1999 ANNUAL REPORT




                              FINANCIAL HIGHLIGHTS

<TABLE>

<S>                                                         <C>              <C>               <C>
At or for the Fiscal Year Ended September 30,              2000              1999             1998
---------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)

Selected Financial Condition Data

Total assets                                               $522,874       $457,695        $383,204
Loans receivable, net                                       364,238        297,950         184,025
Mortgage-backed securities                                   83,574         97,380         113,485
Other securities                                             44,991         41,268          55,043
Deposits                                                    325,106        272,974         231,181
Borrowings                                                  157,412        147,935         107,790
Stockholders' equity                                         34,882         32,017          41,802


Selected Operating Data

Net interest income                                        $ 13,962       $ 12,048        $ 11,453
Net income                                                    3,141          2,663           2,901
Basic earnings per common share(1)                             1.56           1.13            1.12
Diluted earnings per common share(1)                           1.53           1.11            1.08


Asset Quality Data

Non-performing loans                                       $    123       $    755        $    753
Non-performing loans to total loans
    receivable                                                 0.03%          0.25%           0.41%

Selected Statistical  Data

Return on average equity                                       9.69%          6.64%           6.72%
Average equity to average assets                               6.37          10.21           12.18
Book value per share(2)                                      $15.65         $14.30          $15.33
Cash dividends per share                                       0.36           0.32            0.28
</TABLE>


(1) Earnings per share data for all periods has been computed in accordance with
Statement of Financial Accounting Standards No. 128.

(2) Represents  stockholders'  equity divided by total common shares outstanding
at the end of the period .
                                        1
<PAGE>


TO OUR STOCKHOLDERS:

     From  a  financial  point  of  view,  fiscal  2000  was  Yonkers  Financial
Corporation's best year since becoming a public company in 1996,-- a year marked
by  strong  asset  growth,  records  profits  and  a  growing  presence  in  our
marketplace.

     The Company,  which is the holding company for The Yonkers Savings and Loan
Association,  F.A.  reported  earnings of $1.53 per diluted share for the fiscal
year ended  September  30,  2000,  an increase of 37.8% over the $1.11 per share
reported in fiscal 1999.  Net income rose to a record $3.1 million,  an increase
of 17.9% over 1999.

     By  any  measure,  this  was an  outstanding  performance,  but it was  not
entirely  unexpected.  In fact,  it  reflected  the  effective  execution of our
business plan for 2000.  That plan called for strong growth in our deposit base,
increased   lending  for  residential  and  commercial  real  estate   purposes,
appropriate  control of  expenses,  and a further  reduction  in  non-performing
loans. It called for us to capitalize  further on the growth  initiatives we had
put in place over the past few  years.  And with some  additional  help from the
continuing  strength in our region's economy,  our dedicated employees delivered
even better results than we projected.

     Solid Asset Growth.  The Company's assets,  principally its loan portfolio,
grew a solid $65.2 million, or 14.2%, to $522.9 million. We funded the growth in
two ways.  First,  we grew our deposit  base with the majority of the increase a
direct  result  from the  expansion  of our retail  franchise  over the past two
years.  Deposits rose by $52.1 million,  or 19.1% to $325.1 million.  Second, we
increased  our  borrowings,  in the form of advances  from the Federal Home Loan
Bank, by $9.5 million, or 6.4% to $157.4 million.

     Deposit Base Increases.  Although while we operate in a highly  competitive
marketplace for banking  services,  we successfully  increased our deposit base,
increasing our market share in the process.  We achieved this through  effective
promotions  in our four  traditional  branches  and by taking  advantage  of the
expanded  presence afforded by our five recently added in-store branches located
in Wappingers Falls, Yorktown Heights, Mount Vernon,  Poughkeepsie and Cortlandt
Manor.

     We also stepped up our emphasis on our BusinessVantage program for business
customers,  expanding the number of  BusinessVantage  accounts by more than 50%,
from 525 to 800, and more than doubling the amount of these deposits.  Combined,
these efforts enabled us to increase our deposits beyond our projections.

     It is worthy of note that we achieved this strong  deposit growth at a time
when most competing institutions were having trouble attracting deposits.

     Expanded Loan Portfolio.  Total loans,  including both loans receivable and
mortgage loans held for sale, rose by an impressive  22.7% or $67.8 million to a
new high of $367.0 million.

     As described in our 1999 annual report, our modern lending center,  staffed
by our  dedicated  retail sales team, is making a  significant  contribution  in
growing  our  loan  portfolio.  Traditionally,  we  have  focused  primarily  on
originating mortgage loans secured by one- to four-family residences, but we are
currently  placing  increased   emphasis  on  commercial  real  estate  lending.
Multi-family  and  mixed-use  loans  accounted  for 36%, or $24.4 million of the
$67.8 million loan growth in fiscal 2000,  compared to 21% of the loan growth in
the previous year.

     Loan  quality  improved  even  further  in  2000  as  non-performing  loans
decreased  from  $755,000 in 1999 to $123,000 in 2000.  Non-performing  loans to
total loans fell from 0.25% in 1999 to 0.03%. While a robust economy has helped,
this excellent  performance is mainly attributable to the skill and diligence of
our staff.

     Net  Interest  and Non  Interest  Income  Up.  The  expansion  of our  loan
portfolio  contributed to an increase of $2.0 million in net interest  income to
$14.0  million,  a gain of 15.9%  over  fiscal  1999.  The  additional  earnings
generated by this loan growth more than offset the negative effects of a decline
in our average interest rate spread from 2.66 % to 2.47%.
                                       2
<PAGE>
     Our non-interest income rose 37.7% for the year to $1.6 million,  primarily
reflecting  increases  in  service  charges  and fee  income.  Growth in service
charges revenue resulted mainly from higher transaction volume, while fee income
increased on the strength of sales of annuities and mutual funds under a program
launched during fiscal 2000. This program,  which generated  $236,000 in income,
was  essentially  on  target  in  sales  for the  fiscal  year,  and we look for
continued  growth during fiscal 2001. The gains in these income  categories were
partially offset by declines in our net gain on sales of securities and on sales
of real estate mortgages held for sale.

     Strong Financial  Position.  Yonkers  Financial  Corporation ended its 2000
fiscal year in excellent financial condition. Return on average equity increased
substantially, from 6.64% in fiscal 1999 to 9.69% in fiscal 2000, and we hope to
improve on that in the future.  The  increase  reflects  higher  profits and the
further  leveraging of our capital.  Essentially  the same trend is displayed in
another ratio, average equity to average assets, which went from 10.2% in fiscal
1999 to 6.4% in fiscal  2000,  as a result  of  growth in fiscal  2000 and stock
repurchases in fiscal 1999. The effect was to position our Company for excellent
EPS growth from the very start of the fiscal year.

     Our solid  performance  enabled  the Board of  Directors  to  maintain  the
quarterly  dividend of $0.9 per share,  established  for 1999's fourth  quarter,
throughout  fiscal 2000.  This amounted to a dividend  increase of 12.5% for the
year.

     New Director Named.  Fredric H. Gould,  Chairman of the Board of BRT Realty
Trust and General  Partner of Gould  Investors L.P., was elected to the Board of
Directors  in February  2000 for a two-year  term.  Mr.  Gould was also a former
majority  owner and member of the Board of Directors of BFS Bankorp.  We believe
the Company will benefit from his real estate  expertise  and business  insight.
Mr. Gould currently serves on the Company's Loan Committee.

     A  Positive  Outlook.  Prospects  for fiscal  2001  appear  very good.  The
regional  economy remains solid, and we will further expand our deposit base and
loan portfolio.  Our employees continue to work diligently to build every aspect
of our business.  We plan to enhance our Web site  (www.yonkers.com) to add bill
paying to the balance inquiry and funds transfer activities currently available.
Overall, we look forward to a solid and profitable performance in fiscal 2001.

     We will continue to take an opportunistic  approach to growth, and are open
to new branches or potential acquisitions if the "fit" and price are right. Most
of all, we remain committed to the goal of building shareholder value.

     It is said that superior business  performance will eventually be reflected
in the price of a company's  stock,  although  that has not been our  experience
lately.  But I am  confident  that our  strong  results  will in due  course  be
rewarding  to our  shareholders.  On  behalf of the  board,  I want to thank our
employees,   our  customers  and  in  particular  our   shareholders  for  their
dedication, loyalty and unstinting support.


Sincerely,

Richard F. Komosinski
President and Chief Executive Officer
November 27, 2000

                                       3
<PAGE>
<TABLE>
                      SELECTED CONSOLIDATED FINANCIAL DATA

                                                                 At or for the Fiscal Year Ended September 30,
                                                    ------------------------------------------------------------------------
                                                       2000           1999           1998           1997           1996
                                                    ------------  -------------   ------------  -------------   ------------
                                                                 (Dollars in thousands, except per share data)
<S>                                                    <C>            <C>            <C>            <C>            <C>

Selected Financial Condition Data:
Total assets                                           $522,874      $457,695       $383,204       $312,956       $259,534
Loans receivable, net                                   364,238       297,950        184,025        118,683         86,666
Real estate mortgage loans held for sale                  2,743         1,226         13,334         20,437             --
Securities:
  Available-for-sale                                    112,373       116,712        125,225         86,286         58,552
  Held-to-maturity                                       16,192        21,936         43,303         76,329         95,007
Cash and cash equivalents                                10,178         4,651          4,195          3,593         12,500
Deposits                                                325,106       272,974        231,181        207,933        190,675
Borrowings                                              157,412       147,935        107,790         60,096         18,264
Stockholders' equity                                     34,882        32,017         41,802         43,878         48,999

Selected Operating Data:
Interest and dividend income                           $ 36,092      $ 26,932       $ 25,475       $ 20,731       $ 16,376
Interest expense                                         22,130        14,884         14,022          9,957          7,975
                                                       --------      --------       --------       --------       --------
  Net interest income                                    13,962        12,048         11,453         10,774          8,401
Provision for loan losses                                   220           235            375            300            462
                                                       --------      --------       --------       --------       --------
  Net interest income after provision for loan losses    13,742        11,813         11,078         10,474          7,939
Non-interest income                                       1,593         1,157          1,128            532            502
Non-interest expense (excluding special assessment)      10,340         8,737          7,301          6,064          4,838
SAIF special assessment (1)                                  --            --             --             --          1,166
                                                       --------      --------       --------       --------       --------
  Income before income tax expense                        4,995         4,233          4,905          4,942          2,437
Income tax expense                                        1,854         1,570          2,004          1,990            917
                                                       --------      --------       --------       --------       --------
  Net income (2)                                       $  3,141      $  2,663       $  2,901       $  2,952       $  1,520
                                                       ========      ========       ========       ========       ========
Basic earnings per common share (3)                    $   1.56      $   1.13       $   1.12       $   1.05       $   0.22
Diluted earnings per common share (3)                  $   1.53      $   1.11       $   1.08       $   1.04       $   0.22

Selected Statistical Data: (4)
Return on average assets (2)                               0.62%         0.68%          0.82%          1.05%          0.66%
Return on average equity (2)                               9.69          6.64           6.72           6.72           4.60
Net interest margin (5)                                    2.80          3.13           3.28           3.93           3.73
Average interest rate spread (6)                           2.47          2.66           2.67           3.26           3.13
Efficiency ratio (7)                                      66.56         66.83          58.21          53.44          53.82
Non-interest expense to average assets (2)                 2.03          2.22           2.06           2.17           2.11
Non-performing loans to total loans receivable             0.03          0.25           0.38           0.81           3.14
Allowance for loan losses to non-performing loans      1,384.55        199.07         172.91          96.05          33.77
Allowance for loan losses to total loans receivable        0.46          0.50           0.66           0.78           1.06
Non-performing assets to total assets                      0.02          0.16           0.28           0.48           1.30
Equity to total assets at end of period                    6.67          7.00          10.91          14.02          18.88
Average equity to average assets                           6.37         10.21          12.18          15.69          14.41
Book value per share (8)                             $    15.65       $ 14.30        $ 15.33        $ 14.53        $ 13.72
Cash dividends per share                                   0.36          0.32           0.28           0.21           0.05
Dividend payout ratio (9)                                 24.23%        28.73%         25.92%         20.66%         22.50%
</TABLE>
----------------------------------------------------

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

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

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

General

     Yonkers  Financial  Corporation  (the  "Holding  Company")  is the  unitary
savings   association   holding   company  for  The  Yonkers  Savings  and  Loan
Association,  FA (the  "Association"),  a federally  chartered  savings and loan
association and a wholly owned subsidiary of the Holding Company.  Collectively,
the Holding Company and the Association are referred to herein as the "Company."

     The Association has two wholly owned  subsidiaries,  Yonkers REIT,  Inc., a
real estate investment trust (the "REIT"), and Yonkers Financial Services, Inc.,
a subsidiary that sells savings bank life insurance, mutual funds and annuities.

     The Company's primary market area consists of Westchester County, New York,
and portions of Putnam,  Rockland and Dutchess Counties,  New York.  Business is
conducted  from  its  executive  offices  as well as four  full-service  banking
offices and a lending office located in Yonkers, New York. In addition, business
is also conducted  through five in-store  branches located in Wappingers  Falls,
Yorktown Heights, Mt. Vernon, Poughkeepsie, and Cortlandt Manor.

     The Association is a community-oriented  savings institution whose business
primarily  consists of accepting  deposits from customers within its market area
and  investing  those funds in  mortgage  loans  secured by one- to  four-family
residences,   multi-family  and  commercial  real  estate,  construction,  land,
consumer and commercial  business loans. The Company has recently  determined to
increase its emphasis on its  multi-family  lending  activity.  The Company also
invests in mortgage-backed and other securities.  The Holding Company's business
activities  have been limited to its  ownership of the  Association  and certain
short-term and other investments.

     The Company's results of operations are primarily dependent on net interest
income,   which  is  the   difference   between  the  interest   income  on  its
interest-earning  assets (such as loans and securities) and the interest expense
on its  interest-bearing  liabilities  (such as deposits  and  borrowings).  The
Company  results of  operations  are also  affected  by the  provision  for loan
losses,  non-interest  income  and  non-interest  expense.  Non-interest  income

                                      5
<PAGE>
primarily  consists of service  charges  and fees on deposit and loan  products,
fees from the sale of annuities and mutual funds, and gains (losses) on sales of
loans and securities.  The Company's  non-interest expenses primarily consist of
employee  compensation  and benefits,  occupancy and  equipment  expenses,  data
processing  service fees,  federal  deposit  insurance costs and other operating
expenses.

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

Operating Strategy

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

Comparison of Financial Condition at September 30, 2000 and 1999

     Total assets at September 30, 2000 amounted to $522.9 million,  an increase
of $65.2  million or 14.2% from $457.7  million at  September  30,  1999.  Asset
growth during the period was funded  primarily  through  growth in the Company's
deposit  base  relating to the  expansion  of its retail  franchise,  as well as
proceeds from  borrowings  under  Federal Home Loan Bank  ("FHLB")  advances and
securities repurchase agreements.

     Funds provided by deposit growth and  borrowings,  as well as proceeds from
sales of mortgage  loans held for sale,  were  invested  primarily in new loans.
Overall,  total  loans  (loans  receivable  and  mortgage  loans  held for sale)
increased  $67.8  million or 22.7% to $367.0  million at September 30, 2000 from
$299.2  million at  September  30,  1999.  One- to  four-family  mortgage  loans
accounted for $39.7 million of the overall  increase (net of an increase of $1.5
million in loans held for sale).  Multi-family real estate loans increased $16.3
million or 111.2% while  commercial  real estate loans increased $6.3 million or
23.5%  reflecting  the  Company's  intention  to increase  such  higher-yielding
assets.  Changes in other portfolio  categories were less significant.  The loan
growth during  fiscal 2000  represented  loan  originations  of $117.3  million,
offset by principal  repayments of $33.1  million,  loans sold of $16.1 million,
and an increase in the  allowance  for loan losses of $200,000.  The increase in
loan  production was the result of an expanded  retail  mortgage  representative
sales force and the establishment of a new lending center during fiscal 1999, as
well as favorable market conditions.

                                       6
<PAGE>

     Total  securities at September 30, 2000  decreased  $10.0 million to $128.6
million  from $138.6  million at September  30, 1999,  reflecting a $5.7 million
decrease  in  held-to-maturity   securities  and  a  $4.3  million  decrease  in
available-for-sale  securities.  Proceeds  from sales,  principal  payments  and
maturities  of  securities  were used to fund the  significant  increase in loan
volume  during  fiscal 2000  rather than the  reinvestment  in  securities.  The
decrease in held-to-maturity securities primarily reflects principal repayments,
maturities and calls. The decrease in  available-for-sale  securities  primarily
reflects $8.1 million in principal repayments, maturities and calls, $370,000 in
proceeds  from  sales  and a  $201,000  decrease  in  the  market  value  of the
portfolio,  partially  offset by purchases of $4.4  million.  Available-for-sale
securities  represented 87.4% of the total securities portfolio at September 30,
2000,  compared  to 84.2%  at  September  30,  1999.  Cash and cash  equivalents
increased  $5.5 million to $10.2 million at September 30, 2000 from $4.7 million
at September 30, 1999.

     Deposit  liabilities  increased $52.1 million or 19.1% to $325.1 million at
September 30, 2000 from $273.0  million at September  30, 1999.  The increase is
attributable  to the  expansion  of the retail  franchise  as well as  continued
aggressive  cross-selling,  quality  customer  service and  competitive  deposit
products.

     Borrowings  increased  $9.5  million  (primarily  FHLB  advances) to $157.4
million at September  30, 2000 from $147.9  million at September  30, 1999.  For
information  regarding the terms of the  borrowings,  see "Liquidity and Capital
Resources".

     Stockholders'  equity  amounted to $34.9  million at September  30, 2000, a
$2.9 million  increase from $32.0 million at September 30, 1999. The increase is
primarily  attributable  to net income retained after dividends of $2.4 million,
and a combined  increase of $795,000  relating to the employee  stock  ownership
plan ("ESOP") and the management  recognition plan ("MRP"),  partially offset by
common share  repurchases of $171,000 for the treasury,  and a $139,000 increase
in the after-tax net unrealized loss on available-for-sale  securities.  A total
of 10,000  common shares were  repurchased  in open market  transactions  during
fiscal 2000 at an average cost of $17.10 per share.  The ratio of  stockholders'
equity to total assets  decreased  to 6.67% at September  30, 2000 from 7.00% at
September 30, 1999,  primarily  reflecting  substantial asset growth. Book value
per share  (computed  based on total  shares  issued less  treasury  shares) was
$15.65 at September 30, 2000, an increase from $14.30 at September 30, 1999. For
information  regarding the Association's  regulatory capital, see "Liquidity and
Capital Resources".

Analysis of Net Interest Income

     Net  interest   income   represents  the   difference   between  income  on
interest-earning  assets  and  expense  on  interest-bearing   liabilities.  Net
interest income is affected by the relative amounts of  interest-earning  assets
and interest-bearing liabilities, and the interest rates earned or paid on them.

     The following table sets forth average  balance sheets,  average yields and
costs,  and certain other  information  for the years ended  September 30, 2000,
1999 and 1998. The average  yields and costs were computed by dividing  interest
income or expense by the average  balance of the related assets or  liabilities.
Average  balances were computed based on daily balances.  The yields include the
effect of deferred fees,  discounts and premiums included in interest income. No
tax-equivalent  yield  adjustments were made for tax-exempt  securities,  as the
effect thereof was not material.

                                       7
<PAGE>
<TABLE>
                                                                                  For the Year Ended September 30,
                                        --------------------------------------------------------------------------------------------
                                                   2000                           1999                            1998
                                        ------------------------------  ------------------------------  ----------------------------
                                        Average              Average    Average             Average     Average           Average
                                        Balance   Interest  Yield/Cost  Balance   Interest  Yield/Cost  Balance  Interest Yield/Cost
                                        -------   --------  ----------  -------   --------  ----------  -------  -------- ----------
Assets                                                                     (Dollars in thousands)
<S>                                      <C>     <C>         <C>        <C>       <C>        <C>        <C>       <C>       <C>
Interest-earning assets:
  Loans (1)                             $353,742 $ 26,005    7.35%      $221,754  $16,399    7.40%      $169,011  $13,243   7.84%
  Mortgage-backed securities (2)          90,016    6,168    6.85        109,831    7,032    6.40        108,674    7,394   6.80
  Other securities (2)                    41,528    3,097    7.46         40,331    2,837    7.03         62,654    4,356   6.95
  Other earning assets                    13,853      822    5.93         13,108      664    5.07          8,646      482   5.57
                                        -------- --------               --------  -------               --------  -------
    Total interest-earning assets        499,139 $ 36,092    7.23        385,024  $26,932    6.99        348,985  $25,475   7.30
                                                 ========                         =======                         =======

Allowance for loan losses                 (1,575)                         (1,423)                         (1,195)
Non-interest earning assets               11,323                           9,194                           6,738
                                        --------                        --------                        --------
    Total assets                        $508,887                        $392,795                        $354,528
                                        ========                        ========                        ========
Liabilities and  Stockholders' Equity
Interest-bearing liabilities:
  NOW, club and money market accounts   $ 62,908 $  1,368    2.17%      $ 56,462  $ 1,286    2.28%      $ 47,078  $   841   1.79%
  Regular savings accounts (3)            55,902      959    1.72         49,148      949    1.93         45,124    1,092   2.42
  Savings certificate accounts           174,798    9,596    5.49        140,763    7,308    5.19        124,647    7,123   5.71
                                        -------- --------               --------  -------               --------  -------
    Total interest-bearing deposits      293,608   11,923    4.06        246,373    9,543    3.87        216,849    9,056   4.18

  Borrowings                             170,809   10,207    5.98         97,138    5,341    5.50         86,031    4,966   5.77
                                        -------- --------               --------  -------               --------  -------
    Total interest-bearing liabilities   464,417 $ 22,130    4.77        343,511  $14,884    4.33        302,880  $14,022   4.63
                                                 ========                         =======                         =======

Non-interest-bearing liabilities          12,067                           9,197                           8,461
                                        --------                        --------                        --------
    Total liabilities                    476,484                         352,708                         311,341

Stockholders' equity                      32,403                          40,087                          43,187
                                        --------                        --------                        --------
    Total liabilities and stockholders'
     equity                             $508,887                        $392,795                        $354,528
                                        ========                        ========                        ========
Net interest income                              $ 13,962                         $12,048                         $11,453
                                                 ========                         =======                         =======
Average interest rate spread (4)                             2.47%                           2.66%                          2.67%
Net interest margin (5)                                      2.80%                           3.13%                          3.28%
Net interest-earning assets (6)         $ 34,722                        $ 41,513                        $ 46,105
                                        ========                        ========                        ========
Ratio of average interest-earning assets
  to average interest-bearing liabilities                  107.48%                         112.08%                        115.22%
</TABLE>


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

                                       8
<PAGE>

     The following  table presents the extent to which changes in interest rates
and  changes  in the  volume of  interest-earning  assets  and  interest-bearing
liabilities  have affected the Company's  interest  income and interest  expense
during the periods  indicated.  Information  is provided in each  category  with
respect to (i)  changes  attributable  to changes in volume  (changes  in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate  multiplied  by prior  volume),  and (iii) the net  change.  The changes
attributable  to the  combined  impact  of volume  and rate have been  allocated
proportionately to the changes due to volume and the changes due to rate.

<TABLE>

                                              Fiscal 2000 Compared to Fiscal 1999           Fiscal 1999 Compared to Fiscal 1998
                                            ----------------------------------------     ------------------------------------------
                                              Increase (Decrease)                           Increase (Decrease)
                                                    Due to                  Net                    Due to                  Net
                                            ------------------------                     ---------------------------
                                             Volume         Rate          Change           Volume           Rate          Change
                                            ----------   -----------    ------------     ------------    -----------    -----------
                                                                              (In Thousands)
<S>                                          <C>            <C>          <C>              <C>             <C>           <C>
Interest-earning assets:
  Loans                                     $ 9,717      $ (111)        $ 9,606          $ 3,936         $ (780)       $ 3,156
  Mortgage-backed securities                 (1,333)        469            (864)              73           (435)          (362)
  Other securities                               85         175             260           (1,570)            51         (1,519)
  Other earning assets                           40         118             158              229            (47)           182
                                            -------      ------         -------          -------         ------        -------
             Total                            8,509         651           9,160            2,668         (1,211)         1,457
                                            -------      ------         -------          -------         ------        -------
Interest-bearing liabilities:
  NOW, club and money market accounts           145         (63)             82              188            257            445
  Regular savings accounts                      121        (111)             10               91           (234)          (143)
  Savings certificate accounts                1,847         441           2,288              869           (684)           185
  Borrowings                                  4,364         502           4,866              616           (241)           375
                                            -------      ------         -------          -------         ------        -------
             Total                            6,477         769           7,246            1,764           (902)           862
                                            -------      ------         -------          -------         ------        -------

Net change in net interest income           $ 2,032      $ (118)        $ 1,914          $   904         $ (309)       $   595
                                            =======      ======         =======          =======         ======        =======
</TABLE>

Comparison of Operating Results for the Years Ended September 30, 2000 and 1999

     General.  Net income was $3.1 million and diluted earnings per common share
("EPS")  was $1.53 for the fiscal  year ended  September  30,  2000,  a $478,000
increase from net income of $2.7 million and diluted EPS of $1.11 for the fiscal
year ended  September  30,  1999.  Basic EPS was $1.56 for the fiscal year ended
September 30, 2000 compared to $1.13 for fiscal 1999. The increase in net income
reflects, a $1.9 million increase in net interest income, a $436,000 increase in
non-interest  income and a $15,000  decrease in the  provision  for loan losses,
partially  offset by  increases  of $1.6  million in  non-interest  expense  and
$284,000 in income tax expense.

     Net Interest  Income.  Net interest income for the year ended September 30,
2000 was $14.0  million,  an increase of $2.0 million from $12.0 million for the
prior year. The increase  reflects the positive effect on net interest income of
higher  average  earning  assets,  primarily  attributable  to the investment of
proceeds from deposit growth and  borrowings,  partially  offset by a decline in
the average  interest rate spread.  The decrease in average interest rate spread
is primarily a result of an increase in the cost of funds. The Company's average
interest  rate spread  decreased  to 2.47% for fiscal 2000 from 2.66% for fiscal
1999,  while the net  interest  margin  decreased  to 2.80% for fiscal 2000 from
3.13% for fiscal 1999.

                                       9
<PAGE>

     Interest and Dividend  Income.  Interest and dividend income increased $9.2
million,  or 34.0%, to $36.1 million for fiscal 2000 from $26.9 for fiscal 1999.
This increase  reflects the impact of a $114.1 million increase in total average
interest-earning  assets,  primarily  loans, and by a 24 basis point increase in
the average yield on such assets to 7.23% for the year ended  September 30, 2000
from 6.99% for the prior year.

     Interest  income on loans  increased  $9.6 million to $26.0 million for the
year ended September 30, 2000 from $16.4 million for the prior year,  reflecting
a $132.0 million increase in the average balance,  partially offset by a 5 basis
point  decrease in the average  yield.  The  increase in the average  balance of
loans was  primarily  attributable  to an  increase in  originations  of one- to
four-family  residential  loans for portfolio  purposes and the  reinvestment of
proceeds from principal repayments, maturities and calls of securities.

     On a combined basis,  interest and dividend income on  mortgage-backed  and
other  securities  decreased  $604,000 to $9.3 million for fiscal 2000 from $9.9
million for the prior year. Interest on mortgage-backed  securities decreased by
$864,000,  attributable  to a $19.8  million  decrease  in the  average  balance
partially offset by a 45 basis point increase in the average yield. The decrease
in the average balance of mortgage backed securities was primarily  attributable
to principal  repayments  and sales of available  for sale  securities in fiscal
1999.  The higher  average  yield on  mortgage-backed  securities in fiscal 2000
reflects the impact of lower premium amortization caused by decreased repayments
of  principal.  Interest on other  securities  increased by $260,000,  primarily
attributable  to a $1.2 million  increase in the average  balance and a 43 basis
point  increase in the average  yield on other  securities to 7.46% for the year
ended September 30, 2000 from 7.03% for fiscal 1999.

     Interest and dividend  income on other earning assets  increased  $158,000,
attributable to a $745,000  increase in the average  balance,  and by a 86 basis
point increase in the average yield.

     Interest Expense. Interest expense totaled $22.1 million for the year ended
September 30, 2000, an increase of $7.2 million from $14.9 million for the prior
year.

     Interest expense on borrowings  increased $4.9 million to $10.2 million for
fiscal 2000 from $5.3  million for fiscal  1999,  as the  Company  continued  to
increase borrowings,  primarily FHLB advances, to leverage available capital and
support further loan growth. Total borrowings averaged $170.8 million for fiscal
2000  at an  average  rate  of  5.98%  compared  to  $97.1  million  and  5.50%,
respectively,  for the prior-year.  See "Liquidity and Capital  Resources" for a
further discussion of the Company's borrowings.

     Interest  expense on deposits  increased  $2.4 million to $11.9 million for
fiscal 2000 from $9.5 million for fiscal 1999. This increase reflects the impact
of a $47.2 million increase in the average balance of interest-bearing deposits,
and a 19 basis point  increase in the average rate paid on deposits to 4.06% for
the year ended September 30, 2000 from 3.87% for the prior year. The increase in
average  interest-bearing  deposits  consisted  of a $34.0  million  increase in
average savings certificate  accounts (to $174.8 million from $140.8 million), a
$6.8 million increase in average regular savings accounts (to $55.9 million from
$49.1  million),  and a $6.4  million  increase  in NOW,  club and money  market
accounts (to $62.9  million  from $56.5  million).  The overall  increase in the
average rate paid on deposits  during fiscal 2000 primarily  reflects a 30 basis
point  increase  in the  average  rate  paid on  savings  certificate  accounts,
partially  offset  by a 21 basis  point  decrease  in the  average  rate paid on
regular savings accounts, and a 11 basis point decrease in the average rate paid
on NOW, club and money market accounts.

                                       10
<PAGE>
     Provision for Loan Losses.  The Company records provisions for loan losses,
which are charged to  earnings,  in order to  maintain  the  allowance  for loan
losses at a level which is  considered  appropriate  to absorb  probable  losses
inherent in the existing loan  portfolio.  The provision in each period reflects
management's  evaluation  of the  adequacy  of the  allowance  for loan  losses.
Factors  considered  include  the  volume  and type of  lending  conducted,  the
Company's  previous loan loss  experience,  the known and inherent  risks in the
loan portfolio,  adverse  situations  that may affect the borrowers'  ability to
repay,  the estimated value of any underlying  collateral,  and current economic
conditions.

     The  provision  for loan losses was $220,000 in fiscal 2000 and $235,000 in
fiscal  1999.  Loans  receivable  (before  the  allowance  for loan  losses  and
including loans held for sale) increased to $368.7 million at September 30, 2000
from $300.7  million at September  30, 1999,  and the  allowance for loan losses
increased  to $1.7  million  at  September  30,  2000 from  $1.5  million a year
earlier.  The  allowance  for loan  losses  represented  0.46%  of  total  loans
receivable at September 30, 2000,  compared to 0.50% at September 30, 1999.  Net
charge-offs  in fiscal 2000 decreased to $20,000 from $34,000 in the prior year,
while  non-performing  loans  decreased to $123,000 at  September  30, 2000 from
$755,000 at September  30, 1999.  The ratio of the  allowance for loan losses to
non-performing  loans was 1384.55% at September 30, 2000, compared to 199.07% at
September 30, 1999. See "Asset Quality" for further  information  concerning the
provision and allowance for loan losses.

     Non-Interest Income. Non-interest income increased $436,000 to $1.6 million
for the year ended  September  30, 2000  compared to $1.2  million for the prior
year. The increase was primarily  attributable  to increases in service  charges
and fee  income  partially  offset  by a  decrease  in the net  gain on sales of
available-for-sale  securities and real estate mortgage loans held for sale. The
$582,000 increase in service charges and fee income primarily reflects increases
in  transaction  volume as well as fee income  generated  from our annuities and
mutual  funds  sales  program  launched  in fiscal  2000.  Net gains on sales of
securities  amounted to $19,000 for fiscal 2000 reflecting  sales of $370,000 in
available-for-sale  securities during the year, compared to gains of $111,000 on
sales of $17.6  million in the prior year.  Mortgage  loan sales  totaled  $16.1
million, resulting in a net gain of $175,000, as compared to loan sales of $37.4
million in fiscal 1999, which resulted in net gains of $197,000.  In addition, a
provision  for losses on loans held for sale of $97,000  was charged to net gain
on sales of loans for fiscal 1999,  while no such provisions were made in fiscal
2000.  The net gain on sales of loans  held  for sale  includes  the  effect  of
capitalizing  mortgage  servicing assets at the time of sale, in accordance with
Statement of Financial  Accounting  Standards No. 125, which amounted to $44,000
for  fiscal  2000 and  $362,000  for the prior  year.  Servicing  assets  with a
carrying  value of $530,000 and $548,000  (after  amortization)  are included in
other assets in the  consolidated  balance  sheet as of  September  30, 2000 and
1999,  respectively.  See  also  Notes  1 and 3 of  the  Notes  to  Consolidated
Financial  Statements.  Other  non-interest  income  for fiscal  2000  decreased
$32,000  from the prior year.  Fiscal 1999  reflected a gain of $72,000 from the
sale of servicing rights.

     Non-Interest Expense.  Non-interest expense increased $1.6 million to $10.3
million for the year ended  September  30, 2000 compared to $8.7 million for the
prior year. The increase in fiscal 2000 was primarily  attributable to increases
in  compensation  and  benefits  expense,   other  non-interest   expense,  data
processing  service fees and occupancy and  equipment  expense.  The increase in
compensation and benefit expense of $887,000, occupancy and equipment expense of
$235,000,  and data  processing  service  fees of  $149,000  primarily  reflects
increased costs  associated with the  establishment  of three in-store  branches
during  fiscal  1999.  The  $389,000  increase  in  other  non-interest  expense
primarily  reflects  expenses of $212,000  relating to the costs associated with
the proxy fight that was concluded in January of this year.

                                       11
<PAGE>
     Income Tax Expense.  Income tax expense was approximately  $1.8 million for
fiscal 2000,  an increase from $1.6 million for fiscal 1999,  reflecting  higher
pre-tax income and effective tax rates of 37.1% in both periods.

Comparison of Operating Results for the Years Ended September 30, 1999 and 1998

     General.  Net income was $2.7 million and diluted earnings per common share
("EPS")  was $1.11 for the fiscal  year ended  September  30,  1999,  a $238,000
decrease from net income of $2.9 million and diluted EPS of $1.08 for the fiscal
year ended  September  30,  1998.  Basic EPS was $1.13 for the fiscal year ended
September 30, 1999 compared to $1.12 for fiscal 1998. The decrease in net income
reflects a $1.4 million increase in non-interest expense, partially offset by an
increase of $595,000 in net  interest  income,  a decrease of $434,000 in income
tax expense, a $140,000 decrease in the provision for loan losses, and a $29,000
increase in non-interest income.

     Net Interest  Income.  Net interest income for the year ended September 30,
1999 was $12.0 million, an increase of $595,000 from $11.5 million for the prior
year.  The  increase  primarily  reflects a rise in the  average  interest  rate
spread,  partially  offset by a decline in  net-interest  earning  assets (total
interest-earning  assets less total interest-bearing  liabilities) primarily due
to $8.7 million in funds used to purchase treasury stock during fiscal 1999. The
increase in the average interest rate spread is primarily a result of a decrease
in the cost of funds as well as increases in the proportion of assets consisting
of commercial real estate and multi-family loans. The Company's average interest
rate spread decreased to 2.66% for fiscal 1999 from 2.67% for fiscal 1998, while
the net interest margin decreased to 3.13% for fiscal 1999 from 3.28% for fiscal
1998.

     Interest and Dividend  Income.  Interest and dividend income increased $1.4
million,  or 5.72%, to $26.9 million for fiscal 1999 from $25.5 for fiscal 1998.
This increase  reflects the impact of a $36.0 million  increase in total average
interest-earning  assets,  primarily loans, partially offset by a 31 basis point
decrease  in the  average  yield  on such  assets  to 6.99%  for the year  ended
September 30, 1999 from 7.30% for the prior year.

     Interest  income on loans  increased  $3.2 million to $16.4 million for the
year ended September 30, 1999 from $13.2 million for the prior year,  reflecting
a $52.7 million increase in the average balance,  partially offset by a 44 basis
point  decrease in the average  yield.  The  increase in the average  balance of
loans was  primarily  attributable  to an  increase in  originations  of one- to
four-family  residential  loans for portfolio  purposes and the  reinvestment of
proceeds from principal  repayments,  maturities  and calls of  securities.  The
decline in the average yield was primarily  attributable  to the  origination of
new loans (including refinancings) in a lower interest rate environment.

     On a combined basis,  interest and dividend income on  mortgage-backed  and
other  securities  decreased  $1.9  million to $9.9 million for fiscal 1999 from
$11.8  million  for the  prior  year.  Interest  on  mortgage-backed  securities
decreased by $362,000,  attributable to the effects of a 40 basis point decrease
in the average yield partially  offset by a $1.1 million increase in the average
balance.  The lower average yield on  mortgage-backed  securities in fiscal 1999
reflects  the  impact  of  higher  premium   amortization  caused  by  increased
repayments of principal.  Interest on other securities declined by $1.5 million,
primarily  attributable to a $22.3 million decrease in the average balance.  The
decrease in the average balance of other  securities was primarily  attributable
to calls of  higher  yielding  agency  securities  in the  lower  interest  rate
environment of fiscal 1999.

                                       12
<PAGE>

     Interest and dividend  income on other earning assets  increased  $182,000,
attributable to a $4.5 million increase in the average balance, partially offset
by a 50 basis point decrease in the average yield.

     Interest Expense. Interest expense totaled $14.9 million for the year ended
September  30, 1999,  an increase of $862,000  from $14.0  million for the prior
year.

     Interest expense on deposits  increased $487,000 to $9.5 million for fiscal
1999 from $9.1 million for fiscal 1998.  This increase  reflects the impact of a
$29.5  million  increase in the average  balance of  interest-bearing  deposits,
partially  offset  by a 31 basis  point  decrease  in the  average  rate paid on
deposits to 3.87% for the year ended September 30, 1999 from 4.18% for the prior
year.  The increase in average  interest-bearing  deposits  consisted of a $16.1
million increase in average savings certificate accounts (to $140.7 million from
$124.6  million),  a $9.4 million increase in average NOW, club and money market
accounts (to $56.5 million from $47.1 million),  and a $4.0 million  increase in
average  regular  savings  accounts (to $49.1 million from $45.1  million).  The
overall  decrease  in the  average  rate paid on  deposits  during  fiscal  1999
primarily reflects a 52 basis point decrease in the average rate paid on savings
certificate accounts, coupled with a 49 basis point decrease in the average rate
paid on regular savings accounts,  partially offset by a 49 basis point increase
in the average rate paid on NOW, club and money market accounts.

     Interest  expense on  borrowings  increased  $375,000  to $5.3  million for
fiscal 1999 from $5.0  million for fiscal  1998,  as the  Company  continued  to
increase borrowings,  primarily FHLB advances, to leverage available capital and
support further loan growth.  Total borrowings averaged $97.1 million for fiscal
1999  at an  average  rate  of  5.50%  compared  to  $86.0  million  and  5.77%,
respectively,  for the prior-year.  See "Liquidity and Capital  Resources" for a
further discussion of the Company's borrowings

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

     The  provision  for loan losses was $235,000 in fiscal 1999 and $375,000 in
fiscal  1998.  Loans  receivable  (before  the  allowance  for loan  losses  and
including loans held for sale) increased to $300.7 million at September 30, 1999
from $198.2  million at September  30, 1998,  and the  allowance for loan losses
increased  to $1.5  million  at  September  30,  1999 from  $1.3  million a year
earlier.  The higher provision in fiscal 1998 reflected the impact of higher net
charge-offs,  which were $166,000 for the period, compared to $34,000 for fiscal
1999. The allowance for loan losses  represented 0.50% of total loans receivable
at September 30, 1999,  compared to 0.66% at September 30, 1998.  Non-performing
loans  increased  slightly to $755,000 at  September  30, 1999 from  $753,000 at
September 30, 1998. The ratio of the allowance for loan losses to non-performing
loans was 199.07% at September  30, 1999,  compared to 172.91% at September  30,
1998. See "Asset Quality" for further  information  concerning the provision and
allowance for loan losses.

                                       13
<PAGE>
     Non-Interest Income.  Non-interest income increased $29,000 to $1.2 million
for the year ended  September  30, 1999  compared to $1.1  million for the prior
year. The increase was primarily  attributable  to increases in service  charges
and fee income and other non-interest  income,  partially offset by decreases in
the net  gain  on  sales  of real  estate  mortgage  loans  held  for  sale  and
available-for-sale  securities. The $166,000 increase in service charges and fee
income  primarily  reflects  increases in  transaction  volume.  In fiscal 1999,
mortgage loan sales totaled $37.4 million,  resulting in a net gain of $197,000,
as compared to loan sales of $69.8 million in fiscal 1998, which resulted in net
gains of $371,000. In addition, a provision for losses on loans held for sale of
$97,000 was charged to net gain on sales of loans for fiscal 1999, while no such
provisions  were made in fiscal  1998.  The net gain on sales of loans  held for
sale includes the effect of capitalizing  mortgage  servicing assets at the time
of sale, in accordance with Statement of Financial Accounting Standards No. 125,
which  amounted to $362,000  for fiscal  1999 and  $594,000  for the prior year.
Servicing  assets  with  a  carrying  value  of  $548,000  and  $538,000  (after
amortization) are included in other assets in the consolidated  balance sheet as
of  September  30,  1999 and 1998,  respectively.  See also Notes 1 and 3 of the
Notes to  Consolidated  Financial  Statements.  Net gain on sales of  securities
amounted  to  $111,000  for fiscal  1999  reflecting  sales of $17.6  million in
available-for-sale  securities during the year, compared to gains of $117,000 on
sales of $28.2 million in the prior year. Other  non-interest  income for fiscal
1999  increased  $43,000 from the prior year,  reflecting a gain of $72,000 from
the sale of servicing rights in fiscal 1999.

     Non-Interest  Expense.  Non-interest expense increased $1.4 million to $8.7
million for the year ended  September  30, 1999 compared to $7.3 million for the
prior year. The increase in fiscal 1999 was primarily  attributable to increases
in compensation and benefits expense, occupancy and equipment expense, and other
non-interest expense.  Compensation and benefits expense increased $818,000 from
the prior year primarily due to increased costs relating to additional  staffing
for three new in-store  branches and the  expansion of lending  operations.  The
$311,000  increase  in  occupancy  and  equipment  expense  primarily   reflects
increased costs associated with the establishment of three in-store branches and
a lending center during fiscal 1999. The $206,000 increase in other non-interest
expense primarily reflects expenses of $140,000 relating to the establishment of
the REIT. On September 30, 1999,  $120.3  million in real estate loans were held
by the REIT. The assets transferred to the REIT are viewed by regulators as part
of the Association's assets in consolidation.


     Income Tax Expense.  Income tax expense was approximately  $1.6 million for
fiscal 1999, a decrease  from $2.0  million for fiscal  1998,  reflecting  lower
pre-tax  income and  effective tax rates of 37.1% and 40.9%,  respectively.  The
decrease in the  effective  tax rate  reflects the  ancillary  benefits from the
aforementioned   REIT.  Under  current  law,  all  income  earned  by  the  REIT
distributed  to the  Association  in the form of a  dividend  has the  effect of
reducing the Company's New York State income tax expense.

 Asset Quality

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

                                       14
<PAGE>
     The following  table sets forth the amounts and categories of the Company's
non-performing assets at the dates indicated. The Company's prospective adoption
of Statement of Financial  Accounting  Standards ("SFAS") No. 114, Accounting by
Creditors for Impairment of a Loan,  effective October 1, 1995, had no impact on
the comparability of this information.  See Note 3 to the Consolidated Financial
Statements for  information  concerning  the Company's  impaired loans which are
included in the non-accrual loans shown below.

<TABLE>
                                                                  At September 30,
                                                    ---------------------------------------------
                                                    2000       1999      1998      1997     1996
                                                                (Dollars in Thousands)
<S>                                                 <C>         <C>      <C>       <C>      <C>
Non-accrual loans past due ninety days or more:
  Real estate mortgage loans:
    One- to four-family                            $  109     $  347     $  515    $  389   $1,757
    Commercial                                         --        305        203       211      214
    Land                                               --         --         --       250      250
    Construction                                       --         --         --       279      511
  Consumer loans                                       14        103         35         9       43
                                                   ------     ------     ------    ------   ------
      Total                                           123        755        753     1,138    2,775
  Real estate owned, net                               --         --        305       379      603
                                                   ------     ------     ------    ------   ------
  Total non-performing assets                      $  123     $  755     $1,058    $1,517   $3,378
                                                   ======     ======     ======    ======   ======

Allowance for loan losses                          $1,703     $1,503     $1,302    $1,093   $  937
                                                   ======     ======     ======    ======   ======

Ratios:
  Non-performing loans to total loans receivable     0.03%      0.25%      0.38%     0.81%    3.14%
  Non-performing assets to total assets              0.02       0.16       0.28      0.48     1.30
  Allowance for loan losses to:
    Non-performing loans                          1384.55     199.07     172.91     96.05    33.77
    Total loans receivable                           0.46       0.50       0.66      0.78     1.06
</TABLE>

     Total  non-performing  assets decreased $632,000 from $755,000 at September
30, 1999 to $123,000 at September 30, 2000. The ratio of  non-performing  assets
to total assets decreased to 0.02% at September 30, 2000 from 0.16% at September
30, 1999. The allowance for loan losses was $1.7 million or 0.46% of total loans
receivable  at  September  30,  2000,  compared  to  $1.5  million  or 0.50 % at
September 30, 1999. The ratio of the allowance for loan losses to non-performing
loans  increased to 1384.55% at September 30, 2000 from 199.07% at September 30,
1999.

     For the year ended  September 30, 2000,  gross  interest  income of $11,000
would have been  recorded if all  non-accrual  loans at  September  30, 2000 had
remained  current  throughout the year in accordance  with their original terms.
The amount of interest income actually  recognized on such loans in fiscal 2000,
prior to placing the loans on non-accrual  status, was $6,000. See Note 3 of the
Notes to the Consolidated Financial Statements.

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

                                       15
<PAGE>

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

                                                                   For the Year Ended September 30,
                                                        --------------------------------------------------
                                                        2000       1999       1998       1997       1996
                                                                     (Dollars in Thousands)
<S>                                                      <C>       <C>        <C>         <C>       <C>
Balance at beginning of year                            $1,503     $1,302     $1,093     $  937     $  719
Provision for losses                                       220        235        375        300        462
Charge-offs:
  Real estate mortgage loans:
    One- to four-family                                    ---        (23)       (45)      (132)       (97)
    Multi-family (1)                                       ---        ---        ---        ---       (203)
    Land                                                   ---        ---        (17)       ---        ---
    Construction                                           ---        ---        (91)       ---        ---
  Consumer loans                                           (44)       (20)       (40)       (25)       (33)
                                                        ------     ------     ------     ------     ------
      Total charge-offs                                    (44)       (43)      (193)      (157)      (333)
Recoveries                                                  24          9         27         13         89
                                                        ------     ------     ------     ------     ------
      Net charge-offs                                      (20)       (34)      (166)      (144)      (244)
                                                        ------     ------     ------     ------     ------

Balance at end of year                                  $1,703     $1,503     $1,302     $1,093     $  937
                                                        ======     ======     ======     ======     ======

Ratio of net charge-offs to average total loans           0.01%      0.02%      0.10%      0.15%      0.29%
</TABLE>

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

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

Interest Rate Risk Management

     The principal  objectives of the  Company's  interest rate risk  management
activities are to: (i) define an acceptable level of risk based on the Company's
business focus,  operating  environment,  capital and liquidity requirements and
performance  objectives;  (ii)  quantify and monitor the amount of interest rate
risk  inherent in the  asset/liability  structure;  (iii)  modify the  Company's
asset/liability  structure, as necessary, to manage interest rate risk; and (iv)
maintain   acceptable  net  interest  margins  in  changing  rate  environments.
Management seeks to reduce the vulnerability of the Company's  operating results
to changes in interest rates and to manage the ratio of  interest-rate-sensitive
assets to  interest-rate-sensitive  liabilities  within specified  maturities or
repricing  periods.  The Company does not currently engage in trading activities
or use off-balance sheet derivative instruments to control interest rate risk.

                                       16
<PAGE>

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

     In managing the  asset/liability  position,  the Company has taken  several
steps to  manage  its  interest  rate  risk.  First,  the  Company  maintains  a
significant  portfolio of interest  rate  sensitive  adjustable-rate  loans that
includes loans with rates that adjust periodically after earning a fixed rate of
interest for initial periods of five, seven or ten years. At September 30, 2000,
total  adjustable-rate  loans  were  $284.1  million  or 76.5% of the total loan
portfolio,  including  $164.1  million  in loans  with  initial  fixed  rates as
described  above.  Second,  beginning  in fiscal  1998,  the  Company has sold a
majority of its newly  originated,  fixed-rate  one- to four-family  residential
mortgage  loans with original  terms of more than 15 years.  Third,  the Company
carries an investment  in  mortgage-backed  securities  that are more liquid and
generally have shorter average lives than mortgage loans. At September 30, 2000,
mortgage-backed securities with terms to repricing or estimated average lives of
less than five  years  amounted  to $2.3  million.  Fourth,  the  Company  has a
substantial  amount of  regular  savings,  transaction,  money  market  and club
accounts,  which  may be less  sensitive  to  changes  in  interest  rates  than
certificate  accounts.  At September 30, 2000,  the Company had $55.1 million of
regular  savings  accounts,  $34.1  million of money  market  accounts and $42.7
million of NOW, checking and club accounts.  Overall,  these accounts  comprised
40.6% of the  Company's  total deposit base at September  30, 2000.  Finally,  a
portion of the Company's securities repurchase agreements and FHLB advances have
terms in excess of one year.  The weighted,  average  remaining  period to final
maturity of these borrowings was  approximately 4.7 years at September 30, 2000,
compared to 3.3 years at September 30, 1999.

                                       17
<PAGE>

     One approach used by  management to quantify  interest rate risk is the net
portfolio  value ("NPV")  analysis.  In essence,  this approach  calculates  the
difference  between the present  value of  liabilities  and the present value of
expected cash flows from assets and off-balance  sheet contracts.  The following
table sets forth,  at  September  30,  2000,  an  analysis of the  Association's
interest  rate risk as measured by the estimated  changes in NPV resulting  from
instantaneous  and  sustained  parallel  shifts in the yield curve (+/-300 basis
points,  measured in 100 basis point increments).  For comparative purposes, the
table also shows the estimated  percent increase  (decrease) in NPV at September
30, 2000.
<TABLE>

    Change in                             At September 30, 2000               Percent Increase
                  -----------------------------------------------------
 Interest Rates   Estimated NPV   Estimated Increase (Decrease) in NPV      (Decrease) in NPV at
                                  -------------------------------------
 (Basis Points)       Amount           Amount         Percent                 September 30, 1999
                                      (Dollars in thousands)
<S>                   <C>              <C>             <C>                        <C>
    +300            $ 8,425         $ (32,624)         (79)%                      (69)%
    +200             19,851           (21,198)         (52)                       (43)
    +100             31,614            (9,435)         (23)                       (19)
      --             41,049                --           --                         --
    -100             49,701             8,652           21                         13
    -200             53,152            12,103           29                         18
    -300             55,644            14,595           36                         22
</TABLE>

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

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

                                       18
<PAGE>

Liquidity and Capital Resources

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

     The  Association  is required to maintain an average daily balance of total
liquid  assets  as a  percentage  of  net  withdrawable  deposit  accounts  plus
short-term  borrowings,  as  defined by the  Office of Thrift  Supervision  (the
"OTS")  regulations.  The minimum required liquidity ratio at September 30, 2000
was 4.0%, and the Company's actual liquidity ratio was 6.0%.

     The  Company's  most  liquid  assets are cash and cash  equivalents,  which
include  highly liquid  short-term  investments  (such as federal funds sold and
money market  mutual  funds) that are readily  convertible  to known  amounts of
cash. At September 30, 2000 and 1999,  cash and cash  equivalents  totaled $10.2
million and $4.7 million,  respectively.  The level of these assets is dependent
on the Company's operating,  financing and investing activities during any given
period.

     The primary investing activities of the Company are the origination of real
estate mortgage and other loans, and the purchase of  mortgage-backed  and other
securities.  During the years  ended  September  30,  2000,  1999 and 1998,  the
Company's  disbursements  for loan originations  totaled $117.3 million,  $178.1
million and $152.6 million, respectively. During fiscal 2000 the Company did not
purchase any mortgage- backed securities  compared to purchases of $35.3 million
and $74.4 million for the years ended September 30, 1999 and 1998.  Purchases of
other securities  totaled $4.4 million,  $19.0 million and $16.2 million for the
years ended  September 30, 2000,  1999, and 1998.  These  activities were funded
primarily  by  net  deposit  inflows,  borrowings  under  securities  repurchase
agreements,  FHLB advances,  principal  repayments on loans and securities,  and
proceeds from sales of loans and securities. Loan sales during fiscal 2000, 1999
and 1998,  provided proceeds of $16.1 million,  $37.4 million and $69.6 million,
respectively, for reinvestment into new loans and securities.

     For the  years  ended  September  30,  2000,  1999  and  1998  the  Company
experienced  net  increases  in  deposits  (including  the  effect  of  interest
credited) of $52.1 million, $41.8 million and $23.2 million,  respectively.  The
increases were primarily due to the opening of five additional in-store branches
during  this  period  as well as  continued  aggressive  cross-selling,  quality
customer service and new deposit products.

                                       19
<PAGE>
     In fiscals 2000, 1999 and 1998, the Company significantly increased its use
of securities  repurchase  agreements and FHLB advances as a funding source.  In
securities repurchase agreements, the Company borrows funds through the transfer
of debt securities to the FHLB of New York, as  counterparty,  and  concurrently
agrees to repurchase  the  identical  securities at a fixed price on a specified
date.  During the years ended  September  30, 2000,  1999 and 1998,  the average
borrowings under repurchase  agreements with the FHLB amounted to $99.8 million,
$79.8 million, and $81.9 million respectively, and the maximum month-end balance
outstanding was $114.1 million,  $101.0 million,  and $119.9  respectively.  The
average interest rate spread on these  transactions,  or the difference  between
the  yield  earned  on the  underlying  securities  and  the  rate  paid  on the
repurchase borrowings,  was 1.26%, 1.25% and 1.27% for the years ended September
30,  2000,  1999,  and  1998  respectively.  See  Note  7 of  the  Notes  to the
Consolidated  Financial Statements for additional  information  concerning these
transactions.

     At  September  30,  2000,  the Company  had  outstanding  loan  origination
commitments of $23.8 million,  undisbursed construction loans in process of $3.4
million,  and  unadvanced  lines of credit to  customers  of $3.2  million.  The
Company  anticipates  that it will have  sufficient  funds available to meet its
current loan origination and other commitments. The Company also had the ability
to borrow  additional  advances of up to $56.3 million from the FHLB of New York
at September 30, 2000.  Certificates of deposit  scheduled to mature in one year
or less from September 30, 2000 totaled $134.6 million,  with a weighted average
rate of  5.62%.  Based on the  Company's  most  recent  experience  and  pricing
strategy,  management  believes that a significant portion of such deposits will
remain with the Company.

     The main sources of liquidity for the Holding Company are net proceeds from
the sale of stock and dividends received from the Association,  if any. The main
cash outflows are payments of dividends to  shareholders  and repurchases of the
Holding Company's common stock. In fiscal 2000, the Holding Company  repurchased
a total of 10,000 common shares in open market  transactions  at a total cost of
$171,000  or $17.10 per share.  The Holding  Company  received  $2.3  million in
dividends from the Association in fiscal 2000.

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

     The OTS regulations require savings associations,  such as the Association,
to meet three minimum capital standards: a tangible capital ratio requirement of
1.5% of total assets as adjusted  under the OTS  regulations;  a leverage  ratio
requirement  of 4.0% of  core  capital  to such  adjusted  total  assets;  and a
risk-based  capital ratio requirement of 8.0% of core and supplementary  capital
to total  risk-based  assets.  The  Association  satisfied these minimum capital
standards at September  30, 2000 with  tangible and leverage  capital  ratios of
6.6% and a total risk-based capital ratio of 15.2%. In determining the amount of
risk-weighted  assets for  purposes of the  risk-based  capital  requirement,  a
savings  association  multiplies  its assets and  credit  equivalent  amount for
certain  off-balance  sheet items by risk-weights,  which range from 0% for cash
and obligations  issued by the United States  Government or its agencies to 100%
for assets such as consumer and commercial loans, as assigned by the OTS capital
regulations. These capital requirements, which are applicable to the Association
only, do not consider  additional capital held at the Holding Company level, and
require certain adjustments to the Association's equity to arrive at the various
regulatory  capital  amounts.  See  Note  11 of the  Notes  to the  Consolidated
Financial Statements.

                                       20
<PAGE>
Impact of Accounting Standards

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

Impact of Inflation and Changing Prices

     The  Consolidated  Financial  Statements  and other  financial  information
included in this report have been prepared in conformity with generally accepted
accounting  principles,  which require the measurement of financial position and
operating results in terms of historical dollars without considering the changes
in the relative purchasing power of money over time due to inflation. The impact
of inflation is reflected in the  increased  cost of the  Company's  operations.
Unlike  industrial  companies,  nearly all of the assets and  liabilities of the
Company  are  monetary  in nature.  As a result,  interest  rates have a greater
impact on the  Company's  performance  than do the effects of general  levels of
inflation.  Interest rates do not  necessarily  move in the same direction or to
the same extent as the prices of goods and services.

                                       21
<PAGE>



<TABLE>

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

                                                                                                September 30,
                                                                                          ------------------------
                                                                                            2000          1999
<S>                                                                                          <C>          <C>
ASSETS
Cash and cash equivalents:
  Cash and due from banks                                                                 $ 10,178     $  4,651
                                                                                          --------     --------
       Total cash and cash equivalents                                                      10,178        4,651
                                                                                          --------     --------
Securities (note 2):
  Available for sale, at fair value (amortized cost of $ 116,858 at
    September 30, 2000 and $120,996 at September 30, 1999)                                 112,373      116,712
  Held to maturity, at amortized cost (fair value of  $ 16,081 at
    September 30, 2000 and $21,959 at September 30, 1999)                                   16,192       21,936
                                                                                          --------     --------
       Total securities                                                                    128,565      138,648
                                                                                          --------     --------
Real estate mortgage loans held for sale, at lower of cost or market value (note 3)          2,743        1,226
                                                                                          --------     --------
Loans receivable, net(note 3):
  Real estate mortgage loans                                                               354,583      291,199
  Consumer and commercial business loans                                                    11,358        8,254
  Allowance for loan losses                                                                 (1,703)      (1,503)
                                                                                          --------     --------
       Total loans receivable, net                                                         364,238      297,950
                                                                                          --------     --------
Accrued interest receivable (note 4)                                                         3,223        2,750
Federal Home Loan Bank  ("FHLB") stock                                                       9,298        7,397
Office properties and equipment, net (note 5)                                                1,859        1,984
Deferred income tax receivable (note 8)                                                      1,886        1,623
Other assets                                                                                   884        1,466
                                                                                          ========     ========
       Total assets                                                                       $522,874     $457,695
                                                                                          ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits (note 6)                                                                       $325,106     $272,974
  Securities repurchase agreements (note 7)                                                 85,012       99,987
  FHLB advances (note 7)                                                                    72,400       47,948
  Other liabilities                                                                          5,474        4,769
                                                                                          --------     --------
      Total liabilities                                                                    487,992      425,678
                                                                                          --------     --------

Commitments and contingencies (notes 10 and 11)

Stockholders' equity (notes 10 and 11):
  Preferred stock (par value $0.01 per share; 100,000
    shares authorized; none issued or outstanding)                                              --           --
  Common stock (par value $0.01 per share: 4,500,000
    shares authorized; 3,570,750 shares issued)                                                 36           36
  Additional paid-in capital                                                                35,443       35,225
  Unallocated common stock  held by employee stock
    ownership plan ("ESOP")                                                                 (1,572)      (1,857)
  Unamortized awards of common stock under  management
    ecognition plan ("MRP")                                                                   (329)        (621)
  Treasury stock, at cost (1,342,011 shares in 2000
    and 1,332,011 shares in 1999)                                                          (22,037)     (21,866)
  Retained income, substantially restricted                                                 26,032       23,652
  Accumulated other comprehensive loss (notes 2 and 11)                                     (2,691)      (2,552)
                                                                                          --------     --------
      Total stockholders' equity                                                            34,882       32,017
                                                                                          --------     --------
                                                                                          $522,874     $457,695
                                                                                          ========     ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       22
<PAGE>
<TABLE>
                                      YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
                                           CONSOLIDATED STATEMENTS OF INCOME
                                         (In thousands, except per share data)

                                                                                        Year Ended September 30,
                                                                              -------------------------------------------
                                                                                 2000          1999           1998
<S>                                                                             <C>           <C>             <C>
Interest and dividend income:
  Loans                                                                         $26,005       $16,399        $13,243
  Securities                                                                      9,265         9,869         11,750
  Other earning assets                                                              822           664            482
                                                                                -------       -------        -------
    Total interest and dividend income                                           36,092        26,932         25,475
                                                                                -------       -------        -------

Interest expense:
  Deposits (note 6)                                                              11,923         9,543          9,056
  Securities repurchase agreements                                                5,908         4,530          4,718
  FHLB advances                                                                   4,299           811            248
                                                                                -------       -------        -------
    Total interest expense                                                       22,130        14,884         14,022
                                                                                -------       -------        -------

    Net interest income                                                          13,962        12,048         11,453

Provision for loan losses (note 3)                                                  220           235            375
                                                                                -------       -------        -------
    Net interest income after provision for loan losses                          13,742        11,813         11,078
                                                                                -------       -------        -------

Non-interest income:
  Service charges and fees                                                        1,317           735            569
  Net gain on sales of real estate mortgage loans held for sale (note 3)            175           197            371
  Net gain on sales of securities (note 2)                                           19           111            117
  Other                                                                              82           114             71
                                                                                -------       -------        -------
    Total non-interest income                                                     1,593         1,157          1,128
                                                                                -------       -------        -------

Non-interest expense:
  Compensation and benefits (note 10)                                             5,700         4,813          3,995
  Occupancy and equipment                                                         1,461         1,226            915
  Data processing service fees                                                      795           646            554
  Federal deposit insurance costs                                                    83           140            131
  Other (note 9)                                                                  2,301         1,912          1,706
                                                                                -------       -------        -------
    Total non-interest expense                                                   10,340         8,737          7,301
                                                                                -------       -------        -------

    Income before income tax expense                                              4,995         4,233          4,905

Income tax  expense (note 8)                                                      1,854         1,570          2,004
                                                                                -------       -------        -------

    Net income                                                                  $ 3,141       $ 2,663        $ 2,901
                                                                                =======       =======        =======

Earnings per common share (note 11):
    Basic                                                                         $1.56         $1.13          $1.12
    Diluted                                                                        1.53          1.11           1.08

See accompanying notes to consolidated financial statements.

</TABLE>

                                       23
<PAGE>
<TABLE>
                  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  (Dollars in thousands, except per share data)

                                                       Unallocated  Unamortized
                                                         Common     Awards of                          Accumulated
                                            Additional    Stock      Common                              Other       Total
                                    Common   Paid-in       Held       Stock     Treasury   Retained    ComprehensivStockholders'
                                    Stock    Capital     by ESOP    Under MRP    Stock      Income     Income(Loss) Equity
<S>                                 <C>      <C>          <C>         <C>         <C>        <C>         <C>        <C>
Balance at September 30, 1997        $ 36    $ 34,734     $ (2,428)  $ (1,125)   $ (7,513)   $19,605      $ 569     $ 43,878

   Net income                          --          --           --         --          --      2,901         --        2,901
   Dividends paid ($0.28 per share)    --          --           --         --          --       (752)        --         (752)
   Common stock repurchased
     (294,524 shares)                  --          --           --         --      (5,676)        --         --       (5,676)
   Amortization of MRP awards          --          --           --        279          --         --         --          279
   Tax benefits from vested
     MRP awards                        --          62           --         --          --         --         --           62
   ESOP shares released for
      allocation (28,566 shares)       --         248          286         --          --         --         --          534
   Change in net unrealized gain
     (loss) on available-for sale
     securities, net of taxes          --          --           --         --          --         --        576          576
                                    ------  ---------- ------------ ---------- ----------- ----------  ---------   ----------
Balance at September 30, 1998          36      35,044       (2,142)      (846)    (13,189)    21,754      1,145       41,802

   Net income                          --          --           --         --          --      2,663         --        2,663
   Dividends paid ($0.32 per share)    --          --           --         --          --       (765)        --         (765)
   Common stock repurchased
     (492,500 shares)                  --          --           --         --      (8,741)        --         --       (8,741)
   Repurchased stock awarded under MRP
     (5,000 shares)                    --          --           --        (64)         64         --         --           --
   Amortization of MRP awards          --          --           --        289          --         --         --          289
   Tax benefits from vested
     MRP awards                        --          12           --         --          --         --         --           12
   ESOP shares released for
      allocation (28,566 shares)       --         169          285         --          --         --         --          454
   Change in net unrealized gain
     (loss) on available-for sale
     securities, net of taxes          --          --           --         --          --         --     (3,697)      (3,697)
                                    ------  ---------- ------------ ---------- ----------- ----------  ---------   ----------
Balance at September 30, 1999          36      35,225       (1,857)      (621)    (21,866)    23,652     (2,552)      32,017

   Net income                          --          --           --         --          --      3,141         --        3,141
   Dividends paid ($0.36 per share)    --          --           --         --          --       (761)        --         (761)
   Common stock repurchased
     (10,000 shares)                   --          --           --         --        (171)        --         --         (171)
   Amortization of MRP awards          --          --           --        292          --         --         --          292
   Tax benefits from vested
     MRP awards                        --          43           --         --          --         --         --           43
   ESOP shares released for
      allocation (28,566 shares)       --         175          285         --          --         --         --          460
   Change in net unrealized gain
     (loss) on available-for sale
     securities, net of taxes          --          --           --         --          --         --       (139)        (139)
                                    ======  ========== ============ ========== =========== ==========  =========   ==========
Balance at September 30, 2000        $ 36    $ 35,443     $ (1,572)    $ (329)   $(22,037)   $26,032   $ (2,691)    $ 34,882
                                    ======  ========== ============ ========== =========== ==========  =========   ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       24
<PAGE>
<TABLE>
                  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                            (In thousands)

                                                                                         Year Ended September 30,
                                                                                 ------------------------------------------
                                                                                          2000         1999          1998
<S>                                                                                       <C>         <C>          <C>
  Net income                                                                           $ 3,141       $ 2,663       $ 2,901
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Provision for loan losses                                                             220           235           375
     ESOP and MRP expense                                                                  752           743           813
     Depreciation and amortization expense                                                 479           363           264
     Amortization of deferred fees, discounts and premiums, net                            269           350            93
     Net gain on sales of real estate mortgage loans held for sale                        (175)         (197)         (371)
     Net gain on sales of securities                                                       (19)         (111)         (117)
     Other adjustments, net                                                                701         4,504          (115)
                                                                                       -------       -------       -------
          Net cash provided by operating activities                                      5,368         8,550         3,843
                                                                                       -------       -------       -------
Cash flows from investing activities:
  Purchases of available-for-sale securities                                            (4,352)      (54,317)      (90,579)
  Proceeds from principal payments, maturities and calls of securities:
     Available-for-sale                                                                  8,051        38,670        24,113
     Held-to-maturity                                                                    5,738        21,346        32,500

     Available-for-sale                                                                    370        17,758        28,308
     Held-to-maturity                                                                       --            --           630
  Disbursements for loan originations                                                 (117,274)     (178,136)     (152,638)
  Principal collections on loans                                                        33,078        38,503        24,181
  Proceeds from sales of loans                                                          16,126        37,407        69,588
  Purchase of FHLB stock                                                                (1,901)         (971)       (3,421)
  Other investing cash flows                                                              (354)         (786)         (437)
                                                                                      --------       -------       -------
          Net cash used in investing activities                                        (60,518)      (80,526)      (67,755)
                                                                                      --------       -------       -------
Cash flows from financing activities:
  Net increase in deposits                                                              52,132        41,793        23,248
  Net (decrease) increase in borrowings with
     original terms of three months or less:
       Securities repurchase agreements                                                (16,975)        1,797         3,411
       FHLB advances                                                                   (29,949)       32,948        (6,000)
  Proceeds from longer-term borrowings                                                  56,401         5,400        50,283
  Common stock repurchased                                                                (171)       (8,741)       (5,676)
  Dividends paid                                                                          (761)         (765)         (752)
                                                                                      --------       -------       -------
          Net cash provided by financing activities                                     60,677        72,432        64,514
                                                                                      --------       -------       -------

Net  increase in cash and cash equivalents                                               5,527           456           602
Cash and cash equivalents at beginning of year                                           4,651         4,195         3,593
                                                                                      --------       -------       -------
Cash and cash equivalents at end of year                                              $ 10,178       $ 4,651       $ 4,195
                                                                                      ========       =======       =======

Supplemental information:
  Interest paid                                                                       $ 21,428       $14,904      $ 13,818
  Income taxes paid                                                                         --           741         2,457
  Mortgage loans transferred to real estate owned                                           --            --           128
                                                                                      ========       =======      ========
</TABLE>

                                       25
<PAGE>




(1)  Summary of Significant Accounting Policies
     ------------------------------------------

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

     The Company's primary market area consists of Westchester  County, New York
and portions of Putnam,  Rockland and Dutchess County, New York. The Association
is a community-oriented savings institution whose business primarily consists of
accepting  deposits from  customers  within its market area and investing  those
funds in mortgage loans secured by one- to four-family residences,  multi-family
and  commercial  real  estate,  construction,  land,  consumer,  and  commercial
business loans. In addition, the Company has recently determined to increase its
emphasis on its  multi-family  lending  activity.  The Company  also  invests in
mortgage-backed  and other  securities.  Deposits  are insured up to  applicable
limits by the Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation ("FDIC"). The Company's primary regulator is the Office of
Thrift Supervision ("OTS").

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

     Basis of Presentation

     The consolidated  financial  statements include the accounts of the Holding
Company and its wholly owned  subsidiary,  the Association.  The Association has
two wholly-owned subsidiaries Yonkers REIT, Inc., a real estate investment trust
formed in March 1999 to hold a portion  of the  Association's  mortgage  related
assets (the "REIT") and Yonkers  Financial  Services,  Inc.,  ("YFS")  formed in
November 1996 to sell Savings Bank Life  Insurance,  annuities and mutual funds.
As of September 30, 1999 YFS was inactive. All significant intercompany accounts
and transactions have been eliminated in consolidation. Prior to the Conversion,
the Holding  Company  had no  operations  other than those of an  organizational
nature.  Subsequent thereto, the Holding Company's business activities have been
limited to its ownership of the  Association  and certain  short-term  and other
investments.

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

                                       26
<PAGE>
     Certain  reclassifications  have been made to prior-year amounts to conform
to the current-year presentation.

     Cash Equivalents

     For purposes of reporting cash flows,  cash  equivalents  consist of highly
liquid  short-term   investments.   Short-term   investments   reported  in  the
consolidated balance sheets were federal funds sold.

     Securities

     The  Company   classifies   individual   securities   as   held-to-maturity
securities,  trading securities,  or available-for-sale  securities.  Securities
held to  maturity  are limited to debt  securities  for which the entity has the
positive intent and ability to hold to maturity. Trading securities are debt and
equity securities that are bought principally for the purpose of selling them in
the near term. All other debt and equity  securities are classified as available
for sale.

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

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

     Real Estate Mortgage Loans Held for Sale

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

     Allowance for Loan Losses

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

                                       27
<PAGE>
     Establishing the allowance for loan losses involves significant  management
judgments utilizing the best information  available at the time. Those judgments
are  subject  to further  review by various  sources,  including  the  Company's
regulators. Adjustments to the allowance may be necessary in the future based on
changes in  economic  and real estate  market  conditions,  further  information
obtained regarding known problem loans, the identification of additional problem
loans, and other factors.

     The  Company  considers  a loan  to be  impaired  when,  based  on  current
information  and  events,  it is  probable  that the  Company  will be unable to
collect all principal  and interest  contractually  due from the  borrower.  The
Company  reviews loans to identify  impairment  for loans that are  individually
evaluated  for   collectibility  in  accordance  with  its  normal  loan  review
procedures (principally loans in the multi-family, commercial mortgage, land and
construction  loan  portfolios).  The  standard  generally  does  not  apply  to
smaller-balance  homogeneous loans in the Company's one- to four-family mortgage
and consumer loan portfolios that are collectively evaluated for impairment. The
measurement  of an  impaired  loan  may be  based  on (i) the  present  value of
expected  future cash flows  discounted at the loan's  effective  interest rate,
(ii)  the  loan's  observable  market  price  or  (iii)  the  fair  value of the
collateral if the loan is collateral dependent.  If the approach used results in
a  measurement  that is less than an impaired  loan's  recorded  investment,  an
impairment loss is recognized as part of the allowance for loan losses.

     Mortgage Servicing Rights

     The Company recognizes mortgage servicing rights as an asset when loans are
sold with servicing  retained,  by allocating the cost of an originated mortgage
loan between the loan and the servicing  right based on estimated  relative fair
values.  The cost allocated to the servicing  right is capitalized as a separate
asset which is amortized  thereafter in  proportion  to, and over the period of,
estimated  net  servicing  income.  Capitalized  mortgage  servicing  rights are
stratified, based on loan type and interest rate, and assessed for impairment by
comparing  the  asset's  amortized  cost to its current  fair value.  Impairment
losses, if any, are recognized through charges to income.

     Interest and Fees on Loans

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

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

                                      28
<PAGE>

     Real Estate Owned

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

     Office Properties and Equipment

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

     Securities Repurchase Agreements

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

     Income Taxes

     The  Company  uses the asset and  liability  method to  account  for income
taxes.  Under this method deferred taxes are recognized for the estimated future
tax effects  attributable  to  "temporary  differences"  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax bases.  A deferred tax liability is recognized for all temporary
differences  that will result in future taxable income.  A deferred tax asset is
recognized  for all  temporary  differences  that  will  result  in  future  tax
deductions,  subject  to  reduction  of the asset by a  valuation  allowance  in
certain  circumstances.  This valuation  allowance is recognized if, based on an
analysis of available  evidence,  management  determines  that it is more likely
than not that a portion or all of the  deferred  tax asset will not be realized.
The valuation  allowance is subject to ongoing  adjustments  based on changes in
circumstances that affect  management's  judgment about the realizability of the
deferred tax asset.  Adjustments to increase or decrease the valuation allowance
are charged or credited, respectively, to income tax expense.

                                       29
<PAGE>
     Deferred tax assets and  liabilities  are measured  using enacted tax rates
expected to apply to future  taxable  income.  The effect on deferred tax assets
and  liabilities  of an enacted  change in tax rates is recognized in income tax
expense in the period that includes the enactment date of the change.

     Treasury Stock

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

     Pension Plans

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

     Stock-Based Compensation Plans

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

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

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

                                       30
<PAGE>

     Earnings Per Share

     The Company presents both basic earnings per share ("EPS") and diluted EPS.
Basic EPS excludes dilution and is computed by dividing net income applicable to
common stock by the weighted average number of common shares outstanding for the
period.  Diluted  EPS  reflects  the  potential  dilution  that  could  occur if
securities or other contracts to issue common stock (such as the Company's stock
options)  were  exercised  or  converted  into  common  stock or resulted in the
issuance  of common  stock that would then share in the  earnings of the entity.

Diluted EPS is computed by dividing net income by the weighted average number of
common  shares  outstanding  for  the  period  plus  common  stock  equivalents.
Unallocated  ESOP  shares  that  have  not  been  committed  to be  released  to
participants  are excluded from  outstanding  shares in computing both basic and
diluted EPS.

     Segment Information

     During fiscal 1999, the Company  adopted SFAS No. 131,  "Disclosures  about
Segments of an Enterprise and Related  Information." SFAS No.131 requires public
companies   to  report   certain   financial   information   about   significant
revenue-producing  segments  of the  business  for  which  such  information  is
available  and  utilized  by  the  chief  operating  decision  maker.   Specific
information to be reported for individual  operating segments includes a measure
of profit and loss,  certain revenue and expense items,  and total assets.  As a
community  oriented  financial  institution,  substantially all of the Company's
operations  involves  the  delivery of loan and deposit  products to  customers.
Management  makes  operating  decisions  and  assesses  performance  based on an
ongoing  review of these  community  banking  operations,  which  constitute the
Company's only operating segment for financial reporting purposes under SFAS No.
131.

(2)  Securities
     ----------

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

                                       31
<PAGE>
     The following is a summary of securities at September 30, 2000


<TABLE>

                                                Amortized             Gross Unrealized                     Fair
                                                                 ----------------------------
                                                  Cost           Gains                 Losses              Value
                                                                        (In thousands)
<S>                                               <C>            <C>                      <C>                <C>
Available-for-Sale Securities
Mortgage-backed securities:
  Pass-through securities                        $ 70,526         $ 12                 $(2,656)            $ 67,882
U.S. Government and Agency securities              41,511           --                  (1,856)              39,655
Corporate bonds                                     3,952           53                      (8)               3,997
Equity securities                                     869           --                     (30)                 839
                                                 --------         ----                 -------             --------
     Total available-for-sale                    $116,858         $ 65                 $(4,550)            $112,373
                                                 ========         ====                 =======             ========
Held-to-Maturity Securities
Mortgage-backed securities:
  Pass-through securities                        $ 13,344         $152                 $  (173)            $ 13,323
  CMOs and other mortgage derivatives               2,348            5                     (87)               2,266
                                                 --------         ----                 -------             --------
                                                   15,692          157                    (260)              15,589
U.S. Government and Agency securities                 500                                   (8)                 492
                                                 ========         ====                 =======             ========
     Total held-to-maturity                      $ 16,192         $157                 $  (268)            $ 16,081
                                                 ========         ====                 =======             ========
</TABLE>


     The following is a summary of securities at September 30, 1999:

<TABLE>


                                                        Amortized               Gross Unrealized                Fair
                                                                          -----------------------------
                                                          Cost             Gains                Losses          Value
                                                                                   (In thousands)
<S>                                                      <C>                <C>                  <C>              <C>
Available-for-Sale Securities
Mortgage-backed securities:
  Pass-through securities                               $ 78,651            $ 23               $(2,730)       $ 75,944
U.S. Government and Agency securities                     41,527              21                (1,392)         40,156
Equity securities                                            818              --                  (206)            612
                                                        --------            ----               -------        --------
     Total available-for-sale                           $120,996            $ 44               $(4,328)       $116,712
                                                        ========            ====               =======        ========
Held-to-Maturity Securities
Mortgage-backed securities:
  Pass-through securities                               $ 16,897            $235               $  (198)       $ 16,934
  CMOs                                                     4,539              29                   (37)          4,531
                                                        --------            ----               -------        --------
                                                          21,436             264                  (235)         21,465
U.S. Government and Agency securities                        500                                    (6)            494
                                                        ========            ====               =======        ========
     Total held-to-maturity                             $ 21,936            $264               $  (241)       $ 21,959
                                                        ========            ====               =======        ========
</TABLE>

                                       32
<PAGE>
     Mortgage-backed  and other debt  securities at September 30, 2000 consisted
of fixed-rate securities and adjustable-rate  securities with amortized costs of
$115.8 million and $16.3 million,  respectively,  and weighted average yields of
7.00% and 6.80%, respectively. Fixed-rate and adjustable-rate debt securities at
September 30, 1999 totaled $122.7 million and $19.4 million, respectively,  with
weighted average yields of 6.94% and 6.46%, respectively.

     Mortgage-backed  securities  primarily  include  securities  guaranteed  by
Ginnie  Mae,  Fannie Mae and  Freddie  Mac with total  amortized  costs of $67.0
million,  $13.8  million and $3.0 million,  respectively,  at September 30, 2000
($74.6 million, $20.6 million and $4.8 million,  respectively,  at September 30,
1999).

     The net unrealized loss on  available-for-sale  securities was $4.5 million
($2.7 million after taxes) at September 30, 2000, compared to an unrealized loss
of $4.3 million ($2.6  million  after taxes) at September  30, 1999.  Changes in
unrealized holding gains and losses resulted in an after-tax (decrease) increase
in stockholders' equity of ($139,000), ($3.7) million and $576,000 during fiscal
2000,  1999 and 1998,  respectively.  These  gains and losses  will  continue to
fluctuate based on changes in the portfolio and market conditions.


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

<TABLE>

                                      2000            1999             1998
                                      ----            ----             ----
                                                (In Thousands)
<S>                                   <C>            <C>              <C>
Available-for-sale securities:
     Gains                            $23            $154            $ 278
     Losses                            (4)            (43)            (175)
                                      ---            ----            -----
                                       19             111              103
                                      ---            ----            -----

Held-to-maturity securities:
     Gains                            $--            $ --            $  16
     Losses                            --              --               (2)
                                      ---            ----            -----
                                       --              --               14
                                      ---            ----            -----
Net gain (loss)                       $19            $111            $ 117
                                      ===            ====            =====
</TABLE>



     The  held-to-maturity  securities sold in fiscal 1998 were  mortgage-backed
securities  with an  amortized  cost of  $616,000  for  which  the  Company  had
collected more than 85% of the principal purchased. Sales in these circumstances
are deemed to be  equivalent to maturities  and,  accordingly,  do not call into
question the intent to hold other debt securities to maturity in the future.

     The  following  is a summary of the  amortized  cost and fair value of U.S.
Government and Agency  securities at September 30, 2000, by remaining  period to
contractual  maturity  (ignoring  earlier call dates, if any). Actual maturities
may differ from contractual maturities because certain security issuers have the
right to call or prepay their obligations.

                                       33
<PAGE>

<TABLE>
                           Available-for-Sale          Held-to-Maturity
                         ----------------------      ---------------------
                         Amortized        Fair       Amortized      Fair
                           Cost          Value        Cost         Value
                         ---------      ------       ---------     -----
                                          (In Thousands)
<S>                       <C>           <C>            <C>          <C>
One to five years           --            --          500           492
Five to ten years        3,998         3,943           --            --
Over ten years          37,513        35,712           --            --
                       -------       -------         ----          ----
          Total        $41,511       $39,655         $500          $492
                       =======       =======         ====          ====
</TABLE>

(3)  Loans
     -----
     A summary of loans  receivable  at September 30 follows:
<TABLE>


                                                                       2000             1999
                                                                       ----             ----
Real estate mortgage loans:                                               (In Thousands)
<S>                                                                   <C>              <C>
        Residential properties:
             One- to four-family                                     $282,603         $244,466
             Multi- family                                             34,352           16,264
        Commercial properties                                          33,052           26,753
        Land loans                                                        759            1,502
        Construction loans                                              6,317            2,812
        Construction loans in process                                  (3,397)          (1,672)
        Deferred loan origination costs (fees), net                       897            1,074
                                                                     --------         --------
                                                                      354,583          291,199
                                                                     --------         --------
Consumer loans:
        Home equity                                                     5,532            4,574
        Personal                                                        1,911            1,483
        Other                                                           2,952            1,117
                                                                     --------         --------
                                                                       10,395            7,174
Commercial business loans                                                 963            1,080
                                                                     --------         --------
                                                                       11,358            8,254
                                                                     --------         --------

             Total loans receivable                                   365,941          299,453

Allowance for loan losses                                              (1,703)          (1,503)
                                                                     --------         --------

             Total loans receivable, net                             $364,238         $297,950
                                                                     ========         ========
</TABLE>

     Gross loans  receivable at September 30, 2000 consisted of  adjustable-rate
loans of $284.1  million and  fixed-rate  loans of $84.3  million with  weighted
average yields of 7.39% and 7.94%, respectively.  Adjustable-rate and fixed-rate
loans at  September  30, 1999  totaled  $209.2  million and $90.9  million  with
weighted  average yields of 7.25% and 7.41%,  respectively.  One- to four-family
residential mortgage loans at September 30, 2000 and 1999 include advances under
home equity lines of credit of $2.5 million and $3.2 million,  respectively, and
cooperative apartment loans of $3.5 million and $3.7 million, respectively.

                                       34
<PAGE>

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

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


                                     2000          1999           1998
                                              (In thousands)
<S>                                <C>            <C>            <C>
Balance at beginning of year       $1,503         $1,302         $1,093
Provision for losses                  220            235            375
Charge-offs                           (44)           (43)          (193)
Recoveries                             24              9             27
                                   ------         ------         ------
Balance at end of year             $1,703         $1,503         $1,302
                                   ======         ======         ======
</TABLE>



     The principal balances of non-accrual loans past due ninety days or more at
September 30 are as follows:
<TABLE>
                                          2000       1999        1998
                                                (In Thousands)
<S>                                       <C>        <C>         <C>
Real estate mortgage loans:
     One- to four-family                  $109       $347        $515
     Commercial                            ---        305         203
Consumer loans                              14        103          35
                                          ----       ----        ----
          Total                           $123       $755        $753
                                          ====       ====        ====
</TABLE>


     If all interest  payments on the foregoing  non-accrual loans had been made
during  the  respective  years in  accordance  with the loan  agreements,  gross
interest  income of $11,000,  $69,000 and $64,000 would have been  recognized in
fiscal 2000, 1999 and 1998,  respectively,  compared to interest income actually
recognized of $6,000, $42,000 and $48,000, respectively.

     There were no impaired loans at September 30, 2000. The Company's  impaired
loans  consisted  of  non-accrual  commercial  mortgage  loans  with a  recorded
investment  totaling $305,000 at September 30, 1999. The Company  determines the
need for an allowance for loan impairment on a loan-by-loan  basis. At September
30, 1999,  such an  allowance  was not  required  with respect to the  Company's
impaired  loans  primarily  due to the  sufficiency  of the  related  collateral
values.  The  Company's  average  recorded  investment  in  impaired  loans  was
approximately $102,000,  $201,000 and $438,000 for the years ended September 30,
2000, 1999 and 1998, respectively. Interest collections and income recognized on
impaired loans (while such loans were  considered  impaired) were  insignificant
during fiscal 2000, 1999 and 1998.

                                       35
<PAGE>

     At September 30, 2000 and 1999, there were no real estate owned properties.

     The Company has sold  certain real estate  mortgage  loans and retained the
related servicing rights.  The principal balances of these serviced loans, which
are not included in the accompanying  consolidated balance sheets, totaled $85.2
million,  $88.4 million and $81.7 million at September 30, 2000,  1999 and 1998,
respectively.  These amounts include loans sold with recourse of $784,000,  $1.3
million,  and $2.0 million at the respective  dates,  for which the  Association
does not expect to incur any significant losses. Real estate loans held for sale
at  September  30, 2000 and 1999 had total  amortized  costs of $2.7 million and
$1.2 million, respectively, which approximated market value at those dates.

     During the years ended  September 30, 2000, 1999 and 1998, the Company sold
$16.1  million,  $37.4 million and $69.8 million,  respectively,  of real estate
mortgage loans,  primarily with servicing retained,  and recognized net gains of
$175,000, $197,000 and $371,000,  respectively,  on such sales. The net gains in
fiscal  2000,  1999  and 1998  includes  the  effect  of  capitalizing  mortgage
servicing assets of $44,000, $362,000 and $594,000,  respectively at the time of
sale, in accordance  with SFAS No. 125. At September 30, 2000 and 1999,  the net
carrying value of capitalized mortgage servicing rights included in other assets
was  $530,000  and  $548,000,   respectively,  which  approximated  fair  value.
Amortization of mortgage  servicing  rights was $157,000,  $352,000 and $56,000,
respectively, for the years ended September 30, 2000, 1999 and 1998.

(4)      Accrued Interest Receivable
         ---------------------------

     A summary of accrued interest receivable at September 30 follows:
<TABLE>
                                      2000              1999
                                      ----              ----
                                          (In thousands)
<S>                                   <C>                <C>
Loans                               $1,996             $1,580
Mortgage-backed securities             506                582
Other securities                       721                588
                                    ------             ------
     Total                          $3,223             $2,750
                                    ======             ======
</TABLE>

                                       36
<PAGE>

(5)    Office Properties and Equipment
       -------------------------------

     A summary of office properties and equipment at September 30 follows:
<TABLE>
                                                                 2000             1999
                                                                 ----             ----
                                                                    (In thousands)
<S>                                                              <C>               <C>
Land                                                             $   45           $   45
Buildings                                                           251              249
Leasehold improvements                                              784              756
Furniture, fixtures and equipment                                 3,594            3,268
                                                                 -------          ------
                                                                  4,674            4,318
Less accumulated depreciation and amortization                   (2,815)          (2,334)
                                                                 ------           ------
     Total office properties and equipment, net                  $1,859           $1,984
                                                                 ======           ======
</TABLE>


(6)     Deposits
        --------

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

<TABLE>
                                                                       2000                       1999
                                                         -----------------------    ------------------------
                                                            Amount        Rate         Amount         Rate
                                                         --------------   ------    --------------    ------
                                                                         (Dollars in Thousands)
<S>                                                        <C>             <C>          <C>            <C>
Checking                                                  $ 11,669                    $ 10,769
NOW                                                         29,379         1.05%        24,708         1.06%
Money market                                                34,087         3.25         33,429         3.19
Regular savings                                             55,122         2.42         50,776         2.23
Club                                                         1,609         2.42          1,480         2.23
                                                          --------                    --------
                                                           131,866         2.12        121,162         2.06
                                                          --------                    --------

Savings certificates by remaining term to
  contractual maturity:
  Within one year                                          134,566         5.62        107,317         4.94
  After one but within two years                            35,822         6.03         33,490         5.23
  After two but within three years                           7,651         5.94          5,157         5.36
  After three years                                         15,201         6.45          5,848         5.38
                                                          --------                    --------
                                                           193,240         5.78        151,812         5.04
                                                          --------                    --------
  Total deposits                                          $325,106         4.29%      $272,974         3.71%
                                                          ========                    ========
</TABLE>


     Savings  certificates  issued in  denominations of $100,000 or more totaled
$32.3 million and $22.2  million at September  30, 2000 and 1999,  respectively.
The FDIC generally insures depositor accounts up to $100,000,  as defined in the
applicable regulations.

                                       37
<PAGE>
     Interest  expense on deposits is  summarized as follows for the years ended
September 30:
<TABLE>
                                         2000       1999       1998
                                              (In Thousands)
<S>                                      <C>        <C>        <C>
NOW, club and money market accounts     $ 1,368    $1,286     $  841
Regular savings accounts                    959       949      1,092
Savings certificate accounts              9,596     7,308      7,123
                                        -------    ------     ------
          Total interest expense        $11,923    $9,543     $9,056
                                        =======    ======     ======
</TABLE>


(7)     Borrowings
        ----------

       Securities Repurchase Agreements

     In securities repurchase agreements,  the Company borrows funds through the
transfer  of debt  securities  to the FHLB of New  York,  as  counterparty,  and
concurrently agrees to repurchase the identical securities at a fixed price on a
specified date.  Repurchase agreements are collateralized by the securities sold
and, in certain cases, by additional margin  securities.  During the years ended
September  30, 2000,  1999 and 1998,  the  Company's  average  borrowings  under
repurchase  agreements  with the  FHLB of New York  were  $99.8  million,  $79.8
million  and $81.9  million,  respectively,  and the maximum  month-end  balance
outstanding was $114.1 million, $101.0 million and $119.9 million, respectively.

     Information  concerning  outstanding  securities repurchase agreements with
the FHLB of New York as of September 30, 2000 and 1999 is summarized as follows:
<TABLE>


                                                                 Accrued Interest    Weighted          Fair Value of
Remaining Term to Final Maturity (1)      Amount       Payable (2)        Average Rate       Collateral Securities (3)
                                                            (Dollars in thousands)
<S>                                        <C>           <C>                  <C>                     <C>
September 30, 2000
Within 30 days                            $12,000        $ 28                6.60%                 $ 12,851
After 30 days but within one year          11,500         173                7.11                    11,978
After one but within three years           11,000          29                5.99                    14,413
After three but within five years          10,100         152                6.18                    11,509
After five years                           40,412         346                5.67                    44,276
                                          -------        ----                                      --------
     Total                                $85,012        $728                6.10%                 $ 95,027
                                          =======        ====                                      ========

September 30, 1999
Within 30 days                            $33,975        $ --                5.29%                 $ 35,403
After one but within three years           25,600         156                5.93                    28,436
After three but within five years          10,000          41                5.48                    14,940
After five years                           30,412         210                5.47                    28,065
                                          -------        ----                                      --------
     Total                                $99,987        $407                5.64%                 $106,844
                                          =======        ====                                      ========
</TABLE>



(1)  The weighted average remaining term to final maturity was approximately 5.0
     years and 3.5 years at September 30, 2000 and 1999,  respectively.  Certain
     securities  repurchase  agreements  are  callable  by the FHLB of New York,
     prior  to the  maturity  date.  The  weighted  average  remaining  term  to
     maturity,  giving effect to earlier call dates, was approximately 1.6 years
     at September 30, 2000.

(2)  Included in other liabilities in the consolidated balance sheets.

(3)  Represents the fair value of the  mortgage-backed and other debt securities
     which  were  transferred  to  the   counterparty,   plus  accrued  interest
     receivable  of  $852,000  and  $879,000  at  September  30,  2000 and 1999,
     respectively.  These securities consisted of available-for-sale  securities
     and held-to-maturity securities with fair values of $83.6 million and $10.6
     million,  respectively,  at  September  30,  2000  ($98.9  million and $7.1
     million, respectively, at September 30, 1999).

                                       38
<PAGE>

     At September  30, 2000,  the  Company's  "amount at risk" under  securities
repurchase agreements was approximately $9.3 million. This amount represents the
excess of (i) the carrying amount,  or market value if higher, of the securities
transferred to the FHLB of New York plus accrued  interest  receivable over (ii)
the amount of the repurchase liability plus accrued interest payable.

     FHLB Advances

     As a member of the FHLB of New York, the Association  may have  outstanding
FHLB  borrowings in a combination of term advances and overnight  funds of up to
25% of its total assets, or approximately  $130.1 million at September 30, 2000.
Borrowings  are secured by the  Association's  investment in FHLB stock and by a
blanket security agreement.  This agreement requires the Association to maintain
as collateral certain qualifying assets (principally  securities and residential
mortgage loans) not otherwise pledged.

     FHLB and weighted  average interest rates at September 30 are summarized as
follows, by remaining period to maturity:
<TABLE>
                                  2000                    1999
                                 ------                  -------
                            Amount     Rate          Amount    Rate
                            ------     ----          ------    ----
                                   (Dollars in thousands)
<S>                         <C>        <C>           <C>        <C>
FHLB advances maturing:
Within 30 days             $ 3,000     6.85%         $32,948   5.49%
30 days to 1 year           15,000     6.72               --     --
1 year to 3 years            6,000     6.48               --     --
3 years to 5 years          28,200     7.17               --     --
Over 5 years                20,200     5.06           15,000   4.36
                           -------                   -------
         Total              72,400     6.42          $47,948   5.19%
                           =======                   =======
</TABLE>



     The  weighted  average  period  to  maturity  date  for the  FHLB  advances
outstanding at September 30, 2000 was 4.3 years,  with a weighted average period
to call date of 2.4 years.  During the years ended  September 30, 2000, 1999 and
1998, the Company's average FHLB advances outstanding were $71.1 million,  $14.5
million  and $4.1  million,  respectively,  and the  maximum  month-end  balance
outstanding was $80.8 million, $47.9 million and $11.0 million, respectively.

(8)     Income Taxes
        ------------

     The  components  of income tax  expense are  summarized  as follows for the
years ended September 30:
<TABLE>
                                                      2000        1999         1998
                                                             (In Thousands)
<S>                                                    <C>       <C>            <C>
Current tax expense:
  Federal                                            $1,885      $1,311       $1,404
  State                                                 171         113          314
                                                     ------      ------       ------
                                                      2,056       1,424        1,718
                                                     ------      ------       ------
Deferred tax expense (benefit):
  Federal                                              (153)        105          207
  State                                                 (49)         41           79
                                                     ------      ------       ------
                                                       (202)        146          286
                                                     ------      ------       ------
Total income tax expense                             $1,854      $1,570       $2,004
                                                     ======      ======       ======
</TABLE>
                                       39
<PAGE>

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

                                                     2000        1999        1998
                                                     ----        ----        ----
                                                          (Dollars in Thousands)
<S>                                                <C>           <C>          <C>
Tax at Federal statutory rate                      $1,698       $1,439       $1,668
New York State income taxes, net
     of Federal tax benefit                            81          102          259
Other reconciling items, net                           75           29           77
                                                   ------       ------       ------
Actual income tax expense                          $1,854       $1,570       $2,004
                                                   ======       ======       ======

Effective income tax rate                            37.1%        37.1%        40.9%
                                                   ======       ======       ======
</TABLE>



     On March 31, 1999 the Association established the REIT at which time $117.7
million in real estate loans were  transferred from the Association to the REIT.
At  September  30,  2000,  $107.6  million in real estate loans were held by the
REIT.  The decrease in the effective  tax rate  reflects the ancillary  benefits
from the REIT.

     The tax effects of  temporary  differences  that give rise to deferred  tax
assets and liabilities are as follows at September 30:
<TABLE>
                                                                       2000            1999
                                                                          (In Thousands)
<S>                                                                   <C>              <C>
Deferred tax assets:
     Net unrealized loss on available-for-sale securities              1,793           1,732
     Allowance for loan losses                                           697             615
     Other deductible temporary differences                               94              95
                                                                      ------          ------
        Total deferred tax assets                                      2,584           2,442
                                                                      ------          ------

Deferred tax liabilities:
     Mortgage servicing assets                                           217             224
    Other taxable temporary differences                                  481             595
                                                                      ------          ------
        Total deferred tax liabilities                                   698             819
                                                                      -------         ------

     Net deferred tax asset                                           $1,886          $1,623
                                                                      ======          ======
</TABLE>

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

                                       40
<PAGE>

     As a thrift  institution,  the Association is subject to special provisions
in the Federal and New York State tax laws  regarding its allowable tax bad debt
deductions and related tax bad debt reserves. These deductions historically have
been  determined  using  methods  based on loss  experience  or a percentage  of
taxable  income.  Tax bad  debt  reserves  represent  the  excess  of  allowable
deductions  over  actual bad debt  losses and other  reserve  reductions.  These
reserves consist of a defined base-year amount, plus additional amounts ("excess
reserves") accumulated after the base year. SFAS No. 109 requires recognition of
deferred tax liabilities  with respect to such excess  reserves,  as well as any
portion  of the  base-year  amount  which is  expected  to  become  taxable  (or
"recaptured") in the foreseeable future.

     At September 30, 2000, the  Association's  base-year  Federal and State tax
bad debt reserves were $3.0 million and $10.8  million,  respectively.  Deferred
tax liabilities  have not been recognized with respect to these reserves,  since
the  Company  does not expect  that these  amounts  will  become  taxable in the
foreseeable future.  Under the tax laws as amended,  events that would result in
taxation of these reserves include (i) redemptions of the Association's stock or
certain  excess  distributions  to the Holding  Company and (ii)  failure of the
Association  to retain a thrift  charter or  continue  to  maintain a  specified
qualifying-assets  ratio and meet  other  thrift  definition  tests for New York
State tax  purposes.  At September  30,  2000,  the  Association's  unrecognized
deferred  tax  liabilities  with  respect to its  Federal and State tax bad debt
reserves totaled $1.8 million.

(9)  Other Non-Interest Expense
     --------------------------

     The components of other  non-interest  expense are as follows for the years
ended September 30:
<TABLE>
                                                           2000           1999          1998
                                                                     (In Thousands)
<S>                                                       <C>             <C>           <C>
Professional services                                    $  530         $  435         $  480
Advertising and promotion                                   387            398            258
Telephone and postage                                       246            195            134
Stationery and printing                                     161            154            149
Insurance and surety bond premiums                          146            105            128
Correspondent bank fees                                     125            107            105
Other                                                       706            518            452
                                                         ------         ------         ------
          Total                                          $2,301         $1,912         $1,706
                                                         ======         ======         ======
</TABLE>




(10) Employee Benefit and Stock Compensation Plans
     ---------------------------------------------

     Pension Benefits

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

                                       41
<PAGE>

     The following  table sets forth changes in benefit  obligation,  changes in
plan assets and the funded status of the Association's  pension plan and amounts
recognized in the consolidated balance sheets at September 30:
<TABLE>
                                                              2000         1999
                                                              ----         ----
                                                                 (In Thousands)
<S>                                                          <C>           <C>
Change in Benefit Obligation:
  Projected benefit obligation - beginning of year          $1,813        $1,378
  Service cost                                                 127           101
  Interest Cost                                                124            94
  Actuarial loss                                               (84)          334
  Benefits paid                                               (100)          (94)
                                                            ------        ------
  Projected benefit obligation - end of year                 1,880         1,813
                                                            ------        ------

Change in Plan Assets:
  Plan assets at fair value - beginning of year              2,326         2,093
  Actuarial return on plan assets                              236           327
  Employer contributions                                        --            --
  Benefits paid                                               (100)          (94)
                                                            ------        ------
  Plan assets at fair value - end of year                    2,462         2,326
                                                            ------        ------

Funded status at end of year                                   582           513
Unrecognized net actuarial (gain) loss                         (90)           38
Unrecognized prior service cost                               (218)         (235)
                                                            ======        ======
  Prepaid pension cost                                      $  274        $  316
                                                            ======        ======
</TABLE>

     The  components  of net pension  expense are as follows for the years ended
September 30:
<TABLE>
                                                                    2000       1999       1998
                                                                           (In thousands)
<S>                                                                  <C>        <C>       <C>
Service cost (benefits earned during the year)                       $127       $101      $ 73
Interest cost on projected benefit obligation                         125         94        97
Actual return on plan assets                                         (193)      (173)     (176)
Net amortization and deferral                                         (17)       (17)      (23)
                                                                     ====       ====      ====
             Net pension (credit) expense                            $ 42       $  5      $(29)
                                                                     ====       ====      ====
</TABLE>

     The  projected  benefit  obligations  at  September  30,  2000 and 1999 was
computed using discount rates of 7.0%,  respectively,  and rates of compensation
4.0%,  respectively.  The expected  long-term  rate of return on plan assets was
8.5%.

                                       42
<PAGE>

     The Company entered into a non-qualified  Supplemental Executive Retirement
Agreement  with an  executive  officer,  effective  January 1, 1997,  to provide
retirement  benefits in addition to the benefits  provided by the pension  plan.
The   projected   benefit   obligation  at  September  30,  2000  and  1999  was
approximately  $263,000  and  $257,000,  respectively.  This amount was computed
using a  discount  rate of 7.0%  and a rate of  compensation  increase  of 4.0%.
Pension expense for this agreement  amounted to $42,000 in fiscal 2000,  $41,000
in fiscal 1999 and $45,000 in fiscal 1998.

Savings Plan

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

Employee Stock Ownership Plan

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

     Shares  purchased  by the ESOP are held in a  suspense  account by the plan
trustee  until  allocated to  participant  accounts.  Shares  released  from the
suspense  account are allocated to  participants  on the basis of their relative
compensation.  Participants  become vested in the allocated shares over a period
not  to  exceed  five  years.  Any  forfeited  shares  are  allocated  to  other
participants  in the same  proportion as  contributions.  A cumulative  total of
128,547 shares have been allocated to participants  through  September 30, 2000.
Compensation  expense  recognized  with  respect  to these  shares  amounted  to
$461,000,  $454,000 and $534,000 in fiscal  2000,  1999 and 1998,  respectively,
based on the average fair value of the Holding  Company's  common stock for each
period.  The cost of the 157,113  shares which have not yet been committed to be
released to  participant  accounts is reflected as a reduction to  stockholders'
equity ($1.6 million at September 30, 2000).  The fair value of these shares was
approximately $2.5 million at that date.

                                       43
<PAGE>
Stock Option and Incentive Plan

     On October 30,  1996,  the  stockholders  approved  the  Yonkers  Financial
Corporation 1996 Stock Option and Incentive Plan. Under the plan, 357,075 shares
of  authorized  but  unissued  Holding  Company  common  stock are  reserved for
issuance to employees and non-employee directors upon option exercises.  Options
may be either  non-qualified  stock  options or incentive  stock  options.  Each
option  entitles the holder to purchase one share of common stock at an exercise
price equal to the fair market value of the stock on the grant date.  An initial
grant of 264,951  options was made,  effective  October 30, 1996, at an exercise
price of $12.875 per share.  Options were granted later in fiscal 1997 for 3,000
shares at an  exercise  price of  $16.625  per share,  in fiscal  1998 for 3,000
shares at an  exercise  price of $21.625  per share,  in fiscal  1999 for 10,563
shares at an exercise price of $14.125 per share,  and in fiscal 2000 for 14,000
shares at an exercise  price of $16.625 per share.  All options  granted  have a
ten-year  term and vest  ratably  over five  years.  No options  were  exercised
through  September 30, 2000 and the 295,514  outstanding  options had a weighted
average  remaining  term of  approximately  6.3 years.  At September 30, 2000, a
total of 165,596  options  with a weighted  average  exercise  price $12.98 were
exercisable and 61,561 reserved shares were available for future option grants.

     Options  were  granted at  exercise  prices  equal to the fair value of the
common stock at the grant dates. Therefore, in accordance with the provisions of
APB Opinion No. 25 related to fixed stock options,  no  compensation  expense is
recognized   with   respect   to   options   granted.   Under  the   alternative
fair-value-based  method  defined in SFAS No.  123,  the fair value of all fixed
stock  options on the grant date would be recognized as expense over the vesting
period.  The estimated  per-share fair value of options  granted in fiscal 2000,
1999 and 1998 was $7.07,  $5.57 and  $6.32,  respectively,  estimated  using the
Black-Scholes  option-pricing  model with assumptions  approximately as follows:
dividend  yield of 2.3% in fiscal 2000 and 1.8% in fiscal 1999 and 1998 expected
volatility  rate of 41.3% in  fiscal  2000 and  38.3% in  fiscal  1999 and 1998;
risk-free interest rate of 6.5% in fiscal 2000, 4.6% in fiscal 1999, and 6.1% in
fiscal 1998; and expected option life of 7.0 years.  Had the Company applied the
fair-value-based  method of SFAS No. 123 to the options  granted,  it would have
reported net income, basic EPS and diluted EPS of $2.9 million, $1.46 and $1.43,
respectively,  in fiscal 2000; $2.5 million, $1.05 and $1.03,  respectively,  in
fiscal 1999 and $2.7 million, $1.05, and $1.01, respectively, in fiscal 1998.

Management Recognition Plan

     On October 30, 1996, the stockholders  also approved the Yonkers  Financial
Corporation 1996 MRP. The purpose of this plan is to provide directors, officers
and employees with a proprietary interest in the Company in a manner designed to
encourage such individuals to remain with the Company. Awards granted under this
plan vest  ratably over five years from the date of grant.  The Holding  Company
completed the funding of the plan in November 1996 by purchasing  142,830 shares
of  common  stock in the  open  market  at a total  cost of  approximately  $1.8
million.  MRP awards for 5,000 of these  shares were  awarded in fiscal 1999 and
108,905 of these  shares were made in fiscal  1997,  with the  remaining  28,925
purchased  shares  included in treasury  stock and available for future  awards.
Unearned  compensation  of $1.5 million was recorded  with respect to the shares
awarded,  and  $292,000,  $289,000 and $279,000 of that amount was  amortized to
compensation expense in fiscal 2000, 1999 and 1998, respectively.

                                       44
<PAGE>

(11) Stockholders' Equity
     --------------------

Conversion and Stock Offering

     Concurrent  with the Conversion on April 18, 1996, the Holding Company sold
3,570,750 shares of its common stock in a subscription and community offering at
a price of $10 per share,  for net  proceeds of $34.6  million  after  deducting
conversion costs of $1.1 million.  The Holding Company used $17.3 million of the
net proceeds to acquire all of the common stock issued by the Association in the
Conversion.  Total  common  shares  issued and  outstanding  were  2,228,739  at
September 30, 2000 (net of 1,342,011 treasury shares) and 2,238,739 at September
30, 1999 (net of 1,332,011 treasury shares).

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

Earnings Per Share

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

     The  following  is a  summary  of the  number  of  shares  utilized  in the
Company's EPS  calculations  for the years ended  September  30, 2000,  1999 and
1998. For purposes of computing basic EPS, net income applicable to common stock
equaled net income for each of the periods presented.
<TABLE>
                                                                       2000             1999              1998
                                                                                   (In Thousands)
<S>                                                                   <C>               <C>               <C>
Weighted average common shares outstanding
 for computation of basic EPS (1)                                     2,011            2,362             2,598
 Common-equivalent shares due to the dilutive effect of
 stock options and MRP awards (2)                                        46               46                77
                                                                      -----            -----             -----
Weighted average common shares for
 computation of diluted EPS                                           2,057            2,408             2,675
                                                                     ------            ------            -----
</TABLE>


(1)  Excludes unvested MRP awards and  unallocated  ESOP shares that have not
     been committed to be released.

(2)Computed using the treasury stock method.

                                       45
<PAGE>

Comprehensive Income

     The  Company  has  adopted  Statement  of  Financial  Accounting  Standards
("SFAS") No. 130, "Reporting  Comprehensive Income," which establishes standards
for  reporting  and  display of  comprehensive  income (and its  components)  in
financial statements.  The standard does not, however, specify when to recognize
or how to measure items that make up comprehensive income.  Comprehensive income
represents net income and certain  amounts  reported  directly in  stockholders'
equity,  such as the net  unrealized  gain or loss on  securities  available for
sale. While SFAS No. 130 does not require a specific  reporting  format, it does
require that an enterprise  report an amount  representing  total  comprehensive
income for the period.  The Company has  reported its  comprehensive  income for
fiscal  2000,  1999  and  1998 in the  consolidated  statements  of  changes  in
stockholders' equity.

     The Company's other  comprehensive  income or loss (other than net income),
which is attributable to gains and losses on securities  available-for-sale,  is
summarized as follows for the years ended September 30:
<TABLE>
                                                       2000          1999          1998
                                                                (In Thousands)
<S>                                                     <C>         <C>            <C>
Net unrealized holding (losses) gains  arising
  during the period                                    $(201)       $(6,192)       $958
Related income tax effect                                 62          2,495        (382)
                                                       -----        -------        ----
Other comprehensive (loss) income                      $(139)       $(3,697)       $576
                                                       =====        =======        ====
</TABLE>



     Capital Distributions

     The  Association may not declare or pay cash dividends on or repurchase any
of  its  shares  of  common  stock  if  the  effect   thereof  would  cause  its
stockholder's   equity  to  be  reduced  below  applicable   regulatory  capital
requirements  or the  amount  required  to be  maintained  for  the  liquidation
account.  The  OTS  capital  distribution   regulations  applicable  to  savings
institutions  (such as the  Association)  that  meet  their  regulatory  capital
requirements,  generally  limit dividend  payments in any year to the greater of
(i) 100% of  year-to-date  net income plus an amount that would  reduce  surplus
capital by one-half or (ii) 75% of net income for the most recent four quarters.
Surplus  capital is the excess of actual  capital at the  beginning  of the year
over the institution's  minimum regulatory capital requirement.  The Association
paid $2.3  million,  $4.0  million and $4.8  million in dividends to the Holding
Company in fiscal 2000, 1999 and 1998, respectively.

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

     Pursuant to approvals received from the OTS, through September 30, 2000 the
Holding  Company  has  repurchased  1,455,916  shares  of  common  stock for its
treasury (or approximately 40.8% of its common stock issued).  These repurchases
were made in open market  transactions,  at a total cost of $23.5  million or an
average of approximately  $16.14 per share. These repurchases have been used, in
part, to fund shares awarded under the MRP described in Note 10.

     Regulatory Capital Requirements

     OTS regulations require savings institutions to maintain a minimum ratio of
tangible  capital to total  adjusted  assets of 1.5%; a minimum  ratio of Tier I
(core)  capital to total  adjusted  assets of 4.0%; and a minimum ratio of total
(core and supplementary) capital to risk-weighted assets of 8.0%.

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

                                       46
<PAGE>
     The  foregoing  capital  ratios are based in part on specific  quantitative
measures  of  assets,   liabilities  and  certain   off-balance-sheet  items  as
calculated  under   regulatory   accounting   practices.   Capital  amounts  and
classifications  are also  subject  to  qualitative  judgments  by the OTS about
capital   components,   risk   weightings  and  other  factors.   These  capital
requirements,  which are  applicable  to the  Association  only, do not consider
additional capital at the Holding Company level.

     Management   believes  that,  as  of  September  30,  2000  and  1999,  the
Association  met all  capital  adequacy  requirements  to which  it is  subject.
Further,  the most recent OTS  notification  categorized  the  Association  as a
well-capitalized  institution under the prompt  corrective  action  regulations.
There have been no conditions or events since that  notification that management
believes have changed the Association's capital classification.

     The following is a summary of the Association's  actual capital amounts and
ratios as of September 30, 2000 and 1999,  compared to the OTS  requirements for
minimum  capital  adequacy  and  for   classification   as  a   well-capitalized
institution:
<TABLE>
                                                          Minimum Capital              Classification as
                            Association Actual                Adequacy                 Well Capitalized
                          ------------------------    -------------------------    --------------------------
                            Amount         Ratio        Amount          Ratio        Amount          Ratio
                                                        (Dollars in Thousands)
<S>                           <C>           <C>          <C>             <C>          <C>              <C>
September 30, 2000
Tangible capital           $ 34,645         6.6%        $ 7,847          1.5%            N/A           N/A
Tier I (core)capital         34,645         6.6          20,924          4.0        $ 26,155           5.0%
Risk-based capital:
     Tier I                  34,645        14.5             N/A          N/A          14,315           6.0
     Total                   36,348        15.2          19,086          8.0          23,858          10.0

September 30, 1999
Tangible capital           $ 33,744         7.4%        $ 6,863          1.5%            N/A           N/A
Tier I (core)capital         33,744         7.4          18,300          4.0        $ 22,876           5.0%
Risk-based capital:
     Tier I                  33,744        17.2             N/A          N/A          11,784           6.0
     Total                   36,520        18.0          15,711          8.0          19,639          10.0
</TABLE>


(12) Commitments and Contingencies

     Off-Balance Sheet Financial Instruments

     The Company had outstanding commitments to originate loans of $23.8 million
and  unadvanced  lines of  credit  extended  to  customers  of $3.2  million  at
September 30, 2000 ($52.1 million and $4.4 million,  respectively,  at September
30, 1999).  Although these  contractual  amounts represent the Company's maximum
potential exposure to credit loss, they do not necessarily represent future cash
requirements  since certain  commitments  and lines of credit may expire without
being funded and others may not be fully drawn upon.  Substantially all of these
commitments  and lines of credit  have been  provided  to  customers  within the
Company's primary lending area described in note 3.

     Commitments to originate loans are legally binding  agreements to lend to a
customer as long as there is no violation of any  condition  established  in the
contract.  Commitments have fixed  expiration dates (generally  ranging up to 45
days) or other  termination  clauses and may require the payment of a fee by the
customer.   The  Company  evaluates  each  customer's   creditworthiness   on  a
case-by-case  basis. The amount of collateral,  if any,  obtained by the Company
upon  extension of credit,  is based on  management's  credit  evaluation of the
borrower.  The  Company's  loan  origination  commitments  at September 30, 2000
include $12.3  million for  fixed-rate  loans with  interest  rates ranging from
7.50% to 10.37%.

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

     At September 30, 2000,  the Company had a commitment to sell mortgage loans
of $2.7 million.  Loan sale  commitments  are used from time to time in order to
limit the interest rate and market risk  associated with loans held for sale and
commitments to originate loans held for sale.  Risks associated with commitments
to sell mortgage loans include the possible  inability of the  counterparties to
meet the contract  terms,  or of the Company to  originate  loans to fulfill the
contracts.  The Company controls its risk by entering into these agreements only
with highly-rated counterparties

                                       47
<PAGE>

     Lease Commitments

     The Company is  obligated  under  non-cancelable  leases for certain of its
banking premises.  Rental expense under these leases was $562,000,  $420,000 and
$255,000 for the years ended September 30, 2000, 1999 and 1998, respectively. At
September  30,  2000,  the  future  minimum  rental  payments  under  the  lease
agreements  for the fiscal  years  ending  September  30 are  $500,000  in 2001,
$500,000 in 2002, $389,000 in 2003, $296,000 in 2004 and $32,000 in 2005.

     Legal Proceedings

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

(13) Fair Values of Financial Instruments

     SFAS No.  107  requires  disclosures  about the fair  values  of  financial
instruments  for which it is practicable to estimate fair value.  The definition
of a financial instrument includes many of the assets and liabilities recognized
in the Company's balance sheet, as well as certain off-balance sheet items. Fair
value is defined in SFAS No. 107 as the amount at which a  financial  instrument
could be exchanged in a current transaction between willing parties,  other than
in a forced or liquidation sale.

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

     The  following is a summary of the carrying  amounts and fair values of the
Company's  financial assets and liabilities (none of which were held for trading
purposes) at September 30:
<TABLE>
                                                        2000                          1999
                                                      ------------------------      -----------------------
                                                        Carrying      Fair            Carrying      Fair
                                                       Amount         Value          Amount         Value
                                                      ----------   -----------      ----------    ---------
                                                                         (In Millions)
<S>                                                   <C>             <C>             <C>           <C>
Financial assets:
  Cash and due from banks                              $ 10.2        $ 10.2          $  4.7       $  4.7
  Securities                                            128.6         128.5           138.6        138.7
  Real estate mortgage loans held for sale                2.7           2.7             1.2          1.2
  Loans receivable                                      364.2         355.6           298.0        291.1
  Accrued interest receivable                             3.2           3.2             2.8          2.8
  FHLB stock                                              9.3           9.3             7.4          7.4

Financial liabilities:
  Savings certificate accounts                          193.2         192.6           151.8        151.1
  Other deposit accounts                                131.9         131.9           121.2        121.2
  Borrowings                                            157.4         157.0           147.9        142.6
</TABLE>

                                       48
<PAGE>

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

     Securities

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

     Loans

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

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

     Deposit Liabilities

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

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

     Borrowings

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

     Other Financial Instruments

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

     The fair values of the loan origination commitments and unadvanced lines of
credit  described in note 12 were estimated based on an analysis of the interest
rates and fees currently charged to enter into similar transactions, considering
the remaining terms of the instruments and the creditworthiness of the potential
borrowers.  At September 30, 2000 and 1999,  the fair values of these  financial
instruments   approximated   the  related   carrying   amounts  which  were  not
significant.

                                       49
<PAGE>
(14) Recent Accounting Pronouncements

     In March 2000, the Financial  Accounting  Standards  Board ("FASB")  issued
interpretation No. 44 (FIN 44), "Accounting for Certain  Transactions  Involving
Stock Compensation-an  Interpretation of APB 25". This interpretation  clarifies
the FASB's view in applying APB 25 to certain stock compensation  awards. FIN 44
was effective  prospectively  July 1, 2000, with the exception of certain awards
granted after December 15, 1998. The implementation of FIN 44 is not expected to
have a material impact on the Company's consolidated financial statements

     In June  2000,  the FASB  issued  SFAS No.  138,  "Accounting  for  Certain
Derivative  Instruments  and Certain  Hedging  Activities-an  amendment  of FASB
Statement No. 133". This statement amends and superseded  certain  paragraphs of
SFAS No. 133. The effective date for SFAS No. 138 is for fiscal years  beginning
after  June  15,  2000.  SFAS No.  138 and 133  apply to  quarterly  and  annual
financial  statements.  The Company is not presently  engaged in derivatives and
hedging  activities,  and  accordingly  SFAS No. 133 is not  expected  to have a
material impact on the Company's consolidated financial statements.

     In September 2000, the FASB issued SFAS No. 140,  "Accounting for Transfers
and Servicing of Financial Assets and  Extinguishments of Liabilities." SFAS No.
140 replaces SFAS No. 125 and revises the standards for accounting and reporting
for  securitizations and other transfers of financial assets and extinguishments
of  liabilities.  SFAS No. 140 is  effective  for  transfers  and  servicing  of
financial assets and  extinguishments  of liabilities  occurring after March 31,
2001.  SFAS No.  140 is  effective  for  recognition  and  reclassifications  of
collateral  and for  disclosures  relating to  securitization  transactions  and
collateral for fiscal years after December 15, 2000. The  implementation of SFAS
No. 140 will not have a material impact on the Company's  consolidated financial
statement.

                                       50
<PAGE>

(15) Parent Company Condensed Financial Information
     ----------------------------------------------

     Set forth  below are the  condensed  balance  sheets of  Yonkers  Financial
Corporation as of September 30, 2000 and 1999,  and its condensed  statements of
income and cash flows for the periods indicated:
<TABLE>

                                                               September 30,
                                                          ----------------------------
                                                             2000             1999
                                                          -------------  -------------
                                                                 (In Thousands)
<S>                                                      <C>                <C>
Condensed Balance Sheets
Assets
  Cash                                                  $    83            $   217
  Securities                                              2,788              2,570
  Investment in subsidiary                               32,003             31,327
  Other assets                                               74                280
                                                        -------            -------
    Total assets                                        $34,948            $34,394
                                                        =======            =======

Liabilities and Stockholders' Equity
  Liabilities                                           $    66            $ 2,377
  Stockholders' equity                                   34,882             32,017
                                                        -------            -------
    Total liabilities and stockholders' equity          $34,948            $34,394
                                                        =======            =======
</TABLE>

<TABLE>
                                                                                    Year Ended September 30,
                                                                            ------------------------------------------
                                                                               2000           1999           1998
                                                                            ------------  -------------  -------------
                                                                                         (In Thousands)
<S>                                                                            <C>           <C>            <C>
Condensed Statements of Income
Dividends received from subsidiary                                            $ 2,300        $ 4,000        $ 4,800
Interest income                                                                   267            353            499
Non-interest income                                                                40             58             38
Non-interest expense                                                             (408)          (207)          (404)
                                                                              -------        -------        -------
     Income before income tax expense and effect of subsidiary earnings         2,199          4,204          4,933
Income tax expense                                                                (43)            68             57
                                                                              -------        -------        -------
     Income before effect of subsidiary earnings                                2,242          4,136          4,876
Effect of subsidiary earnings:
     Excess of dividends over current earnings of subsidiary                      899         (1,473)        (1,975)
                                                                              -------        -------        -------
       Net income                                                             $ 3,141        $ 2,663        $ 2,901
                                                                              =======        =======        =======
</TABLE>

                                       51
<PAGE>
<TABLE>
                                                                                    Year Ended September 30,
                                                                            ------------------------------------------
                                                                               2000           1999           1998
                                                                            ------------  -------------  -------------
                                                                                         (In Thousands)
<S>                                                                            <C>           <C>              <C>
Condensed Statements of Cash Flows
Cash flows from operating activities:
     Net income                                                               $ 3,141        $ 2,663        $ 2,901
     Adjustments to reconcile net income to net cash
       provided by operating activities:
          Excess of dividends over current earnings of subsidiary                (899)         1,473          1,975
          Other adjustments, net                                               (1,411)         3,122            947
                                                                              -------        -------        -------
             Net cash provided by operating activities                            831          7,258          5,823
                                                                              -------        -------        -------
Cash flows from investing activities:
     Purchases of securities                                                     (402)          (465)        (1,187)
     Proceeds from sales and calls of securities                                  369          2,661            256
                                                                              -------        -------        -------
             Net cash (used in) provided by  investing activities                 (33)         2,196           (931)
                                                                              -------        -------        -------
Cash flows from financing activities:
     Common stock repurchased                                                    (171)        (8,741)        (5,676)
     Dividends paid                                                              (761)          (765)          (752)
                                                                              -------        -------        -------
             Net cash used in by financing activities                            (932)        (9,506)        (6,428)
                                                                              -------        -------        -------
Decrease in cash and cash equivalents                                            (134)           (52)        (1,536)
Cash and cash equivalents at beginning of period                                  217            269          1,805
                                                                              -------        -------        -------
Cash and cash equivalents at end of period                                    $    83        $   217        $   269
                                                                              ========       =======        =======
</TABLE>

(16) Selected Quarterly Financial Data (Unaudited)

     The following is a summary of unaudited  quarterly  financial  data for the
fiscal years ended September 30, 2000 and 1999:

<TABLE>
                                                                     Three Months Ended
                                                    --------------------------------------------------------
                                                    December 31     March 31      June 30      September 30
                                                            (In Thousands, except per share data)
<S>                                                     <C>          <C>           <C>          <C>
Fiscal 2000
Interest and dividend income                           $8,588        $8,971       $9,229       $9,304
Interest expense                                        5,136         5,449        5,711        5,834
                                                       -------       ------       ------       ------
       Net interest income                              3,452         3,522        3,518        3,470
Provision for loan losses                                  35            35           75           75
Non-interest income                                       310           418          413          452
Non-interest expense                                    2,603         2,646        2,491        2,600
                                                       ------        ------       ------       ------
       Income before income tax expense                 1,124         1,259        1,365        1,247
Income tax expense                                        420           465          500          469
                                                       =======       ======       ======       ======
       Net income                                      $  704        $  794       $  865       $  778
                                                       =======       ======       ======       ======

Earnings per common share:
       Basic                                           $ 0.35        $ 0.40       $ 0.43       $ 0.38
       Diluted                                           0.34          0.39         0.42         0.38
                                                       ======        ======       ======       ======

Fiscal 1999
Interest and dividend income                           $6,621        $6,472       $6,649       $7,190
Interest expense                                        3,765         3,579        3,585        3,955
                                                       ------        ------       ------       ------
       Net interest income                              2,856         2,893        3,064        3,235
Provision for loan losses                                  75            75           50           35
Non-interest income                                       290           442          165          260
Non-interest expense                                    1,941         2,200        2,153        2,443
                                                       ------        ------       ------       ------
       Income before income tax expense                 1,130         1,060        1,026        1,017
Income tax expense                                        463           394          369          344
                                                       ======        ======       ======       ======
       Net income                                      $  667        $  666       $  657       $  673
                                                       ======        ======       ======       ======

Earnings per common share:
       Basic                                           $ 0.27        $ 0.27        $ 0.28      $  0.31
       Diluted                                           0.27          0.27          0.27         0.30
                                                       ======        ======        ======      =======
</TABLE>
                                       52
<PAGE>

                               MANAGEMENT'S REPORT

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

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

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

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



Richard F. Komosinski                         Joseph D. Roberto
President and Chief Executive Officer         Senior Vice President, Treasurer
                                              and Chief Financial Officer
                                       53
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Yonkers Financial Corporation:

     We have audited the  accompanying  consolidated  balance  sheets of Yonkers
Financial  Corporation  and subsidiary  (the "Company") as of September 30, 2000
and  1999,  and the  related  consolidated  statements  of  income,  changes  in
stockholders'  equity,  and cash  flows for each of the years in the  three-year
period ended September 30, 2000. These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Yonkers
Financial  Corporation and subsidiary as of September 30, 2000 and 1999, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period  ended  September  30,  2000 in  conformity  with  accounting
principals generally accepted in the United States of America.





New York, New York
October 24, 2000

                                       54
<PAGE>

                        YONKERS FINANCIAL CORPORATION
                              CORPORATE INFORMATION
<TABLE>
<S>                                                       <C>
COMPANY AND BANK ADDRESS
6 Executive Plaza                                          Telephone:        (914) 965-2500
Yonkers, New York 10701                                    Fax:              (914) 965-2599
                                                           Internet          www.Yonkers.com

BOARD OF DIRECTORS
William G. Bachop, Chairman                                Richard Komosinski
Retired professional engineer and President of             President and Chief Executive Officer
Herbert G. Martin, Inc.                                    The Yonkers Savings and Loan Association

P. Anthony Sarubbi, Vice Chairman                          Charles D. Lohrfink
A consulting engineer and President of                     Retired Public Affairs Director for
P. Anthony Sarubbi, Inc.                                   Consolidated Edison

Donald R. Angelilli                                        Michael J. Martin
A real estate broker employed by Weichert                  Vice President of Herbert G. Martin, Inc.
Realtors

Fredric H. Gould                                           Eben T. Walker
Chairman, BRT Realty Trust                                 President of Graphite Metallizing
General Partner, Gould Investors, LP                       Corporation


OFFICERS
Richard Komosinski                                         Joseph L. Macchia
President and Chief Executive Officer                      Senior Vice President, Secretary
Joseph D. Roberto                                          Phillip Guarnieri
Senior Vice President, Treasurer and                       Senior Vice President
Chief Financial Officer
Kathy Kowler
Vice President

INDEPENDENT AUDITORS                                       SPECIAL COUNSEL

KPMG LLP                                                   Silver, Freedman & Taff, L.L.P.
757 Third Avenue                                           1100 New York Avenue, N.W.
New York, N.Y. 10017                                       Seventh Floor - East Tower
</TABLE>
<PAGE>

                          YONKERS FINANCIAL CORPORATION
                             STOCKHOLDER INFORMATION

ANNUAL MEETING

The annual meeting of stockholders will be held at 6:00 p.m.,  January 25, 2001,
at The Yonkers  Savings and Loan  Association,  FA, located at 2320 Central Park
Avenue, Yonkers, New York.

STOCK LISTING

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

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

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

     QUARTER ENDED            HIGH      LOW       DIVIDENDS
     -------------            ----      ---       ---------
     <S>                      <C>       <C>        <C>
     December 31, 1998        15        12 1/4     0.08
     March 31, 1999           15 1/2    14         0.08
     June 30, 1999            17 7/8    14 5/8     0.08
     September 30, 1999       19        17 1/2     0.09
     December 31, 1999        18 1/2    16 5/8     0.09
     March 31, 2000           17 3/4    14         0.09
     June 30, 2000            15 13/16  13 7/8     0.09
     September 30, 2000       16 3/8    15 1/8     0.09

</TABLE>

The Board of  Directors  intends to  continue  the  payment  of cash  dividends,
dependent on the results of operations  and financial  condition of the Company,
tax considerations,  industry standards,  economic conditions,  general business
practices  and  other  factors.   Dividend  payment   decisions  are  made  with
consideration of a variety of factors including earnings,  financial  condition,
market  considerations  and regulatory  restrictions.  Restrictions  on dividend
payments  are  described  in  Note 11 of the  Notes  to  Consolidated  Financial
Statements included in this report.

As  of  September  30,  2000,  the  Company  had  approximately  420  registered
stockholders and 2,228,739 outstanding shares of common stock.
<TABLE>

SHAREHOLDER AND                              TRANSFER                           INVESTOR
GENERAL INQUIRIES                            AGENT                              RELATIONS
<S>                                         <C>                                 <C>
Joseph L. Macchia, Senior Vice President    Registrar & Transfer Co.            Yonkers Financial Corporation
Yonkers Financial Corporation               10 Commerce Drive                   6 Executive Plaza
6 Executive Plaza                           Cranford, New Jersey 07016          Yonkers, New York 10701
Yonkers, New York 10701                     (800) 456-0596                      (914) 965-2500
(914) 965-2500
</TABLE>


ANNUAL AND OTHER REPORTS

The  Company is  required  to file an annual  report on Form 10-K for its fiscal
year ended  September 30, 2000,  with the  Securities  and Exchange  Commission.
Copies of the Form 10-K annual report and the Company's quarterly reports may be
obtained without charge by contacting:
                                                          Washington, D.C. 20005