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

                                    FORM 10-K

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

      For the fiscal year ended September 30, 1998

                                       OR

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

                         Commission file number 0-27716

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

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

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

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

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

           Securities Registered Pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
                     ---------------------------------------
                                (Title of Class)

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

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

      As of December 21, 1998, there were issued and outstanding 2,726,239
shares of the Registrant's Common Stock. The aggregate market value of the
voting stock held by non-affiliates of the Registrant, computed by reference to
the closing price of such stock on the Nasdaq National Market as of December 21,
1998, was approximately $38.2 million. (The exclusion from such amount of the
market value of the shares owned by any person shall not be deemed an admission
by the Registrant that such person is an affiliate of the Issuer.)

                       DOCUMENTS INCORPORATED BY REFERENCE

PARTS II and IV of Form 10-K--Annual Report to Stockholders for the fiscal year
ended September 30, 1998. 
PART III of form 10-K--Proxy statement for the Annual Meeting for the fiscal 
year ended September 30, 1998.

================================================================================
<PAGE>

                          YONKERS FINANCIAL CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                               SEPTEMBER 30, 1998

                                Table of Contents

            Part I                                                       Page

Item 1      Business..................................................   3

Item 2      Properties................................................   45

Item 3      Legal Proceedings.........................................   46

Item 4      Submission of Matters to a Vote of Security Holders.......   46

            Part II

Item 5      Market for Registrant's Common Equity and Related
              Stockholder Matters.....................................   46

Item 6      Selected Financial Data...................................   46

Item 7      Management's Discussion and Analysis of Financial
              Condition and Results of Operations.....................   46

Item 7A     Quantitative and Qualitative Disclosures About Market
              Risk....................................................   46

Item 8      Financial Statements and Supplementary Data...............   46

Item 9      Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure.....................   47

            Part III

Item 10     Directors and Executive Officers of the Registrant........   48

Item 11     Executive Compensation....................................   49

Item 12     Security Ownership of Certain Beneficial Owners
              and Management..........................................   49

Item 13     Certain Relationships and Related Transactions............   49

            Part IV

Item 14     Exhibits, Financial Statement Schedules and Reports on
              Form 8-K................................................   50

            Signatures................................................   52


                                       2
<PAGE>

                                     PART I

Item 1. Business

General

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

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

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

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

Market Area

      The Company conducts its banking operations through its main office
located at One Manor House Square, Yonkers, New York; three full-service banking
offices located in Yonkers, New York; and two in-store branches located in
Wappingers Falls, Dutchess County, New York and Yorktown Heights, Westchester
County, New York. The in-store branches opened in December 1997 and October
1998. A corporate headquarters office is also maintained in Yonkers, New York.
The Company's primary market area for deposits includes the City of Yonkers and
surrounding communities. The Company's primary market area for its lending
activities consists of communities within Westchester County and portions of
Rockland, Putnam and Dutchess Counties, New York.


                                       3
<PAGE>

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

Lending Activities

      General. Historically, the Company originated 30-year, fixed-rate mortgage
loans secured by one- to four-family residences. Since the mid-1980s, in order
to reduce its vulnerability to changes in interest rates, the Company has also
originated adjustable-rate mortgage ("ARM") loans and home equity lines of
credit. During fiscal 1997, the Company began to offer a "15/1" residential
mortgage loan product with a fixed rate for the first 15 years and annual rate
adjustments thereafter. Residential mortgage originations also currently include
products with initial fixed-rate periods of five, seven or ten years with annual
rate adjustments thereafter. The Company engages in secondary market sales of a
portion of its residential mortgage originations, as market conditions warrant.
Both originations and sales activity increased significantly in fiscal 1998. The
Company also offers multi-family and commercial real estate, consumer,
construction and land loans.


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                At September 30,
                                                --------------------------------------------------------------------------------
                                                         1998                        1997                        1996           
                                                -----------------------     -----------------------     ----------------------- 
                                                              Percent                     Percent                     Percent   
                                                  Amount      of Total        Amount      of Total        Amount      of Total  
                                                ---------    ----------     ---------    ----------     ---------    ---------- 
                                                                            (Dollars in thousands)
<S>                                             <C>            <C>         <C>                <C>       <C>               <C>   
Real Estate Mortgage Loans:                                               
  One- to four-family (1)(2)(3)                 $ 167,225       84.1%       $ 111,821          79.0%    $  62,283          70.6%
  Multi-family                                      7,846        3.9            5,658           4.0         5,471           6.2 
  Commercial                                       12,766        6.4           11,990           8.5         9,117          10.3 
  Construction                                      2,613        1.3            2,786           2.0         2,175           2.5 
  Land                                                932        0.5            1,814           1.3         1,934           2.2 
                                                ---------      -----        ---------         -----     ---------         ----- 
       Total real estate mortgage loans           191,382       96.2          134,069          94.8        80,980          91.8 
                                                ---------      -----        ---------         -----     ---------         ----- 
Other Loans:                                                              
Consumer loans:                                                           
  Home equity                                       3,678        1.9            3,217           2.3         2,911           3.3 
  Personal                                          1,447        0.7            1,666           1.1         1,632           1.8 
  Other                                             1,224        0.6            1,237           0.9         1,310           1.5 
                                                ---------      -----        ---------         -----     ---------         ----- 
       Total consumer loans                         6,349        3.2            6,120           4.3         5,853           6.6 
Commercial business loans                           1,195        0.6            1,299           0.9         1,413           1.6 
                                                ---------      -----        ---------         -----     ---------         ----- 
       Total other loans                            7,544        3.8            7,419           5.2         7,266           8.2 
                                                ---------      -----        ---------         -----     ---------         ----- 
       Total loans                                198,926      100.0%         141,488         100.0%       88,246         100.0%
                                                               =====                          =====                       ===== 
Less:                                                                     
  Construction loans in process                      (743)                     (1,091)                       (171)              
  Allowance for loan losses                        (1,302)                     (1,093)                       (937)              
  Deferred loan origination costs (fees), net         478                        (184)                       (472)              
                                                ---------                  ----------                   ---------               
       Total loans, net                         $ 197,359                  $  139,120                   $  86,666               
                                                =========                  ==========                   =========               
                                                                       
<CAPTION>
                                                                 At September 30,
                                                --------------------------------------------------
                                                         1995                       1994
                                                -----------------------    -----------------------
                                                              Percent                    Percent
                                                  Amount      of Total       Amount      of Total
                                                ---------    ----------    ---------    ----------
                                                              (Dollars in thousands)
<S>                                             <C>               <C>      <C>               <C>  
Real Estate Mortgage Loans:
  One- to four-family (1)(2)(3)                 $  63,282          74.4%   $  64,078          80.7%
  Multi-family                                      5,647           6.6        4,483           5.7
  Commercial                                        6,575           7.7        3,176           4.0
  Construction                                      2,205           2.6        2,138           2.7
  Land                                              2,112           2.5          814           1.0
                                                ---------         -----    ---------         -----
       Total real estate mortgage loans            79,821          93.8       74,689          94.1
                                                ---------         -----    ---------         -----
Other Loans:
Consumer loans:
  Home equity                                       2,389           2.8        1,872           2.3
  Personal                                          1,734           2.0        1,704           2.2
  Other                                             1,092           1.3        1,025           1.3
                                                ---------         -----    ---------         -----
       Total consumer loans                         5,215           6.1        4,601           5.8
Commercial business loans                              56           0.1           92           0.1
                                                ---------         -----    ---------         -----
       Total other loans                            5,271           6.2        4,693           5.9
                                                ---------         -----    ---------         -----
       Total loans                                 85,092         100.0%      79,382         100.0%
                                                                  =====                      =====
Less:
  Construction loans in process                      (293)                      (943)
  Allowance for loan losses                          (719)                      (311)
  Deferred loan origination costs (fees), net        (401)                      (304)
                                                ---------                  ---------
       Total loans, net                         $  83,679                  $  77,824
                                                =========                  =========
</TABLE>
----------
(1)   Includes advances under home equity lines of credit of $4.6 million, $5.9
      million, $7.3 million, $9.1 million and $10.1 million, respectively, at
      September 30, 1998, 1997, 1996, 1995 and 1994.
(2)   Includes cooperative apartment loans of $4.5 million, $4.8 million, $5.5
      million, $5.8 million and $5.9 million, respectively, at September 30,
      1998, 1997, 1996, 1995 and 1994.
(3)   Includes loans held for sale of $13.3 million and $20.4 million at
      September 30, 1998 and 1997, respectively.


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                At September 30,
                                                --------------------------------------------------------------------------------
                                                         1998                        1997                        1996           
                                                -----------------------     -----------------------     ----------------------- 
                                                              Percent                     Percent                     Percent   
                                                  Amount      of Total        Amount      of Total        Amount      of Total  
                                                ---------    ----------     ---------    ----------     ---------    ---------- 
                                                                            (Dollars in thousands)
<S>                                             <C>               <C>      <C>                <C>       <C>               <C>   
Fixed-Rate Loans:
Real estate mortgage loans:
  One- to four-family (1)(2)                    $ 46,838           23.5%   $ 36,074            25.5%    $ 11,805           13.4%
  Multi-family                                     1,529            0.8         108             0.1           47            0.1 
  Commercial                                       1,742            0.9          95             0.1          131            0.1 
  Land                                               270            0.1         390             0.3           49            0.1 
                                                --------          -----    --------           -----     --------          ----- 
       Total real estate mortgage loans           50,379           25.3      36,667            26.0       12,032           13.7 
Consumer loans                                     6,349            3.2       6,120             4.3        5,853            6.6 
                                                --------          -----    --------           -----     --------          ----- 
       Total fixed-rate loans                     56,728           28.5      42,787            30.3       17,885           20.3 
                                                --------          -----    --------           -----     --------          ----- 
Adjustable-Rate Loans:                                                                                                    
Real estate mortgage loans:                                                                                               
  One- to four-family (3)(4)(5)                  120,387           60.6      75,747            53.5       50,478           57.2 
  Multi-family                                     6,317            3.2       5,550             3.9        5,424            6.1 
  Commercial                                      11,024            5.5      11,895             8.4        8,986           10.2 
  Construction                                     2,613            1.3       2,786             2.0        2,175            2.5 
  Land                                               662            0.3       1,424             1.0        1,885            2.1 
                                                --------          -----    --------           -----     --------          ----- 
       Total real estate mortgage loans          141,003           70.9      97,402            68.8       68,948           78.1 
Commercial business loans                          1,195            0.6       1,299             0.9        1,413            1.6 
                                                --------          -----    --------           -----     --------          ----- 
       Total adjustable-rate loans               142,198           71.5      98,701            69.7       70,361           79.7 
                                                --------          -----    --------           -----     --------          ----- 
Total loans                                      198,926          100.0%    141,488           100.0%      88,246          100.0%
                                                                  =====                       =====                       ===== 
Less:
  Construction loans in process                     (743)                    (1,091)                        (171)               
  Allowance for loan losses                       (1,302)                    (1,093)                        (937)               
  Deferred loan origination costs (fees), net        478                       (184)                        (472)               
                                                --------                   --------                     --------                
       Total loans, net                         $197,359                   $139,120                     $ 86,666                
                                                ========                   ========                     ========                

<CAPTION>
                                                                 At September 30,
                                                --------------------------------------------------
                                                         1995                       1994
                                                -----------------------    -----------------------
                                                              Percent                    Percent
                                                  Amount      of Total       Amount      of Total
                                                ---------    ----------    ---------    ----------
                                                              (Dollars in thousands)
<S>                                             <C>               <C>      <C>               <C>  
Fixed-Rate Loans:                               
Real estate mortgage loans:                     $ 11,805           13.9%   $  8,352           10.5% 
  One- to four-family (1)(2)                         715            0.8         539            0.7  
  Multi-family                                       396            0.5         194            0.2  
  Commercial                                          49            0.1          49            0.1  
  Land                                          --------          -----    --------          -----  
                                                  12,965           15.3       9,134           11.5  
       Total real estate mortgage loans            5,215            6.1       4,601            5.8  
Consumer loans                                  --------          -----    --------          -----  
                                                  18,180           21.4      13,735           17.3  
       Total fixed-rate loans                   --------          -----    --------          -----  
                                                                                                    
Adjustable-Rate Loans:                                                                              
Real estate mortgage loans:                       51,477           60.4      55,726           70.1  
  One- to four-family (3)(4)(5)                    4,932            5.8       3,944            5.0  
  Multi-family                                     6,179            7.3       2,982            3.8  
  Commercial                                       2,205            2.6       2,138            2.7  
  Construction                                     2,063            2.4         765            1.0  
  Land                                          --------          -----    --------          -----  
                                                  66,856           78.5      65,555           82.6  
       Total real estate mortgage loans               56            0.1          92            0.1  
Commercial business loans                       --------          -----    --------          -----  
                                                  66,912           78.6      65,647           82.7  
       Total adjustable-rate loans              --------          -----    --------          -----  
                                                  85,092          100.0%     79,382          100.0% 
Total loans                                                       =====                      =====  
                                                                                                    
Less:                                               (293)                      (943)                
  Construction loans in process                     (719)                      (311)                
  Allowance for loan losses                         (401)                      (304)                
  Deferred loan origination costs (fees), net   --------                   --------                 
                                                $ 83,679                   $ 77,824                 
       Total loans, net                         ========                   ========                 
</TABLE>

----------
(1)   Includes loans held for sale of $13.3 million and $20.4 million at
      September 30, 1998 and 1997, respectively.
(2)   Fixed-rate totals include loans with an initial fixed-rate period of 15
      years, with annual rate adjustments thereafter, totaling $14.0 million and
      $23.6 million, respectively, at September 30, 1998 and 1997.
(3)   Adjustable-rate totals include loans with initial fixed-rate periods of
      five, seven or ten years, with annual rate adjustments thereafter,
      totaling $83.8 million, $35.7 million and $3.6 million, respectively, at
      September 30, 1998, 1997 and 1996.
(4)   Includes advances under home equity lines of credit of $4.6 million, $5.9
      million, $7.3 million, $9.1 million and $10.1 million, respectively, at
      September 30, 1998, 1997, 1996, 1995 and 1994.
(5)   Includes cooperative apartment loans of $4.5 million, $4.8 million, $5.5
      million, $5.8 million and $5.9 million, respectively, at September 30,
      1998, 1997, 1996, 1995 and 1994.


                                       6
<PAGE>

      The following table sets forth the contractual maturity of the Company's
loan portfolio at September 30, 1998. The table reflects the entire unpaid
principal balance of a loan in the maturity period that includes the final
payment date and, accordingly, does not give effect to periodic principal
repayments or possible prepayments. Principal repayments and prepayments totaled
$24.2 million, $13.6 million and $11.8 million for the years ended September 30,
1998, 1997 and 1996, respectively.

<TABLE>
<CAPTION>
                                                                      At September 30, 1998
                                      --------------------------------------------------------------------------------------
                                                                                       Commercial                           
                                      One- to Four-Family(1)     Multi-Family          Real Estate           Construction   
                                      ----------------------  ------------------    ------------------    ------------------
                                                  Weighted              Weighted              Weighted              Weighted
                                                  Average               Average               Average               Average 
                                        Amount      Rate      Amount      Rate      Amount      Rate      Amount      Rate  
                                       --------   --------   --------   --------   --------   --------   --------   --------
                                                                      (Dollars in thousands)
<S>                                    <C>          <C>      <C>          <C>      <C>          <C>      <C>         <C>    
Contractual maturity:
   One year or less (2)                $    978     9.89%    $     --       --%    $     --       --%    $  2,613    10.01% 
                                       --------              --------              --------              --------           

   After one year:
     More than 1 year to 2 years          1,069     9.45            3     8.25           --       --           --       --  
     More than 2 years to 3 years           767     9.82          253     9.08           20     9.50           --       --  
     More than 3 years to 5 years         2,028     9.55           --       --          315     9.28           --       --  
     More than 5 years to 10 years        5,666     8.07          799     8.39        2,070     8.62           --       --  
     More than 10 years to 20 years      36,645     7.34        6,498     8.83        7,870     8.75           --       --  
     More than 20 years                 120,072     7.18          293     8.53        2,491     8.56           --       --  
                                       --------              --------              --------              --------           

         Total after one year           166,247     7.30        7,846     8.78       12,766     8.71           --       --  
                                       --------              --------              --------              --------           

   Total amount due                    $167,225     7.32%    $  7,846     8.78%    $ 12,766     8.71%    $  2,613    10.01% 
                                       ========              ========              ========              ========           

<CAPTION>
                                                            At September 30, 1998
                                      ---------------------------------------------------------------
                                                               Consumer and
                                             Land           Commercial Business           Total
                                       ------------------   -------------------    ------------------
                                                 Weighted              Weighted              Weighted
                                                 Average               Average               Average
                                       Amount      Rate      Amount      Rate      Amount      Rate
                                      --------   --------   --------   --------   --------   --------
                                                            (Dollars in thousands)
<S>                                   <C>         <C>       <C>         <C>       <C>         <C>
Contractual maturity:
   One year or less (2)               $    324    10.50%    $    211    14.64%    $  4,126    10.25%
                                      --------              --------              --------

   After one year:
     More than 1 year to 2 years           320    10.50          409    11.23        1,801    10.04
     More than 2 years to 3 years           --       --          677    10.90        1,717    10.13
     More than 3 years to 5 years           --       --        1,604    10.64        3,947     9.97
     More than 5 years to 10 years          --       --        4,410     9.35       12,945     8.62
     More than 10 years to 20 years        288     9.70          233     9.32       51,534     7.76
     More than 20 years                     --       --           --       --      122,856     7.21
                                      --------              --------              --------

         Total after one year              608    10.12        7,333     9.88      194,800     7.56
                                      --------              --------              --------

   Total amount due                   $    932    10.25%    $  7,544    10.01%    $198,926     7.62%
                                      ========              ========              ========
</TABLE>

----------
(1)   Includes $4.6 million of advances under home equity lines of credit which
      require minimum interest-only payments for the first five to ten years the
      advance is outstanding, followed by a balloon payment thereafter. Also
      includes $13.3 million in loans held for sale on the basis of their final
      contractual maturity (all more than 20 years).
(2)   Includes demand loans, loans having no stated maturity, and overdraft
      loans.


                                       7
<PAGE>

      The following table sets forth the dollar amounts in each loan category at
September 30, 1998 that are contractually due after September 30, 1999, and
whether such loans have fixed interest rates or adjustable interest rates.

                                                   Due After September 30, 1999
                                                 -------------------------------
                                                  Fixed    Adjustable     Total
                                                 -------   ----------   --------
                                                          (In thousands)
      Real estate mortgage loans:
         One- to four-family                     $46,825    $119,422    $166,247
         Multi-family                              1,529       6,317       7,846
         Commercial                                1,742      11,024      12,766
         Land                                        238         370         608
                                                 -------    --------    --------
            Total real estate mortgage loans      50,334     137,133     187,467
      Consumer and commercial business loans       6,139       1,194       7,333
                                                 -------    --------    --------
            Total loans                          $56,473    $138,327    $194,800
                                                 =======    ========    ========

      Pursuant to Federal law, the aggregate amount of loans that the Company is
permitted to make to any one borrower or a group of related borrowers is
generally limited to 15% of the Association's unimpaired capital and surplus
(25% if the security for such loan has a "readily ascertainable" value or 30%
for certain residential development loans). At September 30, 1998, based on the
15% limitation, the Company's loans-to-one borrower limit was approximately $5.7
million. On the same date, the Company had no borrowers with outstanding
balances in excess of this amount. As of September 30, 1998, the largest dollar
amount outstanding to one borrower, or group of related borrowers, was a $1.5
million loan secured by an office building located in Yonkers, New York. At
September 30, 1998, the Company's next largest loan relationship totaled $1.3
million to a development company for the purpose of land development and the
construction of four single-family residences located in Ossining, New York. The
advanced portion of this loan totaled $1.1 million at September 30, 1998,
consisting of $320,000 for land lots and $828,000 for construction of four
residences for which there are contracts for sale. These loans were performing
in accordance with their terms at September 30, 1998.

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

      Under the Company's loan policy, the individual processing an application
is responsible for ensuring that all documentation is obtained prior to the
submission of the application to a loan officer for approval. In addition, the
loan officer verifies that the application meets the Company's underwriting
guidelines described below. Also, each application file is reviewed to assure
its accuracy and completeness. In 1997, the Company instituted an enhanced
process for quality control reviews of residential loan originations. The


                                       8
<PAGE>

quality control process includes reviews of underwriting decisions, appraisals
and documentation. The Company is using the services of an independent company
to perform the quality control reviews.

      The Company's lending officers have approval authority for one- to
four-family residential loans, other than cooperative apartment ("co-op") loans,
up to $250,000. One- to four-family residential loans over $250,000 to $500,000
require the approval of the Company's President or its Vice President and Chief
Lending Officer. Co-op loans up to $500,000 require the approval and/or review
of the Chief Lending Officer. The Company's Chief Lending Officer has approval
authority for multi-family and commercial real estate loans up to $500,000 and
for land loans up to $250,000. Loans in excess of these amounts require the
approval of the Company's Loan Committee or Board of Directors. Various officers
have approval authority ranging from $2,000 on secured consumer loans, up to
$50,000 on fixed-rate home equity loans and up to $30,000 on commercial business
loans. Approval authorities on unsecured consumer loans range from $2,000 to
$10,000.

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

      One- to Four-Family Residential Real Estate Lending. The cornerstone of
the Company's lending program is the origination of loans secured by mortgages
on owner-occupied one- to four-family residences. At September 30, 1998, $167.2
million, or 84.1%, of the Company's loan portfolio consisted of mortgage loans
on one- to four-family residences (including $13.3 million of loans held for
sale, $4.6 million of advances under home equity lines of credit and $4.5
million of co-op loans). Substantially all of the residential loans originated
by the Company are secured by properties located in the Company's primary
lending area. A majority of the mortgage loans originated by the Company are
retained and serviced by it, although a larger percentage of its originations
were sold in the secondary market (with servicing retained) in fiscal 1998. At
September 30, 1998, approximately $5.1 million of the Company's one- to
four-family residential real estate loans were secured by non-owner occupied
properties. At that date, the average outstanding residential loan balance was
approximately $163,000, compared to $114,000 at September 30, 1997. The increase
in the average outstanding residential loan balance reflects recent originations
of larger loans, consistent with changes in the Company's lending operations
(including the introduction of new residential loan products).

      Since the mid-1980s, the Company has offered ARM loans at rates and on
terms determined in accordance with market and competitive factors. The Company
offers one-year ARMs for terms of up to 30 years at a margin (generally 275
basis points) over the yield on the Average Weekly One Year U.S. Treasury
Constant Maturity Index. The one-year ARM loans currently offered by the Company
generally provide for a 200 basis point annual interest rate change cap and a
lifetime cap of 600 basis points over the initial rate. The Company also offers
a three-year ARM loan which adjusts based on a margin (generally 275 basis
points) over the yield on the three-year Treasury Note. The Company's three-year
ARM loans have a 200 basis point interest rate cap per adjustment period and a
lifetime cap of 500 basis points 


                                       9
<PAGE>

over the initial rate. The Company also offers loans which are fixed for the
first five-, seven- or ten-year period of the loan term and adjust annually
thereafter based on a specified margin over the yield on the Average Weekly One
Year U.S. Treasury Constant Maturity Index for the remaining loan term. These
loans are classified as ARM loans for reporting purposes and currently provide
for an annual interest rate cap not to exceed 300 basis points for the initial
adjustment period (and 200 basis points thereafter) and a lifetime cap of 500
basis points.

      Initial interest rates offered on the Company's ARMs may be 100 to 350
basis points below the fully indexed rate. Although borrowers on such loans are
generally qualified at the fully indexed rate, the risk of default on these
loans may increase as interest rates increase. See "- Delinquencies and
Non-Performing Assets." The Company's ARMs do not permit negative amortization
of principal, do not contain prepayment penalties and are not convertible into
fixed-rate loans. At September 30, 1998, one- to four-family ARMs (including
loans of $83.8 million earning a fixed rate of interest for initial periods of
five, seven or 10 years) totaled $142.2 million, or 71.5% of the Company's total
loan portfolio.

      During fiscal 1997, the Company began to offer a 30-year residential
mortgage loan product with a fixed rate for the first fifteen years and annual
rate adjustments thereafter based on a specified margin over the Average Weekly
One Year U.S. Treasury Constant Maturity Index. In addition, the loan has a
conversion option which allows the borrower to convert, during years sixteen
through eighteen, to a fixed rate for the remaining term. The Company also
offers conventional fixed-rate loans with maximum terms of up to 30 years,
although the Company has recently emphasized originations of fixed-rate loans
with terms of 10 to 15 years. The interest rate on such loans is generally based
on competitive factors. The fixed-rate one- to four-family loans described in
this paragraph are typically underwritten in accordance with Freddie Mac and
Fannie Mae standards to permit their sale in the secondary market. The Company
engages in secondary market sales of a portion of its residential mortgage
originations, as market conditions warrant. Loans held for sale at September 30,
1998 amounted $13.3 million and represented a variety of fixed-rate one- to
four-family loans.

      The Company originates home equity lines of credit secured by a lien on
the borrower's residence. The Company's home equity lines are generally limited
to $250,000. The Company uses the same underwriting standards for home equity
lines as it uses for one- to four-family residential mortgage loans. The
interest rates for home equity lines of credit float at a stated margin over the
lowest prime rate published in The Wall Street Journal and may not exceed 15.75%
over the life of the loan. The Company currently offers home equity lines for
terms of up to 30 years with interest only paid for the first 10 years of the
loan term. At September 30, 1998, the Company had $4.6 million of outstanding
advances under home equity lines and an additional $3.7 million of funds
committed, but undrawn, under home equity lines of credit.

      The Company also originates loans secured by co-ops and condominiums
located in its market area. Condominium and co-op loans are made on
substantially the same terms as one- to four-family loans, except that co-op
loans are made only at adjustable rates of interest. At September 30, 1998, the
Company had $13.2 million of condominium loans and $4.5 million of co-op loans.


                                       10
<PAGE>

      In underwriting one- to four-family residential real estate loans, the
Company evaluates the borrower's ability to make principal, interest and escrow
payments, as well as the value of the property that will secure the loan and
debt-to-income ratios. The Company currently originates residential mortgage
loans with loan-to-value ratios of up to 80% for owner-occupied homes (95% with
private mortgage insurance to reduce the Company's exposure to 80% or less); up
to 65% for non-owner occupied homes; and up to 75% for co-op loans. The
Company's home equity lines of credit are originated in amounts which, together
with the amount of the first mortgage, generally do not exceed 75% of the
appraised value of the property securing the loan.

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

      Multi-family and Commercial Real Estate Lending. The Company has increased
its emphasis on the origination of permanent multi-family and commercial real
estate loans in recent years, in order to increase the interest rate sensitivity
and yield of its loan portfolio and to complement residential lending
opportunities. The Company's multi-family and commercial real estate loan
portfolio includes loans secured by apartment buildings, office buildings, strip
shopping centers and other income producing properties located in its market
area. At September 30, 1998, the Company had $12.8 million in commercial real
estate loans, representing 6.4% of the total loan portfolio, and $7.8 million in
multi-family loans, or 3.9% of the total loan portfolio.

      The Company's permanent multi-family and commercial real estate loans
generally carry a maximum term of 20 years and have adjustable rates generally
based on a specific index, plus a margin. These loans are generally made in
amounts of up to 75% of the lesser of the appraised value or the purchase price
of the property, with a projected debt service coverage ratio of at least 125%.
Appraisals on properties securing multi-family and commercial real estate loans
are performed by an independent appraiser designated by the Company at the time
the loan is made. All appraisals on multi-family or commercial real estate loans
are reviewed by the Company's management. In addition, the Company's
underwriting procedures require verification of the borrower's credit history,
income and financial statements, banking relationships, references and income
projections for the property. Where feasible, the Company seeks to obtain
personal guarantees on these loans. For loans in excess of $250,000, Phase I
environmental studies are performed.


                                       11
<PAGE>

      The table below sets forth, by type of security property, the number and
amount of the Company's multi-family and commercial real estate loans at
September 30, 1998. Substantially all of the loans referred to in the table
below are secured by properties located in the Company's market area.

<TABLE>
<CAPTION>
                                                                       Outstanding     Amount Non-
                                                             Number     Principal     Performing or
                                                            of Loans     Balance      of Concern(1)
                                                            --------   -----------    -------------
                                                                     (Dollars in thousands)
<S>                                                               <C>     <C>                 <C>  
Commercial real estate:
    Small business facilities                                     37      $  8,867            $ 203
    Office buildings                                               6         3,073              223
    Health care facilities                                         4           734               --
    Industrial real estate                                         1            92               --
Multi-family                                                      38         7,846               --
                                                                ----      --------            -----
    Total multi-family and commercial real estate loans           86      $ 20,612            $ 426
                                                                ====      ========            =====
</TABLE>

----------
(1)   See "- Delinquencies and Non-Performing Assets".

      At September 30, 1998, the Company's largest commercial real estate loan
had an outstanding balance of $1.5 million. This loan was originated in
September 1995 and refinanced in July 1997, and is secured by an office building
located in Yonkers. At September 30, 1998, the largest multi-family loan had a
balance of $506,000 and is secured by a 21-unit apartment building located in
Yonkers, New York.

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

      Construction and Land Lending. The Company originates a modest amount of
construction loans to individuals and builders for the construction of
residential real estate. At September 30, 1998, the Company's construction loan
portfolio totaled $2.6 million, or 1.3% of the total loan portfolio. The Company
also currently originates a limited number of land loans primarily for the
purpose of developing residential subdivisions. At September 30, 1998, the
Company's land loan portfolio totaled $932,000, or 0.5% of the total loan
portfolio. At September 30, 1998, all of the Company's land loans were made for
the purpose of developing residential lots except for one loan totaling $238,000
which was secured by commercial real estate.


                                       12
<PAGE>

      Construction loans to individuals for the construction of their residences
are structured to convert to permanent loans at the end of the construction
phase, which typically runs up to one year. These construction loans have rates
and terms comparable to one- to four-family loans then offered by the Company,
except that during the construction phase, the borrower pays interest only at a
specified margin over the prime rate. The maximum loan-to-value ratio of
owner-occupied single-family construction loans is 75%. Residential construction
loans are generally underwritten pursuant to the same guidelines used for
originating permanent residential loans. At September 30, 1998, there were
$230,000 of construction loans outstanding to persons intending to occupy the
premises upon the completion of the construction.

      The Company also originates construction loans to builders of one- to
four-family residences. Such loans generally carry terms of up to two years and
require the payment of interest only for the loan term. The maximum
loan-to-value ratio on loans to builders for the construction of residential
real estate is 75%. When practical, the Company seeks to obtain personal
guarantees on such loans. The Company generally limits loans to builders for the
construction of homes on speculation for sale to two homes per builder. At
September 30, 1998, the Company had $2.4 million of construction loans
outstanding to builders of one- to four-family residences.

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

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


                                       13
<PAGE>

      The table below sets forth, by type of security property, the number and
amount of the Company's construction and land loans at September 30, 1998, all
of which are secured by properties located in the Company's market area.

<TABLE>
<CAPTION>
                                                                 Outstanding   Amount Non-
                                        Number        Loan        Principal   Performing or
                                       of Loans    Commitment      Balance    of Concern(1)
                                       --------    ----------    -----------  -------------
                                                       (Dollars in thousands)
<S>                                          <C>      <C>            <C>              <C>  
Single-family construction                   10       $ 2,613        $ 1,870          $  --
Residential land                              5           694            694             --
Other land                                    1           238            238            238
                                          =====       =======        =======          =====
    Total construction and land loans        16       $ 3,545        $ 2,802          $ 238
                                          =====       =======        =======          =====
</TABLE>

----------
(1)   See "- Delinquencies and Non-Performing Assets".

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

      Construction and land lending generally affords the Company an opportunity
to receive interest at rates higher than those obtainable from permanent
residential loans and to receive higher origination and other loan fees. In
addition, construction and land loans are generally made with adjustable rates
of interest or for relatively short terms. Nevertheless, construction and land
lending is generally considered to involve a higher level of credit risk than
one- to four-family residential lending due to the concentration of principal in
a limited number of loans and borrowers, as well as the effects of general
economic conditions on development properties and on real estate developers and
managers. In addition, the nature of these loans is such that they are more
difficult to evaluate and monitor. Finally, the risk of loss on construction and
land loans is dependent largely upon the accuracy of the initial estimate of the
individual property's value upon completion and the estimated cost (including
interest) of construction. If the cost estimate proves to be inaccurate, the
Company may be required to advance funds beyond the amount originally committed
to permit completion of the property.

      Consumer Lending. In order to increase the interest rate sensitivity of
the loan portfolio and provide a broader range of loan products to its retail
customers, the Company originates a variety of consumer loans, including
automobile, home equity, deposit account and other loans for household and
personal purposes. At September 30, 1998, consumer loans totaled $6.3 million,
or 3.2% of total loans outstanding. The Company intends to emphasize its
consumer lending in the future and to consider hiring an additional consumer
lending officer in order to increase volume.


                                       14
<PAGE>

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

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

      Consumer loans may entail greater credit risk than residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by rapidly depreciable assets, such as automobiles. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At September 30, 1998, there were $35,000 of consumer loans
delinquent 90 days or more. There can be no assurance that delinquencies will
not increase in the future.

      Commercial Business Lending. Federally chartered savings institutions,
such as the Association, are authorized to make secured or unsecured loans and
letters of credit for commercial, corporate, business and agricultural purposes
and to engage in commercial leasing activities, up to a maximum of 20% of total
assets, provided that amounts in excess of 10% relate to small business loans
(as defined). The Company may from time to time make a limited number of secured
and unsecured commercial loans to local businesses. At September 30, 1998, the
Company had $1.2 million of commercial business loans outstanding, representing
0.6% of the total loan portfolio.

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

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


                                       15
<PAGE>

Originations, Purchases and Sales of Loans

      Loan applications are taken at each of the Company's offices. Applications
are processed and approved at the Company's Loan Center which is located in one
of the branch offices, except for consumer loans which are processed and
approved at the main office. The Company currently offers incentives to
employees for loan referrals. The Company also employs commissioned loan
originators and utilizes mortgage brokers to assist in the process of obtaining
loans. Total loan originations increased substantially to $151.7 million in
fiscal 1998, compared to $70.1 million in fiscal 1997 and $17.7 million in
fiscal 1996, primarily reflecting higher one- to four-family loan originations.

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

      Historically, most of the fixed-rate one- to four-family residential loans
originated by the Company were retained in its portfolio. However, in order to
reduce its vulnerability to changes in interest rates, the Company currently
sells in the secondary market a portion of its fixed-rate residential mortgage
originations. In addition, certain current year originations of adjustable-rate
loans are sold in the secondary market. Residential mortgage sales increased
substantially to $69.8 million in fiscal 1998, compared to $2.8 million in
fiscal 1997 and $1.9 million in fiscal 1996. When loans are sold, the Company
typically retains the responsibility for collecting and remitting loan payments,
making certain that real estate tax payments are made on behalf of borrowers,
and otherwise servicing the loans. At September 30, 1998, the Company serviced
$81.7 million of mortgage loans for others.


                                       16
<PAGE>

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

<TABLE>
<CAPTION>
                                                   For the Year Ended September 30,
                                                   --------------------------------
                                                     1998        1997        1996
                                                    -----      ------        ----
                                                            (In thousands)
<S>                                                <C>         <C>         <C>     
Unpaid principal balances at beginning of year     $ 141,488   $  88,246   $ 85,092
                                                   ---------   ---------   --------
Loans originated:
  Real estate mortgage loans:
    One- to four-family(1)                           139,351      60,497      9,053
    Multi-family                                       3,372         839        174
    Commercial                                         2,235       2,815      2,740
    Construction                                       3,734       2,913      1,285
    Land                                                  50         150         --
  Consumer and commercial business loans               2,981       2,919      4,415
                                                   ---------   ---------   --------
    Total loans originated                           151,723      70,133     17,667
                                                   ---------   ---------   --------

Loans sold:
  One-to four-family real estate mortgage loans      (69,810)     (2,822)    (1,886)
                                                   ---------   ---------   --------

Principal repayments:
  Real estate mortgage loans                         (21,325)    (10,846)    (9,389)
  Consumer and commercial business loans              (2,856)     (2,766)    (2,391)
                                                   ---------   ---------   --------
    Total principal repayments                       (24,181)    (13,612)   (11,780)
                                                   ---------   ---------   --------

Net charge-offs                                         (166)       (144)      (244)
Transfers to real estate owned                          (128)       (313)      (603)
                                                   ---------   ---------   --------
Unpaid principal balances at end of year             198,926     141,488     88,246
Less:
  Construction loans in process                         (743)     (1,091)      (171)
  Allowance for loan losses                           (1,302)     (1,093)      (937)
  Deferred loan origination costs (fees), net            478        (184)      (472)
                                                   ---------   ---------   --------
Net loans at end of year                           $ 197,359   $ 139,120   $ 86,666
                                                   =========   =========   ========
</TABLE>

----------
(1)   Consists of (i) adjustable-rate loans of $89.0 million, $32.3 million and
      $5.6 million, and (ii) fixed-rate loans of $50.3 million, $28.2 million
      and $3.5 million for the years ended September 30, 1998, 1997 and 1996,
      respectively.


                                       17
<PAGE>

Delinquencies and Non-Performing Assets

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

      Real estate acquired by the Company as a result of foreclosure or by deed
in lieu of foreclosure is classified as real estate owned until it is sold. When
property is acquired or expected to be acquired by foreclosure or deed in lieu
of foreclosure, it is recorded at estimated fair value less the estimated cost
of disposition, with the resulting write-down charged to the allowance for loan
losses. After acquisition, all costs incurred in maintaining the property are
expensed. Costs relating to the development and improvement of the property,
however, are capitalized.

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

<TABLE>
<CAPTION>
                                                    September 30, 1998                             September 30, 1997
                                       --------------------------------------------  -----------------------------------------------
                                            60-89 Days            90 Days or More          60-89 Days             90 Days or More
                                       --------------------    --------------------  ---------------------     ---------------------
                                        Number    Principal     Number    Principal   Number     Principal      Number     Principal
                                       of Loans    Balance     of Loans    Balance   of Loans     Balance      of Loans     Balance
                                       --------    -------     --------    -------   --------     -------      --------     -------
                                                                            (Dollars in thousands)
<S>                                       <C>       <C>           <C>       <C>         <C>        <C>            <C>       <C>    
Real estate mortgage loans:
   One- to four-family                     4        $ 257          5        $ 515        1         $  88           3        $   389
   Multi-family                           --           --         --           --        1           101          --             --
   Construction                           --           --         --           --        1            88           2            279
   Land                                   --           --         --           --       --            --           3            250
   Commercial                             --           --          1          203       --            --           1            211
Consumer loans                             3           43          5           35        1             7           2              9
                                       --------    -------     --------    -------   --------     -------      --------     -------
    Total                                  7        $ 300         11        $ 753        4         $ 284          11        $ 1,138
                                       ========    =======     ========    =======   ========     =======      ========     =======
                                                                                                           
    Delinquent loans to total loans(1)               0.15%                   0.38%                  0.20%                      0.80%
                                                   =======                 =======                =======                   =======
</TABLE>

----------
(1)   If loans held for sale are excluded from total loans, the percentages are
      0.16% for the 60-89 days category and 0.41% for the 90 days or more
      category at September 30, 1998 (0.23% and 0.94%, respectively, at
      September 30, 1997).


                                       18
<PAGE>

      Classification of Assets. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful, and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the institution will sustain
some loss if the deficiencies are not corrected. Doubtful assets have the
weaknesses of substandard assets, with the additional characteristics that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified loss is considered uncollectible and of
such little value that continuance as an asset on the balance sheet of the
institution is not warranted. Assets classified as substandard or doubtful
require the institution to establish prudent general allowances for loan losses.
If an asset or portion thereof is classified as loss, the institution must
either establish specific allowances for loan losses in the amount of 100% of
the portion of the asset classified loss, or charge off such amount. If an
institution does not agree with an examiner's classification of an asset, it may
appeal this determination to the Regional Director of the OTS. On the basis of
management's review, at September 30, 1998 the Company had classified $924,000
of loans and $305,000 of real estate owned as substandard, and $1,000 of loans
as doubtful.

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


                                       19
<PAGE>

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

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

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

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

----------
(1)   Includes a participation loan of $309,000 classified as a troubled debt
      restructuring at September 30, 1995 and 1994. Collections and charge-offs
      in fiscal 1996 eliminated the recorded investment in this loan.
(2)   Total loans receivable for this purpose exclude loans held for sale.

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


                                       20
<PAGE>

      At September 30, 1998, the Company's non-performing loans consisted of
five loans secured by one- to four-family real estate located in the Company's
market area which totaled $515,000; one loan for $203,000 secured by a store and
five apartments located in Yonkers, New York; and five consumer loans which
totaled $35,000. At September 30, 1998, real estate owned consisted of two
single-family residences with a net carrying value of $305,000.

      Other Loans of Concern. In addition to the non-performing loans and real
estate owned discussed in the preceding section, as of September 30, 1998 there
were other loans of concern totaling approximately $551,000. These are loans
with respect to which known information about the possible credit problems of
the borrowers or the cash flows of the security properties have caused
management to have concerns as to the ability of the borrowers to comply with
present loan repayment terms and which may result in the future inclusion of
such items in the non-performing asset categories. Management has considered the
Company's non-performing loans and other loans of concern in establishing the
allowance for loan losses.

      As of September 30, 1998, the Company's loans of concern included the
following loans with principal balances in excess of $200,000:

            The Company has a $238,000 land loan, secured by a lot located in
      Patterson, New York. The borrower intended to build a commercial building
      on the security property. At September 30, 1998, although this loan was
      performing, it was classified substandard due to hazardous building
      materials on an adjacent lot which may result in a decline in value of the
      security property. Although a phase I environmental study performed on the
      security property did not disclose any contamination to the security
      property from the adjoining lot, the contamination on the adjacent lot has
      prevented the borrower from using the security property for its intended
      purpose. As a result, the loan was extended and modified in January 1997
      as a 15-year, self-liquidating loan with a market rate of interest. The
      borrower is continuing to make payments on this loan as required by the
      terms of the loan agreement and is waiting for the resolution of the
      problem with the adjacent property.

            The Company has a $223,000 participation interest in a $3.5 million
      commercial mortgage loan secured by a two-story office building located in
      Queens, New York originated by the Thrift Association Service Corporation
      ("TASCO"). This loan originally had a 30-year amortization schedule with a
      balloon payment which was due in December 1996. Prior to this scheduled
      maturity, the borrower had been unsuccessful in securing financing in
      order to payoff the loan. As a result, a short-term extension was granted
      at the original terms of the loan until December 1997. In December 1997,
      the loan was extended at market terms for an additional five-year term
      with principal payments based on a 25-year amortization schedule. Although
      the loan was current as of September 30, 1998, the Company considers this
      loan to be of concern due to its past performance and extended term.


                                       21
<PAGE>

      Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses charged to operations based on management's
evaluation of the risk inherent in the loan portfolio. The allowance is
established as an amount that management believes will be adequate to absorb
probable losses on existing loans. 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.

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

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

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

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

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

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


                                       22
<PAGE>

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

<TABLE>
<CAPTION>
                                                                        At September 30,
                            --------------------------------------------------------------------------------------------------------
                                           1998                               1997                                1996    
                            ----------------------------------  ----------------------------------  --------------------------------
                                                    Percent of                          Percent of                        Percent of
                                                     Loans in                            Loans in                          Loans in 
                                          Loan         Each                  Loan          Each                  Loan        Each   
                                        Amounts      Category               Amounts      Category               Amounts    Category 
                            Allowance      by        to Total   Allowance      by        to Total   Allowance      by      to Total 
                             Amount    Category(1)     Loans      Amount   Category(1)     Loans     Amount     Category     Loans  
                            --------   -----------  ----------  ---------  -----------  ----------  ---------   --------  ----------
                                                                     (Dollars in thousands)
<S>                         <C>         <C>           <C>        <C>        <C>            <C>      <C>         <C>          <C>    
Real estate mortgage loans:                                                                                                         
   One- to four-family      $    917    $153,891       82.9%     $    608   $ 91,367        75.5%   $    538    $ 62,283      70.6% 
   Multi-family                   16       7,846        4.2            11      5,658         4.7          11       5,471       6.2  
   Commercial                    160      12,766        6.9           121     11,990         9.9          91       9,117      10.3  
   Construction                   23       2,613        1.4            98      2,786         2.3          74       2,175       2.5  
   Land(2)                       128         932        0.5           196      1,814         1.5         166       1,934       2.2  
Consumer and commercial                                                                                                             
   business loans                 58       7,544        4.1            59      7,419         6.1          57       7,266       8.2  
                            --------    --------      -----      --------   --------       -----    --------    --------     -----  
Total                       $  1,302    $185,592      100.0%     $  1,093   $121,034       100.0%   $    937    $ 88,246     100.0% 
                            ========    ========      =====      ========   ========       =====    ========    ========     =====  
                                                                                                                                    
<CAPTION>
                                                      At September 30,
                            --------------------------------------------------------------------
                                           1995                              1994
                            ---------------------------------  ---------------------------------
                                                   Percent of                         Percent of
                                                    Loans in                           Loans in
                                          Loan        Each                   Loan        Each
                                         Amounts    Category                Amounts    Category
                            Allowance       by      to Total   Allowance       by      to Total
                              Amount     Category     Loans      Amount     Category     Loans
                            ---------    --------  ----------  ---------    --------  ----------
                                                   (Dollars in thousands)      
<S>                          <C>         <C>          <C>       <C>         <C>         <C>   
Real estate mortgage loans:                        
   One- to four-family       $    302    $ 63,282      74.4%    $    188    $ 64,078     80.7%
   Multi-family                    64       5,647       6.6           64       4,483      5.6
   Commercial                      66       6,575       7.7           20       3,176      4.0
   Construction                    75       2,205       2.6           16       2,138      2.7
   Land(2)                        171       2,112       2.5            8         814      1.0
Consumer and commercial                            
   business loans                  41       5,271       6.2           15       4,693      5.9
                             --------    --------     -----     --------    --------    ----- 
Total                        $    719    $ 85,092     100.0%    $    311    $ 79,382    100.0%
                             ========    ========     =====     ========    ========    ===== 
</TABLE>

----------
(1)   Excludes real estate mortgage loans held for sale of $13.3 million and
      $20.4 million, respectively, at September 30, 1998 and 1997.
(2)   The allowance at September 30, 1998, 1997, 1996 and 1995 principally
      represents an allocation to land loans "of concern." See "- Other Loans of
      Concern."


                                       23
<PAGE>

Investment Activities

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

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

      Generally, the investment policy of the Company is to invest funds among
categories of investments and maturities based upon the Company's
asset/liability management policies, investment quality, loan and deposit
volume, liquidity needs and performance objectives. SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, requires that securities be
classified into three categories: trading, held to maturity, and available for
sale. Securities that are bought and held principally for the purpose of selling
them in the near term are classified as trading securities and are reported at
fair value with unrealized gains and losses included in earnings. Debt
securities for which the Company has the positive intent and ability to hold to
maturity are classified as held to maturity and reported at amortized cost. All
other securities not classified as trading or held to maturity are classified as
available for sale. Available-for-sale securities are reported at fair value
with unrealized gains and losses included, on an after-tax basis, in a separate
component of stockholders' equity. At September 30, 1998, the Company had no
securities classified as trading. At September 30, 1998, $125.2 million or 74.3%
of the Company's mortgage-backed and other securities was classified as
available for sale. The remaining $43.3 million, or 25.7%, was classified as
held to maturity.

      Mortgage-Backed Securities. The Company invests in mortgage-backed
securities in order to supplement loan production and achieve its
asset/liability management goals. The Company has also invested in
mortgage-backed securities, including collateralized mortgage obligations
("CMOs"), in order to take advantage of the spread between the yield on such
securities and the cost of borrowings from the FHLB and other "wholesale"
sources. In a number of instances, the expected maturity of the securities
purchased has been significantly longer than the term of the related borrowings.

      Substantially all of the mortgage-backed securities owned by the Company
are issued, insured or guaranteed either directly or indirectly by a federal
agency or are rated "AA" or higher. As of September 30, 1998, the Company did
not have any mortgage-backed securities of a single issuer in excess of 10% of
the Company's stockholders' equity, except for federal agency obligations. At
September 30, 1998, the Company classified mortgage-backed securities of $33.8
million as held to maturity and $79.7 million as available for sale. Consistent
with its asset/liability management strategy, $33.2 million, or 29.6%, of the
Company's mortgage-backed securities at September 30, 1998 had adjustable
interest rates.


                                       24
<PAGE>

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

      Management believes that CMOs at times represent attractive investment
alternatives relative to other investments due to the wide variety of maturity
and repayment options available through such investments. In particular, the
Company has from time to time concluded that short and intermediate duration
CMOs (seven-year or less estimated average life) represent a better combination
of rate and duration than adjustable-rate mortgage-backed securities. At
September 30, 1998, the Company held $9.1 million of CMOs, all of which were
classified as held-to-maturity.

      Prior to the purchase of a CMO, the Company conducts an analysis of the
security to assess its price volatility. The analysis is designed to show the
expected change in the value of the security that would result from immediate
parallel shifts in the yield curve of plus or minus 100, 200, and 300 basis
points. The Company establishes risk tolerance levels for its CMO activities on
a periodic basis based on its overall asset/liability management goals and
market conditions.

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

      For additional information regarding the Company's mortgage-backed
securities portfolio, see Note 2 of the Notes to Consolidated Financial
Statements.


                                       25
<PAGE>

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

<TABLE>
<CAPTION>
                                                       At September 30,
                                  ----------------------------------------------------------
                                         1998                1997                1996
                                  ------------------  ------------------  ------------------
                                  Amortized   Fair    Amortized   Fair    Amortized   Fair
                                    Cost      Value     Cost      Value     Cost      Value
                                  --------- --------  --------- --------  --------- --------
                                                        (In thousands)
<S>                               <C>       <C>       <C>       <C>       <C>       <C>     
Held to Maturity
     Pass-through securities      $ 24,704  $ 25,230  $ 35,283  $ 35,905  $ 41,493  $ 41,520
     CMOs                            9,104     9,165    15,063    15,066    16,646    16,478
                                  --------  --------  --------  --------  --------  --------
       Total                        33,808    34,395    50,346    50,971    58,139    57,998
                                  --------  --------  --------  --------  --------  --------

Available for Sale
     Pass-through securities        78,549    79,678    34,460    34,892    20,679    20,572
     CMOs                               --        --     8,148     8,146     2,146     2,139
                                  --------  --------  --------  --------  --------  --------
       Total                        78,549    79,678    42,608    43,038    22,825    22,711
                                  --------  --------  --------  --------  --------  --------

Total mortgage-backed securities  $112,357  $114,073  $ 92,954  $ 94,009  $ 80,964  $ 80,709
                                  ========  ========  ========  ========  ========  ========
</TABLE>

      All mortgage-backed securities are guaranteed by Ginnie Mae, Fannie Mae or
Freddie Mac, except for privately-issued securities with an amortized cost of
$160,000, $302,000 and $367,000 at September 30, 1998, 1997 and 1996,
respectively.


                                       26
<PAGE>

      The following table sets forth certain information regarding the amortized
cost, fair value and weighted average yield of the Company's mortgage-backed
securities at September 30, 1998. The entire amortized cost and fair value of
such securities are reflected in the maturity period that includes the final
security payment date and, accordingly, no effect has been given to periodic
repayments or possible prepayments. In addition, under the structure of some of
the Company's CMOs, the Company's short- and intermediate-tranche interests have
repayment priority over the longer term tranches of the same underlying mortgage
pool.

<TABLE>
<CAPTION>
                                                               At September 30, 1998
                                           ------------------------------------------------------------
                                                 Held to Maturity              Available for Sale
                                           -----------------------------  -----------------------------
                                                                Weighted                       Weighted
                                           Amortized    Fair     Average  Amortized    Fair     Average
                                             Cost       Value     Yield     Cost       Value     Yield
                                            -------    -------  --------  ---------   -------  --------
                                                              (Dollars in thousands)
<S>                                         <C>        <C>        <C>      <C>        <C>        <C>
Pass-through securities:
   Due after 1 year but within 5 years      $   433    $   458    8.17%    $    --    $    --      --%
   Due after 5 years but within 10 years      1,620      1,648    6.80          --         --      --
   Due after 10 years                        22,651     23,124    6.85      78,549     79,678    7.19
                                            -------    -------             -------    -------
     Total                                  $24,704    $25,230    6.87%    $78,549    $79,678    7.19%
                                            =======    =======             =======    =======

CMOs:
   Due after 1 year but within 5 years      $   373    $   384    8.00%    $    --    $    --      --%
   Due after 5 years but within 10 years      2,244      2,246    5.81          --         --      --
   Due after 10 years                         6,487      6,535    5.62          --         --      --
                                            -------    -------             -------    -------
     Total                                  $ 9,104    $ 9,165    5.76%    $    --    $    --      --%
                                            =======    =======             =======    =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                 For the Year Ended September 30,
                                                 ---------------------------------
                                                   1998        1997        1996
                                                 ---------   ---------   ---------
                                                            (In thousands)
<S>                                              <C>         <C>         <C>      
Amortized cost at beginning of year              $  92,954   $  80,964   $  59,034
                                                 ---------   ---------   ---------
Purchases:
    Pass-through securities:
        Fixed rate                                  74,391      15,144      10,264
        Adjustable rate                                 --       2,502      21,657
    CMOs                                                --       8,149          --
                                                 ---------   ---------   ---------
          Total purchases                           74,391      25,795      31,921
                                                 ---------   ---------   ---------
Sales                                              (16,667)     (4,372)         --
Principal repayments                               (38,116)     (9,421)     (9,979)
Premium amortization, net of discount accretion       (205)        (12)        (12)
                                                 ---------   ---------   ---------
Amortized cost at end of year                    $ 112,357   $  92,954   $  80,964
                                                 =========   =========   =========
</TABLE>


                                       27
<PAGE>

      Other Securities. In addition to mortgage-backed securities, the Company
also invests in high-quality assets (primarily government and agency
obligations) with short and intermediate terms (typically seven years or less)
to maturity. At September 30, 1998, the Company did not own any investment
securities of a single issuer which exceeded 10% of the Company's stockholders'
equity, other than U.S. Government or federal agency obligations. From time to
time, the Company holds high-grade, medium-term (up to five years) corporate
debt securities, as well as common stocks and mutual fund shares. See Note 2 of
the Notes to Consolidated Financial Statements for additional information
regarding the Company's securities portfolio.

      From time to time, the Company has invested in "step-up" securities which
provide for interest rate increases periodically if the security is not redeemed
by the issuer. Because of this "step-up" structure, the Company expects most of
these securities to be redeemed prior to maturity. Prior to investing in these
securities, the Company analyzes the yield on the security in comparison to the
option on the part of the issuer to redeem the security or pay a higher interest
rate. A majority of the Company's "step-up" securities have terms of seven years
or less and provide for increases in interest rates of 25 to 180 basis points
within one to three years of issuance. At September 30, 1998, the Company had
$3.5 million of "step-up" securities with a weighted average yield of 5.69%.

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

<TABLE>
<CAPTION>
                                                                  At September 30,
                                          ---------------------------------------------------------------
                                                 1998                  1997                  1996
                                          ------------------    -------------------   -------------------
                                          Amortized    Fair     Amortized    Fair     Amortized    Fair
                                            Cost       Value      Cost       Value      Cost       Value
                                          ---------   -------   ---------   -------   ---------   -------
                                                                (Dollars in thousands)
<S>                                        <C>        <C>        <C>        <C>        <C>        <C>    
Available for Sale
  U.S. Government and Agency securities    $43,801    $44,810    $40,805    $41,469    $29,960    $29,992
  Equity securities                            967        737      1,923      1,779      6,070      5,849
                                           -------    -------    -------    -------    -------    -------
     Total                                  44,768     45,547     42,728     43,248     36,030     35,841
                                           -------    -------    -------    -------    -------    -------
                                                                                                 
Held to Maturity                                                                                 
  U.S. Government and Agency securities      9,495      9,553     25,983     25,931     36,368     35,663
  Corporate bonds                               --         --         --         --        500        501
                                           -------    -------    -------    -------    -------    -------
     Total                                   9,495      9,553     25,983     25,931     36,868     36,164
                                           -------    -------    -------    -------    -------    -------
                                                                                                 
Total other securities                     $54,263    $55,100    $68,711    $69,179    $72,898    $72,005
                                           =======    =======    =======    =======    =======    =======
</TABLE>


                                       28
<PAGE>

      The following table sets forth certain information regarding the amortized
cost, fair value and weighted average yield of other debt securities at
September 30, 1998, by remaining period to contractual maturity.

<TABLE>
<CAPTION>
                                                 Held to Maturity              Available for Sale
                                           -----------------------------  -----------------------------
                                                                Weighted                       Weighted
                                           Amortized    Fair     Average  Amortized    Fair     Average
                                             Cost       Value     Yield     Cost       Value     Yield
                                            -------    -------  --------  ---------   -------  --------
                                                              (Dollars in thousands)
<S>                                         <C>        <C>        <C>      <C>        <C>        <C>
U.S. Government and Agency:
   Due within 1 year                        $ 2,500    $ 2,503    5.37%    $     --   $     --     --%
   Due after 1 years but within 5 years       3,496      3,510    5.66           --         --     --
   Due after 5 years but within 10 years      1,500      1,528    6.69       19,100     19,343   7.57
   Due after 10 years                         1,999      2,012    6.00       24,701     25,467   7.35
                                            -------    -------             --------   -------- 
     Total                                  $ 9,495    $ 9,553    5.82%    $ 43,801   $ 44,810   7.45%
                                            =======    =======             ========   ========
</TABLE>

      In addition to its securities portfolios, from time to time the Company
holds short-term liquid assets such as money market mutual funds, federal funds
sold and interest-bearing deposits. Short-term investments at September 30, 1998
consisted of federal funds sold of $1.0 million.

Sources of Funds

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

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

      The variety of deposit accounts offered by the Company has allowed it to
be competitive in obtaining funds and to respond with flexibility to changes in
consumer demand. As certain customers have become more interest rate conscious,
the Company has become more susceptible to short-term fluctuations in deposit
flows. The Company manages the pricing of its deposits in keeping with its
asset/liability management, profitability and growth objectives.

      Management believes that the "core" portion of the Company's regular
savings, transaction, money market and club accounts can have a lower cost and
be more resistant to interest rate changes than certificate accounts and
therefore are relatively stable sources of deposits. These core accounts
increased $7.9 million during fiscal 1998, as compared to $5.4


                                       29
<PAGE>

million during fiscal 1997. The Company continues to utilize customer service
and marketing initiatives (including newspaper advertisements) in an effort to
maintain and increase the volume of such deposits. However, the ability of the
Company to attract and maintain these accounts (as well as certificate accounts)
has been and will continue to be affected by market conditions.

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

                                           For the Year Ended September 30,
                                       ---------------------------------------
                                         1998           1997           1996
                                       ---------      ---------      ---------
                                                (Dollars in thousands)

Balance at beginning of year           $ 207,933      $ 190,675      $ 188,009
Deposits                                 593,174        425,392        421,132
Withdrawals                             (578,982)      (416,056)      (426,246)
Interest credited                          9,056          7,922          7,780
                                       ---------      ---------      ---------
Balance at end of year                 $ 231,181      $ 207,933      $ 190,675
                                       =========      =========      =========

Net increase during the year:
    Amount                             $  23,248      $  17,258      $   2,666
    Percent                                 11.2%           9.1%           1.4%
                                       =========      =========      =========

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

<TABLE>
<CAPTION>
                                                                   At September 30,
                              ----------------------------------------------------------------------------------------------
                                            1998                               1997                               1996
                              -------------------------------  -----------------------------  ------------------------------
                                          Percent    Weighted           Percent     Weighted             Percent    Weighted
                                          of Total   Average            of Total    Average              of Total   Average
                               Amount     Deposits     Rate    Amount   Deposits      Rate     Amount    Deposits     Rate
                               ------     --------   --------  ------   --------    --------   ------    --------   --------
                                                                      (Dollars in thousands)
<S>                           <C>          <C>         <C>    <C>          <C>         <C>    <C>          <C>         <C>
Checking accounts             $  5,423       2.4%        --%  $  4,655       2.2%        --%  $  1,957       1.0%        --%
NOW accounts                    21,123       9.1       1.00     19,055       9.2       2.00     18,141       9.5       1.86
Money market accounts           27,613      11.9       3.64     21,624      10.4       3.33     16,599       8.7       2.91
Regular savings accounts        43,492      18.8       2.43     44,591      21.4       2.56     47,832      25.1       2.61
Club accounts                    1,282       0.6       2.43      1,132       0.6       2.56      1,112       0.6       2.61
Savings certificate accounts   132,248      57.2       5.43    116,876      56.2       5.45    105,034      55.1       5.24
                              --------     -----              --------     -----              --------     -----
    Total                     $231,181     100.0%      4.10%  $207,933     100.0%      4.15%  $190,675     100.0%      3.99%
                              ========     =====              ========     =====              ========     =====
</TABLE>


                                       30
<PAGE>

      The following table sets forth, by interest rate ranges, the amount of
savings certificate accounts outstanding at the dates indicated and the period
to maturity of savings certificate accounts outstanding at September 30, 1998.

<TABLE>
<CAPTION>
                                   At September 30, 1998
                 ---------------------------------------------------------        Total at
                                    Period to Maturity                          September 30,
                 ---------------------------------------------------------   --------------------
                 Less than    One to       More than              Percent
                 One Year   Three Years   Three Years   Total     of Total     1997        1996
                 ---------  -----------   -----------  --------   --------   --------    --------
                                           (Dollars in thousands)
<S>              <C>         <C>           <C>         <C>         <C>       <C>         <C>     
4.00% and below  $     --    $     --      $     --    $     --       --%    $     --    $     39
4.01% to 5.00%     28,014       1,663            --      29,677     22.4       31,003      52,810
5.01% to 6.00%     54,055      23,167         5,738      82,960     62.8       74,440      35,805
6.01% to 7.00%      2,192      16,865           554      19,611     14.8       11,433      16,293
7.01% and above        --          --            --          --       --           --          87
                 --------    --------      --------    --------    -----     --------    --------
    Total        $ 84,261    $ 41,695      $  6,292    $132,248    100.0%    $116,876    $105,034
                 ========    ========      ========    ========    =====     ========    ========
</TABLE>

      The following table sets forth the maturity distribution and related
weighted average interest rates for savings certificate accounts with balances
less than $100,000, accounts of $100,000 or more, and tot1l savings certificates
at September 30, 1998.

<TABLE>
<CAPTION>
                                      Less than $100,000    $100,000 or more            Total
                                     --------------------  -------------------   -------------------
                                                Weighted              Weighted              Weighted
                                                Average               Average               Average
                                      Amount      Rate      Amount      Rate      Amount      Rate
                                      ------      ----      ------      ----      ------      ----
                                                            (Dollars in thousands)
<S>                                  <C>          <C>      <C>          <C>      <C>          <C>  
Within three months                  $ 22,283     5.11%    $  2,221     5.21%    $ 24,504     5.12%
After three but within six months      17,855     5.16        1,711     5.06       19,566     5.15
After six but within 12 months         34,410     5.41        5,781     5.57       40,191     5.43
                                     --------              --------              --------
    Total within one year              74,548     5.26        9,713     5.40       84,261     5.28
After one but within two years         30,735     5.70        5,820     5.83       36,555     5.72
After two but within three years        4,144     5.49          996     5.67        5,140     5.52
After three but within five years       6,292     5.78           --       --        6,292     5.78
                                     --------              --------              --------
    Total                            $115,719     5.41%    $ 16,529     5.57%    $132,248     5.43%
                                     ========              ========              ========
</TABLE>

      Borrowings. The Company's other available sources of funds include
securities repurchase agreements and advances from the FHLB of New York. As a
member of the FHLB of New York, the Company is required to own capital stock in
the FHLB of New York and is authorized to apply for advances from the FHLB of
New York. Each FHLB credit program has its own interest rate, which may be fixed
or variable, and range of maturities. The FHLB of New York may prescribe the
acceptable uses for these advances, as well as limitations on the size of the
advances and repayment provisions. At September 30, 1998, the Company had a
collateral pledge arrangement with the FHLB of New York pursuant to which the
Company may borrow advances of up to $94.5 million. On such date, there were no
FHLB advances outstanding.


                                       31
<PAGE>

      The Company enters into securities repurchase agreements with the FHLB of
New York utilizing mortgage-backed and other securities as collateral. At
September 30, 1998, the Company had $107.8 million of outstanding borrowings
under securities repurchase agreements which were collateralized by
mortgage-backed and other debt securities with a total fair value of $118.5
million.

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

<TABLE>
<CAPTION>
                                                            At or for the Year
                                                            Ended September 30,
                                                     ----------------------------------
                                                       1998         1997         1996
                                                     --------     --------     --------
                                                           (Dollars in thousands)
<S>                                                  <C>          <C>          <C>     
Securities repurchase agreements:
    Balance at end of year                           $107,790     $ 54,096     $ 10,264
    Average balance during year                        81,892       32,074        1,214
    Maximum outstanding at any month end              119,890       54,096       10,264
    Weighted average interest rate at end of year        5.64%        5.82%        5.44%
    Average interest rate during the year                5.76         5.77         5.35

FHLB advances:
    Balance at end of year                           $     --     $  6,000     $  8,000
    Average balance during year                         4,139        3,186        2,356
    Maximum outstanding at any month end               11,000        7,500        8,000
    Weighted average interest rate at end of year          --%        6.75%        5.73%
    Average interest rate during the year                5.99         5.84         5.52
</TABLE>

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

Service Corporations

      As a federally chartered savings and loan association, the Association is
permitted by OTS regulations to invest up to 2% of its assets in the stock of,
or loans to, service corporation subsidiaries, and may invest an additional 1%
of its assets in service corporations where such additional funds are used for
inner-city or community development purposes. In addition to investments in
service corporations, federal institutions are permitted to invest an unlimited
amount in operating subsidiaries engaged solely in activities which a federal
savings association may engage in directly. At September 30, 1998, the
Association had one service corporation, Yonkers Financial Services Corporation,
which offers life insurance on an agency basis to the Association's customers.


                                       32
<PAGE>

Competition

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

      Competition for deposits is intense given the size of the New York market
and the fact that it is the home state for many large regional and money center
banks. Competition for deposits is principally from money market and mutual
funds, securities firms, commercial banks, credit unions and other savings
institutions located in the same communities. There is further competition for
deposits from institutions offering home and internet computer banking. The
ability of the Company to attract and retain deposits depends on its ability to
provide an investment opportunity that satisfies the requirements of investors
as to rate of return, liquidity, risk, convenient locations and other factors.
The Company is significantly smaller than most of its competitors which, due to
their size and economies of scale, generally offer a broader range of deposit
products than the Company. The Company competes for these deposits by offering
deposit accounts at competitive rates, convenient business hours, availability
of ATMs and a customer oriented staff. As of June 30, 1997, the latest date such
information was available, there were 333 other thrift, commercial bank and
credit union offices in Westchester County which compete for deposits. As of
June 30, 1997, the Company held approximately 1.0% of total deposits in
Westchester County.

Employees

      At September 30, 1998, the Company had a total of 74 full-time and 8
part-time employees. None of the Company's employees are represented by any
collective bargaining agreement. Management considers its employee relations to
be good.

Regulation

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


                                       33
<PAGE>

has certain regulatory and examination authority over Yonkers Savings.

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

      Federal Regulation of Savings Associations. The OTS has extensive
authority over the operations of savings associations. As part of this
authority, Yonkers Savings is required to file periodic reports with the OTS and
is subject to periodic examinations by the OTS and the FDIC. The last regular
OTS safety and soundness examination of Yonkers Savings was as of December 31,
1997. When these examinations are conducted by the OTS and the FDIC, the
examiners may require Yonkers Savings to provide for higher general or specific
loan loss reserves. All savings associations are subject to a semi-annual
assessment, based upon the savings association's total assets, to fund the
operations of the OTS. Yonkers Savings' OTS assessment for the fiscal year ended
September 30, 1998 was approximately $82,000.

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

      In addition, the investment, lending and branching authority of Yonkers
Savings is prescribed by federal laws and it is prohibited from engaging in any
activities not permitted by such laws. For instance, no savings institution may
invest in non-investment grade corporate debt securities. In addition, the
permissible level of investment by federal associations in loans secured by
non-residential real property may not exceed 400% of total capital, except with
approval of the OTS. Federal savings associations are also generally authorized
to branch nationwide. Yonkers Savings is in compliance with the noted
restrictions.

      Yonkers Savings' general permissible lending limit for loans-to-one
borrower is equal to the greater of $500,000 or 15% of unimpaired capital and
surplus (except for loans fully secured by certain readily marketable
collateral, in which case this limit is increased to 25% of unimpaired capital
and surplus). At September 30, 1998, Yonkers Savings' lending limit under this
restriction was $5.7 million. Yonkers Savings is in compliance with the
loans-to-one borrower limitation.

      The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure, and compensation and other employee benefits. Any
institution which fails to comply with these standards must submit a compliance
plan. A failure to submit a plan or to comply with an approved plan will subject
the institution to further enforcement action.


                                       34
<PAGE>

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

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

      In order to equalize the deposit insurance premium schedule for SAIF
insured institutions with the schedule for institutions insured by the Bank
Insurance Fund ("BIF"), the FDIC imposed a special assessment on all
SAIF-assessable deposits pursuant to federal legislation passed on September 30,
1996. The Company's special assessment, which was approximately $1.2 million,
was accrued as an expense charge for the fiscal year ended September 30, 1996
and paid in November 1996. Effective January 1, 1997, the premium schedule for
both BIF and SAIF insured institutions ranged from 0 to 27 basis points.
However, SAIF-insured institutions are required to pay a Financing Corporation
(FICO) assessment, in order to fund the interest on bonds issued to resolve
thrift failures in the 1980s, currently equal to 6.10 basis points for each $100
in domestic deposits, while BIF-insured institutions currently pay an assessment
equal to 1.22 basis points for each $100 in domestic deposits. The assessment
for SAIF-insured institutions is expected to be reduced to 2.43 basis points no
later than January 1, 2000, when BIF-insured institutions fully participate in
the assessment. These assessments, which may be revised based upon the level of
BIF and SAIF deposits, will continue until the FICO bonds mature in the year
2017.

      Regulatory Capital Requirements. Federally insured savings associations,
such as Yonkers Savings, are required to maintain a minimum level of regulatory
capital. The OTS has established capital standards, including a tangible capital
requirement, a leverage ratio (or core capital) requirement and a risk-based
capital requirement applicable to such savings associations. These capital
requirements must be generally as stringent as the comparable


                                       35
<PAGE>

capital requirements for national banks. The OTS is also authorized to impose
capital requirements in excess of these standards on individual associations on
a case-by-case basis.

      The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained earnings, and certain
noncumulative perpetual preferred stock and related surplus. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights and credit card relationships, must be deducted from tangible capital for
calculating compliance with the requirement. At September 30, 1998, Yonkers
Savings had no intangible assets.

      The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. Debt and equity
investments in excludable subsidiaries are deducted from assets and capital. At
September 30, 1998, Yonkers Savings had one "includable" subsidiary.

      At September 30, 1998, Yonkers Savings had tangible capital of $35.2
million, or 9.3% of adjusted total assets, which is $29.6 million above the
minimum requirement of 1.5% in effect on that date.

      The capital standards also require core capital equal to at least 3% of
adjusted total assets. Core capital generally consists of tangible capital plus
certain intangible assets, including a limited amount of purchased mortgage
servicing rights and credit card relationships. In accordance with the prompt
corrective action provisions discussed below, however, a savings association
must maintain a core capital ratio of at least 4% to be considered adequately
capitalized unless its supervisory condition is such to allow it to maintain a
3% ratio.

      At September 30, 1998, Yonkers Savings had core capital equal to $35.2
million, or 9.3% of adjusted total assets, which is $23.9 million above the
minimum leverage ratio requirement of 3% in effect on that date.

      The OTS risk-based capital regulations require savings associations to
have total capital of at least 8% of risk-weighted assets. Total capital
consists of core capital, as defined above, and supplementary capital.
Supplementary capital consists of certain permanent and maturing capital
instruments that do not qualify as core capital and general valuation loan and
lease loss allowances up to a maximum of 1.25% of risk-weighted assets.
Supplementary capital may be used to satisfy the risk-based capital requirement
only up to the amount of core capital. The OTS is also authorized to require a
savings association to maintain an additional amount of total capital to account
for concentration of credit risk and the risk of non-traditional activities. At
September 30, 1998, Yonkers Savings had no capital instruments that qualify as


                                       36
<PAGE>

supplementary capital and $1.3 million of general loan loss reserves, which was
less than 1.25% of risk-weighted assets.

      Certain exclusions from capital and assets are required to be made for the
purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. Yonkers Savings had no
such exclusions from capital and assets at September 30, 1998.

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

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

      At September 30, 1998, Yonkers Savings had total capital of $36.5 million
(including $35.2 million in core capital and $1.3 million in qualifying
supplementary capital) and risk-weighted assets of $140.4 million (including
$2.8 million in converted off-balance sheet items), or total capital of 26.0% of
risk-weighted assets. This amount was $25.3 million above the 8% requirement in
effect on that date.

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


                                       37
<PAGE>

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

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

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

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

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


                                       38
<PAGE>

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

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

      Liquidity. All savings associations, including Yonkers Savings, are
required to maintain an average daily balance of liquid assets equal to a
certain percentage of the sum of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less. This liquid asset
ratio requirement may vary from time to time (between 4% and 10%) depending upon
economic conditions and savings flows of all savings associations. The minimum
liquid asset ratio was 4% at September 30, 1998. Penalties may be imposed upon
associations for violations of the liquidity requirement. At September 30, 1998,
Yonkers Savings' liquidity ratio of 13.1% was in compliance with the
requirement.

      Qualified Thrift Lender Test. All savings associations, including Yonkers
Savings, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations. This test requires a savings
association to have at least 65% of its portfolio assets (as defined by
regulation) in qualified thrift investments, primarily residential housing
related loans and investments. At September 30, 1998, Yonkers Savings met the
test and has always met the test since its effectiveness.

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


                                       39
<PAGE>

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

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

      In 1995, the federal banking agencies, including the OTS, revised the CRA
regulations and the methodology for determining an institution's compliance with
the CRA. Due to the heightened attention being given to the CRA in the past few
years, Yonkers Savings may be required to devote additional funds for investment
and lending in its local community. Yonkers Savings was examined for CRA
compliance by the OTS in September 1996 and received a rating of satisfactory.

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

      Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests.


                                       40
<PAGE>

Among other things, such loans must be made on terms substantially the same as
for loans to unaffiliated individuals.

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

      As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Holding Company and any of its subsidiaries (other than Yonkers Savings or
any other SAIF-insured savings association) would become subject to such
restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.

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

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

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

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


                                       41
<PAGE>

      Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At September 30, 1998, Yonkers Savings was in compliance
with these reserve requirements. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements that may be imposed by the OTS. See "- Liquidity."

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

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

      As a member, Yonkers Savings is required to purchase and maintain stock in
the FHLB of New York. At September 30, 1998, Yonkers Savings held $6.4 million
in FHLB stock, which was in compliance with this requirement. Dividends paid by
the FHLB of New York to Yonkers Savings totaled $338,000 for fiscal 1998.

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


                                       42
<PAGE>

Taxation

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

      Savings associations such as the Association are permitted to establish
reserves for bad debts and to make annual additions thereto which may, within
specified formula limits, be taken as a deduction in computing taxable income
for federal income tax purposes. The amount of the bad debt reserve deduction
for "non-qualifying loans" is computed under the experience method. The amount
of the bad debt reserve deduction for "qualifying real property loans"
(generally loans secured by improved real estate) is also computed under the
experience method. Under the experience method, the bad debt reserve deduction
is an amount determined under a formula based generally upon the bad debts
actually sustained by the savings association over a period of years.
Historically, a percentage of taxable income method was also available in
computing the qualifying loan bad debt deduction; however, as a result of 1996
federal tax legislation, this method is no longer available to the Association
for tax years ending on or after September 30, 1997.

      The 1996 federal tax legislation also imposed a requirement to recapture
into taxable income the portion of the qualifying and non-qualifying loan
reserves in excess of the "base-year" balances of such reserves. For the
Association, the base-year reserves are the balances as of September 30, 1988.
Recapture of the excess reserves will occur over a six-year period which will
begin for the Association in the tax year ending September 30, 1999. The
Association previously established, and will continue to maintain, a deferred
tax liability with respect to its federal tax bad debt reserves in excess of the
base-year balances; accordingly, the legislative changes will have no effect on
total income tax expense for financial reporting purposes.

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

      In addition to the regular income tax, corporations generally are subject
to a minimum tax. An alternative minimum tax is imposed at a minimum tax rate of
20% on alternative minimum taxable income, which is the sum of a corporation's
regular taxable income (with certain adjustments) and tax preference items, less
any available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax, and net operating losses can
offset no more than 90% of alternative minimum taxable income. The Association
and the Company have not been subject to the alternative minimum tax.


                                       43
<PAGE>

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

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

      In July 1996, New York State enacted legislation to preserve the use of
the percentage of taxable income bad debt deduction for state tax purposes. In
general, the legislation provides for a deduction equal to 32% of the
Association's New York State taxable income, which is comparable to the
deductions permitted under the prior State tax law. The legislation also
provides for a floating base year, which will allow the Association to change
from the percentage of taxable income method to the experience method without
recapture of any reserve. Previously, the Association had established a deferred
New York State tax liability for the excess of its New York State tax bad debt
reserves over the amount of its base-year New York State reserves. Since the new
legislation effectively eliminated the reserves in excess of the base-year
balances, the Company reduced its deferred tax liability by $100,000 (with a
corresponding reduction in income tax expense) during the quarter ended
September 30, 1996.

      Generally, New York State tax law has requirements similar to federal
requirements regarding the recapture of base-year tax bad debt reserves. One
notable exception is that, after the 1996 legislation, New York continues to
require that at least 60% of the Association's assets consist of specified
assets (generally, loans secured by residential real estate or deposits,
educational loans, cash and certain government obligations). The Association
expects to continue to meet the 60% requirement and does not anticipate engaging
in any of the transactions which would require recapture of its base-year
reserves (such as changing to a commercial bank charter). Accordingly, under
SFAS No. 109, it has not provided any deferred tax liability on such reserves.

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


                                       44
<PAGE>

Item 2. Properties

      The following table sets forth information concerning the Company's
properties at September 30, 1998. The Company's premises had an aggregate net
book value of approximately $270,000 at that date.

                                Year                          Net Book Value at
        Location           Acquired/Leased   Owned or Leased  September 30, 1998
------------------------   ---------------   ---------------  ------------------
                             (Dollars in thousands)

Corporate Headquarters:

6 Executive Plaza                1996             Leased           $  8
Yonkers, New York
10701-9858

Main Office:

One Manor House Square           1976             Owned             137
Yonkers, New York
10701-2701                        

Full-Service Branches:

780 Palisade Avenue              1989             Leased             23
Yonkers, New York  10703         

1759 Central Park Avenue         1977             Leased             54
Yonkers, New York
10710-2828                       

2320 Central Park Avenue         1986             Leased             48
Yonkers, New York
10710-1216                       

In-Store Branches:

1357 Route 9                     1997             Leased             --
Wappingers Falls, New
York  12590                      

3303 Crompond Road               1998             Leased             --
Yorktown Heights, New York
10598                            

      Yonkers Savings has entered into an agreement for in-store branching with
BJ's Wholesale Club, Inc. An in-store branch opened in December 1997 in BJ's
location in Wappingers Falls, New York and a second in-store branch opened in
October 1998 in BJ's location in Yorktown Heights, New York. The Association's
agreement gives it the right of first refusal to establish an in-store branch in
any of BJ's remaining or future clubs located in Dutchess, Putnam, Rockland, and
Westchester Counties, New York.

      The Company believes that its current facilities are adequate to meet
present needs. In the future, the Company intends to continue to explore
branching opportunities to the extent they develop, although no specific
proposals are currently under consideration, other than the possibility of
additional in-store branches under the agreement described above.

      The Company's depositor and borrower customer files are maintained by an
independent data processing company. The net book value of the computer
equipment utilized by the Company at September 30, 1998 was approximately
$296,000.


                                       45
<PAGE>

Item 3. Legal Proceedings

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

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

      No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended September 30,
1998.

                                     PART II

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

      Page 55 of the attached 1998 Annual Report to Stockholders is herein
incorporated by reference.

Item 6. Selected Financial Data

      Pages 5 and 6 of the attached 1998 Annual Report to Stockholders are
herein incorporated by reference.

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

      Pages 7 through 26 of the attached 1998 Annual Report to Stockholders are
herein incorporated by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      The section "Interest Rate Risk Management", appearing on pages 20 and 21
of the attached 1998 Annual Report to Stockholders, is herein incorporated by
reference.

Item 8. Financial Statements and Supplementary Data

      Pages 27 through 54 of the attached 1998 Annual Report to Stockholders are
herein incorporated by reference.


                                       46
<PAGE>

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

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


                                       47
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

Directors

      Information concerning directors of the Registrant is incorporated herein
by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held in January 1999, a copy of which will be
filed not later than 120 days after the close of the fiscal year.

Executive Officers Who Are Not Directors

      The following are the Company's executive officers who are not also
directors as of September 30, 1998.

      Joseph L. Macchia. Mr. Macchia, age 47, has been Vice President and
Secretary to the Association since 1991, and Vice President and Secretary of the
Holding Company since its formation. Mr. Macchia was named Chief Operations
Officer in January 1997. Mr. Macchia is responsible for the Association's branch
administration, consumer lending and savings operations. He is also responsible
for the Association's Bank Secrecy Act compliance. Prior to such time, Mr.
Macchia served as the Association's Vice President. Mr. Macchia has been
employed by the Association since 1972.

      Joseph D. Roberto. Mr. Roberto, age 46, is the Vice President, Treasurer
and Chief Financial Officer of the Holding Company, a position he has held since
its formation, and is Vice President, Treasurer and Chief Financial Officer of
the Association. Mr. Roberto was appointed the Association's Vice President and
Treasurer in 1991 and Chief Financial Officer in 1995. Mr. Roberto is
responsible for the Accounting Department, interest rate risk and
asset/liability management as well as financial reporting. Prior to 1991, Mr.
Roberto served as the Association's Secretary and Treasurer. Mr. Roberto has
been employed by the Association since 1973.

      Philip Guarnieri. Mr. Guarnieri, age 41, is the Vice President and Chief
Lending Officer of the Association. Mr. Guarnieri was appointed Vice President
and Chief Lending Officer in July 1996. Prior to joining the Association, Mr.
Guarnieri was the Vice President for loan origination at Home Federal Savings
Bank, Queens, New York. Mr. Guarnieri is responsible for the administration of
the Association's real estate lending programs.

Compliance with Section 16(a) of the Exchange Act

      Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Holding Company's 


                                       48
<PAGE>

equity securities, to file with the SEC reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Holding
Company. Officers, directors and greater than 10% stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

      To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended September 30, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were met.

Item 11. Executive Compensation

      Information concerning executive compensation is incorporated herein by
reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in January 1999, a copy of which will be filed not later
than 120 days after the close of the fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management

      Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from the definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in January 1999, a
copy of which will be filed not later than 120 days after the close of the
fiscal year.

Item 13. Certain Relationships and Related Transactions

      Information concerning certain relationships and related transactions is
incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held in January 1999, a copy of which will
be filed not later than 120 days after the close of the fiscal year.


                                       49
<PAGE>

                                     PART IV

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

(a)(1) Financial Statements

      The following information appearing in the Company's 1998 Annual Report to
Stockholders is herein incorporated by reference

Item                                                      Pages in Annual Report
---------------------------------------                   ----------------------
Independent Auditors' Report                              Page 27

Consolidated  Balance Sheets as of September 30, 1998     Page 28
 and 1997

Consolidated Statements of Income for the Years           Page 29
 Ended September 30, 1998, 1997 and 1996

Consolidated Statements of Changes in Stockholders'       Page 30
 Equity for the Years Ended  September 30, 1998, 1997
 and 1996

Consolidated Statements of Cash Flows for the Years       Page 31
 Ended September 30, 1998, 1997 and 1996

Notes to Consolidated Financial Statements                Pages 32 through 54

(a)(2) Financial Statement Schedules

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


                                       50
<PAGE>

(a)(3)  Exhibits

<TABLE>
<CAPTION>
                                                                            Sequential page
                                                          Reference to        Number Where
                                                          Prior Filing      Attached Exhibits
Regulation S-K                                             or Exhibit      are located in this
   Exhibit                                              Number Attached         Form 10-K
   Number                Document                           Hereto               Report
   ------                --------                           ------               ------
    <S>       <C>                                        <C>                 <C>
    3(a)      Certificate of Incorporation                     *             Not applicable
    3(b)      By-Laws                                          *             Not applicable
    4         Instruments defining the rights                  *             Not applicable
                of security holders including           
                debentures                              
    9         Voting Trust Agreement                          None           Not applicable
    10        Material Contracts                        
    10.1      Management Recognition Plan                      *             Not applicable
    10.2      Stock Option and Incentive Plan                  *             Not applicable
    10.3      Employment Contract with                       10.3 
                Richard F. Komosinski dated June       
                30, 1998                               
    10.4      Change-in-Control Severence Agreement          10.4
                with Joseph L. Macchia dated           
                June 30, 1998                          
    10.5      Change-in-Control Severence Agreement          10.5
                with Joseph D. Roberto dated           
                June 30, 1998                          
    10.6      Change-in-Control Severence Agreement          10.6
                with Philip Guarnieri                  
    11        Statement re: computation of per share     Not required        Not applicable
                earnings                              
    12        Statement re: computation of ratios        Not required        Not applicable
    13        Annual Report to Security Holders               13
    16        Letter re: change in certifying                None            Not applicable
                accountants                           
    18        Letter re: change in accounting                None            Not applicable
                principles                            
    19        Previously unfiled documents                   None            Not applicable
    21        Subsidiaries of Registrant                      21
    22        Published report regarding matters             None            Not applicable
                submittedto vote of security holders  
    23        Consents of Experts and Counsel                 23
    24        Power of Attorney                          Not required        Not applicable
    27        Financial Data Schedule                         27
    28        Information from reports furnished to          None            Not applicable
                state insurance regulatory authorities
    99        Additional Exhibits                            None            Not applicable
</TABLE>

----------
*     Filed as exhibits to the Company's Form S-1 registration statement filed
      on December 29, 1995 (File No. 33- 81013) pursuant to Section 5 of the
      Securities Act of 1933, as amended. All of such previously filed documents
      are hereby incorporated herein by reference in accordance with Item 601 of
      Regulation S-K.

(b) Reports on Form 8-K

      During the quarter ended September 30, 1998, no current reports on Form
8-K were filed by the Holding Company.


                                       51
<PAGE>

                                   SIGNATURES

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

                                       YONKERS FINANCIAL CORPORATION


                                       By: /s/ Richard F. Komosinski
                                           -------------------------------------
                                           Richard F. Komosinski, President,
                                           Chief Executive Officer and Director
                                           (Duly Authorized Representative)

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

/s/ Richard F. Komosinski              /s/ William G. Bachop
-----------------------------------    -----------------------------------------
Richard F. Komosinski, President,      William G. Bachop, Chairman
Chief Executive Officer and      
Director (Principal Executive and
Operating Officer)


Date: December 28, 1998                Date: December 28, 1998
      -----------------------------          -----------------------------------


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


Date: December 28, 1998                Date: December 28, 1998
      -----------------------------          -----------------------------------


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


Date: December 28, 1998                Date: December 28, 1998
      -----------------------------          -----------------------------------


/s/ P. Anthony Sarubbi                 /s/ Joseph D. Roberto
-----------------------------------    -----------------------------------------
P. Anthony Sarubbi, Director           Joseph D. Roberto, Vice President,

                                       Treasurer and Chief Financial Officer
                                       (Principal Financial and Accounting 
                                       Officer)


Date: December 28, 1998                Date: December 28, 1998
      -----------------------------          -----------------------------------


                                       52