1999 ANNUAL REPORT










YONKERS FINANCIAL CORPORATION




                                                                           99

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION


MISSION STATEMENT

     The Mission of Yonkers Financial  Corporation is to continue to be a strong
community-oriented financial institution with an ongoing commitment to improving
shareholder value, while delivering the highest quality products and services to
our customers and business markets.  As we expand our franchise,  we will always
strive to give extraordinary service to our customers by providing our employees
with  the  means  and  opportunities  to  make  full  use of  their  skills  and
capabilities.  These  commitments to our  shareholders,  customers and employees
will enable Yonkers  Financial  Corporation to maintain a level of profitability
necessary  to  remain  an  independent   institution  for  the  benefit  of  the
communities we serve.



<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report


FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>

                                                    AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
                                                ---------------------------------------------------
(Dollars in thousands, except per share data)     1999               1998                 1997
---------------------------------------------------------------------------------------------------

SELECTED FINANCIAL CONDITION DATA

<S>                                             <C>                  <C>                  <C>
Total assets                                    $457,695             $383,204             $312,956
Loans receivable, net                            297,950              184,025              118,683
Mortgage-backed securities                        97,380              113,485               93,384
Other securities                                  41,368               55,043               69,231
Deposits                                         272,974              231,181              207,933
Borrowings                                       147,935              107,790               60,096
Stockholders' equity                              32,017               41,802               43,878
Book value per share(1)                            14.30                15.33                14.53

SELECTED OPERATING DATA

Net interest income                             $ 12,048             $ 11,453             $ 10,774
Net income                                         2,663                2,901                2,952
Basic earnings per common share(2)                  1.13                 1.12                 1.05
Diluted earnings per common share(2)                1.11                 1.08                 1.04

ASSET QUALITY DATA

Non-performing loans                            $    755             $    753             $  1,138
Non-performing loans to total loans
    receivable                                      0.25%                0.41%                0.94%

</TABLE>

---------------------
(1)  Represents stockholders' equity divided by total common  shares outstanding
     at the end of the period.
(2)  Earnings per share  data for all  periods has  been  computed in accordance
     with Statement of Financial Accounting Standards No. 128.


[BAR GRAPHS OF TOTAL ASSETS, LOANS RECEIVABLE, NET AND DEPOSITS]



                                        1
<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

[PICTURE CHAIRMAN,  RICHARD  F. KOMOSINSKI,  PRESIDENT AND CEO OMITTED]


TO OUR STOCKHOLDERS:

     Yonkers  Financial  Corporation  made  notable  gains  in  1999,  achieving
significant growth in assets,  loans,  deposits and number of branches.  Perhaps
most importantly, earnings per share also increased.

     We compete for loans,  deposits and customers not only with community banks
and thrifts  but with some of the world's  largest  financial  institutions.  We
succeed  by  focusing  on  meeting  our  community's  particular  needs  and  by
exploiting emerging opportunities.

     Through our subsidiary,  The Yonkers Savings and Loan  Association,  FA, we
moved aggressively along the growth track outlined in our 1998 annual report. In
the  fiscal  year  ended  September  30,  1999,  our third full year as a public
company,  we significantly  increased our mortgage lending,  extended our branch
operations  into new geographic  markets,  and broadened our product and service
offerings to retail and business  customers.  Total assets increased from $383.0
million to $457.7 million, a gain of $74.7 million, or 19.5%.

     As  always,  our  objective  is to  enhance  stockholder  value,  and it is
indicative of the  underlying  strength of our business that we were able to pay
for these  investments  in our franchise out of current  earnings.  Despite that
expense,  we achieved a modest gain in earnings  per share,  although net income
decreased slightly.

EXPANDING  OUR  LENDING.

     We continued the vigorous expansion of our real estate lending  activities,
aided by our new  modern  lending  center.  Our  energetic  retail  sales  team,
available to customers seven days a week, is supported by a full menu of lending
products and an automated  underwriting  system that will soon allow  completion
and approval of a mortgage  application  in a customer's  home,  or  practically
anywhere, via laptop.

     Total  loans  (including  loans  receivable  and loans being held for sale)
increased by $101.8 million or 51.6%,  to $299.2 million.  Net loans  receivable
increased  by $113.9  million or nearly  61.9%,  from  $184.0  million to $297.9
million.  Most  of  this  strong  growth  came  from  mortgages  originated  for
one-to-four  family  homes,  our  traditional  market  niche,  but  lending  for
higher-yielding  multi-family  and  mixed-use  projects rose by $22.4 million as
well.

     We  achieved  this  growth  without  compromising  our  lending  standards.
Non-performing  loans  declined as a percentage of total loans  receivable  from
0.41% to 0.25%, a remarkable  record that we believe reflects the quality of our
loans and diligence of our staff.

                                       2

<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

EXTENDING  OUR  BRANCH  NETWORK.

     We capitalized  on a growth  opportunity  created in part by  consolidation
among other  financial  institutions  by expanding our retail banking  franchise
into new territories  through five in-store branches.  Operating in leased space
seven days a week, these offer a fast and economical way to establish a presence
and  customer  base in a new  community.  We opened our first two such  branches
within BJ's Wholesale Club warehouse stores in Wappingers Falls, Dutchess County
and Yorktown  Heights,  Westchester  County in December  1997 and October  1998,
respectively.  We launched two more in supermarkets in Mount Vernon, Westchester
County and Poughkeepsie,  Dutchess County in May and September 1999, and a fifth
in a supermarket in the Westchester  community of Cortlandt in October 1999. The
first  three  branches  have  proven  to be  successful,  beating  even  our own
projections in attracting deposits,  and we hope for similar results for the two
newest  ones.  In  addition,  we expanded  our  network of ATMs to 11,  eight in
branches and three at stand-alone sites.

ATTRACTING NEW CUSTOMERS.

     Through our BusinessVantage program, launched during the fourth quarter, we
intend to increase  our  commercial  deposit  base  substantially.  We now offer
business  customers  a full  range  of  banking  products  tied to a  commercial
checking  account,  and we have  achieved this without  adding  staff.  Business
accounts  comprise  only about 2% of  deposits  but hold  promise  because  they
generate fee income and low-cost deposits.

     In another new program,  offered by a subsidiary of The Yonkers Savings and
Loan  Association,  FA, retail  customers  will soon be able to purchase  mutual
funds and  annuities.  This program is intended to help us keep our customers by
meeting more of their needs.

GROWING OUR DEPOSIT BASE.

     All these efforts helped us attract  deposits,  our primary source of funds
(along with  borrowings).  Total  deposits  grew from $231.2  million in 1998 to
$273.0  million in 1999,  an increase of $41.8  million or 18.1%.  This enlarged
deposit base enhances our capacity to generate additional earnings and increases
the value of our retail franchise.

GAIN IN EARNINGS PER SHARE.

     Net interest  income,  the principal  driver of our earnings,  rose 5.2% to
$12.0 million, continuing a strong upward trend. Despite our heavy investment in
growth,  we were able to maintain our  earnings at close to the 1998 level.  Net
income for the 1999 fiscal year was $2.7  million,  a decrease of 8.1% from $2.9
million in 1998.

     Basic earnings per share, however, rose to $1.13 ($1.11 diluted),  compared
with $1.12 ($1.08 diluted) in 1998. The increase resulted from our repurchase of
492,500  shares  of our  stock on the  open  market  at a cost of $8.7  million,
reducing shares  outstanding to approximately  2.2 million.  We will continue to
repurchase  shares when that yields a better,  or comparable,  return on capital
than available alternatives.

                                       3

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION


[PICTURE OF BOARD OF  DIRECTORS:  MICHAEL J.  MARTIN,  CHARLES D.  LOHRFINK,  P.
ANTHONY  SARUBBI,  VICE  CHAIRMAN,  WILLIAM  G.  BACHOP,  CHAIRMAN,  RICHARD  F.
KOMOSINSKI,  PRESIDENT AND CEO,  EBAN T. WALKER,  DONALD T. WALKER AND DONALD R.
ANGELILLI]

     Commitment, experience and community involvement are common characteristics
of Yonkers Financial  Corporation's Board of Directors.  The Company's Directors
are proud to uphold the  long-standing  values and traditions that have made the
Yonkers Savings and Loan Association, FA successful for the past one hundred and
eleven years.

     We maintained our quarterly  dividend at $.08 per share,  or $.32 per share
for the 1999 fiscal  year.  In October  1999,  our Board of  Directors  voted to
increase the quarterly dividend to $.09 per share.

POSITIVE OUTLOOK  FOR  2000.

     Our outlook for the  millennial  year is  distinctly  positive.  Barring an
economic downturn or a sharp spike in interest rates, we expect continued growth
in assets, loans, deposits and net interest income.  Accordingly,  we anticipate
an  increase in net  earnings  and  earnings  per share,  based on the  combined
benefits  of  higher  revenues,   effective  expense  control,  and  sound  cash
management and tax strategies.  After more than a year of effort,  we believe we
are well prepared to handle any Y2K issues that may arise.

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

     In pursuing  that goal,  we are  fortunate  to have a skilled and  diligent
staff, a growing customer base and loyal stockholders. On behalf of the Board of
Directors, I want to thank all of them for their staunch support.


                                           Sincerely,


                                           /s/ RICHARD F. KOMOSINSKI
                                           Richard F. Komosinski
                                           President and Chief Executive Officer


                                       4
<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                       At or for the Fiscal Year Ended September 30,
                                                       ---------------------------------------------
(Dollars in thousands, except per share data)           1999      1998      1997      1996      1995
----------------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>       <C>       <C>       <C>
SELCETED FINANCIAL CONDITION DATA:
Total Assets                                           $457,695  $383,204  $312,956  $259,534  $208,283
Loans receivable, net                                   297,950   184,025   118,683    86,666    83,679
Real estate mortgage loans held for sale                  1,226    13,334    20,437       ---       ---
Securities :
  Available-for-sale                                    116,712   125,225    86,286    58,552    20,877
  Hold-to-maturity                                       21,936    43,303    76,329    95,007    95,464
Cash and cash equivalents                                 4,651     4,195     3,593    12,500     3,261
Deposits                                                272,974   231,181   207,933   190,675   188,009
Borrowings                                              147,935   107,790    60,096    18,264     4,295
Stockholders' equity(1)                                  32,017    41,802    43,878    48,999    15,765

SELECTED OPERATING DATA:
Interest and dividend income                            $26,932  $  25,475 $ 20,731   $16,376  $ 14,063
Interest expense                                         14,884     14,022    9,957     7,975     7,004
    Net interest income                                  12,048     11,453   10,774     8,401     7,059
Provision for loan losses                                   235        375      300       462       493
    Net interest income after provision for loan
      losses                                             11,813     11,078   10,474     7,939     6,566
Noninterest income                                        1,512      1,410      733       649       638
Noninterest expense (excluding special assessment)        9,092      7,583    6,265     4,985     4,731
SAIF-special assessment(2)                                  ---        ---      ---     1,166       ---
                                                         ------   --------  -------    ------   -------
    Income before income tax expense                      4,233      4,905    4,942     2,437     2,473
Income tax expense                                        1,570      2,004    1,990       917     1,033
                                                         ------   --------  -------    ------   -------
    Net income(3)                                       $ 2,663     $2,901  $ 2,952    $1,520    $1,440
                                                         ------     ------  -------    ------    ------
Basic earnings per common share(4)                      $  1.13    $  1.12  $  1.05    $ 0.22      ---
Diluted earnings per common share(4)                    $  1.11    $  1.08  $  1.04    $ 0.22      ---

</TABLE>


                                       5

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA (continued)
<TABLE>
<CAPTION>

                                                             At or for the Fiscal Year Ended September 30,
                                              -----------------------------------------------------------------------------

                                                   1999           1998            1997           1996            1995
                                              -------------    -------------   ------------   -------------   -------------

                                                             (Dollars in thousands, except per share data)
<S>                                               <C>            <C>             <C>            <C>             <C>
SELECTED STATISTICAL DATA:(5)
Return on average assets(3)                          0.68%          0.82%           1.05%          0.66%           0.72%
Return on average equity(3)                          6.64           6.72            6.72           4.60            9.61
Net interest margin(6)                               3.13           3.28            3.93           3.73            3.61
Average interest rate spread(7)                      2.71           2.67            3.26           3.13            3.34
Efficiency ratio(8)                                 67.55          59.33           54.43          57.12           58.18
Noninterest expense to average assets(3)             2.31           2.16            2.26           2.70            2.39
Nonperforming loans to total loans
 receivable                                          0.25           0.41            0.94           3.14            4.15
Allowance for loan losses to
   nonperforming loans                             199.07         172.91           96.05          33.77           20.37
Allowance for loan losses to total loans
   receivable                                        0.50           0.70            0.90           1.06            0.84
Nonperforming assets to total assets                 0.16           0.28            0.48           1.30            1.80
Equity to total assets at end of period              7.00          10.91           14.02          18.88            7.57
Average equity to average assets                    10.21          12.18           15.69          14.41            7.50
Book value per share(9)                            $14.30         $15.33          $14.53         $13.72             ---
Cash dividends per share                             0.32           0.28            0.21           0.05             ---
Dividend payout ratio(10)                           28.73%         25.92%          20.66%         22.50%            ---
<FN>

---------------------
(1)  Includes  additional capital in 1999, 1998, 1997 and 1996 subsequent to the
     sale  of  the  Holding  Company's  common  stock  in  connection  with  the
     Association's conversion tostock form on April 18, 1996.
(2)  Represents the Association's  share of a special  assessment imposed on all
     financial  institutions  with deposits  insured by the Savings  Association
     Insurance Fund (the "SAIF").
(3)  Excluding the after-tax  SAIF charge  described in note (2), net income for
     fiscal 1996 would have been approximately  $700,000 higher,  resulting in a
     return on average  assets of 0.97% and a return on average equity of 6.71%.
     The ratio of noninterest expense to average assets would have been 2.20%.
(4)  Earnings  per share data for all  periods has been  computed in  accordance
     with  Statement of Financial  Accounting  Standards  No. 128.  Earnings per
     share  for  fiscal  1997  is for the  period  following  the  Association's
     conversion.
(5)  With the  exception  of end-of  period  ratios are based on  average  daily
     balances in 1999,  1998 and 1997, and average  monthly  balances in earlier
     years.
(6)  Net interest income divided by average interest-earnings assets.
(7)  The  difference  between the  weighted  average  yield on  interest-earning
     assets and the weighted average cost of interest-bearing liabilities.
(8)  Noninterest  expense  (other  than  certain  loss  provisions  and the SAIF
     special  assessment)  divided  by  the  sum  of  net  interest  income  and
     noninterest income (other than net security gains and losses).
(9)  Represents  stockholders' equity divided by total common shares outstanding
     at the end of the period.
(10) Dividends  paid as a  percentage  of net  income.  Ratio for fiscal 1996 is
     based on net income for the six-month  period  following the  Association's
     conversion to stock form.
</FN>
</TABLE>


                                       6
<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

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

     THE COMPANY'S  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS CONSISTING
OF ESTIMATES WITH RESPECT TO THE FINANCIAL CONDITION,  RESULTS OF OPERATIONS AND
BUSINESS OF THE COMPANY  THAT ARE  SUBJECT TO VARIOUS  FACTORS  THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE ESTIMATES.  THESE FACTORS INCLUDE
CHANGES  IN  GENERAL,  ECONOMIC  AND  MARKET,  AND  LEGISLATIVE  AND  REGULATORY
CONDITIONS;  THE IMPACT OF COMPETITION AND PRICING PRESSURES ON LOAN AND DEPOSIT
PRODUCTS;  YEAR 2000 COSTS AND  ISSUES  SUBSTANTIALLY  DIFFERENT  FROM THOSE NOW
ANTICIPATED;  AND THE DEVELOPMENT OF AN INTEREST RATE ENVIRONMENT THAT ADVERSELY
AFFECTS THE INTEREST RATE SPREAD OR OTHER INCOME  ANTICIPATED FROM THE COMPANY'S
OPERATIONS.

     THE COMPANY  CAUTIONS THAT ITS  FORWARD-LOOKING  STATEMENTS  ARE SUBJECT TO
NUMEROUS  ASSUMPTIONS,  RISKS AND UNCERTAINTIES,  AND THAT STATEMENTS CONCERNING
SUBSEQUENT PERIODS ARE SUBJECT TO GREATER  UNCERTAINTY  BECAUSE OF THE INCREASED
LIKELIHOOD  OF CHANGES IN  UNDERLYING  FACTORS AND  ASSUMPTIONS.  THE  COMPANY'S
FORWARD-LOOKING  STATEMENTS  SPEAK ONLY AS OF THE DATE ON WHICH SUCH  STATEMENTS
ARE MADE. BY MAKING ANY FORWARD-LOOKING  STATEMENTS, THE COMPANY ASSUMES NO DUTY
TO UPDATE THEM TO REFLECT NEW, CHANGED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES.

GENERAL

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

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

     The Company's primary market area consists of Westchester County, New York,
and portions of Putnam,  Rockland and Dutchess Counties,  New York.  Business is
conducted  from  its  executive  offices  as well as four  full-service  banking
offices and a lending office located in Yonkers, New York. A branch located in a
discount store in Wappingers Falls, Dutchess County, was opened in December 1997
and a second in-store branch was opened in Yorktown Heights,  Westchester County
in  October  1998.  In May  1999,  a  third  in-store  branch  was  opened  in a
supermarket  in Mt.  Vernon,  Westchester  County  and a fourth  was opened in a
supermarket in Poughkeepsie, Dutchess County in September 1999.

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

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

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

OPERATING STRATEGY

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

                                       7

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)


COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1999 AND 1998

     Total assets at September 30, 1999 amounted to $457.7 million,  an increase
of $74.7  million or 19.5% from $383.0  million at  September  30,  1998.  Asset
growth during the period was funded  primarily  through proceeds from borrowings
through  Federal Home Loan Bank  ("FHLB")  advances and growth in the  Company's
deposit base relating to the expansion of its retail franchise.  In addition,  a
portion of the available  funding was used to repurchase shares of the Company's
common stock.

     Funds provided by borrowings and deposit  growth,  as well as proceeds from
sales of mortgage  loans held for sale,  were  primarily  invested in new loans.
Overall,  total  loans  (loans  receivable  and  mortgage  loans  held for sale)
increased  $101.8  million or 51.6% to $299.2 million at September 30, 1999 from
$197.4  million  at  September  30,  1998.  One-to  four-family  mortgage  loans
accounted for $78.5 million of the overall  increase (net of a decrease of $12.1
million in loans held for sale).  Commercial  real estate loans  increased $14.0
million or 7.1%, and,  multi-family  real estate loans increased $8.4 million or
4.3%  reflecting  the Company's  intention to increase  higher-yielding  assets,
while changes in other  portfolio  categories  were less  significant.  The loan
growth during  fiscal 1999  represented  loan  originations  of $178.1  million,
offset by principal  repayments of $38.5  million,  loans sold of $37.4 million,
and an increase in the  allowance  for loan losses of $201,000.  The increase in
loan  production  was the result of an expanded  mortgage  representative  sales
force and the  establishment of a new lending center during fiscal 1999, as well
as favorable market conditions.

     Total  securities at September 30, 1999  decreased  $29.9 million to $138.6
million from $168.5  million at September  30, 1998,  reflecting a $21.4 million
decrease  in  held-to-maturity   securities  and  a  $8.5  million  decrease  in
available-for-sale  securities. These decreases reflect the significant increase
in  loan  volume   during   fiscal   1999.   The  $21.4   million   decrease  in
held-to-maturity securities primarily reflects principal repayments,  maturities
and calls. The $8.5 million decrease in available-for-sale  securities primarily
reflects  $38.7 million in principal  repayments,  maturities  and calls,  $17.6
million in proceeds  from sales and a $6.2 million  decrease in the market value
of the  portfolio,  partially  offset by purchases of $54.3  million  (including
purchases of longer-term,  fixed-rate  securities  funded with borrowings  under
repurchase agreements).  Available-for-sale  securities represented 84.2% of the
total securities portfolio at September 30, 1999, compared to 74.3% at September
30,  1998.  Cash and cash  equivalents  increased  $456,000  to $4.7  million at
September 30, 1999 from $4.2 million at September 30, 1998.

     Deposit  liabilities  increased $41.8 million or 18.1% to $273.0 million at
September 30, 1999 from $231.2  million at September  30, 1998.  The increase is
attributable to the opening of three additional in-store branches in fiscal 1999
as well as continued aggressive cross-selling,  quality customer service and new
deposit products.

     Borrowings  increased  $40.1 million  (primarily  FHLB  advances) to $147.9
million at September  30, 1999 from $107.8  million at September  30, 1998.  For
information  regarding the terms of the  borrowings,  see "Liquidity and Capital
Resources".

     Stockholders'  equity  amounted to $32.0  million at September  30, 1999, a
$9.8 million  decrease from $41.8 million at September 30, 1998. The decrease is
primarily  attributable  to common  share  repurchases  of $8.7  million for the
treasury,  and a $3.7 million  decrease in the after-tax net unrealized  gain on
available-for-sale  securities,  partially  offset by net income  retained after
dividends of $1.9 million,  and a combined  increase of $755,000 relating to the
employee  stock  ownership  plan ("ESOP") and the  management  recognition  plan
("MRP").  A total of 492,500  common  shares  were  repurchased  in open  market
transactions  during  fiscal  1999 at an average  cost of $17.75 per share.  The
ratio of  stockholders'  equity to total assets  decreased to 7.00% at September
30, 1999 from 10.91% at September 30, 1998, reflecting  substantial asset growth
coupled  with the net  decrease in  stockholders'  equity.  Book value per share
(computed  based on total  shares  issued  less  treasury  shares) was $14.30 at
September  30,  1999,  a  decrease  from  $15.33  at  September  30,  1998.  For
information  regarding the Association's  regulatory capital, see "Liquidity and
Capital Resources".

                                       8

<PAGE>
                               YONKERS FINANCIAL CORPORATION  1999 Annual Report
<TABLE>
<CAPTION>


                                                                      For the Year Ended September 30,
                                          ------------------------------------------------------------------------------------------
                                                       1999                          1998                          1997
                                          ------------------------------ ----------------------------- -----------------------------
                                          Average               Average  Average             Average   Average             Average
                                          Balance    Interest Yield/Cost Balance   Interest Yield/Cost Balance   Interest Yield/Cost
                                          --------   -------- ---------- --------  -------- ---------- --------  -------- ----------
                                                                         (Dollars in thousands)
<S>       <C>                            <C>         <C>        <C>     <C>        <C>       <C>     <C>         <C>       <C>
Assets
Interest-earning assets:
    Loans (1)                             $221,754    $16,399    7.40%   $169,011   $13,243   7.84%   $ 98,721    $ 8,603   8.71%
    Mortgage-backed securities (2)         109,831      7,032    6.40     108,674     7,394   6.80      88,030      6,078   6.90
    Other securities (2)                    40,331      2,837    7.03      62,654     4,356   6.95      79,584      5,655   7.11
    Other earning assets                    13,108        664    5.07       8,646       482   5.57       7,760        395   5.09
                                          ---------   --------           ---------  -------           ---------   -------
       Total interest-earning assets       385,024    $26,932    6.99     348,985   $25,475   7.30     274,095    $20,731   7.56
                                                      --------                      -------                       -------

Allowance for loan losses                   (1,423)                        (1,195)                      (1,048)
Non-interest earning assets                  9,194                          6,738                        6,850
                                          ---------                      ---------                    ---------
       Total assets                       $392,795                       $354,528                     $279,897
                                          ---------                      ---------                    ---------
Liabilities and  Stockholders' Equity
Interest-bearing liabilities:
    NOW, club and money market
          accounts                        $ 56,462    $ 1,286    2.28%   $ 47,078     $ 841   1.79%   $ 38,284      $ 862   2.25%
    Regular savings accounts (3)            49,148        949    1.93      45,124     1,092   2.42      46,636      1,166   2.50
    Savings certificate accounts           144,475      7,308    5.06     124,647     7,123   5.71     110,935      5,894   5.31
                                          ---------   --------           ---------  -------           ---------   -------
       Total interest-bearing deposits     250,085      9,543    3.82     216,849     9,056   4.18     195,855      7,922   4.04

    Borrowings                              97,138      5,341    5.50      86,031     4,966   5.77      35,260      2,035   5.77
                                          ---------   --------           ---------  -------           ---------   -------
       Total interest-bearing liabilities  347,223    $14,884    4.29     302,880   $14,022   4.63     231,115    $ 9,957   4.30
                                                      --------                      -------                       -------

Non-interest-bearing liabilities             5,485                          8,461                        4,860
                                          ---------                      ---------                    ---------
       Total liabilities                   352,708                        311,341                      235,975

Stockholders' equity                        40,087                         43,187                       43,922
                                          ---------                      ---------                    ---------
       Total liabilities and              $392,795                       $354,528                     $279,897
           stockholders' equity           ---------                      ---------                    ---------
Net interest income                                   $12,048                       $11,453                       $10,774
                                                      --------                      -------                       -------
Average interest rate spread (4)                                 2.71%                         2.67%                         3.26%
Net interest margin (5)                                          3.13%                         3.28%                         3.93%
Net interest-earning assets (6)           $ 37,801                       $ 46,105                     $ 42,980
                                          ---------                      ---------                    ---------
Ratio of average interest-earning
    assets to average interest-
    bearing liabilities                                        110.89%                       115.22%                       118.60%
<FN>

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


                                       9

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)

ANALYSIS OF NET INTEREST INCOME

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

     The following table sets forth average  balance sheets,  average yields and
costs,  and certain other  information  for the years ended  September 30, 1999,
1998 and 1997. The average  yields and costs were computed by dividing  interest
income or expense by the average  balance of the related assets or  liabilities.
Average  balances were computed based on daily balances.  The yields include the
effect of deferred fees,  discounts and premiums included in interest income. No
tax-equivalent  yield  adjustments were made for tax-exempt  securities,  as the
effect thereof was not material.

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


                                     Fiscal 1999 Compared to Fiscal 1998     Fiscal 1998 Compared to Fiscal 1997
                                     -----------------------------------     -----------------------------------
                                        Increase (Decrease)                     Increase (Decrease)
                                               Due to                                  Due to
                                        -------------------     Net             -------------------      Net
                                         Volume      Rate      Change            Volume      Rate      Change
                                        --------   --------   --------          --------   --------   --------
                                                                                                  (In Thousands)
<S>                                    <C>        <C>        <C>               <C>        <C>        <C>
Interest-earning assets:
  Loans                                 $ 3,936    $  (780)   $ 3,156           $ 5,576    $  (936)   $ 4,640
  Mortgage-backed securities                 73       (435)      (362)            1,408        (90)     1,318
  Other securities                       (1,570)        51     (1,519)           (1,177)      (124)    (1,301)
  Other earning assets                      229        (47)       182                48         39         87
                                        -------    -------    -------           -------    -------    -------
               Total                      2,668     (1,211)     1,457             5,855     (1,111)     4,744
                                        -------    -------    -------           -------    -------    -------
Interest-bearing liabilities:
  NOW, club and money market accounts       188        257        445               175       (196)       (21)
  Regular savings accounts                   91       (234)      (143)              (37)       (37)       (74)
  Savings certificate accounts            1,052       (867)       185               764        465      1,229
  Borrowings                                616       (241)       375             2,931         --      2,931
                                                   -------    -------           -------    -------    -------
                                                                                                      -------
               Total                      1,947     (1,085)       862             3,833        232      4,065
                                        -------    -------    -------           -------    -------    -------

Net change in net interest income       $   721    $  (126)   $   595           $ 2,022    $(1,343)   $   679
                                        -------    -------    -------           -------    -------    -------
</TABLE>


COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998

GENERAL.

     Net income was $2.7 million and diluted  earnings per common share  ("EPS")
was $1.11 for the fiscal year ended September 30, 1999, a $238,000 decrease from
net income of $2.9  million  and  diluted EPS of $1.08 for the fiscal year ended
September 30, 1998.  Basic EPS was $1.13 for the fiscal year ended September 30,
1999  compared to $1.12 for fiscal 1998.  The decrease in net income  reflects a
$1.5 million increase in non-interest  expense,  partially offset by an increase
of  $595,000  in net  interest  income,  a decrease  of  $434,000  in income tax
expense,  a $140,000  decrease in the provision for loan losses,  and a $102,000
increase in non-interest income.

NET INTEREST  INCOME.

     Net  interest  income  for the year  ended  September  30,  1999 was  $12.0
million,  an  increase of $595,000  from $11.5  million for the prior year.  The
increase  primarily  reflects  a  rise  in the  average  interest  rate  spread,
partially   offset  by  a  decline  in   net-interest   earning   assets  (total
interest-earning  assets less total interest-bearing  liabilities) primarily due
to $8.7 million in funds used to purchase treasury stock during fiscal 1999. The
increase in the average interest rate spread is primarily a result of a decrease
in the cost of funds as well as increases in the proportion of assets consisting
of commercial real estate and multi-family loans. The Company's average interest
rate spread increased to 2.71% for fiscal 1999 from 2.67% for fiscal 1998, while
the net interest margin decreased to 3.13% for fiscal 1999 from 3.28% for fiscal
1998.

INTEREST AND DIVIDEND  INCOME.

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

                                       10

<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

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

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

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

INTEREST  EXPENSE.

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

     Interest expense on deposits  increased $487,000 to $9.5 million for fiscal
1999 from $9.1 million for fiscal 1998.  This increase  reflects the impact of a
$33.2  million  increase in the average  balance of  interest-bearing  deposits,
partially  offset  by a 36 basis  point  decrease  in the  average  rate paid on
deposits to 3.82% for the year ended September 30, 1999 from 4.18% for the prior
year.  The increase in average  interest-bearing  deposits  consisted of a $19.9
million increase in average savings certificate accounts (to $144.5 million from
$124.6  million),  a $9.4 million increase in average NOW, club and money market
accounts (to $56.5 million from $47.1 million),  and a $4.0 million  increase in
average  regular  savings  accounts (to $49.1 million from $45.1  million).  The
overall  decrease  in the  average  rate paid on  deposits  during  fiscal  1999
primarily reflects a 65 basis point decrease in the average rate paid on savings
certificate accounts, coupled with a 49 basis point decrease in the average rate
paid on regular savings accounts,  partially offset by a 49 basis point increase
in the average rate paid on NOW, club and money market accounts.

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

PROVISION FOR LOAN LOSSES.

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

     The  provision  for loan losses was $235,000 in fiscal 1999 and $375,000 in
fiscal 1998. Loans receivable  (before the allowance for loan losses)  increased
to $299.4  million at September  30, 1999 from $185.3  million at September  30,
1998,  and the allowance for loan losses  increased to $1.5 million at September
30, 1999 from $1.3 million a year earlier.  The higher  provision in fiscal 1998
reflected  the impact of higher net  charge-offs,  which were  $166,000  for the
period,  compared  to $34,000 for fiscal  1999.  The  allowance  for loan losses
represented  0.50% of total loans receivable at September 30, 1999,  compared to
0.70% at September 30, 1998. Non-performing loans increased slightly to $755,000
at  September  30, 1999 from  $753,000 at September  30, 1998.  The ratio of the
allowance for loan losses to  non-performing  loans was 199.07% at September 30,
1999, compared to 172.91% at September 30, 1998. See "Asset Quality" for further
information concerning the provision and allowance for loan losses.

NON-INTEREST INCOME.

     Non-interest  income increased  $102,000 to $1.5 million for the year ended
September 30, 1999 compared to $1.4 million for the prior year. The increase was
primarily  attributable to increases in service charges and fee income and other
non-interest  income,  partially offset by decreases in the net gain on sales of
real estate mortgage loans held for sale and available-for-sale  securities. The
$239,000 increase in service charges and fee income primarily reflects increases
in  transaction  volume.  In fiscal  1999,  mortgage  loan sales  totaled  $37.4
million,  resulting  in a net gain of $197,000  (including  the  recognition  of
mortgage servicing assets), as compared to loan sales of $69.8 million in fiscal
1998,  which  resulted in net gains of $371,000.  In addition,  a provision  for
losses on loans  held for sale of  $97,000  was  charged to net gain on sales of
loans for fiscal 1999,  while no such  provisions  were made in fiscal 1998. The
net gain on sales of loans held for sale  includes  the  effect of  capitalizing
mortgage  servicing  assets at the time of sale, in accordance with Statement of
Financial  Accounting  Standards No. 125,  which amounted to $362,000 for fiscal
1999 and $594,000 for the prior year.  Servicing assets with a carrying value of
$548,000 and $538,000 (after  amortization)  are included in other assets in the
consolidated balance sheet as of September 30, 1999 and 1998, respectively.  See
also Notes 1 and 3 of the Notes to Consolidated  Financial Statements.  Net gain
on sales of securities  amounted to $111,000 for fiscal 1999 reflecting sales of
$17.6  million in  available-for-sale  securities  during the year,  compared to
gains  of  $117,000  on  sales  of  $28.2  million  in  the  prior  year.  Other
non-interest  income for fiscal  1999  increased  $43,000  from the prior  year,
reflecting a gain of $72,000 from the sale of servicing rights in fiscal 1999.

                                       11

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)

NON-INTEREST EXPENSE.

     Non-interest  expense  increased  $1.5 million to $9.1 million for the year
ended  September  30,  1999  compared to $7.6  million  for the prior year.  The
increase in fiscal 1999 was primarily  attributable to increases in compensation
and benefits expense,  occupancy and equipment  expense,  and other non-interest
expense.  Compensation  and benefits expense  increased  $818,000 from the prior
year primarily due to increased costs relating to additional  staffing for three
new in-store  branches and the  expansion  of lending  operations.  The $311,000
increase in occupancy and equipment expense primarily  reflects  increased costs
associated  with the  establishment  of three  in-store  branches  and a lending
center during fiscal 1999. The $279,000 increase in other  non-interest  expense
primarily  reflects  expenses of $140,000  relating to the  establishment of the
REIT.  On September 30, 1999,  $120.3  million in real estate loans were held by
the REIT. The assets transferred to the REIT are viewed by regulators as part of
the Association's assets in consolidation.

INCOME TAX EXPENSE.

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

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997

GENERAL.

     Net income  was $2.9  million  and basic EPS was $1.12 for the fiscal  year
ended September 30, 1998, a $51,000  decrease from net income of $3.0 million or
basic EPS of $1.05 for the fiscal year ended September 30, 1997. Diluted EPS was
$1.08 for the fiscal year ended  September 30, 1998 compared to $1.04 for fiscal
1997.  The  decrease  in  net  income  reflects  a  $1.3  million   increase  in
non-interest  expense, as well as increases in the provision for loan losses and
income  tax  expense,  substantially  offset by  increases  of  $679,000  in net
interest income and $677,000 in non-interest income.

NET INTEREST  INCOME.

     Net  interest  income  for the year  ended  September  30,  1998 was  $11.5
million,  an  increase of $679,000  from $10.8  million for the prior year.  The
positive  effect  on net  interest  income of  higher  average  interest-earning
assets,  primarily  attributable to the reinvestment of proceeds from borrowings
and deposit growth,  was partially  offset by a decline in the average  interest
rate spread.  The narrower spread primarily  reflects (i) an overall lower asset
yield from the origination of new mortgage loans (including refinancings) in the
current lower interest rate  environment  and (ii) a higher average rate paid on
interest-bearing   liabilities  due  primarily  to  the  larger   proportion  of
higher-rate    borrowings   and   savings   certificate    accounts   to   total
interest-bearing  funding.  The relatively  flat yield curve in fiscal 1998 also
contributed to the reduction in the Company's average interest rate spread.  The
low level of interest rates fueled a surge in home sales and refinancings, which
supported the Company's higher volume of loan  originations but also contributed
to a lower average yield on the portfolio.  The Company's  average interest rate
spread and net interest margin decreased to 2.67% and 3.28%,  respectively,  for
the year ended  September  30,  1998,  from 3.26% and 3.93%,  respectively,  for
fiscal 1997.

INTEREST AND DIVIDEND INCOME.

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

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

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

                                       12

<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

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

INTEREST  EXPENSE.

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

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

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

PROVISION FOR LOAN LOSSES.

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

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

NON-INTEREST INCOME.

     Non-interest  income increased  $677,000 to $1.4 million for the year ended
September  30, 1998  compared  to  $733,000  for fiscal  1997.  The  increase is
primarily  attributable  to  increases  in the net gain on sales of real  estate
mortgage loans held for sale,  the net gain on sales of securities,  and service
charges  and fee income.  In fiscal  1998,  mortgage  loan sales  totaled  $69.8
million  resulting in a net gain of $371,000,  as compared to loan sales of $2.8
million in fiscal 1997 which resulted in net losses of $17,000.  The net gain in
fiscal 1998 includes the effect of  capitalizing  mortgage  servicing  assets of
$594,000  at the  time of  sale,  in  accordance  with  Statement  of  Financial
Accounting Standards No. 125. Servicing assets with a carrying value of $538,000
(after  amortization)  are included in other assets in the consolidated  balance
sheet  as of  September  30,  1998.  See  also  Notes  1 and 3 of the  Notes  to
Consolidated  Financial  Statements.  The  increase  in the net gain on sales of
securities  reflects  a net  gain of  $117,000  on sales  of  $28.3  million  in
available-for-sale  securities in fiscal 1998,  while net losses of $48,000 were
incurred on sales of $16.2  million in the prior year.  The $91,000  increase in
service  charges and fee income  primarily  reflects  increases  in  transaction
volume.

NON-INTEREST EXPENSE.

     Non-interest  expense  increased  $1.3 million to $7.6 million for the year
ended  September  30,  1998  compared  to  $6.3  million  for  the  prior  year.
Compensation  and  benefits  expense  increased  $584,000  from the  prior  year
primarily due to (i)  increased  costs  relating to  additional  staffing for an
in-store branch and the expansion of lending operations and (ii) the recognition
of $106,000 in  additional  expense  associated  with the ESOP due to the higher
average  market price of the  Company's  common stock in fiscal 1998 compared to
the prior  year.  The  $182,000  increase in  occupancy  and  equipment  expense
primarily  reflects  increased  costs  associated with the  establishment  of an
in-store branch during fiscal 1998. The $515,000 increase in other  non-interest
expense was primarily  attributable  to  additional  costs  associated  with the
expansion of the Company's  business  activities and review of additional growth
opportunities.

INCOME TAX EXPENSE.

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

                                       13

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)

ASSET QUALITY

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

     The following  table sets forth the amounts and categories of the Company's
non-performing assets at the dates indicated. The Company's prospective adoption
of Statement of Financial  Accounting  Standards ("SFAS") No. 114, ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN,  effective October 1, 1995, had no impact on
the comparability of this information.  See Note 3 to the Consolidated Financial
Statements for  information  concerning  the Company's  impaired loans which are
included in the non-accrual loans shown below.
<TABLE>
<CAPTION>

                                                                                At September 30,
                                                       -----------------------------------------------------------
                                                       1999          1998         1997         1996         1995
                                                       ----          ----         ----         ----         ----
                                                                            (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                             $  347       $  515       $  389       $1,757       $2,759
       Multi-family (1)                                    --           --           --           --          389
       Commercial                                         305          203          211          214           --
       Land                                                --           --          250          250           49
       Construction                                        --           --          279          511          279
  Consumer loans                                          103           35            9           43           54
                                                       ------       ------       ------       ------       ------
           Total                                          755          753        1,138        2,775        3,530
Real estate owned, net                                     --          305          379          603          227
                                                       ------       ------       ------       ------       ------
Total non-performing assets                            $  755       $1,058       $1,517       $3,378       $3,757
                                                       ------       ------       ------       ------       ------

Allowance for loan losses                              $1,503       $1,302       $1,093       $  937       $  719
                                                       ------       ------       ------       ------       ------

Ratios:
  Non-performing loans to total loans receivable         0.25%        0.41%        0.94%        3.14%        4.15%
  Non-performing assets to total assets                  0.16         0.28         0.48         1.30         1.80
  Allowance for loan losses to:
      Non-performing loans                             199.07       172.91        96.05        33.77        20.37
      Total loans receivable                             0.50         0.70         0.90         1.06         0.84
<FN>

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

     Total  non-performing  assets  decreased  $303,000  from  $1.1  million  at
September 30, 1998 to $755,000 at September 30, 1999, primarily reflecting a net
reduction of $305,000 in real estate owned. The ratio of  non-performing  assets
to total assets decreased to 0.16% at September 30, 1999 from 0.28% at September
30, 1998. The allowance for loan losses was $1.5 million or 0.50% of total loans
receivable  at  September  30,  1999,  compared  to  $1.3  million  or 0.70 % at
September 30, 1998. The ratio of the allowance for loan losses to non-performing
loans  increased to 199.07% at September  30, 1999 from 172.91% at September 30,
1998.

     For the year ended  September 30, 1999,  gross  interest  income of $69,000
would have been  recorded if all  non-accrual  loans at  September  30, 1999 had
remained  current  throughout the year in accordance  with their original terms.
The amount of interest income actually  recognized on such loans in fiscal 1999,
prior to placing the loans on non-accrual status, was $42,000. See Note 3 of the
Notes to the Consolidated Financial Statements.

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

                                       14

<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

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

<TABLE>
<CAPTION>

                                                                             For the Year Ended September 30,
                                                      ------------------------------------------------------------------------
                                                        1999            1998             1997           1996            1995
                                                        ----            ----             ----           ----            ----
                                                                                  (Dollars in Thousands)

<S>                                                <C>             <C>             <C>             <C>             <C>
Balance at beginning of year                          $ 1,302         $ 1,093         $   937         $   719         $   311
Provision for losses                                      235             375             300             462             493
Charge-offs:
     Real estate mortgage loans:
          One- to four-family                             (23)            (45)           (132)            (97)            (76)
          Multi-family (1)                                 --              --              --            (203)             --
          Land                                             --             (17)             --              --              --
          Construction                                     --             (91)             --              --              --
     Consumer loans                                       (20)            (40)            (25)            (33)            (13)
                                                      -------         -------         -------         -------         -------
          Total charge-offs                               (43)           (193)           (157)           (333)            (89)
Recoveries                                                  9              27              13              89               4
                                                      -------         -------         -------         -------         -------
          Net charge-offs                                 (34)           (166)           (144)           (244)            (85)
                                                      -------         -------         -------         -------         -------

Balance at end of year                                $ 1,503         $ 1,302         $ 1,093         $   937         $   719
                                                      -------         -------         -------         -------         -------

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

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

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

INTEREST RATE RISK MANAGEMENT

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

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

     In managing the  asset/liability  position,  the Company has taken  several
steps to  manage  its  interest  rate  risk.  First,  the  Company  maintains  a
significant  portfolio of interest  rate  sensitive  adjustable-rate  loans that
includes loans with rates that adjust periodically after earning a fixed rate of
interest for initial periods of five, seven or ten years. At September 30, 1999,
total  adjustable-rate  loans  were  $209.2  million  or 69.7% of the total loan
portfolio,  including  $157.0  million  in loans  with  initial  fixed  rates as
described above. Second,  beginning in fiscal 1998 the Company sold the majority
of its newly  originated,  fixed-rate one- to four-family  residential  mortgage
loans with original terms of more than 15 years.  Third,  the Company carries an
investment in mortgage-backed securities that are more liquid and generally have
shorter   average   lives  than   mortgage   loans.   At  September   30,  1999,
mortgage-backed securities with terms to repricing or estimated average lives of
less than five  years  amounted  to $4.5  million.  Fourth,  the  Company  has a
substantial  amount of  regular  savings,  transaction,  money  market  and club
accounts,  which  may be less  sensitive  to  changes  in  interest  rates  than
certificate  accounts.  At September 30, 1999,  the Company had $50.8 million of
regular  savings  accounts,  $33.4  million of money  market  accounts and $37.0
million of NOW, checking and club accounts.  Overall,  these accounts  comprised
44.4% of the  Company's  total deposit base at September  30, 1999.  Finally,  a
portion of the Company's securities repurchase agreements and FHLB advances have
terms in excess of one year.  The weighted,  average  remaining  period to final
maturity of these borrowings was  approximately 3.3 years at September 30, 1999,
compared to 3.8 years at September 30, 1998.

                                       15

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)

     One approach used by  management to quantify  interest rate risk is the net
portfolio  value ("NPV")  analysis.  In essence,  this approach  calculates  the
difference  between the present  value of  liabilities  and the present value of
expected cash flows from assets and off-balance  sheet contracts.  The following
table sets forth,  at  September  30,  1999,  an  analysis of the  Association's
interest  rate risk as measured by the estimated  changes in NPV resulting  from
instantaneous  and  sustained  parallel  shifts in the yield curve (+/-300 basis
points,  measured in 100 basis point increments).  For comparative purposes, the
table also shows the estimated  percent increase  (decrease) in NPV at September
30, 1998.
<TABLE>
<CAPTION>

                                            At September 30, 1999
                        ------------------------------------------------------
     Change in                            Estimated Increase (Decrease) in NPV             Percent Increase
   Interest Rates       Estimated NPV     ------------------------------------           (Decrease) in NPV at
   (Basis Points)           Amount           Amount                   Percent             September 30, 1998
   --------------       -------------        ------                   -------            --------------------
              (Dollars in thousands)

<S>                  <C>              <C>                          <C>                       <C>
        +300             $ 13,819         $ (30,670)                   (69)%                     (29)%
        +200               25,230           (19,259)                   (43)                      (17)
        +100               36,107            (8,382)                   (19)                      (7)
         --                44,489                --                     --                        --
        -100               50,493             6,004                     13                        5
        -200               52,607             8,118                     18                        12
        -300               54,057             9,568                     22                        21

</TABLE>

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

     The  Association  is required to maintain an average daily balance of total
liquid  assets  as a  percentage  of  net  withdrawable  deposit  accounts  plus
short-term  borrowings,  as  defined by the  Office of Thrift  Supervision  (the
"OTS")  regulations.  The minimum required liquidity ratio at September 30, 1999
was 4.0%, and the Company's actual liquidity ratio was 7.8%.

     The  Company's  most  liquid  assets are cash and cash  equivalents,  which
include  highly liquid  short-term  investments  (such as federal funds sold and
money market  mutual  funds) that are readily  convertible  to known  amounts of
cash. At September  30, 1999 and 1998,  cash and cash  equivalents  totaled $4.7
million and $4.2 million,  respectively.  The level of these assets is dependent
on the Company's operating,  financing and investing activities during any given
period.


                                       16

<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

     The primary investing activities of the Company are the origination of real
estate mortgage and other loans, and the purchase of  mortgage-backed  and other
securities.  During the years  ended  September  30,  1999,  1998 and 1997,  the
Company's  disbursements  for loan originations  totaled $178.1 million,  $152.6
million and $69.2 million, respectively. For the years ended September 30, 1999,
1998 and 1997,  purchases of  mortgage-backed  securities totaled $35.3 million,
$74.4 million and $25.8 million, respectively, and purchases of other securities
totaled $19.0  million,  $16.2 million and $30.0  million,  respectively.  These
activities  were funded  primarily  by net  deposit  inflows,  borrowings  under
securities repurchase agreements,  FHLB advances,  principal repayments on loans
and  securities,  and proceeds  from sales of loans and  securities.  Loan sales
during fiscal 1999, 1998 and 1997,  provided  proceeds of $37.4,  $69.6 and $2.8
million, respectively, for reinvestment into new loans and securities.

     For the  years  ended  September  30,  1999,  1998  and  1997  the  Company
experienced  net  increases  in  deposits  (including  the  effect  of  interest
credited) of $41.8 million, $23.2 million and $17.2 million,  respectively.  The
increases  were due to the  opening of three  additional  in-store  branches  in
fiscal 1999 as well as  continued  aggressive  cross-selling,  quality  customer
service and new deposit products.

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

     At  September  30,  1999,  the Company  had  outstanding  loan  origination
commitments of $53.3 million,  undisbursed construction loans in process of $1.7
million,  and  unadvanced  lines of credit to  customers  of $4.4  million.  The
Company  anticipates  that it will have  sufficient  funds available to meet its
current loan origination and other commitments. The Company also had the ability
to borrow  additional  advances of up to $65.8 million from the FHLB of New York
at September 30, 1999.  Certificates of deposit  scheduled to mature in one year
or less from September 30, 1999 totaled $107.3 million,  with a weighted average
rate of  4.94%.  Based on the  Company's  most  recent  experience  and  pricing
strategy,  management  believes that a significant portion of such deposits will
remain with the Company.

     The main sources of liquidity for the Holding Company are net proceeds from
the sale of stock and dividends received from the Association,  if any. The main
cash outflows are payments of dividends to  shareholders  and repurchases of the
Holding Company's common stock. In fiscal 1999, the Holding Company  repurchased
a total of 492,500 common shares in open market  transactions at a total cost of
$8.7 million or $17.75 per share.  The Holding Company  received $4.0 million in
dividends from the Association in fiscal 1999.

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

     The OTS regulations require savings associations,  such as the Association,
to meet three minimum capital standards: a tangible capital ratio requirement of
1.5% of total assets as adjusted  under the OTS  regulations;  a leverage  ratio
requirement  of 4.0% of  core  capital  to such  adjusted  total  assets;  and a
risk-based  capital ratio requirement of 8.0% of core and supplementary  capital
to total  risk-based  assets.  The  Association  satisfied these minimum capital
standards at September  30, 1999 with  tangible and leverage  capital  ratios of
7.4% and a total risk-based capital ratio of 18.0%. In determining the amount of
risk-weighted  assets for  purposes of the  risk-based  capital  requirement,  a
savings  association  multiplies  its assets and  credit  equivalent  amount for
certain  off-balance  sheet items by risk-weights,  which range from 0% for cash
and obligations  issued by the United States  Government or its agencies to 100%
for assets such as consumer and commercial loans, as assigned by the OTS capital
regulations. These capital requirements, which are applicable to the Association
only, do not consider  additional capital held at the Holding Company level, and
require certain adjustments to the Association's equity to arrive at the various
regulatory capital amounts.

                                       17

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)

IMPACT OF ACCOUNTING STANDARDS

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

IMPACT OF INFLATION AND CHANGING PRICES

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

IMPACT OF YEAR 2000 ISSUE

     The Company, like all companies that utilize computer technology, has faced
significant  challenges  associated with ensuring that its computer systems will
accurately  process  time-sensitive  data  beyond  the year 1999 (the "Year 2000
Issue").  Many existing computer programs and systems were originally programmed
with nine digit dates that  provided  only two digits to identify  the  calendar
year in the date field,  without considering the upcoming change in the century.
With the impending millennium,  these programs and computers will recognize "00"
as the year 1900 rather than the year 2000.

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

       The  Company's  primary  federal   regulator,   the  OTS,  has  published
substantive guidance on the Year 2000 Issue, alone and in conjunction with other
federal regulatory agencies. The OTS has also included Year 2000 compliance as a
substantive  area  of  examination   during  special  and  regularly   scheduled
examinations. These publications also included requirements for the creation and
implementation  of a Year 2000  compliance plan as well as setting forth certain
target dates. Should a financial institution not become Year 2000 compliant,  it
could then be subject to  administrative  remedies  similar to those  imposed on
financial  institutions  otherwise found not to be operating in a safe and sound
manner.

      The Company has  established  and implemented a Year 2000 Action Plan (the
"Plan") to address the Year 2000 Issue. The Plan includes the five components as
recommended by the OTS, which address issues  involving  awareness,  assessment,
renovation,  validation and  implementation.  All phases have been substantially
completed.

     Under the  regulatory  guidelines  previously  mentioned,  testing  of core
mission  critical  internal  systems must have been  substantively  completed by
December  31,  1998  and  testing  with   service   providers   must  have  been
substantively  completed  by June 30,  1999.  All  renovations  must  have  been
substantially  completed, and testing of mission critical systems must have been
completed, by June 30, 1999. As of September 30, 1999, the Company substantially
completed  testing its internal  mission  critical  systems and testing with its
primary  service  provider,  which  provides  almost all of the  Company's  data
processing.

     As part of the  Plan,  the  Company  is in  communication  with  all of its
significant  suppliers  and vendors to determine the extent to which the Company
is vulnerable to those third parties'  failure to remediate  their own Year 2000
Issue.  The  Company  presently  believes  that with the  modifications  made to
existing  software and conversions to new software,  the Year 2000 Issue will be
mitigated  without  causing a material  adverse  impact on the operations of the
Company.
                                       18

<PAGE>

                               YONKERS FINANCIAL CORPORATION  1999 Annual Report

     The Company is also preparing a Year 2000 business  resumption  contingency
plan to  document  pre-determined  actions  to help the  Company  resume  normal
operations in the event of failure of any mission-critical  service and product.
Uncontrollable  events,  such as loss of the  global  power  grid and  telephone
service  failures,  will affect all companies,  government and customers;  these
global  events  cannot  be  remedied  by  anyone  other  than  the   appropriate
responsible  party.  The Company has  reviewed  its  customer  base to determine
whether they pose  significant  Year 2000 risks;  the customer base is primarily
composed of  individuals  who  utilize  the  Company's  services  for  personal,
household  or  consumer  uses and  thus,  individually,  are not  likely to pose
significant  Year 2000 risks  directly.  The Company also  reviewed its borrower
base and  determined  that its loans are primarily  secured by  residential  and
multi-family  residences,  which management  believes does not carry a high Year
2000 risk. The Company is ensuring the  availability  of sufficient cash to meet
potential depositor demand due to concerns about the availability of funds as we
approach the Year 2000.  Contingency  plans have been  developed for  identified
mission-critical  systems in anticipation of the possibility of unplanned system
difficulties or failure of third parties to successfully prepare for the century
date change.

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

     Monitoring  and  managing  the Year 2000  Issue will  result in  additional
direct and indirect costs to the Company. Direct costs include potential charges
by  third-party  software  vendors for product  enhancements,  costs involved in
testing software products for Year 2000 compliance,  and any resulting costs for
developing and implementing  contingency  plans for critical  software  products
which are not  enhanced.  Indirect  costs will  principally  consist of the time
devoted by existing  employees in monitoring  software vendor progress,  testing
enhanced  software  products and implementing any necessary  contingency  plans.
Based on the  current  status  of the  Company's  Year 2000  efforts,  the costs
associated  with identified Year 2000 issues are not expected to have a material
adverse  effect on the  results of  operations  or  financial  condition  of the
Company. Costs incurred through September 30, 1999 were approximately  $138,000.
This includes Y2K  remediation  efforts and planned system  upgrades  related to
business expansion. Approximately $115,000 of this cost was recognized in fiscal
1999.  Management  currently  estimates  that  remaining  costs  will not exceed
$40,000,  most of which will be  recognized  in the quarter  ended  December 31,
1999.

                                       19

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

                                                       Year Ended September 30,
                                                     --------------------------
(In thousands, except per share data)                    1999         1998
-------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents:
  Cash and due from banks                               $   4,651    $   3,195
  Short-term investments                                       --        1,000
                                                        ---------    ---------
    Total cash and cash equivalents                         4,651        4,195
                                                        ---------    ---------
Securities (note 2):
  Available-for-sale, at fair value
    (amortized cost of $120,996 in 1999
     and $123,317 in 1998)                                116,712      125,225
  Held-to-maturity, at amortized cost
    (fair value of $21,959 in 1999
     and $43,948 in 1998)                                  21,936       43,303
                                                        ---------    ---------
    Total securities                                      138,648      168,528
                                                        ---------    ---------
Real estate mortgage loans held for sale,
  at lower of cost or market value (note 3)                 1,226       13,334
                                                        ---------    ---------
Loans receivable, net(note 3):
  Real estate mortgage loans                              291,199      177,783
  Consumer and commercial business loans                    8,254        7,544
  Allowance for loan losses                                (1,503)      (1,302)
                                                        ---------    ---------
    Total loans receivable, net                           297,950      184,025
                                                        ---------    ---------
Accrued interest receivable (note 4)                        2,750        2,791
Federal Home Loan Bank  ("FHLB") stock                      7,397        6,426
Office properties and equipment, net (note 5)               1,984        1,258
Net deferred income taxes (note 8)                          1,623           --
Other assets                                                1,466        2,467
                                                        ---------    ---------
    Total assets                                        $ 457,695    $ 383,024
                                                        ---------    ---------

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits (note 6)                                     $ 272,974    $ 231,181
  Securities repurchase agreements (note 7)                99,987      107,790
  FHLB advances (note 7)                                   47,948           --
  Net deferred income taxes (note 8)                           --          726
  Other liabilities                                         4,769        1,525
    Total liabilities                                     425,678      341,222
                                                        ---------    ---------
Commitments and contingencies (note 10 and 11)
Stockholders' equity (notes 10 and 11):
  Preferred stock (par value $0.01 per share; 100,000
    shares authorized; none issued or outstanding)             --           --
  Common stock (par value $0.01 per share: 4,500,000
    shares authorized; 3,570,750 shares issued)                36           36
  Additional paid-in capital                               35,225       35,044
  Unallocated common stock  held by employee stock
    ownership plan ("ESOP")                                (1,857)      (2,142)
  Unamortized awards of common stock under management
    recognition plan ("MRP")                                 (621)        (846)
  Treasury stock, at cost (1,332,011 shares in 1999
    and 844,511 shares in 1998)                           (21,866)     (13,189)
  Retained income, substantially restricted                23,652       21,754
  Accumulated other comprehensive (loss) income (note 2)   (2,552)       1,145
                                                        ---------    ---------
    Total stockholders' equity                             32,017       41,802
                                                        ---------    ---------
                                                        $ 457,695    $ 383,024
                                                        ---------    ---------

See accompanying notes to consolidated financial statements.

                                       20

<PAGE>

                 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY 1999 Annual Report

CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

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

                                                                                               Year Ended September 30,
                                                                                      ----------------------------------------
                                                                                         1999           1998           1997
                                                                                         ----           ----           ----
<S>                                                                                  <C>            <C>            <C>
Interest and dividend income:
   Loans                                                                               $ 16,399       $ 13,243       $  8,603
   Securities                                                                             9,869         11,750         11,733
   Other earning assets                                                                     664            482            395
                                                                                       --------       --------       --------
     Total interest and dividend income                                                  26,932         25,475         20,731
                                                                                       --------       --------       --------

Interest expense:
   Deposits (note 6)                                                                      9,543          9,056          7,922
   Securities repurchase agreements                                                       4,530          4,718          1,849
   FHLB advances                                                                            811            248            186
                                                                                       --------       --------       --------
     Total interest expense                                                              14,884         14,022          9,957
                                                                                       --------       --------       --------

       Net interest income                                                               12,048         11,453         10,774

Provision for loan losses (note 3)                                                          235            375            300
                                                                                       --------       --------       --------
       Net interest income after provision for loan losses                               11,813         11,078         10,474
                                                                                       --------       --------       --------

Non-interest income:
   Service charges and fees                                                               1,090            851            760
   Net gain (loss) on sales of real estate mortgage loans held for sale (note 3)            197            371            (17)
   Net gain (loss) on sales of securities (note 2)                                          111            117            (48)
   Other                                                                                    114             71             38
                                                                                       --------       --------       --------
      Total non-interest income                                                           1,512          1,410            733
                                                                                       --------       --------       --------

Non-interest expense:
   Compensation and benefits (note 8)                                                     4,813          3,995          3,411
   Occupancy and equipment                                                                1,226            915            733
   Data processing service fees                                                             646            554            465
   Federal deposit insurance costs                                                          140            131            183
   Other (note 9)                                                                         2,267          1,988          1,473
                                                                                       --------       --------       --------
      Total non-interest expense                                                          9,092          7,583          6,265
                                                                                       --------       --------       --------

        Income before income tax expense                                                  4,233          4,905          4,942

Income tax  expense (note 8)                                                              1,570          2,004          1,990
                                                                                       --------       --------       --------

       Net income                                                                      $  2,663       $  2,901       $  2,952
                                                                                       --------       --------       --------

Earnings per common share (note 11):
       Basic                                                                           $   1.13       $   1.12       $   1.05
       Diluted                                                                             1.11           1.08           1.04
                                                                                       --------       --------       --------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       21

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

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

                                                           Unallocated  Unamortized
                                                             Common      Awards of                      Accumulated
                                                Additional    Stock       Common                           Other          Total
                                       Common    Paid-in      Held        Stock     Treasury  Retained  Comprehensive  Stockholders'
                                       Stock     Capital     by ESOP     Under MRP    Stock    Income   (Loss)Income     Equity

<S>                                   <C>       <C>        <C>         <C>         <C>         <C>         <C>          <C>
Balance at September 30, 1996         $    36   $ 34,596   $ (2,714)   $     --    $     --    $ 17,263    $   (182)    $ 48,999

    Net income                             --         --         --          --          --       2,952          --        2,952
    Dividends paid ($0.21 per share)       --         --         --          --          --        (610)         --         (610)
    Common stock repurchased
      (658,892 shares)                     --         --         --          --      (8,909)         --          --       (8,909)
    Repurchased stock awarded under
      MRP (108,905 shares)                 --         --         --      (1,396)      1,396          --          --           --
    Amortization of MRP awards             --         --         --         271          --          --          --          271
    ESOP shares released for
       allocation (28,566 shares)          --        138        286          --          --          --          --          424
    Change in net unrealized gain
      (loss) on available-for-sale
      securities, net of taxes             --         --         --          --          --          --         751          751
                                      -------   --------   --------    --------    --------    --------    --------     --------

Balance at September 30, 1997              36     34,734     (2,428)     (1,125)     (7,513)     19,605         569       43,878

    Net income                             --         --         --          --          --       2,901          --        2,901
    Dividends paid ($0.28 per share)       --         --         --          --          --        (752)         --         (752)
    Common stock repurchased
      (294,524 shares)                     --         --         --          --      (5,676)         --          --       (5,676)
    Amortization of MRP awards             --         --         --         279          --          --          --          279
    Tax benefits from vested
      MRP awards                           --         62         --          --          --          --          --           62
    ESOP shares released for
       allocation (28,566 shares)          --        248        286          --          --          --          --          534
    Change in net unrealized gain
      (loss) on available-for-sale
      securities, net of taxes             --         --         --          --          --          --         576          576
                                      -------   --------   --------    --------    --------    --------    --------     --------

Balance at September 30, 1998              36     35,044     (2,142)       (846)    (13,189)     21,754       1,145       41,802

    Net income                             --         --         --          --          --       2,663          --        2,663
    Dividends paid ($0.32 per share)       --         --         --          --          --        (765)         --         (765)
    Common stock repurchased
      (492,500 shares)                     --         --         --          --      (8,741)         --          --       (8,741)
    Repurchased stock awarded under
      MRP (5,000 shares)                   --         --         --         (64)         64          --          --           --
    Amortization of MRP awards             --         --         --         289          --          --          --          289
    Tax benefits from vested
      MRP awards                           --         12         --          --          --          --          --           12
    ESOP shares released for
       allocation (28,566 shares)          --        169        285          --          --          --          --          454
    Change in net unrealized gain
      (loss) on available-for-sale
      securities, net of taxes             --         --         --          --          --          --      (3,697)      (3,697)

                                      -------   --------   --------    --------    --------    --------    --------     --------
Balance at September 30, 1999         $    36   $ 35,225   $ (1,857)   $   (621)   $(21,866)   $ 23,652    $ (2,552)    $ 32,017
                                      -------   --------   --------    --------    --------    --------    --------     --------
</TABLE>

See accompanying notes to consolidated financial statements.


                                       22

<PAGE>


                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

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

                                                                                  Year Ended September 30,
                                                                            ------------------------------------
                                                                               1999          1998         1997
                                                                               ----          ----         ----
<S>                                                                       <C>          <C>          <C>
Cash flows from operating activities:
  Net income                                                                $   2,663    $   2,901    $   2,952
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Provision for loan losses                                                    235          375          300
     ESOP and MRP expense                                                         743          813          695
     Depreciation and amortization expense                                        363          264          194
     Amortization of deferred fees, discounts and premiums, net                   350           93         (289)
     Net (gain) loss on sales of real estate mortgage loans held for sale        (197)        (371)          17
     Net (gain) loss on sales of securities                                      (111)        (117)          48
     Other adjustments, net                                                     4,504         (115)        (186)
                                                                            ---------    ---------    ---------
          Net cash provided by operating activities                             8,550        3,843        3,731
                                                                            ---------    ---------    ---------
Cash flows from investing activities:
  Purchases of available-for-sale securities                                  (54,317)     (90,579)     (55,835)
  Proceeds from principal payments, maturities and calls of securities:
     Available-for-sale                                                        38,670       24,113       13,356
     Held-to-maturity                                                          21,346       32,500       18,563
  Proceeds from sales of securities:
     Available-for-sale                                                        17,758       28,308       15,943
     Held-to-maturity                                                              --          630          237
  Disbursements for loan originations                                        (178,136)    (152,638)     (69,169)
  Principal collections on loans                                               38,503       24,181       13,612
  Proceeds from sales of loans                                                 37,407       69,588        2,785
  Purchase of FHLB stock                                                         (971)      (3,421)      (1,940)
  Other investing cash flows                                                     (786)        (437)         239
                                                                            ---------    ---------    ---------
          Net cash used in investing activities                               (80,526)     (67,755)     (62,209)
                                                                            ---------    ---------    ---------
Cash flows from financing activities:
  Net increase in deposits                                                     41,793       23,248       17,258
  Net increase (decrease) in borrowings with
     original terms of three months or less:
       Securities repurchase agreements                                         1,797        3,411       18,503
       FHLB advances                                                           32,948       (6,000)      (2,000)
  Proceeds from longer-term borrowings                                          5,400       50,283       25,329
  Common stock repurchased                                                     (8,741)      (5,676)      (8,909)
  Dividends paid                                                                 (765)        (752)        (610)
                                                                            ---------    ---------    ---------
          Net cash provided by financing activities                            72,432       64,514       49,571
                                                                            ---------    ---------    ---------

Net  increase (decrease) in cash and cash equivalents                             456          602       (8,907)
Cash and cash equivalents at beginning of year                                  4,195        3,593       12,500
                                                                            ---------    ---------    ---------

Cash and cash equivalents at end of year                                    $   4,651    $   4,195    $   3,593
                                                                            ---------    ---------    ---------

Supplemental information:
  Interest paid                                                             $  14,904    $  13,818    $   9,623
  Income taxes paid                                                               741        2,457        1,931
  Mortgage loans transferred to real estate owned                                  --          128          313
                                                                            ---------    ---------    ---------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       23

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

BASIS OF PRESENTATION

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

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

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

CASH EQUIVALENTS

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

SECURITIES

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

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

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

REAL ESTATE MORTGAGE LOANS HELD FOR SALE

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

                                       24

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

ALLOWANCE FOR LOAN LOSSES

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

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

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

MORTGAGE SERVICING RIGHTS

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

INTEREST AND FEES ON LOANS

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

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

REAL ESTATE OWNED

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

OFFICE PROPERTIES AND EQUIPMENT

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

SECURITIES REPURCHASE AGREEMENTS

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

                                       25

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

INCOME TAXES

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

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

TREASURY STOCK

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

PENSION PLANS

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

STOCK-BASED COMPENSATION PLANS

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

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

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

EARNINGS PER SHARE

         The Company  presents both basic earnings per share ("EPS") and diluted
EPS.  Basic EPS  excludes  dilution  and is  computed  by  dividing  net  income
applicable  to common  stock by the  weighted  average  number of common  shares
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could occur if securities or other  contracts to issue common stock (such as the
Company's  stock  options)  were  exercised  or  converted  into common stock or
resulted in the  issuance of common  stock that would then share in the earnings
of the entity.  Diluted EPS is computed by dividing  net income by the  weighted
average  number of common  shares  outstanding  for the period plus common stock
equivalents. Unallocated ESOP shares that have not been committed to be released
to participants are excluded from outstanding shares in computing both basic and
diluted EPS.

SEGMENT INFORMATION

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

                                       26

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report


(2)      SECURITIES

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

           The following is a summary of securities at September 30, 1999:
<TABLE>
<CAPTION>

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

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

<TABLE>
<CAPTION>

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


         Mortgage-backed  and  other  debt  securities  at  September  30,  1999
consisted of fixed-rate securities and adjustable-rate securities with amortized
costs of $122.7 million and $19.4 million,  respectively,  and weighted  average
yields of 6.94% and 6.46%,  respectively.  Fixed-rate and  adjustable-rate  debt
securities  at September  30, 1998  totaled  $129.0  million and $36.7  million,
respectively, with weighted average yields of 7.18% and 6.60%, respectively.

         Mortgage-backed  securities primarily include securities  guaranteed by
Ginnie  Mae,  Fannie Mae and  Freddie  Mac with total  amortized  costs of $74.6
million,  $20.6  million and $4.8 million,  respectively,  at September 30, 1999
($69.7 million, $34.7 million and $7.8 million,  respectively,  at September 30,
1998).

         The net  unrealized  loss on  available-for-sale  securities  was  $4.3
million  ($2.6  million  after  taxes) at  September  30,  1999,  compared to an
unrealized  gain of $1.9 million  ($1.1  million  after taxes) at September  30,
1998.  Changes in unrealized  holding gains and losses  resulted in an after-tax
(decrease)  increase in  stockholders'  equity of ($3.7)  million,  $576,000 and
$751,000 during fiscal 1999, 1998 and 1997, respectively. These gains and losses
will  continue  to  fluctuate  based on  changes  in the  portfolio  and  market
conditions.

                                       27

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

(In thousands)                        1999         1998         1997
---------------------------------------------------------------------
Available-for-sale securities:
  Gains                              $ 154        $ 278        $  47
  Losses                               (43)        (175)         (97)
                                     -----        -----        -----
                                       111          103          (50)
                                     -----        -----        -----

Held-to-maturity securities:
  Gains                               $ --        $  16        $   2
  Losses                                --           (2)          --
                                     -----        -----        -----
                                        --           14            2
                                     -----        -----        -----
Net gain (loss)                      $ 111        $ 117        $ (48)
                                     -----        -----        -----

         The  held-to-maturity  securities  sold in  fiscal  1998 and 1997  were
mortgage-backed  securities  with an amortized  cost of $616,000  and  $235,000,
respectively, for which the Company had collected more than 85% of the principal
purchased.  Sales  in  these  circumstances  are  deemed  to  be  equivalent  to
maturities and, accordingly,  do not call into question the intent to hold other
debt securities to maturity in the future.

         The following is a summary of the amortized cost and fair value of U.S.
Government and Agency  securities at September 30, 1999, by remaining  period to
contractual  maturity  (ignoring  earlier call dates, if any). Actual maturities
may differ from contractual maturities because certain security issuers have the
right to call or prepay their obligations.

                         Available-for-Sale            Held-to-Maturity
                        ----------------------      ----------------------
                        Amortized       Fair        Amortized      Fair
(In thousands)            Cost          Value         Cost         Value
--------------------------------------------------------------------------
One to five years       $    --       $    --       $   500       $   494
Five to ten years         2,000         2,021            --            --
Over ten years           39,527        38,135            --            --
                        -------       -------       -------       -------

     Total              $41,527       $40,156       $   500       $   494
                        -------       -------       -------       -------

(3)      LOANS

         A summary of loans receivable at September 30 follows:
<TABLE>
<CAPTION>

                                                              1999              1998
                                                              ----              ----
                                                                   (In Thousands)
<S>                                                       <C>              <C>
Real estate mortgage loans:
          Residential properties:
               One- to four-family                          $ 244,466        $ 153,891
               Multi- family                                   16,264            7,846
          Commercial properties                                26,753           12,766
          Land loans                                            1,502              932
          Construction loans                                    2,812            2,613
          Construction loans in process                        (1,672)            (743)
          Deferred loan origination costs (fees), net           1,074              478
                                                            ---------        ---------
                                                              291,199          177,783
                                                            ---------        ---------
Consumer loans:
          Home equity                                           4,574            3,678
          Personal                                              1,483            1,447
          Other                                                 1,117            1,224
                                                            ---------        ---------
                                                                7,174            6,349
Commercial business loans                                       1,080            1,195
                                                            ---------        ---------
                                                                8,254            7,544
                                                            ---------        ---------

               Total loans receivable                         299,453          185,327

Allowance for loan losses                                      (1,503)          (1,302)
                                                            ---------        ---------

               Total loans receivable, net                  $ 297,950        $ 184,025
                                                            ---------        ---------
</TABLE>

         Gross  loans   receivable   at   September   30,  1999   consisted   of
adjustable-rate  loans of $209.2 million and  fixed-rate  loans of $90.9 million
with weighted average yields of 7.25% and 7.41%,  respectively.  Adjustable-rate
and  fixed-rate  loans at September  30, 1998 totaled  $142.2  million and $43.4
million with weighted average yields of 7.60% and 7.99%,  respectively.  One- to
four-family  residential  mortgage  loans at September 30, 1999 and 1998 include
advances  under home equity  lines of credit of $3.2  million and $4.6  million,
respectively,  and cooperative apartment loans of $3.7 million and $4.5 million,
respectively.

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

                                       28

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

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

(In thousands)                       1999           1998           1997
--------------------------------------------------------------------------
Balance at beginning of year       $ 1,302        $ 1,093        $   937
Provision for losses                   235            375            300
Charge-offs                            (43)          (193)          (157)
Recoveries                               9             27             13
                                   -------        -------        -------

Balance at end of year             $ 1,503        $ 1,302        $ 1,093
                                   -------        -------        -------

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

(In thousands)                       1999           1998           1997
--------------------------------------------------------------------------
Real estate mortgage loans:
  One- to four-family              $   347        $   515        $   389
  Commercial                           305            203            211
  Land                                 ---            ---            250
  Construction                         ---            ---            279
Consumer loans                         103             35              9
                                   -------        -------        -------

     Total                         $   755        $   753        $ 1,138
                                   -------        -------        -------

         If all interest  payments on the foregoing  non-accrual  loans had been
made during the respective years in accordance with the loan  agreements,  gross
interest  income of $69,000,  $64,000 and $107,000 would have been recognized in
fiscal 1999, 1998 and 1997,  respectively,  compared to interest income actually
recognized of $42,000, $48,000 and $15,000, respectively.

         The  Company's  impaired  loans  consisted  of  non-accrual  commercial
mortgage  loans with a recorded  investment  totaling  $305,000  and $203,000 at
September   30,   1999  and  1998,   respectively.   All  of  these  loans  were
collateral-dependent  loans measured based on the fair value of the  collateral.
The  Company  determines  the need for an  allowance  for loan  impairment  on a
loan-by-loan  basis.  At September 30, 1999 and 1998,  such an allowance was not
required  with respect to the  Company's  impaired  loans  primarily  due to the
sufficiency of the related  collateral  values.  The Company's  average recorded
investment in impaired loans was approximately  $201,000,  $438,000 and $799,000
for the years ended  September 30, 1999, 1998 and 1997,  respectively.  Interest
collections  and income  recognized  on  impaired  loans  (while such loans were
considered impaired) were insignificant during fiscal 1999, 1998 and 1997.

         At September 30, 1998, other assets includes  single-family real estate
owned properties with net carrying values of $305,000. There were no real estate
owned properties at September 30, 1999. Provisions for losses and other activity
in the  allowance  for real estate  owned losses were  insignificant  during the
years ended September 30, 1999, 1998 and 1997.

         The Company has sold  certain real estate  mortgage  loans and retained
the related  servicing rights.  The principal  balances of these serviced loans,
which are not included in the accompanying  consolidated balance sheets, totaled
$88.4 million,  $81.7 million and $15.5 million at September 30, 1999,  1998 and
1997,  respectively.  These  amounts  include  loans sold with  recourse of $1.3
million,  $2.0 million and $2.7 million at the respective  dates,  for which the
Association does not expect to incur any significant  losses.  Real estate loans
held for sale at September 30, 1999 and 1998 had total  amortized  costs of $1.2
million and $13.3  million,  respectively,  which  approximated  market value at
those dates.

         During the years ended  September  30, 1999 and 1998,  the Company sold
$37.4 million and $69.8 million,  respectively,  of real estate  mortgage loans,
primarily  with  servicing  retained,  and  recognized net gains of $197,000 and
$371,000,   respectively,   on  such  sales  (sales  in  fiscal  1997  were  not
significant).  The net  gains in fiscal  1999 and 1998  includes  the  effect of
capitalizing mortgage servicing assets of $362,000 and $594,000, respectively at
the time of sale,  in  accordance  with SFAS No. 125. At September  30, 1999 and
1998, the net carrying value of capitalized  mortgage  servicing rights included
in other assets was $548,000 and $538,000, respectively, which approximated fair
value.  Amortization  of mortgage  servicing  rights was  $352,000  and $56,000,
respectively, for the years ended September 30, 1999 and 1998.

(4)      ACCRUED INTEREST RECEIVABLE

         A summary of accrued interest receivable at September 30 follows:

(In thousands)                     1999        1998
-----------------------------------------------------
Loans                            $1,580       $1,100
Mortgage-backed securities          582          640
Other securities                    588        1,051
                                 ------       ------

     Total                       $2,750       $2,791
                                 ------       ------

(5)      OFFICE PROPERTIES AND EQUIPMENT

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

(In thousands)                             1999          1998
---------------------------------------------------------------
Land                                    $    45        $    45
Buildings                                   249            246
Leashold improvements                       756            591
Furniture, fixtures and equipment         3,268          2,344
                                        -------        -------
                                          4,318          3,226

Less accumulated depreciation
  and amortization                       (2,334)        (1,968)
                                        -------        -------

     Total office properties and
       equipment, net                   $ 1,984        $ 1,258
                                        -------        -------


                                       29
<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 (6)     DEPOSITS

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

                                              1999              1998
                                       ----------------   ----------------
                                         AMOUNT   RATE     Amount    Rate
                                         ------   ----     ------    ----
                                                (Dollars in Thousands)

Checking                               $ 10,769           $  5,423
NOW                                      24,708   1.06%     21,123   1.00%
Money market                             33,429   3.19      27,613   3.64
Regular savings                          50,776   2.23      43,492   2.43
Club                                      1,480   2.23       1,282   2.43
                                       --------           --------
                                        121,162   2.06      98,933   2.34
                                       --------           --------

Savings certificates by
  remaining term to
  contractual maturity:
    Within one year                     107,317   4.94      84,261   5.28
    After one but within two years       33,490   5.23      36,555   5.72
    After two but within three years      5,157   5.36       5,140   5.52
    After three years                     5,848   5.38       6,292   5.78
                                       --------           --------
                                        151,812   5.04     132,248   5.43
                                       --------           --------
    Total deposits                     $272,974   3.71%   $231,181   4.10%
                                       --------           --------

         Savings  certificates  issued  in  denominations  of  $100,000  or more
totaled  $22.2  million  and  $16.5  million  at  September  30,  1999 and 1998,
respectively.  The FDIC generally insures depositor accounts up to $100,000,  as
defined in the applicable regulations.

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

                                              1999         1998        1997
                                              ----         ----        ----
                                                     (In Thousands)

NOW, club and money market accounts          $1,286        $ 841       $ 862
Regular savings accounts                        949        1,092       1,166
Savings certificate accounts                  7,308        7,123       5,894
                                         -----------   ----------  ----------
          Total interest expense             $9,543      $ 9,056     $ 7,922
                                         -----------   ----------  ----------

(7)      BORROWINGS

SECURITIES REPURCHASE AGREEMENTS

         In securities repurchase agreements,  the Company borrows funds through
the transfer of debt  securities to the FHLB of New York, as  counterparty,  and
concurrently agrees to repurchase the identical securities at a fixed price on a
specified date.  Repurchase agreements are collateralized by the securities sold
and, in certain cases, by additional margin  securities.  During the years ended
September  30, 1999,  1998 and 1997,  the  Company's  average  borrowings  under
repurchase  agreements  with the  FHLB of New York  were  $79.8  million,  $81.9
million  and $32.1  million,  respectively,  and the maximum  month-end  balance
outstanding was $101.0 million, $119.9 million and $54.1 million, respectively.

         Information  concerning  outstanding  securities  repurchase agreements
with the FHLB of New York as of  September  30, 1999 and 1998 is  summarized  as
follows:

<TABLE>
<CAPTION>

                                                                   Accrued      Weighted     Fair Value
                                                                   Interest     Average     of Collateral
Remaining term to Final Maturity (1)                   Amount     Payable (2)    Rate        Securities (3)
-----------------------------------------------------------------------------------------------------------
                                                                    (Dollars in Thousands)
SEPTEMBER 30, 1999
<S>                                                  <C>           <C>            <C>        <C>
Within 30 days                                       $  33,975     $    --        5.29%      $  35,403
After one but within three years                        25,600         156        5.93          28,436
After three but within five years                       10,000          41        5.48          14,940
After five years                                        30,412         210        5.47          28,065
                                                     ---------     -------                   ---------
     Total                                           $  99,987     $   407        5.64%      $ 106,844
                                                     ---------     -------                   ---------

SEPTEMBER 30, 1998
Within 30 days                                       $  32,178     $   110        5.57%      $  37,243
After 30 days but within one year                        9,600          57        5.76          10,933
After one but within three years                        13,100          10        5.81          12,237
After three but within five years                       22,500         179        5.80          24,694
After five years                                        30,412         200        5.47          33,387
                                                     ---------     -------                   ---------
     Total                                           $ 107,790     $   556        5.64%      $ 118,494
                                                     ---------     -------                   ---------
<FN>

---------------------
(1)   The weighted  average  remaining term to final maturity was  approximately
      3.5 years  and 3.8 years at  September  30,  1999 and 1998,  respectively.
      Certain securities  repurchase  agreements are callable by the FHLB of New
      York, prior to the maturity date. The weighted  average  remaining term to
      maturity, giving effect to earlier call dates, was approximately 1.3 years
      at  September  30,  1999.
(2)   Included in other liabilities in the consolidated balance sheets.
(3)   Represents the fair value of the mortgage-backed and other debt securities
      which  were  transferred  to  the  counterparty,   plus  accrued  interest
      receivable  of $879,000 and $1.1  million at September  30, 1999 and 1998,
      respectively.  These securities consisted of available-for-sale securities
      and held-to-maturity securities with fair values of $98.9 million and $7.1
      million,  respectively,  at  September  30, 1999 (100.5  million and $16.9
      million, respectively, at September 30, 1998).

</FN>
</TABLE>
                                       30

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

         At September 30, 1999, the Company's  "amount at risk" under securities
repurchase agreements was approximately $6.5 million. This amount represents the
excess of (i) the carrying amount,  or market value if higher, of the securities
transferred to the FHLB of New York plus accrued  interest  receivable over (ii)
the amount of the repurchase liability plus accrued interest payable.

FHLB ADVANCES

         As a  member  of the  FHLB  of  New  York,  the  Association  may  have
outstanding  FHLB  borrowings  in a  combination  of term advances and overnight
funds of up to 25% of its total  assets,  or  approximately  $113.8  million  at
September 30, 1999.  Borrowings are secured by the  Association's  investment in
FHLB stock and by a blanket  security  agreement.  This  agreement  requires the
Association to maintain as collateral  certain  qualifying  assets  (principally
securities and residential mortgage loans) not otherwise pledged.

         FHLB and weighted  average  interest  rates at  September  30, 1999 are
summarized  as follows,  by  remaining  period to  maturity  (there were no such
borrowings at September 30, 1998):

(Dollars in thousands)        Amount     Rate
-----------------------------------------------

FHLB advances maturing:
  Within 30 days             $ 32,948     5.49%
  Over 5 years                 15,000     4.36
                             --------
    Total                    $ 47,948     5.19%
                             --------


         The  weighted  average  period to maturity  date for the FHLB  advances
outstanding at September 30, 1999 was 2.9 years,  with a weighted average period
to date of 0.3 years.

(8)      INCOME TAXES

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

(In thousands)                   1999          1998          1997
-------------------------------------------------------------------

Current tax expense:
  Federal                       $1,311        $1,404        $1,177
  State                            113           314           247
                                ------        ------        ------
                                 1,424         1,718         1,424
                                ------        ------        ------

Deferred tax expense:
  Federal                          105           207           413
  State                             41            79           153
                                ------        ------        ------
                                   146           286           566
                                ------        ------        ------

Total income tax expense        $1,570        $2,004        $1,990
                                ------        ------        ------


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

(Dollars in thousands)                       1999        1998        1997
--------------------------------------------------------------------------

Tax at Federal statutory rate              $ 1,439     $ 1,668     $ 1,680
New York State income taxes, net
  of Federal tax benefit                       102         259         264
Other reconciling items, net                    29          77          46
                                           -------     -------     -------
Actual income tax expense                  $ 1,570     $ 2,004     $ 1,990
                                           -------     -------     -------

Effective income tax rate                     37.1%       40.9%       40.3%
                                              -----       -----       -----

         On March 31, 1999 the  Association  established  the REIT at which time
$117.7 million in real estate loans were transferred from the Association to the
REIT.  At September 30, 1999,  $120.3  million in real estate loans were held by
the REIT. The decrease in the effective tax rate reflects the ancillary benefits
from the REIT.

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

(In thousands)                                        1999            1998
------------------------------------------------------------------------------

Deferred tax liabilities:
  Net unrealized gain on
    available-for-sale securities                  $    --          $   763
  Mortgage servicing assets                            224              220
  Other taxable temporary differences                  595              371
                                                   -------          -------
    Total deferred tax liabilities                     819            1,354
                                                   -------          -------
Deferred tax assets:
  Net unrealized loss on
    available-for-sale securities                    1,732               --
  Allowance for loan losses                            615              533
  Other deductible temporary differences                95               95
                                                   -------          -------
    Total deferred tax assets                        2,442              628
                                                   -------          -------

  Net deferred tax (asset) liability               $(1,623)         $   726
                                                   -------          -------

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

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

                                       31

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

         At September 30, 1999, the  Association's  base-year  Federal and State
tax bad debt  reserves  were  $3.0  million  and  $10.1  million,  respectively.
Deferred  tax  liabilities  have  not  been  recognized  with  respect  to these
reserves,  since the  Company  does not expect  that these  amounts  will become
taxable in the foreseeable  future.  Under the tax laws as amended,  events that
would  result in  taxation of these  reserves  include  (i)  redemptions  of the
Association's  stock or certain excess  distributions to the Holding Company and
(ii)  failure  of the  Association  to retain a thrift  charter or  continue  to
maintain a specified  qualifying-assets  ratio and meet other thrift  definition
tests for New York State tax purposes.  At September 30, 1999, the Association's
unrecognized  deferred tax liabilities with respect to its Federal and State tax
bad debt reserves totaled $1.7 million.

(9)      OTHER NON-INTEREST EXPENSE

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

(In thousands)                       1999         1998          1997
----------------------------------------------------------------------
Professional services              $  435        $  480        $  301
Advertising and promotion             398           258           246
Telephone and postage                 195           134           107
Stationery and printing               154           149            93
Checking account expenses             122           107           100
Insurance and surety bond premiums    105           128           107
Correspondent bank fees               107           105           113
Other                                 751           627           406
                                   ------        ------        ------

     Total                         $2,267        $1,988        $1,473
                                   ------        ------        ------


(10)     EMPLOYEE BENEFIT AND STOCK COMPENSATION PLANS

PENSION BENEFITS

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

         The following table sets forth changes in benefit  obligation,  changes
in plan  assets  and the funded  status of the  Association's  pension  plan and
amounts recognized in the consolidated balance sheets at September 30:


(In thousands)                                    1999           1998
------------------------------------------------------------------------

CHANGE IN BENEFIT OBLIGATION:
  Projected benefit obligation -
    beginning of year                          $   1,378      $   1,224
  Service cost                                       101             73
  Interest Cost                                       94             97
  Actuarial loss                                     334            106
  Benefits paid                                      (94)          (122)
                                               ---------      ---------
  Projected benefit obligation -
    end of year                                    1,813          1,378
                                               ---------      ---------
CHANGE IN PLAN ASSETS:
  Plan assets at fair value -
    beginning of year                              2,093          1,963
  Actuarial return on plan assets                    327            252
  Employer contributions                              --             --
  Benefits paid                                      (94)          (122)
  Plan assets at fair value -
    end of year                                    2,326          2,093
                                               ---------      ---------

Funded status at end of year                         513            715
Unrecognized net actuarial (gain) loss                38           (142)
Unrecognized prior service cost                     (235)          (252)

  Prepaid pension cost                         $     316      $     321
                                               ---------      ---------


         The  components  of net  pension  expense  are as follows for the years
ended September 30:

(In thousands)                                     1999       1998      1997
------------------------------------------------------------------------------

Service cost (benefits earned during the year)     $ 101      $  73     $  72
Interest cost on projected benefit obligation         94         97        94
Actual return on plan assets                        (173)      (176)     (155)
Net amortization and deferral                        (17)       (23)      (13)
                                                   -----      -----     -----
     Net pension (credit) expense                  $   5      $ (29)    $  (2)
                                                   -----      -----     -----


         The projected  benefit  obligations  at September 30, 1999 and 1998 was
computed using discount rates of 7.0%,  respectively,  and rates of compensation
increases of 4.0% and 4.5%, respectively.  The expected long-term rate of return
on plan assets was 8.5%.

         The  Company  entered  into  a  non-qualified   Supplemental  Executive
Retirement  Agreement with an executive  officer,  effective January 1, 1997, to
provide retirement  benefits in addition to the benefits provided by the pension
plan.  The  projected  benefit  obligation  at  September  30, 1999 and 1998 was
approximately  $257,000  and  $175,000,  respectively.  This amount was computed
using a  discount  rate of 7.0%  and a rate of  compensation  increase  of 4.0%.
Pension expense for this agreement  amounted to $41,000 in fiscal 1999,  $45,000
in fiscal 1998 and $27,000 in fiscal 1997.


                                       32

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

SAVINGS PLAN

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

EMPLOYEE STOCK OWNERSHIP PLAN

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

         Shares purchased by the ESOP are held in a suspense account by the plan
trustee  until  allocated to  participant  accounts.  Shares  released  from the
suspense  account are allocated to  participants  on the basis of their relative
compensation.  Participants  become vested in the allocated shares over a period
not  to  exceed  five  years.  Any  forfeited  shares  are  allocated  to  other
participants  in the same  proportion as  contributions.  A cumulative  total of
99,981 shares have been allocated to  participants  through  September 30, 1999.
Compensation  expense  recognized  with  respect  to these  shares  amounted  to
$454,000,  $534,000 and $424,000 in fiscal  1999,  1998 and 1997,  respectively,
based on the average fair value of the Holding  Company's  common stock for each
period.  The cost of the 185,679  shares which have not yet been committed to be
released to  participant  accounts is reflected as a reduction to  stockholders'
equity ($1.9 million at September 30, 1999).  The fair value of these shares was
approximately $3.3 million at that date.

STOCK OPTION AND INCENTIVE PLAN

         On October 30, 1996, the  stockholders  approved the Yonkers  Financial
Corporation 1996 Stock Option and Incentive Plan. Under the plan, 357,075 shares
of  authorized  but  unissued  Holding  Company  common  stock are  reserved for
issuance to employees and non-employee directors upon option exercises.  Options
may be either  non-qualified  stock  options or incentive  stock  options.  Each
option  entitles the holder to purchase one share of common stock at an exercise
price equal to the fair market value of the stock on the grant date.  An initial
grant of 264,951  options was made,  effective  October 30, 1996, at an exercise
price of $12.875 per share.  Options were granted later in fiscal 1997 for 3,000
shares at an  exercise  price of  $16.625  per share,  in fiscal  1998 for 3,000
shares at an  exercise  price of $21.625 per share and in fiscal 1999 for 10,563
shares at an exercise  price of $14.125 per share.  All options  granted  have a
ten-year  term and vest  ratably  over five  years.  No options  were  exercised
through  September 30, 1999 and the 281,514  outstanding  options had a weighted
average  remaining  term of  approximately  7.2 years.  At September 30, 1999, a
total of 107,780  options  with a weighted  average  exercise  price $12.97 were
exercisable and 75,561 reserved shares were available for future option grants.

         Options were granted at exercise  prices equal to the fair value of the
common stock at the grant dates. Therefore, in accordance with the provisions of
APB Opinion No. 25 related to fixed stock options,  no  compensation  expense is
recognized   with   respect   to   options   granted.   Under  the   alternative
fair-value-based  method  defined in SFAS No.  123,  the fair value of all fixed
stock  options on the grant date would be recognized as expense over the vesting
period.  The estimated  per-share fair value of options  granted in fiscal 1999,
1998 and 1997 was $5.57,  $6.32 and  $4.50,  respectively,  estimated  using the
Black-Scholes  option-pricing  model with assumptions  approximately as follows:
dividend yield of 1.8% in fiscal 1999 and 1998 and 1.7% in fiscal 1997; expected
volatility  rate of 38.3% in  fiscal  1999 and 1998 and  25.3% in  fiscal  1997;
risk-free  interest rate of 4.6% in fiscal 1999, 6.1% in fiscal 1998 and 6.7% in
fiscal 1997; and expected option life of 7.0 years.  Had the Company applied the
fair-value-based  method of SFAS No. 123 to the options  granted,  it would have
reported net income, basic EPS and diluted EPS of $2.5 million, $1.05 and $1.03,
respectively,  in fiscal 1999; $2.7 million, $1.05 and $1.01,  respectively,  in
fiscal 1998 and $2.8 million, $0.99, and $0.98, respectively, in fiscal 1997.

MANAGEMENT RECOGNITION PLAN

         On October  30,  1996,  the  stockholders  also  approved  the  Yonkers
Financial  Corporation  1996  MRP.  The  purpose  of  this  plan  is to  provide
directors,  officers and employees with a proprietary interest in the Company in
a manner  designed to  encourage  such  individuals  to remain with the Company.
Awards  granted  under this plan vest  ratably  over five years from the date of
grant. The Holding Company completed the funding of the plan in November 1996 by
purchasing  142,830 shares of common stock in the open market at a total cost of
approximately $1.8 million. MRP awards for 5,000 of these shares were awarded in
fiscal  1999 and  108,905 of these  shares  were made in fiscal  1997,  with the
remaining  28,925  purchased shares included in treasury stock and available for
future awards.  Unearned  compensation of $1.5 million was recorded with respect
to the shares  awarded,  and $289,000,  $279,000 and $271,000 of that amount was
amortized to compensation expense in fiscal 1999, 1998 and 1997, respectively.

                                       33

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(11)     STOCKHOLDERS' EQUITY

CONVERSION AND STOCK OFFERING

         Concurrent  with the Conversion on April 18, 1996, the Holding  Company
sold  3,570,750  shares of its  common  stock in a  subscription  and  community
offering at a price of $10 per share,  for net proceeds of $34.6  million  after
deducting  conversion  costs of $1.1  million.  The Holding  Company  used $17.3
million of the net  proceeds  to acquire all of the common  stock  issued by the
Association in the Conversion.  Total common shares issued and outstanding  were
3,020,763 at September 30, 1997 (net of 549,987 treasury  shares),  2,726,239 at
September 30, 1998 (net of 844,511  treasury  shares) and 2,238,739 at September
30, 1999 (net of 1,332,011 treasury shares).

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

EARNINGS PER SHARE

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

         The  following  is a summary  of the number of shares  utilized  in the
Company's EPS  calculations  for the years ended  September  30, 1999,  1998 and
1997. For purposes of computing basic EPS, net income applicable to common stock
equaled net income for each of the periods presented.

(In thousands)                           1999        1998        1997
----------------------------------------------------------------------
Weighted average common shares
  outstanding for computation of
  basic EPS(1)                          2,362       2,598       2,815

Common-equivalent shares due
  to the dilutive effect of stock
  options and MRP awards(2)                46          77          35
                                        -----       -----       -----

Weighted average common shares
  for computation of diluted EPS        2,408       2,675       2,850
                                        -----       -----       -----

-----------------
(1)   Excludes  unvested  MRP awards and  unallocated  ESOP shares that have not
      been  committed  to be  released.
(2)   Computed  using the  treasury  stock method.

COMPREHENSIVE INCOME

         The Company has adopted  Statement  of Financial  Accounting  Standards
("SFAS") No. 130, "Reporting  Comprehensive Income," which establishes standards
for  reporting  and  display of  comprehensive  income (and its  components)  in
financial statements.  The standard does not, however, specify when to recognize
or how to measure items that make up comprehensive income.  Comprehensive income
represents net income and certain  amounts  reported  directly in  stockholders'
equity,  such as the net  unrealized  gain or loss on  securities  available for
sale. While SFAS No. 130 does not require a specific  reporting  format, it does
require that an enterprise  report an amount  representing  total  comprehensive
income for the period.  The company has  reported its  comprehensive  income for
fiscal  1999,  1998  and  1997 in the  consolidated  statements  of  changes  in
stockholders' equity.

         The  company's  other  comprehensive  income  or loss  (other  than net
income),   which  is   attributable   to  gains   and   losses   on   securities
available-for-sale,  is summarized as follows for the years ended  September 30:

(In thousands)                    1999           1998          1997
----------------------------------------------------------------------
Net unrealized holding
  (losses) gains arising
  during the period             $(6,192)       $   958        $ 1,253
Related income tax effect         2,495           (382)          (502)
                                -------        -------        -------

Other comprehensive
  (loss) income                 $(3,697)       $   576        $   751
                                -------        -------        -------


                                       34

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

CAPITAL DISTRIBUTIONS

         The  Association may not declare or pay cash dividends on or repurchase
any of its  shares  of  common  stock if the  effect  thereof  would  cause  its
stockholder's   equity  to  be  reduced  below  applicable   regulatory  capital
requirements  or the  amount  required  to be  maintained  for  the  liquidation
account.  The  OTS  capital  distribution   regulations  applicable  to  savings
institutions  (such as the  Association)  that  meet  their  regulatory  capital
requirements,  generally  limit dividend  payments in any year to the greater of
(i) 100% of  year-to-date  net income plus an amount that would  reduce  surplus
capital by one-half or (ii) 75% of net income for the most recent four quarters.
Surplus  capital is the excess of actual  capital at the  beginning  of the year
over the institution's  minimum regulatory capital requirement.  The Association
paid $4.0 million and $4.8 million in dividends to the Holding Company in fiscal
1999 and 1998, respectively (none in fiscal 1997 and 1996).

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

         Pursuant to approvals received from the OTS, through September 30, 1999
the Holding  Company has  repurchased  1,445,916  shares of common stock for its
treasury (or approximately 40.5% of its common stock issued).  These repurchases
were made in open market  transactions,  at a total cost of $23.3  million or an
average of approximately  $16.13 per share. These repurchases have been used, in
part, to fund shares awarded under the MRP described in note 10.

REGULATORY CAPITAL REQUIREMENTS

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

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

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

         Management  believes  that,  as of  September  30,  1999 and 1998,  the
Association  met all  capital  adequacy  requirements  to which  it is  subject.
Further,  the most recent OTS  notification  categorized  the  Association  as a
well-capitalized  institution under the prompt  corrective  action  regulations.
There have been no conditions or events since that  notification that management
believes have changed the Association's capital classification.

         The following is a summary of the Association's  actual capital amounts
and ratios as of September 30, 1999 and 1998,  compared to the OTS  requirements
for  minimum  capital  adequacy  and for  classification  as a  well-capitalized
institution:

<TABLE>
<CAPTION>

                                                         Minimum Capital           Classification as
                              ASSOCIATION ACTUAL             Adequacy               Well Capitalized
                            ----------------------    ---------------------      ----------------------
(Dollars in thousands)       AMOUNT        RATIO       AMOUNT        RATIO        AMOUNT         RATIO
-------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1999
<S>                         <C>             <C>        <C>            <C>        <C>              <C>
Tangible capital            $ 33,744        7.4%       $  6,863       1.5%            N/A         N/A
Tier I (core)capital          33,744        7.4          18,300       4.0        $ 22,876         5.0%
Risk-based capital:
     Tier I                   33,744       17.2             N/A       N/A          11,784         6.0
     Total                    36,520       18.0          15,711       8.0          19,639        10.0

SEPTEMBER 30, 1998
Tangible capital            $ 35,218        9.3%       $  5,654       1.5%            N/A         N/A
Tier I (core)capital          35,218        9.3          11,308       3.0        $ 18,845         5.0%
Risk-based capital:
     Tier I                   35,218       25.1             N/A       N/A           8,427         6.0
     Total                    36,520       26.0          11,236       8.0          14,045        10.0

</TABLE>

                                       35

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(12)    COMMITMENTS AND CONTINGENCIES

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

         The Company had  outstanding  commitments  to originate  loans of $52.1
million and unadvanced  lines of credit extended to customers of $4.4 million at
September 30, 1999 ($18.3 million and $3.7 million,  respectively,  at September
30, 1998).  Although these  contractual  amounts represent the Company's maximum
potential exposure to credit loss, they do not necessarily represent future cash
requirements  since certain  commitments  and lines of credit may expire without
being funded and others may not be fully drawn upon.  Substantially all of these
commitments  and lines of credit  have been  provided  to  customers  within the
Company's primary lending area described in note 3.

         Commitments to originate loans are legally  binding  agreements to lend
to a customer as long as there is no violation of any condition  established  in
the contract.  Commitments have fixed expiration dates (generally  ranging up to
45 days) or other  termination  clauses  and may require the payment of a fee by
the  customer.  The Company  evaluates  each  customer's  creditworthiness  on a
case-by-case  basis. The amount of collateral,  if any,  obtained by the Company
upon  extension of credit,  is based on  management's  credit  evaluation of the
borrower.  The  Company's  loan  origination  commitments  at September 30, 1999
include $5.8 million for fixed-rate loans with interest rates ranging from 6.63%
to 8.26%.

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

         At September  30, 1999,  the Company had a commitment  to sell mortgage
loans of $1.2 million. Loan sale commitments are used from time to time in order
to limit the interest rate and market risk  associated  with loans held for sale
and  commitments  to  originate  loans  held for  sale.  Risks  associated  with
commitments  to sell  mortgage  loans  include  the  possible  inability  of the
counterparties  to meet the contract terms, or of the Company to originate loans
to fulfill the contracts.  The Company  controls its risk by entering into these
agreements only with highly-rated counterparties

LEASE COMMITMENTS

         The Company is obligated under non-cancelable leases for certain of its
banking premises.  Rental expense under these leases was $420,000,  $255,000 and
$203,000 for the years ended September 30, 1999, 1998 and 1997, respectively. At
September  30,  1999,  the  future  minimum  rental  payments  under  the  lease
agreements  for the fiscal  years  ending  September  30 are  $446,000  in 2000,
$357,000 in 2001, $280,000 in 2002, $169,000 in 2003 and $74,000 in 2004.

LEGAL PROCEEDINGS

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

(13)     FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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

                                       36

<PAGE>


                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

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

<TABLE>
<CAPTION>
                                                        1999                      1998
                                                -------------------------------------------------
                                                Carrying      Fair         Carrying       Fair
(In millions)                                    Amount       Value         Amount        Value
-------------------------------------------------------------------------------------------------

FINANCIAL ASSETS:
<S>                                             <C>           <C>           <C>          <C>
  Cash and due from banks                       $   4.7       $   4.7       $   3.2      $   3.2
  Short-term investments                             --            --           1.0          1.0
  Securities                                      138.6         138.7         168.5        169.2
  Real estate mortgage loans held for sale          1.2           1.2          13.3         13.4
  Loans receivable                                298.0         291.1         184.0        186.9
  Accrued interest receivable                       2.8           2.8           2.8          2.8
  FHLB stock                                        7.4           7.4           6.4          6.4

FINANCIAL LIABILITIES:
  Savings certificate accounts                    151.8         151.1         132.3        133.9
  Other deposit accounts                          121.2         121.2          98.9         98.9
  Borrowings                                      147.9         142.6         107.8        109.6

</TABLE>


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

SECURITIES

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

LOANS

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

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

DEPOSIT LIABILITIES

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

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

BORROWINGS

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

OTHER FINANCIAL INSTRUMENTS

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

         The fair  values of the loan  origination  commitments  and  unadvanced
lines of credit  described in note 12 were estimated based on an analysis of the
interest  rates and fees currently  charged to enter into similar  transactions,
considering the remaining terms of the instruments and the  creditworthiness  of
the  potential  borrowers.  At September  30, 1999 and 1998,  the fair values of
these financial instruments approximated the related carrying amounts which were
not significant.

(14)     RECENT ACCOUNTING PRONOUNCEMENTS

         In February 1998, the FASB issued SFAS No.132,  EMPLOYERS'  DISCLOSURES
ABOUT  PENSIONS  AND  OTHER  POSTRETIREMENT  BENEFITS,  which  standardizes  the
disclosure  requirements for these benefits;  requires additional information on
changes  in the  benefit  obligations  and  fair  values  of  plan  assets;  and
eliminates certain present  disclosure  requirements.  This statement  addresses
disclosure  only and does not change any  measurement or recognition  provisions
provided in previous statements.  The Company implemented this statement for the
year ended September 30, 1999. See note 10.

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

                                       37

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


         In  October  1998,  the  FASB  issued  SFAS  No.  134,  ACCOUNTING  FOR
MORTGAGE-BACKED  SECURITIES  RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS
HELD FOR SALE BY A MORTGAGE  BANKING  ENTERPRISE.  SFAS No. 134 provides for the
classification  of such retained  securities as held to maturity,  available for
sale,  or trading in accordance  with SFAS No.115.  Prior  accounting  standards
limited the classification of these securities to the trading category. SFAS No.
134 is effective for the fiscal quarter beginning after December 15, 1998 and is
not expected to have a material impact on the Company's  consolidated  financial
statements.

(15)     PARENT COMPANY CONDENSED FINANCIAL INFORMATION

         Set forth below are the condensed  balance sheets of Yonkers  Financial
Corporation as of September 30, 1999 and 1998,  and its condensed  statements of
income and cash flows for the periods indicated:

                                                          SEPTEMBER 30,
                                                     ----------------------
(In thousands)                                           1999        1998
---------------------------------------------------------------------------
CONDENSED BALANCE SHEETS
Assets
  Cash                                                $    217    $    269
  Securities                                             2,570       4,760
  Investment in subsidiary                              31,327      36,488
  Other assets                                             280         329
                                                      --------    --------
    Total assets                                      $ 34,394    $ 41,846
                                                      --------    --------
Liabilities and Stockholders' Equity
  Liabilities                                         $    104    $     44
  Stockholders' equity                                  34,290      41,802
                                                      --------    --------
    Total liabilities and stockholders' equity        $ 34,394    $ 41,846
                                                      --------    --------


                                               YEAR ENDED SEPTEMBER 30,
                                          ---------------------------------
(In thousands)                              1999         1998        1997
---------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME
Dividends received from subsidiary      $   4,000     $  4,800    $    --
Interest income                               353          499        682
Non-interest income                            58           38         --
Non-interest expense                         (207)        (404)      (150)
                                        ----------    ---------   --------
  Income before income tax expense
    and effect of subsidiary earnings       4,204        4,933        532
Income tax expense                             68           57        232
                                        ----------    ---------   --------
  Income before effect of subsidiary
    earnings                                4,136        4,876        300
Effect of subsidiary earnings:
  Excess of dividends over current
    earnings of subsidiary                 (1,473)      (1,975)        --
  Equity in undistributed earnings
    of subsidiary                              --           --      2,652
                                        ----------    ---------   --------
    Net income                          $   2,663     $  2,901    $ 2,952
                                        ----------    ---------   --------


                                       38

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report


<TABLE>
<CAPTION>
                                                                           YEAR ENDED SEPTEMBER 30,
                                                                   --------------------------------------
(In thousands)                                                         1999          1998         1997
---------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
<S>                                                                  <C>           <C>          <C>
  Net income                                                         $  2,663      $  2,901     $  2,952
  Adjustments to reconcile net income to
    net cash provided by operating activities:
    Excess of dividends over current earnings of subsidiary             1,473         1,975           --
    Equity in undistributed earnings of subsidiary                         --            --       (2,652)
    Other adjustments, net                                              3,122           947          392
                                                                     --------      --------     --------
      Net cash provided by operating activities                         7,258         5,823          692
                                                                     --------      --------     --------
Cash flows from investing activities:
  Purchases of securities                                                (465)       (1,187)      (4,000)
  Proceeds from sales and calls of securities                           2,661           256        4,000
                                                                     --------      --------     --------
      Net cash used in investing activities                             2,196          (931)          --
                                                                     --------      --------     --------
Cash flows from financing activities:
  Common stock repurchased                                             (8,741)       (5,676)      (8,909)
  Dividends paid                                                         (765)         (752)        (610)
                                                                     --------      --------     --------
      Net cash (used in) provided by financing activities              (9,506)       (6,428)      (9,519)
                                                                     --------      --------     --------
(Decrease) increase in cash and cash equivalents                          (52)       (1,536)      (8,827)
Cash and cash equivalents at beginning of period                          269         1,805       10,632
                                                                     --------      --------     --------
Cash and cash equivalents at end of period                                217           269        1,805
                                                                     --------      --------     --------
</TABLE>

(16)     SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

         The following is a summary of unaudited  quarterly  financial  data for
the fiscal years ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>


                                                                         Three Months Ended
                                                     ---------------------------------------------------------
In thousands, except per share data)                     December 31    March 31        June 30   September 30
---------------------------------------------------------------------------------------------------------------
FISCAL 1999
<S>                                                       <C>            <C>            <C>            <C>
Interest and dividend income                              $ 6,621        $ 6,472        $ 6,649        $ 7,190
Interest expense                                            3,765          3,579          3,585          3,955
                                                          -------        -------        -------        -------
  Net interest income                                       2,856          2,893          3,064          3,235
Provision for loan losses                                      75             75             50             35
Non-interest income                                           389            509            246            368
Non-interest expense                                        2,040          2,267          2,234          2,551
                                                          -------        -------        -------        -------
  Income before income tax expense                          1,130          1,060          1,026          1,017
Income tax expense                                            463            394            369            344
                                                          -------        -------        -------        -------
  Net income                                              $   667        $   666        $   657        $   673
                                                          -------        -------        -------        -------
Earnings per common share:
  Basic                                                   $  0.27        $  0.27        $  0.28        $  0.31
  Diluted                                                    0.27           0.27           0.27           0.30
                                                          -------        -------        -------        -------
FISCAL 1998
Interest and dividend income                              $ 6,054        $ 6,246        $ 6,429        $ 6,746
Interest expense                                            3,031          3,293          3,718          3,980
                                                          -------        -------        -------        -------
  Net interest income                                       3,023          2,953          2,711          2,766
Provision for loan losses                                     175             75             75             50
Non-interest income                                           344            234            520            312
Non-interest expense                                        1,816          1,965          1,938          1,864
                                                          -------        -------        -------        -------
  Income before income tax expense                          1,376          1,147          1,218          1,164
Income tax expense                                            568            459            491            486
                                                          -------        -------        -------        -------
  Net income                                              $   808        $   688        $   727        $   678
                                                          -------        -------        -------        -------
Earnings per common share:
  Basic                                                   $  0.30        $  0.26        $  0.28        $  0.28
  Diluted                                                    0.29           0.25           0.27           0.27
                                                          -------        -------        -------        -------

</TABLE>
                                       39

<PAGE>

1999 Annual Report  YONKERS FINANCIAL CORPORATION AND SUBSIDIARY

MANAGEMENT'S REPORT

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

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

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

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



/s/ RICHARD F. KOMOSINSKI                         /s/ JOSEPH D. ROBERTO
-----------------------------------               ------------------------------
Richard F. Komosinski                             Joseph D. Roberto
President and Chief Executive Officer             Vice President, Treasurer and
                                                  Chief Financial Officer



INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Yonkers Financial Corporation:

     We have audited the  accompanying  consolidated  balance  sheets of Yonkers
Financial  Corporation  and subsidiary  (the "Company") as of September 30, 1999
and  1998,  and the  related  consolidated  statements  of  income,  changes  in
stockholders'  equity,  and cash  flows for each of the years in the  three-year
period ended September 30, 1999. These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Yonkers
Financial  Corporation and subsidiary as of September 30, 1999 and 1998, and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended September 30, 1999 in conformity with generally accepted
accounting principles.




/s/ KPMG LLP
------------------
New York, New York
October 25, 1999

                                       40

<PAGE>

                YONKERS FINANCIAL CORPORATION AND SUBSIDIARY  1999 Annual Report

CORPORATE INFORMATION

COMPANY AND BANK ADDRESS

6 Executive Plaza
Yonkers, New York 10701
Telephone: (914) 965-2500
Fax: (914) 965-2599
Internet: www.Yonkers.com

BOARD OF DIRECTORS

WILLIAM G. BACHOP, CHAIRMAN
Retired professional engineer and President of
Herbert G. Martin, Inc.

P. ANTHONY SARUBBI, VICE CHAIRMAN
A  consulting  engineer  and
President  of P.  Anthony  Sarubbi, Inc.

DONALD R. ANGELILLI
A real estate broker employed by
Weichert Realtors

RICHARD F. KOMOSINSKI
President and Chief Executive Officer
The Yonkers Savings and Loan Association, FA

CHARLES D. LOHRFINK
Retired Public Affairs Director
for Consolidated Edison

MICHAEL J. MARTIN
Vice President of Herbert G. Martin, Inc.

EBEN T. WALKER
President of Graphite Metallizing Corporation

OFFICERS

RICHARD F. KOMOSINSKI
President and Chief Executive Officer

JOSEPH L. MACCHIA
Vice President, Secretary

JOSEPH D. ROBERTO
Vice President, Treasurer and
Chief Financial Officer

PHILIP GUARNIERI
Vice President

KATHY KOWLER
Vice President


<PAGE>

INDEPENDENT AUDITORS

KPMG LLP
3001 Summer Street
Stamford, Connecticut 06905

SPECIAL COUNSEL

Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor--East Tower
Washington, D.C. 20005

ANNUAL MEETING

The annual meeting of stockholders will be held at 6:00 p.m.,  January 27, 2000,
at The Yonkers  Savings and Loan  Association,  FA, located at 2320 Central Park
Avenue, Yonkers, New York.

STOCK LISTING

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

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

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

-------------------------------------------------------------------------------
QUARTER ENDED                      HIGH          LOW           DIVIDENDS
-------------------------------------------------------------------------------
December 31, 1997                 $22           $18 1/4          $0.06
March 31, 1998                     20 1/4        18 5/16          0.07
June 30, 1998                      20            18 1/4           0.07
September 30, 1998                 19 3/8        13 7/8           0.08
December 31, 1998                  15            12 1/4           0.08
March 31, 1999                     15 1/2        14               0.08
June 30, 1999                      17 7/8        14 5/8           0.08
September 30, 1999                 19            17 1/2           0.09
-------------------------------------------------------------------------------

<PAGE>


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

As of September 30, 1999,  the Company had  approximately  450  stockholders  of
record and 2,238,739 outstanding shares of common stock.

SHAREHOLDER AND GENERAL INQUIRIES

Joseph L. Macchia, Vice President
Yonkers Financial Corporation
6 Executive Plaza
Yonkers, New York 10701
(914) 965-2500

TRANSFER AGENT

Registrar & Transfer Co.
10 Commerce Drive
Cranford, New Jersey 07016
(800) 456-0596

ANNUAL AND OTHER REPORTS

The  Company is  required  to file an annual  report on Form 10-K for its fiscal
year ended  September 30, 1999,  with the  Securities  and Exchange  Commission.
Copies of the Form 10-K annual report and the Company's quarterly reports may be
obtained without charge by contacting:

INVESTOR RELATIONS
Yonkers Financial Corporation
6 Executive Plaza
Yonkers, New York 10701
Telephone: (914) 965-2500
Fax:  (914) 965-2599
Internet: www.Yonkers.com