December 27, 1996




VIA MESSENGER

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549

         Re:      Yonkers Financial Corporation - File No. 0-27716

Dear Sir/Madam:

         On behalf of our client, Yonkers Financial Corporation (the "Company"),
attached herewith for filing via EDGAR is the Company's annual report for the
year ended September 30, 1996 on Form 10-K under the Securities Exchange Act of
1934. The filing fee of $250 has been wired to the Securities and Exchange
Commission by the Company.

         Pursuant to General Instruction C.3. to Form 10-K, please note that,
based on our discussions with KPMG Peat Marwick LLP, it is our understanding
that the financial statements in the Form 10-K do not reflect any change from
the preceding year in any accounting principles or practices or in the methods
of application of such principles or practices, with the exception of the
Company's adoption of SFAS No. 114 and 118, and SOP 94-6 during fiscal 1996.

         Concurrently herewith, three complete copies of the Form 10-K are being
filed with the National Association of Securities Dealers, Inc.


<PAGE>



         Kindly acknowledge receipt of the enclosures by stamping and returning
to our messenger the attached copy of this letter.

 

                                                     Very truly yours,



                                                     Gary A. Lax, P.C.

Enclosures

cc:      NASD, Inc.
         Mr. Joseph Roberto
         Mr. Thomas W. Canfarotta




<PAGE>

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




                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                ----------------
                                    FORM 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]

                  For the fiscal year ended September 30, 1996

                                       OR

    [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [No Fee Required]

                         Commission file number 0-27716


                          YONKERS FINANCIAL CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                         13-3870836
-------------------------------                           ------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

  6 Executive Plaza, Yonkers, New York                              10701
---------------------------------------                          ----------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code: (914) 965-2500

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                     Common Stock, par value $0.01 per share
                     ---------------------------------------
                                (Title of Class)

         Indicate by check mark whether the Registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
twelve months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such requirements for the past
90 days. YES [X] NO [ ]

         Indicate by check mark if there is no disclosure of delinquent filers
in response to Item 405 of Regulation S-K contained in this form, and no
disclosure will be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]

         As of December 23, 1996, there were issued and outstanding 3,172,250
shares of the Registrant's Common Stock. The aggregate market value of the
voting stock held by non-affiliates of the Registrant, computed by reference to
the average of the closing bid and asked price of such stock on the Nasdaq
National Market System as of December 23, 1996, was approximately $34.4 million.
(The exclusion from such amount of the market value of the shares owned by any
person shall not be deemed an admission by the Registrant that such person is an
affiliate of the Issuer.)

                       DOCUMENTS INCORPORATED BY REFERENCE

PARTS II and IV of Form 10-K--Annual Report to Stockholders for the fiscal year
ended September 30, 1996.

PART III of Form 10-K--Proxy Statement for the Annual Meeting of Stockholders
for the fiscal year ended September 30, 1996.

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

<PAGE>



                          YONKERS FINANCIAL CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                               SEPTEMBER 30, 1996

                                Table of Contents



          Part I                                                            Page
Item 1    Business..........................................................   3
Item 2    Properties........................................................  39
Item 3    Legal Proceedings.................................................  40
Item 4    Submission of Matters to a Vote of Security Holders...............  40

          Part II
Item 5    Market for Registrant's Common Equity and
            Related Shareholder Matters.....................................  40
Item 6    Selected Financial Data...........................................  40
Item 7    Management's Discussion and Analysis of Financial
             Condition and Results of Operations............................  40
Item 8    Financial Statements and Supplementary Data.......................  41
Item 9    Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure............................  41

          Part III
Item 10   Directors, Executive Officers, Promoters and Control Persons;       41
             Compliance with Section 16(a) of the Exchange Act..............
Item 11   Executive Compensation............................................  42
Item 12   Security Ownership of Certain Beneficial Owners
             and Management.................................................  42
Item 13   Certain Relationships and Related Transactions....................  42

          Part IV
Item 14   Exhibits, Financial Statement Schedules and Reports
             on Form 8-K....................................................  43
          Signatures........................................................  45



                                        2

<PAGE>



                                     PART I


Item 1.   Business

General

         Yonkers Financial Corporation (the "Holding Company") was formed at the
direction of The Yonkers Savings and Loan Association, FA ("Yonkers Savings" or
the "Association") in December 1995 for the purpose of owning all of the
outstanding stock of the Association issued in the Association's conversion from
the mutual to stock form of organization (the "Conversion"). The Conversion was
completed on April 18, 1996. Concurrent with the Conversion, the Holding Company
sold 3,570,750 shares of its common stock for net proceeds of $34.6 million. The
Holding Company and the Association are collectively referred to herein as the
"Company."

         The Holding Company is incorporated under the laws of the State of
Delaware (and qualified to do business in the State of New York) and generally
is authorized to engage in any activity that is permitted by the Delaware
General Corporation Law. The assets of the Holding Company consist of the stock
of the Association, certain short-term and other investments, and a loan to its
Employee Stock Ownership Plan (the "ESOP").

         As a community-oriented financial institution, the Association offers a
variety of financial services to meet the needs of communities in its market
area. The Association attracts deposits from the general public and uses such
deposits, together with borrowings, to originate primarily one- to four-family
residential mortgage loans (including home equity lines of credit) and, to a
lesser extent, multi-family and commercial real estate, consumer, land,
construction and commercial business loans in the Association's primary market
area. The Association also invests in mortgage-backed and other securities
permissible for a federally-chartered savings association. As a member of the
Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation ("FDIC"), the Association's deposits are insured up to applicable
limits.

         The executive offices (corporate headquarters) of the Company are
located at 6 Executive Plaza, Yonkers, New York 10701, and its telephone number
at that address is (914) 965-2500.

Market Area

         The Company conducts its banking operations through its main office
located at One Manor House Square, Yonkers, New York and three branch offices
located in Yonkers, New York. A corporate headquarters office is also maintained
in Yonkers, New York. The Company's market area for deposits includes the City
of Yonkers and surrounding communities. The Company's primary market area for
its lending activities consists of communities within Westchester County and
portions of Rockland, Putnam and Dutchess Counties, New York.

         Yonkers is located in Westchester County approximately 10 miles north
of the Borough of Manhattan in New York City. Yonkers and the surrounding
communities include a diverse population of low- and moderate-income
neighborhoods as well as middle class and more affluent neighborhoods. The
housing in the low- and moderate-income neighborhoods consists mainly of
apartments while other areas consist primarily of single-family residences. The
Company's market area also includes substantial commercial areas containing
shopping areas, office and medical facilities and small- and medium-size
manufacturing and industrial facilities.

                                        3

<PAGE>



Lending Activities

         General. Historically, the Company originated 30-year, fixed-rate
mortgage loans secured by one- to four-family residences. Since the mid-1980s,
in order to reduce its vulnerability to changes in interest rates, the Company
has also originated adjustable-rate mortgage ("ARM") loans and home equity lines
of credit. Currently, the Company sells all of its conforming new 30-year,
fixed-rate loan originations in the secondary market. The Company also offers
multi-family and commercial real estate, consumer, construction and land loans.

                                        4

<PAGE>



         The following table sets forth the composition of the loan portfolio,
by category, in dollar amounts and as a percentage of the total portfolio at the
dates indicated.

<TABLE>
<CAPTION>

                                                                      At September 30, 
                                 -------------------------------------------------------------------------------------------------  
                                         1996                 1995                  1994                  1993              1992    
                                         ----                 ----                  ----                  ----              ----    
                                
                                            Percent            Percent             Percent               Percent          Percent 
                                 Amount    of Total   Amount  of Total    Amount  of Total     Amount   of Total   Amount of Total
                                 ------    --------   ------  --------    ------  --------     ------   --------   ------ --------
                                                                         (Dollars in Thousands)
<S>                              <C>           <C>      <C>      <C>        <C>      <C>         <C>       <C>       <C>      <C>   
                                                                                                                                  
Real Estate Loans:                                                                                                                
  One- to four-family(1)(2)...  $62,283       70.6%   $63,282    74.4%    $64,078    80.7%     $67,633     85.1%   $72,577   86.7%
  Multi-family................    5,471        6.2      5,647     6.6       4,483     5.7        2,281      2.9      1,264    1.5 
  Commercial..................    9,117       10.3      6,575     7.7       3,176     4.0        2,704      3.4      2,392    2.9 
  Construction................    2,175        2.5      2,205     2.6       2,138     2.7        1,472      1.9      1,784    2.1 
  Land........................    1,934        2.2      2,112     2.5         814     1.0          914      1.1      1,199    1.4 
                                -------     ------    -------  ------    --------  ------     --------   ------    ------- ------ 
     Total real estate loans..   80,980       91.8     79,821    93.8      74,689    94.1       75,004     94.4     79,216   94.6 
                                -------      -----    -------   -----     -------   -----      -------    -----    -------  ----- 
                                                                                                                                  
Other Loans:                                                                                                                      
  Consumer loans:                                                                                                                 
  Home equity.................    2,911        3.3      2,389     2.8       1,872     2.4        1,881      2.4      1,815    2.2 
  Personal....................    1,632        1.8      1,734     2.0       1,704     2.2        1,589      2.0      1,475    1.7 
  Automobile..................      367        0.4        409     0.5         473     0.6          381      0.5        480    0.6 
  Home improvement............      153        0.2        209     0.2         279     0.3          326      0.4        455    0.5 
  Other.......................      790        0.9        474     0.6         273     0.3           81      0.1         73    0.1 
                               --------     ------    -------  ------    --------  ------    ---------   ------   -------- ------ 
     Total consumer loans.....    5,853        6.6      5,215     6.1       4,601     5.8        4,258      5.4      4,298    5.1 
                                                                                                                                  
Commercial business loans.....    1,413        1.6         56     0.1          92     0.1          175      0.2        226    0.3 
                               --------     ------   --------  ------   ---------  ------     --------   ------    ------- ------ 
                                                                                                                                  
     Total other loans........    7,266        8.2      5,271     6.2       4,693     5.9        4,433      5.6      4,524    5.4 
                               --------     ------    -------  ------    --------  ------     --------   ------    ------- ------ 
                                                                                                                                  
     Total loans..............   88,246      100.0%    85,092   100.0%     79,382   100.0%      79,437    100.0%    83,740  100.0%
                                             =====              =====               =====                 =====             ===== 
                                                                                                                                    
Less:                                                                                                                               
  Construction loans in process.  (171)                 (293)               (943)                 (215)               (260)         
  Allowance for loan losses.....  (937)                 (719)               (311)                 (295)               (490)         
  Net deferred loans fees.......  (472)                 (401)               (304)                 (294)               (288)         
                               -------              --------              ------               -------             -------          
                                                                                                                                    
     Total loans, net..........$86,666               $83,679             $77,824               $78,633             $82,702          
                               =======               =======             =======               =======             =======          
</TABLE>                                                                      
---------------  
(1) Includes advances under home equity lines of credit of $7.3 million, $9.1
    million, $10.1 million, $11.2 million and $11.5 million, respectively, at
    September 30, 1996, 1995, 1994, 1993 and 1992.
(2) Includes cooperative apartment loans of $5.5 million, $5.8 million, $5.9
    million, $6.7 million and $7.3 million, respectively, at September 30,1996,
    1995, 1994, 1993 and 1992.

                                        5

<PAGE>



         The following table sets forth the composition of the loan portfolio,
by category and by type of interest rate (fixed or adjustable), in dollar
amounts and as a percentage of the total portfolio at the dates indicated.

<TABLE>
<CAPTION>

                                                                        At September 30,
                                  -------------------------------------------------------------------------------------------------
                                         1996                 1995               1994               1993               1992
                                         ----                 ----               ----               ----               ----
                                
                                             Percent             Percent            Percent             Percent             Percent
                                    Amount   of Total   Amount   of Total  Amount   of Total   Amount   of Total   Amount   of Total
                                    ------   --------   ------   --------  ------   --------   ------   --------   ------   --------
                                                                    (Dollars in Thousands)
<S>                                   <C>        <C>      <C>        <C>    <C>        <C>     <C>         <C>     <C>         <C>

Fixed-Rate Loans
Real estate loans:
    One- to four-family...........  $11,805      13.4%  $11,805    13.9%  $ 8,352     10.5%   $10,094      12.7%  $12,985      15.5%
    Multi-family..................       47       0.1       715     0.8       539      0.7        550       0.7        29      ---
    Commercial....................      131       0.1       396     0.5       194      0.2        230       0.3        19      ---
    Land..........................       49       0.1        49     0.1        49      0.1         49       0.1        49       0.1
                                   --------     -----  -------- ------   --------   -------   -------    -------  -------    ------
       Total real estate loans....   12,032      13.7    12,965    15.3     9,134     11.5     10,923      13.8    13,082      15.6
                                                                                             
Consumer loans....................    5,853       6.6     5,215     6.1     4,601      5.8      4,258       5.3     4,298       5.1
                                   --------    ------   -------  ------   -------   ------   --------    ------  --------    ------
       Total fixed-rate loans.....   17,885      20.3    18,180    21.4    13,735     17.3     15,181      19.1    17,380      20.7
                                   --------     -----   -------   -----   -------    -----    -------     -----   -------     -----
                                                                                             
Adjustable-Rate Loans                                                                        
Real estate loans:                                                                           
    One- to four-family(1)(2).....   50,478      57.2    51,477    60.5    55,726     70.2     57,539      72.4    59,592      71.2
    Multi-family..................    5,424       6.1     4,932     5.8     3,944      5.0      1,731       2.2     1,235       1.5
    Commercial....................    8,986      10.2     6,179     7.2     2,982      3.7      2,474       3.1     2,373       2.8
    Construction..................    2,175       2.5     2,205     2.6     2,138      2.7      1,472       1.9     1,784       2.1
    Land..........................    1,885       2.1     2,063     2.4       765      1.0        865       1.1     1,150       1.4
                                   --------    ------   -------  -------  -------   ------   --------    ------  --------    ------
       Total real estate loans....   68,948      78.1    66,856    78.5    65,555     82.6     64,081      80.7    66,134      79.0
                                                                                             
Commercial business loans.........    1,413       1.6        56     0.1        92      0.1        175       0.2       226       0.3
                                   --------    ------  --------  --------  ------   ------   --------    ------  --------    ------
       Total adjustable-rate loans   70,361      79.6    66,912    78.7    65,647     82.7     64,256      80.9    66,360      79.3
                                    -------     -----   -------   -----   -------    -----    -------     -----   -------     -----
                                                                                             
Total loans.......................   88,246     100.0%   85,092   100.0%   79,382    100.0%    79,437     100.0%   83,740     100.0%
                                                =====             =====              =====                =====               =====
                                                                                           
Less:
    Construction loans in process.     (171)               (293)             (943)               (215)               (260)
    Allowance for loan losses.....     (937)               (719)             (311)               (295)               (490)
    Net deferred loan fees........     (472)               (401)             (304)               (294)               (288)
                                    -------            --------          --------            --------            --------
       Total loans, net...........  $86,666             $83,679           $77,824             $78,633             $82,702
                                    =======             =======           =======             =======             =======
</TABLE>
-------------
(1) Includes advances under home equity lines of credit of $7.3 million, $9.1
    million, $10.1 million, $11.2 million and $11.5 million, respectively, at
    September 30, 1996, 1995, 1994, 1993 and 1992.
(2) Includes cooperative apartment loans of $5.5 million, $5.8 million, $5.9
    million, $6.7 million and $7.3 million, respectively, at September 30, 1996,
    1995, 1994, 1993 and 1992.

                                        6

<PAGE>



         The following table sets forth the contractual maturity of the
Company's loans at September 30, 1996. The table reflects the entire unpaid
principal balance of a loan in the maturity period that includes the final
payment date and, accordingly, does not give effect to periodic principal
repayments or possible prepayments. Principal repayments and prepayments
totalled $11.8 million, $11.0 million and $15.4 million for the years ended
September 30, 1996, 1995 and 1994, respectively.

<TABLE>
<CAPTION>

                                                                           At September 30, 1996
                                   ---------------------------------------------------------------------------------
                                                                                  Commercial                                     
                                        One- to Four-Family(1)   Multi-Family     Real Estate       Construction    
                                   ---------------------------  ---------------  ---------------   -----------------
                                               Weighted            Weighted            Weighted           Weighted  
                                                Average             Average             Average            Average  
                                       Amount    Rate     Amount     Rate     Amount     Rate    Amount     Rate    
                                       ------    ----     ------     ----     ------     ----    ------     ----    
                                                                      (Dollars in Thousands)
<S>                                      <C>       <C>      <C>       <C>       <C>       <C>       <C>       <C>   
Contractual maturity:
   One year or less(2).............   $ 1,204     9.25%  $   ---      ---%    $  229     10.51%   $1,826    10.25%  
                                       ------            -------               -----               -----            
                                                                                                                    
   After one year:                                                                                                  
     More than 1 year to 2 years...     1,446     9.44       103      9.13        55      8.50       349    10.25   
     More than 2 years to 3 years..     1,403     9.61         2      8.25       ---     ---         ---    ---     
     More than 3 years to 5 years..     2,837     9.69         7      8.25        39      9.50       ---    ---     
     More than 5 years to 10 years.     4,706     9.06        43      8.00       508      9.00       ---    ---     
     More than 10 years to 20 years    13,986     7.94     5,014      8.62     7,291      8.72       ---    ---     
     More than 20 years............    36,701     7.92       302      8.35       995      8.68       ---    ---     
                                      -------             ------               ------             -------        
                                                                                                                    
     Total after one year..........    61,079     8.17     5,471      8.61     8,888      8.73       349    10.25   
                                      -------             ------              ------             -------            
                                                                                                                    
Total amount due...................   $62,283     8.19  % $5,471      8.61%   $9,117      8.78%   $2,175    10.25%  
                                      =======             ======              ======              ======            


                                       ------------------------------------------------------------
                                                                   Consumer and                            
                                                Land            Commercial Business         Total          
                                                ----            -------------------         -----          
                                        
                                                 Weighted            Weighted             Weighted 
                                                 Average             Average               Average 
                                       Amount      Rate     Amount    Rate     Amount       Rate   
                                       ------      ----     ------    ----     ------       ----   
                                     
<S>                                     <C>         <C>       <C>      <C>      <C>          <C>
                                   
                                                  
Contractual maturity:                                             
   One year or less(2).............   $1,314      10.43%    $  240    13.97%  $ 4,813       10.25%
                                       -----                 -----             ------             
                                                                                   
   After one year:                                                                 
     More than 1 year to 2 years...      ---        ---        417    11.35     2,370        9.86 
     More than 2 years to 3 years..      ---        ---        679    11.01     2,084       10.06 
     More than 3 years to 5 years..      620      10.25      2,318     9.61     5,821        9.71 
     More than 5 years to 10 years.      ---        ---      3,494    10.00     8,751        9.43 
     More than 10 years to 20 years      ---        ---        118     8.84    26,409        8.29 
     More than 20 years............      ---        ---        ---      ---    37,998        7.94 
                                     --------              -------            -------             
                                                                                   
     Total after one year..........      620      10.25      7,026    10.03    83,433        8.44 
                                     -------                ------            -------             
                                                                                   
Total amount due...................   $1,934      10.37%    $7,266    10.16%  $88,246        8.54%
                                     =======               =======            =======  
</TABLE>                                                    
-----------  
(1) Includes $7.3 million of advances under home equity lines of credit which
    require minimum interest-only payments for the first five to ten years the
    advance is outstanding, followed by a balloon payment thereafter.
(2) Includes demand loans, loans having no stated maturity, and overdraft loans.



                                        7

<PAGE>



         The following table sets forth the dollar amounts in each loan category
at September 30, 1996 that are contractually due after September 30, 1997, and
whether such loans have fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>

                                                         Due After September 30, 1997
                                                  ---------------------------------------
                                                  Fixed          Adjustable         Total
                                                  -----          ----------         -----
                                                              (In Thousands)
<S>                                               <C>              <C>               <C>  

Real estate loans:
    One- to four-family......................    $11,746          $49,333          $61,079
    Multi-family.............................         47            5,424            5,471
    Commercial...............................        131            8,757            8,888
    Construction.............................        ---              349              349
    Land.....................................        ---              620              620
                                                --------         --------         --------
       Total real estate loans...............     11,924           64,483           76,407

Consumer and commercial business loans.......      5,613            1,413            7,026
                                                --------          -------          -------

       Total loans...........................    $17,537          $65,896          $83,433
                                                 =======          =======          =======
</TABLE>

         Pursuant to Federal law, the aggregate amount of loans that the Company
is permitted to make to any one borrower or a group of related borrowers is
generally limited to 15% of the Association's unimpaired capital and surplus
(25% if the security for such loan has a "readily ascertainable" value or 30%
for certain residential development loans). At September 30, 1996, based on the
15% limitation, the Company's loans-to-one borrower limit was approximately $5.2
million. On the same date, the Company had no borrowers with outstanding
balances in excess of this amount. As of September 30, 1996, the largest dollar
amount outstanding to one borrower, or group of related borrowers, was a $1.4
million commercial business loan secured by an assignment to the Company of a
note and leasehold mortgage on a research and development facility located in
Yonkers, New York. The Company's next largest loan to one borrower or group
outstanding totaled $1.1 million at September 30, 1996 and was secured by an
office building located in Yonkers, New York. These loans were performing in
accordance with their terms at September 30, 1996.

         The Company's lending is subject to its written underwriting standards
and to loan origination procedures. Decisions on loan applications are made on
the basis of detailed applications submitted by the prospective borrower and
property valuations (consistent with the Company's appraisal policy) prepared by
independent appraisers. The loan applications are designed primarily to
determine the borrower's ability to repay, and the more significant items on the
application are verified through use of credit reports, financial statements,
tax returns and/or confirmations.

         Under the Company's loan policy, the individual processing an
application is responsible for ensuring that all documentation is obtained prior
to the submission of the application to a loan officer for approval. In
addition, the loan officer verifies that the application meets the Company's
underwriting guidelines described below. Also, each application file is reviewed
to assure its accuracy and completeness.

         The Company's lending officers have approval authority for one- to
four-family residential loans, other than cooperative apartment ("co-op") loans,
up to $250,000. One- to four-family residential loans over $250,000 to $500,000
require the approval of the Company's President or its Vice President and

                                        8

<PAGE>



Chief Lending Officer. Co-op loans up to $500,000 require the approval and/or
review of the Chief Lending Officer. The Company's Chief Lending Officer has
approval authority for multi-family and commercial real estate loans up to
$500,000 and for land loans up to $250,000. Loans in excess of these amounts
require the approval of the Company's Executive Committee or Board of Directors.
Various officers have approval authority ranging from $2,000 on secured consumer
loans, up to $50,000 on fixed-rate home equity loans and up to $30,000 on
commercial business loans. Approval authorities on unsecured consumer loans
range from $2,000 to $10,000.

         Generally, the Company requires title insurance or abstracts on its
mortgage loans as well as fire and extended coverage casualty insurance in
amounts at least equal to the principal amount of the loan or the value of
improvements on the property, depending on the type of loan. The Company also
requires flood insurance to protect the property securing its interest when the
property is located in a flood plain.

         One- to Four-Family Residential Real Estate Lending. The cornerstone of
the Company's lending program is the origination of loans secured by mortgages
on owner-occupied one- to four-family residences. At September 30, 1996, $62.3
million, or 70.6%, of the Company's loan portfolio consisted of mortgage loans
on one- to four-family residences (including $7.3 million of advances under home
equity lines of credit and $5.5 million of co-op loans). Substantially all of
the residential loans originated by the Company are secured by properties
located in the Company's primary lending area. A majority of the mortgage loans
originated by the Company are retained and serviced by it. At September 30,
1996, approximately $6.3 million of the Company's one- to four-family
residential real estate loans were secured by non-owner occupied properties. At
that date, the average outstanding residential loan balance was approximately
$72,000.

         Since the mid-1980s, the Company has offered ARM loans at rates and on
terms determined in accordance with market and competitive factors. The Company
offers one-year ARMs for terms of up to 30 years at a margin (generally 275
basis points) over the yield on the Average Weekly One Year U.S. Treasury
Constant Maturity Index. The one-year ARM loans currently offered by the Company
generally provide for a 200 basis point annual interest rate change cap and a
lifetime cap of 600 basis points over the initial rate. The Company also offers
a three-year ARM loan which adjusts based on a margin (generally 275 basis
points) over the yield on the three-year Treasury Note. The Company's three-year
ARM loans have a 200 basis point interest rate cap per adjustment period and a
lifetime cap of 500 basis points over the initial rate. The Company also offers
ARM loans which are fixed for the first five-, seven- or ten-year period of the
loan term and adjust annually thereafter based on a specified margin over the
yield on the Average Weekly One Year U.S. Treasury Constant Maturity Index for
the remaining loan term. These loans currently provide for an annual interest
rate cap not to exceed 300 basis points for the initial adjustment period (and
200 basis points thereafter) and a lifetime cap of 500 basis points.

         The Company's ARM loans typically do not adjust below the initial rate.
Initial interest rates offered on the Company's ARMs may be 100 to 350 basis
points below the fully indexed rate. Although borrowers on such loans are
generally qualified at the fully indexed rate, the risk of default on these
loans may increase as interest rates increase. See "- Delinquencies and
Non-Performing Assets." The Company's ARMs do not permit negative amortization
of principal, do not contain prepayment penalties and are not convertible into
fixed-rate loans. At September 30, 1996, one- to four-family ARMs (including
ARMs earning a fixed rate of interest for an initial period of up to 10 years)
totaled $50.5 million, or 57.2% of the Company's total loan portfolio.


                                        9

<PAGE>



         The Company also originates home equity lines of credit secured by a
lien on the borrower's residence. The Company's home equity lines are generally
limited to $250,000. The Company uses the same underwriting standards for home
equity lines as it uses for one- to four-family residential mortgage loans. The
interest rates for home equity lines of credit float at a stated margin over the
lowest prime rate published in The Wall Street Journal and may not exceed 15.75%
over the life of the loan. The Company currently offers home equity lines for
terms of up to 30 years with interest only paid for the first 10 years of the
loan term. At September 30, 1996, the Company had $7.3 million of outstanding
advances under home equity lines and an additional $5.0 million of funds
committed, but undrawn, under home equity lines of credit.

         The Company also offers conventional fixed-rate loans with maximum
terms of up to 30 years, although the Company has recently emphasized
originations of fixed-rate loans with terms of 10 to 15 years. The interest rate
on such loans is generally based on competitive factors. The Company typically
underwrites its fixed-rate one- to four-family loans in accordance with Federal
Home Loan Mortgage Corporation ("FHLMC") and Federal National Mortgage
Association ("FNMA") standards to permit their sale in the secondary market. The
Company currently sells in the secondary market all of the conforming fixed-rate
residential loans it originates with maturities of 30 years.

         The Company also originates loans secured by co-ops and condominiums
located in its market area. Condominium and co-op loans are made on
substantially the same terms as one- to four-family loans, except that co-op
loans are made only at adjustable rates of interest. At September 30, 1996, the
Company had $7.4 million of condominium and co-op loans.

         In underwriting one- to four-family residential real estate loans, the
Company evaluates the borrower's ability to make principal, interest and escrow
payments, as well as the value of the property that will secure the loan and
debt-to-income ratios. The Company currently originates residential mortgage
loans with loan-to-value ratios of up to 80% for owner-occupied homes (90% with
private mortgage insurance to reduce the Company's exposure to 80% or less); up
to 65% for non-owner occupied homes; and up to 75% for co-op loans. The
Company's home equity lines of credit are originated in amounts which, together
with the amount of the first mortgage, generally do not exceed 75% of the
appraised value of the property securing the loan.

         The Company's residential mortgage loans customarily include
due-on-sale clauses giving the Company the right to declare the loan immediately
due and payable in the event that, among other things, the borrower sells or
otherwise disposes of the property subject to the mortgage and the loan is not
repaid.

         Multi-family and Commercial Real Estate Lending. The Company has
increased its emphasis on the origination of permanent multi-family and
commercial real estate loans since fiscal 1994, in order to increase the
interest rate sensitivity and yield of its loan portfolio and to complement
residential lending opportunities. The Company's multi-family and commercial
real estate loan portfolio includes loans secured by apartment buildings, office
buildings, strip shopping centers and other income producing properties located
in its market area. At September 30, 1996, the Company had $9.1 million in
commercial real estate loans, representing 10.3% of the total loan portfolio,
and $5.5 million in multi-family loans, or 6.2% of the total loan portfolio.

         The Company's permanent multi-family and commercial real estate loans
generally carry a maximum term of 20 years and have adjustable rates generally
based on a specific index, plus a margin. These loans are generally made in
amounts of up to 75% of the lesser of the appraised value or the purchase price
of the property, with a projected debt service coverage ratio of at least 125%.
Appraisals on properties securing multi-family and commercial real estate loans
are performed by an independent

                                       10

<PAGE>



appraiser designated by the Company at the time the loan is made. All appraisals
on multi-family or commercial real estate loans are reviewed by the Company's
management. In addition, the Company's underwriting procedures require
verification of the borrower's credit history, income and financial statements,
banking relationships, references and income projections for the property. Where
feasible, the Company seeks to obtain personal guarantees on these loans.

         The table below sets forth, by type of security property, the number
and amount of the Company's multi-family and commercial real estate loans at
September 30, 1996. Substantially all of the loans referred to in the table
below are secured by properties located in the Company's market area. See "-
Delinquencies and Non-Performing Assets" for a discussion of the non-performing
commercial real estate loan at September 30, 1996.

<TABLE>
<CAPTION>

                                                                         Outstanding        Amount
                                                            Number of     Principal     Non-Performing
                                                              Loans        Balance       or of Concern
                                                              -----        -------       -------------
                                                                     (Dollars in Thousands)
<S>                                                            <C>            <C>             <C>  

Commercial real estate:
    Small business facilities...............................    25         $ 6,034            $214
    Office buildings........................................     5           2,150             ---
    Health care facilities..................................     4             801             ---
    Industrial real estate..................................     1             132             ---
Multi-family................................................    31           5,471             ---
                                                                --        --------          ------
    Total multi-family and commercial real estate loans.....    66         $14,588            $214
                                                                ==         =======            ====
</TABLE>

         At September 30, 1996, the Company's largest commercial real estate
loan had an outstanding balance of $1.1 million. This loan was originated in
September 1995 and is secured by an office building located in Yonkers. Also at
September 30, 1996, the largest multi-family loan had a balance of $438,000 and
was secured by a 33-unit apartment building located in Eastchester, New York.

         Multi-family and commercial real estate loans generally present a
higher level of risk than loans secured by one- to four-family residences. This
greater risk is due to several factors, including the concentration of principal
in a limited number of loans and borrowers, the effects of general economic
conditions on income producing properties, and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multi-family and commercial real estate is typically dependent
upon the successful operation of the related real estate project. If the cash
flow from the project is reduced (for example, if leases are not obtained or
renewed), the borrower's ability to repay the loan may be impaired.

         Construction and Land Lending. The Company originates a modest amount
of construction loans to individuals and builders for the construction of
residential real estate. At September 30, 1996, the Company's construction loan
portfolio totaled $2.2 million, or 2.5% of the total loan portfolio. The Company
also currently originates a limited number of land loans primarily for the
purpose of developing residential subdivisions. At September 30, 1996, the
Company's land loan portfolio totaled $1.9 million, or 2.2% of the total loan
portfolio. At September 30, 1996, all of the Company's land loans were made for
the purpose of developing residential lots except for two loans totaling
$299,000 which were secured by commercial real estate.

         Construction loans to individuals for the construction of their
residences are structured to convert to permanent loans at the end of the
construction phase, which typically runs up to one year. These construction
loans have rates and terms comparable to one- to four-family loans then offered
by the

                                       11

<PAGE>



Company, except that during the construction phase, the borrower pays interest
only at a specified margin over the prime rate. The maximum loan-to-value ratio
of owner-occupied single-family construction loans is 75%. Residential
construction loans are generally underwritten pursuant to the same guidelines
used for originating permanent residential loans. At September 30, 1996, there
were $200,000 of construction loans outstanding to persons intending to occupy
the premises upon the completion of the construction.

         The Company also originates construction loans to builders of one- to
four-family residences. Such loans generally carry terms of up to two years and
require the payment of interest only for the loan term. The maximum
loan-to-value ratio on loans to builders for the construction of residential
real estate is 75%. When practical, the Company seeks to obtain personal
guarantees on such loans. The Company generally limits loans to builders for the
construction of homes on speculation for sale to two homes per builder. At
September 30, 1996, the Company had $2.0 million of construction loans
outstanding to builders of one- to four-family residences.

         The Company's construction loan agreements generally provide that loan
proceeds are disbursed in increments as construction progresses. The Company
reviews the progress of the construction of the dwelling before disbursements
are made.

         The Company also makes loans to builders and developers for the
development of one- to four-family lots in the Company's market area. All of the
Company's land loans have been originated with adjustable rates of interest tied
to the prime rate of interest and have terms of five years or less. Land loans
are generally made in amounts up to a maximum loan-to-value ratio of 65% on raw
land and up to 75% on developed building lots based upon an independent
appraisal. When feasible, the Company obtains personal guarantees for its land
loans.

         The table below sets forth, by type of security property, the number
and amount of the Company's construction and land loans at September 30, 1996,
all of which are secured by properties located in the Company's market area. See
"- Delinquencies and Non-Performing Assets" for a discussion of certain of the
non-performing loans and other loans of concern at September 30, 1996.

<TABLE>
<CAPTION>

                                                                             Outstanding         Amount
                                                     Number         Loan      Principal      Non-Performing
                                                    Of Loans     Commitment    Balance        or of Concern
                                                    --------     ----------    -------        -------------
                                                                   (Dollars in Thousands)
<S>                                                   <C>          <C>           <C>               <C>   

Single-family construction......................       11         $2,175        $2,004            $1,180
Residential land................................        5          1,635         1,635               201
Other land......................................        2            299           299               299
                                                       --        -------       -------           -------
     Total construction and land loans..........       18         $4,109        $3,938            $1,680
                                                       ==         ======        ======            ======
</TABLE>

         Construction and land loans are obtained principally through referrals
from the Company's and management's contacts in the business community as well
as existing and walk-in customers. The application process includes a submission
to the Company of accurate plans, specifications and costs of the project to be
constructed/developed. These items are used as a basis to determine the
appraised value of the subject property. Loans are based on the lesser of
current appraised value and/or the cost of construction (land plus building).

         Construction and land lending generally affords the Company an
opportunity to receive interest at rates higher than those obtainable from
permanent residential loans and to receive higher origination and other loan
fees. In addition, construction and land loans are generally made with
adjustable rates of interest or for relatively short terms. Nevertheless,
construction and land lending is generally considered

                                       12

<PAGE>



to involve a higher level of credit risk than one- to four-family residential
lending due to the concentration of principal in a limited number of loans and
borrowers, as well as the effects of general economic conditions on development
properties and on real estate developers and managers. In addition, the nature
of these loans is such that they are more difficult to evaluate and monitor.
Finally, the risk of loss on construction and land loans is dependent largely
upon the accuracy of the initial estimate of the individual property's value
upon completion and the estimated cost (including interest) of construction. If
the cost estimate proves to be inaccurate, the Company may be required to
advance funds beyond the amount originally committed to permit completion of the
property.

         Consumer Lending. In order to increase the interest rate sensitivity of
the loan portfolio and provide a broader range of loan products to its retail
customers, the Company originates a variety of consumer loans, including
automobile, home equity, deposit account and other loans for household and
personal purposes. At September 30, 1996, consumer loans totaled $5.9 million,
or 6.6% of total loans outstanding. The Company intends to emphasize its
consumer lending in the future and to consider hiring an additional consumer
lending officer in order to increase volume.

         Consumer loan terms vary according to the type of loan and value of
collateral, length of contract and creditworthiness of the borrower. The
Company's consumer loans are made at fixed interest rates, with terms of up to
10 years. Home equity loans are made at fixed rates up to a maximum loan amount
of $50,000.

         The underwriting standards employed by the Company for consumer loans
include a determination of the applicant's payment history on other debts and
the ability to meet existing obligations and payments on the proposed loan.
Although creditworthiness of the applicant is of primary consideration, the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount.

         Consumer loans may entail greater credit risk than residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by rapidly depreciable assets, such as automobiles. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At September 30, 1996, there were $43,000 of consumer loans
delinquent 90 days or more. There can be no assurance that delinquencies will
not increase in the future.

         Commercial Business Lending. Federally chartered savings institutions,
such as the Company, are authorized to make secured or unsecured loans and
letters of credit for commercial, corporate, business and agricultural purposes
and to engage in commercial leasing activities, up to a maximum of 20% of total
assets, provided that amounts in excess of 10% relate to small business loans
(as defined). The Company may from time to time make a limited number of secured
and unsecured commercial loans to local businesses. At September 30, 1996, the
Company had $1.4 million of commercial business loans outstanding, representing
1.6% of the total loan portfolio.

         The Company's commercial business lending policy includes credit file
documentation and analysis of the borrower's character and capacity to repay the
loan, the adequacy of the borrower's capital and collateral, and an evaluation
of conditions affecting the borrower. Analysis of the borrower's past, present
and future cash flows is also an important aspect of the Company's current
credit analysis.


                                       13

<PAGE>



         Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income, and which are secured by real property whose value tends to be
more easily ascertainable, commercial business loans are of higher risk and
typically are made on the basis of the borrower's ability to make repayment from
the cash flow of the borrower's business. As a result, the availability of funds
for the repayment of commercial business loans may be substantially dependent on
the success of the business itself. Further, the collateral securing the loans
may depreciate over time, may be difficult to appraise and may fluctuate in
value based on the success of the business.

Originations, Purchases and Sales of Loans

         Loan applications are taken at each of the Company's offices.
Applications are processed and approved at the Company's Loan Center which is
located in one of the branch offices, except for consumer loans which are
processed and approved at the main office. The Company currently offers
incentives to employees for loan referrals. The Company also employs a
commissioned loan originator to assist in the process of obtaining loans.

         While the Company originates both fixed- and adjustable-rate loans, its
ability to originate loans is dependent upon the relative customer demand for
loans in its market. Demand is affected by the local economy and the interest
rate environment.

         Historically, most of the fixed-rate one- to four-family residential
loans originated by the Company were retained in its portfolio. However, in
order to reduce its vulnerability to changes in interest rates, the Company
currently sells in the secondary market all of the conforming fixed-rate
residential loans it originates with maturities of 30 years. When loans are
sold, the Company typically retains the responsibility for collecting and
remitting loan payments, making certain that real estate tax payments are made
on behalf of borrowers, and otherwise servicing the loans. At September 30,
1996, the Company serviced $14.0 million of mortgage loans for others.

         From time to time, in order to supplement loan demand in the Company's
market area, the Company has acquired mortgage-backed securities which are held,
depending on the investment intent, in the "held to maturity" or "available for
sale" portfolios. See "- Investment Activities - Mortgage-Backed Securities"
and Note 2 of the Notes to Consolidated Financial Statements.



                                       14

<PAGE>



         The following table sets forth the Company's loan originations, sales,
repayments and other portfolio activity for the periods indicated.

<TABLE>
<CAPTION>

                                                              For the Year Ended September 30,
                                                              --------------------------------
                                                                 1996        1995       1994
                                                                 ----        ----       ----
                                                                    (In Thousands)
<S>                                                               <C>        <C>         <C>  

Unpaid principal balances at beginning of year..............    $85,092     $79,382    $79,437
                                                                -------     -------    -------

Loans originated:
    Real estate loans
      One- to four-family(1)................................      9,142       7,787     11,767
      Multi-family..........................................        174       1,328      2,593
      Commercial............................................      2,740       3,548        600
      Construction..........................................      1,285         755      2,228
      Land..................................................        ---       1,300        327
    Consumer and commercial business loans..................      4,415       2,732      3,015
                                                               --------    --------   --------
      Total loans originated................................     17,756      17,450     20,530
                                                                -------     -------    -------
Loans sold:
    One- to four-family real estate loans...................    (1,886)       (387)    (5,148)
                                                              ---------   --------   --------
Principal repayments:
    Real estate loans.......................................    (9,389)     (8,807)   (12,616)
    Consumer and commercial business loans..................    (2,391)     (2,154)    (2,755)
                                                              ---------   --------   --------
      Total principal repayments............................   (11,780)    (10,961)   (15,371)
                                                               --------    -------    -------

Charge-offs.................................................      (333)        (89)       (66)
Transfers to real estate owned..............................      (603)       (303)        ---
                                                              ---------   --------   ---------
Unpaid principal balances at end of year....................     88,246      85,092     79,382

Less:
    Construction loans in process...........................      (171)       (293)      (943)
    Allowance for loan losses...............................      (937)       (719)      (311)
    Net deferred loan fees..................................      (422)       (401)      (304)
                                                              ---------   --------   --------
Net loans at end of year....................................    $86,666     $83,679   $77,824
                                                                =======     =======   =======
</TABLE>
-------------
(1)  Consists of (i) adjustable-rate loans of $5.6 million, $3.4 million and
     $9.0 million, and (ii) fixed-rate loans of $3.5 million, $4.4 million
     and $2.8 million for the years ended September 30, 1996, 1995 and 1994,
     respectively.


Delinquencies and Non-Performing Assets

         Delinquency Procedures. When a borrower fails to make a required
payment on a loan, the Company attempts to cure the delinquency by contacting
the borrower. A late notice is sent on all loans over 16 days delinquent.
Additional written and verbal contacts may be made with the borrower between 30
and 90 days after the due date. If the loan is contractually delinquent 60 days,
the Company usually sends a 30-day demand letter to the borrower and, after the
loan is contractually delinquent 91 days, institutes appropriate action to
foreclose on the property. If foreclosed, the property is sold at auction and
may be purchased by the Company. Delinquent consumer loans are generally handled
in a similar manner. The Company's procedures for repossession and sale of
consumer collateral are subject to various requirements under New York consumer
protection laws.

         Real estate acquired by the Company as a result of foreclosure or by
deed in lieu of foreclosure is classified as real estate owned until it is sold.
When property is acquired or expected to be acquired

                                       15

<PAGE>



by foreclosure or deed in lieu of foreclosure, it is recorded at estimated fair
value less the estimated cost of disposition, with the resulting write-down
charged to the allowance for loan losses. After acquisition, all costs incurred
in maintaining the property are expensed. Costs relating to the development and
improvement of the property, however, are capitalized.

         The following table sets forth certain information with respect to loan
portfolio delinquencies at the dates indicated.

<TABLE>
<CAPTION>

                                              At September 30, 1996                   At September 30, 1995
                                     -------------------------------------- -----------------------------------------
                                        60 - 89 Days       90 Days or More     60 - 89 Days        90 Days or More
                                        ------------       ---------------     ------------        ---------------
                                     Number of Principal Number of Principal Number of Principal Number of  Principal
                                        Loans    Balance    Loans    Balance   Loans     Balance  Loans      Balance
                                        -----    -------    -----   -------    -----   -------    -----     -------
                                                                  (Dollars in Thousands)
<S>                                      <C>     <C>         <C>     <C>        <C>      <C>      <C>         <C>

Real estate loans:
    One- to four-family............       12    $1,513        17    $1,757       13     $1,151       26      $2,759
    Multi-family...................      ---       ---       ---       ---        1        214        2         389
    Construction...................      ---       ---         3       511      ---        ---        2         279
    Land...........................      ---       ---         3       250      ---        ---        1          49
    Commercial.....................        1       383         1       214      ---        ---      ---         ---
Consumer loans.....................        3         5         7        43        2         67        7          54
                                         -----  ------       -----  ------    -----      -----      ---    --------

       Total.......................       16    $1,901        31    $2,775       16     $1,432       38      $3,530
                                         ===    ======       ===    ======      ===     ======      ===      ======

       Delinquent loans to total loans            2.15%               3.14%               1.68%                4.15%
                                                  ====                ====                ====                 ====
</TABLE>

         Classification of Assets. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful, and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the institution will sustain
some loss if the deficiencies are not corrected. Doubtful assets have the
weaknesses of substandard assets, with the additional characteristics that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified loss is considered uncollectible and of
such little value that continuance as an asset on the balance sheet of the
institution is not warranted. Assets classified as substandard or doubtful
require the institution to establish prudent general allowances for loan losses.
If an asset or portion thereof is classified as loss, the institution must
either establish specific allowances for loan losses in the amount of 100% of
the portion of the asset classified loss, or charge off such amount. If an
institution does not agree with an examiner's classification of an asset, it may
appeal this determination to the Regional Director of the OTS. On the basis of
management's review, at September 30, 1996, the Company had classified $2.2
million of loans and $603,000 of real estate owned as substandard, and $16,000
of loans as doubtful.

         The Company's classified assets consist principally of non-performing
loans, real estate owned and certain other loans of concern discussed herein. As
of the date hereof, these asset classifications are substantially consistent
with those of the OTS and FDIC.



                                       16

<PAGE>



         Non-Performing Assets. The table below sets forth the amounts and
categories of the Company's non-performing assets at the dates indicated. Loans
are placed on non-accrual status when the collection of principal or interest
becomes doubtful. Real estate owned represents properties acquired in settlement
of loans.

<TABLE>
<CAPTION>

                                                                               At September 30,
                                                            -----------------------------------------------------
                                                            1996         1995        1994        1993        1992
                                                            ----         ----        ----        ----        ----
                                                                            (Dollars in Thousands)
<S>                                                         <C>          <C>         <C>         <C>          <C>  

Non-accruing loans past due 90 days or more:
    Real estate loans
       One- to four-family............................     $1,757       $2,759      $2,229      $  479     $   514
       Multi-family(1)................................        ---          389         389         399         878
       Commercial.....................................        214          ---         ---         ---         ---
       Land...........................................        250           49         ---         ---         ---
       Construction...................................        511          279         ---         217         379
    Consumer loans....................................         43           54          45          62           2
                                                          -------      -------     -------     -------    --------
         Total........................................      2,775        3,530       2,663       1,157       1,773
Real estate owned, net................................        603          227          73         242         ---
                                                          -------      -------     -------      ------   ---------
Total non-performing assets...........................     $3,378       $3,757      $2,736      $1,399      $1,773
                                                           ======       ======      ======      ======      ======

Allowance for loan losses.............................     $  937       $  719      $  311      $  295     $   490
                                                           ======       ======      ======      ======     =======

Ratios:
    Non-performing loans to total loans...............       3.14%        4.15%       3.35%       1.46%       2.12%
    Non-performing assets to total assets.............       1.30         1.80        1.40        0.77        1.05
    Allowance for loan losses to:                                     
       Non-performing loans...........................      33.77        20.37       11.68       25.50       27.64
       Total loans....................................       1.06         0.84        0.39        0.37        0.59
</TABLE>                                                          
---------------
(1)      Includes a participation loan classified as a troubled debt
         restructuring of $309,000, $309,000, $312,000 and $462,000 at September
         30, 1995, 1994, 1993 and 1992, respectively. Collections and
         charge-offs in fiscal 1996 eliminated the recorded investment in this
         loan.


         For the year ended September 30, 1996, gross interest income of
$251,000 would have been recorded if the non-accruing loans at September 30,
1996 had remained current in accordance with their original terms. The amount of
interest income actually received on such loans in fiscal 1996 was $94,000. See
Note 3 of the Notes to Consolidated Financial Statements.

         At September 30, 1996, the Company's non-performing loans consisted of
17 loans secured by one- to four-family real estate located in the Company's
market area which totaled $1.8 million, one loan for $214,000 secured by
commercial real estate, three loans for the construction of one- to four-family
real estate which totaled $511,000, three loans secured by land which totaled
$250,000 and seven consumer loans which totaled $43,000. At September 30, 1996,
real estate owned consisted of four single-family residences with a net carrying
value of $603,000.

         As of September 30, 1996, the Company's non-accruing loans (other than
single-family permanent loans) to individual borrowers with a carrying value of
$200,000 or more were as follows:

                  The Company has two outstanding construction loans
         to a development company for the purpose of constructing two
         single-family residences in Yonkers, New York to be sold on
         speculation. The Company also obtained a personal guarantee
         from the owner of the company. These loans were placed on
         non-accrual status due to cash flow

                                       17

<PAGE>



         problems experienced by the borrower in developing
         the property. Although houses have been constructed on the
         property, the road has not been finished due to the
         borrower's cash flow problems. The borrower has recently
         obtained financing from a third party to continue completion
         of the road. At September 30, 1996, these loans had an
         outstanding balance of $279,000. The Company also made a land
         loan for $49,000 to the owner of the development company
         secured by a parking lot. This loan was over 90 days
         delinquent at September 30, 1996.

                  The Company also had a construction loan for
         $232,000 on a two-family residence in Yonkers, New York,
         which was over 90 days delinquent at September 30, 1996. In
         April 1996, this loan was placed on non-accrual status due to
         the borrower's inability to comply with the present loan
         repayment terms. The house has been completed and is
         currently being marketed for sale.

                  The only non-performing commercial real estate loan
         at September 30, 1996 was a loan for $214,000 secured by a
         store and five apartments located in Yonkers, New York. This
         loan was placed on non-accrual status due to cash flow
         problems experienced by the borrower on collecting rental
         income on the subject property. If the borrower cannot bring
         the account current, the Company will start legal action to
         foreclose on the mortgage. In addition, the Company also has
         a $113,000 home equity loan to the same borrower on a
         personal residence which is also on non-accrual status.

         Other Loans of Concern. In addition to the non-performing loans and
real estate owned set forth in the preceding table, as of September 30, 1996
there were $919,000 of "other loans of concern." These are loans with respect to
which known information about the possible credit problems of the borrowers or
the cash flows of the security properties have caused management to have
concerns as to the ability of the borrowers to comply with present loan
repayment terms and which may result in the future inclusion of such items in
the non-performing asset categories. Management has considered the Company's
non-performing loans and other loans of concern in establishing the allowance
for loan losses.

         As of September 30, 1996, the Company had the following loans of
concern with carrying values in excess of $200,000:

                  The Company has a $250,000 land loan, secured by a
         lot located in Paterson, New York, which was structured from
         its inception to provide for payments of interest only during
         the term of the loan with the principal payment to be made
         upon maturity. The borrower intended to build a commercial
         building on the security property. At September 30, 1996,
         although this loan was performing, it was classified
         substandard due to hazardous building materials on an
         adjacent lot which may result in a decline in value of the
         security property. Although a phase I environmental study
         performed on the security property did not disclose any
         contamination to the security property from the adjoining
         lot, the contamination on the adjacent lot has prevented the
         borrower from using the security property for its intended
         purpose. As a result of the problems associated with the
         adjacent lot, the loan was renewed at a market rate of
         interest and its term was extended until January 1997. The
         borrower is continuing to make interest payments on this loan
         as required by the terms of the loan agreement and is waiting
         for the resolution of the problem with the adjacent property.

                  The Company also has a development loan secured by
         25 residential lots located in Dutchess County, New York.
         Sales of lots have been slow, and the Company has

                                       18

<PAGE>



         renewed the loan several times at market rates and
         terms. At September 30, 1996, six of the 15 lots in phase I
         had been sold and construction of the homes completed. This
         loan was performing and had an outstanding balance of
         $314,000 at September 30, 1996. On such date, the Company
         also had two construction loans to the same borrower totaling
         $355,000 for the construction of two single-family homes in
         this development. Although such loans were current at
         September 30, 1996, the Company considers these loans to be
         of concern due to the slow sales in the development.

         Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses charged to operations based on management's
evaluation of the risk inherent in the loan portfolio. The allowance is
established as an amount that management believes will be adequate to absorb
probable losses on existing loans. Management's evaluation of the adequacy of
the allowance, which is subject to periodic review by the Company's regulators,
takes into consideration such factors as the historical loan loss experience,
known and inherent risks in the portfolio, changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific problem loans,
estimated value of underlying collateral, and current economic conditions that
may affect borrowers' ability to pay. While management believes that it uses the
best information available to determine the allowance for loan losses,
unforeseen market conditions could result in adjustments to the allowance for
loan losses, and net earnings could be significantly affected, if circumstances
differ substantially from the estimates made in making the final determination.

         The following table sets forth activity in the allowance for loan
losses for the periods indicated.

<TABLE>
<CAPTION>
                                                                    For the Year Ended September 30,
                                                       --------------------------------------------------------
                                                       1996         1995         1994         1993         1992
                                                       ----         ----         ----         ----         ----
                                                                        (Dollars in Thousands)
<S>                                                     <C>          <C>          <C>          <C>          <C> 

Balance at beginning of year.......................    $719         $311         $295         $490         $606
Provision for losses...............................     462          493           64          313           17
Charge-offs:
    Real estate loans
       One- to four-family.........................     (97)         (76)         (64)         (19)          (7)
       Multi-family(1).............................    (203)          ---          ---        (477)        (108)
    Consumer and commercial business loans.........     (33)         (13)          (2)         (12)         (18)
                                                     ------         ----        -----        -----        -----
       Total charge-offs...........................    (333)         (89)         (66)        (508)        (133)
Recoveries.........................................      89            4           18          ---          ---
                                                     ------        -----        -----       ------       ------
       Net charge-offs.............................    (244)         (85)         (48)        (508)        (133)
                                                     ------         ----        -----        -----        -----

Balance at end of year.............................    $937         $719         $311         $295         $490
                                                       ====         ====         ====         ====         ====

Ratio of net charge-offs to average total loans....    0.29%        0.10%        0.06%        0.62%        0.16%
                                                       ====         ====         ====         ====         ====
</TABLE>
------------
(1) Charge-offs in fiscal 1996, 1993 and 1992 relate to the Company's
    purchased participation interests in three multi-family loans
    originated by the Thrift Associations Service Corporation
    ("TASCO"). All such purchased participations have been collected
    or charged-off at September 30, 1996.



                                       19

<PAGE>



         The following table sets forth the allowance for loan losses allocated
by loan category, the total loan amounts by category, and the percent of loans
in each category to total loans at the dates indicated.

<TABLE>
<CAPTION>
                                                                                           At September 30,
                       -------------------------------------------------------------------------------------------------------
                                   1996                           1995                           1994                   
                       ---------------------------- ------------------------------ -------------------------------------------
                                                Percent of                       Percent of                         Percent of  
                                                 Loans in                         Loans in                           Loans in  
                                     Loan          Each                 Loan        Each                    Loan        Each    
                        Allowance Amounts by   Category to  Allowance Amounts by  Category to  Allowance Amounts by  Category to
                         Amount    Category    Total Loans    Amount   Category   Total Loans    Amount  Category   Total Loans 
                         ------    --------    -----------    ------   --------   -----------    ------  --------   ----------- 
                                                                                        (Dollars in Thousands)
<S>                        <C>         <C>        <C>          <C>       <C>        <C>           <C>        <C>          <C>

Real estate loans:   
  One- to four-family.     $538    $62,283       70.6%      $  302     $63,282     74.4%        $ 188     $64,078        80.7%   
  Multi-family........       11      5,471        6.2           64       5,647      6.6            64       4,483         5.7     
  Commercial..........       91      9,117       10.3           66       6,575      7.7            20       3,176         4.0     
  Construction........       74      2,175        2.5           75       2,205      2.6            16       2,138         2.7     
  Land(1).............      166      1,934        2.2          171       2,112      2.5             8         814         1.0     
Consumer and commer-
  cial business loans.       57      7,266        8.2           41       5,271      6.2            15       4,693         5.9     
                          -----    -------     ------     --------    --------   ------      --------    --------      ------
Total.................     $937    $88,246      100.0%     $   719     $85,092    100.0%       $  311     $79,382       100.0%  
                           ====    =======      =====      =======     =======    =====       =======     =======       ===== 

</TABLE>




<TABLE>
<CAPTION>


                    ---------------------------------------------------------------------
                                  1993                           1992                        
                    ------------------------------  -------------------------------------           
                                           Percent of                          Percent of      
                                            Loans in                            Loans in       
                                 Loan         Each                    Loan        Each          
                   Allowance  Amounts by   Category to  Allowance  Amounts by  Category to
                    Amount    Category     Total Loans    Amount    Category   Total Loans      
                    ------    --------     -----------   ------     --------   -----------        
                                                                  
<S>                     <C>       <C>          <C>        <C>         <C>          <C>
                                                                  
Real estate loans:                                                                        
  One- to four-family.  183    $67,633        85.1%$      225      $72,577        86.7%        
  Multi-family........   61      2,281         2.9        197        1,264         1.5         
  Commercial..........   17      2,704         3.4         12        2,392         2.9         
  Construction........   12      1,472         1.9         19        1,784         2.1         
  Land(1).............    9        914         1.1         12        1,199         1.4         
Consumer and commer-                                                                      
  cial business loans.   13      4,433         5.6         25        4,524         5.4         
                        ---   --------     -------      -----     --------      ------         
Total.................  295    $79,437       100.0%    $  490      $83,740       100.0%        
                        ===    =======       =====     =======     =======       =====         
</TABLE> 
--------------
(1) The allowance at both September 30, 1996 and 1995 includes
    $150,000 allocated to land loans "of concern." See "- Other Loans
    of Concern."



                                  20

<PAGE>



Investment Activities

         General. The Company utilizes mortgage-backed and other securities in
virtually all aspects of its asset/liability management strategy. In making
investment decisions, the Board of Directors considers, among other things, the
Company's yield and interest rate objectives, its interest rate and credit risk
position, and its liquidity and cash flow.

         Yonkers Savings must maintain minimum levels of investments that
qualify as liquid assets under OTS regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Cash flow projections are
regularly reviewed and updated to assure that adequate liquidity is maintained.

         Generally, the investment policy of the Company is to invest funds
among categories of investments and maturities based upon the Company's
asset/liability management policies, investment quality, loan and deposit
volume, liquidity needs and performance objectives. Statement of Financial
Accounting Standards ("SFAS") No. 115 requires that securities be classified
into three categories: trading, held to maturity, and available for sale.
Securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities and are reported at fair
value with unrealized gains and losses included in earnings. Debt securities for
which the Company has the positive intent and ability to hold to maturity are
classified as held to maturity and reported at amortized cost. All other
securities not classified as trading or held to maturity are classified as
available for sale. Available-for-sale securities are reported at fair value
with unrealized gains and losses included, on an after-tax basis, in a separate
component of equity. At September 30, 1996, the Company had no securities
classified as trading. At September 30, 1996, $58.6 million, or 38.1% of the
Company's mortgage-backed and other securities portfolio was classified as
available for sale. The remaining $95.0 million, or 61.9% of the Company's
securities portfolio, was classified as held to maturity.

         Mortgage-Backed Securities. The Company invests in mortgage-backed
securities in order to supplement loan production and achieve its
asset/liability management goals. Substantially all of the mortgage-backed
securities owned by the Company are issued, insured or guaranteed either
directly or indirectly by a federal agency or are rated "AA" or higher. As of
September 30, 1996, the Company did not have any mortgage-backed securities of a
single issuer in excess of 10% of the Company's equity, except for federal
agency obligations. At September 30, 1996, the Company had $58.1 million and
$22.7 million, respectively, of mortgage-backed securities classified as held to
maturity and as available for sale.

         Consistent with its asset/liability management strategy, at September
30, 1996, $48.8 million, or 60.4% of the Company's mortgage-backed securities
had adjustable interest rates. In addition, as discussed below, at September 30,
1996, the Company had $14.5 million of CMOs with anticipated average lives of
five years or less. For additional information regarding the Company's
mortgage-backed securities portfolio, see Note 2 of the Notes to Consolidated
Financial Statements.

         CMOs are securities derived by reallocating the cash flows from
mortgage-backed securities or pools of mortgage loans in order to create
multiple classes, or tranches, of securities with coupon rates and average lives
that differ from the underlying collateral as a whole. The term to maturity of
any particular tranche is dependent upon the prepayment speed of the underlying
collateral as well as the structure of the particular CMO. As a result, the cash
flows (and hence the values) of certain CMOs are subject to substantial change.


                                  21

<PAGE>



         Management believes that CMOs at times represent attractive investment
alternatives relative to other investments due to the wide variety of maturity
and repayment options available through such investments. In particular, the
Company has from time to time concluded that short and intermediate duration
CMOs (seven-year or less estimated average life) represent a better combination
of rate and duration than adjustable rate mortgage-backed securities. At
September 30, 1996, the Company held $18.8 million of CMOs.

         To assess price volatility, the Federal Financial Institutions
Examination Council ("FFIEC") adopted a policy in 1992 which requires an annual
"stress" test of mortgage derivative securities. This policy, which has been
adopted by the OTS, requires the Company to annually test its CMOs to determine
whether they are high-risk or nonhigh-risk securities. Mortgage derivative
products with an average life or price volatility in excess of a benchmark
30-year, mortgage-backed, pass-through security are considered high-risk
mortgage securities. Under the policy, savings institutions may generally only
invest in high-risk mortgage securities in order to reduce interest rate risk.
In addition, all high-risk mortgage securities acquired after February 9, 1992
which are classified as high risk at the time of purchase must be carried in the
institution's trading account or as assets held for sale. At September 30, 1996,
none of the Company's CMOs were classified as "high-risk."

         The value of the Company's mortgage-backed securities, particularly
those carrying fixed rates, would decline significantly in the event of an
increase in interest rates. In addition, a decrease in interest rates could
result in an increase in prepayments on the fixed-rate portion of the Company's
mortgage-backed securities portfolio. Funds from such prepayments may be
reinvested at a lower yield. Similarly, a decline in interest rates would result
in the downward adjustment of the rates earned on the Company's adjustable-rate,
mortgage-backed securities portfolio resulting in lower yields and interest
income in future periods.

         The following table sets forth the amortized cost and fair value of the
mortgage-backed securities portfolio, by accounting classification category and
by type of security, at the dates indicated:

<TABLE>
<CAPTION>
                                                                         At September 30,
                                              --------------------------------------------------------------------
                                                       1996                    1995                    1994
                                              ---------------------  ----------------------  ---------------------
                                               Amortized     Fair      Amortized     Fair      Amortized     Fair
                                                 Cost        Value       Cost        Value       Cost        Value
                                                 ----        -----       ----        -----       ----        -----
                                                                          (In Thousands)
<S>                                              <C>         <C>         <C>        <C>         <C>           <C>

Held to Maturity
    Pass-through securities(1)..............   $41,493     $41,520     $35,586     $35,874     $32,216     $31,768
    CMOs(2).................................    16,646      16,478      17,025      16,880      16,965      16,148
                                              --------    --------     -------     -------     -------     -------
       Total................................    58,139      57,998      52,611      52,754      49,181      47,916
                                              --------    --------     -------     -------     -------     -------
Available for Sale
    Pass-through securities(1)..............    20,679      20,572       4,151       4,170       5,555       5,514
    CMOs(2).................................     2,146       2,139       2,272       2,266       2,348       2,272
                                              --------    --------    --------    --------    --------    --------
       Total................................    22,825      22,711       6,423       6,436       7,903       7,786
                                              --------    --------    --------    --------    --------    --------
Total mortgage-backed securities............   $80,964     $80,709     $59,034     $59,190     $57,084     $55,702
                                               =======     =======     =======     =======     =======     =======
</TABLE>
--------------
(1) All pass-through securities are guaranteed by GNMA, FNMA or FHLMC, except
    for privately issued securities with an amortized cost of $302,000, $422,000
    and $548,000 at September 30, 1996, 1995 and 1994, respectively.

(2) All CMOs are guaranteed by GNMA, FNMA or FHLMC, except for privately issued
    securities with an amortized cost of $65,000, $85,000 and $171,000 at
    September 30, 1996, 1995 and 1994, respectively.


                                       22

<PAGE>



         The following table sets forth certain information regarding the
amortized cost, fair value and weighted average yield of the Company's
mortgage-backed securities at September 30, 1996. The entire amortized cost and
fair value of such securities are reflected in the maturity period that includes
the final security payment date and, accordingly, no effect has been given to
periodic repayments or possible prepayments. In addition, under the structure of
some of the Company's CMOs, the Company's short-and intermediate-tranche
interests have repayment priority over the longer term tranches of the same
underlying mortgage pool.

<TABLE>
<CAPTION>

                                                                      At September 30, 1996
                                              ------------------------------------------------------------------------
                                                      Held to Maturity                  Available for Sale
                                              ---------------------------------  -------------------------------------
                                                                      Weighted                                Weighted
                                              Amortized     Fair       Average    Amortized      Fair         Average
                                                Cost        Value       Yield       Cost         Value         Yield
                                                ----        -----       -----       ----         -----         -----
                                                                     (Dollars in Thousands)
<S>                                               <C>          <C>        <C>       <C>         <C>             <C>

Pass-through securities:
    Due after 1 year but within 5 years......   $     31    $     33    10.25%    $   ---     $    ---          ---%
    Due after 5 years but within 10 years....        169         169     6.85         189          198          9.37
    Due after 10 years.......................     41,293      41,318     6.90      20,490       20,374          7.40
                                                 -------     -------              -------     --------
       Total.................................    $41,493     $41,520     6.90     $20,679      $20,572          7.42
                                                 =======     =======              =======      =======
 
CMOs:
    Due after 1 year but within 5 years......  $     ---   $     ---      ---%    $   796      $   796          6.96%
    Due after 5 years but within 10 years....      3,401       3,399     6.97         ---          ---           ---
    Due after 10 years.......................     13,245      13,079     5.95       1,350        1,343          6.21
                                                 -------     -------              -------      -------
       Total.................................    $16,646     $16,478     6.16     $ 2,146      $ 2,139          6.49
                                                 =======     =======              =======      =======
</TABLE>

         The following table sets forth the activity in the mortgage-backed
securities portfolio for the periods indicated.

<TABLE>
<CAPTION>

                                                           For the Year Ended September 30,
                                                        ----------------------------------------
                                                         1996             1995            1994
                                                          ---             ----            ----
                                                                  (In Thousands)
<S>                                                       <C>              <C>              <C>  
Amortized cost at beginning of year....................  $59,034          $57,084         $61,295
                                                         -------          -------         -------
Purchases:
    Pass-through securities:
      Adjustable rate..................................   21,657            8,500           9,966
      Fixed rate.......................................   10,264            1,000             ---
                                                        --------         --------        --------
        Total pass-through securities..................   31,921            9,500           9,966
    CMOs...............................................      ---              946           1,957
                                                       ---------         --------        --------
        Total purchases................................   31,921           10,446          11,923
Sales of pass-through securities.......................      ---           (1,285)         (2,289)
Principal repayments...................................   (9,979)          (7,210)        (13,874)
Premium and discount amortization, net.................      (12)              (1)             29
                                                       ---------         --------       ---------
Amortized cost at end of year..........................  $80,964          $59,034         $57,084
                                                         =======          =======         =======
</TABLE>

         Other Securities. To date, the Company's investment strategy has been
directed toward high-quality assets (primarily government and agency
obligations) with short and intermediate terms (typically seven years or less)
to maturity. At September 30, 1996, the Company did not own any investment
securities of a single issuer which exceeded 10% of the Company's equity, other
than U.S. Government

                                       23

<PAGE>



or federal agency obligations. The Company also invests in high-grade,
medium-term (up to five years) corporate debt securities and a variety of mutual
funds which invest in adjustable-rate mortgage-backed securities, asset-backed
securities, and U.S. Treasury and Agency obligations. See Note 2 of the Notes to
Consolidated Financial Statements for additional information regarding the
Company's securities portfolio.

         From time to time, the Company has invested in "step-up" securities
which provide for interest rate increases periodically if the security is not
redeemed by the issuer. Because of this "step-up" structure, the Company expects
most of these securities to be redeemed prior to maturity. Prior to investing in
these securities, the Company analyzes the yield on the security in comparison
to the option on the part of the issuer to redeem the security or pay a higher
interest rate. A majority of the Company's "step-up" securities have terms of
seven years or less and provide for increases in interest rates of 25 to 180
basis points within one to three years of issuance. At September 30, 1996, the
Company had $16.0 million of "step-up" securities with a weighted average yield
of 5.78%.

         The following table sets forth the amortized cost and fair value of
other securities, by accounting classification category and by type of security,
at the dates indicated:


<TABLE>
<CAPTION>

                                                                         At September 30,
                                             ----------------------------------------------------------------------
                                                      1996                     1995                    1994
                                             ----------------------- -----------------------  ---------------------
                                               Amortized     Fair       Amortized     Fair      Amortized     Fair
                                                 Cost        Value        Cost        Value       Cost        Value
                                                 ----        -----        ----        -----       ----        -----
                                                                          (In Thousands)
<S>                                               <C>         <C>          <C>          <C>        <C>          <C>

Held to Maturity
    U.S. Government and Agency:
       Step-up securities...................     $12,966     $12,651      $20,960     $20,675     $22,432     $21,001
       Other securities.....................      23,402      23,012       21,393      21,171      15,607      14,600
    Corporate bonds.........................         500         501          500         500         500         503
                                                --------    --------     --------    --------   ---------   ---------
       Total................................      36,868      36,164       42,853      42,346      38,539      36,104
                                                 -------     -------      -------     -------     -------     -------

Available for Sale
    U.S. Government and Agency:
       Step-up securities...................       3,000       2,969        2,000       1,985       2,501       2,424
       Other securities.....................      26,960      27,023        6,951       6,921       3,899       3,783
    Mutual fund investments.................       6,070       5,849        5,740       5,535       5,432       5,223
                                                --------    --------     --------    --------    --------    --------
       Total................................      36,030      35,841       14,691      14,441      11,832      11,430
                                                 -------     -------      -------     -------     -------     -------

Total other securities, net.................     $72,898     $72,005      $57,544     $56,787     $50,371     $47,534
                                                 =======     =======      =======     =======     =======     =======
</TABLE>


                                       24

<PAGE>



         The following table sets forth certain information regarding the
amortized cost, fair value and weighted average yield of other debt securities
at September 30, 1996, by remaining period to contractual maturity.

<TABLE>
<CAPTION>


                                                      Held to Maturity                  Available for Sale
                                                ---------------------------------  --------------------------------
                                                                         Weighted                          Weighted
                                                Amortized     Fair       Average    Amortized    Fair       Average
                                                  Cost        Value       Yield       Cost       Value       Yield
                                                  ----        -----       -----       ----       -----       -----
                                                                     (Dollars in Thousands)

<S>                                                <C>         <C>       <C>         <C>        <C>          <C>
U.S. Government and Agency:
    Due within 1 year........................    $ 2,429     $ 2,437     6.40%      $   ---   $    ---        ---%
    Due after 1 year but within 5 years......     12,976      12,733     5.32         5,000      4,996       6.47
    Due after 5 years but within 10 years....     14,973      14,760     7.06        13,000     13,004       7.47
    Due after 10 years.......................      5,990       5,733     6.76        11,960     11,992       8.02
                                                 -------     -------                -------    -------
       Total.................................    $36,368     $35,663     6.34       $29,960    $29,992       7.52
                                                 =======     =======                =======    =======

Corporate:
    Due within 1 year........................   $    500    $    501     5.96%      $   ---   $    ---        ---%
                                                ========    ========                ======= ==========

</TABLE>
         In addition to its securities portfolios, from time to time the Company
holds short-term liquid assets such as money market mutual funds, federal funds
sold and interest-bearing deposits. Short-term investments at September 30, 1996
primarily consisted of a $10.2 million investment in a money market mutual fund.

Sources of Funds

         General. The Company's primary sources of funds are deposits, payments
(including prepayments) of loan principal, interest earned on loans and
securities, repayments of securities, borrowings and funds provided from
operations.

         Deposits. The Company offers a variety of deposit accounts having a
wide range of interest rates and terms. The Company's deposits consist of
regular savings (passbook) accounts, transaction (NOW and checking) accounts,
money market accounts, club accounts and certificate accounts. The Company only
solicits deposits in its market area and does not accept brokered deposits. The
Company relies primarily on competitive pricing policies, advertising and
customer service to attract and retain these deposits and provides incentives to
employees who refer new deposit customers to the Company. The Company also has
ATMs located in two branch offices.

         The variety of deposit accounts offered by the Company has allowed it
to be competitive in obtaining funds and to respond with flexibility to changes
in consumer demand. As certain customers have become more interest rate
conscious, the Company has become more susceptible to short-term fluctuations in
deposit flows. The Company manages the pricing of its deposits in keeping with
its asset/liability management, profitability and growth objectives. For
instance, in fiscal 1993, the Company introduced a 30-month "advantage"
certificate account which provided the customer with a one-time increase in rate
during the term of the account. At September 30, 1996, the Company had $15.9
million of advantage certificate accounts.

         Management believes that the "core" portion of the Company's regular
savings, transaction, money market and club accounts can have a lower cost and
be more resistant to interest rate changes than certificate accounts. These core
accounts decreased $17.7 million during fiscal 1995, but were relatively stable
during fiscal 1996. Management believes that the outflow in fiscal 1995
represented the most

                                       25

<PAGE>



interest rate sensitive portion of such accounts and that the majority of the
remaining portion of the Company's regular savings, transaction, money market
and club accounts are relatively stable sources of deposits. The Company
continues to utilize customer service and marketing initiatives (including
newspaper advertisements) in an effort to maintain and increase the volume of
such deposits. However, the ability of the Company to attract and maintain these
accounts (as well as certificate accounts) has been and will continue to be
affected by market conditions.

         The following table sets forth the deposit activity of the Company for
the periods indicated.


<TABLE>
<CAPTION>
                                                           For the Year Ended September 30,
                                                        --------------------------------------
                                                        1996             1995             1994
                                                        ----             ----             ----
                                                              (Dollars in Thousands)
<S>                                                    <C>              <C>              <C>   
Balance at beginning of year..................       $188,009         $179,816         $169,508
Deposits......................................        421,132          297,860          261,501
Withdrawals...................................      (426,246)        (296,569)        (256,600)
Interest credited.............................          7,780            6,902            5,407
                                                    ---------        ---------        ---------
Balance at end of year........................       $190,675         $188,009         $179,816
                                                     ========         ========         ========

Net increase during the year:
    Amount....................................      $   2,666        $   8,193        $  10,308
                                                    =========        =========        =========
    Percent...................................            1.4%             4.6%             6.1%
                                                          ===              ===              ===
</TABLE>


         The following table sets forth the distribution of the Company's
deposit accounts and the related weighted average interest rates at the dates
indicated.

<TABLE>
<CAPTION>
                                                                 At September 30,
                               ---------------------------------------------------------------------------------------
                                          1996                         1995                          1994
                               -----------------------  ---------------------------------  ---------------------------
                                       Percent of  Weighted          Percent of  Weighted          Percent of Weighted
                                          Total    Average             Total     Average             Total    Average
                               Amount   Deposits    Rate    Amount   Deposits     Rate     Amount   Deposits    Rate
                               ------   --------    ----    ------   --------     ----     ------   --------    ----
                                                              (Dollars in Thousands)
<S>                               <C>       <C>     <C>       <C>      <C>         <C>        <C>      <C>       <C>
Checking accounts............ $   1,957    1.0%      --%    $ 2,680     1.4%        ---%   $ 2,454     1.4%      ---%
NOW accounts.................    18,141    9.5     1.86      15,609     8.3        1.73     15,895     8.8      1.74
Money market accounts........    16,599    8.7     2.91      12,484     6.7        2.91     12,722     7.1      2.43
Regular savings accounts ....    47,832   25.1     2.61      54,794    29.1        2.70     72,257    40.2      2.70
Club accounts................     1,112    0.6     2.61       1,044     0.6        2.70        970     0.5      2.70
Savings certificate accounts.   105,034   55.1     5.24     101,398    53.9        5.61     75,518    42.0      4.25
                               --------  -----               ------   -----               --------   -----

    Total....................  $190,675  100.0%    3.99%   $188,009   100.0%       4.16%   $179,816   100.0%     3.21%
                               ========  =====              =======   =====                ========   =====

</TABLE>



                                       26

<PAGE>



         The following table sets forth, by interest rate ranges, the amount of
savings certificate accounts outstanding at the dates indicated and the period
to maturity of savings certificate accounts outstanding at September 30, 1996.

<TABLE>
<CAPTION>

                                                  At  September 30, 1996                           
                                 -------------------------------------------------------------       Total at
                                                    Period to Maturity                             September 30,
                                 -------------------------------------------------------------    -----------------
                                 Less than     One to      More than                 Percent
     Interest Rate Range         One Year    Three Years  Three Years      Total     of Total       1995      1994
-----------------------------    ---------  ------------  -----------  -----------  -----------  ----------- ------
                                                              (Dollars in Thousands)
<S>                                   <C>        <C>           <C>          <C>       <C>         <C>            <C>

4.00% and below..............     $     39   $    ---     $    ---    $     39       ---%      $ 3,174    $ 44,716
4.01% to 5.00%...............       50,229      2,581          ---      52,810      50.3        18,252      17,442
5.01% to 6.00%...............       12,916     20,330        2,559      35,805      34.1        44,359      11,186
6.01% to 7.00%...............        7,236      3,070        5,987      16,293      15.5        34,282         755
7.01% and above..............           87        ---          ---          87       0.1         1,331       1,419
                                 ---------  ---------   ----------  ----------     -----     ---------   ---------

    Total....................      $70,507    $25,981      $ 8,546    $105,034     100.0%     $101,398    $ 75,518
                                   =======    =======      =======    ========     =====      ========    ========

</TABLE>

         The following table sets forth the maturity distribution and related
weighted average interest rates for savings certificate accounts with balances
less than $100,000, accounts of $100,000 or more, and total savings certificates
at September 30, 1996.


<TABLE>
<CAPTION>
                                           Less than $100,000         $100,000 or More                Total
                                        ------------------------- ------------------------- -----------------------
                                                         Weighted                  Weighted                Weighted
                                                          Average                   Average                 Average
             Maturity Period                 Amount        Rate        Amount        Rate        Amount      Rate
------------------------------------   --------------  ----------- ------------  ----------- -----------  ----------
                                                                   (Dollars in Thousands)
<S>                                            <C>         <C>        <C>           <C>          <C>        <C>

Within three months.....................     $ 18,191      4.97%   $  2,077          5.14%    $  20,268     4.99%
After three but within six months.......       18,360      4.88       1,772          4.94        20,132     4.88
After six but within 12 months..........       27,316      5.11       2,791          5.23        30,107     5.12
                                             --------               -------                   ---------
    Total within one year...............       63,867      5.00       6,640          5.13        70,507     5.02
After one but within two years..........       17,023      5.47       1,732          5.75        18,755     5.49
After two but within three years........        6,480      5.53         746          5.49         7,226     5.52
After three but within five years.......        7,113      6.25       1,433          6.44         8,546     6.28
                                             --------              --------                   ---------
    Total...............................      $94,483      5.22%    $10,551          5.43%     $105,034     5.24%
                                              =======               =======                    ========

</TABLE>

         Borrowings. The Company's other available sources of funds include
advances from the FHLB of New York and other borrowings, including repurchase
agreements. As a member of the FHLB of New York, the Company is required to own
capital stock in the FHLB of New York and is authorized to apply for advances
from the FHLB of New York. Each FHLB credit program has its own interest rate,
which may be fixed or variable, and range of maturities. The FHLB of New York
may prescribe the acceptable uses for these advances, as well as limitations on
the size of the advances and repayment provisions. At September 30, 1996, the
Company had $8.0 million of FHLB advances outstanding. On such date, the Company
had a collateral pledge arrangement with the FHLB of New York pursuant to which
the Company may borrow up to $61.2 million.

         From time to time, the Company enters into repurchase agreements with
counterparties such as the FHLB of New York utilizing mortgage-backed and other
securities as collateral. At September 30, 1996, the Company had $10.3 million
of repurchase agreements outstanding which were collateralized by
mortgage-backed securities.


                                       27

<PAGE>



         See Note 7 of the Notes to Consolidated Financial Statements for
further information concerning the Company's FHLB advances and repurchase
agreements.

         The following table sets forth information concerning the balances and
interest rates on borrowings at the dates and for the periods indicated.

<TABLE>
<CAPTION>

                                                                   At or For the Year Ended September 30,
                                                                  ---------------------------------------
                                                                    1996            1995         1994
                                                                    ----            ----         ----
                                                                              (Dollars in Thousands)
<S>                                                                    <C>        <C>           <C>  

FHLB advances:
    Balance at end of year..............................            $ 8,000      $4,295       $  295
    Average balance during year.........................              2,356         920          295
    Maximum outstanding at any month end................              8,000       4,295          295
    Weighted average interest rate at end of year.......               5.73%       6.26%        5.29%
    Average interest rate during the year...............               5.52%       5.87%        5.29%

Repurchase agreements:
    Balance at end of year..............................            $10,264      $  ---     $    ---
    Average balance during year.........................              1,214       1,250          ---
    Maximum outstanding at any month end................             10,264       4,000          ---
    Weighted average interest rate at end of year.......               5.44%        ---%         ---%
    Average interest rate during the year...............               5.35%       6.26%         ---%

</TABLE>
Service Corporations

         As a federally chartered savings and loan association, the Association
is permitted by OTS regulations to invest up to 2% of its assets in the stock
of, or loans to, service corporation subsidiaries, and may invest an additional
1% of its assets in service corporations where such additional funds are used
for inner-city or community development purposes. In addition to investments in
service corporations, federal institutions are permitted to invest an unlimited
amount in operating subsidiaries engaged solely in activities which a federal
savings association may engage in directly. At September 30, 1996, the
Association had no service corporations.

Competition

         The Company faces extremely strong competition both in originating real
estate loans and in attracting deposits. Competition in originating loans comes
primarily from mortgage bankers, commercial banks, credit unions and other
savings institutions, which also make loans secured by real estate located in
the Company's market area. The Company competes for loans principally on the
basis of the interest rates and loan fees it charges, the types of loans it
originates and the quality of services it provides to borrowers.

         Competition for deposits is intense given the size of the New York
market and the fact that it is the home state for many large regional and money
center banks. Competition for deposits is principally from money market and
mutual funds, securities firms, commercial banks, credit unions and other
savings institutions located in the same communities. The ability of the Company
to attract and retain deposits depends on its ability to provide an investment
opportunity that satisfies the requirements of investors as to rate of return,
liquidity, risk, convenient locations and other factors. The Company is
significantly smaller than most of its competitors which, due to their size and
economies of scale, generally offer a broader range of deposit products than the
Company. The Company competes for these deposits by offering deposit accounts at
competitive rates, convenient business hours, availability of

                                       28

<PAGE>



ATMs and a customer oriented staff. As of June 30, 1996, the latest date such
information was available, there were 350 other thrift, commercial bank and
credit union offices in Westchester County which compete for deposits. As of
June 30, 1995, the Company held approximately 1.0% of total deposits in
Westchester County.

Employees

         At September 30, 1996, the Company had a total of 43 full-time and 10
part-time employees. None of the Company's employees are represented by any
collective bargaining agreement. Management considers its employee relations to
be good.

Regulation

         General. Yonkers Savings is a federally chartered savings and loan
association, the deposits of which are federally insured and backed by the full
faith and credit of the United States Government. Accordingly, Yonkers Savings
is subject to broad federal regulation and oversight extending to all its
operations. Yonkers Savings is a member of the FHLB of New York and is subject
to certain limited regulation by the Board of Governors of the Federal Reserve
System ("Federal Reserve Board"). Prior to December 1995, the Association was a
state-chartered savings and loan association and was subject to the regulation
of the State of New York Banking Department. Effective December 28, 1995, the
Association converted to a federal charter. As the savings and loan holding
company of Yonkers Savings, the Holding Company also is subject to federal
regulation and oversight. The purpose of holding company regulation is to
protect subsidiary savings associations. Yonkers Savings is a member of the SAIF
and the deposits of Yonkers Savings are insured by the FDIC. As a result, the
FDIC has certain regulatory and examination authority over Yonkers Savings.

         Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.

         Federal Regulation of Savings Associations. The OTS has extensive
authority over the operations of savings associations. As part of this
authority, Yonkers Savings is required to file periodic reports with the OTS and
is subject to periodic examinations by the OTS and the FDIC. The last regular
OTS safety and soundness examination of Yonkers Savings was as of September 30,
1995. When these examinations are conducted by the OTS and the FDIC, the
examiners may require Yonkers Savings to provide for higher general or specific
loan loss reserves. All savings associations are subject to a semi-annual
assessment, based upon the savings association's total assets, to fund the
operations of the OTS. Yonkers Savings' OTS assessment for the fiscal year ended
September 30, 1996 was approximately $62,000.

         The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including Yonkers Savings and the
Holding Company. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders and to initiate injunctive actions. In general, these enforcement actions
may be initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.

         In addition, the investment, lending and branching authority of Yonkers
Savings is prescribed by federal laws and it is prohibited from engaging in any
activities not permitted by such laws. For instance, no savings institution may
invest in non-investment grade corporate debt securities. In addition, the
permissible level of investment by federal associations in loans secured by
non-residential real property

                                       29

<PAGE>



may not exceed 400% of total capital, except with approval of the OTS. Federal
savings associations are also generally authorized to branch nationwide. Yonkers
Savings is in compliance with the noted restrictions.

         Yonkers Savings' general permissible lending limit for loans-to-one
borrower is equal to the greater of $500,000 or 15% of unimpaired capital and
surplus (except for loans fully secured by certain readily marketable
collateral, in which case this limit is increased to 25% of unimpaired capital
and surplus). At September 30, 1996, Yonkers Savings' lending limit under this
restriction was $5.2 million. Yonkers Savings is in compliance with the
loans-to-one borrower limitation.

         The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure, and compensation and other employee benefits. Any
institution which fails to comply with these standards must submit a compliance
plan. A failure to submit a plan or to comply with an approved plan will subject
the institution to further enforcement action. The OTS and the other federal
banking agencies have also proposed additional guidelines on asset quality and
earnings standards. No assurance can be given as to whether or in what form the
proposed regulations will be adopted.

         Insurance of Accounts and Regulation by the FDIC. Yonkers Savings is a
member of the SAIF, which is administered by the FDIC. Deposits are insured up
to applicable limits by the FDIC and such insurance is backed by the full faith
and credit of the United States Government. As insurer, the FDIC imposes deposit
insurance premiums and is authorized to conduct examinations of and to require
reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured
institution from engaging in any activity the FDIC determines by regulation or
order to pose a serious risk to the FDIC. The FDIC also has the authority to
initiate enforcement actions against savings associations, after giving the OTS
an opportunity to take such action, and may terminate the deposit insurance if
it determines that the institution has engaged in unsafe or unsound practices or
is in an unsafe or unsound condition.

         The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums, based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium, while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classifications of all insured
institutions are made by the FDIC for each semi-annual assessment period.

         The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF-insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

         On September 30, 1996, federal legislation was enacted that requires
the SAIF to be recapitalized with a one-time assessment on virtually all
SAIF-insured institutions, such as the Association, equal to 65.7 basis points
on SAIF-insured deposits maintained by those institutions as of March 31, 1995.
The SAIF special assessment applicable to the Association, which was paid to the
FDIC in November 1996,

                                       30

<PAGE>



was approximately $1.2 million. This amount was accrued by the Company at
September 30, 1996 by a charge to earnings.

         As a result of the SAIF recapitalization, the FDIC has proposed to
amend its regulation concerning the insurance premiums payable by SAIF-insured
institutions. For the period October 1, 1996 through December 31, 1996, the FDIC
has proposed that the SAIF insurance premium for all SAIF- insured institutions
that are required to pay the Financing Corporation (FICO) obligation, such as
the Association, be reduced to a range of 18 to 27 basis points from 23 to 31
basis points per $100 of domestic deposits. The FDIC has also proposed to
further reduce the SAIF insurance premium to a range of 0 to 27 basis points per
$100 of domestic deposits, effective January 1, 1997. Management cannot predict
whether or in what form the FDIC's final regulation may be promulgated.

         Regulatory Capital Requirements. Federally insured savings
associations, such as Yonkers Savings, are required to maintain a minimum level
of regulatory capital. The OTS has established capital standards, including a
tangible capital requirement, a leverage ratio (or core capital) requirement and
a risk-based capital requirement applicable to such savings associations. These
capital requirements must be generally as stringent as the comparable capital
requirements for national banks. The OTS is also authorized to impose capital
requirements in excess of these standards on individual associations on a
case-by-case basis.

         The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained earnings, and certain
noncumulative perpetual preferred stock and related surplus. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights and credit card relationships, must be deducted from tangible capital for
calculating compliance with the requirement. At September 30, 1996, Yonkers
Savings had no intangible assets.

         The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. Debt and equity
investments in excludable subsidiaries are deducted from assets and capital. At
September 30, 1996, Yonkers Savings had no subsidiaries.

         At September 30, 1996, Yonkers Savings had tangible capital of $34.4
million, or 14.0% of adjusted total assets, which is $30.7 million above the
minimum requirement of 1.5% in effect on that date.

         The capital standards also require core capital equal to at least 3% of
adjusted total assets. Core capital generally consists of tangible capital plus
certain intangible assets, including a limited amount of purchased mortgage
servicing rights and credit card relationships. At September 30, 1996, Yonkers
Savings had no intangible assets. In accordance with the prompt corrective
action provisions discussed below, however, a savings association must maintain
a core capital ratio of at least 4% to be considered adequately capitalized
unless its supervisory condition is such to allow it to maintain a 3% ratio.

         At September 30, 1996, Yonkers Savings had core capital equal to $34.4
million, or 14.0% of adjusted total assets, which is $27.1 million above the
minimum leverage ratio requirement of 3% in effect on that date.

          The OTS risk-based capital regulations require savings associations to
have total capital of at least 8% of risk-weighted assets. Total capital
consists of core capital, as defined above, and

                                       31

<PAGE>



supplementary capital. Supplementary capital consists of certain permanent and
maturing capital instruments that do not qualify as core capital and general
valuation loan and lease loss allowances up to a maximum of 1.25% of
risk-weighted assets. Supplementary capital may be used to satisfy the risk-
based capital requirement only up to the amount of core capital. The OTS is also
authorized to require a savings association to maintain an additional amount of
total capital to account for concentration of credit risk and the risk of
non-traditional activities. At September 30, 1996, Yonkers Savings had no
capital instruments that qualify as supplementary capital and $937,000 of
general loan loss reserves, which was less than 1.25% of risk-weighted assets.

         Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. Yonkers Savings had no
such exclusions from capital and assets at September 30, 1996.

         In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet items, are multiplied by a risk weight,
ranging from 0% to 100%, based on the risk inherent in the type of asset. For
example, the OTS has assigned a risk weight of 50% for prudently underwritten
permanent one- to four-family first lien mortgage loans not more than 90 days
delinquent and having a loan to value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the FNMA or FHLMC.

         The OTS has adopted a final rule that requires every savings
association with more than normal interest rate risk exposure to deduct from its
total capital, for purposes of determining compliance with such requirement, an
amount equal to 50% of its interest-rate risk exposure multiplied by the present
value of its assets. This exposure is a measure of the potential decline in the
net portfolio value of a savings association, greater than 2% of the present
value of its assets, based upon a hypothetical 200 basis point increase or
decrease in interest rates (whichever results in a greater decline). Net
portfolio value is the present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. The rule provides for a two quarter
lag between calculating interest rate risk and recognizing any deduction from
capital. The rule will not become effective until the OTS evaluates the process
by which savings associations may appeal an interest rate risk deduction
determination. It is uncertain as to when this evaluation may be completed. Any
savings association with less than $300 million in assets and a total risk-based
capital ratio in excess of 12% (such as the Association) is exempt from this
requirement unless the OTS determines otherwise.

         At September 30, 1996, Yonkers Savings had total capital of $35.3
million (including $34.4 million in core capital and $937,000 in qualifying
supplementary capital) and risk-weighted assets of $94.9 million (including $4.2
million in converted off-balance sheet items), or total capital of 37.2% of
risk-weighted assets. This amount was $27.8 million above the 8% requirement in
effect on that date.

         Under the prompt corrective action regulations, the OTS and the FDIC
are authorized (and, under certain circumstances, required) to take certain
actions against savings associations that fail to meet their capital
requirements. The OTS is generally required to take action to restrict the
activities of an "undercapitalized association" (generally defined as having
less than either a 4% core capital ratio, a 4% Tier 1 risked-based capital ratio
or an 8% risk-based capital ratio). Any such association must submit a capital
restoration plan and until such plan is approved by the OTS may not increase its
assets, acquire another institution, establish a branch or engage in any new
activities, and generally may not make capital distributions. The OTS is
authorized to impose the additional restrictions that are applicable to
significantly undercapitalized associations.


                                       32

<PAGE>



          As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.

         The prompt corrective action regulations also provide that any savings
association that fails to comply with its capital plan or is "significantly
undercapitalized" (i.e., Tier 1 risk-based or core capital ratios of less than
3% or a risk-based capital ratio of less than 6%) must be made subject to one or
more of additional specified actions and operating restrictions which may cover
all aspects of its operations and include a forced merger or acquisition of the
association. An association that becomes "critically undercapitalized" (i.e., a
tangible capital ratio of 2% or less) is subject to further mandatory
restrictions on its activities in addition to those applicable to significantly
undercapitalized associations. In addition, the OTS must appoint a receiver (or
conservator with the concurrence of the FDIC) for a savings association, with
certain limited exceptions, within 90 days after it becomes critically
undercapitalized. Any undercapitalized association is also subject to the
general enforcement authority of the OTS and the FDIC, including the appointment
of a conservator or a receiver.

         The OTS is also generally authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an unsafe
or unsound condition.

         The imposition by the OTS or the FDIC of any of these measures on
Yonkers Savings may have a substantial adverse effect on Yonkers Savings'
operations and profitability, and on the value of the Holding Company's common
stock. Holding Company shareholders do not have preemptive rights, and
therefore, if the Holding Company is directed by the OTS or the FDIC to issue
additional shares of common stock, such issuance may result in the dilution in
the percentage ownership of present shareholders.

         Limitations on Dividends and Other Capital Distributions. OTS
regulations impose various restrictions on associations with respect to their
ability to make distributions of capital which include dividends, stock
redemptions or repurchases, cash-out mergers and transactions charged to the
capital account. OTS regulations prohibit an association from declaring or
paying any dividends or from repurchasing any of its stock if, as a result, the
regulatory capital of the association would be reduced below the amount required
to be maintained for the liquidation account established in connection with its
mutual to stock conversion.

         Generally, associations (such as Yonkers Savings) that before and after
the proposed distribution meet their capital requirements, may make capital
distributions during any calendar year equal to the greater of (i) 100% of net
income for the year-to-date plus 50% of the amount by which the lesser of the
association's tangible, core or risk-based capital exceeds its fully phased-in
capital requirement for such capital component, as measured at the beginning of
the calendar year, or (ii) 75% of net income for the most recent four-quarter
period. However, an association deemed to be in need of more than normal
supervision by the OTS may have its dividend authority restricted.

         Associations proposing to make a capital distribution need only submit
written notice to the OTS 30 days prior to such distribution. Associations that
do not currently meet or would not after the proposed capital distribution meet
their minimum capital requirements must obtain OTS approval prior to making such
distribution. As a subsidiary of the Holding Company, Yonkers Savings will also
be required to give the OTS 30 days' notice prior to declaring any dividend on
its stock. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns.


                                       33

<PAGE>



         The OTS has proposed regulations that would revise the current capital
distribution restrictions. Under the proposal a savings association may make a
capital distribution without notice to the OTS (unless it is a subsidiary of a
holding company) provided that it has a CAMEL 1 or 2 rating, is not in troubled
condition (as defined by regulation) and would remain adequately capitalized (as
defined in the OTS prompt corrective action regulations) following the proposed
distribution. Savings associations that would remain adequately capitalized
following the proposed distribution but do not meet the other noted requirements
must notify the OTS 30 days prior to declaring a capital distribution. The OTS
stated it will generally regard as permissible that amount of capital
distributions that do not exceed 50% of the institution's excess regulatory
capital plus net income to date during the calendar year. A savings association
may not make a capital distribution without prior approval of the OTS and the
FDIC if it is undercapitalized before, or as a result of, such a distribution.
As under the current rule, the OTS may object to a capital distribution if it
would constitute an unsafe or unsound practice. No assurance may be given as to
whether or in what form the regulations may be adopted.

         Liquidity. All savings associations, including Yonkers Savings, are
required to maintain an average daily balance of liquid assets equal to a
certain percentage of the sum of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less. This liquid asset
ratio requirement may vary from time to time (between 4% and 10%) depending upon
economic conditions and savings flows of all savings associations. At the
present time, the minimum liquid asset ratio is 5%.

         In addition, short-term liquid assets (e.g., cash, certain time
deposits, certain bankers acceptances and short-term United States Treasury
obligations) currently must constitute at least 1% of an association's average
daily balance of net withdrawable deposit accounts and current borrowings.

         Penalties may be imposed upon associations for violations of either
liquid asset ratio requirement. At September 30, 1996, Yonkers Savings was in
compliance with both requirements, with an overall liquid asset ratio of 12.5%
and a short-term liquid asset ratio of 3.6%.

         Accounting. An OTS policy statement applicable to all savings
associations clarifies and reemphasizes that the investment activities of a
savings association must be in compliance with approved and documented
investment policies and strategies, and must be accounted for in accordance with
GAAP. Under the policy statement, management must support its classification of
and accounting for loans and securities (i.e., whether held for investment, sale
or trading) with appropriate documentation. Yonkers Savings believes it is in
compliance with these amended rules.

         The OTS has adopted an amendment to its accounting regulations, which
may be made more stringent than GAAP by the OTS, to require that transactions be
reported in a manner that best reflects their underlying economic substance and
inherent risk and that financial reports must incorporate any other accounting
regulations or orders prescribed by the OTS.

         Qualified Thrift Lender Test. All savings associations, including
Yonkers Savings, are required to meet a qualified thrift lender ("QTL") test to
avoid certain restrictions on their operations. This test requires a savings
association to have at least 65% of its portfolio assets (as defined by
regulation) in qualified thrift investments on a monthly average for nine out of
every 12 months on a rolling basis. Such assets primarily consist of residential
housing related loans and investments. At September 30, 1996, Yonkers Savings
met the test and has always met the test since its effectiveness.

         Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new

                                       34

<PAGE>



investments and activities are limited to those permissible for both a savings
association and a national bank, and it is limited to national bank branching
rights in its home state. In addition, the association is immediately ineligible
for additional FHLB borrowings and is subject to national bank limits for
payment of dividends. If such association has not requalified or converted to a
national bank within three years after the failure, it must divest of all
investments and cease all activities not permissible for a national bank. In
addition, it must repay promptly any outstanding FHLB borrowings, which may
result in prepayment penalties. If any association that fails the QTL test is
controlled by a holding company, then within one year after the failure, the
holding company must register as a bank holding company and become subject to
all restrictions on bank holding companies. See "- Holding Company Regulation."

         Community Reinvestment Act. Under the Community Reinvestment Act
("CRA"), every FDIC insured institution has a continuing and affirmative
obligation consistent with safe and sound banking practices to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with the examination of Yonkers Savings, to
assess the institution's record of meeting the credit needs of its community and
to take such record into account in its evaluation of certain applications, such
as a merger or the establishment of a branch, by Yonkers Savings. An
unsatisfactory rating may be used as the basis for the denial of an application
by the OTS.

         The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, Yonkers Savings may be required to devote additional
funds for investment and lending in its local community. Yonkers Savings was
examined for CRA compliance by the OTS in September 1996 and received a rating
of satisfactory.

         Transactions with Affiliates. Generally, transactions between a savings
association or its subsidiaries and its affiliates are required to be on terms
as favorable to the association as transactions with non-affiliates. In
addition, certain of these transactions, such as loans to an affiliate, are
restricted to a percentage of the association's capital. Affiliates of Yonkers
Savings include the Holding Company and any company which is under common
control with Yonkers Savings. In addition, a savings association may not lend to
any affiliate engaged in activities not permissible for a bank holding company
or acquire the securities of most affiliates. Subsidiaries of a savings
association are generally not deemed affiliates; however, the OTS has the
discretion to treat subsidiaries of savings associations as affiliates on a
case-by-case basis.

         Certain transactions with directors, officers or controlling persons
are also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.

         Holding Company Regulation. The Holding Company is a unitary savings
and loan holding company subject to regulatory oversight by the OTS. As such,
the Holding Company is required to register and file reports with the OTS and is
subject to regulation and examination by the OTS. In addition, the OTS has
enforcement authority over the Holding Company and its non-savings association
subsidiaries (if any) which also permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary savings
association.

         As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a

                                       35

<PAGE>



separate subsidiary, it would become a multiple savings and loan holding
company, and the activities of the Holding Company and any of its subsidiaries
(other than Yonkers Savings or any other SAIF-insured savings association) would
become subject to such restrictions unless such other associations each qualify
as a QTL and were acquired in a supervisory acquisition.

         If Yonkers Savings fails the QTL test, the Holding Company must obtain
the approval of the OTS prior to continuing after such failure, directly or
through its other subsidiaries, any business activity other than those approved
for multiple savings and loan holding companies or their subsidiaries. In
addition, within one year of such failure the Holding Company must register as,
and will become subject to, the restrictions applicable to bank holding
companies. The activities authorized for a bank holding company are more limited
than are the activities authorized for a unitary or multiple savings and loan
holding company. See "- Qualified Thrift Lender Test."

         The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings association.

         Federal Securities Law. The stock of the Holding Company is registered
with the SEC under the Exchange Act. The Holding Company is subject to the
information, proxy solicitation, insider trading restrictions and other
requirements of the SEC under the Exchange Act.

         Holding Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Holding Company may not
be resold without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified current public information
requirements, each affiliate is able to sell in the public market, without
registration, a limited number of shares in any three-month period.

         Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At September 30, 1996, Yonkers Savings was in compliance
with these reserve requirements. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements that may be imposed by the OTS. See "- Liquidity."

         Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.

         Federal Home Loan Bank System. Yonkers Savings is a member of the FHLB
of New York, which is one of 12 regional FHLBs that administer the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the board of directors of the FHLB, which
are subject to the oversight of the Federal Housing Finance Board. All advances
from the FHLB are required to be fully secured by sufficient collateral as
determined by the FHLB. In addition, all long-term advances are required to
provide funds for residential home financing.


                                       36

<PAGE>



         As a member, Yonkers Savings is required to purchase and maintain stock
in the FHLB of New York. At September 30, 1996, Yonkers Savings had $1.1 million
in FHLB stock, which was in compliance with this requirement. For the fiscal
year ended September 30, 1996, dividends paid by the FHLB of New York to Yonkers
Savings totaled $72,000 compared to $84,000 for fiscal 1995. Over the past five
calendar years (1991-1995) such dividends have averaged 8.6% and were 6.5% for
calendar year 1995.

         Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately-priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of Yonkers Savings' FHLB stock may result in a corresponding
reduction in Yonkers Savings' capital.

Taxation

         Federal. The Association and the Holding Company currently file
separate federal income tax returns. These returns are filed on a fiscal year
basis, as of September 30, using the accrual method of accounting.

         Savings associations such as the Association are permitted to establish
reserves for bad debts and to make annual additions thereto which may, within
specified formula limits, be taken as a deduction in computing taxable income
for federal income tax purposes. The amount of the bad debt reserve deduction
for "non-qualifying loans" is computed under the experience method. The amount
of the bad debt reserve deduction for "qualifying real property loans"
(generally loans secured by improved real estate) is also computed under the
experience method. A percentage of taxable income method was also available in
computing the qualifying loan bad debt deduction for tax years ended on or prior
to December 31, 1995.

         Under the experience method, the bad debt reserve deduction is an
amount determined under a formula based generally upon the bad debts actually
sustained by the savings association over a period of years.

         Since 1987, the percentage of specially-computed taxable income that
was used to compute a savings association's bad debt reserve deduction under the
percentage of taxable income method (the "percentage bad debt deduction") was
8%. The percentage bad debt deduction thus computed was reduced by the amount
permitted as a deduction for non-qualifying loans under the experience method.
The availability of the percentage of taxable income method permitted qualifying
savings associations to be taxed at a lower effective federal income tax rate
than that applicable to corporations generally (approximately 31.3% assuming the
maximum percentage bad debt deduction). Under changes in federal tax law enacted
in August 1996, the percentage bad debt deduction has been eliminated for tax
years beginning after December 31, 1995. Accordingly, this method will not be
available to the Association for its tax years ending September 30, 1997 and
thereafter.

         Under the percentage of taxable income method, the percentage bad debt
deduction could not exceed the amount necessary to increase the balance in the
reserve for qualifying real property loans to an amount equal to 6% of such
loans outstanding at the end of the taxable year or the greater of (i) the
amount deductible under the experience method or (ii) the amount which when
added to the bad debt deduction for non-qualifying loans equals the amount by
which 12% of the amount comprising savings accounts at year-end exceeds the sum
of surplus, undivided profits and reserves at the beginning of the

                                       37

<PAGE>



year. Through September 30, 1996, the 6% and 12% limitations did not restrict
the percentage bad debt deduction available to the Association.

         The federal tax legislation enacted in August 1996 also imposes a
requirement to recapture into taxable income the portion of the qualifying and
non-qualifying loan reserves in excess of the "base-year" balances of such
reserves. For the Association, the base-year reserves are the balances as of
September 30, 1988. Recapture of the excess reserves will occur over a six-year
period which could begin for the Association as early as the tax year ending
September 30, 1997 (commencement of the recapture period may be delayed,
however, for up to two years provided the Association meets certain residential
lending requirements). The Association previously established, and will continue
to maintain, a deferred tax liability with respect to its federal tax bad debt
reserves in excess of the base-year balances; accordingly, the legislative
changes will have no effect on total income tax expense for financial reporting
purposes.

         Also, under the August 1996 legislation, the Association's base-year
federal tax bad debt reserves are "frozen" and subject to current recapture only
in very limited circumstances. Generally, recapture of all or a portion of the
base-year reserves will be required if the Association pays a dividend in excess
of the greater of its current or accumulated earnings and profits, redeems any
of its stock, or is liquidated. The Association has not established a deferred
federal tax liability under SFAS No. 109 for its base-year federal tax bad debt
reserves, as it does not anticipate engaging in any of the transactions that
would cause such reserves to be recaptured.

         In addition to the regular income tax, corporations generally are
subject to a minimum tax. An alternative minimum tax is imposed at a minimum tax
rate of 20% on alternative minimum taxable income, which is the sum of a
corporation's regular taxable income (with certain adjustments) and tax
preference items, less any available exemption. The alternative minimum tax is
imposed to the extent it exceeds the corporation's regular income tax, and net
operating losses can offset no more than 90% of alternative minimum taxable
income. For taxable years beginning after 1986 and before 1996, corporations
were also subject to an environmental tax equal to 0.12% of the excess of
alternative minimum taxable income for the taxable year (determined without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.

         The Association has been audited by the IRS with respect to federal
income tax returns through September 30, 1991, and all deficiencies have been
satisfied. In the opinion of management, any examination of still open returns
would not result in a deficiency which could have a material adverse effect on
the financial condition of the Company.

         New York State. The Association and the Holding Company currently file
combined New York State tax returns on a fiscal year basis. The Company is
subject to the New York State Franchise Tax on Banking Corporations in an annual
amount equal to the greater of (i) 9% of "entire net income" allocable to New
York State during the taxable year, or (ii) the applicable alternative minimum
tax. The alternative minimum tax is generally the greater of (a) 0.01% of the
value of assets allocable to New York State with certain modifications, (b) 3%
of "alternative entire net income" allocable to New York State, or (c) $250. In
addition, New York also imposes a general surtax on the applicable tax described
above. The surtax is scheduled to be reduced to 2.5% for taxable years ending
after June 30, 1996 and before July 1, 1997, and to expire thereafter. Entire
net income is similar to federal taxable income, subject to certain
modifications (including the fact that net operating losses cannot be carried
back or carried forward). In addition, New York also imposes a Metropolitan
Commuter Transportation District surcharge of 17% that is assessed on the New
York State Franchise tax before the general surtax.


                                       38

<PAGE>



         In July 1996, New York State enacted legislation to preserve the use of
the percentage of taxable income bad debt deduction for thrift institutions such
as the Association. In general, the legislation provides for a deduction equal
to 32% of the Association's New York State taxable income, which is comparable
to the deductions permitted under the prior tax law. The legislation also
provides for a floating base year, which will allow the Association to switch
from the percentage of taxable income method to the experience method without
recapture of any reserve. Previously, the Association had established a deferred
New York State tax liability for the excess of its New York State tax bad debt
reserves over the amount of its base-year New York State reserves. Since the new
legislation effectively eliminated the reserves in excess of the base-year
balances, 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.

         Generally, New York State tax law has requirements similar to federal
requirements regarding the recapture of base-year tax bad debt reserves. One
notable exception is that, after the recent legislation, New York continues to
require that at least 60% of the Association's assets consist of specified
assets (generally, loans secured by residential real estate or deposits,
educational loans, cash and certain government obligations). The Association
expects to continue to meet the 60% requirement and does not anticipate engaging
in any of the transactions which would require recapture of its base-year
reserves. Accordingly, under SFAS No. 109, it has not provided any deferred tax
liability on such reserves.

         Delaware. As a Delaware company, the Holding Company is exempted from
Delaware corporate income tax but is required to file an annual report with and
pay an annual fee to the State of Delaware. The Holding Company is also subject
to an annual franchise tax imposed by the State of Delaware.

Item 2.   Properties

         The following table sets forth information concerning the Company's
properties at September 30, 1996. The Company's premises had an aggregate net
book value of approximately $346,000 at that date.

<TABLE>
<CAPTION>

                                      Year                               Net Book Value at
              Location           Acquired/Leased    Owned or Leased     September 30, 1996
              --------           ---------------    ---------------     ------------------
                                                                            (In Thousands)
<S>                                   <C>               <C>                     <C>  

Corporate Headquarters:
6 Executive Plaza                     1996              Leased                 $   5
Yonkers, New York  10701-9858

Main Office:
One Manor House Square                1976               Owned                   123
Yonkers, New York  10701-2701

Full Service Branches:
780 Palisade Avenue                   1989              Leased                    60
Yonkers, New York  10703
1759 Central Park Avenue              1977              Leased                    75
Yonkers, New York  10710-2828
2320 Central Park Avenue              1986              Leased                    83
Yonkers, New York  10710-1216

</TABLE>

                                       39

<PAGE>



         The Company believes that its current facilities are adequate to meet
present needs. In the future, the Company intends to continue to explore
branching opportunities to the extent they develop, although no specific
proposals are currently under consideration.

         The Company's depositor and borrower customer files are maintained by
an independent data processing company. The net book value of the computer
equipment utilized by the Company at September 30, 1996 was approximately
$100,000.

Item 3.   Legal Proceedings

         The Company is involved as plaintiff or defendant in various legal
proceedings arising in the normal course of its business. While the ultimate
outcome of these various legal proceedings cannot be predicted with certainty,
it is the opinion of management that the resolution of these legal actions
should not have a material effect on the Company's financial position, results
of operations or liquidity.

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

         (a)  On October 30, 1996, the Company held a Special Meeting of
              Stockholders.

         (b)  At the meeting, stockholders voted on the following matters:

         (i)  The approval of the 1996 Stock Option and Incentive Plan; and

                                                               BROKER
         VOTES:     FOR       AGAINST         ABSTAIN         NON-VOTES 
         ------     ---       -------         -------         --------- 
                 2,234,609   215,554          187,454           4,001

         (ii) The approval of the 1996 Management Recognition Plan.

                                                                 BROKER
         VOTES:     FOR      AGAINST          ABSTAIN           NON-VOTES
         ------     ---      -------          -------           ---------

                 2,119,974   330,760          190,884              0


                                                      PART II


Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

         Page 53 of the attached 1996 Annual Report to Stockholders is herein
incorporated by reference.

Item 6.   Selected Financial Data

         Pages 1 and 2 of the attached 1996 Annual Report to Stockholders are
herein incorporated by reference.

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

         Pages 3 through 20 of the attached 1996 Annual Report to Stockholders
are herein incorporated by reference.

                                       40

<PAGE>



Item 8.   Financial Statements and Supplementary Data

         Pages 21 through 52 of the attached 1996 Annual Report to Stockholders
are herein incorporated by reference.

Item 9.   Changes In and Disagreements With Accountants on Accounting and
          Financial Disclosure

         There has been no Current Report on Form 8-K filed within 24 months
prior to the date of the most recent financial statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.


                                                     PART III

Item      10. Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act

Directors

         Information concerning directors of the Registrant is incorporated
herein by reference from the Holding Company's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held in 1997, a copy of which will be
filed not later than 120 days after the close of the fiscal year.

Executive Officers Who Are Not Directors

         The following are the Company's executive officers who are not also
directors as of September 30, 1996.

         Joseph L. Macchia. Mr. Macchia, age 45, has been Vice President and
Secretary to the Association since 1991, and Vice President and Secretary of the
Holding Company since its formation. Mr. Macchia is responsible for the
Association's branch administration, consumer lending and savings operations. He
is also responsible for the Association's Bank Secrecy Act compliance. Prior to
such time, Mr. Macchia served as the Association's Vice President. Mr. Macchia
has been employed by the Association since 1972.

         Joseph D. Roberto. Mr. Roberto, age 44, is the Vice President,
Treasurer and Chief Financial Officer of the Holding Company, a position he has
held since its formation, and is Vice President, Treasurer and Chief Financial
Officer of the Association. Mr. Roberto was appointed the Association's Vice
President and Treasurer in 1991 and Chief Financial Officer in 1995. Mr. Roberto
is responsible for the Association's Accounting Department, interest rate risk
and asset/liability management as well as the Association's financial reporting.
Prior to 1991, Mr. Roberto served as the Association's Secretary and Treasurer.
Mr. Roberto has been employed by the Association since 1973.

         Philip Guarnieri. Mr. Guarnieri, age 39, is the Vice President and
Chief Lending Officer of the Association. Mr. Guarnieri was appointed Vice
President and Chief Lending Officer in July 1996. Prior to joining the
Association, Mr. Guarnieri was the Vice President for loan origination at Home
Federal Savings Bank, Queens, New York. Mr. Guarnieri is responsible for the
administration of the Association's real estate lending programs.

                                       41

<PAGE>



Compliance with Section 16(a)

         Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Holding Company's equity securities, to file with the SEC reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Holding Company. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.

         To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1996, the
Registrant complied with all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10 percent beneficial owner were complied
with.

Item 11.  Executive Compensation

         Information concerning executive compensation is incorporated herein by
reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in 1997, a copy of which will be filed not later than
120 days after the close of the fiscal year.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in 1997, a copy of
which will be filed not later than 120 days after the close of the fiscal year.

Item 13.  Certain Relationships and Related Transactions

         Information concerning certain relationships and related transactions
is incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held in 1997, a copy of which will be filed
not later than 120 days after the close of the fiscal year.




                                       42

<PAGE>



                                                      PART IV

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

         (a) (1)  Financial Statements

         The following information appearing in the Company's 1996 Annual Report
to Stockholders is herein incorporated by reference:

       Item                                           Pages in Annual Report
       ----                                           ----------------------
Independent Auditors' Report                                Page 21
Consolidated Balance Sheets as of September 30, 1996
 and 1995                                                   Page 22
Consolidated Statements of Income for the Years
 Ended September 30, 1996, 1995 and 1994                    Page 23
Consolidated Statements of Changes in Stockholders'
 Equity for the Years Ended September 30, 1996, 1995
  and 1994                                                  Page 24
Consolidated Statements of Cash Flows for the Years
 Ended September 30, 1996, 1995 and 1994                    Page 25
Notes to Consolidated Financial Statements                  Pages 26 through 52


                                       43

<PAGE>
<TABLE>
<CAPTION>



         (a) (2)  Financial Statement Schedules

         All financial statement schedules have been omitted as the required
information is not applicable or has been included in the Consolidated Financial
Statements.

         (a) (3)  Exhibits


                                                                                                            Sequential Page
                                                                                Reference to                  Number Where
                                                                                 Prior Filing              Attached Exhibits
  Regulation S-K                                                                  or Exhibit              are Located in this
      Exhibit                                                                  Number Attached                 Form 10-K
      Number                              Document                                 Hereto                       Report
      ------                              --------                                 ------                       ------
       <S>                    <C>                                                    <C>                          <C>   

       3(a)        Certificate of Incorporation                                       *                     Not applicable
       3(b)        By-Laws                                                            *                     Not applicable
         4         Instruments defining the rights of security holders,               *                     Not applicable
                    including debentures
         9         Voting Trust Agreement                                           None                    Not applicable
        10         Material Contracts
                     Employment Contract                                              *                     Not applicable
                     Management Recognition Plan and Stock
                       Option and Incentive Plan                                      *                     Not applicable
                   Change-in-Control Severance Agreements                            **                     Not applicable
        11         Statement re: computation of per share earnings              Not required                Not applicable
        12         Statement re: computation of ratios                          Not required                Not applicable
        13         Annual Report to Security Holders                                 13                        Page ___
        16         Letter re: change in certifying accountants                      None                    Not applicable
        18         Letter re: change in accounting principles                       None                    Not applicable
        19         Previously unfiled documents                                     None                    Not applicable
        21         Subsidiaries of Registrant                                        21                        Page ___
        22         Published report regarding matters submitted to vote             None                    Not applicable
                    of security holders
        23         Consents of Experts and Counsel                              Not required                Not applicable
        24         Power of Attorney                                            Not required                Not applicable
        27         Financial Data Schedule                                      Not required                Not applicable
        28         Information from reports furnished to state insurance            None                    Not applicable
                    regulatory authorities
        99         Additional Exhibits                                              None                    Not applicable
</TABLE>
----------------
         * Filed as exhibits to the Company's Form S-1 registration statement
filed on December 29, 1995 (File No. 33-81013) pursuant to Section 5 of the
Securities Act of 1933, as amended. All of such previously filed documents are
hereby incorporated herein by reference in accordance with Item 601 of
Regulation S-K.

         ** Filed as exhibits to the Company's Pre-effective Amendment No.1 to
its Form S-1 registration statement filed on February 6, 1996 (File No.
33-81013) pursuant to Section 5 of the Securities Act of 1933, as amended. All
of such previously filed documents are hereby incorporated herein by reference
in accordance with Item 601 of Regulation S-K.

         (b)  Reports on Form 8-K

         During the quarter ended September 30, 1996, no current reports on Form
8-K were filed by the Holding Company.

                                       44

<PAGE>


                                   SIGNATURES

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

                            YONKERS FINANCIAL CORPORATION


                            By: /s/ Richard F. Komosinski
                                Richard F. Komosinski, President and  Director
                                (Duly Authorized Representative)
<TABLE>
<CAPTION>

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

<S>                                                    <C>   
/s/ Richard F. Komosinski                      /s/ William G. Bachop      
Richard F. Komosinski, President and Director  William G. Bachop, Chairman
(Principal Executive and Operating Officer)    


Date: December 30, 1996                         Date: December 30, 1996


/s/ Michael J. Martin                           /s/ Charles D. Lohrfink      
Michael J. Martin,  Director                    Charles D. Lohrfink, Director
                                                

Date: December 30, 1996                         Date: December 30, 1996


/s/ Donald R. Angelilli                         /s/ Eben T. Walker      
Donald R. Angelilli, Director                   Eben T. Walker, Director
                                                


Date: December 30, 1996                         Date: December 30, 1996 



/s/ P. Anthony Sarubbi                          /s/ Joseph D. Roberto                        
P. Anthony Sarubbi, Director                    Joseph D. Roberto,                           
                                                Vice President and Treasurer                 
                                                (Principal Financial and Accounting Officer) 
                                                



Date: December 30, 1996                        Date: December 30, 1996



</TABLE>
                                       45