundation ("Foundation") and made a charitable contribution of 192,423 shares of the Company's common stock to the Foundation, which resulted in a one time charge relating to the funding of the Foundation of $1.9 million ($1.2 million net of tax). The net proceeds from the Offering amounted to $61.5 million, and the Company contributed 50% of the net proceeds from the Offering to the Bank in exchange for all of the issued and outstanding shares of common stock of the Bank. The remaining net proceeds were retained by the Company and invested primarily in federal funds, government and federal agency mortgage-backed securities, other debt securities and equity securities. Prior to the Offering, the Company had no significant assets, liabilities or operations. Presently, the only significant assets of the Company are the capital stock of the Bank, the note evidencing the loan the Company made to the Warwick Community Bancorp, Inc. Employee Stock Ownership Plan ("ESOP") to allow the ESOP to purchase 8% of the Company's common stock issued in the Offering and the investment of the net proceeds of the Offering retained by the Company.

The primary business of the Company is the operation of its wholly owned subsidiary, the Bank. The Bank's principal business has been and continues to be attracting retail deposits from the general public in the areas surrounding its four branches and investing those deposits, together with funds generated from operations and borrowings, primarily in one to four-family residential mortgage loans, mortgage-backed securities, commercial business and real estate loans and various debt and equity securities.

The Bank's results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on its interest-earning assets, such as loans and securities, and the interest expense on its interest-bearing liabilities, such as deposits and borrowed funds. The Bank also generates other income, such as service charges and other fees, which are primarily servicing fees received from residential mortgage loans that are sold with servicing retained. Other expenses primarily consist of employee compensation and benefits, occupancy expenses, federal deposit insurance premiums, net costs of real estate owned, data processing fees and other operating expenses. The Bank's results of operations are also significantly affected by general economic and competitive conditions (particularly changes in market interest rates), government policies, changes in accounting standards and actions of regulatory agencies.

While the following discussion of financial condition and results of operations includes the collective results of the Company and the Bank, this discussion reflects primarily the Bank's activities. Unless otherwise disclosed, the information presented in this Annual Report reflects the financial condition and results of operations of the Company and the Bank on a consolidated basis.

Management Strategy

The Bank has historically employed an operating strategy that emphasizes the origination of one to four-family residential mortgage loans in its market area with both fixed and variable rates and, to an increasing degree over the past 10 years, its commercial lending business, with mostly prime rate-based loans secured by real estate located mainly in Orange County, New York. Due in part to this strategy, the Bank historically has had profitable operations, resulting in a strong regulatory capital position. The Bank's goal of maintaining this position has led to an overall strategy of managed growth in both deposits and assets. The major elements of the Company's operating strategy are to: (i) grow and diversify the Bank's loan portfolio by continuing to originate owner-occupied residential mortgage, commercial business and commercial real estate, construction and consumer loans in its market area; (ii) complement the Bank's mortgage lending activities by investing in mortgage-backed and other securities; (iii) maintain the Bank's relatively low cost of funds and (iv) manage the Bank's level of interest rate risk. From time to time, the Bank employs a leveraging strategy, whereby borrowings are used to fund specific investments in order to provide for a reasonable net margin of return. The Bank also seeks to attract and retain customers through extended office hours, low turnover of employees and prompt, flexible and personalized production of a variety of loan products. In addition, it is a goal of the Bank to increase its market share in the communities it serves through the acquisition or establishment of branch offices and, if appropriate, the acquisition of smaller financial institutions. Additionally, it is a goal of the Bank to expand into new markets. For this reason, the Bank has expanded its mortgage banking operations and lending into New Jersey.

10 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Management of Interest Rate Risk

The principal objectives of the Bank's interest rate risk management activities are to: (i) evaluate the interest rate risk included in certain balance sheet accounts, (ii) determine the level of risk appropriate given the Bank's business focus, operating environment, capital and liquidity requirements and performance objectives, (iii) establish prudent asset concentration guidelines and (iv) manage the risk consistent with Board approved policies and guidelines. Through such management, the Bank seeks to reduce the vulnerability of its operating results to changes in interest rates and to manage the ratio of interest rate sensitive assets to interest rate sensitive liabilities within specified maturities or repricing dates. The Bank closely monitors its interest rate risk as such risk relates to its operating strategies. The extent of the movement of interest rates, higher or lower, is an uncertainty that could have a negative impact on the earnings of the Bank.

Historically, the Bank had been a traditional thrift lender, but differentiated itself from other thrifts by also focusing on commercial lending since the late 1980's and commission-based mortgage banking operations since 1995. The Bank also adopted a more competitive pricing policy, more efficient lock-in policies to close loans faster and more streamlined Federal National Mortgage Association ("FNMA") approved processing and underwriting procedures. Additionally, the Bank's array of products has expanded to include Federal Housing Authority ("FHA"), Veterans Administration ("VA") and State of New York Mortgage Association ("SONYMA") loans. As a result, the Bank has invested a relatively large amount of its earning assets in fixed-rate loans and fixed-rate mortgage-backed securities with contractual maturities of up to 30 years. At May 31, 1998, an aggregate of $178.2 million, or 46.2% of total earning assets, were invested in such assets. Based upon the assumptions used in the following table, at May 31, 1998, the Company's total interest-bearing liabilities maturing or repricing within one year exceeded its total interest-earning assets maturing or repricing in the same time period by $26.3 million, representing a one-year cumulative "gap," as defined below, as a percentage of total assets of negative 6.42%. Accordingly, management views the Company as having a manageable gap position, but still slightly vulnerable to a rising interest rate environment.

The Bank has taken several actions, under various market conditions, designed to manage its level of interest rate risk. These actions have included: (i) increasing the percentage of the loan portfolio consisting of adjustable-rate mortgage loans and prime rate-based commercial loans through originations, as market conditions permit, (ii) selling fixed-rate loans, but retaining the servicing rights, (iii) purchasing shorter-term investment securities and (iv) seeking to maintain a relatively high percentage of checking accounts in its deposit base. Additionally, in the normal course of business, the Bank uses off-balance sheet financial instruments primarily as part of mortgage banking hedging strategies. Such instruments generally include put options purchased and forward commitments to sell mortgage loans. As a result of interest rate fluctuations, these financial instruments will develop unrealized gains or losses that mitigate changes in the underlying hedged portion of the balance sheet. When effectively used, these instruments are designed to moderate the impact on earnings as interest rates move up or down.

Gap Analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets or liabilities are "interest rate sensitive" and by monitoring an institution's interest rate sensitivity "gap." An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, therefore, a negative gap would tend to adversely affect net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income.

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at May 31, 1998, which are anticipated by the Bank, based upon certain assumptions, to reprice or mature in each of the future time periods shown. Except as stated below, the amount of assets and liabilities shown which reprice or mature during a particular period were determined based on the earlier of term to repricing or the term to repayment of the asset or liability. The table is intended to provide an approximation of the projected repricing of assets and liabilities at May 31, 1998 on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be reinvested and/or repriced as a result of contractual amortization and anticipated early payoffs of adjustable-rate loans and fixed-rate loans, and as a result of contractual rate adjustments on adjustable-rate loans. For loans on one to four-family residential properties and mortgage-backed securities, assumed average annual prepayment rates of 17.89% and 18.82%, respectively, were utilized.

[LOGO] 11


[LOGO]

                                                                           At May 31, 1998
                                      ---------------------------------------------------------------------------------------------
                                                    More Than     More Than     More Than
                                                      Three          One          Three       More Than
                                        Three       Months to      Year to      Years to        Five
                                        Months        Twelve        Three         Five         Years to     More Than
                                       or Less        Months        Years         Years       Ten Years     Ten Years       Total
                                      ---------     ---------     ---------     ---------     ---------     ---------     ---------
                                                                         (Dollars in thousands)
Interest-earning assets:
    Mortgage loans (1)(5)             $  27,668     $  12,073     $  17,151     $  12,528     $   2,285     $  78,808     $ 150,513
    Other loans (2)                      24,275         1,007         7,520        16,811        12,785         1,572        63,970
    Mortgage-backed
       securities, fixed (5)             14,792            --           827             5         1,017        61,954        78,595
    Mortgage-backed
       securities, variable (5)           2,283         1,274            --            --            --            --         3,557
    Mutual funds and
       preferred stock                       --        14,931            --            --            --         1,698        16,629
    Investment securities:
       held-to-maturity                     309           910         1,000           105            --         5,000         7,324
    Investment securities:
       available-for-sale                    --         7,132        10,278         2,904         4,514        39,815        64,643
                                      ---------     ---------     ---------     ---------     ---------     ---------     ---------

        Total interest-
           earning assets                69,327        37,327        36,776        32,353        20,601       188,847       385,231

Net deferred loan
   fees and costs (3)                       (34)          (21)          (39)          (44)          (21)         (133)         (292)
                                      ---------     ---------     ---------     ---------     ---------     ---------     ---------

        Net interest-
           earning assets                69,293        37,306        36,737        32,309        20,580       188,714       384,939
                                      ---------     ---------     ---------     ---------     ---------     ---------     ---------

Interest-bearing liabilities:
    Passbook accounts (4)                    --        16,130            --            --            --        64,520        80,650
    Escrow accounts                          --            --            --            --            --         2,266         2,266
    NOW accounts                             --            --            --            --            --        17,558        17,558
    Money market
       accounts                          26,863            --            --            --            --            --        26,863
    Certificates of
       deposit                           20,052        44,548         3,998         2,308            --            --        70,906
    Borrowed funds                        9,380        15,970        50,650        15,000            --            --        91,000
                                      ---------     ---------     ---------     ---------     ---------     ---------     ---------

        Total interest-
          bearing liabilities            56,295        76,648        54,648        17,308            --        84,344       289,243
                                      ---------     ---------     ---------     ---------     ---------     ---------     ---------

    Interest rate
       sensitivity gap                $  12,998     $ (39,342)    $ (17,911)    $  15,001     $  20,580     $ 104,370     $  95,696
                                      =========     =========     =========     =========     =========     =========     =========

    Cumulative interest
       rate sensitivity gap           $  12,998     $ (26,344)    $ (44,255)    $ (29,254)    $  (8,674)    $  95,696
                                      =========     =========     =========     =========     =========     =========

    Cumulative interest
       rate sensitivity gap
       as a percentage
       of total assets                     3.17%        (6.42)%      (10.78)%       (7.15)%       (2.11)%      (23.32)%

    Cumulative net
       interest-earning assets
       as a percentage
       of cumulative interest-
       bearing liabilities               123.09%        80.18%        76.41%        85.72%        95.77%       133.08%


(1) For purposes of the gap analysis, mortgage and other loans are not reduced for the allowance for loan losses and non-performing loans.

(2) For purposes of the gap analysis, second mortgage loans are included in the "Other Loans" category.

(3) For purposes of the gap analysis, unearned fees and deferred loan origination costs are prorated.

(4) For purposes of the gap analysis, based upon the Bank's historical experience, management traditionally and conservatively slots 20% of the Bank's total savings account balances into the twelve-month time horizon. The remaining 80% are viewed as long-term deposits.

(5) For loans on residential properties an average annual prepayment rate of 17.89% is utilized. Mortgage-backed securities are assumed to prepay at an average annual rate of 18.82%.

12 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

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

The Company's interest rate sensitivity is also monitored by management through the use of a model which internally generates estimates of the change in net portfolio value ("NPV") over a range of interest rate change scenarios. NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. For purposes of the NPV table, prepayment speeds similar to those used in the "gap" table were used, reinvestment rates were those in effect for similar products being offered and rates on core deposits were modified to reflect recent trends. The following table sets forth the Company's NPV as of May 31, 1998, as calculated by the Company.

                                      Net Portfolio Value                   Portfolio Value of Assets
----------------------       ---------------------------------------       ---------------------------
 Rate in Basis Points
     (Rate Shock)
(Dollars in thousands)       $ Amount       $ Change        % Change       NPV Ratio      % Change (1)
----------------------       --------       --------        --------       --------       ------------
          200                $ 81,647       $(13,182)         (14)%         20.95%           (1.93)%
          100                  88,741         (6,088)          (6)          22.01            (0.87)
        Static                 94,829             --            0           22.88               --
         (100)                 92,472         (2,357)          (2)          22.01            (0.88)
         (200)                 87,583         (7,246)          (8)          20.68            (2.21)

(1) Based upon the portfolio value of the Company's assets assuming no change in interest rates.

As in the case with the "gap" table, certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV require the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in actual market interest rates. In this regard, the NPV model presented assumes that the composition of the Company's interest rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV measurements and net interest income models provide an indication of the Company's interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on the Company's net interest income and will differ from actual results.

Analysis of Net Interest Income

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

Average Balance Sheets. The table on the following page sets forth certain information relating to the Company for the years ended May 31, 1998, 1997 and 1996. The yields and costs were derived by dividing interest income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances were computed based on month-end balances. Management believes the use of average monthly balances instead of average daily balances does not have a material effect on the information presented. The yields include deferred fees and discounts which are considered yield adjustments.

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                                                                        For the Year Ended May 31,
                                        -------------------------------------------------------------------------------------------
                                                      1998                          1997                           1996
                                        ------------------------------ ----------------------------   ------------------------------
                                                               Average                      Average                          Average
                                        Average                Yield/  Average               Yield/   Average                 Yield/
                                        Balance     Interest    Cost   Balance    Interest    Cost    Balance    Interest      Cost
                                        --------    --------   ------- --------   --------  -------   --------   --------    -------
                                                                           (Dollars in thousands)
Assets:
  Interest-earning assets:
      Mortgage
         loans, net (1)                 $131,973    $ 10,191   7.72%   $ 90,771   $ 7,152     7.88%   $103,854   $  8,098      7.80%
      Consumer and
         other loans, net(1)              39,931       3,774   9.45      36,160     3,457     9.56      33,127      3,150      9.51
      Mortgage-backed
         securities                       75,020       5,533   7.38      80,255     5,897     7.35      19,612      1,617      8.24
      Federal funds sold                   3,130         172   5.50         283        15     5.30       6,058        322      5.32
      Interest earning
         accounts at banks                   635          34   5.35         395        18     4.56          93          5      5.38
      Investment securities               56,374       4,073   7.22      61,508     4,152     6.75      78,681      5,141      6.53
                                        --------    --------           --------     -----             --------   --------
          Total interest-
             earning assets              307,063      23,777   7.74     269,372    20,691     7.68     241,425     18,333      7.59
                                                    --------           --------                       --------
      Non-interest
         earning assets                   17,846                         15,856                         19,149
                                        --------                       --------                       --------
          Total assets                  $324,909                       $285,228                       $260,574
                                        ========                       ========                       ========

Liabilities and
     retained earnings:
  Interest-bearing liabilities:
      Passbook accounts                 $ 77,999    $  2,304   2.95%   $ 78,132   $ 2,323     2.97%   $ 77,868   $  2,365      3.04%
      Escrow deposits                      1,422          94   6.61       1,020        50     4.90       2,345         68      2.90
      NOW accounts                        15,384         245   1.59      14,117       227     1.61      12,638        215      1.70
      Money market
         accounts                         25,827         849   3.29      27,016       883     3.27      28,674        936      3.26
      Certificate accounts                74,618       3,823   5.12      79,155     3,985     5.03      89,831      5,109      5.69
                                        --------    --------           --------     -----             --------   --------
      Total deposits                     195,250       7,315   3.75     199,440     7,468     3.74     211,356      8,693      4.11
      Borrowed funds                      44,437       2,657   5.98      31,249     1,908     6.11         489         24      4.91
                                        --------    --------           --------     -----             --------   --------
          Total interest-
             bearing
             liabilities                 239,687       9,972   4.16     230,689     9,376     4.06     211,845      8,717      4.11
                                                    --------           --------                       --------
  Non-interest
     bearing liabilities                  35,174                         28,528                         25,432
                                        --------                       --------                       --------

          Total liabilities              274,861                        259,217                        237,277

  Retained earnings                       50,048                         26,011                         23,297
                                        --------                       --------                       --------

          Total liabilities
             and retained
            earnings                    $324,909                       $285,228                       $260,574
                                        ========                       ========                       ========

  Net interest income/
     interest rate spread(2)                        $ 13,805   3.58%             $ 11,315     3.62%              $  9,616      3.48%
                                                    ========   ====              ========     ====               ========      ====

  Net interest-earning assets/
     net interest margin(3)             $ 67,376               4.50%   $ 38,683               4.20%   $ 29,580                 3.98%
                                        ========               ====    ========               ====    ========                 ====

  Ratio of interest-earning
     assets to interest-bearing
     liabilities                                             128.11%                        116.77%                          113.96%
                                                             ======                         ======                           ======


(1) In computing the average balance of loans, non-accrual loans have been included.

(2) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(3) Net interest margin on interest-bearing assets represents net interest income as a percentage of average-earning assets.

14 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

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

                                                                 Year Ended May 31, 1998                Year Ended May 31, 1997
                                                                       Compared to                            Compared to
                                                                 Year Ended May 31, 1997                Year Ended May 31, 1996
                                                           ---------------------------------      ---------------------------------
                                                                   Increase (Decrease)                    Increase (Decrease)
                                                                 In Net Interest Income                 In Net Interest Income
                                                                         Due to                                 Due to
                                                           ---------------------------------      ---------------------------------
                                                           Volume         Rate         Net        Volume         Rate         Net
                                                           -------      -------      -------      -------      -------      -------
                                                                                        (In thousands)
  Interest-earning assets:
      Mortgage loans, net                                  $ 3,246      $  (207)     $ 3,039      $(1,020)     $    74      $  (946)
      Consumer and other loans, net                            361          (44)         317          288           19          307
      Mortgage-backed securities                              (385)          21         (364)       5,000         (720)       4,280
      Federal funds sold                                       151            6          157         (307)          --         (307)
      Interest earning accounts at banks                        11            5           16           16           (3)          13
      Investment securities                                   (347)         268          (79)      (1,122)         133         (989)
                                                           -------      -------      -------      -------      -------      -------
                Total                                        3,037           49        3,086        2,855         (497)       2,358
                                                           -------      -------      -------      -------      -------      -------

  Interest-bearing liabilities:
      Passbook accounts                                         (4)         (15)         (19)           8          (50)         (42)
      Escrow accounts                                           20           24           44          (39)          20          (19)
      NOW accounts                                              20           (2)          18           25          (13)          12
      Money market accounts                                    (39)           5          (34)         (54)           1          (53)
      Certificates of deposits                                (228)          66         (162)        (607)        (517)      (1,124)
      Borrowed funds                                           805          (56)         749        1,510          374        1,884
                                                           -------      -------      -------      -------      -------      -------
                Total                                          574           22          596          843         (185)         658
                                                           -------      -------      -------      -------      -------      -------
Net change in net interest income                          $ 2,463      $    27      $ 2,490      $ 2,012      $  (312)     $ 1,700
                                                           =======      =======      =======      =======      =======      =======

Asset Quality

Non-Performing Loans. Management and the Board of Directors perform a monthly review of delinquent loans. The actions taken by the Bank with respect to the delinquencies vary depending on the nature of the loan and period of delinquency. The Bank's policies on residential mortgage loans provide that delinquent mortgage loans be reviewed and that a late charge notice be mailed no later than the 15th day of delinquency, with the delinquency charge assessed on the 16th day. The Bank's collection policies on residential mortgage loans essentially mirror those shown in the FNMA servicing agreements. On other loans, telephone contact and various delinquency notices at different intervals are the methods used to collect past due loans.

It is the Bank's general policy to discontinue accruing interest on all loans when management has determined that the borrower will be unable to meet contractual obligations or when interest or principal payments are 90 days past due. When a loan is classified as non-accrual, the recognition of interest income ceases. Interest previously accrued and remaining unpaid is reversed against income. Cash payments received are applied to principal, and interest income is not recognized unless management determines that the financial condition and payment record of the borrower warrant the recognition of income. If a foreclosure action is commenced and the loan is not brought current, paid in full or an acceptable workout arrangement is not agreed upon before the foreclosure sale, the real property securing the loan is generally sold at foreclosure. Property acquired by the Bank as a result of foreclosure on a mortgage loan is classified as "real estate owned" and is recorded at the lower of the unpaid balance or fair value less costs to sell at the date of acquisition and thereafter. Upon foreclosure, it is the Bank's policy to generally require an appraisal of the property and, thereafter, appraise the property on an as-needed basis.

Other Real Estate Owned. At May 31, 1998, the Bank's OREO, net, which consisted of five single-family residential properties, totaled $409 thousand and was held directly by the Bank.

The following table sets forth information regarding non-accrual loans, other past due loans and OREO. There were no troubled restructurings within the meaning of SFAS No. 15 at any of the dates presented below.

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                                                                                             At May 31,
                                                                 ------------------------------------------------------------------
                                                                  1998           1997           1996           1995           1994
                                                                 ------         ------         ------         ------         ------
                                                                                       (Dollars in thousands)
Non-accrual mortgage loans delinquent
   more than 90 days                                             $  699         $1,111         $  582         $1,093         $1,217
Non-accrual other loans delinquent
   more than 90 days                                                186             83             82            131             69
                                                                 ------         ------         ------         ------         ------
Total non-accrual loans                                             885          1,194            664          1,224          1,286
Total 90 days or more
   delinquent and still accruing                                    133            237            199            978            928
                                                                 ------         ------         ------         ------         ------
Total non-performing loans                                        1,018          1,431            863          2,202          2,214
Total foreclosed real estate,
   net of related allowance for losses                              409            224            330            493            306
                                                                 ------         ------         ------         ------         ------
Total non-performing assets                                      $1,427         $1,655         $1,193         $2,695         $2,520
                                                                 ======         ======         ======         ======         ======

Non-performing loans to total loans                                0.47%          1.02%          0.78%          1.78%          2.02%
Total non-performing assets to total assets                        0.35%          0.58%          0.44%          1.04%          1.08%

Comparison of Financial Condition at May 31, 1998 and May 31, 1997

Total assets increased $123.9 million to $410.4 million at May 31, 1998, from $286.5 million at May 31, 1997, reflecting the Company's ongoing strategy of managed growth. This increase in total assets was primarily the result of increases in the Company's interest-earning assets, as the Company grew both its loan and investment securities portfolios. The asset growth was also funded through borrowings, which increased $61.7 million to $90.0 million at May 31, 1998, and from the $61.5 million in net proceeds raised by the Company in the Offering. At May 31, 1998, the Company had $27.2 million in securities sold under repurchase agreements and $62.9 million in term loans from the Federal Home Loan Bank of New York ("FHLBNY"). Deposit liabilities increased by $1.5 million to $222.7 at May 31, 1998 from $221.2 million at May 31, 1997, primarily due to increases in demand checking accounts, NOW accounts and money market accounts, offset by the decline in time certificates.

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

================================================================================
                            Total Assets and Deposits

                                          Total Assets            Total Deposits
                                          ------------            --------------
                                                       (in millions)
5/31/94                                      $234                     $208
5/31/95                                      $259                     $229
5/31/96                                      $274                     $233
5/31/97                                      $287                     $221
5/31/98                                      $410                     $223


Asset growth was concentrated in mortgage loans, net which increased $50.8 million to $148.2 million at May 31, 1998 from $97.4 million at May 31, 1997. Other loans, net showed an increase of $11.1 million to $47.2 million at May 31,1998 from $36.1 million at May 31, 1997. Total securities were $170.7 million at May 31, 1998 compared to $126.4 million at May 31, 1997. Securities held-to-maturity at May 31, 1998 totaled $7.3 million as compared to $6.1 million at May 31,1997. Securities available-for-sale at May 31, 1998 totaled $163.4 million as compared to $120.3 million at May 31, 1997. This increase is primarily the result of the Bank's utilization of additional wholesale leverage transactions in order to enhance earnings.

Other assets increased $2.6 million, or 92.9%, from $2.8 million at May 31, 1997 to $5.4 million at May 31, 1998. This increase was primarily the result of an increase in capitalizable costs associated with the Bank's new full service branch office located in the town of Wallkill that opened for business on July 27, 1998. Upon being placed into service, approximate costs of $2.3 million, relating to land improvements, the construction of the building and the purchase of furniture and equipment, were reclassified to "Bank premises and equipment, net."

Total stockholders' equity increased $58.0 million to $86.1 million at May 31, 1998 from $28.1 million at May 31, 1997. This increase was primarily attributable to the $61.5 million in net proceeds raised by the Company in the Offering in connection with the Bank's Conversion.

Comparison of Operating Results for the Fiscal Years Ended May 31, 1998 and 1997

General. Net income for the fiscal year ended May 31, 1998, which included a one-time after-tax charge of $1.2 million for the establishment of the Foundation, totaled $1.9 million, or $0.30 per share, as compared to $2.9 million

16 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

[THE FOLLOWING TABLES WERE REPRESENTED BY BAR CHARTS IN THE PRINTED MATERIAL.]


                      Residential Mortgage Loans Originated

                            For the Year Ended May 31
1998                                                                    $124,014
1997                                                                    $ 69,026
1996                                                                    $ 85,061
1995                                                                    $ 21,302
1994                                                                    $ 24,044


                            Consumer Loans Originated

                            For the Year Ended May 31
1998                                                                    $ 13,410
1997                                                                    $ 16,774
1996                                                                    $ 10,936
1995                                                                    $  8,918
1994                                                                    $  7,150


                          Commercial Loans Originated *

                            For the Year Ended May 31
1998                                                                    $ 26,628
1997                                                                    $ 14,966
1996                                                                    $ 12,326
1995                                                                    $ 11,585
1994                                                                    $ 12,595

* Includes renewals and refinancings.


for the comparable 1997 fiscal year. However, excluding the one-time charge for the Foundation, net income for the fiscal year ended May 31, 1998 would have increased 5.2% to $3.1 million, or $0.49 per share. Earnings per share results are not available for the fiscal year ended May 31, 1997 because the Company did not complete its Offering until December 1997.

Net Interest Income. Net interest margin is net interest income expressed as a percentage of total average earning assets. For the fiscal year ended May 31, 1998 the net interest margin was 4.50% as compared to 4.20% for the fiscal year ended May 31, 1997.This increase was primarily attributable to the $37.7 million increase in average interest-earning assets from $269.4 million over the fiscal year ended May 31, 1997 to $307.1 million over the fiscal year ended May 31, 1998, while average interest-bearing liabilities increased $9.0 million from $230.7 million to $239.7 million over the same period. Supplementing the increase in average interest-bearing liabilities, funding for the increase in average interest-earning assets was primarily provided by a $24.0 million increase in average retained earnings, which included the infusion of capital derived from the Offering, from $26.0 million for the fiscal year ended May 31, 1997, to $50.0 million for the comparable period ended May 31, 1998.

Net interest income for the fiscal year ended May 31, 1998 increased $2.5 million, or 22.0%, to $13.8 million, from $11.3 million for the fiscal year ended May 31, 1997.

The increase in interest income resulted primarily from the significant growth of the mortgage loan portfolio, as home purchasers and existing homeowners capitalized on the opportunities afforded by lower mortgage loan interest rates. Concurrently, the more modest increase in interest expense resulted primarily from an increase in interest on borrowed funds, coupled with a decrease in time deposit interest expense.

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]


Net Income

(in millions)

5/31/95                                                             $  503,765
5/31/96                                                             $1,465,580
5/31/97                                                             $2,865,503
5/31/98                                                             $1,860,945*

* Impacted by $1.9 Million (before tax) contributions to The Warwick Savings Foundation and initial $730 thousand (before tax) ESOP benefit.


Interest Income. For the fiscal year ended May 31, 1998 interest income totaled $23.8 million as compared to $20.7 million for the fiscal year ended May 31, 1997. The $3.1 million, or 14.9%, increase in 1998 was primarily attributable to a $3.0 million, or 42.5%, increase in the amount of interest earned on the Bank's mortgage loan portfolio, which resulted primarily from an increase in the average balance of the Company's mortgage loans from $90.7 million for the fiscal year ended May 31, 1997 to $132.0 million for the fiscal year ended May 31, 1998. Interest earned on other loans and on federal funds sold during the fiscal year ended May 31, 1998 increased by $317 thousand and $157 thousand, respectively, compared to the fiscal year ended May 31, 1997. Those increases, however, were largely offset by a $443 thousand decrease in interest earned on mortgage-backed and investment securities over the same period.

The increase in the average yield on interest-earning assets to 7.74% for the fiscal year ended May 31, 1998, as compared to 7.68% for the fiscal year ended May 31, 1997, resulted in part from the sale of relatively lower yielding securities, and the purchase of higher yielding securities with portions of the proceeds from such sales, in connection with the Company's restructuring of its investment securities portfolio during the summer of 1997. However, the improvement in yield derived from investments was partially offset by lower yields earned on the Bank's loan portfolios due to lower long-term interest rates at the start of 1998.

Interest Expense. Interest expense for the fiscal year ended May 31, 1998 was $10.0 million, compared to $9.4 million for the fiscal year ended May 31, 1997, due primarily to an increase of $13.2 million in the average balance of borrowed funds, a 171 basis point increase in the average rate paid on escrow deposits and a $402 thousand increase in the average balance of escrow deposits in connection with the increase in the Company's mortgage loans and additional wholesale leverage transactions entered into during the 1998 fiscal year. These increases were partially offset by a $4.2 million decrease in the average balance of total interest-bearing deposits and by a 13 basis point decrease in the average rate paid on borrowed funds.

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Provision For Loan Losses. The provision for loan losses for the fiscal year ended May 31, 1998 increased to $592 thousand, as compared to $130 thousand for the fiscal year ended May 31, 1997. This increase resulted from management's assessment of the growth in the loan portfolio, the level of the Bank's allowance for possible loan losses and its assessment of the local economy and market conditions. For the fiscal years ended May 31, 1998 and 1997, loan charge-offs, net of recoveries, aggregated $311 thousand and $203 thousand, respectively. At May 31, 1998 and 1997, the allowance for possible loan losses totaled $1.5 million and $1.2 million, respectively, and the ratio of such allowance to non-performing loans was 123.61% at May 31, 1998, as compared to 86.09% at May 31, 1997.

Other Income. Other income, consisting of service and fee income and gains and losses on securities and loan transactions, increased by $360 thousand, or 13.0%, to $3.1 million for the fiscal year ended May 31, 1998, as compared to $2.8 million for the fiscal year ended May 31, 1997. This increase was primarily attributable to an increase of $219 thousand in service and fee income due to the growth in checking account deposits during 1998 and an increase of $258 thousand in other income associated with increased loan and loan servicing activity, which was partially offset by a $74 thousand reduction on sales of securities and a $43 thousand reduction on loan sales.

Other Expense. Other expense increased by $3.9 million to $13.2 million for the fiscal year ended May 31, 1998, as compared to $9.3 million for the fiscal year ended May 31, 1997. This increase resulted primarily from an expense of $1.9 million relating to the Company's contribution to the Foundation and an expense of $730 thousand relating to the first year's allocation of shares under the ESOP which was established in connection with the Conversion and the Offering. Salaries and employee benefits expense also increased $615 thousand, or 11.7%, due to higher levels of expenses incurred in connection with the employee benefit plans established in connection with the Conversion and the Offering and normal salary increases. Professional fees increased $343 thousand primarily as a result of various consultation and audit activities in connection with the Conversion and the Offering.

Provision for Income Taxes. The provision for income taxes decreased $452 thousand from $1.8 million for the fiscal year ended May 31, 1997 to $1.3 million for the fiscal year ended May 31, 1998. This decrease was primarily attributable to the tax benefit derived from the Company's contribution to the Foundation.

Comparison of Financial Condition at May 31, 1997 and May 31, 1996

Total assets increased $12.4 million to $286.5 million at May 31, 1997, from $274.1 million at May 31, 1996, reflecting the Company's ongoing strategy of managed growth. The asset growth was funded primarily through borrowings, which increased $20.0 million to $28.3 million at May 31, 1997. As of May 31, 1997, the Company had $23.1 million in securities sold under repurchase agreements and $5.2 million in term loans from the FHLBNY. Deposit liabilities declined by $11.8 million to $221.2 million at May 31, 1997 from $233.0 million at May 31, 1996, primarily due to continued decreases in rollovers of a February 1995 offering of a nine-month certificate of deposit account ("Premium Certificates"), initially priced slightly above local market rates to provide the Bank with additional liquidity at the time of the failure of Nationar, one of the Bank's correspondent banks. FHLBNY advances and other borrowings are used by the Bank as an alternative to traditional retail deposits and take the form of overnight advances, repriced daily, and one-month lines of credit, repriced monthly.

Asset growth was concentrated in mortgage loans, net, which increased $25.5 million to $97.4 million at May 31, 1997 from $71.9 million at May 31, 1996. This loan growth (net of amortizations and satisfactions) contrasts to a decrease of $17.6 million for the year ended May 31, 1996. In addition, other loans, net, increased $4.1 million to $36.1 million at May 31, 1997 from $32.0 million at May 31, 1996. Total securities were $126.4 million at May 31, 1997 compared to $144.3 million at May 31, 1996, reflecting the reinvestment of funds from the securities portfolio into higher yielding loans. Securities held-to-maturity at May 31, 1997 totaled $6.1 million as compared to $7.1 million at May 31, 1996. Securities available-for-sale at May 31, 1997 totaled $120.3 million as compared to $135.2 million at May 31, 1996. The Company's available-for-sale portfolio was adjusted for an unrealized gain of $1.1 million ($500 thousand after-tax) for the fiscal year ended May 31, 1997.

Other assets decreased by $4.3 million to $2.8 million at May 31, 1997, primarily due to the satisfactory liquidation of the Company's $3.9 million claim against the Superintendent of Banks of the State of New York, as receiver for Nationar, regarding the Superintendent's seizure of Nationar in early February, 1995.

As a result of adopting Statement of Financial Accounting Standards No. 122, the Bank capitalized $444 thousand of originated mortgage servicing rights during fiscal year 1996.

Total net worth increased $3.3 million to $28.1 million at May 31, 1997 from $24.8 million at May 31,1996, resulting from net income of $2.8 million and approximately $500 thousand of unrealized appreciation on securities available for sale, net of taxes.

18 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Comparison of Operating Results for the Fiscal Years Ended May 31, 1997 and 1996

General. Net income for the fiscal year ended May 31, 1997 was $2.9 million, compared to $1.5 million for the fiscal year ended May 31, 1996. The increase of $1.3 million resulted primarily from an 18% increase in the Company's net interest margin and greater profits on sales of mortgage-backed securities. Also contributing to the increase in net income was a decline in the Company's provision for income taxes due to a change in tax regulations from an effective tax rate of 41% in fiscal 1996 to 38% in fiscal 1997.

Net Interest Income. Net interest income for the fiscal year ended May 31, 1997 increased $1.7 million, or 17.7%, to $11.3 million. This increase reflects the overall rise in the Company's average interest rate spread of 14 basis points to 3.62%, and a rise in the Company's net interest margin of 22 basis points to 4.20% for the 1997 fiscal year, as well as a greater increase in interest-earning assets than interest-bearing liabilities.

Market interest rates were slightly higher in the 1997 fiscal year across the entire U.S. Treasury yield curve than in the 1996 fiscal year. While the Company realized a higher overall yield of nine basis points on its average interest-earning assets, yields on the Company's interest-bearing liabilities declined by five basis points.

Interest Income. Interest income totaled $20.7 million for the fiscal year ended May 31, 1997, compared to $18.3 million for the fiscal year ended May 31, 1996. This increase of $2.4 million, or 13.1%, reflects an increase of more than $3.3 million in interest and dividends on securities due to the securitization of approximately $50 million of the Company's mortgages in April and May of 1996, offset, in part, by a decrease in the average yield on the Company's mortgage-backed securities of 89 basis points. The increase in interest was offset, in part, by a decline of over $600 thousand in interest income on mortgage and other loans due to the decreased volume of such loans resulting mainly from such securitization, mitigated somewhat by an increase of 13 basis points in the average yield on such loans. Interest income on federal funds sold decreased substantially in the fiscal year ended May 31, 1997, as compared to the prior years, due to management's focus on extending maturities slightly, in its efforts to increase yield in a flattening yield curve environment.

Interest Expense. Interest expense on deposits and borrowings increased $660 thousand to $9.4 million for the fiscal year ended May 31, 1997, compared to $8.7 million for the fiscal year ended May 31, 1996. This increase reflects an increase in average interest-bearing liabilities of $18.8 million during the 1997 fiscal year and a decrease in the average rate paid on such liabilities of five basis points over the same period. The increase in average interest-bearing liabilities is primarily attributable to an increase in the average balance of borrowed funds to $31.2 million for the 1997 fiscal year from $489 thousand for the 1996 fiscal year. Average certificate of deposit accounts declined by approximately $10.7 million in fiscal year 1997, partially due to the maturity of the Premium Certificates which was attributable to the Company's decision not to offer premium rates in a highly competitive rate environment. While there was a 12% decline in average certificate of deposit accounts, there was a 22% decline in interest expense associated with such accounts, from $5.1 million in the fiscal year ended May 31, 1996 to $4.0 million in the 1997 fiscal year. As a result, the Company's total cost of funds decreased by five basis points, from 4.11% to 4.06%, despite the increases in market interest rates in fiscal year 1997.

Provision for Loan Losses. The provision for loan losses decreased to $130 thousand for the fiscal year ended May 31, 1997 from $140 thousand for the fiscal year ended May 31, 1996, although there was an increase in non-performing loans (consisting of loans over 90 days past due and non-accrual loans) to $1.4 million at May 31, 1997, from $863 thousand at May 31, 1996. At May 31, 1997, the percentage of the allowance for loan losses to total loans was 0.88%, as compared to 1.18% as of May 31, 1996. However, management's analysis indicated that the majority of the non-performing loans were one to four-family residential mortgage loans. Moreover, management believes that most of these loans are adequately secured by properties affording low loan-to-value ratios, based upon current evaluations. In addition, management performs a quarterly in-depth analysis of its allowance for loan losses. Based upon loan types and volumes, loan review and classification systems, and the factors described above and various other factors, management has made regular determinations that its allowance and monthly provisions are adequate.

Other Income. Other income, net, for the fiscal year ended May 31, 1997 increased $696 thousand to $2.8 million from $2.1 million for the fiscal year ended May 31, 1996. This increase was primarily attributable to increased gains on sales of mortgage-backed securities, emanating from the Company's mortgage banking operation. Total service and fee income increased 8% to $1.9 million in the fiscal year ended May 31, 1997, due to service charges and other fees reflecting increased loan and loan servicing activity, as well as increases in certain transaction fees during the 1997 fiscal year.

Other Expenses. Other expenses increased $273 thousand to $9.3 million for the fiscal year ended May 31, 1997 from $9.1 million for the fiscal year ended May 31, 1996. The increase in other expenses primarily reflects increases in salaries and employee benefits and occupancy costs. Salaries and employee benefits expense increased $206 thousand to $5.3 million for the 1997 fiscal year compared to $5.0 million for the 1996 fiscal year. This increase was primarily attributable to a general increase in salaries. Data processing costs and advertising costs increased by $156 thousand, or 32%, and $23 thousand, or 18%, respectively. The Company's ratio of other expenses to average assets decreased to 3.28% in the 1997 fiscal year from 3.48% in the 1996 fiscal year.

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Provision for Income Taxes. The provision for income taxes increased $732 thousand from $1.0 million for the fiscal year ended May 31, 1996 to $1.8 million for the fiscal year ended May 31, 1997. This increase was primarily attributable to the increase of $2.1 million, or 86%, in pre-tax income, offset by savings due to a change in the Bank's effective tax rate from 41% in fiscal 1996 to 38% in fiscal 1997.

Liquidity and Capital Resources

The Bank's primary sources of funds are retail deposits, wholesale funding from FHLBNY or other bank borrowings, securities sold under repurchase agreements, principal and interest payments on loans and securities and, to a lesser extent, proceeds from the sale of securities. While maturities and scheduled amortization of loans and securities provide an indication of the timing of the receipt of funds, changes in interest rates, economic conditions and competition strongly influence mortgage prepayment rates and deposit flows, reducing the predictability of the timing of sources of funds.

The Bank has no required regulatory liquidity ratios or balances to maintain, however, it does adhere to a Liquidity and Funds Management Policy approved by its Board of Directors, which sets minimum internal guidelines for liquidity purposes.

As a member of the FHLBNY, the Bank has the availability of two lines of credit for borrowings in the amounts of $17.0 million each, one on an overnight basis and the other on a 30-day term basis. In accordance with the FHLBNY's credit policy, the Bank now has total credit facilities available of nearly $101.9 million, inclusive of the aforementioned amounts, before the delivery of qualifying collateral is required. Additionally, the Bank has other sources of liquidity if the need arises. One source is to borrow up to $5 million from a commercial bank on an unsecured basis and the other is the ability to sell securities under repurchase agreements in an amount up to $10 million from a securities investment company.

The primary investing activities of the Bank are the origination of one to four-family residential mortgage loans, commercial real estate and commercial business loans, a variety of consumer loans, and the purchase of mortgage-backed securities and debt and equity securities. During the fiscal years ended May 31, 1998, 1997 and 1996, the Bank's disbursements for loan originations totaled $164.1 million, $100.6 million and $108.4 million, respectively. Purchases of mortgage-backed securities totaled $59.6 million, $23.2 million and $12.1 million for the fiscal years ended May 31, 1998, 1997 and 1996, respectively. Other debt and equity securities purchased during the fiscal years ended May 31, 1998, 1997 and 1996 were $65.1 million, $26.0 million and $23.4 million, respectively. The Bank's investing activities are funded primarily by borrowings, net deposit inflows, sales of loans and securities and principal repayments on loans and securities. The Bank increased borrowings at May 31, 1998 and 1997 by $61.7 million and $20 million, respectively, to fund its investments.

At May 31, 1998, the Company's total approved loan origination commitments outstanding totaled $55.5 million and the unadvanced/unused portion of commercial lines of credit totaled $5.6 million. The Company believes it will have sufficient funds available to meet its current originations and other lending commitments. Certificates of deposit scheduled to mature in one year or less from May 31, 1998 totaled $64.6 million. Based on historical experience and pricing strategy, management believes that a significant portion of such deposits will remain with the Bank.

At May 31, 1998, the Company had cash and due from banks of $11.2 million and securities available for sale of $163.4 million. Management believes these amounts, together with the Company's borrowing capabilities, to be more than adequate to meet its short-term cash needs.

[THE FOLLWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]


Net Worth or Capital Ratios of the Bank

                            For the Year Ended May 31

1998                                                                       26%
1997                                                                       20%
1996                                                                       18%
1995                                                                       16%
1994                                                                       20%

Risk-based Ratios of Tier 1 Capital.

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

Regulatory Capital Position.

The Bank is subject to minimum regulatory capital requirements imposed by the Federal Deposit Insurance Corporation which vary according to an institution's capital level and the composition of its assets. An insured institution is required to maintain Tier I capital of not less than 3.00% of total assets plus an additional amount of at least 100 to 200 basis points ("leverage capital ratio"). An insured institution must also maintain a ratio of total capital to risk-based assets of 8.00%. Although the minimum leverage capital ratio is 3.00%, the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") stipulates that an institution with less than a 4.00% leverage capital ratio is deemed to be an "undercapitalized" institution, which results in the imposition of regulatory restrictions. The Bank's capital ratios qualify it to be deemed "well capitalized" under FDICIA. In addition, the Company's capital ratios exceed the minimum regulatory capital requirements imposed by the Federal Reserve Board, which are substantially similar to the requirements of the FDIC. See Note 13 to the Notes to Consolidated Financial Statements for the Bank's and the Company's regulatory capital position as of May 31, 1998 and 1997.

20 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Year 2000 Compliance.

The Year 2000 issue is the result of the inability of certain computer systems to recognize the year 2000. Many existing computer programs and systems were initially programmed with six digit dates that provided only two digits to identify the calendar year in the date field without considering the upcoming change in the century. As a result, such programs and systems may recognize a date using "00" as the year 1900 instead of the year 2000, which could result in system failures or miscalculations. Like most financial service providers, the Company and its operations may be significantly affected by the Year 2000 issue due to the nature of financial information. Software, hardware and equipment both within and outside the Company's direct control and with whom the Company electronically or operationally interfaces (i.e., third party vendors providing data processing, information system management, maintenance of computer systems and credit bureau information) are likely to be affected.

The Company has implemented a plan to respond to the Year 2000 issue and has initiated formal discussions with all of its significant suppliers to determine the extent to which the Company is vulnerable to those third parties' failure to remedy their own Year 2000 issue. The Company presently believes that, with modifications to existing software and conversions to new software, the Year 2000 issue may be mitigated without causing a material adverse impact on the operations of the Company or the Bank. However, if such modifications and conversions are not made, or are not timely completed, the Year 2000 issue could have an impact on the operations of the Company and the Bank. At this time, management of the Company does not believe that the impact and any resulting costs will be material.

Monitoring and managing the Year 2000 issue will result in additional direct and indirect costs to the Company. Direct costs include the replacement of the Company's non-compliant computer hardware and software, potential charges by third party vendors for product enhancements, cost involved in testing software products for Year 2000 compliance and any resulting costs for developing and implementing contingency plans for critical software products which are not enhanced. Indirect costs will principally consist of time devoted by existing employees in monitoring software vendor progress, testing enhanced software products and implementing any necessary contingency plans. The Company does not believe that such costs will have a material effect on its results of operations. The Company's costs associated with the Year 2000 issue have not been material to date.

Impact of Inflation and Changing Prices.

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

Impact of New Accounting Standards.

See Note 1 to Notes to the Consolidated Financial Statements.

Market for Common Stock

The Company's common stock commenced trading on the Nasdaq National Market System under the symbol "WSBI" following the completion of the Company's Offering on December 23, 1997. In the period from that date to the close of business on May 29, 1998, the last trading date in the fiscal year ended May 31, 1998, the stock's low and high sales price was $15.25 and $18.13, respectively.

As of July 31, 1998, there were 6,606,548 shares of the Company's common stock outstanding and approximately 1,614 holders of record. The holders of record include banks and brokers who act as nominees, each of whom may represent more than one stockholder.

The Board of Directors of the Company did not declare any dividends on the common stock during the fiscal year ended May 31, 1998. The Board of Directors of the Company may consider a policy of paying cash dividends on the common stock in the future subject to statutory and regulatory requirements. However, no decision has been made as to the amount or timing of such dividends. Declarations of dividends by the Board of Directors, if any, will depend upon a number of factors, including, but not limited to, investment opportunities available to the Company or the Bank, capital requirements, regulatory limitations, the Company's and the Bank's financial condition and results of operations, tax considerations and general economic conditions. No assurance can be given, however, that any dividends will be paid or, if commenced, will continue to be paid.

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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MAY 31, 1998 AND 1997

                                                                      1998              1997
                                                                  -------------    -------------
                                     ASSETS
ASSETS:
  Cash on hand and in banks                                       $  11,190,124    $  10,366,711
  Federal funds sold                                                         --        1,315,000
  Securities-
      Available-for-sale, at fair value                             163,425,416      120,301,288
      Held-to-maturity, at amortized cost (fair value of
      $7,276,933 and $6,116,184 in 1998 and 1997, respectively)       7,323,818        6,091,684
                                                                  -------------    -------------
             Total securities                                       170,749,234      126,392,972
                                                                  -------------    -------------

  Mortgage loans, net                                               148,242,725       97,440,203
  Mortgage loans held-for-sale                                       17,237,483        4,831,500
  Other loans, net                                                   47,184,643       36,051,438
  Mortgage servicing rights                                           1,051,496          835,079
  Accrued interest receivable                                         2,462,632        2,096,627
  Federal Home Loan Bank stock                                        3,392,500        1,731,300
  Bank premises and equipment, net                                    3,105,380        2,425,831
  Other real estate owned, net                                          409,363          223,782
  Other assets                                                        5,368,319        2,834,743
                                                                  -------------    -------------
             Total assets                                         $ 410,393,899    $ 286,545,186
                                                                  =============    =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILiTIES:
  Deposits                                                        $ 222,721,609    $ 221,211,137
  Mortgage escrow funds                                               2,265,878        1,397,584
  Securities sold under agreements to repurchase                     27,190,000       23,090,000
  Federal Home Loan Bank advances                                    62,850,000        5,250,000
  Accrued expenses and other liabilities                              9,216,802        7,482,034
                                                                  -------------    -------------
             Total liabilities                                      324,244,289      258,430,755
                                                                  =============    =============

COMMITMENTS AND CONTINGENCIES (NOTE 14)

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value;
     5,000,000 shares authorized; none issued                                --               --
  Common stock, $.01 par value; 15,000,000
     shares authorized; 6,606,548 shares issued                          66,065               --
  Additional paid-in capital                                         63,386,358               --
  Retained earnings--subject to restrictions                         29,355,454       27,494,509
  Unrealized appreciation on securities, net of taxes                 1,164,946          619,922
  Less- Unallocated common stock held by ESOP                        (7,823,213)              --
                                                                  -------------    -------------
             Total stockholders' equity                              86,149,610       28,114,431
                                                                  -------------    -------------
             Total liabilities and stockholders' equity           $ 410,393,899    $ 286,545,186
                                                                  =============    =============

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

22 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MAY 31, 1998, 1997 AND 1996

                                                            1998           1997             1996
                                                        ------------    ------------    ------------
INTEREST INCOME:
  Interest on mortgage loans                            $ 10,191,223    $  7,151,702    $  8,098,219
  Interest on other loans                                  3,772,844       3,457,460       3,149,131
  Interest on securities                                   9,605,844      10,049,163       6,728,913
  Interest on federal funds sold                             172,638          14,504         321,903
  Interest on short-term money market instruments             34,116          18,290          34,870
                                                        ------------    ------------    ------------
             Total interest income                        23,776,665      20,691,119      18,333,036
                                                        ------------    ------------    ------------

INTEREST EXPENSE:
  Time deposits                                            3,822,525       3,984,829       5,108,712
  Money market deposits                                      848,801         882,979         936,218
  Savings deposits                                         2,549,228       2,550,704       2,580,121
  Mortgagors' escrow funds                                    93,689          49,588          68,165
  Borrowed funds                                           2,657,220       1,908,062          23,882
                                                        ------------    ------------    ------------
             Total interest expense                        9,971,463       9,376,162       8,717,098
                                                        ------------    ------------    ------------
             Net interest income                          13,805,202      11,314,957       9,615,938

PROVISION FOR LOAN LOSSES                                   (592,450)       (130,000)       (140,000)
                                                        ------------    ------------    ------------
             Net interest
             income after provision for loan losses       13,212,752      11,184,957       9,475,938
                                                        ------------    ------------    ------------

OTHER INCOmE (LOSS):
  Service and fee income                                   2,134,419       1,915,139       1,767,610
  Securities transactions                                    742,248         816,304         356,266
  Net gain on sale of loans                                   94,036         137,403         118,807
  Other income (loss)                                        169,198         (89,079)       (158,713)
                                                        ------------    ------------    ------------
             Total other income, net                       3,139,901       2,779,767       2,083,970
                                                        ------------    ------------    ------------

OTHER EXPENSES:
  Salaries and employee benefits                           5,870,423       5,255,869       5,049,942
  ESOP benefits                                              729,529              --              --
  FDIC insurance                                              27,836          12,447          53,226
  Occupancy                                                1,219,397       1,307,727       1,237,485
  Data processing                                            672,484         639,654         483,572
  Advertising                                                159,797         152,529         129,227
  Professional fees                                          583,311         240,513         325,392
  Contribution to The Warwick Savings Foundation           1,924,230              --              --
  Other                                                    2,000,434       1,734,616       1,791,244
                                                        ------------    ------------    ------------
             Total other expenses                         13,187,441       9,343,355       9,070,088
                                                        ------------    ------------    ------------
             Income before provision for income taxes      3,165,212       4,621,369       2,489,820


PROVISION FOR INCOME TAXES                                 1,304,267       1,755,866       1,024,240
                                                        ------------    ------------    ------------
             Net income                                 $  1,860,945    $  2,865,503    $  1,465,580
                                                        ============    ============    ============

WEIGHTED AVERAGE:
  Common shares                                            6,112,610          N/A              N/A
  Dilutive stock options                                          --          N/A              N/A
                                                        ------------
                                                           6,112,610          N/A              N/A
                                                        ============

EARNINGS PER SHARE SINCE CONVERSION:
  Basic                                                 $        .10          N/A              N/A
                                                        ============
  Diluted                                               $        .10          N/A              N/A
                                                        ============

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

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 1998, 1997 AND 1996

                                                                                                        Unrealized
                                                                                                       Appreciation
                                                                         Unallocated                   (Depreciation)
                                                                           Common                      on Securities
                                             Common       Additional    Stock Held by     Retained      Available-
                                              Stock     Paid-in Capital     ESOP          Earnings     for-Sale, Net      Total
                                          ------------  --------------- -------------   ------------   -------------   ------------
BALANCE, MAY 31, 1995                     $         --   $         --   $               $ 23,163,426   $    (87,288)   $ 23,076,138
  Net income                                        --             --             --       1,465,580             --       1,465,580
     Unrealized appreciation
     on securities
     available-for-sale, net                        --             --             --              --        228,755         228,755
                                          ------------   ------------   ------------    ------------   ------------    ------------

BALANCE, MAY 31, 1996                               --             --             --      24,629,006        141,467      24,770,473
  Net income                                        --             --             --       2,865,503             --       2,865,503
  Unrealized appreciation on
     securities
     available-for-sale, net                        --             --             --              --        478,455         478,455
                                          ------------   ------------   ------------    ------------   ------------    ------------

BALANCE, May 31, 1997                               --             --             --      27,494,509        619,922      28,114,431
  Net income                                        --             --             --       1,860,945                      1,860,945
  Unrealized appreciation
     on securities
     available-for-sale, net                        --             --             --              --        545,024         545,024
  Issuance of  6,414,125 shares of
     $.01 par value common stock in
     initial public offering, net of
     conversion related expenses                64,141     61,421,084             --              --             --      61,485,225
  Issuance of 192,423 shares
     of $.01 par value common
     stock to The Warwick
     Savings Foundation                          1,924      1,922,306             --              --             --       1,924,230
  Purchase of common
     stock by ESOP                                  --             --     (8,509,774)             --             --      (8,509,774)
  Allocation of ESOP stock                          --         42,968        686,561              --             --         729,529
                                          ------------   ------------   ------------    ------------   ------------    ------------
BALANCE, MAY 31, 1998                     $     66,065   $ 63,386,358   $ (7,823,213)   $ 29,355,454   $  1,164,946    $ 86,149,610
                                          ============   ============   ============    ============   ============    ============

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

24 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1998, 1997 AND 1996

                                                                                     1998              1997                 1996
                                                                              -------------       -------------       -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                  $   1,860,945       $   2,865,503       $   1,465,580
  Adjustments to reconcile net income to net cash
     provided by operating activities-
      Depreciation                                                                  455,354             459,171             428,008
      Charitable contribution of Warwick Community
         Bancorp, Inc. common stock to The
         Warwick Savings Foundation                                               1,924,230                  --                  --
      Amortization of premium on investment securities                               70,641             264,120             497,342
      Accretion of discount on investment securities                               (893,335)           (189,667)           (509,755)
      Net (increase) decrease in accrued interest receivable                       (366,005)           (154,589)            140,166
      Net (increase) decrease in mortgage
         servicing rights and other assets                                       (2,935,574)          4,111,000          (2,165,524)
      Provision for loan losses                                                     592,450             130,000             140,000
      Net (gain) on sales of loans                                                  (94,036)           (137,403)           (118,807)
      Net (gain) on sale of securities                                             (742,249)           (816,304)           (356,266)
      Net increase (decrease) in accrued interest payable                           274,104              10,496            (174,460)
      Net increase in accrued expenses and other liabilities                      1,460,664             706,750           1,539,027
                                                                              -------------       -------------       -------------
            Net cash provided by operating activities                             1,607,189           7,249,077             885,311
                                                                              -------------       -------------       -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities and calls of securities                               32,800,000          12,424,922          39,576,296
  Purchases of securities                                                      (155,073,028)        (70,743,474)       (108,398,408)
  Proceeds from sales of trading securities
     and securities available-for-sale                                           63,117,707          66,376,202          31,727,463
  Principal repayments from mortgage-backed securities                           16,446,960          10,469,393           3,637,431
  Purchases of Federal Home Loan Bank stock                                      (1,661,200)           (553,200)           (267,600)
  Net (increase) decrease in loans                                              (74,341,710)        (29,187,635)         14,537,389
  Purchases of banking premises and equipment, net                               (1,128,283)           (240,610)             60,174
                                                                              -------------       -------------       -------------
            Net cash used in investing activities                              (119,839,554)        (11,454,402)        (19,127,255)
                                                                              -------------       -------------       -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in deposits                                             1,510,472         (11,649,533)           (882,800)
  Net increase (decrease) in mortgage escrow funds                                  868,294             395,059           3,051,380
  Increase in borrowed funds                                                     61,700,000          20,040,000           8,300,000
  Purchase of common stock by ESOP                                               (8,509,774)                 --                  --
  ESOP allocation                                                                   686,561                  --                  --
  Proceeds from issuance of common stock                                         64,141,250                  --                  --
  Payments for conversion costs                                                  (2,656,025)                 --                  --
                                                                              -------------       -------------       -------------
            Net cash provided by financing activities                           117,740,778           8,785,526          10,468,580
                                                                              -------------       -------------       -------------
            Increase (decrease) in cash and cash equivalents                       (491,587)          4,580,201          (7,773,364)

CASH AND CASH EQUIVALENTS, beginning of year                                     11,681,711           7,101,510          14,874,874
                                                                              -------------       -------------       -------------
CASH AND CASH EQUIVALENTS, end of year                                        $  11,190,124       $  11,681,711       $   7,101,510
                                                                              =============       =============       =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for-
    Interest on deposits and borrowed funds                                     $ 9,697,360       $   9,365,666       $   8,891,558
    Income taxes                                                                  1,312,041           2,117,500                  --
Reclassification from held-to-maturity to available-for-sale                             --                  --          26,180,452

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

[LOGO] 25


[LOGO] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a description of the significant accounting policies followed by Warwick Community Bancorp, Inc. and subsidiary (the "Company") in the preparation of its consolidated financial statements:

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, The Warwick Savings Bank (the "Bank"). All significant intercompany balances and transactions are eliminated in consolidation.

As more fully discussed in Note 2, Warwick Community Bancorp, Inc., a Delaware corporation, was organized by the Bank for the purpose of acquiring all of the capital stock of the Bank pursuant to the conversion of the Bank from a New York chartered mutual savings bank to a New York chartered stock savings bank. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported assets and liabilities as of the date of the consolidated statements of financial condition. The same is true of revenues and expenses reported for the period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company generally considers short-term instruments, with original maturities of three months or less, measured from their acquisition date, and highly liquid instruments readily convertible to known amounts of cash to be cash equivalents.

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Generally, federal funds sold are sold for one-day periods.

SECURITIES

The Company classifies its securities as trading securities, available-for-sale securities, or held-to-maturity securities in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Trading securities are debt and equity securities that are bought principally for the purpose of selling them in the near term, and securities classified as held-to-maturity consist of debt securities which the Company has the positive intent and ability to hold to maturity and are carried at amortized cost. Securities considered neither trading nor held-to-maturity are classified as available-for-sale securities and are carried at fair value with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity (net of related deferred taxes). Trading securities are carried at fair value with unrealized gains and losses included in earnings.

Federal Home Loan Bank stock is considered restricted stock under SFAS No. 115 and, accordingly, is carried at cost.

In November 1995, the Financial Accounting Standards Board ("FASB") issued a special report on the implementation of SFAS No. 115. This special report provided an opportunity for a one-time reassessment of an institution's classification of securities as of a single measurement date between November 15, 1995 and December 31, 1995. In December 1995, the Company transferred $26,180,452 of U.S. Government agency securities and other securities to available-for-sale from the held-to-maturity portfolio.

LOANS

Loans are stated at the principal amount outstanding, net of unearned income. Loans are placed on non-accrual status when management has determined that the borrower will be unable to meet contractual principal or interest obligations or when unsecured interest or principal payments are 90 days past due. When a loan is classified as non-accrual, the recognition of interest income ceases. Interest previously accrued and remaining unpaid is reversed against income. Cash payments received are applied to principal and interest income is not recognized unless management determines that the financial condition and payment record of the borrower warrant the recognition of income.

26 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is a significant estimate based upon management's periodic evaluation of the loan portfolio under current economic conditions, considering factors such as the Company's past loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, and the estimated value of the underlying collateral. Establishing the allowance for loan losses involves significant management judgment, utilizing the best available information at the time of review. Those judgments are subject to further review by various sources, including the Bank's regulators. While management estimates loan losses using the best available information, future adjustments to the allowance may be necessary based on changes in economic and real estate market conditions, further information obtained regarding known problem loans, the identification of additional problem loans, and other factors.

SFAS No. 114 defines an impaired loan as a loan for which it is probable, based on current information, that the lender will not collect all amounts due under the contractual terms of the loan agreement. The Company applies the impairment criteria to all loans, except for large groups of smaller balance homogenous loans that are collectively evaluated for impairment, such as residential mortgage and consumer installment loans. Income recognition and charge-off policies were not changed as a result of this statement. At May 31, 1998 and 1997, in addition to the non-accrual loans discussed in Notes 4 and 5, there were $630,946 and $504,265, respectively, of loans identified by the Company as impaired, as defined under SFAS No. 114 with no specific reserves for losses.

MORTGAGE LOANS HELD-FOR-SALE

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate, with net unrealized losses (if any) reported in earnings. Realized gains and losses on sales of loans are based on the cost of the specific loans sold.

LOAN ORIGINATION FEES AND RELATED COSTS

Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized in income using the level-yield method over the contractual life of the loans. Unamortized fees and costs on loans sold or prepaid prior to contractual maturity are recognized as an adjustment to income in the year such loans are sold or prepaid.

MORTGAGE SERVICING RIGHTS

The cost of mortgage servicing rights (purchased or originated rights with related loans sold) is amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment of mortgage servicing rights is assessed based on the fair value of those rights. For purposes of measuring impairment, the servicing rights are stratified based on the following predominant risk characteristics of the underlying loans: (a) loan type and (b) origination or securitization date.

BANK PREMISES AND EQUIPMENT

Bank premises and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Equipment under capital leases is amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Repairs and maintenance, as well as renewals and replacements of a routine nature, are expensed while costs incurred to improve or extend the life of existing assets are capitalized.

OTHER REAL ESTATE OWNED

Other real estate owned ("OREO") represents properties acquired through legal foreclosure. Prior to transferring a real estate loan to OREO, the loan is written down to the lower of the recorded investment in the loan or the fair value of the property. Any resulting write-downs are charged to the allowance for loan losses. Thereafter, the property is carried at the lower of cost or fair value less costs to sell, with any adjustments recorded as an increase or decrease to the allowance for losses on OREO.

INTEREST INCOME

Interest income includes interest income on loans and investment securities and dividend income received on investment securities.

The operations of the Company are substantially dependent on its net interest income, which is the difference between the interest income earned on its interest-earning assets and the interest expense paid on its interest-bearing liabilities. Like most savings institutions, the Company's earnings are affected by changes in market interest rates and the economic factors beyond its control. Decreases in the Company's average interest rate spread could adversely affect the Company's net interest income.

[LOGO] 27


INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax effects attributable to "temporary differences" (differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases) and tax loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if, based on an analysis of available evidence, management determines that it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in income in the period that includes the enactment date of the change.

EMPLOYEE STOCK OWNERSHIP PLAN

The Company follows AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" ("SOP 93-6"), to account for the Warwick Community Bancorp, Inc. Employee Stock Ownership Plan ("ESOP"). SOP 93-6 requires that compensation expense be recognized for shares committed to be released to directly compensate employees equal to the fair value of the shares committed. In addition, SOP 93-6 requires that leveraged ESOP debt and related interest expense be reflected in the employer's financial statements. The application of SOP 93-6 will result in fluctuations in compensation expense as a result of changes in the fair value of the Company's common stock; however, any such compensation expense fluctuations will result in an offsetting adjustment to paid-in capital. Therefore, total capital will not be affected.

EARNINGS PER SHARE

The Company adopted SFAS No. 128, "Earnings Per Share." Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share, which reflects the potential dilution that could occur if outstanding stock options were exercised and resulted in the issuance of common stock that then shared in the earnings of the Company, is computed by dividing net income by the weighted average number of common shares and dilutive instruments. As of May 31, 1998, the Company has no securities that could be converted into common stock nor does the Company have any contracts that could result in the issuance of common stock.

RECLASSIFICATIONS

Certain reclassifications were made to the accompanying 1997 and 1996 financial statements to conform to 1998 presentation.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." These statements are effective for fiscal years beginning after December 15, 1997 and restatement of financial statements or information for earlier periods provided for comparative purposes is required. The provisions of these statements will not affect the Company's results of operations or financial condition.

In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures About Pensions and Other Post-retirement Benefits." SFAS No. 132 supercedes the disclosure requirements for pension and other post-retirement plans as set forth in SFAS No. 87 "Employers' Accounting for Pensions," SFAS No. 88 "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106 "Employers' Accounting for Post-retirement Benefits Other Than Pensions." SFAS No. 132 does not address measurement or recognition for pension and other post-retirement benefit plans. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. Restatement of disclosures for earlier periods provided for comparative purposes is required unless the information is not readily available, in which case the notes to the financial statements shall include all available information and a description of the information not available. The provision of this statement will not affect the Company's results of operations or financial condition.

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities." This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999 and should not be applied retroactively to financial statements of prior periods. The provisions of this statement will not affect the Company's results of operations or financial condition.

28 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

2. CONVERSION TO STOCK FORM OF OWNERSHIP

On July 10, 1997, the Board of Trustees of the Bank adopted a proposed Plan of Conversion ("Plan") to convert the Bank from a New York mutual savings bank to a New York stock savings bank and to become a wholly owned subsidiary of the Company. The Company completed its initial public offering on December 23, 1997 and sold 6,414,125 shares of common stock resulting in proceeds of $61,485,225 net of expenses totaling $2,656,025. The Company used $30,742,613, or 50%, of the net proceeds to purchase all of the outstanding stock of the Bank. The Company also loaned $8,509,774 to the ESOP, which purchased 528,523 shares of the Company's stock.

As part of the Plan, the Bank and the Company formed The Warwick Savings Foundation and donated 192,423 shares of the Company's common stock valued at $1,924,230. The Company recorded a contribution expense charge and a corresponding deferred tax benefit of $769,692 for this donation. The formation of this private charitable foundation is to further the Bank's commitment to the communities that it serves.

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

3. SECURITIES

A summary of securities at May 31, 1998 and 1997 follows:

                                                                                                 1998
                                                                 -------------------------------------------------------------------
                                                                                         Gross          Gross              Estimated
                                                                  Amortized           Unrealized       Unrealized            Fair
                                                                     Cost                Gains          Losses               Value
                                                                 ------------      ------------      ------------        -----------
Securities available-for-sale:
    Debt securities-
        U.S. Government and agency
           obligations                                           $ 44,464,532      $    433,987      $   (664,499)      $ 44,234,020
        Industrial and financial                                      822,419            28,270                --            850,689
        Collateralized mortgage obligations                        19,592,884             6,060           (40,380)        19,558,564
        Mortgage-backed securities                                 81,097,563         1,192,142          (137,495)        82,152,210
                                                                 ------------      ------------      ------------       ------------
              Total debt securities                               145,977,398         1,660,459          (842,374)       146,795,483

    Common stock                                                      582,215                --            (5,678)           576,537
    Preferred stock                                                 1,101,654            20,346                --          1,122,000
    Mutual fund shares                                             13,822,573         1,122,698           (13,875)        14,931,396
                                                                 ------------      ------------      ------------       ------------
              Total securities available-for-sale                 161,483,840         2,803,503          (861,927)       163,425,416
                                                                 ------------      ------------      ------------       ------------

Securities held-to-maturity:
    U.S. Government and agency
       obligations                                                  6,658,864            14,551           (63,450)         6,609,965
    Obligations of state and political
       subdivisions                                                   664,954             2,014                --            666,968
                                                                 ------------      ------------      ------------       ------------
              Total securities held-to-maturity                     7,323,818            16,565           (63,450)         7,276,933
                                                                 ------------      ------------      ------------       ------------
              Total securities                                   $168,807,658      $  2,820,068      $   (925,377)      $170,702,349
                                                                 ============      ============      ============       ============

[LOGO] 29


[LOGO]

                                                                                                1997
                                                                 -------------------------------------------------------------------
                                                                                      Gross             Gross              Estimated
                                                                   Amortized        Unrealized        Unrealized             Fair
                                                                     Cost             Gains             Losses              Value
                                                                 ------------      ------------      ------------        -----------
Securities available-for-sale:
    Debt securities-
        U.S. Government and
           agency obligations                                    $ 29,901,648      $    160,787      $    (40,877)      $ 30,021,558
        Public utilities                                              999,340                --            (7,710)           991,630
        Industrial and financial                                    6,991,615            51,779            (5,700)         7,037,694
        Collateralized mortgage obligations                         2,695,832                --           (11,354)         2,684,478
        Mortgage-backed securities                                 72,811,663           770,367          (310,970)        73,271,060
                                                                 ------------      ------------      ------------       ------------
              Total debt securities                               113,400,098           982,933          (376,611)       114,006,420

    Preferred stock                                                   203,518             1,011               (29)           204,500
    Mutual fund shares                                              5,597,002           493,366                --          6,090,368
                                                                 ------------      ------------      ------------       ------------
              Total securities available-for-sale                 119,200,618         1,477,310          (376,640)       120,301,288
                                                                 ------------      ------------      ------------       ------------
Securities held-to-maturity:
    U.S. Government and
       agency obligations                                           5,684,812            38,720           (16,932)         5,706,600
    Obligations of state and
       political subdivisions                                         406,872             2,712                --            409,584
                                                                 ------------      ------------      ------------       ------------
              Total securities held-to-maturity                     6,091,684            41,432           (16,932)         6,116,184
                                                                 ------------      ------------      ------------       ------------
              Total securities                                   $125,292,302      $  1,518,742      $   (393,572)      $126,417,472
                                                                 ============      ============      ============       ============

A summary of the carrying value of debt securities at May 31, 1998 by contractual maturity is shown below. Actual maturities may differ from contractual maturities because certain security issuers may have the right to call or prepay their obligations.

                                                                    After One        After Five
                                                   One Year         Through           Through          After Ten
                                                   or Less          Five Years       Ten Years           Years              Total
                                                 ------------      ------------     ------------     -----------         -----------
Available-for-sale-
    U.S. Government and
       agency obligations                       $  1,015,000      $  3,148,120      $ 19,813,760      $ 20,257,140      $ 44,234,020
    Industrial and financial                          19,836           830,853                --                --           850,689
    Collateralized mortgage
       obligations                                        --                --                --        19,558,564        19,558,564
    Mortgage-backed securities                            --         1,024,722         1,252,674        79,874,814        82,152,210
                                                ------------      ------------      ------------      ------------      ------------
        Total available-for-sale                $  1,034,836      $  5,003,695      $ 21,066,434      $119,690,518      $146,795,483
                                                ============      ============      ============      ============      ============
Held-to-maturity-
    U.S. Government and
       agency obligations                       $    309,218      $  1,349,646      $         --      $  5,000,000      $  6,658,864
    Obligations of state and
       political subdivisions                        560,000           104,954                --                --           664,954
                                                ------------      ------------      ------------      ------------      ------------
        Total held-to-maturity                  $    869,218      $  1,454,600      $         --      $  5,000,000      $  7,323,818
                                                ============      ============      ============      ============      ============


Proceeds  from  sales  of  securities  (trading  and   available-for-sale)   are
summarized as follows:

                                                                                            Years Ended May 31
                                                                     ---------------------------------------------------------------
                                                                         1998                     1997                       1996
                                                                     -----------               -----------               -----------
Proceeds from sales                                                  $63,117,707               $66,376,202               $31,727,463
                                                                     ===========               ===========               ===========
Gross gains on sales                                                 $   922,582               $ 1,046,199               $   545,577
                                                                     ===========               ===========               ===========
Gross losses on sales                                                $   180,333               $   229,895               $   189,311
                                                                     ===========               ===========               ===========

No securities held-to-maturity were sold during the three years ended May 31, 1998.

30 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

4. MORTGAGE LOANS

A summary of mortgage loans at May 31, 1998 and 1997 follows:

                                                            1998                       1997
                                                       -------------              -------------
Conventional 1-4 family residential loans originated   $ 127,812,039              $  79,096,961
Conventional 1-4 family residential loans purchased        2,103,550                  2,706,457
Loans partially guaranteed by VA or insured by FHA           594,827                    748,520
Home equity loans                                         15,875,753                 13,449,077
Construction loans                                         6,703,046                  4,109,840
                                                       -------------              -------------
                                                         153,089,215                100,110,855
Undisbursed portion of construction loans                 (3,939,460)                (2,117,833)
Net deferred loan fees                                      (535,434)                  (328,740)
Allowance for loan losses                                   (371,596)                  (224,079)
                                                       -------------              -------------
                                                       $ 148,242,725              $  97,440,203
                                                       =============              =============

The Bank has sold certain conventional mortgage loans without recourse and has retained the related servicing rights. The remaining principal balances of mortgage loans serviced for others, which are not included in the accompanying consolidated financial statements, were approximately $144,283,000 and $122,311,000 at May 31, 1998 and 1997, respectively.

Mortgage loans in arrears three months or more were approximately $970,000 and $1,214,000 at May 31, 1998 and 1997, respectively. Mortgage loans on non-accrual status at May 31, 1998 and 1997 were approximately $699,000 and $1,111,000, respectively. Interest income that would have been recorded if the loans had been performing in accordance with their original terms aggregated approximately $100,000, $93,000 and $54,000 during the years ended May 31, 1998, 1997 and 1996, respectively.

5. OTHER LOANS

A summary of other loans at May 31, 1998 and 1997 follows:

                                                           1998                        1997
                                                       -------------              -------------
Commercial                                             $ 34,113,671               $ 23,417,939
Automobile                                                8,351,918                  7,738,516
Student                                                   1,352,784                  1,331,569
Credit card                                               1,239,391                  1,334,548
Other consumer loans                                      3,025,549                  3,053,852
                                                       ------------               ------------
                                                         48,083,313                 36,876,424
Net deferred loan fees                                      242,704                    182,590
Allowance for loan losses                                (1,141,374)                (1,007,576)
                                                       ------------               ------------
                                                       $ 47,184,643               $ 36,051,438
                                                       ============               ============

Commercial loans in arrears three months or more were approximately $292,000 and $121,000 at May 31, 1998 and 1997, respectively. Commercial loans on non-accrual status at May 31, 1998 and 1997 were approximately $159,000 and $26,000, respectively. Consumer loans in arrears three months or more were approximately $27,000 and $96,000 at May 31, 1998 and 1997, respectively.

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[LOGO]

6. ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses is as follows:

                                                           Years Ended May 31
                                     --------------------------------------------------------------
                                         1998                     1997                     1996
                                     -----------              -----------              ------------
Balance at beginning of period       $ 1,231,655              $ 1,304,765              $ 1,206,486
    Provision for loan losses            592,450                  130,000                  140,000
    Charge-offs                         (325,524)                (213,042)                (149,877)
  Recoveries                              14,389                    9,932                  108,156
                                     -----------              -----------              -----------
Balance at end of period             $ 1,512,970              $ 1,231,655              $ 1,304,765
                                     ===========              ===========              ===========

7. MORTGAGE SERVICING RIGHTS

Mortgage servicing rights as of May 31, 1998 and 1997 consist of the following:

                                                    1998                1997
                                                 -----------        -----------
Mortgage Servicing Rights                        $ 1,180,858        $   885,992
Less-Accumulated amortization                       (129,362)           (50,913)
                                                 -----------        -----------
                                                 $ 1,051,496        $   835,079
                                                 ===========        ===========

The Bank capitalized originated mortgage servicing rights of $342,720 and $216,047 for the years ended May 31, 1998 and 1997, respectively.

8. BANK PREMISES AND EQUIPMENT

A summary of bank premises and equipment at May 31, 1998 and 1997 follows:

                                                    1998                1997
                                                 -----------        -----------
Land                                             $ 1,169,109        $   340,587
Buildings and improvements                         2,745,075          2,720,751
Equipment                                          2,684,039          2,522,432
Furniture and fixtures                               647,091            584,896
                                                 -----------        -----------
                                                   7,245,314          6,168,666
Less-Accumulated depreciation                     (4,139,934)        (3,742,835)
                                                 -----------        -----------
                                                 $ 3,105,380        $ 2,425,831
                                                 ===========        ===========

9. DEPOSITOR ACCOUNTS

Deposit account balances and stated interest rates at May 31, 1998 and 1997 are summarized as follows:

                                         1998                                               1997
                                        Stated                                             Stated
                                         Rates                    1998                      Rates                     1997
                                      -----------              -----------               -----------               -----------
Demand checking accounts                    --  %              $26,743,222                     --  %              $ 23,854,838
Negotiable order of
   withdrawal accounts (NOW)          1.00 - 2.25               17,557,881               1.00 - 2.25                15,023,912
Savings accounts                      2.00 - 3.25               80,650,580                   3.00                   80,175,311
Money market accounts                 2.35 - 3.50               26,863,318               2.35 - 3.50                27,119,239
Time certificates                     4.50 - 5.00               70,906,608               4.30 - 5.50                75,037,837
                                                              ------------                                        ------------
          Total deposits                                      $222,721,609                                        $221,211,137
                                                              ============                                        ============

32 Warwick Community Bancorp, Inc. o Annual Report


Time certificate balances at May 31, 1998 and 1997 are summarized by remaining period to contractual maturity as follows:

                                                       1998              1997
                                                   -----------       -----------
Under one year                                     $64,599,733       $69,248,768
One year to under three years                        3,998,068         3,792,718
Three years and over                                 2,308,807         1,996,351
                                                   -----------       -----------
                                                   $70,906,608       $75,037,837
                                                   ===========       ===========

The aggregate amount of time certificates in denominations of $100,000 or more was approximately $6,107,000 and $5,174,000 at May 31, 1998 and 1997, respectively.

10. INCOME TAXES

The tax effects of temporary differences that give rise to the Bank's deferred tax assets and deferred tax liabilities, on a combined basis, for federal and state tax purposes at May 31, 1998 and 1997, are as follows:

                                                                   1998     1997
                                                                   -----   -----
                                                                 (000's omitted)
Deferred tax assets:
    Charitable contribution benefit                              $  496     $ --
    Allowance for loan losses                                       620      504
    Accrued post-retirement benefits                                646      618
    Other deductible temporary differences                           49      141
                                                                 ------   ------

          Total gross deferred tax assets                         1,811    1,263
                                                                 ------   ------
Deferred tax liabilities:
    Bad debt reserves for income tax purposes in
       excess of the base-year reserves                             289      289
    Net unrealized gain on securities available-for-sale            755      438
    Other taxable temporary differences                             170      479
                                                                 ------   ------
          Total gross deferred tax liabilities                    1,214    1,206
                                                                 ------   ------
          Net deferred tax asset (included in other assets)      $  597   $   57
                                                                 ======   ======

Management believes that it is more likely than not that it will realize the net deferred tax asset.

Provision for income taxes is comprised of the following:

                                              Years Ended May 31
                              --------------------------------------------------
                                   1998              1997                1996
                              -----------        -----------        ------------
Current:
    Federal                   $ 1,636,872        $ 1,302,494        $   945,021
    State                         445,276            450,864            350,741
                              -----------        -----------        -----------
                                2,082,148          1,753,358          1,295,762
                              -----------        -----------        -----------
Deferred:
    Federal                      (614,224)           109,410           (198,026)
    State                        (163,657)          (106,902)           (73,496)
                              -----------        -----------        -----------
                                 (777,881)             2,508           (271,522)
                              -----------        -----------        -----------
                              $ 1,304,267        $ 1,755,866        $ 1,024,240
                              ===========        ===========        ===========


                                                                       [LOGO] 33


[LOGO]

The provision for income taxes for the three years ended May 31, 1998 differs from that computed at the federal statutory rate as follows:

                                                                            Years Ended May 31
                                                          --------------------------------------------------
                                                              1998              1997                 1996
                                                          -----------        -----------        ------------
Tax at federal statutory rate                             $ 1,076,172        $ 1,571,265         $   846,539
State taxes, net of federal income tax benefit                218,379            322,566             182,981
Reversal of New York State Deferred Taxes                          --           (164,817)                 --
Other                                                           9,716             26,852              (5,280)
                                                          -----------        -----------         -----------
          Total income tax expense                        $ 1,304,267        $ 1,755,866         $ 1,024,240
                                                          ===========        ===========         ===========
Effective rate                                                  41.21%             37.99%              41.14%

As a thrift institution, the Bank is subject to special provisions in the federal and New York State tax laws regarding its allowable tax bad debt deductions and related tax bad debt reserves. These deductions historically have been determined using methods based on loss experience or a percentage of taxable income. Tax bad debt reserves are maintained for qualifying real property loans and for non-qualifying loans in amounts equal to the excess of allowable deductions over actual bad debt losses and other reserve reductions. A supplemental reserve is also maintained. The qualifying and non-qualifying loan reserves consist of a defined base-year amount, plus additional amounts ("excess reserves") accumulated after the base year. SFAS No. 109 requires recognition of deferred tax liabilities with respect to such excess reserves, as well as any portion of the base-year amount or the supplemental reserve which is expected to become taxable (or "recaptured") in the foreseeable future.

Certain amendments to the federal tax bad debt provisions were enacted in July 1996. The federal amendments include elimination of the percentage-of-taxable-income method for tax years beginning after December 31, 1995 and imposition of a requirement to recapture into taxable income (over a six-year period) the qualifying and non-qualifying loan reserves in excess of the base-year amounts. However, such recapture requirements were suspended for each of the two successive taxable years beginning January 1, 1996 in which the Bank originates a minimum amount of certain residential loans during such years that is not less than the average of the principal amounts of such loans made by the Bank during its six taxable years preceding January 1, 1996. The Bank previously established, and will continue to maintain, a deferred tax liability with respect to such excess federal reserves.

The New York State amendments enacted in August of 1996 redesignate the Bank's State bad debt reserves at May 31, 1997 as the base-year amount and also provide for future additions to the base-year reserve using the percentage-of-taxable-income method. This change effectively eliminated the excess New York State reserves for which a deferred tax liability had been recognized, and accordingly, the Bank reduced its deferred tax liability by $164,817 (with a corresponding reduction in income tax expense) during the year ended May 31, 1997.

In accordance with SFAS No. 109, deferred tax liabilities have not been recognized with respect to the base-year and supplemental reserves, since the Bank does not expect that these amounts will become taxable in the foreseeable future. Under the tax laws as amended, events that would result in taxation of these reserves include: (i) reductions in the reserves for purposes other than tax bad debt losses, (ii) failure of the Bank to maintain a specified qualifying-assets ratio or meet other thrift definition tests for New York State tax purposes and (iii) certain stock redemptions, partial or complete liquidation or distribution in excess of post-1951 earnings and profits. The reserve balance of $4,713,000 at December 31, 1987 has not been subject to deferred taxes.

11. BENEFIT PLANS

Pension Plan

All eligible employees of the Bank are included in a noncontributory defined benefit pension plan administered by Actuarial Pension Analysts, Inc. Under the terms of the Plan, participants vest 100% upon completion of five years of service as defined in the plan document. The Bank's policy is to fund the consulting actuary's recommended contribution.

34 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

The funded status of the Bank's pension plan was as follows at May 31, 1998 and 1997:

                                                                                    1998                 1997
                                                                                -----------          ------------
Actuarial present value of benefit obligations:
    Accumulated benefit obligation, including vested benefits of
       $3,474,680 and $3,188,237 at May 31, 1998 and 1997, respectively         $(3,513,332)         $(3,203,156)
    Effect of projected future compensation levels                               (1,038,139)            (915,896)
                                                                                -----------          -----------
          Projected benefit obligation                                           (4,551,471)          (4,119,052)
                                                                                -----------          -----------
Plan assets at fair value, primarily fixed income and equity funds                5,820,424            4,990,430
                                                                                -----------          -----------
          Excess of plan assets over projected benefit obligation                 1,268,953              871,378
Unrecognized net gain from past experience different from that assumed
   and effect of changes in assumptions                                          (1,096,860)            (515,120)
Unrecognized past service liability                                                 (38,937)             (45,471)
Unrecognized net transition asset                                                      --                (19,099)
                                                                                -----------          -----------
          Net prepaid pension cost (included in other assets)                   $   133,156          $   291,688
                                                                                ===========          ===========

                                                                                       Years Ended May 31
                                                                      --------------------------------------------------
                                                                         1998                1997                1996
                                                                      -----------         -----------        -----------
Net pension cost includes the following components:
    Service costs--benefits earned during the period                  $ 277,347           $ 228,068           $ 176,483
    Interest cost on projected benefit obligation                       302,451             275,763             266,739
    Actual return on assets                                            (393,466)           (357,442)           (321,582)
    Amortization of transition assets                                   (21,266)            (33,311)            (33,311)
    Amortization of prior service cost                                   (6,534)             (6,534)             (6,024)
                                                                      ---------           ---------           ---------
              Net pension cost                                        $ 158,532           $ 106,544           $  82,305
                                                                      =========           =========           =========
Major assumptions utilized as follows:
    Discount rate                                                          7.50%               7.50%               7.50%
    Rate of increase in compensation levels                                5.50                5.50                5.50
    Expected long-term rate of return on Plan assets                       8.00                8.00                8.00

Post-retirement Benefits Other Than Pensions

The Bank also provides post-retirement health care (medical and dental) benefits and life insurance benefits to certain retirees if they meet certain age and length of service requirements prior to retirement. For retirees who retire after April 24, 1996, the continuation of such benefits is conditioned upon the retiree contributing a portion of the cost of such benefits. For retirees who retire before April 25, 1996, such benefits are not conditioned upon retiree contributions.

The Bank adopted SFAS No. 106 in fiscal 1995 and changed its method of accounting for these post-retirement benefits. Under SFAS No. 106, the cost of post-retirement health care and life insurance benefits is recognized on an accrual basis as such benefits is earned by active employees. Prior to the adoption of SFAS No. 106, the Bank recognized the cost of these benefits on a cash basis.

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At May 31, 1998 and 1997, the actuarial and accrued liabilities for post-retirement health care and life insurance benefits, none of which have been funded, were as follows:

                                                                                                         1998               1997
                                                                                                     -----------        -----------
Accumulated post-retirement benefit obligations:
    Retirees                                                                                         $   540,033        $   629,490
    Other active participants                                                                            733,962            654,434
                                                                                                     -----------        -----------
          Accumulated post-retirement benefit obligation                                               1,273,995          1,283,924
Unrecognized (gain) loss                                                                                (303,975)          (200,486)
                                                                                                     -----------        -----------
          Accrued post-retirement benefit cost (including in other liabilities)                      $ 1,577,970        $ 1,484,410
                                                                                                     ===========        ===========
Effect of 1% increase in health care cost trend rate--
   accumulated post-retirement benefit obligation                                                    $   194,887        $   154,095
                                                                                                     ===========        ===========

Net periodic post-retirement benefit cost is included in the following components:

                                                                                                 Years Ended May 31
                                                                                       ---------------------------------------------
                                                                                         1998              1997              1996
                                                                                       ---------         ---------         ---------
Service cost--benefits attributed to service during period                             $  63,209         $  59,341         $  72,156
Interest cost on accumulated post-retirement benefit obligation                           91,391           101,806           102,074
Amortization of prior service cost                                                       (35,240)             --                --
Amortization of (gains) losses                                                             4,904           (17,141)           13,845
                                                                                       ---------         ---------         ---------
          Net periodic post-retirement benefit cost                                    $ 124,264         $ 144,006         $ 188,075
                                                                                       =========         =========         =========

The accumulated post-retirement benefit obligation was determined using the projected unit cost method, as required by SFAS No. 106, and a discount rate of 7.2% in 1998, 8.00% in 1997 and 7.50% in 1996. The assumed rate of increase in future health care costs was 9.0% in 1998, 9.50% in 1997 and 10.0% in 1996, gradually decreasing to 5.0% in the year 2006 and remaining at that level thereafter.

401(k) Plan
The Bank has a 401(k) plan (the "Plan") covering full-time employees who satisfy the eligibility requirement and elect to participate in the plan. The Plan provides for employer matching contributions subject to a specified maximum. Amounts charged to operations for the years ended May 31, 1998, 1997 and 1996 were approximately $110,000, $86,000 and $65,000, respectively.

Benefit Restoration Plan
The Bank adopted the Benefit Restoration Plan of The Warwick Savings Bank ("BRP") to provide certain designated employees with the benefits that would be due to such employees under the Pension Plan, the 401(k) Plan and the ESOP if such benefits were not limited under the Internal Revenue Code. Expense related to the BRP included in the consolidated statements of income is approximately $70,000 for the year ended May 31, 1998.

Employee Stock Ownership Plan
The Company has established an ESOP for eligible employees. Generally full-time employees of the Company or the Bank who have been credited with at least 1,000 hours during a twelve-month period are eligible to participate.

The ESOP borrowed $8,509,774 at an interest rate of 8.00% from the Company and used the funds to purchase 528,523 shares of the Company's common stock issued in the Conversion. Generally, the loan is repaid principally from the Bank's discretionary contributions to the ESOP over a 10-year period. At May 31, 1998, the loan had an outstanding balance of $8,014,720. Interest expense for the obligations was $262,095 for the year ended May 31, 1998. Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is paid. Contributions to the ESOP and shares released from the loan collateral in an amount proportional to the repayment of the ESOP loan are allocated among participants on the basis of compensation, as described in the plan, in the year of allocation. Benefits generally become 100% vested after seven years of vesting service and are immediately vested on death, retirement or disability. In addition, in the event of a change in control, as defined in the plan, any unvested portion of benefits shall vest immediately. Forfeitures are used to reduce employer contributions. Benefits are payable upon death, retirement, disability, or separation from service based on vesting status and share allocations made.

36 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

As of May 31, 1998, 31,016 shares were allocated to participants and 13,213 shares were committed to be released. As shares are released from collateral, the shares become outstanding for earnings per share computations. As of May 31, 1998, the fair market value of the 484,294 unearned shares was $8,232,998.

12. BORROWED FUNDS AND REPURCHASED AGREEMENTS

Securities sold under agreements to repurchase at May 31, 1998 and 1997 which were transacted with a major securities firm are as follows:

                          1998                                                         1997
------------------------------------------------------         -----------------------------------------------------
   Amount                 Rate              Maturity               Amount              Rate               Maturity
-------------          -------------     -------------         -------------       -------------        ------------
$   490,000               5.64%             06/15/98           $   705,000             5.69%              06/18/97
  4,000,000               5.64              06/15/98             4,685,000             5.69               06/18/97
  1,300,000               5.95              06/19/98             1,300,000             6.00               06/19/97
  1,300,000               6.40              06/19/98             1,300,000             6.40               06/19/98
  5,000,000               5.69              06/30/98             4,700,000             6.65               07/01/98
  4,700,000               6.32              05/24/99             1,000,000             6.65               06/19/99
  1,000,000               6.65              06/19/99             4,700,000             6.32               05/24/99
  4,700,000               6.65              06/30/99             4,700,000             6.53               08/01/99
  4,700,000               6.53              08/01/99           -----------
-----------                                                    $23,090,000
$27,190,000                                                    ===========
===========

Information relating to borrowings under repurchase agreements is summarized as follows:

                                                                                               Years Ended May 31
                                                                         -----------------------------------------------------------
                                                                             1998                    1997                    1996
                                                                         ------------            -------------         -------------
Average balance during the year                                          $24,056,648              $19,685,315          $   101,075
Average interest rates during the year                                          6.18%                    6.20%                6.32%
Maximum month-end balance during the year                                 27,500,000               23,300,000            4,700,000
Securities underlying agreement at year-end:
    Amortized cost                                                        37,729,203               25,470,851            5,000,000
    Estimated market value                                                38,071,150               25,508,437            4,981,000

Federal Home Loan Bank advances are as follows at May 31, 1998 and 1997:

                                             Available           Outstanding             Rate              Maturity
                                             ---------           -----------           --------            --------
1998:
    Revolving line of credit                 $16,982,150        $ 7,600,000              5.81%               Daily
    Repricing line of credit                  16,982,150                 --                                 Monthly
    Term loans                                                      250,000              6.96              06/19/00
                                                                  5,000,000              5.79              12/18/01
                                                                 20,000,000              5.02              01/30/08
                                                                 10,000,000              5.79              02/26/08
                                                                  5,000,000              5.26              04/30/08
                                                                  5,000,000              5.63              04/30/08
                                                                 10,000,000              5.47              05/29/01
                                                                -----------
                                                                $62,850,000
                                                                ===========
1997:
    Revolving line of credit                 $14,417,000        $        --                --                Daily
    Repricing line of credit                  14,417,000                 --                --               Monthly
    Term loans                                                      250,000              6.96               6/19/00
                                                                  5,000,000              5.79              12/18/01
                                                                -----------
                                                                $ 5,250,000
                                                                ===========

In addition, the Bank has a $5 million line of credit from a commercial bank and a $10 million line of credit from a securities investment company which expire on November 30, 1998. As of May 31, 1998 and 1997 the credit lines were unused.

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13. REGULATORY CAPITAL REQUIREMENTS

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

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of May 31, 1998, that the Company and the Bank meet all capital adequacy requirements to which it is subject.

The most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution's category.

The Bank's actual capital amounts and ratios are presented in the following table (000's omitted):

                                                                                                  To Be Well
                                                                                               Capitalized Under
                                                                    For Capital Adequacy       Prompt Corrective
                                                 Actual                   Purposes             Action Provisions
                                          --------------------       -------------------       -----------------
                                          Amount         Ratio       Amount        Ratio       Amount      Ratio
                                          ------         -----       ------        -----       ------      -----
 As of May 31, 1998:
      Total Capital
       (to risk weighted assets)        $54,910           26.27%     $16,721        >8.0%      $20,901      >10.0%
    Tier 1 Capital
       (to risk weighted assets)         53,397           25.55        8,360        >4.0        12,540      >6.0
    Tier 1 Capital
       (to average assets)               53,397           13.91       15,352        >4.0        19,190      >5.0

As of May 31, 1997:
    Total Capital
       (to risk weighted assets)        $28,726           20.33%     $11,302        >8.0%      $14,127      >10.0%
    Tier 1 Capital
       (to risk weighted assets)         27,495           19.46        5,651        >4.0         8,476      >6.0
    Tier 1 Capital
       (to average assets)               27,495            9.53       11,535        >4.0        14,419      >5.0

38 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

The Company's actual capital amounts and ratios are presented in the following table (000's omitted):

                                                                                                  To Be Well
                                                                                               Capitalized Under
                                                                    For Capital Adequacy       Prompt Corrective
                                                 Actual                   Purposes             Action Provisions
                                         --------------------       --------------------       -----------------
                                         Amount         Ratio       Amount        Ratio         Amount      Ratio
                                         ------         -----       ------        -----         ------      -----
As of May 31, 1998:
   Total Capital
     (to risk weighted assets)          $86,498         40.78%     $16,968        >8.0%        $21,211       >10.0%
   Tier 1 Capital
     (to risk weighted assets)           84,985         40.07        8,484        >4.0          12,726        >6.0
   Tier 1 Capital
     (to average assets)                 84,985         21.44       15,855        >4.0          19,818        >5.0

14. COMMITMENTS AND CONTINGENCIES

Lease Commitments

Rental expense included in the statements of income was approximately $281,000, $267,000 and $249,000 for the years ended May 31, 1998, 1997 and 1996, respectively.

In 1993, the Bank entered into an agreement with a company to provide data processing services. Such agreement expires in July 2000. The commitment for future payments fluctuates with the level of service provided. The costs incurred in connection with this agreement are included in data processing expenses in the accompanying statements of income.

Loan Commitments
Loan commitments and unused lines of credit as of May 31, 1998 are as follows (with comparative totals as of May 31, 1997):

                                                   Commitments             Unused
                                                  to Originate            Lines of
                                                      Loans                Credit                  Total
                                                 --------------         ------------           -------------
Mortgage loans                                    $  42,034,747         $         --           $  42,034,747
Construction loans                                    7,047,106                   --               7,047,106
Commercial loans                                             --            5,558,603               5,558,603
Other loans                                           6,414,805                   --               6,414,805
                                                  -------------         ------------           -------------
          Total as of May 31, 1998                $  55,496,658         $  5,558,603           $  61,055,261
                                                  =============         ============           =============
          Total as of May 31, 1997                $  30,011,669         $  4,275,202           $  34,286,871
                                                  =============         ============           =============

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments may expire, the total commitment amounts do not necessarily represent future cash requirements.

The Bank's exposure to credit loss in the event of nonperformance by the other party to the loan commitments is represented by their contractual amount. The Bank controls the credit risk of loan commitments through credit approvals, limits and monitoring procedures. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the borrower.

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Concentration of Credit Risk
The Bank grants residential mortgage loans, construction loans, commercial loans and consumer loans to customers located primarily in Orange County, New York and the surrounding counties of Rockland and Dutchess in New York. The borrowers' ability to repay loan principal and accrued interest is dependent upon, among other things, the economic conditions prevailing in the Bank's lending area.

Hedging
In the normal course of business, the Bank uses off-balance sheet financial instruments primarily as part of mortgage banking hedging strategies. Such instruments generally include put options purchased and forward commitments to sell mortgage loans. As a result of interest rate fluctuations, these off-balance sheet financial instruments will develop unrealized gains or losses that mitigate changes in the underlying hedged portion of the balance sheet. When effectively used, these off-balance sheet financial instruments are designed to moderate the impact on earnings as interest rates move up or down.

Litigation
The Bank is involved in legal proceedings incurred in the normal course of business. In the opinion of management, none of these proceedings are expected to have a material effect on the consolidated financial position or results of operations of the Bank.

15. DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Due from Banks and Federal Funds Sold For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Accrued Interest and FHLB Stock
The carrying amount is a reasonable estimate of fair value.

Securities
Fair values for securities are based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans, net
For certain homogeneous categories of loans, such as some residential mortgages and other consumer loans, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

For other loan types, fair value is based on the credit and interest rate characteristics of individual loans. These loans are stratified by type, maturity, interest rate, underlying collateral where applicable, and credit quality ratings. Fair value is estimated by discounting scheduled cash flows through estimated maturities using discount rates which in management's opinion best reflect current market interest rates that would be charged on loans with similar characteristics and credit quality. Credit risk concerns are reflected by adjusting cash flow forecasts, by adjusting the discount rate or by adjusting both.

Depositor Accounts
The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

40 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Mortgage Escrow Funds and Borrowed Funds

The carrying amount is a reasonable estimate of fair value.

The following is a summary of the carrying values and estimated fair values of the Bank's financial assets and liabilities at May 31, 1998 and 1997 (000's omitted):

                                                              1998                               1997
                                                   --------------------------         --------------------------
                                                    Carrying          Fair             Carrying         Fair
                                                      Value           Value              Value          Value
                                                   ------------   -----------         ------------   -----------
Financial assets:
    Cash on hand and in banks                      $   11,190     $   11,190         $   10,367     $    10,367
    Federal funds sold                                     --             --              1,315           1,315
    Securities                                        170,749        170,702            126,393         126,417
    Loans, net                                        212,665        215,186            138,323         139,126
    Accrued interest receivable                         2,463          2,463              2,097           2,097
    Federal Home Loan Bank stock                        3,393          3,393              1,731           1,731

Financial liabilities:
    Demand, NOW, statement savings and
       passbook, and money market accounts          $ 151,815      $ 151,815          $ 146,173      $  146,173
    Time certificate accounts                          70,907         70,998             75,038          75,003
    Mortgage escrow funds                               2,266          2,266              1,398           1,398
    Borrowed funds                                     90,040         90,040             28,340          28,340
    Accrued interest payable                            1,486          1,486              1,211           1,211

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16. WARWICK COMMUNITY BANCORP, INC.-PARENT COMPANY ONLY FINANCIAL STATEMENTS

The following statement of financial condition as of May 31, 1998, the statement of income for the year ended May 31, 1998, and the related statements of cash flows for the year ended May 31, 1998, reflect the Company's investment in its wholly owned subsidiary, the Bank, using the equity method of accounting.

                        STATEMENT OF FINANCIAL CONDITION
                                  MAY 31, 1998
                      (000's omitted except share amounts)

                   ASSETS
Assets:
    Cash and cash equivalents                                                           $ 19,976
    Investment securities available for sale                                               2,901
    Accrued interest receivable                                                              262
    Other assets                                                                             783
    ESOP loan to the trustee of the ESOP                                                   8,015
    Investment in The Warwick Savings Bank                                                54,503
                                                                                        --------
          Total assets                                                                  $ 86,440
                                                                                        ========

                   LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
    Other liabilities                                                                   $    252
    Income taxes payable                                                                      39
                                                                                        --------
          Total liabilities                                                                  291
                                                                                        --------
Stockholders' equity:
    Preferred stock, $.01 par value;
       5,000,000 shares  authorized;  none issued                                             --
    Common stock, $.01 par
       value; 15,000,000 shares authorized,
       6,606,548 shares issued                                                                66
    Additional paid-in capital                                                            63,386
    Less-Unallocated common stock held by ESOP                                            (7,823)
    Retained earnings - subject to restrictions                                           29,355
    Unrealized appreciation on securities available for sale, net                          1,165
                                                                                        --------
          Total stockholders' equity                                                      86,149
                                                                                        --------
          Total liabilities and stockholders' equity                                    $ 86,440
                                                                                        ========

                               STATEMENT OF INCOME
                         FOR THE YEAR ENDED MAY 31, 1998
                                 (000'S OMITTED)

Interest income:
    ESOP loan to the trustee of the ESOP                                                $    262
    Investment securities                                                                     24
                                                                                        --------
          Total interest income                                                              286

Interest expense                                                                              --
                                                                                        --------
    Net interest income before provision for loan losses                                     286

Provision for loan losses                                                                     --
                                                                                        --------
    Net interest income after provision for loan losses                                      286
                                                                                        --------
Non-interest income:
    Gain on sale of investment securities                                                     28
    Equity in undistributed net income of subsidiary bank                                  2,941
                                                                                        --------
                                                                                           2,969

Non-interest expense                                                                       2,054
                                                                                        --------
          Income before provision for income taxes                                         1,201

Income tax benefit                                                                          (660)
                                                                                        --------
          Net income                                                                    $  1,861
                                                                                        ========

42 Warwick Community Bancorp, Inc. o Annual Report


WARWICK COMMUNITY BANCORP, INC. AND SUBSIDIARIES

                             STATEMENT OF CASH FLOWS
                         FOR THE YEAR ENDED MAY 31, 1998
                                 (000's omitted)

Cash flows from operating activities:
      Net income                                                                      $   1,861
      Adjustments to reconcile net income to net cash
         provided by operating activities-
          Undistributed earnings of subsidiary bank                                      (2,941)
          Charitable contribution to The Warwick Savings Foundation                       1,924
          Gain on sale of securities                                                        (30)
      (Increase) decrease in assets-
          Accrued interest receivable                                                      (262)
          Other assets                                                                     (783)
      Increase in liabilities-
          Other liabilities                                                                 252
          Income taxes payable                                                               39
                                                                                      ---------
                Net cash provided by operating activities                                    60
                                                                                      ---------

Cash flows from investing activities:
      Payment made to purchase 100% of the outstanding stock of the Bank                (30,743)
      Purchases of securities available for sale                                         (4,592)
      Proceeds from sale of securities available for sale                                 1,781
                                                                                      ---------
                Net cash used in investing activities                                   (33,554)
                                                                                      ---------

Cash flows from financing activities:
      (Increase) in ESOP loan receivable                                                 (8,015)
      Proceeds from issuance of common stock                                             61,485
                                                                                      ---------
                Net cash provided by financing activities                                53,470
                                                                                      ---------
                Net increase in cash and cash equivalents                                19,976

Cash and cash equivalents, beginning of year                                                 --
                                                                                      ---------
Cash and cash equivalents, end of year                                                $  19,976
                                                                                      =========

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17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended May 31, 1998 and 1997:

                                                                         Three Months Ended
                                            ---------------------------------------------------------------------------
                                             May 31,            February 28,            November 30,          August 31,
                                              1998                  1998                    1997                 1997
                                            --------             ----------              ----------          ----------
Total interest income                       $  7,046             $  6,208                $  5,291            $  5,232
Total interest expense                         2,844                2,335                   2,434               2,359
Net interest income                            4,202                3,873                   2,857               2,873
Provision for loan losses                        125                  104                      60                 303
Non-interest income                              987                  764                     711                 678
Non-interest expense and
   provision for income taxes                  3,835                5,133                   2,814               2,710
Net income (loss)                              1,229                 (600)                    694                 538
Basic earnings (loss) per common share           .20                 (.10)                    N/A                 N/A
Diluted earnings (loss) per common share         .20                 (.10)                    N/A                 N/A

                                                                         Three Months Ended
                                            ---------------------------------------------------------------------------
                                             May 31,            February 28,             November 30,         August 31,
                                               1997                1997                     1996                1996
                                            --------            ----------              ------------          ---------
Total interest income                       $  5,274            $  5,356                  $  5,150            $  4,911
Total interest expense                         2,400               2,342                     2,354               2,280
Net interest income                            2,874               3,014                     2,796               2,631
Provision for loan losses                         50                  30                        30                  20
Non-interest income                              574                 539                       683                 984
Non-interest expense and provision
   for income taxes                            2,751               2,832                     2,769               2,747
Net income                                       647                 691                       680                 848
Basic earnings per common share                  N/A                 N/A                       N/A                 N/A
Diluted earnings per common share                N/A                 N/A                       N/A                 N/A

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors & Stockholders of Warwick Community Bancorp, Inc:

We have audited the accompanying consolidated statements of financial condition of Warwick Community Bancorp, I