EXHIBIT 13 ANNUAL REPORT

                              FINANCIAL HIGHLIGHTS

At or for the Fiscal Year Ended September 30,    1998        1997        1996
--------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Data)

Selected Financial Condition Data

Total assets                                   $383,204    $312,956    $259,534
Loans receivable, net                           184,025     118,683      86,666
Mortgage-backed securities                      113,485      93,384      80,850
Other securities                                 55,043      69,231      72,709
Deposits                                        231,181     207,933     190,675
Borrowings                                      107,790      60,096      18,264
Stockholders' equity                             41,802      43,878      48,999
Book value per share(1)                           15.33       14.53       13.72

Selected Operating Data

Net interest income                            $ 11,453    $ 10,774    $  8,401
Net income(2)                                     2,901       2,952       1,520
Basic earnings per common share(3)                 1.12        1.05        0.22
Diluted earnings per common share(3)               1.08        1.04        0.22

Asset Quality Data

Non-performing loans                           $    753    $  1,138    $  2,775
Non-performing loans to total loans
    receivable                                     0.41%       0.94%       3.14%

----------
(1)   Represents stockholders' equity divided by total common shares outstanding
      at the end of the period.
(2)   Fiscal 1996 net income was reduced by approximately $700,000 for the
      after-tax impact of a Federal deposit insurance special assessment imposed
      to recapitalize the Savings Association Insurance Fund.
(3)   Earnings per share data for all periods has been computed in accordance
      with Statement of Financial Accounting Standards No. 128. Earnings per
      share for fiscal 1996 is for the period following the Association's
      conversion to stock form in April 1996.


                                       1
<PAGE>

                             LETTER TO STOCKHOLDERS

To Our Stockholders:

It is with a great deal of pride that I report to you on our progress and
results for the fiscal year ended September 30, 1998, our second full year
operating as a public company. Although fiscal 1998 was a challenging year
caused by turbulence in the financial markets, we remained committed to
increasing our core business and enhancing shareholder value. This is reflected
in our subsidiary, The Yonkers Savings and Loan Association, FA, which continues
to operate as a community-oriented financial institution with a focus on
providing quality banking services to our local customer base.

Our financial results for fiscal 1998 reflect our progress as a public company.
Net income for the fiscal year ended September 30, 1998 was $2.9 million or
basic earnings per common share of $1.12, compared to net income of $3.0 million
or basic earnings per common share of $1.05 for the fiscal year ended September
30, 1997.

Total assets increased $70.0 million, or 22.4%, to $383.0 million at September
30, 1998 from $313.0 million a year earlier, primarily through growth of $58.3
million in the loan portfolio and $5.9 million in the securities portfolio. The
asset growth was primarily funded by proceeds from borrowings which increased
$47.7 million and deposits which increased $23.3 million.

From a performance perspective, although our efficiency ratio was higher at
59.3% in fiscal 1998 compared to 54.4% in fiscal 1997, the ratio of non-interest
expense to average assets decreased to 2.16% in fiscal 1998 from 2.26% in the
prior year. Our percentage of non-performing loans to total loans receivable at
year end decreased to 0.41% this year from 0.94% in fiscal 1997, while our
allowance for loan losses as a percentage of non-performing loans at year end
increased to 172.9% in fiscal 1998 from 96.0% in fiscal 1997.

Fiscal 1998 saw a dramatic increase in our core business, mortgage lending. Loan
growth of 41.9% was accomplished through record levels of one- to four-family
residential mortgage originations which continue to be the backbone of our
lending operations. Loans receivable and loans held for sale increased $58.3
million to $197.4 million at September 30, 1998 from $139.1 million at September
30, 1997. In total, we originated $152.6 million in loans and have become a
leading lender in our market area. As we move ahead, we will continue to provide
home financing to our community, focusing on prudent underwriting standards in
an effort to maintain a high-quality mortgage loan portfolio.

Our core business expansion in fiscal 1998 also included significant growth in
deposits attributable to aggressive cross-selling, quality customer service and
the successful opening in December 1997 of our first in-store branch in BJ's
Wholesale Club located in Wappingers Falls, Dutchess County, New York. Deposit
liabilities increased $23.3 million to $231.2 million at September 30, 1998 from
$207.9 million at September 30, 1997. Our aggressive sales and services
practices, along with product enhancement and service-oriented employees, will
be key to strengthening our community banking franchise. We will continue to
take advantage of cross-selling opportunities for expanded relationships within
our market area.

Fiscal 1999 began with the Company taking further action to enhance its retail
banking franchise. In October 1998, we opened our second in-store branch in BJ's
Yorktown Heights, Westchester County, New York location. This branch will enable
us to bring our personalized service and convenient products to other market
areas.


                                       2
<PAGE>

The Company continues to focus on enhancing shareholder value. In addition to
growth in our core business, the Company completed two stock repurchase programs
in fiscal 1998. A total of 294,524 shares, or approximately 10% of the Company's
outstanding common shares, was repurchased in the open market. The Board of
Directors believes that treasury repurchases have enhanced shareholder value by
increasing earnings per share. The positive effect of treasury share repurchases
and earnings retained is reflected in the increase in our book value per share
to $15.33 at September 30, 1998 from $14.53 at September 30, 1997.

Since converting to stock form, the Company has declared nine consecutive
quarterly cash dividends. The dividend paid in the quarter ended September 30,
1998 was increased to $0.08 per share from $0.07 per share, reflecting the
continued strength of the Company's operating results.

As a well-established community bank, we will continue to explore ways to add
value for our stockholders and customers. We intend to continue to focus on the
financial needs of our community and continue our active participation in
community development and other types of community-related programs.

On behalf of the Board of Directors, I wish to thank our stockholders, customers
and staff for your continued support of Yonkers Financial Corporation.

Sincerely,


Richard F. Komosinski,
President and Chief Executive Officer


                                       3
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                At or for the Fiscal Year Ended September 30,
                                                            ----------------------------------------------------
                                                              1998       1997       1996       1995       1994
                                                            --------   --------   --------   --------   --------
                                                                (Dollars in thousands, except per share data)
<S>                                                         <C>        <C>        <C>        <C>        <C>     
Selected Financial Condition Data:
Total assets                                                $383,204   $312,956   $259,534   $208,283   $194,862
Loans receivable, net                                        184,025    118,683     86,666     83,679     77,824
Real estate mortgage loans held for sale                      13,334     20,437         --         --         --
Securities:
  Available-for-sale                                         125,225     86,286     58,552     20,877     19,216
  Held-to-maturity                                            43,303     76,329     95,007     95,464     87,720
Cash and cash equivalents                                      4,195      3,593     12,500      3,261      5,818
Deposits                                                     231,181    207,933    190,675    188,009    179,816
Borrowings                                                   107,790     60,096     18,264      4,295        295
Stockholders' equity (1)                                      41,802     43,878     48,999     15,765     14,156

Selected Operating Data:
Interest and dividend income                                $ 25,475   $ 20,731   $ 16,376   $ 14,063   $ 12,460
Interest expense                                              14,022      9,957      7,975      7,004      5,422
                                                            --------   --------   --------   --------   --------
  Net interest income                                         11,453     10,774      8,401      7,059      7,038
Provision for loan losses                                        375        300        462        493         64
                                                            --------   --------   --------   --------   --------
  Net interest income after provision for loan losses         11,078     10,474      7,939      6,566      6,974
Non-interest income                                            1,471        787        702        686        625
Non-interest expense (excluding special assessment)            7,644      6,319      5,038      4,779      4,272
SAIF special assessment (2)                                       --         --      1,166         --         --
                                                            --------   --------   --------   --------   --------
  Income before income tax expense and cumulative
    effect of change in accounting principle                   4,905      4,942      2,437      2,473      3,327
Income tax expense                                             2,004      1,990        917      1,033      1,356
                                                            --------   --------   --------   --------   --------
  Income before cumulative effect of change in
   accounting principle                                        2,901      2,952      1,520      1,440      1,971
Cumulative effect of change in accounting for income taxes        --         --         --         --        326
                                                            --------   --------   --------   --------   --------
  Net income (3)                                            $  2,901   $  2,952   $  1,520   $  1,440   $  2,297
                                                            ========   ========   ========   ========   ========
Basic earnings per common share (4)                         $   1.12   $   1.05   $   0.22
Diluted earnings per common share (4)                           1.08       1.04       0.22

Selected Statistical Data: (5)
Return on average assets (3)                                    0.82%      1.05%      0.66%      0.72%      1.22%
Return on average equity (3)                                    6.72       6.72       4.60       9.61      17.31
Net interest margin (6)                                         3.28       3.93       3.73       3.61       3.80
Average interest rate spread (7)                                2.67       3.26       3.13       3.34       3.58
Efficiency ratio (8)                                           59.33      54.43      57.12      58.18      55.31
Non-interest expense to average assets (3)                      2.16       2.26       2.70       2.39       2.27
Non-performing loans to total loans receivable                  0.41       0.94       3.14       4.15       3.35
Allowance for loan losses to non-performing loans             172.91      96.05      33.77      20.37      11.68
Allowance for loan losses to total loans receivable             0.70       0.90       1.06       0.84       0.39
Non-performing assets to total assets                           0.28       0.48       1.30       1.80       1.40
Equity to total assets at end of period                        10.91      14.02      18.88       7.57       7.26
Average equity to average assets                               12.18      15.69      14.41       7.50       7.04
Book value per share (9)                                    $  15.33   $  14.53   $  13.72
Cash dividends per share                                        0.28       0.21       0.05
Dividend payout ratio (10)                                     25.92%     20.66%     22.50%
</TABLE>

----------
(1)   Includes additional capital in 1998, 1997 and 1996 subsequent to the sale
      of the Holding Company's common stock in connection with the Association's
      conversion to stock form on April 18, 1996.
(2)   Represents the Association's share of a special assessment imposed on all
      financial institutions with deposits insured by the Savings Association
      Insurance Fund (the "SAIF").
(3)   Excluding the after-tax SAIF charge described in note (2), net income for
      fiscal 1996 would have been approximately $700,000 higher, resulting in a
      return on average assets of 0.97% and a return on average equity of 6.71%.
      The ratio of non-interest expense to average assets would have been 2.20%.
(4)   Earnings per share data for all periods has been computed in accordance
      with Statement of Financial Accounting Standards No.128. Earnings per
      share for fiscal 1996 is for the six-month period following the
      Association's conversion.
(5)   With the exception of end-of-period ratios, all ratios are based on
      average daily balances in 1998 and 1997, and average monthly balances in
      earlier years.
(6)   Net interest income divided by average interest-earning assets.
(7)   The difference between the weighted average yield on interest-earning
      assets and the weighted average cost of interest-bearing liabilities.
(8)   Non-interest expense (other than certain loss provisions and the SAIF
      special assessment) divided by the sum of net interest income and
      non-interest income (other than net security gains and losses).
(9)   Represents stockholders' equity divided by total common shares outstanding
      at the end of the period.
(10)  Dividends paid as a percentage of net income. Ratio for fiscal 1996 is
      based on net income for the six-month period following the Association's
      conversion to stock form.


                                       4
<PAGE>

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

      The Company's Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements consisting
of estimates with respect to the financial condition, results of operations and
business of the Company that are subject to various factors that could cause
actual results to differ materially from these estimates. These factors include
changes in general, economic and market, and legislative and regulatory
conditions; the impact of competition and pricing pressures on loan and deposit
products; Year 2000 costs and issues substantially different from those now
anticipated; and the development of an interest rate environment that adversely
affects the interest rate spread or other income anticipated from the Company's
operations.

      The Company cautions that its forward-looking statements are subject to
numerous assumptions, risks and uncertainties, and that statements concerning
subsequent periods are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. The Company's
forward-looking statements speak only as of the date on which such statements
are made. By making any forward-looking statements, the Company assumes no duty
to update them to reflect new, changed or unanticipated events or circumstances.

General

      Yonkers Financial Corporation (the "Holding Company") is the unitary
savings association holding company for The Yonkers Savings and Loan
Association, FA (the "Association"), a federally chartered savings and loan
association and a wholly-owned subsidiary of the Holding Company. Collectively,
the Holding Company and the Association are referred to herein as the "Company."
On April 18, 1996, the Association converted from a mutual savings and loan
association to a stock savings and loan association (the "Conversion").
Concurrent with the Conversion, the Holding Company sold 3,570,750 shares of its
common stock in a subscription and community offering at a price of $10.00 per
share, for net proceeds of $34.6 million (the "Stock Offering").

      The Company's primary market area consists of Westchester County, New
York, and portions of Putnam, Rockland and Dutchess Counties, New York. Business
is conducted from its executive offices as well as four full-service banking
offices located in Yonkers, New York. A branch located in a discount store in
Wappingers Falls, Dutchess County, was opened in December 1997 and a second
in-store branch was opened in Yorktown Heights, Westchester County in October
1998. The Association is a community-oriented savings institution whose business
primarily consists of accepting deposits from customers within its market area
and investing those funds in mortgage loans secured by one- to four-family
residences. To a lesser extent, funds are invested in multi-family and
commercial real estate, construction, land, consumer and commercial business
loans. The Company also invests in mortgage-backed and other securities. The
Holding Company's business activities have been limited to its ownership of the
Association and certain short-term and other investments.

      The Company's results of operations are primarily dependent on net
interest income, which is the difference between the interest income on its
interest-earning assets (such as loans and securities) and the interest expense
on its interest-bearing liabilities (such as deposits and borrowings). The
Company's results of operations are also affected by the provision for loan
losses, non-interest income and non-interest expense. Non-interest income
primarily consists of service charges and fees on deposit and loan products, and
gains (losses) on sales of loans and securities. The Company's non-interest
expenses primarily consist of employee compensation and benefits, occupancy and
equipment expenses, data processing service fees, federal deposit insurance
costs and other operating expenses.


                                       5
<PAGE>

      The Company's results of operations are 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. Future changes in applicable laws, regulations or
government policies may have a material impact on the Company. Lending
activities are influenced by the demand for and supply of housing, competition
among lenders, the level of interest rates, national and local economic
conditions, and the availability of funds. Deposit flows and costs of funds are
influenced by prevailing market interest rates (including rates on non-deposit
investment alternatives), account maturities, and the levels of personal income
and savings in the Company's market area.

Operating Strategy

      The Company's basic mission is to maintain its focus as an independent,
community-oriented financial institution servicing customers in its primary
market area. The Board of Directors has sought to accomplish this mission
through an operating strategy designed to maintain capital in excess of
regulatory requirements and manage, to the extent practical, the Company's loan
delinquencies and vulnerability to changes in interest rates. The key components
of the Company's operating strategy are to: (i) focus its lending operations on
the origination of loans secured by one- to four-family residential real estate,
with a portion of such originations being sold in the secondary market; (ii)
maintain a significant portfolio of adjustable-rate loans, including loans with
rates that adjust periodically after an initial fixed-rate period; (iii)
supplement its one- to four-family residential lending activities with
multi-family, commercial real estate, consumer, construction and land loans;
(iv) augment its lending activities with investments in mortgage-backed and
other securities; (v) build and maintain its regular savings, transaction, money
market and club accounts; (vi) increase, at a managed pace, the volume of the
Company's assets and liabilities; and (vii) utilize borrowings to fund increases
in asset volume at a positive interest-rate spread.

Comparison of Financial Condition at September 30, 1998 and 1997

      Total assets increased $70.0 million, or 22.4%, in fiscal 1998 to $383.0
million at September 30, 1998 from $313.0 million at September 30, 1997. Asset
growth was funded primarily through proceeds from borrowings under securities
repurchase agreements and from deposit inflows. In addition, a portion of the
available funding was used to repurchase shares of the Holding Company's common
stock.

      Funds provided by borrowings and deposit growth, as well as proceeds from
sales of mortgage loans held for sale, were primarily invested in new loans.
Overall, total loans (loans receivable and mortgage loans held for sale)
increased $58.3 million to $197.4 million at September 30, 1998 from $139.1
million at September 30, 1997. One- to four-family mortgage loans accounted for
$55.4 million of the overall increase (net of a decrease of $7.1 million in
loans held for sale). Multi-family real estate loans increased $2.2 million,
while changes in other portfolio categories were less significant. The loan
growth during fiscal 1998 primarily reflects originations (net of repayments) of
$127.4 million less $69.8 million in loans sold. The significant increase in
loan production was the result of loan program changes implemented during fiscal
1997 (such as the use of mortgage brokers, additional mortgage sales
representatives and the offering of new residential mortgage loan products), as
well as favorable market conditions.

      Total securities increased $5.9 million to $168.5 million at September 30,
1998 from $162.6 million at September 30, 1997, reflecting a $38.9 million
increase in available-for-sale securities and a $33.0 million decrease in
held-to-maturity securities. The increase in available-for-sale securities
primarily reflected purchases of $90.6 million (including purchases of
longer-term, fixed-rate securities funded with borrowings under repurchase
agreements), partially offset by $24.1 million in principal payments, maturities
and calls, and $28.3 million in proceeds from sales. The decrease in
held-to-maturity securities primarily reflects principal payments, maturities
and calls of $32.5 million. Available-for-sale securities 


                                       6
<PAGE>

represented 74.3% of the total securities portfolio at September 30, 1998,
compared to 53.1% at September 30, 1997. Management has increased the level of
available-for-sale securities to enhance the Company's overall financial
flexibility, including the ability to reposition the portfolio or reduce
borrowings in response to changes in interest rates and other market conditions.

      Deposit liabilities increased $23.3 million to $231.2 million at September
30, 1998 from $207.9 million at September 30, 1997. The increase is attributable
to aggressive cross-selling, quality customer service and new deposit products,
as well as the opening of an in-store branch in December 1997. During fiscal
1997, the Company introduced a VIP program which offers certain high-balance
customers higher savings and certificate of deposit rates, lower loan costs and
other benefits, all tied into an attractive checking account.

      Borrowings under securities repurchase agreements increased $53.7 million
to $107.8 million at September 30, 1998 from $54.1 million at September 30,
1997. For information regarding the terms of the repurchase agreements, see
"Liquidity and Capital Resources".

      Stockholders' equity decreased $2.1 million, from $43.9 million at
September 30, 1997 to $41.8 million at September 30, 1998. The decrease is
primarily attributable to common share repurchases of $5.7 million for the
treasury, partially offset by net income of $2.1 million retained after
dividends, a combined increase of $875,000 relating to the employee stock
ownership plan ("ESOP") and the Management Recognition Plan ("MRP"), and an
increase of $576,000 in the after-tax net unrealized gain on available-for-sale
securities. A total of 294,524 common shares were repurchased in open market
transactions during fiscal 1998 at an average cost of $19.27 per share. The
ratio of stockholders' equity to total assets decreased to 10.91% at September
30, 1998 from 14.02% at September 30, 1997, reflecting the substantial asset
growth coupled with the net decrease in stockholders' equity. Book value per
share (computed based on total shares issued less treasury shares) was $15.33 at
September 30, 1998, an increase from $14.53 at September 30, 1997. For
information regarding the Association's regulatory capital, see "Liquidity and
Capital Resources".

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 is affected by the relative amounts of interest-earning assets
and interest-bearing liabilities, and the interest rates earned or paid on them.

      The following table sets forth average balance sheets, average yields and
costs, and certain other information for the years ended September 30, 1998,
1997 and 1996. The average yields and costs were computed by dividing interest
income or expense by the average balance of the related assets or liabilities.
Average balances were computed based on daily balances in fiscal 1998 and 1997,
and month-end balances in fiscal 1996. Management believes that the use of
average monthly balances rather than average daily balances in fiscal 1996 did
not have a material effect on the information presented. The yields include the
effect of deferred fees, discounts and premiums included in interest income. No
tax-equivalent yield adjustments were made for tax-exempt securities, as the
effect thereof was not material.


                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                                                For the Year Ended September 30,
                                                    --------------------------------------------------------------------------------
                                                                     1998                                        1997               
                                                    ----------------------------------------   -------------------------------------
                                                     Average                       Average     Average                     Average  
                                                     Balance      Interest        Yield/Cost   Balance      Interest      Yield/Cost
                                                     -------      --------        ----------   -------      --------      ----------
                                                                                   (Dollars in thousands)
<S>                                                 <C>           <C>                <C>      <C>           <C>              <C>    
Assets                    
Interest-earning assets:
    Loans (1)                                       $ 169,011     $  13,243          7.84%    $  98,721     $   8,603        8.71%  
    Mortgage-backed securities (2)                    108,674         7,394          6.80        88,030         6,078        6.90   
    Other securities (2)                               62,654         4,356          6.95        79,584         5,655        7.11   
    Other earning assets                                8,646           482          5.57         7,760           395        5.09   
                                                    ---------     ---------                   ---------     ---------
       Total interest-earning assets                  348,985     $  25,475          7.30       274,095     $  20,731        7.56   
                                                                  =========                                 =========

Allowance for loan losses                              (1,195)                                   (1,048)                            
Non-interest earning assets                             6,738                                     6,850                             
                                                    ---------                                 ---------
       Total assets                                 $ 354,528                                 $ 279,897                             
                                                    =========                                 =========                             
                                                                                                                                    
Liabilities and  Stockholders' Equity
Interest-bearing liabilities:
    NOW, club and money market accounts             $  47,078     $     841          1.79%    $  38,284     $     862        2.25%  
    Regular savings accounts (3)                       45,124         1,092          2.42        46,636         1,166        2.50   
    Savings certificate accounts                      124,647         7,123          5.71       110,935         5,894        5.31   
                                                    ---------     ---------                   ---------     ---------
       Total interest-bearing deposits                216,849         9,056          4.18       195,855         7,922        4.04   

    Borrowings                                         86,031         4,966          5.77        35,260         2,035        5.77   
                                                    ---------     ---------                   ---------     ---------
       Total interest-bearing liabilities             302,880     $  14,022          4.63       231,115     $   9,957        4.30   
                                                                  =========                                 =========

Non-interest-bearing liabilities                        8,461                                     4,860                             
                                                      -------                                 ---------
       Total liabilities                              311,341                                   235,975                             

Stockholders' equity                                   43,187                                    43,922                             
                                                    ---------                                 ---------
       Total liabilities and stockholders' equity   $ 354,528                                 $ 279,897                             
                                                    =========                                 =========
Net interest income                                               $  11,453                                 $  10,774
                                                                  =========                                 =========
Average interest rate spread (4)                                                     2.67%                                   3.26%  
Net interest margin (5)                                                              3.28%                                   3.93%  
Net interest-earning assets (6)                     $  46,105                                 $  42,980
                                                    =========                                 =========
Ratio of average interest-earning assets to average
    interest-bearing liabilities                                                   115.22%                                 118.60%  

<CAPTION>

                                                           For the Year Ended September 30,
                                                       ----------------------------------------
                                                                           1996
                                                        ---------------------------------------
                                                        Average                       Average
                                                        Balance       Interest       Yield/Cost
                                                        -------       --------       ----------
                                                                 (Dollars in thousands)
Assets                    
Interest-earning assets:
    Loans (1)                                          $  85,479     $   7,471          8.74%
    Mortgage-backed securities (2)                        66,778         4,346          6.51
    Other securities (2)                                  60,567         3,807          6.29
    Other earning assets                                  12,367           752          6.08
                                                       ---------     ---------
       Total interest-earning assets                     225,191     $  16,376          7.27
                                                                     ========= 

Allowance for loan losses                                   (841)       
Non-interest earning assets                                5,062        
                                                       ---------
       Total assets                                    $ 229,412        
                                                       =========
Liabilities and  Stockholders' Equity
Interest-bearing liabilities:
    NOW, club and money market accounts                $  32,606     $     788          2.42%
    Regular savings accounts (3)                          51,564         1,336          2.59
    Savings certificate accounts                         104,613         5,656          5.41
                                                       ---------     ---------
       Total interest-bearing deposits                   188,783         7,780          4.12

    Borrowings                                             3,570           195          5.46
                                                       ---------     ---------
       Total interest-bearing liabilities                192,353     $   7,975          4.14
                                                                     =========

Non-interest-bearing liabilities                           3,996        
                                                       ---------
       Total liabilities                                 196,349        

Stockholders' equity                                      33,063        
                                                       ---------
       Total liabilities and stockholders' equity      $ 229,412        
                                                       =========
Net interest income                                                  $    8,401
                                                                     ==========
Average interest rate spread (4)                                                        3.13%
Net interest margin (5)                                                                 3.73%
Net interest-earning assets (6)                        $  32,838
                                                       =========
Ratio of average interest-earning assets to average
    interest-bearing liabilities                                                      117.07%
</TABLE>

(1)   Balances are net of deferred loan fees and construction loans in process,
      and include loans receivable and loans held for sale. Non-accrual loans
      are included in the balances.
(2)   Average balances represent amortized cost.
(3)   Includes mortgage escrow accounts.
(4)   Average interest rate spread represents the difference between the yield
      on average interest-earning assets and the cost of average
      interest-bearing liabilities.
(5)   Net interest margin represents net interest income divided by average
      total interest-earning assets.
(6)   Net interest-earning assets represents total interest-earning assets less
      total interest-bearing liabilities.


                                       8
<PAGE>

      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.

<TABLE>
<CAPTION>
                                              Fiscal 1998 Compared to Fiscal 1997           Fiscal 1997 Compared to Fiscal 1996
                                              ------------------------------------          ------------------------------------
                                                Increase (Decrease)                          Increase (Decrease)
                                                      Due to                                        Due to
                                              -----------------------        Net            ---------------------         Net
                                              Volume           Rate         Change          Volume          Rate         Change
                                              -------        --------       -------         -------        ------        -------
                                                                              (In thousands)
<S>                                           <C>            <C>            <C>             <C>            <C>           <C>   
Interest-earning assets:
  Loans                                       $ 5,576        $  (936)       $ 4,640         $1,155         $ (23)        $1,132
  Mortgage-backed securities                    1,408            (90)         1,318          1,406           326          1,732
  Other securities                             (1,177)          (124)        (1,301)         1,232           616          1,848
  Other earning assets                             48             39             87           (246)         (111)          (357)
                                              -------        -------        -------         ------         -----         ------
             Total                              5,855         (1,111)         4,744          3,547           808          4,355
                                              -------        -------        -------         ------         -----         ------
Interest-bearing liabilities:
  NOW, club and money market accounts             175           (196)           (21)           134           (60)            74
  Regular savings accounts                        (37)           (37)           (74)          (127)          (43)          (170)
  Savings certificate accounts                    764            465          1,229            339          (101)           238
  Borrowings                                    2,931             --          2,931          1,782            58          1,840
                                              -------        -------        -------         ------         -----         ------
             Total                              3,833            232          4,065          2,128          (146)         1,982
                                              -------        -------        -------         ------         -----         ------

Net change in net interest income             $ 2,022        $(1,343)       $   679         $1,419         $ 954         $2,373
                                              =======        =======        =======         ======         =====         ======
</TABLE>

Comparison of Operating Results for the Years Ended September 30, 1998 and 1997

      General. Net income was $2.9 million and basic earnings per common share
("EPS") was $1.12 for the fiscal year ended September 30, 1998, compared to net
income of $3.0 million or basic EPS of $1.05 for the fiscal year ended September
30, 1997. Diluted EPS was $1.08 for the fiscal year ended September 30, 1998
compared to $1.04 for fiscal 1997. The decrease in net income reflects a $1.3
million increase in non-interest expense, as well as increases in the provision
for loan losses and income tax expense, substantially offset by increases of
$679,000 in net interest income and $684,000 in non-interest income.

      Net Interest Income. Net interest income for the year ended September 30,
1998 was $11.5 million, an increase of $679,000 from $10.8 million for the prior
year. The positive effect on net interest income of higher average
interest-earning assets, primarily attributable to the reinvestment of proceeds
from borrowings and deposit growth, was partially offset by a decline in the
average interest rate spread. The narrower spread primarily reflects (i) an
overall lower asset yield from the origination of new mortgage loans (including
refinancings) in the current lower interest rate environment, and (ii) a higher
average rate paid on interest-bearing liabilities due primarily to the larger
proportion of higher-rate borrowings and savings certificate accounts to total
interest-bearing funding. The relatively flat yield curve in fiscal 1998 also
contributed to the reduction in the Company's average interest rate spread. The
low level of interest rates fueled a surge in home sales and refinancings, which
supported the Company's higher volume of loan originations but also contributed
to a lower average yield on the portfolio. The Company's average 


                                       9
<PAGE>

interest rate spread and net interest margin decreased to 2.67% and 3.28%,
respectively, for the year ended September 30, 1998, from 3.26% and 3.93%,
respectively, for fiscal 1997.

      Interest and Dividend Income. Interest and dividend income increased $4.8
million, or 22.9%, to $25.5 million for fiscal 1998 from $20.7 million for
fiscal 1997. This increase reflects the impact of a $74.9 million increase in
total average interest-earning assets, primarily loans, partially offset by a 26
basis point decrease in the average yield on such assets to 7.30% for the year
ended September 30, 1998 from 7.56% for the prior year.

      Interest income on loans increased $4.6 million to $13.2 million for the
year ended September 30, 1998 from $8.6 million for the prior year, reflecting a
$70.3 million increase in the average balance, partially offset by an 87 basis
point decrease in the average yield. The increase in the average balance of
loans was primarily attributable to a dramatic increase in originations of one-
to four-family residential loans. The decline in the average yield was primarily
attributable to the origination of new loans (including refinancings) in the
current lower interest rate environment.

      On a combined basis, interest and dividend income on mortgage-backed and
other securities increased $17,000 in fiscal 1998 compared to the prior year.
Interest on mortgage-backed securities increased by $1.3 million, attributable
to a $20.6 million increase in the average balance partially offset by a 10
basis point decrease in the average yield. Interest on other securities declined
by $1.3 million, attributable to a $16.9 million decrease in the average balance
and a 16 basis point decrease in the average yield. The lower average yields in
fiscal 1998 reflect the impact of (i) higher premium amortization on
mortgage-backed securities caused by increased repayments of principal, and (ii)
calls of higher-yielding agency securities in the current lower interest rate
environment.

      Interest and dividend income on other earning assets increased $87,000,
attributable to a 48 basis point increase in the average yield and an $886,000
increase in the average balance.

      Interest Expense. Interest expense totaled $14.0 million for the year
ended September 30, 1998, an increase of $4.0 million from $10.0 million for the
prior year.

      Interest expense on deposits increased $1.2 million to $9.1 million for
fiscal 1998 from $7.9 million for fiscal 1997. This increase reflects the impact
of a $21.0 million increase in the average balance of interest-bearing deposits,
as well as a 14 basis point increase in the average rate paid on deposits to
4.18% for the year ended September 30, 1998 from 4.04% for the prior year. The
increase in average interest-bearing deposits consisted of increases of $13.7
million in average savings certificate accounts and $8.8 million in average NOW,
club and money market accounts, partially offset by a $1.5 million decrease in
average regular savings accounts. The overall increase in the average rate paid
on deposits reflects a 40 basis point increase in the average rate paid on
savings certificate accounts during fiscal 1998, coupled with the higher volume
of certificate accounts resulting from aggressive advertising campaigns to
attract such long-term accounts.

      Interest expense on borrowings increased $3.0 million to $5.0 million for
fiscal 1998 from $2.0 million for fiscal 1997, as the Company continued to
increase borrowings, primarily securities repurchase agreements, to leverage
available capital and support further asset growth. The average balance of
borrowings was $86.0 million for fiscal 1998 compared to $35.3 million for the
prior year. Although interest rates have declined in the past year, the average
cost of borrowings for the year ended September 30, 1998 was 5.77%, unchanged
from a year ago due to the use in fiscal 1998 of longer-term borrowings


                                       10
<PAGE>

with higher interest rates. See "Liquidity and Capital Resources" for a further
discussion of the Company's securities repurchase agreements.

      Provision for Loan Losses. The Company records provisions for loan losses,
which are charged to earnings, in order to maintain the allowance for loan
losses at a level which is considered appropriate to absorb probable losses
inherent in the existing loan portfolio. The provision in each period reflects
management's evaluation of the adequacy of the allowance for loan losses.
Factors considered include the volume and type of lending conducted, the
Company's previous loan loss experience, the known and inherent risks in the
loan portfolio, adverse situations that may affect the borrowers' ability to
repay, the estimated value of any underlying collateral, and current economic
conditions.

      The provision for loan losses was $375,000 in fiscal 1998 and $300,000 in
fiscal 1997. Loans receivable (before the allowance for loan losses) increased
to $185.3 million at September 30, 1998 from $119.8 million at September 30,
1997, and the allowance for loan losses increased to $1.3 million at September
30, 1998 from $1.1 million a year earlier. The provision and allowance for loan
losses were increased in fiscal 1998 primarily in light of changes in inherent
losses attributable to continued portfolio growth. The allowance for loan losses
represented 0.70% of total loans receivable at September 30, 1998, compared to
0.90% at September 30, 1997. Net charge-offs in fiscal 1998 increased to
$166,000 from $144,000 in the prior year, while non-performing loans declined to
$753,000 at September 30, 1998 from $1.1 million at September 30, 1997. The
ratio of the allowance for loan losses to non-performing loans was 172.91% at
September 30, 1998, compared to 96.05% at September 30, 1997.

      See "Asset Quality" for further information concerning the provision and
allowance for loan losses.

      Non-Interest Income. Non-interest income increased $684,000 to $1.5
million for the year ended September 30, 1998 compared to $787,000 for fiscal
1997. The increase is primarily attributable to increases in the net gain on
sales of real estate mortgage loans held for sale, the net gain on sales of
securities, and service charges and fee income. In fiscal 1998, mortgage loan
sales totaled $69.8 million resulting in a net gain of $371,000, as compared to
loan sales of $2.8 million in fiscal 1997 which resulted in net losses of
$17,000. The net gain in fiscal 1998 includes the effect of capitalizing
mortgage servicing assets of $594,000 at the time of sale, in accordance with
Statement of Financial Accounting Standards No. 125. Servicing assets with a
carrying value of $538,000 (after amortization) are included in other assets in
the consolidated balance sheet as of September 30, 1998. See also Notes 1 and 3
of the Notes to Consolidated Financial Statements. The increase in the net gain
on sales of securities reflects a net gain of $117,000 on sales of $28.8 million
in securities in fiscal 1998, while net losses of $48,000 were incurred on sales
of $16.2 million in the prior year. The $98,000 increase in service charges and
fee income primarily reflects increases in transaction volume.

      Non-Interest Expense. Non-interest expense increased $1.3 million to $7.6
million for the year ended September 30, 1998 compared to $6.3 million for the
prior year. Compensation and benefits expense increased $584,000 from the prior
year primarily due to (i) increased costs relating to additional staffing for an
in-store branch and the expansion of lending operations, and (ii) the
recognition of $106,000 in additional expense associated with the ESOP due to
the higher average market price of the Company's common stock in fiscal 1998
compared to the prior year. The $182,000 increase in occupancy and equipment
expense primarily reflects increased costs associated with the establishment of
an in-store branch during fiscal 1998. The $522,000 increase in other
non-interest expense was primarily attributable to additional costs associated
with the expansion of the Company's business activities and review of additional
growth opportunities.


                                       11
<PAGE>

      Income Tax Expense. Income tax expense was approximately $2.0 million for
both fiscal 1998 and 1997, reflecting effective tax rates of 40.9% and 40.3%,
respectively.

Comparison of Operating Results for the Years Ended September 30, 1997 and 1996

      General. Net income was $3.0 million in fiscal 1997 (basic EPS of $1.05
and diluted EPS of $1.04), as compared to net income of $1.5 million in fiscal
1996. Both basic and diluted EPS were $0.22 for the six-month period from the
Conversion to September 30, 1996. The increase in net income was primarily
attributable to a $2.4 million increase in net interest income and the absence
in fiscal 1997 of a $1.2 million Federal deposit insurance special assessment
charged to earnings in fiscal 1996, partially offset by increases of $1.3
million in non-interest expenses (other than the special assessment) and $1.1
million in income tax expense. Excluding the after-tax effect of the special
assessment, net income for fiscal 1996 would have been $2.2 million.

      Net Interest Income. Net interest income increased $2.4 million to $10.8
million for the year ended September 30, 1997 from $8.4 million for the prior
year. The increase reflects higher average interest-earning assets primarily
attributable to growth in the loan and securities portfolios in fiscal 1997, as
well as reinvestment of the net proceeds from the Stock Offering for a full year
in fiscal 1997 compared to approximately six months in fiscal 1996. The higher
net interest income also reflects increases in both the average interest rate
spread and net interest margin, which were 3.26% and 3.93%, respectively, for
the year ended September 30, 1997 compared to 3.13% and 3.73%, respectively, for
the prior year.

      Compared to fiscal 1996, market interest rates averaged slightly lower in
fiscal 1997, particularly across the longer-term maturity end of the U.S.
Treasury yield curve. The Company realized higher average yields on its
interest-earning assets primarily as a result of the purchase of
higher-yielding, longer-term, fixed-rate securities. Although the Company's rate
paid on deposit liabilities declined, the overall rate on its interest-bearing
liabilities increased due to the larger proportion of higher-rate borrowings to
total interest-bearing liabilities. However, on a combined basis, these trends
in interest rates had a positive impact on the Company's average interest rate
spread and net interest margin in fiscal 1997 compared to fiscal 1996.

      Interest and Dividend Income. Interest and dividend income totaled $20.7
million for the year ended September 30, 1997, an increase of $4.3 million
compared to $16.4 million for the prior year. This increase reflects the effect
of a $48.9 million increase in total average interest-earning assets and a 29
basis point increase in the average yield on such assets to 7.56% for the year
ended September 30, 1997 from 7.27% for the prior year.

      Interest income on loans increased by $1.1 million to $8.6 million for the
year ended September 30, 1997 from $7.5 million for the prior year, reflecting a
$13.2 million increase in the average balance, partially offset by a 3 basis
point decrease in the average yield. The increase in the average balance of
loans was primarily attributable to increases in one- to four-family residential
loans and commercial real estate loans.

      On a combined basis, interest and dividend income on mortgage-backed and
other securities increased $3.5 million to $11.7 million for the year ended
September 30, 1997 from $8.2 million for the year ended September 30, 1996. This
combined increase consisted of (i) a $1.8 million increase in interest on other
securities, attributable to the effects of a $19.0 million increase in the
average balance and an 82 basis point increase in the average yield, and (ii) a
$1.7 million increase in interest on mortgage-backed 


                                       12
<PAGE>

securities, attributable to the effects of a $21.2 million increase in the
average balance and a 39 basis point increase in the average yield. The higher
average yields on both portfolios reflect purchases in fiscal 1997 of
longer-term, fixed-rate securities at higher yields.

      Interest and dividend income on other earning assets decreased $357,000,
primarily due to the use of short-term investments to fund repurchases of the
Holding Company's common stock during fiscal 1997.

      Interest Expense. Interest expense totaled $10.0 million for the year
ended September 30, 1997, an increase of $2.0 million from $8.0 million for the
year ended September 30, 1996.

      Interest expense on deposits increased $142,000 to $7.9 million for the
year ended September 30, 1997 from $7.8 million for the prior year. This
increase reflects the impact of a $7.1 million increase in the average balance
of interest-bearing deposits, partially offset by an 8 basis point decrease in
the average rate to 4.04% for the year ended September 30, 1997 from 4.12% for
the prior year. The increase in average interest-bearing deposits consisted of a
$6.3 million increase in average savings certificate accounts and a $5.7 million
increase in average NOW, club and money market accounts, partially offset by a
$5.0 million decrease in average regular savings accounts. The overall decrease
in the average rate paid reflects the overall stability in deposit interest
rates during fiscal 1997, coupled with a slowdown in the shift from generally
lower-rate savings accounts to generally higher-rate certificate accounts.

      Interest expense on borrowings increased $1.8 million to $2.0 million for
the year ended September 30, 1997 from $195,000 for the year ended September 30,
1996, as the Company continued to increase borrowings to leverage available
capital and support further asset growth. Substantially all of this increase was
attributable to interest on borrowings under securities repurchase agreements,
which had an average balance of $32.1 million and an average rate of 5.77% for
the year ended September 30, 1997 compared to $1.2 million and 5.35%,
respectively, for the prior year.

      Provision for Loan Losses. The provision for loan losses was $300,000 and
$462,000 for the fiscal years ended September 30, 1997 and 1996, respectively.
The provision in fiscal 1997 reflects the impact of lower non-performing loans
and net charge-offs compared to the prior year, partially offset by the impact
of portfolio growth. The allowance for loan losses was $1.1 million or 0.90% of
loans receivable at September 30, 1997, compared to $937,000 or 1.06% at
September 30, 1996. The ratio of the allowance for loan losses to non-performing
loans increased to 96.05% at September 30, 1997 from 33.77% at September 30,
1996.

      Non-performing loans declined to $1.1 million at September 30, 1997 from
$2.8 million at September 30, 1996. The decrease in non-performing loans was
primarily a result of (i) returning certain loans to accruing status due to
collections received and management's judgment that these loans will continue to
perform, (ii) payoffs received on a $232,000 construction loan secured by a
two-family residence and a $304,000 mortgage loan secured by a single-family
residence as a result of the sale of these properties, and (iii) transfers of
loans of $313,000 to real estate owned.

      Net loan charge-offs declined to $144,000 in fiscal 1997 from $244,000 in
fiscal 1996. Charge-offs in fiscal 1996 include $203,000 relating to the
settlement of the Company's participation interest in a loan originated by the
Thrift Association Service Corporation ("TASCO"). The remaining charge-offs in
both years primarily relate to transfers of foreclosed properties to real estate
owned.

      Non-Interest Income. Non-interest income for the year ended September 30,
1997 increased $85,000 to $787,000 from $702,000 for the year ended September
30, 1996. This increase was primarily 


                                       13
<PAGE>

attributable to a $134,000 increase in service charges and fee income, partially
offset by a $48,000 net loss on sales of securities in fiscal 1997. The increase
in service charges and fee income primarily reflects increases in transaction
volume. The net loss on securities primarily reflects realized losses on sales
of available-for-sale securities.

      Non-Interest Expense. Non-interest expense increased $115,000 to $6.3
million for the year ended September 30, 1997 from $6.2 million for the prior
year. Increases of $886,000 in compensation and benefits expense and $519,000 in
other non-interest expense were substantially offset by a $1.4 million decrease
in Federal deposit insurance costs.

      The increase in compensation and benefits expense primarily reflects (i)
the recognition of $271,000 in costs in fiscal 1997 associated with the MRP,
(ii) a $277,000 increase in ESOP expenses reflecting a full year of costs under
such plan in fiscal 1997, as well as an increase in the Company's stock price,
and (iii) additional staffing and merit and performance-based increases for
management and staff members.

      The increase in other non-interest expense is primarily attributable to
additional advertising expense and costs associated with operations as a public
company for a full year in fiscal 1997, as well as a non-recurring reduction of
$162,000 in fiscal 1996 expenses resulting from the favorable resolution of the
Company's Nationar claim.

      The decrease in Federal deposit insurance costs was attributable to the
Federal deposit insurance special assessment of $1.2 million in fiscal 1996, as
well as lower deposit insurance rates subsequent to the recapitalization of the
Savings Association Insurance Fund ("SAIF"). Following the recapitalization,
SAIF insurance premiums range from 0 to 27 basis points of insured deposits,
compared to 23 basis points for all institutions prior to the recapitalization.
In connection with the recapitalization, a Financing Corporation ("FICO")
assessment is now imposed on all SAIF-assessable deposits.

      Income Tax Expense. Income tax expense amounted to $2.0 million and
$917,000 for the fiscal years ended September 30, 1997 and 1996, respectively.
The increase primarily reflects higher pre-tax income in fiscal 1997, as well as
a non-recurring tax benefit of $100,000 recognized in fiscal 1996 due to an
amendment to the New York State tax law.

Asset Quality

      Non-performing assets consist of non-accrual loans past due 90 days or
more and real estate owned properties that have been acquired by foreclosure or
deed in lieu of foreclosure. Loans are placed on non-accrual status when the
collection of principal or interest becomes doubtful. Management and the Board
of Directors perform a monthly review of all non-performing loans. The actions
taken by the Company with respect to delinquencies (workout, settlement or
foreclosure) vary depending on the nature of the loan, length of delinquency and
the borrower's past credit history. The classification of a loan as
non-performing does not necessarily indicate that the principal and interest
ultimately will be uncollectible. Historical experience indicates that a portion
of non-performing assets will eventually be recovered. Real estate owned
properties are carried at the lower of cost or fair value less sales costs.

     The following table sets forth the amounts and categories of the Company's
non-performing assets at the dates indicated. The Company's prospective adoption
of Statement of Financial Accounting Standards ("SFAS") No. 114, Accounting by
Creditors for Impairment of a Loan, effective October 1, 1995, had no impact on
the comparability of this information. See Note 3 to the Consolidated Financial


                                       14
<PAGE>

Statements for information concerning the Company's impaired loans which are
included in the non-accrual loans shown below.

<TABLE>
<CAPTION>
                                                                    At September 30,
                                                      ------------------------------------------
                                                       1998     1997     1996     1995     1994
                                                      ------   ------   ------   ------   ------
                                                                 (Dollars in thousands)
<S>                                                   <C>      <C>      <C>      <C>      <C>   
Non-accrual loans past due ninety days or more:
  Real estate mortgage loans:
       One- to four-family                            $  515   $  389   $1,757   $2,759   $2,229
       Multi-family (1)                                   --       --       --      389      389
       Commercial                                        203      211      214       --       --
       Land                                               --      250      250       49       --
       Construction                                       --      279      511      279       --
  Consumer loans                                          35        9       43       54       45
                                                      ------   ------   ------   ------   ------
           Total                                         753    1,138    2,775    3,530    2,663
Real estate owned, net                                   305      379      603      227       73
                                                      ------   ------   ------   ------   ------
Total non-performing assets                           $1,058   $1,517   $3,378   $3,757   $2,736
                                                      ======   ======   ======   ======   ======

Allowance for loan losses                             $1,302   $1,093   $  937   $  719   $  311
                                                      ======   ======   ======   ======   ======

Ratios:
  Non-performing loans to total loans receivable (2)    0.41%    0.94%    3.14%    4.15%    3.35%
  Non-performing assets to total assets                 0.28     0.48     1.30     1.80     1.40
  Allowance for loan losses to:
      Non-performing loans                            172.91    96.05    33.77    20.37    11.68
      Total loans receivable (2)                        0.70     0.90     1.06     0.84     0.39
</TABLE>

----------
(1)   Includes a loan of $309,000 classified as a troubled debt restructuring at
      September 30, 1995 and 1994. Collections and charge-offs in fiscal 1996
      eliminated the recorded investment in this loan.

      Total non-performing assets decreased $459,000 from $1.5 million at
September 30, 1997 to $1.1 million at September 30, 1998, reflecting net
reductions of $385,000 in non-accrual loans past due ninety days or more and
$74,000 in real estate owned. The ratio of non-performing assets to total assets
decreased to 0.28% at September 30, 1998 from 0.48% at September 30, 1997. The
allowance for loan losses was $1.3 million or 0.70% of total loans receivable at
September 30, 1998, compared to $1.1 million or 0.90% at September 30, 1997. The
ratio of the allowance for loan losses to non-performing loans increased to
172.91% at September 30, 1998 from 96.05% at September 30, 1997.

      For the year ended September 30, 1998, gross interest income of $64,000
would have been recorded if all non-accrual loans at September 30, 1998 had
remained current throughout the year in accordance with their original terms.
The amount of interest income actually recognized on such loans in fiscal 1998,
prior to placing the loans on non-accrual status, was $48,000. See Note 3 of the
Notes to the Consolidated Financial Statements.

      The Company provides for loan losses based on the allowance method.
Accordingly, losses for uncollectible loans are charged to the allowance and all
recoveries of loans previously charged-off are credited to the allowance.
Additions to the allowance for loan losses are provided by charges to income


                                       15
<PAGE>

based on various factors which, in management's judgment, deserve current
recognition in estimating probable losses. Management regularly reviews the loan
portfolio and makes provisions for loan losses in order to maintain the adequacy
of the allowance for loan losses. The allowance for loan losses consists of
amounts specifically allocated to non-performing loans and potential problem
loans (if any) as well as allowances determined for each major loan category.
Loan categories such as single-family residential mortgages and consumer loans
are generally evaluated on an aggregate or "pool" basis by applying loss factors
to the current balances of the various loan categories. The loss factors are
determined by management based on an evaluation of historical loss experience,
delinquency trends, volume and type of lending conducted, and the impact of
current economic conditions in the Company's market area.

      The following table sets forth activity in the allowance for loan losses
for the periods indicated. The Company's prospective adoption of SFAS No. 114 as
of October 1, 1995 had no impact on the comparability of this information.

<TABLE>
<CAPTION>
                                                           For the Year Ended September 30,
                                                 ---------------------------------------------------
                                                   1998       1997       1996       1995       1994
                                                 -------    -------    -------    -------    -------
                                                                 (Dollars in thousands)
<S>                                              <C>        <C>        <C>        <C>        <C>    
Balance at beginning of year                     $ 1,093    $   937    $   719    $   311    $   295
Provision for losses                                 375        300        462        493         64
Charge-offs:
  Real estate mortgage loans:
    One- to four-family                              (45)      (132)       (97)       (76)       (64)
    Multi-family (1)                                  --         --       (203)        --         --
    Land                                             (17)        --         --         --         --
    Construction                                     (91)        --         --         --         --
  Consumer loans                                     (40)       (25)       (33)       (13)        (2)
                                                 -------    -------    -------    -------    -------
    Total charge-offs                               (193)      (157)      (333)       (89)       (66)
Recoveries                                            27         13         89          4         18
                                                 -------    -------    -------    -------    -------
    Net charge-offs                                 (166)      (144)      (244)       (85)       (48)
                                                 -------    -------    -------    -------    -------

Balance at end of year                           $ 1,302    $ 1,093    $   937    $   719    $   311
                                                 =======    =======    =======    =======    =======

Ratio of net charge-offs to average total loans     0.10%      0.15%      0.29%      0.10%      0.06%
</TABLE>

----------
(1)   Charge-offs in fiscal 1996 relate to the Company's purchased participation
      interest in a multi-family loan originated by TASCO.

      Although the Company maintains its allowance for loan losses at a level it
considers adequate to absorb probable losses, there can be no assurance that
such losses will not exceed the estimated amounts or that additional substantial
provisions for losses will not be required in future periods. Subject to market
conditions in the future, the Company intends to continue to expand its
multi-family and commercial real estate lending. As a result, these loan
categories may represent a larger percentage of the total loan portfolio in the
future. Since such loans are generally thought to carry a higher degree of
credit risk than one- to four-family residential loans, such a change in the
loan portfolio mix would probably result in a further increase in the allowance
for losses.

Interest Rate Risk Management

      The principal objectives of the Company's interest rate risk management
activities are to: (i) define an acceptable level of risk based on the Company's
business focus, operating environment, capital and 


                                       16
<PAGE>

liquidity requirements, and performance objectives; (ii) quantify and monitor
the amount of interest rate risk inherent in the asset/liability structure; and
(iii) modify the Company's asset/liability structure, as necessary, to manage
interest rate risk and maintain acceptable net interest margins in changing rate
environments. Management seeks to reduce the vulnerability of the Company's
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 periods. The Company does not currently engage
in trading activities or use off-balance sheet derivative instruments to control
interest rate risk.

      Notwithstanding the Company's interest rate risk management activities,
the potential for changing interest rates is an uncertainty that could have an
adverse effect on the earnings of the Company. When interest-bearing liabilities
mature or reprice more quickly than interest-earning assets in a given period, a
significant increase in market interest rates could adversely affect net
interest income. Similarly, when interest-earning assets mature or reprice more
quickly than interest-bearing liabilities, falling interest rates could result
in a decrease in net interest income. Finally, a flattening of the "yield curve"
(i.e., a narrowing of the spread between long- and short-term interest rates),
could adversely impact net interest income to the extent that the Company's
assets have a longer average term than its liabilities.

      In managing the asset/liability position, the Company has taken several
steps to manage its interest rate risk. First, the Company maintains a
significant portfolio of interest rate sensitive adjustable-rate loans,
including loans with rates that adjust periodically after earning a fixed rate
of interest for initial periods of five, seven or ten years. At September 30,
1998, total adjustable-rate loans were $142.2 million or 71.5% of the total loan
portfolio, including $83.8 million in loans with initial fixed rates as
described above. Second, in fiscal 1998 the Company sold certain newly
originated, fixed-rate one- to four-family residential mortgage loans with
original terms of 15 years or more. Third, in recent years the Company has
increased its investment in mortgage-backed securities that are more liquid and
generally have shorter average lives than mortgage loans. At September 30, 1998,
mortgage-backed securities with terms to repricing or estimated average lives of
less than five years amounted to $46.0 million. Fourth, the Company has a
substantial amount of regular savings, transaction, money market and club
accounts which may be less sensitive to changes in interest rates than
certificate accounts. At September 30, 1998, the Company had $43.5 million of
regular savings accounts, $27.6 million of money market accounts and $27.8
million of NOW, checking and club accounts. Overall, these accounts comprised
42.8% of the Company's total deposit base. Fifth, the Company has taken
advantage of the low interest rate environment by increasing the amount of its
longer-term securities repurchase agreements. The weighted average remaining
period to final maturity of these agreements was approximately 3.8 years at
September 30, 1998, compared to 1.7 years at September 30, 1997.

      One approach used by management to quantify interest rate risk is the net
portfolio value ("NPV") analysis. In essence, this approach calculates the
difference between the present value of liabilities and the present value of
expected cash flows from assets and off-balance sheet contracts. The following
table sets forth, at September 30, 1998, an analysis of the Association's
interest rate risk as measured by the estimated changes in NPV resulting from
instantaneous and sustained parallel shifts in the yield curve (+/-300 basis
points, measured in 100 basis point increments). For comparative purposes, the
table also shows the estimated percent increase (decrease) in NPV at September
30, 1997.


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                 At September 30, 1998
                ------------------------------------------------------
   Change in                      Estimated Increase (Decrease) in NPV    Percent Increase
Interest Rates  Estimated NPV     ------------------------------------   (Decrease in NPV at
(Basis Points)      Amount           Amount                 Percent      September 30, 1997
--------------      ------           ------                 -------      ------------------
                                         (Dollars in thousands)
     <S>          <C>             <C>                        <C>                <C>
     +300         $ 39,813        $ (16,069)                 (29)%              (35)%
     +200           46,310           (9,572)                 (17)               (22)
     +100           51,816           (4,066)                  (7)               (11)
       --           55,882               --                   --                 --
     -100           58,653            2,771                    5                  7
     -200           62,468            6,586                   12                 15
     -300           67,442           11,560                   21                 25
</TABLE>

      Certain shortcomings are inherent in the methodology used in the above
interest rate risk measurements. Modeling changes in NPV requires making certain
assumptions that may or may not reflect the manner in which actual yields and
costs respond to changes in market rates. The NPV table presented above assumes
that the composition of the Association's interest-sensitive assets and
liabilities existing at the beginning of a period remains constant over the
period being measured. It also assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the duration
to maturity or the repricing characteristics of specific assets and liabilities.
Computations of prospective effects of hypothetical interest rate changes are
based on numerous assumptions including relative levels of market interest
rates, loan prepayments and deposit decay, and should not be relied upon as
indicative of actual results. Further, the computations do not reflect any
actions management may undertake in response to changes in interest rates.
Accordingly, although the NPV table provides an indication of the Association's
sensitivity to interest rate changes 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 Association's net interest
income and will differ from actual results.

      Interest rate risk is the most significant market risk affecting the
Company. Other types of market risk, such as foreign exchange rate risk and
commodity price risk, do not arise in the normal course of the Company's
business activities.

Liquidity and Capital Resources

      The Company's primary sources of funds are deposits and borrowings;
principal and interest payments on loans and securities; and proceeds from sales
of loans and securities. While maturities and scheduled payments on loans and
securities provide an indication of the timing of the receipt of funds, other
sources of funds such as loan prepayments and deposit inflows are less
predictable due to the effects of changes in interest rates, economic conditions
and competition.

      The Association is required to maintain an average daily balance of total
liquid assets as a percentage of net withdrawable deposit accounts plus
short-term borrowings, as defined by OTS regulations. The minimum required
liquidity ratio at September 30, 1998 was 4.0%, and the Company's actual
liquidity ratio was 13.1%.


                                       18
<PAGE>

      The Company's most liquid assets are cash and cash equivalents, which
include highly liquid short-term investments (such as federal funds sold and
money market mutual funds) that are readily convertible to known amounts of
cash. At September 30, 1998 and 1997, cash and cash equivalents totaled $4.2
million and $3.6 million, respectively. The level of these assets is dependent
on the Company's operating, financing and investing activities during any given
period.

      The primary investing activities of the Company are the origination of
real estate mortgage and other loans, and the purchase of mortgage-backed and
other securities. During the years ended September 30, 1998, 1997 and 1996, the
Company's disbursements for loan originations totaled $152.6 million, $69.2
million and $17.6 million, respectively. For the years ended September 30, 1998,
1997 and 1996, purchases of mortgage-backed securities totaled $74.4 million,
$25.8 million and $31.9 million, respectively, and purchases of other securities
totaled $16.2 million, $30.0 million and $35.3 million, respectively. These
activities were funded primarily by net deposit inflows, borrowings under
repurchase agreements, principal repayments on loans and securities, and
proceeds from sales of loans and securities. Loan sales increased significantly
in fiscal 1998, providing proceeds of $69.6 million for reinvestment into new
loans and securities.

      For the years ended September 30, 1998, 1997 and 1996, the Company
experienced net increases in deposits (including the effect of interest
credited) of $23.2 million, $17.2 million and $2.7 million, respectively. The
increases were due to aggressive cross selling, quality customer service, new
deposit products and the opening of an in-store branch during fiscal 1998.
Deposit inflows in fiscal 1996 were partially offset by deposits withdrawn to
purchase stock in the Conversion.

      In fiscal 1998 and 1997, the Company significantly increased its use of
securities repurchase agreements as a funding source. In these agreements, the
Company borrows funds through the transfer of debt securities to the FHLB of New
York, as counterparty, and concurrently agrees to repurchase the identical
securities at a fixed price on a specified date. During the years ended
September 30, 1998 and 1997, the average borrowings under repurchase agreements
with the FHLB amounted to $81.9 million and $32.1 million, respectively, and the
maximum month-end balance outstanding was $119.9 million and $54.1 million,
respectively. The average interest rate spread on these transactions, or the
difference between the yield earned on the underlying securities and the rate
paid on the repurchase borrowings, was 1.27% in fiscal 1998 and 1.91% in fiscal
1997. See Note 7 of the Notes to the Consolidated Financial Statements for
additional information concerning these transactions.

      At September 30, 1998, the Company had outstanding loan origination
commitments of $18.3 million, undisbursed construction loans in process of
$743,000, and unadvanced lines of credit extended to customers of $3.7 million.
The Company anticipates that it will have sufficient funds available to meet its
current loan origination and other commitments. The Company also had the ability
to borrow advances of up to $94.5 million from the FHLB of New York at September
30, 1998, although there were no such borrowings outstanding at that date.
Certificates of deposit scheduled to mature in one year or less from September
30, 1998 totaled $84.3 million with a weighted average rate of 5.28%. Based on
the Company's most recent experience and pricing strategy, management believes
that a significant portion of such deposits will remain with the Company.

      The main sources of liquidity for the Holding Company are net proceeds
from the sale of stock and dividends received from the Association, if any. The
main cash outflows are payments of dividends to shareholders and repurchases of
the Holding Company's common stock. In fiscal 1998, the Holding


                                       19
<PAGE>

Company repurchased a total of 294,524 common shares in open market transactions
at a total cost of $5.7 million or $19.27 per share. The Holding Company
received $4.8 million in dividends from the Association in fiscal 1998.

      The Association may not declare or pay cash dividends on or repurchase any
of its shares of common stock if the effect thereof would cause equity to be
reduced below applicable regulatory capital requirements or the amount required
to be maintained for the liquidation account established in connection with the
Conversion. Unlike the Association, the Holding Company is not subject to OTS
regulatory restrictions on the payment of dividends to its shareholders;
however, it is subject to the requirements of Delaware law. Delaware law
generally limits dividends to an amount equal to the excess of the net assets of
the Holding Company (the amount by which total assets exceed total liabilities)
over its statutory capital, or if there is no such excess, to its profits for
the current and/or immediately preceding fiscal year.

      The OTS regulations require savings associations, such as the Association,
to meet three minimum capital standards: a tangible capital ratio requirement of
1.5% of total assets as adjusted under the OTS regulations; a leverage ratio
requirement of 3.0% of core capital to such adjusted total assets; and a
risk-based capital ratio requirement of 8.0% of core and supplementary capital
to total risk-based assets. The Association satisfied these minimum capital
standards at September 30, 1998 with tangible and leverage capital ratios of
9.3% and a total risk-based capital ratio of 26.0%. In determining the amount of
risk-weighted assets for purposes of the risk-based capital requirement, a
savings association multiplies its assets and credit equivalent amounts for
certain off-balance sheet items by risk-weights, which range from 0% for cash
and obligations issued by the United States Government or its agencies to 100%
for assets such as consumer and commercial loans, as assigned by the OTS capital
regulations. These capital requirements, which are applicable to the Association
only, do not consider additional capital held at the Holding Company level, and
require certain adjustments to the Association's equity to arrive at the various
regulatory capital amounts.

Impact of Accounting Standards

      See Note 14 of the Notes to the Consolidated Financial Statements for a
discussion of recently-issued accounting standards that the Company will adopt
in the future, and their anticipated impact on the Company's financial
reporting.

Impact of Inflation and Changing Prices

      The Consolidated Financial Statements and other financial information
included in this report have been prepared in conformity 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. The impact
of inflation is reflected in the increased cost of the Company's operations.
Unlike industrial companies, nearly all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a greater
impact on the Company's performance than do the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services.


                                       20
<PAGE>

Year 2000 Considerations

      The Company, like all companies that utilize computer technology, is
facing significant challenges associated with ensuring that its computer systems
will accurately process time-sensitive data beyond the year 1999 (the "Year 2000
Issue"). Many existing computer programs and systems were originally 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. With
the impending millennium, these programs and computers will recognize "00" as
the year 1900 rather than the year 2000.

      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. This includes software, hardware and equipment both within and
outside the Company's direct control and with whom the Company electronically or
operationally interfaces (e.g. third-party vendors providing data processing,
information system management, maintenance of computer systems, and credit
bureau information). If computer systems are not adequately changed to identify
the year 2000, many computer applications could fail or create erroneous
results. As a result, calculations that rely on the date field information (such
as interest, payment or due dates and other operating functions) would generate
results which could be significantly misstated, and the Company could experience
a temporary inability to process transactions and engage in similar normal
business activities. In addition, under certain circumstances, failure to
adequately address the Year 2000 Issue could adversely affect the viability of
the Company's suppliers and creditors, and the creditworthiness of its
borrowers. Thus, if not adequately addressed, the Year 2000 Issue could have a
significant adverse impact on the Company's products, services and competitive
condition.

      The Company is in communication with all of its significant suppliers and
vendors to determine the extent to which the Company is vulnerable to those
third parties' failure to remediate their own Year 2000 Issue. The Company's
data processing is performed almost entirely by a third-party vendor, including
its core mission-critical data processing systems for loans, deposits and the
general ledger. The Company has taken a proactive approach in participating in
the proxy testing process of the third-party vendor, which process is
anticipated to be completed by year-end 1998. The Company presently believes
that with modifications to existing software and conversions to new software,
the Year 2000 Issue will be mitigated without causing a material adverse impact
on the operations of the Company. However, if such modifications and conversions
are not made, or are not completed timely, the Year 2000 Issue could have an
impact on the operations of the Company.

      The Company is also preparing a Year 2000 business resumption contingency
plan to document pre-determined actions to help the Company resume normal
operations in the event of failure of any mission-critical service and product.
Uncontrollable events, such as loss of the global power grid and telephone
service failures, will affect all companies, government and customers; these
global events cannot be remedied by anyone other than the appropriate
responsible party. The Company is assuring the availability of cash to meet
potential depositor demand due to concerns about the availability of funds as we
approach the Year 2000. Contingency plans are being developed for identified
mission- critical systems in anticipation of the possibility of unplanned system
difficulties or failure of third parties to successfully prepare for the century
date change. The Company expects to complete its contingency planning process by
March 31, 1999.

      At this time, the Company does not expect the reasonably foreseeable
consequences of the Year 2000 


                                       21
<PAGE>

Issue to have material adverse effects on the Company's business, operations or
financial condition. However, the Company cannot be certain that it will not
suffer business interruptions, either due to its own Year 2000 Issue or those of
its customers or vendors or third parties whose Year 2000 problems may make it
difficult or impossible to fulfill their commitments to the Company. In
addition, the Year 2000 Issue has many elements and potential consequences, some
of which may not be reasonably foreseeable, and there can be no assurances that
every material Year 2000 issue will be identified and addressed or that
unforeseen consequences will not arise and possibly have a material adverse
effect on the Company.

      Monitoring and managing the Year 2000 Issue will result in additional
direct and indirect costs to the Company. Direct costs include potential charges
by third-party software vendors for product enhancements, costs 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 the time
devoted by existing employees in monitoring software vendor progress, testing
enhanced software products and implementing any necessary contingency plans. The
Company's direct and indirect costs of addressing the Year 2000 Issue are
charged to expense as incurred. Based on the current status of the Company's
Year 2000 efforts, the costs associated with identified Year 2000 issues are not
expected to have a material effect on the results of operations or financial
condition of the Company. Costs incurred through September 30, 1998 were not
significant. Management estimates that remaining costs will range between
$150,000 and $200,000, which are expected to be funded with cash flow from
operations.


                                       22
<PAGE>

                               MANAGEMENT'S REPORT

      Management is responsible for the preparation and integrity of the
consolidated financial statements and other information presented in this annual
report. The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles and reflect management's judgments
and estimates with respect to certain events and transactions.

      Management is responsible for maintaining a system of internal control.
The purpose of the system is to provide reasonable assurance that transactions
are recorded in accordance with management's authorization; that assets are
safeguarded against loss or unauthorized use; and that underlying financial
records support the preparation of financial statements. The system includes the
communication of written policies and procedures, selection of qualified
personnel, appropriate segregation of responsibilities, and the ongoing internal
audit function.

      The Board of Directors meets periodically with Company management, the
internal auditor, and the independent auditors, KPMG Peat Marwick LLP, to review
matters relative to the quality of financial reporting, internal control, and
the nature, extent and results of the audit efforts.

      The independent auditors conduct an annual audit to enable them to express
an opinion on the Company's consolidated financial statements. In connection
with the audit, the independent auditors consider the Company's internal control
to the extent they consider necessary to determine the nature, timing and extent
of their auditing procedures.


Richard F. Komosinski                              Joseph D. Roberto
President and Chief Executive Officer              Vice President, Treasurer and
                                                   Chief Financial Officer


                                       23
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Yonkers Financial Corporation:

      We have audited the accompanying consolidated balance sheets of Yonkers
Financial Corporation and subsidiary (the "Company") as of September 30, 1998
and 1997, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended September 30, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Yonkers
Financial Corporation and subsidiary as of September 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1998 in conformity with generally accepted
accounting principles.


Stamford, Connecticut
October 29, 1998


                                       24
<PAGE>

                         YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
                                 CONSOLIDATED BALANCE SHEETS
                              (In thousands, except share data)

                                                               September 30,
                                                          ----------------------
                                                             1998        1997
                                                          ---------   ---------
ASSETS
Cash and cash equivalents:
  Cash and due from banks                                 $   3,195   $   2,046
  Short-term investments                                      1,000       1,547
                                                          ---------   ---------
      Total cash and cash equivalents                         4,195       3,593
                                                          ---------   ---------
Securities (note 2):
  Available for sale, at fair value (amortized cost of
    $123,317 in 1998 and $85,336 in 1997)                   125,225      86,286
  Held to maturity, at amortized cost (fair value of
    $43,948 in 1998 and $76,902 in 1997)                     43,303      76,329
                                                          ---------   ---------
      Total securities                                      168,528     162,615
                                                          ---------   ---------
Real estate mortgage loans held for sale, at lower of
  cost or market value (note 3)                              13,334      20,437
                                                          ---------   ---------
Loans receivable, net (note 3):
  Real estate mortgage loans                                177,783     112,357
  Consumer and commercial business loans                      7,544       7,419
  Allowance for loan losses                                  (1,302)     (1,093)
                                                          ---------   ---------
      Total loans receivable, net                           184,025     118,683
                                                          ---------   ---------
Accrued interest receivable (note 4)                          2,791       2,845
Federal Home Loan Bank ("FHLB") stock                         6,426       3,005
Office properties and equipment, net (note 5)                 1,258         902
Other assets                                                  2,467         876
                                                          ---------   ---------
      Total assets                                        $ 383,024   $ 312,956
                                                          =========   =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits (note 6)                                       $ 231,181   $ 207,933
  Securities repurchase agreements (note 7)                 107,790      54,096
  FHLB advances (note 7)                                         --       6,000
  Deferred income taxes (note 8)                                726          58
  Other liabilities                                           1,525         991
                                                          ---------   ---------
      Total liabilities                                     341,222     269,078
                                                          ---------   ---------

Commitments and contingencies (notes 3 and 12)

Stockholders' equity (note 10 and 11):
  Preferred stock (par value $0.01 per share; 100,000
    shares authorized; none issued or outstanding)               --          --
  Common stock (par value $0.01 per share: 4,500,000
    shares authorized; 3,570,750 shares issued)                  36          36
  Additional paid-in capital                                 35,044      34,734
  Unallocated common stock  held by employee stock
    ownership plan ("ESOP")                                  (2,142)     (2,428)
  Unamortized awards of common stock under  management
    recognition plan ("MRP")                                   (846)     (1,125)
  Treasury stock, at cost (844,511 shares in 1998 and
    549,987 shares in 1997)                                 (13,189)     (7,513)
  Retained income, substantially restricted                  21,754      19,605
  Net unrealized gain on available-for-sale
    securities, net of taxes (note 2)                         1,145         569
                                                          ---------   ---------
      Total stockholders' equity                             41,802      43,878
                                                          ---------   ---------
      Total liabilities and stockholders' equity          $ 383,024   $ 312,956
                                                          =========   =========

See accompanying notes to consolidated financial statements.


                                       25
<PAGE>

                         YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF INCOME
                            (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                              Year Ended September 30,
                                                           -----------------------------
                                                               1998      1997       1996
                                                           --------  --------   --------
<S>                                                        <C>       <C>        <C>     
Interest and dividend income:
  Loans                                                    $ 13,243  $  8,603   $  7,471
  Securities                                                 11,750    11,733      8,153
  Other earning assets                                          482       395        752
                                                           --------  --------   --------
    Total interest and dividend income                       25,475    20,731     16,376
                                                           --------  --------   --------

Interest expense:
  Deposits (note 6)                                           9,056     7,922      7,780
  Securities repurchase agreements                            4,718     1,849         65
  FHLB advances                                                 248       186        130
                                                           --------  --------   --------
    Total interest expense                                   14,022     9,957      7,975
                                                           --------  --------   --------

      Net interest income                                    11,453    10,774      8,401

Provision for loan losses (note 3)                              375       300        462
                                                           --------  --------   --------
      Net interest income after provision for loan losses    11,078    10,474      7,939
                                                           --------  --------   --------

Non-interest income:
   Service charges and fees                                     912       814        680
   Net gain (loss) on sales of real estate mortgage
     loans held for sale (note 3)                               371       (17)        --
   Net gain (loss) on sales of securities (note 2)              117       (48)        --
   Other                                                         71        38         22
                                                           --------  --------   --------
     Total non-interest income                                1,471       787        702
                                                           --------  --------   --------

Non-interest expense:
   Compensation and benefits (note 10)                        3,995     3,411      2,525
   Occupancy and equipment                                      915       733        653
   Data processing service fees                                 554       465        417
   Federal deposit insurance costs, including
     a special assessment of $1,166 in 1996 (note 6)            131       183      1,601
   Other (note 9)                                             2,049     1,527      1,008
                                                           --------  --------   --------
     Total non-interest expense                               7,644     6,319      6,204
                                                           --------  --------   --------

       Income before income tax expense                       4,905     4,942      2,437

Income tax  expense (note 8)                                  2,004     1,990        917
                                                           --------  --------   --------

       Net income                                          $  2,901  $  2,952   $  1,520
                                                           ========  ========   ========

Earnings per common share, from date of conversion
  in April 1996 (note 11):
       Basic                                               $   1.12  $   1.05   $   0.22
       Diluted                                                 1.08      1.04       0.22
                                                           ========  ========   ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       26
<PAGE>

                         YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                          Unallocated  Unamortized
                                                            Common      Awards of                             Net
                                              Additional     Stock        Common                           Unrealized       Total
                                     Common    Paid-in       Held         Stock    Treasury  Retained  Gain (Loss) on  Stockholders'
                                     Stock     Capital      by ESOP     Under MRP    Stock    Income     Securities       Equity
                                     -----     -------      -------     ---------    -----    ------     ----------       ------
<S>                                 <C>        <C>         <C>          <C>        <C>       <C>        <C>              <C>     
Balance at September 30, 1995       $     --   $     --    $     --     $     --   $     --  $ 15,907   $   (142)        $ 15,765
                                                                                                                         
   Net income                             --         --          --           --         --     1,520         --            1,520
   Dividend paid ($0.05 per share)        --         --          --           --         --      (164)        --             (164)
   Issuance of 3,570,750                                                                                                 
      common shares                       36     34,592          --           --         --        --         --           34,628
   Shares purchased by ESOP                                                                                              
      (285,660 shares)                    --         --      (2,857)          --         --        --         --           (2,857)
   ESOP shares released for                                                                                              
      allocation (14,283 shares)          --          4         143           --         --        --         --              147
   Change in net unrealized gain                                                                                         
     (loss) on available-for sale                                                                                        
     securities, net of taxes             --         --          --           --         --        --        (40)             (40)
                                    --------   --------    --------     --------   --------  --------   --------         --------
                                                                                                                         
Balance at September 30, 1996             36     34,596      (2,714)          --         --    17,263       (182)          48,999
                                                                                                                         
   Net income                             --         --          --           --         --     2,952         --            2,952
   Dividends paid ($0.21 per share)       --         --          --           --         --      (610)        --             (610)
   Common stock repurchased                                                                                              
     (658,892 shares)                     --         --          --           --     (8,909)       --         --           (8,909)
   Repurchased stock awarded under                                                                                       
     MRP (108,905 shares)                 --         --          --       (1,396)     1,396        --         --               --
   Amortization of MRP awards             --         --          --          271         --        --         --              271
   ESOP shares released for                                                                                              
      allocation (28,566 shares)          --        138         286           --         --        --         --              424
   Change in net unrealized gain                                                                                         
     (loss) on available-for sale                                                                                        
     securities, net of taxes             --         --          --           --         --        --        751              751
                                    --------   --------    --------     --------   --------  --------   --------         --------
                                                                                                                         
Balance at September 30, 1997             36     34,734      (2,428)      (1,125)    (7,513)   19,605        569           43,878
                                                                                                                         
   Net income                             --         --          --           --         --     2,901         --            2,901
   Dividends paid ($0.28 per share)       --         --          --           --         --      (752)        --             (752)
   Common stock repurchased                                                                                              
     (294,524 shares)                     --         --          --           --     (5,676)       --         --           (5,676)
   Amortization of MRP awards             --         --          --          279         --        --         --              279
   Tax benefits from vested                                                                                              
     MRP awards                           --         62          --           --         --        --         --               62
   ESOP shares released for                                                                                              
      allocation (28,566 shares)          --        248         286           --         --        --         --              534
   Change in net unrealized gain                                                                                         
     (loss) on available-for sale                                                                                        
     securities, net of taxes             --         --          --           --         --        --        576              576
                                                                                                                         
                                    ========   ========    ========     ========   ========  ========   ========         ========
Balance at September 30, 1998       $     36   $ 35,044    $ (2,142)    $   (846)  $(13,189) $ 21,754   $  1,145         $ 41,802
                                    ========   ========    ========     ========   ========  ========   ========         ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       27
<PAGE>

                         YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (In thousands)

<TABLE>
<CAPTION>
                                                                                   Year Ended September 30,
                                                                             -------------------------------------
                                                                               1998          1997          1996
                                                                             ---------     ---------     ---------
<S>                                                                          <C>           <C>           <C>      
Cash flows from operating activities:
  Net income                                                                 $   2,901     $   2,952     $   1,520
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Provision for loan losses                                                     375           300           462
     ESOP and MRP expense                                                          813           695           147
     Depreciation and amortization expense                                         264           194           196
     Amortization of deferred fees, discounts and premiums, net                     93          (289)         (479)
     Net (gain) loss on sales of real estate mortgage loans held for sale         (371)           17            --
     Net (gain) loss on sales of securities                                       (117)           48            --
     Other adjustments, net                                                       (115)         (186)           80
                                                                             ---------     ---------     ---------
          Net cash provided by operating activities                              3,843         3,731         1,926
                                                                             ---------     ---------     ---------
Cash flows from investing activities:
  Purchases of securities:
     Available-for-sale                                                        (90,579)      (55,835)      (45,036)
     Held-to-maturity                                                               --            --       (22,142)
  Proceeds from principal payments, maturities and calls of securities:
     Available-for-sale                                                         24,113        13,356         7,334
     Held-to-maturity                                                           32,500        18,563        22,895
  Proceeds from sales of securities:
     Available-for-sale                                                         28,308        15,943            --
     Held-to-maturity                                                              630           237            --
  Disbursements for loan originations                                         (152,638)      (69,169)      (17,571)
  Principal collections on loans                                                24,181        13,612        11,780
  Proceeds from sales of loans                                                  69,588         2,785         1,883
  (Purchase) redemption of FHLB stock                                           (3,421)       (1,940)           47
  Other investing cash flows                                                      (437)          239          (119)
                                                                             ---------     ---------     ---------
          Net cash used in investing activities                                (67,755)      (62,209)      (40,929)
                                                                             ---------     ---------     ---------
Cash flows from financing activities:
  Net increase in deposits                                                      23,248        17,258         2,666
  Net increase (decrease) in borrowings with
     original terms of three months or less:
       Securities repurchase agreements                                          3,411        18,503        10,264
       FHLB advances                                                            (6,000)       (2,000)        3,705
  Proceeds from longer-term securities repurchase agreements                    50,283        25,329            --
  Common stock repurchased                                                      (5,676)       (8,909)           --
  Net proceeds from issuance of common stock, exclusive
      of ESOP shares                                                                --            --        31,771
  Dividends paid                                                                  (752)         (610)         (164)
                                                                             ---------     ---------     ---------
          Net cash provided by financing activities                             64,514        49,571        48,242
                                                                             ---------     ---------     ---------

Net  increase (decrease) in cash and cash equivalents                              602        (8,907)        9,239
Cash and cash equivalents at beginning of year                                   3,593        12,500         3,261
                                                                             ---------     ---------     ---------

Cash and cash equivalents at end of year                                     $   4,195     $   3,593     $  12,500
                                                                             =========     =========     =========

Supplemental information:
  Interest paid                                                              $  13,818     $   9,623     $   7,956
  Income taxes paid                                                              2,457         1,931         1,331
  Mortgage loans transferred to real estate owned                                  128           313           603
                                                                             =========     =========     =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       28
<PAGE>

(1)   Summary of Significant Accounting Policies

            In December 1995, The Yonkers Savings and Loan Association converted
      from a New York State chartered mutual savings and loan association to a
      federally chartered mutual savings and loan association under the new name
      The Yonkers Savings and Loan Association, FA (the "Association"). On April
      18, 1996, Yonkers Financial Corporation (the "Holding Company") became the
      holding company for the Association upon completion of the Association's
      conversion to the stock form of ownership (the "Conversion").
      Collectively, the Holding Company and the Association are referred to
      herein as the "Company".

            The Company's primary market area consists of the City of Yonkers
      and its neighboring communities in Westchester County, New York. The
      Association is a community-oriented savings institution whose business
      primarily consists of accepting deposits from customers within its market
      area and investing those funds in mortgage loans secured by one- to
      four-family residences. To a lesser extent, funds are invested in
      multi-family and commercial real estate loans, construction and land
      loans, consumer loans and commercial business loans. The Company also
      invests in mortgage-backed and other securities. Deposits are insured up
      to applicable limits by the Savings Association Insurance Fund ("SAIF") of
      the Federal Deposit Insurance Corporation ("FDIC"). The Company's primary
      regulator is the Office of Thrift Supervision ("OTS").

            The following is a summary of the significant accounting policies
      followed by the Company in the preparation of the consolidated financial
      statements.

      Basis of Presentation

            The consolidated financial statements include the accounts of the
      Holding Company and its wholly-owned subsidiary, the Association. All
      significant intercompany accounts and transactions have been eliminated in
      consolidation. Prior to the Conversion, the Holding Company had no
      operations other than those of an organizational nature. Subsequent
      thereto, the Holding Company's business activities have been limited to
      its ownership of the Association and certain short-term and other
      investments.

            The consolidated financial statements have been prepared in
      conformity with generally accepted accounting principles. In preparing the
      consolidated financial statements, management is required to make
      estimates and assumptions that affect the reported amounts of assets,
      liabilities, income and expense. A material estimate that is particularly
      susceptible to near-term change is the allowance for loan losses, which is
      discussed below.

            Certain reclassifications have been made to prior-year amounts to
      conform to the current-year presentation.

      Cash Equivalents

            For purposes of reporting cash flows, cash equivalents consist of
      highly liquid short-term investments. Short-term investments reported in
      the consolidated balance sheets were federal funds sold at September 30,
      1998 and money market mutual funds at September 30, 1997.


                                       29
<PAGE>

      Securities

            The Company accounts for its securities in accordance with Statement
      of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
      Investments in Debt and Equity Securities. Under SFAS No. 115, individual
      securities are classified as held-to-maturity securities, trading
      securities, or available-for-sale securities. Securities held to maturity
      are limited to debt securities for which the entity has the positive
      intent and ability to hold to maturity. Trading securities are debt and
      equity securities that are bought principally for the purpose of selling
      them in the near term. All other debt and equity securities are classified
      as available for sale.

            Held-to-maturity securities are carried at amortized cost.
      Available-for-sale securities are carried at fair value with unrealized
      gains and losses excluded from earnings and reported on a net-of-tax basis
      as a separate component of stockholders' equity. The Company has no
      trading securities. Federal Home Loan Bank stock is a non-marketable
      equity security held in accordance with certain regulatory requirements
      and, accordingly, is carried at cost.

            Premiums and discounts are amortized to interest income on a
      level-yield basis over the expected term of the debt security. Realized
      gains and losses on sales of securities are determined based on the
      amortized cost of the specific securities sold. Unrealized losses on
      securities are charged to earnings if management determines that the
      decline in fair value of a security is other than temporary.

      Real Estate Mortgage Loans Held for Sale

            Real estate mortgage loans held for sale in the secondary market are
      carried at the lower of cost or market value in the aggregate. Market
      values are estimated based on outstanding investor sale commitments or, in
      the absence of such commitments, based on current secondary market yield
      requirements. Net unrealized losses, if any, are recognized in a valuation
      allowance by a charge to income.

      Allowance for Loan Losses

            The allowance for loan losses is increased by provisions for losses
      charged to income. Losses on loans (including impaired loans) are charged
      to the allowance for loan losses when all or a portion of a loan is deemed
      to be uncollectible. Recoveries of loans previously charged-off are
      credited to the allowance when realized. Management estimates the
      allowance for loan losses based on an evaluation of the Company's past
      loan loss experience, known and inherent risks in the portfolio, estimated
      value of underlying collateral, and current economic conditions. In
      management's judgment, the allowance for loan losses is adequate to absorb
      probable losses in the existing portfolio.

            Establishing the allowance for loan losses involves significant
      management judgments utilizing the best information available at the time.
      Those judgments are subject to further review by various sources,
      including the Company's regulators. Adjustments to the allowance may be
      necessary in the future 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.

            In accordance with SFAS No. 114, Accounting by Creditors for
      Impairment of a Loan, as amended by SFAS No. 118, the Company considers a
      loan to be impaired when, based on current 


                                       30
<PAGE>

      information and events, it is probable that the Company will be unable to
      collect all principal and interest contractually due from the borrower.
      The Company applies SFAS No. 114 to loans that are individually evaluated
      for collectibility in accordance with its normal loan review procedures
      (principally loans in the multi-family, commercial mortgage, land and
      construction loan portfolios). The standard generally does not apply to
      smaller-balance homogeneous loans in the Company's one- to four-family
      mortgage and consumer loan portfolios that are collectively evaluated for
      impairment. Under SFAS No. 114, the measurement of an impaired loan may be
      based on (i) the present value of expected future cash flows discounted at
      the loan's effective interest rate, (ii) the loan's observable market
      price, or (iii) the fair value of the collateral if the loan is collateral
      dependent. If the approach used results in a measurement that is less than
      an impaired loan's recorded investment, an impairment loss is recognized
      as part of the allowance for loan losses. Mortgage Servicing Rights

            SFAS No. 125, Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities, establishes financial reporting
      standards for a broad range of transactions including sales of loans with
      servicing retained, loan securitizations, loan participations, securities
      repurchase agreements, securities lending and in-substance defeasances of
      debt. Among other things, the standard requires recognition of servicing
      rights as an asset when loans are sold with servicing retained. Asset
      recognition of servicing rights on sales of originated loans was not
      permitted under previous accounting standards. SFAS No. 125 is generally
      effective for transactions entered into on or after January 1, 1997 and
      superseded SFAS No. 122, Accounting for Mortgage Servicing Rights, which
      became effective for the Company on October 1, 1996.

            In accordance with SFAS No. 125, the Company recognizes mortgage
      servicing rights as an asset when loans are sold with servicing retained,
      by allocating the cost of an originated mortgage loan between the loan and
      the servicing right based on estimated relative fair values. The cost
      allocated to the servicing right is capitalized as a separate asset which
      is amortized thereafter in proportion to, and over the period of,
      estimated net servicing income. Capitalized mortgage servicing rights are
      stratified, based on loan type and interest rate, and assessed for
      impairment by comparing the asset's amortized cost to its current fair
      value. Impairment losses, if any, are recognized through charges to
      income.

      Interest and Fees on Loans

            Interest is accrued monthly on outstanding principal balances unless
      management considers the collection of interest or principal to be
      doubtful, in which case the loan is placed on non-accrual status. The
      Company's loans on non-accrual status include all loans contractually
      delinquent ninety days or more. Interest payments received on non-accrual
      loans (including impaired loans under SFAS No. 114) are recognized as
      income unless future collections are doubtful. Loans are returned to
      accrual status when collectibility of interest or principal is no longer
      considered doubtful (generally, when all payments have been brought
      current).

            Loan origination fees and certain direct loan origination costs are
      deferred, and the net fee or cost is amortized to interest income over the
      contractual term of the loans using the level-yield method. Unamortized
      fees and costs applicable to loans prepaid or sold are recognized in
      income at the time of prepayment or sale.


                                       31
<PAGE>

      Real Estate Owned

            Real estate owned properties acquired through foreclosure are
      recorded initially at fair value less estimated sales costs, with the
      resulting writedown charged to the allowance for loan losses. Thereafter,
      an allowance for losses on real estate owned is established by a charge to
      expense to reflect any subsequent declines in fair value. Fair value
      estimates are based on recent appraisals and other available information.
      Costs incurred to develop or improve properties are capitalized, while
      holding costs are charged to expense.

      Office Properties and Equipment

            Office properties and equipment are comprised of land (carried at
      cost) and buildings, furniture, fixtures, equipment and leasehold
      improvements (carried at cost less accumulated depreciation and
      amortization). Depreciation is computed using the straight-line method
      over the estimated useful lives of the related assets. Leasehold
      improvements are amortized using the straight-line method over the shorter
      of the lease term or the estimated useful life of the improvement. Costs
      incurred to improve or extend the life of existing assets are capitalized.
      Repairs and maintenance, as well as renewals and replacements of a routine
      nature, are charged to expense. 

      Securities Repurchase Agreements

            In securities repurchase agreements, the Company transfers
      securities to a counterparty under an agreement to repurchase the
      identical securities at a fixed price in the future. These agreements are
      accounted for as secured financing transactions provided the Company
      maintains effective control over the transferred securities and meets the
      other criteria for such accounting as specified in SFAS No. 125. The
      Company's agreements are accounted for as secured financings; accordingly,
      the transaction proceeds are recorded as borrowed funds and the underlying
      securities continue to be carried in the Company's securities portfolio.

      Income Taxes

            In accordance with the asset and liability method required by SFAS
      No. 109, Accounting for Income Taxes, deferred taxes are recognized for
      the estimated future tax effects attributable to "temporary differences"
      between the financial statement carrying amounts of existing assets and
      liabilities and their respective tax bases. A deferred tax liability is
      recognized for all temporary differences that will result in future
      taxable income. A deferred tax asset is recognized for all temporary
      differences that will result in future tax deductions, subject to
      reduction of the asset by a valuation allowance in certain circumstances.
      This valuation allowance is recognized if, based on an analysis of
      available evidence, management determines that it is more likely than not
      that a portion or all of the deferred tax asset will not be realized. The
      valuation allowance is subject to ongoing adjustments based on changes in
      circumstances that affect management's judgment about the realizability of
      the deferred tax asset. Adjustments to increase or decrease the valuation
      allowance are charged or credited, respectively, to income tax expense.

            Deferred tax assets and liabilities are measured using enacted tax
      rates expected to apply to future taxable income. The effect on deferred
      tax assets and liabilities of an enacted change in tax rates is recognized
      in income tax expense in the period that includes the enactment date of
      the change. 


                                       32
<PAGE>

      Treasury Stock

            Treasury stock is recorded at cost and is presented as a reduction
      of stockholders' equity.

      Pension Plans

            The Company has a non-contributory defined benefit pension plan
      which covers substantially all employees. Pension costs are funded on a
      current basis in compliance with the requirements of the Employee
      Retirement Income Security Act. Costs for this plan, as well as the
      Company's unfunded supplemental retirement agreement, are accounted for in
      accordance with SFAS No. 87, Employers' Accounting for Pensions.

      Stock-Based Compensation Plans

            Compensation expense is recognized for the Company's employee stock
      ownership plan ("ESOP") equal to the fair value of shares committed to be
      released for allocation to participant accounts. Any difference between
      the fair value at that time and the ESOP's original acquisition cost is
      charged or credited to stockholders' equity (additional paid-in capital).
      The cost of unallocated ESOP shares (shares not yet committed to be
      released) is reflected as a reduction of stockholders' equity.

            The Company accounts for its stock option plan in accordance with
      Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
      Issued to Employees. Accordingly, compensation expense is recognized only
      if the exercise price of the option is less than the fair value of the
      underlying stock at the grant date. SFAS No. 123, Accounting for
      Stock-Based Compensation, encourages entities to recognize the fair value
      of all stock-based awards (measured on the grant date) as compensation
      expense over the vesting period. Alternatively, SFAS No. 123 allows
      entities to apply the provisions of APB Opinion No. 25 and provide pro
      forma disclosures of net income and earnings per share as if the
      fair-value-based method defined in SFAS No. 123 had been applied. The
      Company has elected to apply the provisions of APB Opinion No. 25 and
      provide these pro forma disclosures.

            The Company's management recognition and retention plan ("MRP") is
      also accounted for in accordance with APB Opinion No. 25. The fair value
      of the shares awarded, measured at the grant date, is recognized as
      unearned compensation (a deduction from stockholders' equity) and
      amortized to compensation expense as the shares become vested. When MRP
      shares become vested, the Company records a credit to additional paid-in
      capital for tax benefits attributable to any MRP deductions for tax
      purposes in excess of the grant-date fair value charged to expense for
      financial reporting purposes.

      Earnings Per Share

            The Company has adopted SFAS No. 128, Earnings Per Share, which
      requires entities with complex capital structures to present both basic
      earnings per share ("EPS") and diluted EPS. Basic EPS excludes dilution
      and is computed by dividing net income applicable to common stock by the
      weighted average number of common shares outstanding for the period.
      Diluted EPS reflects the potential dilution that could occur if securities
      or other contracts to issue common stock (such as the Company's stock
      options) were exercised or converted into common stock or


                                       33
<PAGE>

      resulted in the issuance of common stock that would then share in the
      earnings of the entity. Diluted EPS is computed by dividing net income by
      the weighted average number of common shares outstanding for the period
      plus common stock equivalents. Unallocated ESOP shares that have not been
      committed to be released to participants are excluded from outstanding
      shares in computing both basic and diluted EPS. In accordance with SFAS
      No. 128, the Company has restated all prior-period EPS data to conform to
      the new requirements. EPS data for fiscal 1996 is for the six-month period
      following the Conversion.

(2)   Securities

            The Company's securities portfolio principally consists of
      mortgage-backed securities and U.S. Government and Agency securities.
      Mortgage-backed securities include both pass-through securities and
      collateralized mortgage obligations ("CMOs"), substantially all of which
      are guaranteed by U.S. Government or government-sponsored entities (Ginnie
      Mae, Fannie Mae and Freddie Mac).

            The following is a summary of securities at September 30, 1998:

<TABLE>
<CAPTION>
                                                              Gross Unrealized
                                               Amortized   ----------------------       Fair
                                                 Cost       Gains        Losses        Value
                                                 ----       -----        ------        -----
                                                              (In thousands)
      <S>                                      <C>         <C>          <C>          <C>     
      Available-for-Sale Securities
      Mortgage-backed securities:
        Pass-through securities                $ 78,549    $  1,163     $    (34)    $ 79,678
      U.S. Government and Agency securities      43,801       1,017           (8)      44,810
      Equity securities                             967          --         (230)         737
                                               --------    --------     --------     --------
                Total available-for-sale       $123,317    $  2,180     $   (272)    $125,225
                                               ========    ========     ========     ========
      Held-to-Maturity Securities
      Mortgage-backed securities:
        Pass-through securities                $ 24,704    $    582     $    (56)    $ 25,230
        CMOs                                      9,104          98          (37)       9,165
                                               --------    --------     --------     --------
                                                 33,808         680          (93)      34,395
      U.S. Government and Agency securities       9,495          58           --        9,553
                                               --------    --------     --------     --------
                Total held-to-maturity         $ 43,303    $    738     $    (93)    $ 43,948
                                               ========    ========     ========     ========
</TABLE>


                                       34
<PAGE>

            The following is a summary of securities at September 30, 1997:

<TABLE>
<CAPTION>
                                                              Gross Unrealized
                                               Amortized   ----------------------       Fair
                                                 Cost       Gains        Losses        Value
                                                 ----       -----        ------        -----
                                                              (In thousands)
      <S>                                      <C>         <C>          <C>          <C>     
      Available-for-Sale Securities
      Mortgage-backed securities:
        Pass-through securities                $ 34,460    $    446     $    (14)    $ 34,892
        CMOs                                      8,148          --           (2)       8,146
                                               --------    --------     --------     --------
                                                 42,608         446          (16)      43,038
      U.S. Government and Agency securities      40,805         671           (7)      41,469
      Equity securities                           1,923          --         (144)       1,779
                                               --------    --------     --------     --------
                Total available-for-sale       $ 85,336    $  1,117     $   (167)    $ 86,286
                                               ========    ========     ========     ========
      Held-to-Maturity Securities
      Mortgage-backed securities:
        Pass-through securities                $ 35,283    $    733     $   (111)    $ 35,905
        CMOs                                     15,063         127         (124)      15,066
                                               --------    --------     --------     --------
                                                 50,346         860         (235)      50,971
      U.S. Government and Agency securities      25,983          50         (102)      25,931
                                               --------    --------     --------     --------
                Total held-to-maturity         $ 76,329    $    910     $   (337)    $ 76,902
                                               ========    ========     ========     ========
</TABLE>

            Mortgage-backed and other debt securities at September 30, 1998
      consisted of fixed-rate securities and adjustable-rate securities with
      amortized costs of $129.0 million and $36.7 million, respectively, and
      weighted average yields of 7.18% and 6.60%, respectively. Fixed-rate and
      adjustable-rate debt securities at September 30, 1997 totaled $93.9
      million and $65.8 million, respectively, with weighted average yields of
      7.30% and 6.74%, respectively.

            Mortgage-backed securities include securities guaranteed by Ginnie
      Mae, Fannie Mae and Freddie Mac with total amortized costs of $69.7
      million, $ 34.7 million and $7.8 million, respectively, at September 30,
      1998 ($30.7 million, $39.2 million and $22.7 million, respectively, at
      September 30, 1997). Privately-issued mortgage-backed securities had
      amortized costs of $0.2 million and $0.3 million at September 30, 1998 and
      1997, respectively.

            The Company held step-up securities, issued by U.S. Government
      Agencies or government-sponsored enterprises, with total amortized costs
      and fair values of approximately $3.5 million at September 30, 1998 and
      $11.0 million at September 30, 1997. These securities initially pay an
      above-market yield for a short non-call period; if the securities are not
      called, the interest rate "steps-up" to a higher coupon rate which would
      be below then-current market rates. The Company's step-up securities had a
      weighted average yield of 5.69% and 5.97% at September 30, 1998 and 1997,
      respectively.

            The net unrealized gain on available-for-sale securities was $1.9
      million ($1.1 million after taxes) at September 30, 1998, compared to
      $950,000 ($569,000 after taxes) at September 30, 1997. Changes in
      unrealized holding gains and losses resulted in an after-tax increase
      (decrease) in stockholders' equity of $576,000, $751,000 and ($40,000)
      during fiscal 1998, 1997 and 1996, respectively. These gains and losses
      will continue to fluctuate based on changes in the portfolio and market
      conditions.


                                       35
<PAGE>

            Sales of securities resulted in the following gross realized gains
      and gross realized losses during the years ended September 30:

                                                1998       1997      1996
                                                -----      -----      ----
                                                      (In thousands)
      Available-for-sale securities:
           Gains                                $ 278      $  47      $ --
           Losses                                (175)       (97)       --
                                                -----      -----      ----
                                                  103        (50)       --
                                                -----      -----      ----

      Held-to-maturity securities:
           Gains                                   16          2        --
           Losses                                  (2)        --        --
                                                -----      -----      ----
                                                   14          2        --
                                                -----      -----      ----

      Net gain (loss)                           $ 117      $ (48)     $ --
                                                =====      =====      ====

            The held-to-maturity securities sold in fiscal 1998 and 1997 were
      mortgage-backed securities with an amortized cost of $616,000 and
      $235,000, respectively, for which the Company had collected more than 85%
      of the principal purchased. Under SFAS No. 115, sales in these
      circumstances are deemed to be equivalent to maturities and, accordingly,
      do not call into question the intent to hold other debt securities to
      maturity in the future.

            The following is a summary of the amortized cost and fair value of
      U.S. Government and Agency securities at September 30, 1998, by remaining
      period to contractual maturity (ignoring earlier call dates, if any).
      Actual maturities may differ from contractual maturities because certain
      security issuers have the right to call or prepay their obligations.


                                       36
<PAGE>

                                  Available-for-Sale         Held-to-Maturity
                                 ---------------------     ---------------------
                                 Amortized      Fair       Amortized      Fair
                                   Cost         Value        Cost         Value
                                   ----         -----        ----         -----
                                               (In thousands)

Within one year                   $    --      $    --      $ 2,500      $ 2,503
One to five years                      --           --        3,496        3,510
Five to ten years                  19,100       19,343        1,500        1,528
Over ten years                     24,701       25,467        1,999        2,012
                                  -------      -------      -------      -------
          Total                   $43,801      $44,810      $ 9,495      $ 9,553
                                  =======      =======      =======      =======

(3)   Loans

            A summary of loans receivable at September 30 follows:

                                                         1998          1997
                                                       ---------     ---------
                                                            (In thousands)
      Real estate mortgage loans:
        Residential properties:
          One- to four-family                          $ 153,891     $  91,367
          Multi-family                                     7,846         5,658
        Commercial properties                             12,766        11,990
        Land loans                                           932         1,814
        Construction loans                                 2,613         2,786
        Construction loans in process                       (743)       (1,091)
        Deferred loan origination costs (fees), net          478          (167)
                                                       ---------     ---------
                                                         177,783       112,357
                                                       ---------     ---------
      Consumer loans:
        Home equity                                        3,678         3,217
        Personal                                           1,447         1,666
        Other                                              1,224         1,237
                                                       ---------     ---------
                                                           6,349         6,120
      Commercial business loans                            1,195         1,299
                                                       ---------     ---------
                                                           7,544         7,419
                                                       ---------     ---------

          Total loans receivable                         185,327       119,776

      Allowance for loan losses                           (1,302)       (1,093)
                                                       ---------     ---------

            Gross loans receivable at September 30, 1998 consisted of
      adjustable-rate loans of $142.2 million and fixed-rate loans of $43.4
      million with weighted average yields of 7.60% and 7.99%, respectively.
      Adjustable-rate and fixed-rate loans at September 30, 1997 totaled $98.7
      million and $22.3 million, respectively, with weighted average yields of
      8.19% and 8.65%, respectively. One- to four-family residential mortgage
      loans at September 30, 1998 and 1997 include advances under home equity
      lines of credit of $4.6 million and $5.9 million, respectively, and
      cooperative apartment loans of $4.5 million and $4.8 million,
      respectively.


                                       37
<PAGE>

            The Company primarily originates real estate mortgage loans secured
      by existing single-family residential properties. The Company also
      originates multi-family and commercial real estate loans, land loans,
      construction loans, consumer loans and commercial business loans. A
      substantial portion of the loan portfolio is secured by real estate
      properties located in Westchester County, New York. The ability of the
      Company's borrowers to make principal and interest payments is dependent
      upon, among other things, the level of overall economic activity and the
      real estate market conditions prevailing within the Company's concentrated
      lending area.

            Activity in the allowance for loan losses is summarized as follows
      for the years ended September 30: 

                                            1998        1997        1996
                                          -------     -------     -------
                                                   (In thousands)

      Balance at beginning of year        $ 1,093     $   937     $   719
      Provision for losses                    375         300         462
      Charge-offs                            (193)       (157)       (333)
      Recoveries                               27          13          89
                                          -------     -------     -------

      Balance at end of year              $ 1,302     $ 1,093     $   937
                                          =======     =======     =======

            The principal balances of non-accrual loans past due ninety days or
      more at September 30 are as follows:

                                               1998       1997       1996
                                              ------     ------     ------
                                                      (In thousands)

      Real estate mortgage loans:
           One- to four-family                $  515     $  389     $1,757
           Commercial                            203        211        214
           Land                                   --        250        250
           Construction                           --        279        511
      Consumer loans                              35          9         43
                                              ------     ------     ------

                Total                         $  753     $1,138     $2,775
                                              ======     ======     ======

            If all interest payments on the foregoing non-accrual loans had been
      made during the respective years in accordance with the loan agreements,
      gross interest income of $64,000, $107,000 and $251,000 would have been
      recognized in fiscal 1998, 1997 and 1996, respectively, compared to
      interest income actually recognized of $48,000, $15,000 and $94,000,
      respectively.

            The Company's impaired loans, as defined under SFAS No. 114,
      consisted of non-accrual commercial mortgage, land and construction loans
      with a recorded investment totaling $203,000 and $740,000 at September 30,
      1998 and 1997, respectively. All of these loans were collateral-dependent
      loans measured based on the fair value of the collateral in accordance
      with SFAS No. 114. The Company determines the need for an allowance for
      loan impairment under SFAS No. 114 on a loan-by-loan basis. At September
      30, 1998 and 1997, such an allowance was not required with respect to the
      Company's impaired loans primarily due to the sufficiency of the related
      collateral values. The Company's average recorded investment in impaired
      loans was approximately $438,000, $799,000 and $700,000 for the years
      ended September 30, 1998, 1997 and 1996,


                                       38
<PAGE>

      respectively. Interest collections and income recognized on impaired loans
      (while such loans were considered impaired) were insignificant during
      fiscal 1998, 1997 and 1996.

            At September 30, 1998 and 1997, single-family real estate owned
      properties with net carrying values of $305,000 and $379,000,
      respectively, are included in other assets. Provisions for losses and
      other activity in the allowance for real estate owned losses were
      insignificant during the years ended September 30, 1998, 1997 and 1996.

            The Company has sold certain real estate mortgage loans and retained
      the related servicing rights. The principal balances of these serviced
      loans, which are not included in the accompanying consolidated balance
      sheets, totaled $81.7 million, $15.5 million and $14.0 million at
      September 30, 1998, 1997 and 1996, respectively, are included in other
      assets. These amounts include loans sold with recourse of $2.0 million,
      $2.7 million and $3.4 million at the respective dates, for which the
      Association does not expect to incur any significant losses. Real estate
      loans held for sale at September 30, 1998 and 1997 had total amortized
      costs of $13.3 million and $20.4 million, respectively, which approximated
      market value at those dates.

            During the year ended September 30, 1998, the Company sold $69.8
      million of real estate mortgage loans, with servicing retained, and
      recognized a net gain of $371,000 on such sales (sales in fiscal 1997 and
      1996 were not significant). The net gain in fiscal 1998 includes the
      effect of capitalizing mortgage servicing assets of $594,000 at the time
      of sale, in accordance with SFAS No. 125. At September 30, 1998, the
      amortized cost of capitalized mortgage servicing rights included in other
      assets was $538,000, which approximated fair value. Amortization of
      mortgage servicing rights was $56,000 for the year ended September 30,
      1998.

(4)   Accrued Interest Receivable

            A summary of accrued interest receivable at September 30 follows:

                                                       1998          1997
                                                      ------        ------
                                                         (In thousands)
      
            Loans                                     $1,100        $  940
            Mortgage-backed securities                   640           486
            Other securities                           1,051         1,419
                                                      ------        ------
                 Total                                $2,791        $2,845
                                                      ======        ======

(5)   Office Properties and Equipment

            A summary of office properties and equipment at September 30
      follows:


                                       39
<PAGE>

                                                           1998        1997
                                                         -------     -------
                                                            (In thousands)

      Land                                               $    45     $    45
      Buildings                                              246         240
      Leasehold improvements                                 591         589
      Furniture, fixtures and equipment                    2,344       1,773
                                                         -------     -------
                                                           3,226       2,647
      Less accumulated depreciation and amortization      (1,968)     (1,745)
                                                         -------     -------
           Total office properties and equipment, net    $ 1,258     $   902
                                                         =======     =======

(6)   Deposits

            Deposit balances and weighted average stated interest rates at
      September 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                          1998                  1997
                                                    ------------------    ---------------
                                                    Amount     Rate      Amount     Rate
                                                    ------     ----      ------     ----
                                                           (Dollars in thousands)
      <S>                                          <C>         <C>      <C>         <C>
      Checking                                     $  5,423             $  4,655
      NOW                                            21,123    1.00%      19,055    2.00%
      Money market                                   27,613    3.64       21,624    3.33
      Regular savings                                43,492    2.43       44,591    2.56
      Club                                            1,282    2.43        1,132    2.56
                                                   --------             --------
                                                     98,933    2.34       91,057    2.49
                                                   --------             --------

      Savings certificates by remaining term to
        contractual maturity:
          Within one year                            84,261    5.28       71,765    5.23
          After one but within two years             36,555    5.72       30,882    5.64
          After two but within three years            5,140    5.52        9,547    6.29
          After three years                           6,292    5.78        4,682    5.78
                                                   --------             --------
                                                    132,248    5.43      116,876    5.45
                                                   --------             --------
          Total deposits                           $231,181    4.10%    $207,933    4.15%
                                                   ========             ========
</TABLE>

            Savings certificates issued in denominations of $100,000 or more
      totaled $16.5 million and $12.9 million at September 30, 1998 and 1997,
      respectively. The FDIC generally insures depositor accounts up to
      $100,000, as defined in the applicable regulations.

            The Deposit Insurance Funds Act of 1996 (the "Act") was signed into
      law on September 30, 1996. Among other things, the Act required depository
      institutions to pay a one-time special assessment of 65.7 basis points on
      the balance of their SAIF-assessable deposits held as of March 31, 1995,
      in order to recapitalize the SAIF to the reserve level required by
      statute. Accordingly, the consolidated statement of income for the year
      ended September 30, 1996 reflects a separate expense charge of
      approximately $1.2 million for the accrual of this special assessment
      which was paid in November 1996.


                                       40
<PAGE>

            Interest expense on deposits is summarized as follows for the years
      ended September 30:

                                                 1998      1997      1996
                                                ------    ------    ------
                                                      (In thousands)

      NOW, club and money market accounts       $  841    $  862    $  788
      Regular savings accounts                   1,092     1,166     1,336
      Savings certificate accounts               7,123     5,894     5,656
                                                ------    ------    ------
                Total interest expense          $9,056    $7,922    $7,780
                                                ======    ======    ======

(7)   Borrowings

      Securities Repurchase Agreements

            In securities repurchase agreements, the Company borrows funds
      through the transfer of debt securities to the FHLB of New York, as
      counterparty, and concurrently agrees to repurchase the identical
      securities at a fixed price on a specified date. Repurchase agreements are
      collateralized by the securities sold and, in certain cases, by additional
      margin securities. During the years ended September 30, 1998, 1997 and
      1996, the Company's average borrowings under repurchase agreements with
      the FHLB of New York were $81.9 million, $32.1 million and $1.2 million,
      respectively, and the maximum month-end balance outstanding was $119.9
      million, $54.1 million and $10.3 million, respectively.

            Information concerning outstanding securities repurchase agreements
      with the FHLB of New York as of September 30, 1998 and 1997 is summarized
      as follows:


                                       41
<PAGE>

<TABLE>
<CAPTION>
                               Repurchase Borrowings
      -----------------------------------------------------------------------
                                                          Accrued    Weighted    Fair Value
                                                          Interest   Average    of Collateral
      Remaining Term to Final Maturity (1)     Amount    Payable(2)    Rate     Securities(3)
      ------------------------------------     ------    ----------    ----    --------------
                                                        (Dollars in thousands)
      <S>                                     <C>         <C>         <C>      <C>     
      September 30, 1998
      Within 30 days                          $ 32,178    $    110    5.57%    $ 37,243
      After 30 days but within one year          9,600          57    5.76       10,933
      After one but within three years          13,100          10    5.81       12,237
      After three but within five years         22,500         179    5.80       24,694
      After five years                          30,412         200    5.47       33,387
                                              --------    --------             --------
                                            
           Total                              $107,790    $    556    5.64%    $118,494
                                              ========    ========             ========
                                            
      September 30, 1997                    
      Within 30 days                          $ 28,767    $    149    5.63%    $ 33,302
      After 30 days but within one year          4,729          59    6.15        5,248
      After three but within five years         20,600         145    6.01       21,499
                                              --------    --------             --------
                                            
           Total                              $ 54,096    $    353    5.82%    $ 60,049
                                              ========    ========             ========
</TABLE>

      (1)   The weighted average remaining term to final maturity was
            approximately 3.8 years and 1.7 years at September 30, 1998 and
            1997, respectively. Certain securities repurchase agreements are
            callable by the FHLB of New York, prior to the maturity date. The
            weighted average remaining term to maturity, giving effect to
            earlier call dates, was approximately 1.7 years at September 30,
            1998.
      (2)   Included in other liabilities in the consolidated balance sheets.
      (3)   Represents the fair value of the mortgage-backed and other debt
            securities which were transferred to the counterparty, plus accrued
            interest receivable of $1.1 million and $537,000 at September 30,
            1998 and 1997, respectively. These securities consisted of
            available-for-sale securities and held-to-maturity securities with
            fair values of $100.5 million and $16.9 million, respectively, at
            September 30, 1998 ($42.5 million and $17.0 million, respectively,
            at September 30, 1997).

            At September 30, 1998, the Company's "amount at risk" under
      securities repurchase agreements was approximately $10.1 million. This
      amount represents the excess of (i) the carrying amount, or market value
      if higher, of the securities transferred to the FHLB of New York plus
      accrued interest receivable over (ii) the amount of the repurchase
      liability plus accrued interest payable.

      FHLB Advances

            As a member of the FHLB of New York, the Association may have
      outstanding FHLB borrowings in a combination of term advances and
      overnight funds of up to 25% of its total assets, or approximately $94.5
      million at September 30, 1998, none of which was used at that date. FHLB
      advances of $6.0 million at September 30, 1997 had a weighted average
      interest rate of 6.75% and a term to maturity of less than thirty days.
      Borrowings are secured by the Association's investment in FHLB stock and
      by a blanket security agreement. This agreement requires the Association
      to maintain as collateral certain qualifying assets (principally
      securities and residential mortgage loans) not otherwise pledged.


                                       42
<PAGE>

(8)   Income Taxes

            The components of income tax expense are summarized as follows for
      the years ended September 30:

                                            1998       1997        1996
                                           -------    -------     -------
                                                    (In thousands)
      Current tax expense:
          Federal                          $ 1,404    $ 1,177     $ 1,155
          State                                314        247         668
                                           -------    -------     -------
                                             1,718      1,424       1,823
                                           -------    -------     -------
      Deferred tax expense (benefit):
          Federal                              207        413        (410)
          State                                 79        153        (496)
                                           -------    -------     -------
                                               286        566        (906)
                                           -------    -------     -------

      Total income tax expense             $ 2,004    $ 1,990     $   917
                                           =======    =======     =======

            The following is a reconciliation of the expected income tax
      expense, computed at the applicable Federal statutory rate of 34%, to the
      actual income tax expense for the years ended September 30:

                                             1998       1997       1996
                                            ------     ------     ------
                                                (Dollars in thousands)

      Tax at Federal statutory rate         $1,668     $1,680     $  829
      New York State income taxes, net
           of Federal tax benefit              259        264        114
      Other reconciling items, net              77         46        (26)
                                            ------     ------     ------
      Actual income tax expense             $2,004     $1,990     $  917
                                            ======     ======     ======

      Effective income tax rate               40.9%      40.3%      37.6%
                                            ======     ======     ======


                                       43
<PAGE>

            The tax effects of temporary differences that give rise to deferred
      tax assets and liabilities are as follows at September 30: 

                                                                 1998      1997
                                                                ------    ------
                                                                 (In thousands)
      Deferred tax liabilities:
        Net unrealized gain on available-for-sale securities    $  763    $  381
        Mortgage servicing assets                                  220        --
        ther taxable temporary differences                         371       200
                                                                ------    ------
           Total deferred tax liabilities                        1,354       581
                                                                ------    ------

      Deferred tax assets:
        Allowance for loan losses                                  533       448
        Other deductible temporary differences                      95        75
                                                                ------    ------
           Total deferred tax assets                               628       523
                                                                ------    ------

        Net deferred tax liability                              $  726    $   58
                                                                ======    ======

            Based on the Company's historical and anticipated future pre-tax
      earnings, management believes that it is more likely than not that the
      deferred tax assets will be realized.

            As a thrift institution, the Association 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
      represent the excess of allowable deductions over actual bad debt losses
      and other reserve reductions. These 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 which is expected to become taxable (or
      "recaptured") in the foreseeable future.

            Certain amendments to the Federal and New York State tax laws
      regarding bad debt deductions were enacted in the quarter ended September
      30, 1996. The Federal amendments eliminated the
      percentage-of-taxable-income method for tax years beginning after December
      31, 1995 and imposed a requirement to recapture into taxable income (over
      a six-year period) the bad debt reserves in excess of the base-year
      amounts. The Company previously established, and has continued to
      maintain, a deferred tax liability with respect to such excess Federal
      reserves. The New York State amendments redesignated the State bad debt
      reserve as the base-year amount and permit future additions to the
      base-year reserve using the percentage-of-taxable-income method. These
      changes effectively eliminated the excess New York State reserves for
      which a deferred tax liability had been recognized and, accordingly, the
      Company reduced its deferred tax liability by $100,000 (with a
      corresponding reduction in income tax expense) during the quarter ended
      September 30, 1996.

            At September 30, 1998, the Association's base-year Federal and State
      tax bad debt reserves were $3.0 million and $9.8 million, respectively. In
      accordance with SFAS No. 109, deferred tax liabilities have not been
      recognized with respect to these reserves, since the Company 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) redemptions of the Association's stock or
      certain excess distributions to the Holding Company, and (ii) failure of
      the 


                                       44
<PAGE>

      Association to retain a thrift charter or continue to maintain a specified
      qualifying-assets ratio and meet other thrift definition tests for New
      York State tax purposes. At September 30, 1998, the Association's
      unrecognized deferred tax liabilities with respect to its Federal and
      State tax bad debt reserves totaled $1.7 million.

(9)   Other Non-Interest Expense

            The components of other non-interest expense are as follows for the
      years ended September 30:

                                                       1998      1997     1996
                                                     -------   -------  -------
                                                           (In thousands)

      Professional services                          $   480   $   301  $   177
      Advertising and promotion                          258       246      118
      Stationery and printing                            149        93       68
      Telephone and postage                              134       107       80
      Insurance and surety bond premiums                 128       107       78
      Correspondent bank fees                            105       113      114
      Checking account expenses                          107       100       93
      Adjustment for settlement of Nationar claim         --        --     (162)
      Other                                              688       460      442
                                                     -------   -------  -------
                Total                                $ 2,049   $ 1,527  $ 1,008
                                                     =======   =======  =======

            In February 1995, the New York Superintendent of Banks took
      possession of Nationar, a check clearing and trust company, freezing all
      of Nationar's assets. At that time, the Company had a check clearing
      balance of $841,000 due from Nationar. Based upon the information
      available at September 30, 1995, management believed that there was at
      least a reasonable likelihood that the Company would not recover its
      entire claim against Nationar and, accordingly, a valuation allowance of
      $168,000 was recorded in fiscal 1995. In June 1996, the Company collected
      $835,000 in settlement of the claim. The difference of $162,000 between
      the amount collected and the claim's net carrying amount was reflected as
      a credit to other non-interest expense for the year ended September 30,
      1996.

(10)  Employee Benefit and Stock Compensation Plans

      Pension Benefits

            All eligible Company employees are included in the New York State
      Bankers' Retirement System, a trusteed non-contributory pension plan. The
      benefits contemplated by the plan are funded through annual remittances
      based on actuarially determined funding requirements.


                                       45
<PAGE>

            The following is a reconciliation of the funded status of the plan
      and the amount of prepaid pension cost included in other assets at
      September 30:

<TABLE>
<CAPTION>
                                                                           1998        1997
                                                                          -------     -------
                                                                             (In thousands)
      <S>                                                                 <C>         <C>     
      Actuarial present value of benefit obligations:
        Accumulated benefit obligation, including vested benefits
           of $1,231 in 1998 and $1,054 in 1997                           $(1,335)    $(1,063)
                                                                          =======     =======

        Projected benefit obligation                                      $(1,378)    $(1,224)
      Plan assets at fair value (primarily debt and equity securities)      2,093       1,963
                                                                          -------     -------
      Plan assets in excess of projected benefit obligation                   715         739
      Unrecognized net gain                                                  (142)       (179)
      Unrecognized prior service cost                                        (252)       (269)

                                                                          -------     -------
           Prepaid pension cost                                           $   321     $   291
                                                                          =======     =======
</TABLE>

            Pension (credit) expense consisted of the following for the years
      ended September 30:

                                                       1998      1997      1996
                                                      -----     -----     -----
                                                           (In thousands)

      Service cost (benefits earned during the year)  $  73     $  72     $  96
      Interest cost on projected benefit obligation      97        94       111
      Actual return on plan assets                     (176)     (155)     (136)
      Net amortization and deferral                     (23)      (13)       --
                                                      -----     -----     -----
                   Net pension (credit) expense       $ (29)    $  (2)    $  71
                                                      =====     =====     =====

            The projected benefit obligation at September 30, 1998 and 1997 was
      computed using discount rates of 7.0% and 8.0%, respectively, and rates of
      compensation increase of 4.0% and 5.0%, respectively. The expected
      long-term rate of return on plan assets was 8.5%.

            The Company entered into a non-qualified Supplemental Executive
      Retirement Agreement with an executive officer, effective January 1, 1997,
      to provide retirement benefits in addition to the benefits provided by the
      pension plan. The projected benefit obligation at September 30, 1998 was
      approximately $175,000. This amount was computed using a discount rate of
      7.0% and a rate of compensation increase of 4.0%. Pension expense for this
      agreement amounted to $45,000 in fiscal 1998 and $27,000 in fiscal 1997.

      Savings Plan

            The Company also maintains an employee savings plan under Section
      401(k) of the Internal Revenue Code. Eligible employees may make
      contributions to the plan of up to 15% of their compensation, subject to a
      dollar limitation. Effective January 1997, the Company no longer makes
      matching contributions; prior thereto, matching contributions were made in
      amounts of up to 2% of a participant's compensation. Participants vest
      immediately in their own contributions and over a five-year period with
      respect to Company contributions. Savings plan expense was $10,000 in
      fiscal 1997 and $28,000 in fiscal 1996.


                                       46
<PAGE>

      Employee Stock Ownership Plan

            In connection with the Conversion, the Company established an ESOP
      for eligible employees. The ESOP borrowed approximately $2.9 million from
      the Holding Company and used the funds to purchase 285,660 shares of the
      Holding Company's common stock sold in the subscription and community
      offering described in note 11. The Association makes semi-annual
      contributions to the ESOP equal to the debt service requirements less all
      dividends received by the ESOP on unallocated shares. The ESOP uses these
      contributions and dividends to repay principal and interest over the
      ten-year term of the loan.

            Shares purchased by the ESOP are held in a suspense account by the
      plan trustee until allocated to participant accounts. Shares released from
      the suspense account are allocated to participants on the basis of their
      relative compensation. Participants become vested in the allocated shares
      over a period not to exceed five years. Any forfeited shares are allocated
      to other participants in the same proportion as contributions. Total
      shares released for allocation to participants were 28,566 in both fiscal
      1998 and 1997, and 14,283 in fiscal 1996 following the Conversion.
      Compensation expense recognized with respect to these shares amounted to
      $534,000, $424,000 and $147,000 in fiscal 1998, 1997 and 1996,
      respectively, based on the average fair value of the Holding Company's
      common stock for each period. The cost of the 214,245 shares that have not
      yet been committed to be released to participant accounts is reflected as
      a reduction to stockholders' equity ($2.1 million at September 30, 1998).
      The fair value of these shares was approximately $3.3 million at that
      date.

      Stock Option and Incentive Plan

            On October 30, 1996, the stockholders approved the Yonkers Financial
      Corporation 1996 Stock Option and Incentive Plan. Under the plan, 357,075
      shares of authorized but unissued Holding Company common stock are
      reserved for issuance to employees and non-employee directors upon option
      exercises. Options may be either non-qualified stock options or incentive
      stock options. Each option entitles the holder to purchase one share of
      common stock at an exercise price equal to the fair market value of the
      stock on the grant date. An initial grant of 264,951 options was made,
      effective October 30, 1996, at an exercise price of $12.875 per share.
      Options were granted later in fiscal 1997 for 3,000 shares at an exercise
      price of $16.625 per share and in fiscal 1998 for 3,000 shares at an
      exercise price of $21.625 per share. All options granted have a ten-year
      term and vest ratably over five years. No options were exercised through
      September 30, 1998 and the 270,951 outstanding options had a weighted
      average remaining term of approximately 8.1 years. At September 30, 1998,
      a total of 53,590 options with a weighted average exercise price $12.92
      were exercisable and 86,124 reserved shares were available for future
      option grants.

            Options were granted at exercise prices equal to the fair value of
      the common stock at the grant dates. Therefore, in accordance with the
      provisions of APB Opinion No. 25 related to fixed stock options, no
      compensation expense is recognized with respect to options granted. Under
      the alternative fair-value-based method defined in SFAS No. 123, the fair
      value of all fixed stock options on the grant date would be recognized as
      expense over the vesting period. The estimated per-share fair value of
      options granted in fiscal 1998 and 1997 was $4.28 and $4.50, respectively,
      estimated using the Black-Scholes option-pricing model with assumptions
      approximately as follows: dividend yield of 1.8% and 1.7%; expected
      volatility rate of 38.3% and 25.3%; risk-free interest rate of 6.1% and
      6.7%; and expected option life of 7.0 years. Had the Company applied the
      fair-value-based method of SFAS No. 123 to the options granted, it would
      have reported net income, 


                                       47
<PAGE>

      basic EPS and diluted EPS of $2.7 million, $1.05 and $1.01, respectively,
      in fiscal 1998 ($2.8 million, $0.99 and $0.98, respectively, in fiscal
      1997).

      Management Recognition Plan

            On October 30, 1996, the stockholders also approved the Yonkers
      Financial Corporation 1996 Management Recognition Plan ("MRP"). The
      purpose of this plan is to provide directors, officers and employees with
      a proprietary interest in the Company in a manner designed to encourage
      such individuals to remain with the Company. Awards granted under this
      plan vest ratably over five years from the date of grant. The Holding
      Company completed the funding of the plan in November 1996 by purchasing
      142,830 shares of common stock in the open market at a total cost of
      approximately $1.8 million. MRP awards for 108,905 of these shares were
      made in fiscal 1997, with the remaining 33,925 purchased shares included
      in treasury stock and available for future awards. Unearned compensation
      of $1.4 million was recorded with respect to the shares awarded, and
      $279,000 and $271,000 of that amount was amortized to compensation expense
      in fiscal 1998 and 1997, respectively.

(11)  Stockholders' Equity

      Conversion and Stock Offering

            Concurrent with the Conversion on April 18, 1996, the Holding
      Company sold 3,570,750 shares of its common stock in a subscription and
      community offering at a price of $10 per share, for net proceeds of $34.6
      million after deducting conversion costs of $1.1 million. The Holding
      Company used $17.3 million of the net proceeds to acquire all of the
      common stock issued by the Association in the Conversion. Total common
      shares issued and outstanding were 3,570,750 at September 30, 1996,
      3,020,763 at September 30, 1997 (net of 549,987 treasury shares) and
      2,726,239 at September 30, 1998 (net of 844,511 treasury shares).

            In accordance with regulatory requirements, the Association
      established a liquidation account at the time of the Conversion in the
      amount of $15.8 million, equal to its equity at September 30, 1995. The
      liquidation account is maintained for the benefit of eligible and
      supplemental eligible account holders who continue to maintain their
      accounts at the Association after the Conversion. The liquidation account
      is reduced annually to the extent that eligible and supplemental eligible
      account holders have reduced their qualifying deposits as of each
      anniversary date. Subsequent increases do not restore such account
      holder's interest in the liquidation account. In the event of a complete
      liquidation of the Association, each eligible account holder and
      supplemental eligible account-holder will be entitled to receive a
      distribution from the liquidation account in an amount proportionate to
      the current adjusted qualifying balances for accounts then held.

      Earnings Per Share

            As discussed in note 1, the Company has adopted SFAS No. 128 and
      restated its EPS data for all periods to present basic EPS and diluted EPS
      in accordance with the new requirements.


                                       48
<PAGE>

            The following is a summary of the number of shares utilized in the
      Company's EPS calculations for the years ended September 30, 1998, 1997
      and 1996. For purposes of computing basic EPS, net income applicable to
      common stock equaled net income for each of the periods presented.

<TABLE>
<CAPTION>
                                                                  1998     1997       1996(1)
                                                                  -----    -----      -------
                                                                         (In thousands)
      <S>                                                         <C>      <C>         <C>  
      Weighted average common shares outstanding
         for computation of basic EPS (2)                         2,598    2,815       3,292
        Common-equivalent shares due to the dilutive effect of
         stock options and MRP awards (3)                            77       35          --
                                                                  -----    -----       -----
      Weighted average common shares for
         computation of diluted EPS                               2,675    2,850       3,292
                                                                  =====    =====       =====
</TABLE>

(1)   From the date of Conversion, April 18, 1996. Net income for this six-month
      period was $729,000.
(2)   Excludes unvested MRP awards and unallocated ESOP shares that have not
      been committed to be released.
(3)   Computed using the treasury stock method.

      Capital Distributions

            The Association may not declare or pay cash dividends on or
      repurchase any of its shares of common stock if the effect thereof would
      cause its stockholder's equity to be reduced below applicable regulatory
      capital requirements or the amount required to be maintained for the
      liquidation account. The OTS capital distribution regulations applicable
      to savings institutions (such as the Association) that meet their
      regulatory capital requirements, generally limit dividend payments in any
      year to the greater of (i) 100% of year-to-date net income plus an amount
      that would reduce surplus capital by one-half, or (ii) 75% of net income
      for the most recent four quarters. Surplus capital is the excess of actual
      capital at the beginning of the year over the institution's minimum
      regulatory capital requirement. The Association paid $4.8 million in
      dividends to the Holding Company in fiscal 1998 (none in fiscal 1997 and
      1996).

            Unlike the Association, the Holding Company is not subject to OTS
      regulatory restrictions on the payment of dividends to its shareholders.
      The Holding Company is subject, however, to Delaware law, which generally
      limits dividends to an amount equal to the excess of the net assets of the
      Holding Company (the amount by which total assets exceed total
      liabilities) over its statutory capital, or if there is no such excess, to
      its net profits for the current and/or immediately preceding fiscal year.

            Pursuant to approvals received from the OTS, through September 30,
      1998 the Holding Company has repurchased 810,586 shares of common stock
      for its treasury (or approximately 22.7% of its common stock issued).
      These repurchases were made in open market transactions, at a total cost
      of $12.8 million or an average of approximately $15.73 per share. These
      repurchases were in addition to 33,925 treasury shares included in the MRP
      purchases described in note 10.

      Regulatory Capital Requirements

            OTS regulations require savings institutions to maintain a minimum
      ratio of tangible capital to total adjusted assets of 1.5%; a minimum
      ratio of Tier I (core) capital to total adjusted assets of


                                       49
<PAGE>

      3.0%; and a minimum ratio of total (core and supplementary) capital to
      risk-weighted assets of 8.0%.

            Under its prompt corrective action regulations, the OTS is required
      to take certain supervisory actions (and may take additional discretionary
      actions) with respect to an undercapitalized institution. Such actions
      could have a direct material effect on the institution's financial
      statements. The regulations establish a framework for the classification
      of savings institutions into five categories: well capitalized, adequately
      capitalized, undercapitalized, significantly undercapitalized, and
      critically undercapitalized. Generally, an institution is considered well
      capitalized if it has a Tier I (core) capital ratio of at least 5.0%; a
      Tier I risk-based capital ratio of at least 6.0%; and a total risk-based
      capital ratio of at least 10.0%.

            The foregoing capital ratios are based in part on specific
      quantitative measures of assets, liabilities and certain off-balance-sheet
      items as calculated under regulatory accounting practices. Capital amounts
      and classifications are also subject to qualitative judgments by the OTS
      about capital components, risk weightings and other factors. These capital
      requirements, which are applicable to the Association only, do not
      consider additional capital at the Holding Company level.

            Management believes that, as of September 30, 1998 and 1997, the
      Association met all capital adequacy requirements to which it is subject.
      Further, the most recent OTS notification categorized the Association as a
      well-capitalized institution under the prompt corrective action
      regulations. There have been no conditions or events since that
      notification that management believes have changed the Association's
      capital classification.

            The following is a summary of the Association's actual capital
      amounts and ratios as of September 30, 1998 and 1997, compared to the OTS
      requirements for minimum capital adequacy and for classification as a
      well-capitalized institution:

<TABLE>
<CAPTION>
                                                       Minimum Capital       Classification as
                             Association Actual            Adequacy           Well Capitalized
                             ------------------       ------------------     -----------------
                              Amount     Ratio        Amount     Ratio        Amount     Ratio
                              ------     -----        ------     -----        ------     -----
                                                   (Dollars in thousands)
<S>                          <C>           <C>        <C>           <C>      <C>          <C>
September 30, 1998
Tangible capital             $ 35,218      9.3%       $ 5,654       1.5%          N/A      N/A
Tier I (core)capital           35,218      9.3         11,308       3.0      $ 18,845      5.0%
Risk-based capital:
     Tier I                    35,218     25.1            N/A       N/A         8,427      6.0
     Total                     36,520     26.0         11,236       8.0        14,045     10.0

September 30, 1997
Tangible capital             $ 37,108     12.1%       $ 4,608       1.5%          N/A      N/A
Tier I (core)capital           37,108     12.1          9,217       3.0      $ 15,361      5.0%
Risk-based capital:
     Tier I                    37,108     31.2            N/A       N/A         7,145      6.0
     Total                     38,201     32.1          9,527       8.0        11,909     10.0
</TABLE>

(12)  Commitments and Contingencies

      Off-Balance Sheet Financial Instruments


                                       50
<PAGE>

            The Company had outstanding commitments to originate loans of $18.3
      million and unadvanced lines of credit extended to customers of $3.7
      million at September 30, 1998 ($16.4 million and $4.4 million,
      respectively, at September 30, 1997). Although these contractual amounts
      represent the Company's maximum potential exposure to credit loss, they do
      not necessarily represent future cash requirements since certain
      commitments and lines of credit may expire without being funded and others
      may not be fully drawn upon. Substantially all of these commitments and
      lines of credit have been provided to customers within the Company's
      primary lending area described in note 3.

            Commitments to originate loans are legally-binding agreements to
      lend to a customer as long as there is no violation of any condition
      established in the contract. Commitments have fixed expiration dates
      (generally ranging up to 45 days) or other termination clauses and may
      require the payment of a fee by the customer. The Company evaluates each
      customer's creditworthiness on a case-by-case basis. The amount of
      collateral, if any, obtained by the Company upon extension of credit, is
      based on management's credit evaluation of the borrower. The Company's
      loan origination commitments at September 30, 1998 include $3.6 million
      for fixed-rate loans with interest rates ranging from 6.125% to 8.25%.

            Unused lines of credit are legally binding agreements to lend a
      customer as long as there is no violation of any condition established in
      the contract. Lines of credit generally have fixed expiration dates or
      other termination clauses. The amount of collateral obtained, if deemed
      necessary by the Company, is based on management's credit evaluation of
      the borrower.

            At September 30, 1998, the Company had a commitment to sell mortgage
      loans of $12.0 million. This sale was completed in October 1998. Loan sale
      commitments are used from time to time in order to limit the interest rate
      and market risk associated with loans held for sale and commitments to
      originate loans held for sale. Risks associated with commitments to sell
      mortgage loans include the possible inability of the counterparties to
      meet the contract terms, or of the Company to originate loans to fulfill
      the contracts. The Company controls its risk by entering into these
      agreements only with creditworthy counterparties.

      Lease Commitments

            The Company is obligated under non-cancelable leases for certain of
      its banking premises. Rental expense under these leases was $255,000,
      $203,000 and $172,000 for the years ended September 30, 1998, 1997 and
      1996, respectively. At September 30, 1998, the future minimum rental
      payments under the lease agreements for the fiscal years ending September
      30 are $313,000 in 1999, $275,000 in 2000, $220,000 in 2001, $171,000 in
      2002 and $59,000 in 2003.

      Legal Proceedings

            In the normal course of business, the Company is involved in various
      outstanding legal proceedings. In the opinion of management, after
      consultation with legal counsel, the outcome of such legal proceedings
      should not have a material effect on the Company's financial condition,
      results of operations or liquidity.

(13)  Fair Values of Financial Instruments

            SFAS No. 107 requires disclosures about the fair values of financial
      instruments for which it is practicable to estimate fair value. The
      definition of a financial instrument includes many of the 


                                       51
<PAGE>

      assets and liabilities recognized in the Company's balance sheet, as well
      as certain off-balance sheet items. Fair value is defined in SFAS No. 107
      as the amount at which a financial instrument could be exchanged in a
      current transaction between willing parties, other than in a forced or
      liquidation sale.

            Quoted market prices are used to estimate fair values when those
      prices are available. However, active markets do not exist for many types
      of financial instruments. Consequently, fair values for these instruments
      must be estimated by management using techniques such as discounted cash
      flow analysis and comparison to similar instruments. Estimates developed
      using these methods are highly subjective and require judgments regarding
      significant matters, such as the amount and timing of future cash flows
      and the selection of discount rates that appropriately reflect market and
      credit risks. Changes in these judgments often have a material effect on
      the fair value estimates. Since these estimates are made as of a specific
      point in time, they are susceptible to material near-term changes. Fair
      values disclosed in accordance with SFAS No. 107 do not reflect any
      premium or discount that could result from the sale of a large volume of a
      particular financial instrument, nor do they reflect possible tax
      ramifications or estimated transaction costs.

            The following is a summary of the carrying amounts and fair values
      of the Company's financial assets and liabilities (none of which were held
      for trading purposes) at September 30:

<TABLE>
<CAPTION>
                                                          1998               1997
                                                   -----------------   -----------------
                                                   Carrying   Fair     Carrying   Fair
                                                    Amount    Value     Amount    Value
                                                    ------    ------    ------    ------
                                                                (In millions)
      <S>                                           <C>       <C>       <C>       <C>   
      Financial assets:
        Cash and due from banks                     $  3.2    $  3.2    $  2.0    $  2.0
        Short-term investments                         1.0       1.0       1.5       1.5
        Securities                                   168.5     169.2     162.6     163.2
        Real estate mortgage loans held for sale      13.3      13.4      20.4      20.4
        Loans receivable                             184.0     186.9     118.7     119.5
        Accrued interest receivable                    2.8       2.8       2.8       2.8
        FHLB stock                                     6.4       6.4       3.0       3.0

      Financial liabilities:
        Savings certificate accounts                 132.3     133.9     116.9     116.9
        Other deposit accounts                        98.9      98.9      91.0      91.0
        Securities repurchase agreements             107.8     109.6      54.1      53.8
        FHLB advances                                   --        --       6.0       6.0
</TABLE>

            The following is a description of the principal valuation methods
      used by the Company to estimate the fair values of its financial
      instruments:

      Securities

            The fair values of securities were based on market prices or dealer
      quotes.


                                       52
<PAGE>

      Loans

            Fair values of real estate mortgage loans held for sale were based
      on contractual sale prices for loans covered by investor commitments. Any
      remaining loans held for sale were valued based on current secondary
      market prices and yields.

            For valuation purposes, the portfolio of loans receivable was
      segregated into its significant categories, such as residential mortgage
      loans and consumer loans. These categories were further analyzed, where
      appropriate, into components based on significant financial
      characteristics such as type of interest rate (fixed or adjustable).
      Generally, management estimated fair values by discounting the anticipated
      cash flows at current market rates for loans with similar terms to
      borrowers of similar credit quality.

      Deposit Liabilities

            The fair values of savings certificate accounts represent
      contractual cash flows discounted using interest rates currently offered
      on certificates with similar characteristics and remaining maturities. In
      accordance with SFAS No. 107, the fair values of deposit liabilities with
      no stated maturity (checking, NOW, money market, regular savings and club
      accounts) are equal to the carrying amounts payable on demand.

            In accordance with SFAS No. 107, these fair values do not include
      the value of core deposit relationships which comprise a significant
      portion of the Company's deposit base. Management believes that the
      Company's core deposit relationships provide a relatively stable, low-cost
      funding source which has a substantial unrecognized value separate from
      the deposit balances.

      Borrowings

            The fair values of securities repurchase agreements and FHLB
      advances represent contractual repayments discounted using interest rates
      currently available on borrowings with similar characteristics and
      remaining maturities.

      Other Financial Instruments

            The other financial assets set forth in the preceding table have
      fair values that approximate the respective carrying amounts because the
      instruments are payable on demand or have short-term maturities and
      present relatively low credit risk and interest rate risk.

            The fair values of the loan origination commitments and unadvanced
      lines of credit described in note 12 were estimated based on an analysis
      of the interest rates and fees currently charged to enter into similar
      transactions, considering the remaining terms of the instruments and the
      creditworthiness of the potential borrowers. At September 30, 1998 and
      1997, the fair values of these financial instruments approximated the
      related carrying amounts which were not significant.

(14)  Recent Accounting Pronouncements

            In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
      Income, which establishes standards for the reporting and display of
      comprehensive income (and its components) in financial statements. The
      standard does not, however, specify when to recognize or how to measure


                                       53
<PAGE>

      items that make up comprehensive income. Comprehensive income represents
      net income and certain amounts reported directly in stockholders' equity,
      such as the net unrealized gain or loss on available-for-sale securities.
      While SFAS No. 130 does not require a specific reporting format, it does
      require that an enterprise display in the financial statements an amount
      representing total comprehensive income for the period. SFAS No. 130 is
      effective for fiscal years beginning after December 15, 1997 and,
      accordingly, will be adopted by the Company in fiscal 1999. Management
      does not expect that SFAS No. 130 will have a significant impact on the
      Company's financial reporting.

            In June 1997, the FASB also issued SFAS No. 131, Disclosures about
      Segments of an Enterprise and Related Information. Among other things,
      SFAS No. 131 requires public companies to report (i) certain financial and
      descriptive information about its reportable operating segments (as
      defined), and (ii) certain enterprise-wide financial information about
      products and services, geographic areas and major customers. The required
      segment financial disclosures include a measure of profit or loss, certain
      specific revenue and expense items, and total assets. SFAS No. 131 is
      effective for fiscal years beginning after December 15, 1997 and,
      accordingly, will be adopted by the Company in fiscal 1999. Management
      does not expect that SFAS No. 131 will have a significant impact on the
      Company's financial reporting.

            In February 1998, the FASB issued SFAS No.132, Employers'
      Disclosures about Pensions and Other Postretirement Benefits, which
      standardizes the disclosure requirements for these benefits; requires
      additional information on changes in the benefit obligations and fair
      values of plan assets; and eliminates certain present disclosure
      requirements. SFAS No. 132 is effective for fiscal years beginning after
      December 15, 1997 and, accordingly, will be adopted by the Company in
      fiscal 1999. Management does not expect that this standard will
      significantly affect the Company's financial reporting.

            In June 1998, the FASB issued SFAS No. 133, Accounting for
      Derivative Instruments and Hedging Activities, which requires entities to
      recognize all derivatives as either assets or liabilities in the balance
      sheet at fair value. If certain conditions are met, a derivative may be
      specifically designated as a fair value hedge, a cash flow hedge, or a
      foreign currency hedge. A specific accounting treatment applies to each
      type of hedge. Entities may reclassify securities from the
      held-to-maturity category to the available-for-sale category at the time
      of adopting SFAS No. 133. SFAS No. 133 is effective for fiscal years
      beginning after June 15, 1999, although early adoption is permitted. The
      Company has not yet selected an adoption date or decided whether it will
      reclassify securities between categories. The Company is not presently
      engaged in derivatives and hedging activities covered by the new standard
      and, accordingly, SFAS No. 133 is not expected to have a material impact
      on the Company's consolidated financial statements.

            In October 1998, the FASB issued SFAS No. 134, Accounting for
      Mortgage-Backed Securities Retained after the Securitization of Mortgage
      Loans held for Sale by a Mortgage Banking Enterprise. SFAS No. 134
      provides for the classification of such retained securities as held to
      maturity, available for sale, or trading in accordance with SFAS No.115.
      Prior accounting standards limited the classification of these securities
      to the trading category. SFAS No. 134 is effective for the fiscal quarter
      beginning after December 15, 1998 and is not expected to have a material
      impact on the Company's consolidated financial statements.


                                       54
<PAGE>

(15)  Parent Company Condensed Financial Information

            Set forth below are the condensed balance sheets of Yonkers
      Financial Corporation as of September 30, 1998 and 1997, and its condensed
      statements of income and cash flows for the periods indicated:

                                                             September 30,
                                                          ------------------
                                                           1998       1997
                                                          -------    -------
                                                             (In thousands)
      Condensed Balance Sheets
      Assets
          Cash                                            $   269    $   259 
          Short-term investments                               --      1,546 
          Securities                                        4,760      4,024 
          Investment in subsidiary                         36,488     37,749 
          Other assets                                        329        318 
                                                          -------    ------- 
            Total assets                                  $41,846    $43,896
                                                          =======    =======

      Liabilities and Stockholders' Equity
          Liabilities                                     $    44    $    18 
          Stockholders' equity                             41,802     43,878 
                                                          -------    ------- 
            Total liabilities and stockholders' equity    $41,846    $43,896
                                                          =======    =======

<TABLE>
<CAPTION>
                                                                                    Year Ended September 30,
                                                                                --------------------------------
                                                                                 1998        1997         1996*
                                                                                -------     -------      -------
                                                                                       (In thousands)
<S>                                                                             <C>         <C>          <C>    
      Condensed Statements of Income
      Dividends received from subsidiary                                        $ 4,800     $    --      $    --
      Interest income                                                               537         682          388
      Non-interest expense                                                         (404)       (150)         (43)
                                                                                -------     -------      -------
          Income before income tax expense and effect of subsidiary earnings      4,933         532          345
      Income tax expense                                                             57         232          146
                                                                                -------     -------      -------
          Income before effect of subsidiary earnings                             4,876         300          199
      Effect of subsidiary earnings:
          Excess of dividends over current earnings of subsidiary                (1,975)         --           --
          Equity in undistributed earnings of subsidiary                             --       2,652          530
                                                                                -------     -------      -------
            Net income                                                          $ 2,901     $ 2,952      $   729
                                                                                =======     =======      =======
</TABLE>

      * From the date of Conversion, April 18, 1996 


                                       55
<PAGE>

<TABLE>
<CAPTION>
                                                                                        Year Ended September 30,
                                                                                  -----------------------------------
                                                                                    1998         1997          1996*
                                                                                  --------     --------      --------
                                                                                              (In thousands)
      <S>                                                                         <C>          <C>           <C>     
      Condensed Statements of Cash Flows 
      Cash flows from operating activities:
          Net income                                                              $  2,901     $  2,952      $    729
          Adjustments to reconcile net income to net cash
            provided by operating activities:
               Excess of dividends over current earnings of subsidiary               1,975           --            --
               Equity in undistributed earnings of subsidiary                           --       (2,652)         (530)
               Other adjustments, net                                                  947          392           140
                                                                                  --------     --------      --------
                  Net cash provided by operating activities                          5,823          692           339
                                                                                  --------     --------      --------
      Cash flows from investing activities:
          Purchases of securities                                                   (1,187)      (4,000)       (4,000)
          Proceeds from sales and calls of securities                                  256        4,000            --
          Purchase of subsidiary's common stock                                         --           --       (17,314)
                                                                                  --------     --------      --------
                  Net cash (used in) provided by investing activities                 (931)          --       (21,314)
                                                                                  --------     --------      --------
      Cash flows from financing activities:
          Common stock repurchased                                                  (5,676)      (8,909)           --
          Net proceeds from issuance of common stock, exclusive
            of ESOP shares                                                              --           --        31,771
          Dividends paid                                                              (752)        (610)         (164)
                                                                                  --------     --------      --------
                  Net cash (provided by) used in financing activities               (6,428)      (9,519)       31,607
                                                                                  --------     --------      --------
      (Decrease) increase in cash and cash equivalents                              (1,536)      (8,827)       10,632
      Cash and cash equivalents at beginning of period                               1,805       10,632            --
                                                                                  --------     --------      --------
      Cash and cash equivalents at end of period                                  $    269     $  1,805      $ 10,632
                                                                                  ========     ========      ========
</TABLE>


                                       56
<PAGE>

(16)  Selected Quarterly Financial Data (Unaudited)

            The following is a summary of unaudited quarterly financial data for
      the fiscal years ended September 30, 1998 and 1997:

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                               ---------------------------------------------------
                                               December 31   March 31      June 30    September 30
                                               -----------   --------      -------    ------------
                                                      (In thousands, except per share data)
      <S>                                        <C>          <C>          <C>          <C>     
      Fiscal 1998
      Interest and dividend income               $6,054       $6,246       $6,429       $6,746  
      Interest expense                            3,031        3,293        3,718        3,980
                                                 ------       ------       ------       ------
             Net interest income                  3,023        2,953        2,711        2,766
      Provision for loan losses                     175           75           75           50
      Non-interest income                           357          248          534          332
      Non-interest expense                        1,829        1,979        1,952        1,884
                                                 ------       ------       ------       ------
             Income before income tax expense     1,376        1,147        1,218        1,164
      Income tax expense                            568          459          491          486
                                                 ------       ------       ------       ------
             Net income                          $  808       $  688       $  727       $  678
                                                 ======       ======       ======       ======
                                                                                      
      Earnings per common share:                                                      
             Basic                               $ 0.30       $ 0.26       $ 0.28       $ 0.28
             Diluted                               0.29         0.25         0.27         0.27
                                                 ======       ======       ======       ======
                                                                                      
      Fiscal 1997                                                                     
      Interest and dividend income               $4,740       $5,107       $5,339       $5,545
      Interest expense                            2,229        2,392        2,588        2,748
                                                 ------       ------       ------       ------
             Net interest income                  2,511        2,715        2,751        2,797
      Provision for loan losses                      75           75           75           75
      Non-interest income                           202          165          199          221
      Non-interest expense                        1,583        1,549        1,569        1,618
                                                 ------       ------       ------       ------
             Income before income tax expense     1,055        1,256        1,306        1,325
      Income tax expense                            388          508          513          581
                                                 ------       ------       ------       ------
             Net income                          $  667       $  748       $  793       $  744
                                                 ======       ======       ======       ======
                                                                                      
      Earnings per common share:                                                      
             Basic                               $ 0.22       $ 0.27       $ 0.29       $ 0.28
             Diluted                               0.22         0.26         0.28         0.27
                                                 ======       ======       ======       ======
</TABLE>


                                       57
<PAGE>

                          YONKERS FINANCIAL CORPORATION
                             STOCKHOLDER INFORMATION

ANNUAL MEETING

The annual meeting of stockholders will be held at 4:30 p.m., January 27, 1999,
at The Yonkers Savings and Loan Association, FA, located at One Manor House
Square, Yonkers, New York.

STOCK LISTING

The Company's stock is traded over the counter, on the NASDAQ National Market
under the symbol "YFCB".

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The table below shows the range of high and low bid prices and dividends paid
for the quarters indicated. The prices do not represent actual transactions and
do not include retail markups, markdowns or commissions.

           QUARTER ENDED            HIGH        LOW       DIVIDENDS
           -------------            ----        ---       ---------
           
           December 31, 1996      $13 3/8     $12 1/8       $0.05
           
           March 31, 1997          16 1/4      12 3/4        0.05
           
           June 30, 1997           15 3/4      14 1/4        0.05
           
           September 30, 1997      20 3/8      15 3/8        0.06
           
           December 31, 1997       22          18 1/4        0.06
           
           March 31, 1998          20 1/4      18 5/16       0.07
                                   
           June 30, 1998           20          18 1/4        0.07
                                   
           September 30, 1998      19 3/8      13 7/8        0.08
           
The Board of Directors intends to continue the payment of cash dividends,
dependent on the results of operations and financial condition of the Company,
tax considerations, industry standards, economic conditions, general business
practices and other factors. Dividend payment decisions are made with
consideration of a variety of factors including earnings, financial condition,
market considerations and regulatory restrictions. Restrictions on dividend
payments are described in Note 11 of the Notes to the Consolidated Financial
Statements included in this report.

As of September 30, 1998, the Company had approximately 491 stockholders of
record and 2,726,239 outstanding shares of common stock.

SHAREHOLDER AND                                      TRANSFER                  
GENERAL INQUIRIES                                    AGENT                     

Joseph L. Macchia, Vice President and Secretary      Registrar & Transfer Co.  
Yonkers Financial Corporation                        10 Commerce Drive         
6 Executive Plaza                                    Cranford, New Jersey 07016
Yonkers, New York 10701                              (800) 456-0596            
(914) 965-2500

INVESTOR                      
RELATIONS                     
                              
Yonkers Financial Corporation 
6 Executive Plaza             
Yonkers, New York 10701       
(914) 965-2500                

ANNUAL AND OTHER REPORTS

The Company is required to file an annual report on Form 10-K for its fiscal
year ended September 30, 1998, with the Securities and Exchange Commission.
Copies of the Form 10-K annual report and the Company's quarterly reports may be
obtained without charge by contacting:


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<PAGE>

                          YONKERS FINANCIAL CORPORATION
                              CORPORATE INFORMATION

COMPANY AND BANK ADDRESS

6 Executive Plaza                            Telephone  (914) 965-2500
Yonkers, New York 10701                      Fax        (914) 965-2599

BOARD OF DIRECTORS

William G. Bachop, Chairman                  Michael J. Martin
Retired professional engineer                Vice President of Herbert G. 
and President of Herbert G. Martin, Inc.     Martin, Inc.

P. Anthony Sarubbi, Vice Chairman            Eben T. Walker
A consulting engineer and President of       President of Graphite Metallizing
P. Anthony Sarubbi, Inc.                     Corporation 

                                                        
Donald R. Angelilli                          Charles D. Lohrfink
A real estate broker employed by             Retired Public Affairs Director for
Weichert Realtors                            Consolidated Edison

Richard F. Komosinski
President and Chief Executive Officer
The Yonkers Savings and Loan Association, FA

OFFICERS

Richard F. Komosinski                        Joseph L. Macchia
President and Chief Executive Officer        Vice President, Secretary

Joseph D. Roberto                            Philip Guarnieri
Vice President, Treasurer and                Vice President
Chief Financial Officer

INDEPENDENT AUDITORS                         SPECIAL COUNSEL

KPMG Peat Marwick LLP                        Silver, Freedman & Taff, L.L.P.
3001 Summer Street                           1100 New York Avenue, N.W.
Stamford, Connecticut  06905                 Seventh Floor -- East Tower
                                             Washington, D.C.  20005


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