UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
Commission file number 0-27716
YONKERS FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3870836
---------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Executive Plaza, Yonkers, New York 10701
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 965-2500
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
---------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
twelve months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such requirements for the past
90 days. YES [X] NO [ ]
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of December 15, 2000, there were issued and outstanding 2,228,739 shares
of the Registrant's Common Stock. The aggregate market value of the voting stock
held by non-affiliates of the Registrant, computed by reference to the closing
price of such stock on the Nasdaq National Market as of December 15, 2000, was
approximately $24.1 million. (The exclusion from such amount of the market value
of the shares owned by any person shall not be deemed an admission by the
Registrant that such person is an affiliate of the Issuer.)
DOCUMENTS INCORPORATED BY REFERENCE
PARTS II and IV of Form 10-K--Annual Report to Stockholders for the fiscal year
ended September 30, 2000.
PART III of Form 10-K--Proxy Statement for the Annual Meeting of Stockholders
for the fiscal year ended September 30, 2000.
<PAGE>
YONKERS FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
SEPTEMBER 30, 2000
Table of Contents
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PART I PAGE
Item 1 Business............................................... 3
Item 2 Properties............................................. 40
Item 3 Legal Proceedings...................................... 41
Item 4 Submission of Matters to a Vote of Security Holders.... 41
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters.................................... 41
Item 6 Selected Financial Data................................ 41
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 41
Item 7A Quantitative and Qualitative Disclosures About Market 41
Risk...................................................
Item 8 Financial Statements and Supplementary Data............ 42
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 42
PART III
Item 10 Director, and Executive Officers of the Registrant..... 42
Item 11 Executive Compensation................................. 43
Item 12 Security Ownership of Certain Beneficial Owners
and Management...................................... 43
Item 13 Certain Relationships and Related Transactions......... 43
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K............................................ 44
Signatures............................................. 46
2
<PAGE>
PART I
Item 1. Business
General
Yonkers Financial Corporation (the "Holding Company") was formed at the
direction of The Yonkers Savings and Loan Association, FA ("Yonkers Savings" or
the "Association") in December 1995 for the purpose of owning all of the
outstanding stock of the Association issued in the Association's conversion from
the mutual to stock form of organization (the "Conversion"). The Conversion was
completed on April 18, 1996. Concurrent with the Conversion, the Holding Company
sold 3,570,750 shares of its common stock for net proceeds of $34.6 million. The
Holding Company and the Association are collectively referred to herein as the
"Company."
The Holding Company is incorporated under the laws of the State of Delaware
(and qualified to do business in the State of New York) and generally is
authorized to engage in any activity that is permitted by the Delaware General
Corporation Law. The principal asset of the Holding Company is its investment in
the stock of the Association, although it also holds certain other investments
and a loan to its Employee Stock Ownership Plan (the "ESOP"). 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, annuities, and mutual funds.
As a community-oriented financial institution, the Association offers a
variety of financial services to meet the needs of communities in its market
area. The Association attracts deposits from the general public and uses such
deposits, together with borrowings, to originate mortgage loans secured by one-
to four-family residences, multi-family and commercial real estate and, to a
lesser extent, construction, land, consumer and commercial business loans in the
Association's primary market area. The Association also invests in
mortgage-backed and other securities permissible for a federally-chartered
savings association. As a member of the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation ("FDIC"), the
Association's deposits are insured up to applicable limits.
The executive offices (corporate headquarters) and lending center of the
Company are located at 6 Executive Plaza, Yonkers, New York 10701, and its
telephone number at that address is (914) 965-2500.
Market Area
The Company conducts its banking operations through its main office located
at One Manor House Square, Yonkers, New York and three full-service banking
offices located in Yonkers, New York. In addition, business is also conducted
through five in-store branches located in Wappingers Falls, Yorktown Heights,
Mt. Vernon, Poughkeepsie, and Cortlandt Manor. A corporate headquarters office
and lending center is also maintained in Yonkers, New York. The Company's
primary market area for deposits includes the City of Yonkers and the
communities surrounding its in-store branches. The Company's primary market area
for its lending activities consists of communities within Westchester County and
portions of Rockland, Putnam and Dutchess Counties, the five boroughs of New
York City, and Long Island.
3
<PAGE>
Yonkers is located in Westchester County approximately 10 miles north of
the Borough of Manhattan in New York City. Yonkers and the surrounding
communities include a diverse population of low- and moderate-income
neighborhoods as well as middle class and more affluent neighborhoods. The
housing in the low- and moderate-income neighborhoods consists mainly of
apartments while other areas consist primarily of single-family residences. The
Company's market area also includes substantial commercial areas containing
shopping areas, office and medical facilities and small- and medium-size
manufacturing and industrial facilities.
Lending Activities
General. Historically, the Company originated 30-year, fixed-rate mortgage
loans secured by one- to four-family residences. Since the mid-1980s, in order
to reduce its vulnerability to changes in interest rates, the Company has also
originated adjustable-rate mortgage ("ARM") loans and home equity lines of
credit. Residential mortgage originations currently emphasizes products with
initial fixed-rate periods of five, seven or ten years with annual rate
adjustments thereafter. The Company engages in secondary market sales of a
portion of its residential mortgage originations, as market conditions warrant.
Both originations and sales activity increased significantly in fiscal 1998. The
Company also offers multi-family and commercial real estate, consumer,
construction and land loans. During fiscal 1999 the Company expanded its lending
operations and increased originations of multi-family and commercial real estate
loans in order to enhance portfolio yield.
4
<PAGE>
The following table sets forth the composition of the loan portfolio,
by category, in dollar amounts and as a percentage of the total portfolio at the
dates indicated.
<TABLE>
At September 30,
----------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------- ---------------- ----------------- ----------------- ----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
------ --------- ------ -------- ------ --------- ------ --------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Mortgage Loans:
One- to four-family (1)(2)(3) $285,346 76.9% $245,692 81.6% $167,225 84.1% $111,821 79.0% $62,283 70.6%
Multi-family 34,352 9.3 16,264 5.4 7,846 3.9 5,658 4.0 5,471 6.2
Commercial 33,052 8.9 26,753 8.9 12,766 6.4 11,990 8.5 9,117 10.3
Construction 6,317 1.7 2,812 0.9 2,613 1.3 2,786 2.0 2,175 2.5
Land 759 0.2 1,502 0.5 932 0.5 1,814 1.3 1,934 2.2
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total real estate mortgage loans 359,826 96.9 293,023 97.3 191,382 96.2 134,069 94.8 80,980 91.8
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Other Loans:
Consumer loans:
Home equity 5,532 1.5 4,574 1.5 3,678 1.9 3,217 2.3 2,911 3.3
Personal 1,911 0.5 1,483 0.5 1,447 0.7 1,666 1.1 1,632 1.8
Other 2,952 0.8 1,117 0.4 1,224 0.6 1,237 0.9 1,310 1.5
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total consumer loans 10,395 2.8 7,174 2.4 6,349 3.2 6,120 4.3 5,853 6.6
Commercial business loans 963 0.3 1,080 0.3 1,195 0.6 1,299 0.9 1,413 1.6
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total other loans 11,358 3.1 8,254 2.7 7,544 3.8 7,419 5.2 7,266 8.2
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total loans 371,184 100.0% 301,277 100.0% 198,926 100.0% 141,488 100.0% 88,246 100.0%
===== ===== ===== ===== =====
Less:
Construction loans in process (3,397) (1,672) (743) (1,091) (171)
Allowance for loan losses (1,703) (1,503) (1,302) (1,093) (937)
Deferred loan origination costs
(fees), net 897 1,074 478 (184) (472)
-------- -------- -------- -------- -------
Total loans, net $366,981 $299,176 $197,359 $139,120 $86,666
======== ======== ======== ======== =======
</TABLE>
--------------------------------
(1) Includes advances under home equity lines of credit of $2.5 million, $3.2
million, $4.6 million, $5.9 million, and $7.3 million respectively, at
September 30, 2000, 1999, 1998, 1997, and 1996.
(2) Includes cooperative apartment loans of $3.5 million, $3.7 million, $4.5
million, $4.8 million, and $5.5 million, respectively, at September 30,
2000, 1999, 1998, 1997, and 1996.
(3) Includes loans held for sale of $2.7 million, $1.2 million , $13.3
million and $20.4 million at September 30, 2000, 1999, 1998 and 1997,
respectively.
5
<PAGE>
The following table sets forth the composition of the loan portfolio, by
category and by type of interest rate (fixed or adjustable), in dollar amounts
and as a percentage of the total portfolio at the dates indicated.
<TABLE>
At September 30,
---------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------- ----------------- ----------------- ---------------- ----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
------ --------- ------ --------- ------ --------- ------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed-Rate Loans:
Real Estate Mortgage Loans:
One- to four-family (1)(2) $ 31,652 8.5% $ 60,071 19.9% $ 46,838 23.5% $ 36,074 25.5% $11,805 13.4%
Multi-family 24,438 6.6 10,320 3.4 1,529 0.8 108 0.1 47 0.1
Commercial 20,050 5.4 14,295 4.7 1,742 0.9 95 0.1 131 0.1
Land 559 0.2 229 0.1 270 0.1 390 0.3 49 0.1
Total real estate mortgage loans 76,699 20.7 84,915 28.1 50,379 25.3 36,667 26.0 12,032 13.7
Consumer loans 10,395 2.8 7,174 2.4 6,349 3.2 6,120 4.3 5,853 6.6
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total fixed-rate loans 87,094 23.5 92,089 30.5 56,728 28.5 42,787 30.3 17,885 20.3
------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Adjustable-Rate Loans:
Real Estate Mortgage Loans:
One- to four-family (3)(4)(5) 253,694 68.3 185,621 61.7 120,387 60.6 75,747 53.5 50,478 57.2
Multi-family 9,914 2.7 5,944 2.0 6,317 3.2 5,550 3.9 5,424 6.1
Commercial 13,002 3.5 12,458 4.1 11,024 5.5 11,895 8.4 8,986 10.2
Construction 6,317 1.6 2,812 0.9 2,613 1.3 2,786 2.0 2,175 2.5
Land 200 0.1 1,273 0.4 662 0.3 1,424 1.0 1,885 2.1
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total real estate mortgage loans 283,127 76.2 208,108 69.1 141,003 70.9 97,402 68.8 68,948 78.1
Commercial business loans 963 0.3 1,080 0.4 1,195 0.6 1,299 0.9 1,413 1.6
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total adjustable-rate loans 284,090 76.5 209,188 69.5 142,198 71.5 98,701 69.7 70,361 79.7
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total loans 371,184 100.0% 301,277 100.0% 198,926 100.0% 141,488 100.0% 88,246 100.0%
===== ===== ===== ===== =====
Less:
Construction loans in process (3,397) (1,672) (743) (1,091) (171)
Allowance for loan losses (1,703) (1,503) (1,302) (1,093) (937)
Deferred loan origination costs
(fees), net 897 1,074 478 (184) (472)
-------- -------- -------- -------- -------
Total loans, net $366,981 $299,176 $197,359 $139,120 $86,666
======== ======== ======== ======== =======
</TABLE>
(1) Includes loans held for sale of $2.7 million ,$1.2 million, $13.3 million
and $20.4 million at September 30, 2000, 1999, 1998 and 1997,
respectively.
(2) Fixed-rate totals include loans with an initial fixed-rate period of 15
years, with annual rate adjustments thereafter, totaling $27.5 million,
$23.5 million, $14.0 million and $23.6 million, respectively, at
September 30, 2000, 1999, 1998 and 1997.
(3) Adjustable-rate totals include loans with initial fixed-rate periods of
five, seven or ten years, with annual rate adjustments thereafter,
totaling $164.1 million, $157.0 million, $83.8 million, $35.7 million and
$3.6 million, respectively, at September 30, 2000, 1999, 1998, 1997 and
1996.
(4) Includes advances under home equity lines of credit of $2.5 million, $3.2
million, $4.6 million, $5.9 million, and $73 million respectively, at
September 30, 2000, 1999, 1998, 1997, and 1996.
(5) Includes cooperative apartment loans of $3.5 million, $3.7 million, $4.5
million, $4.8 million, and $5.5 million , respectively, at September 30,
2000, 1999, 1998, 1997, and 1996.
6
<PAGE>
The following table sets forth the contractual maturity of the Company's
loan portfolio at September 30, 2000. The table reflects the entire unpaid
principal balance of a loan in the maturity period that includes the final
payment date and, accordingly, does not give effect to periodic principal
repayments or possible prepayments. Principal repayments and prepayments totaled
$33.1 million, $38.5 million, and $24.2 million for the years ended September
30, 2000, 1999 and 1998, respectively.
<TABLE>
At September 30, 2000
-----------------------------------------------------------------------------------------------------
Consumer and
One-to Commercial Commercial
Four-Family(1) Multi-Family Real Estate Construction Land Business
---------------- ---------------- --------------- --------------- ----------------- -------------
Weighted Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------ ------- ------ ------- ------ -------- ------ -------- ------ --------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contractual maturity:
One year or less (2) $ 450 10.17% $ -- --% $ -- --% $6,317 10.46% $153 10.66% $ 302 13.34%
-------- ------- ------- ------ ---- ------
After one year:
More than 1 year to 2 years 525 10.71 -- -- 2,176 7.16 -- -- -- -- 423 10.86
More than 2 years to 3 years 688 10.25 -- -- 676 7.65 -- -- -- -- 841 10.42
More than 3 years to 5 years 2,405 9.19 -- -- 771 7.44 -- -- -- -- 2,549 9.46
More than 5 years to 10 years 8,129 7.71 7,270 8.33 10,662 8.09 -- -- 339 8.63 4,860 8.93
More than 10 years to 20 year 29,484 7.58 15,463 8.27 16,289 8.09 -- -- 267 9.69 2,383 8.72
More than 20 years 243,665 7.11 11,619 8.54 2,478 8.53 -- -- -- -- --
-------- ------- ------- ------ ---- -------
Total after one year 284,896 7.21 34,352 8.38 33,052 8.04 -- -- 606 9.09 11,056 9.19
-------- ------- ------- ------ ---- -------
Total amount due $285,346 7.06% $34,352 8.38% $33,052 8.04% $6,317 10.46% $759 9.41 % $11,358 9.30%
======== ======= ======= ====== ==== =======
</TABLE>
<TABLE>
At September 30, 2000
------------------------------------------------
Total
----------------------
Weighted
Average
Amount Rate
------ --------
(Dollars in thousands)
<S> <C> <C>
Contractual maturity:
One year or less (2) $ 7,222 10.57%
-------
After one year:
More than 1 year to 2 years 3,124 8.26
More than 2 years to 3 years 2,205 9.52
More than 3 years to 5 years 5,725 9.07
More than 5 years to 10 years 31,260 8.18
More than 10 years to 20 year 63,886 7.93
More than 20 years 257,762 7.19
--------
Total after one year 363,962 7.46
--------
Total amount due $371,184 7.52%
========
</TABLE>
-----------------------------------
(1) Includes $2.5 million of advances under home equity lines of credit which
require minimum interest-only payments for the first five to ten years
the advance is outstanding, followed by a balloon payment thereafter.
Also includes $2.7 million in loans held for sale on the basis of their
final contractual maturity (all more than 20 years).
(2) Includes demand loans, loans having no stated maturity, and overdraft
loans.
7
<PAGE>
The following table sets forth the dollar amounts in each loan category
at September 30, 2000 that are contractually due after September 30, 2001, and
whether such loans have fixed interest rates or adjustable interest rates.
<TABLE>
Due After September 30, 2001
-------------------------------------------
Fixed Adjustable Total
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Real estate mortgage loans:
One- to four-family $31,638 $253,258 $284,896
Multi-family 24,438 9,914 34,352
Commercial 20,050 13,001 33,051
Construction -- -- --
Land 559 48 607
------- -------- --------
Total real estate mortgage loans 76,685 276,221 352,906
Consumer and commercial business loans 10,094 963 11,057
------- -------- --------
Total loans $86,779 $277,184 $363,963
======== ======== ========
</TABLE>
Pursuant to Federal law, the aggregate amount of loans that the Company
is permitted to make to any one borrower or a group of related borrowers is
generally limited to 15% of the Association's unimpaired capital and surplus
(25% if the security for such loan has a "readily ascertainable" value or 30%
for certain residential development loans). At September 30, 2000, based on the
15% limitation, the Company's loans-to-one-borrower limit was approximately $5.2
million. On the same date, the Company had no borrowers with outstanding
balances in excess of this amount. As of September 30, 2000, the largest dollar
amount outstanding to one borrower, or group of related borrowers, was $2.9
million secured by six apartment buildings located in Mt. Vernon and Yonkers,
New York; one four family residence located in Yonkers, New York and one single
family residence located in Eastchester, New York.. At September 30, 2000, the
Company's next largest loan relationship or group outstanding was a $2.6 million
construction loan project secured by 16 condominium units in Cold Spring, New
York. These loans were performing in accordance with their terms at September
30, 2000.
The Company's lending is subject to its written underwriting standards
and to loan origination procedures. Decisions on loan applications are made on
the basis of detailed applications submitted by the prospective borrower and
property valuations (consistent with the Company's appraisal policy) prepared by
independent appraisers. The loan applications are designed primarily to
determine the borrower's ability to repay, and the more significant items on the
application are verified through use of credit reports, financial statements,
tax returns and/or confirmations.
Under the Company's loan policy, the individual processing an application
is responsible for ensuring that all documentation is obtained prior to the
submission of the application to a loan officer for approval. In addition, the
loan officer verifies that the application meets the Company's underwriting
guidelines described below. Also, each application file is reviewed to assure
its accuracy and completeness. In 1997, the Company instituted an enhanced
process for quality control reviews of residential loan originations, and in
2000 instituted a commercial review and grading process. In 2000, the Company
8
<PAGE>
also employed a staff appraiser to inspect our multi-family and commercial real
estate loan collateral. The quality control process includes reviews of
underwriting decisions, appraisals and documentation. The Company is using the
services of an independent company to perform the quality control reviews.
The Company's lending officers have approval authority for one- to
four-family residential loans and cooperative apartment ("co-op") loans, up to
$350,000. One- to four-family residential loans over $350,000 to $500,000
require the approval of the Company's President or its Vice President and Chief
Lending Officer. Co-op loans over $350,000 require the approval and/or review of
the Chief Lending Officer. The Company's Chief Lending Officer has approval
authority for multi-family, commercial real estate loans, and for land loans up
to $500,000. Loans up to and including $750,000 require the approval of the
Chief Lending Officer and the President. Loans in excess of these amounts
require the approval of the Company's Loan Committee or Board of Directors.
Various officers have approval authority ranging from $2,000 on secured consumer
loans, up to $50,000 on fixed-rate home equity loans and up to $30,000 on
commercial business loans. Approval authorities on unsecured consumer loans
range from $2,000 to $10,000.
Generally, the Company requires title insurance or abstracts on its
mortgage loans as well as fire and extended coverage casualty insurance in
amounts at least equal to the principal amount of the loan or the value of
improvements on the property, depending on the type of loan. The Company also
requires flood insurance to protect the property securing its interest when the
property is located in a flood plain.
One- to Four-Family Residential Real Estate Lending. Currently, the
Company is originating and selling the majority of its one-to-four family
mortgage loan originations. At September 30, 2000, $285.3 million, or 76.9%, of
the Company's loan portfolio consisted of mortgage loans secured by one- to
four-family residences (including $2.7 million of loans held for sale, $2.5
million of advances under home equity lines of credit and $3.5 million of co-op
loans). Substantially all of the residential loans originated by the Company are
secured by properties located in the Company's primary lending area. A majority
of the mortgage loans originated by the Company are generally retained and
serviced by it, although a portion of its originations were sold in the
secondary market (with servicing released) in fiscal 2000. At September 30,
2000, approximately $8.2 million of the Company's one- to four-family
residential real estate loans were secured by non-owner occupied properties. At
that date, the average outstanding residential loan balance was approximately
$218,000 compared to $204,000 at September 30, 1999. The increase in the average
outstanding residential loan balance reflects the origination of loans with
larger loan balances.
Since the mid-1980s, the Company has offered ARM loans at rates and on
terms determined in accordance with market and competitive factors. The Company
offers one-year ARMs for terms of up to 30 years at a margin (generally 275
basis points) over the yield on the Average Weekly One Year U.S. Treasury
Constant Maturity Index. The one-year ARM loans currently offered by the Company
generally provide for a 200 basis point annual interest rate change cap and a
lifetime cap of 600 basis points over the initial rate. The Company also offers
a three-year ARM loan which adjusts based on a margin (generally 275 basis
points) over the yield on the three-year Treasury Note. The Company's three-year
9
<PAGE>
ARM loans have a 200 basis point interest rate cap per adjustment period and a
lifetime cap of 500 basis points over the initial rate. The Company has recently
emphasized ARMs which are fixed for the first five-, seven- or ten-year period
of the loan term and adjust annually thereafter based on a specified margin over
the yield on the Average Weekly One Year U.S. Treasury Constant Maturity Index
for the remaining loan term. These loans are classified as ARM loans for
reporting purposes and currently provide for an annual interest rate cap not to
exceed 300 basis points for the initial adjustment period (and 200 basis points
thereafter) and a lifetime cap of 500 basis points.
Initial interest rates offered on the Company's ARMs may be 100 to 350
basis points below the fully indexed rate. Although borrowers on such loans are
generally qualified at the fully indexed rate, the risk of default on these
loans may increase as interest rates increase. See "- Delinquencies and
Non-Performing Assets." The Company's ARMs do not permit negative amortization
of principal, do not contain prepayment penalties and are not convertible into
fixed-rate loans. At September 30, 2000 one- to four-family ARMs (including
loans of $164.1 million earning a fixed rate of interest for initial periods of
five, seven or 10 years) totaled $253.7 million, or 68.4% of the Company's total
loan portfolio.
During fiscal 1997, the Company began to offer a 30-year residential
mortgage loan product with a fixed rate for the first fifteen years and annual
rate adjustments thereafter based on a specified margin over the Average Weekly
One Year U.S. Treasury Constant Maturity Index. In addition, the loan has a
conversion option which allows the borrower to convert, during years sixteen
through eighteen, to a fixed rate for the remaining term. At September 30, 2000,
the Company had $27.5million of such loans, all of which are classified on the
loan tables as fixed rate loans.
The Company also offers conventional fixed-rate loans with maximum terms
of up to 30 years, although the Company has recently emphasized originations of
fixed-rate loans with terms of 10 to 15 years. The interest rate on such loans
is generally based on competitive factors. The fixed-rate one- to four-family
loans described in this paragraph are typically underwritten in accordance with
Freddie Mac and Fannie Mae standards to permit their sale in the secondary
market. The Company engages in secondary market sales of a portion of its
residential mortgage originations, as market conditions warrant. Loans held for
sale at September 30, 2000 amounted $2.7 million and represented a variety of
fixed-rate and ARM one- to four-family loans.
The Company originates home equity lines of credit secured by a lien on
the borrower's residence. The Company's home equity lines are generally limited
to $250,000. The Company uses the same underwriting standards for home equity
lines as it uses for one- to four-family residential mortgage loans. The
interest rates for home equity lines of credit float at a stated margin over the
lowest prime rate published in The Wall Street Journal and may not exceed 15.75%
over the life of the loan. The Company currently offers home equity lines for
terms of up to 30 years with interest only paid for the first 10 years of the
loan term. At September 30, 2000, the Company had $2.5 million of outstanding
advances under home equity lines and an additional $3.2 million of funds
committed, but undrawn, under home equity lines of credit.
10
<PAGE>
The Company also originates loans secured by co-ops and condominiums
located in its market area. Condominium and co-op loans are made on
substantially the same terms as one- to four-family loans, except that co-op
loans are made only at adjustable rates of interest. At September 30, 2000, the
Company had $30.5 million of condominium loans and $3.5 million of co-op loans.
In underwriting one- to four-family residential real estate loans, the
Company evaluates the borrower's ability to make principal, interest and escrow
payments, as well as the value of the property that will secure the loan and
debt-to-income ratios. The Company currently originates residential mortgage
loans with loan-to-value ratios of up to 80% for owner-occupied homes (95% with
private mortgage insurance to reduce the Company's exposure to 80% or less); up
to 70% for non-owner occupied homes; and up to 90% for co-op loans. The
Company's home equity lines of credit are originated in amounts which, together
with the amount of the first mortgage, generally do not exceed 80% of the
appraised value of the property securing the loan.
The Company's residential mortgage loans customarily include due-on-sale
clauses giving the Company the right to declare the loan immediately due and
payable in the event that, among other things, the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid.
Multi-family and Commercial Real Estate Lending. The Company has
increased its emphasis on the origination of permanent multi-family and
commercial real estate loans in recent years, in order to increase the interest
rate sensitivity and yield of its loan portfolio and to complement residential
lending opportunities. The Company's multi-family and commercial real estate
loan portfolio includes loans secured by apartment buildings, office buildings,
strip shopping centers and other income producing properties located in its
market area. At September 30, 2000, the Company had $34.4 million in
multi-family loans, or 9.3% of the total loan portfolio, and $33.1 million in
commercial real estate loans, representing 8.9% of the total loan portfolio.
The Company's permanent multi-family and commercial real estate loans
generally carry a maximum term of 20 years and have adjustable rates generally
based on a specific index, plus a margin. These loans are generally made in
amounts of up to 75% of the lesser of the appraised value or the purchase price
of the property, with a projected debt service coverage ratio of at least 125%.
Appraisals on properties securing multi-family and commercial real estate loans
are performed by an independent appraiser designated by the Company at the time
the loan is made. All appraisals on multi-family or commercial real estate loans
are reviewed by the Company's management. In addition, the Company's
underwriting procedures require verification of the borrower's credit history,
income and financial statements, banking relationships, references and income
projections for the property. Where feasible, the Company seeks to obtain
personal guarantees on these loans. For loans in excess of $250,000, Phase I
environmental studies are performed.
The table below sets forth, by type of security property, the number and
amount of the Company's multi-family and commercial real estate loans at
September 30, 2000. Substantially all of the loans referred to in the table
below are secured by properties located in the Company's market area.
11
<PAGE>
<TABLE>
Outstanding Amount Non-
Number Principal Performing or
of Loans Balance of Concern(1)
--------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Commercial real estate:
Small business facilities 46 $15,730 --
Office buildings 10 3,268 219
Health care facilities 5 858 --
Mixed use 33 13,112 --
Industrial real estate 1 84 --
Multi-family 111 34,352 --
=== ======= ====
Total multi-family and commercial real estate loans 206 $67,404 $219
=== ======= ====
</TABLE>
-----------------------
(1) See "- Delinquencies and Non-Performing Assets"
At September 30, 2000, the Company's largest commercial real estate loan
had an outstanding balance of $1.8 million. This loan was originated in December
1999 and is secured by six-retail stores and a free standing restaurant located
in Millwood, New York. At September 30, 2000, the largest multi-family loan had
a balance of $1.6 million, and is secured by a 60-unit apartment building
located in Bronx, New York.
Multi-family and commercial real estate loans generally present a higher
level of risk than loans secured by one- to four-family residences. This greater
risk is due to several factors, including the concentration of principal in a
limited number of loans and borrowers, the effects of general economic
conditions on income producing properties, and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multi-family and commercial real estate is typically dependent
upon the successful operation of the related real estate project. If the cash
flow from the project is reduced (for example, if leases are not obtained or
renewed), the borrower's ability to repay the loan may be impaired. There can be
no assurance that the Company will not experience increased credit problems as a
result of its increase in multi-family and commercial real estate loans.
Construction and Land Lending. The Company originates a modest amount of
construction loans to individuals and builders for the construction of
residential real estate. At September 30, 2000, the Company's construction loan
portfolio totaled $6.3 million, or 1.7% of the total loan portfolio. The Company
also originates a limited number of land loans primarily for the purpose of
developing residential subdivisions. At September 30, 2000, the Company's land
loan portfolio totaled $759,000, or 0.2% of the total loan portfolio. At
September 30, 2000, all of the Company's land loans were made for the purpose of
developing residential lots except for two loans totaling $220,000 which was
secured by commercial real estate.
12
<PAGE>
Construction loans to individuals for the construction of their
residences are structured to convert to permanent loans at the end of the
construction phase, which typically runs up to one year. These construction
loans have rates and terms comparable to one- to four-family loans then offered
by the Company, except during the construction phase where the borrower pays
interest only at a specified margin over the prime rate. The maximum
loan-to-value ratio of owner-occupied single-family construction loans is 75%.
Residential construction loans are generally underwritten pursuant to the same
guidelines used for originating permanent residential loans. At September 30,
2000, there were $524,000, of construction loans outstanding to persons
intending to occupy the premises upon the completion of the construction.
The Company also originates construction loans to builders of one- to
four-family residences. Such loans generally carry terms of up to two years and
require the payment of interest only for the loan term. The maximum
loan-to-value ratio on loans to builders for the construction of residential
real estate is 75%. When practical, the Company seeks to obtain personal
guarantees on such loans. The Company generally limits loans to builders for the
construction of homes on speculation for sale to two homes per builder. At
September 30, 2000, the Company had $2.4 million of construction loans
outstanding to builders of one- to four-family residences.
The Company's construction loan agreements generally provide that loan
proceeds are disbursed in increments as construction progresses. The Company
reviews the progress of the construction of the dwelling before disbursements
are made.
The Company also makes loans to builders and developers for the
development of one- to four-family lots in the Company's market area. All of the
Company's land loans have been originated with adjustable rates of interest tied
to the prime rate of interest and have terms of five years or less. Land loans
are generally made in amounts up to a maximum loan-to-value ratio of 65% on raw
land and up to 75% on developed building lots based upon an independent
appraisal. When feasible, the Company obtains personal guarantees for its land
loans.
The table below sets forth, by type of security property, the number and
amount of the Company's construction and land loans at September 30, 2000, all
of which are secured by properties located in the Company's market area.
<TABLE>
Outstanding Amount Non-
Number Loan Principal Performing or
of Loans Commitment Balance of Concern(1)
--------- ------------- ------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Single-family construction 9 $2,962 $2,176 $ --
Other construction 2 3,355 744 --
Residential land 3 200 200 --
Other land 2 559 559 220
== ====== ====== ====
Total construction and land loans 16 $7,076 $3,679 $220
== ====== ====== ====
</TABLE>
-------------------
(1) See "- Delinquencies and Non-Performing Assets"
13
<PAGE>
Construction and land loans are obtained principally through referrals
from the Company's and management's contacts in the business community as well
as existing and walk-in customers. The application process includes a submission
to the Company of accurate plans, specifications and costs of the project to be
constructed/developed. These items are used as a basis to determine the
appraised value of the subject property. Loans are based on the lesser of
current appraised value and/or the cost of construction (land plus building).
Construction and land lending generally affords the Company an
opportunity to receive interest at rates higher than those obtainable from
permanent residential loans and to receive higher origination and other loan
fees. In addition, construction and land loans are generally made with
adjustable rates of interest or for relatively short terms. Nevertheless,
construction and land lending is generally considered to involve a higher level
of credit risk than one- to four-family residential lending due to the
concentration of principal in a limited number of loans and borrowers, as well
as the effects of general economic conditions on development properties and on
real estate developers and managers. In addition, the nature of these loans is
such that they are more difficult to evaluate and monitor. Finally, the risk of
loss on construction and land loans is dependent largely upon the accuracy of
the initial estimate of the individual property's value upon completion and the
estimated cost (including interest) of construction. If the cost estimate proves
to be inaccurate, the Company may be required to advance funds beyond the amount
originally committed to permit completion of the property.
Consumer Lending. In order to increase the interest rate sensitivity of
the loan portfolio and provide a broader range of loan products to its retail
customers, the Company originates a variety of consumer loans, including
automobile, home equity, deposit account and other loans for household and
personal purposes. At September 30, 2000, consumer loans totaled $10.4 million,
or 2.8% of total loans outstanding.
Consumer loan terms vary according to the type of loan and value of
collateral, length of contract and creditworthiness of the borrower. The
Company's consumer loans are made at fixed interest rates, with terms of up to
15 years. Home equity loans are made at fixed rates up to a maximum loan amount
of $100,000.
The underwriting standards employed by the Company for consumer loans
include a determination of the applicant's payment history on other debts and
the ability to meet existing obligations and payments on the proposed loan.
Although creditworthiness of the applicant is a primary consideration, the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount.
Consumer loans may entail greater credit risk than residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by rapidly depreciable assets, such as automobiles. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
14
<PAGE>
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At September 30, 2000, there were $14,000 of consumer loans
delinquent 90 days or more. There can be no assurance that delinquencies will
not increase in the future.
Commercial Business Lending. Federally chartered savings institutions,
such as the Association, are authorized to make secured or unsecured loans and
letters of credit for commercial, corporate, business and agricultural purposes
and to engage in commercial leasing activities, up to a maximum of 20% of total
assets, provided that amounts in excess of 10% relate to small business loans
(as defined). The Company may from time to time make a limited number of secured
and unsecured commercial loans to local businesses. At September 30, 2000, the
Company had $1.0 million of commercial business loans outstanding, representing
0.3% of the total loan portfolio.
The Company's commercial business lending policy includes credit file
documentation and analysis of the borrower's character and capacity to repay the
loan, the adequacy of the borrower's capital and collateral, and an evaluation
of conditions affecting the borrower. Analysis of the borrower's past, present
and future cash flows is also an important aspect of the Company's current
credit analysis.
Unlike residential mortgage loans, which generally are made on the basis
of the borrower's ability to make repayment from his or her employment and other
income, and which are secured by real property whose value tends to be more
easily ascertainable, commercial business loans are of higher risk and typically
are made on the basis of the borrower's ability to make repayment from the cash
flow of the borrower's business. As a result, the availability of funds for the
repayment of commercial business loans may be substantially dependent on the
success of the business itself. Further, the collateral securing the loans may
depreciate over time, may be difficult to appraise and may fluctuate in value
based on the success of the business.
Originations, Purchases and Sales of Loans
Loan applications are taken at each of the Company's offices as well as
through mortgage originators. Applications are processed and approved at the
Company's Loan Center which is located in the corporate headquarters. The
Company currently offers incentives to employees for loan referrals. The Company
also employs commissioned loan originators and utilizes mortgage brokers to
assist in the process of obtaining loans. Total loan originations amounted to
$119.1 million in fiscal 2000, compared to $178.4 million in fiscal 1999 and
$151.7 million in fiscal 1998, primarily reflecting higher one- to four-family
loan originations.
While the Company originates both fixed- and adjustable-rate loans, its
ability to originate loans is dependent upon the relative customer demand for
loans in its market. Demand is affected by the local economy and the interest
rate environment.
Historically, most of the fixed-rate one- to four-family residential
loans originated by the Company were retained in its portfolio. However, in
order to reduce its vulnerability to changes in interest rates, the Company
currently sells in the secondary market a portion of its fixed-rate residential
mortgage originations. In addition, certain current year originations of
15
<PAGE>
adjustable-rate loans are sold in the secondary market. Residential mortgage
sales amounted to $16.1 million in fiscal 2000, compared to $37.4 million in
fiscal 1999 and $69.8 million in fiscal 1998. When loans are sold, the Company
typically retains the responsibility for collecting and remitting loan payments,
making certain that real estate tax payments are made on behalf of borrowers,
and otherwise servicing the loans. At September 30, 2000, the Company serviced
$85.2 million of mortgage loans for others.
The following table sets forth the Company's loan originations, sales,
repayments and other portfolio activity for the periods indicated.
<TABLE>
For the Year Ended September 30,
-------------------------------------------
2000 1999 1998
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Unpaid principal balances at beginning of year $301,277 $198,900 $141,488
-------- -------- --------
Loans originated:
Real estate mortgage loans:
One- to four-family(1) 77,016 141,648 139,325
Multi-family 19,677 8,349 3,372
Commercial 9,428 19,697 2,235
Construction 6,609 4,597 3,734
Land 345 732 50
Consumer and commercial business loans 5,982 3,367 2,981
-------- -------- --------
Total loans originated 119,057 178,390 151,697
-------- -------- --------
Loans sold:
One-to four-family real estate mortgage loans (16,052) (37,476) (69,810)
-------- -------- --------
Principal repayments:
Real estate mortgage loans (30,244) (35,866) (21,325)
Consumer and commercial business loans (2,834) (2,637) (2,856)
-------- -------- --------
Total principal repayments (33,078) (38,503) (24,181)
-------- -------- --------
Net charge-offs (20) (34) (166)
Transfers to real estate owned -- -- (128)
-------- -------- --------
Unpaid principal balances at end of year 371,184 301,277 198,900
Less:
Construction loans in process (3,397) (1,672) (743)
Allowance for loan losses (1,703) (1,503) (1,302)
Deferred loan origination costs (fees), net 897 1,074 478
-------- -------- --------
Net loans at end of year $366,981 $299,176 $197,333
======== ======== ========
</TABLE>
-------------------------
(1) Consists of (i) adjustable-rate loans of $55.9 million, $107.8 million,
and $89.0 million , and (ii) fixed-rate loans of $20.3 million, $32.7
million, and $50.3 million for the years ended September 30, 2000, 1999
and 1998, respectively.
16
<PAGE>
Delinquencies and Non-Performing Assets
Delinquency Procedures. When a borrower fails to make a required payment
on a loan, the Company attempts to cure the delinquency by contacting the
borrower. A late notice is sent on all loans over 16 days delinquent. Additional
written and verbal contacts may be made with the borrower between 30 and 90 days
after the due date. If the loan is contractually delinquent 60 days, the Company
usually sends a 30-day demand letter to the borrower and, after the loan is
contractually delinquent 91 days, institutes appropriate action to foreclose on
the property. If foreclosed, the property is sold at auction and may be
purchased by the Company. Delinquent consumer loans are generally handled in a
similar manner. The Company's procedures for repossession and sale of consumer
collateral are subject to various requirements under New York consumer
protection laws.
Real estate acquired by the Company as a result of foreclosure or by deed
in lieu of foreclosure is classified as real estate owned until it is sold. When
property is acquired or expected to be acquired by foreclosure or deed in lieu
of foreclosure, it is recorded at estimated fair value less the estimated cost
of disposition, with the resulting write-down charged to the allowance for loan
losses. After acquisition, all costs incurred in maintaining the property are
expensed. Costs relating to the development and improvement of the property,
however, are capitalized.
The following table sets forth certain information with respect to loan
portfolio delinquencies at the dates indicated.
<TABLE>
September 30, 2000 September 30, 1999
------------------------------------------------ -------------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
----------------------- ----------------------- ---------------------- ------------------------
Number Principal Number Principal Number Principal Number Principal
of Loans Balance of Loans Balance of Loans Balance of Loans Balance
-------- ---------- -------- -------- -------- --------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans:
One- to four-family 2 $70 1 $109 4 $20 4 $347
Multi-family -- -- -- -- -- -- -- --
Construction -- -- -- -- -- -- -- --
Land -- -- -- -- -- -- -- --
Commercial -- -- -- -- -- -- 2 305
Consumer loans -- -- 4 14 1 7 8 103
== === == ==== == === == ====
Total 2 $70 5 $123 5 $27 14 $755
== === == ==== == === == ====
Delinquent loans to total loans (1) 0.02% 0.03% 0.01% 0.25%
==== ==== ==== ====
</TABLE>
------------------------------------------------------
(1) If loans held for sale are excluded from total loans, the percentages
would have remained the same for the 60-89 days category and the 90 days
or more category at September 30, 2000 (0.01% and 0.25%, respectively, at
September 30, 1999).
17
<PAGE>
Classification of Assets. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful, and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the institution will sustain
some loss if the deficiencies are not corrected. Doubtful assets have the
weaknesses of substandard assets, with the additional characteristics that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified loss is considered uncollectible and of
such little value that continuance as an asset on the balance sheet of the
institution is not warranted. Assets classified as substandard or doubtful
require the institution to establish prudent general allowances for loan losses.
If an asset or portion thereof is classified as loss, the institution must
either establish specific allowances for loan losses in the amount of 100% of
the portion of the asset classified loss, or charge off such amount. If an
institution does not agree with an examiner's classification of an asset, it may
appeal this determination to the Regional Director of the OTS. On the basis of
management's review, at September 30, 2000 the Company had classified $839,000
of loans as substandard.
The Company's classified assets consist principally of non-performing
loans and certain other loans of concern discussed herein. As of the date
hereof, these asset classifications are substantially consistent with those of
the OTS and FDIC.
Non-Performing Assets. The table below sets forth the amounts and
categories of the Company's non-performing assets at the dates indicated. Loans
are placed on non-accrual status when the collection of principal or interest
becomes doubtful. Real estate owned represents properties acquired in settlement
of loans. The Company's prospective adoption of Statement of Financial
Accounting Standards ("SFAS") No. 114, Accounting by Creditors for Impairment of
a Loan, effective October 1, 1995, had no impact on the comparability of this
information.
18
<PAGE>
<TABLE>
At September 30,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans past due ninety days or more:
Real estate mortgage loans:
One- to four-family $ 109 $ 347 $ 515 $ 389 $1,757
Commercial -- 305 203 211 214
Land -- -- -- 250 250
Construction -- -- -- 279 511
Consumer loans 14 103 35 9 43
------- ------ - ------ ------ ------
Total 123 755 753 1,138 2,775
Real estate owned, net -- -- 305 379 603
------- ------ ------ ------ ------
Total non-performing assets $ 123 $ 755 $1,058 $1,517 $3,378
======= ====== ====== ====== ======
Allowance for loan losses $ 1,703 $1,503 $1,302 $1,093 $ 937
======= ====== ====== ====== ======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Ratios:
Non-performing loans to total loans receivable 0.03% 0.25% 0.41% 0.94% 4.15 %
Non-performing assets to total assets 0.02 0.16 0.28 0.48 1.30
Allowance for loan losses to:
Non-performing loans 1384.55 199.07 172.91 96.05 33.77
Total loans receivable 0.46 0.50 0.70 0.90 0.84
</TABLE>
For the year ended September 30, 2000, gross interest income of $11,000
would have been recorded if the non-accrual loans at September 30, 2000 had
remained current in accordance with their original terms. The amount of interest
income actually received on such loans in fiscal 2000 was $6,000. See Note 3 of
the Notes to Consolidated Financial Statements.
At September 30, 2000, the Company's non-performing loans consisted of
one loan secured by a one- to four-family real estate located in the Company's
market area which totaled $109,000; and five consumer loans which totaled
$14,000. At September 30, 2000, there was no real estate owned.
Other Loans of Concern. In addition to the non-performing loans and real
estate owned discussed in the preceding section, as of September 30, 2000 there
were other loans of concern totaling approximately $716,000
These are loans with respect to which known information about the
possible credit problems of the borrowers or the cash flows of the security
properties have caused management to have concerns as to the ability of the
borrowers to comply with present loan repayment terms and which may result in
the future inclusion of such items in the non-performing asset categories.
Management has considered the Company's non-performing loans and other loans of
concern in establishing the allowance for loan losses.
19
<PAGE>
As of September 30, 2000, the Company's other loans of concern included
the following loans with principal balances in excess of $200,000:
The Company has a $220,000 land loan, secured by a lot located in
Patterson, New York. The borrower intended to build a commercial building on the
security property. At September 30, 2000, although this loan was performing, it
was classified substandard due to hazardous building materials on an adjacent
lot which may result in a decline in value of the security property. Although a
phase I environmental study performed on the security property did not disclose
any contamination to the security property from the adjoining lot, the
contamination on the adjacent lot was subsequently discovered and has prevented
the borrower from using the security property for its intended purpose. As a
result, the loan was extended and modified in January 1997 as a 15-year,
self-liquidating loan with a market rate of interest. The borrower is continuing
to make payments on this loan as required by the terms of the loan agreement and
is waiting for the resolution of the problem with the adjacent property.
The Company has a $219,000 participation interest in a $3.5 million
commercial mortgage loan secured by a two-story office building located in
Queens, New York originated by the Thrift Association Service Corporation
("TASCO"). This loan originally had a 30-year amortization schedule with a
balloon payment which was due in December 1996. Prior to this scheduled balloon
payment, the borrower had been unsuccessful in securing financing in order to
payoff the loan. As a result, a short-term extension was granted at the original
terms of the loan until December 1997. In December 1997 the loan was extended at
market terms for an additional five-year term with principal payments based on a
25-year amortization schedule. Although the loan was current as of September 30,
2000, the Company considers this loan to be of concern due to its past
performance and extended term.
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses charged to operations based on management's
evaluation of the risk inherent in the loan portfolio. The allowance is
established as an amount that management believes will be adequate to absorb
probable losses on existing loans. The allowance for loan losses consists of
amounts specifically allocated to non-performing loans and potential problem
loans (if any) as well as allowances determined for each major loan category.
Loan categories such as single-family residential mortgages and consumer loans
are generally evaluated on an aggregate or "pool" basis by applying loss factors
to the current balances of the various loan categories. The loss factors are
determined by management based on an evaluation of historical loss experience,
delinquency trends, volume and type of lending conducted, and the impact of
current economic conditions in the Company's market area.
Management's evaluation of the adequacy of the allowance, which is
subject to periodic review by the Company's regulators, takes into consideration
such factors as the historical loan loss experience, known and inherent risks in
the portfolio, changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, estimated value of
underlying collateral, and current economic conditions that may affect borrowers
ability to pay. While management believes that it uses the best information
available to determine the allowance for loan losses, unforeseen market
conditions could result in adjustments to the allowance for loan losses, and net
earnings could be significantly affected, if circumstances differ substantially
from the estimates made in making the final determination.
20
<PAGE>
The following table sets forth activity in the allowance for loan
losses for the periods indicated.
<TABLE>
For the Year Ended September 30,
---------------------------------------------------------------
2000 1999 1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $1,503 $1,302 $1,093 $ 937 $719
Provision for losses 220 235 375 300 462
Charge-offs:
Real estate mortgage loans:
One- to four-family -- (23) (45) (132) (97)
Multi-family (1) -- -- -- -- (203)
Land -- -- (17) -- --
Construction -- -- (91) -- --
Consumer loans (44) (20) (40) (25) (33)
------ ------ ------ ------ ----
Total charge-offs (44) (43) (193) (157) (333)
Recoveries 24 9 27 13 89
------ ------ ------ ------ ----
Net charge-offs (20) (34) (166) (144) (244)
------ ------ ------ ------ ----
Balance at end of year $1,703 $1,503 $1,302 $1,093 $937
====== ====== ====== ====== ====
Ratio of net charge-offs to average total loans 0.01% 0.02% 0.10% 0.15% 0.29%
</TABLE>
------------------------
(1) Charge-offs in fiscal 1996 relate to the Company's purchased
participation interests in a multi-family loan originated by TASCO.
21
<PAGE>
The following table sets forth the allowance for loan losses allocated
by loan category, the total loan amounts by category, and the percent of loans
in each category to loans receivable at the dates indicated.
<TABLE>
2000 1999 1998
--------------------------------- ---------------------------------- ---------------------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Loan Each Loan Each Loan Each
Amounts Category Amounts Category Amounts Category
Allowance by to Total Allowance by to Total Allowance by to Total
Amount Category(1) Loans Amount Category(1) Loans Amount Category(1) Loans
--------- ----------- --------- --------- ----------- --------- --------- ----------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans:
One- to four-family $ 987 $282,603 76.7% $ 895 $244,466 81.5% $ 917 $153,891 82.9%
Multi-family 135 34,352 9.3 86 16,264 5.4 16 7,846 4.2
Commercial 352 33,052 9.0 297 26,753 8.9 160 12,766 6.9
Construction 29 6,317 1.7 11 2,812 0.9 23 2,613 1.4
Land(2) 85 759 0.2 118 1,502 0.5 128 932 0.5
Consumer and commercial
business loans 115 11,358 3.1 96 8,254 2.8 58 7,544 4.1
------ -------- ---- ------ -------- ----- ------ -------- -----
Total $1,703 $368,441 100.0% $1,503 $300,051 100.0% $1,302 $185,592 100.0%
====== ======== ===== ====== ======== ===== ====== ======== =====
</TABLE>
<TABLE>
1997 1996
------------------------------ ---------------------------------
Percent of Percent of
Loans in Loans in
Loan Each Loan Each
Amounts Category Amounts Category
Allowance by to Total Allowance by to Total
Amount Category Loans Amount Category Loans
--------- -------- -------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans:
One- to four-family $ 608 $ 91,367 75.5% $538 $62,283 70.6%
Multi-family 11 5,658 4.7 11 5,471 6.2
Commercial 121 11,990 9.9 91 9,117 10.3
Construction 98 2,786 2.3 74 2,175 2.5
Land(2) 196 1,814 1.5 166 1,934 2.2
Consumer and commercial
business loans 59 7,419 6.1 57 7,266 8.2
------ -------- ----- ---- ------- -----
Total $1,093 $121,034 100.0% $937 $88,246 100.0%
====== ======== ===== ==== ======= =====
</TABLE>
-------------------------------------
(1) Excludes real estate mortgage loans held for sale of $2.7 million, $1.2
million, $13.3 million and $20.4 million, respectively, at September 30,
2000, 1999, 1998 and 1997.
(2) The allowance principally represents an allocation to land loans "of
concern." See "- Other Loans of Concern."
22
<PAGE>
Investment Activities
General. The Company utilizes mortgage-backed and other securities in
virtually all aspects of its asset/liability management strategy. In making
investment decisions, the Board of Directors considers, among other things, the
Company's yield and interest rate objectives, its interest rate and credit risk
position, and its liquidity and cash flow.
Yonkers Savings must maintain minimum levels of investments that qualify
as liquid assets under OTS regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. Cash flow projections are regularly reviewed
and updated to assure that adequate liquidity is maintained.
Generally, the investment policy of the Company is to invest funds among
categories of investments and maturities based upon the Company's
asset/liability management policies, investment quality, loan and deposit
volume, liquidity needs and performance objectives. SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, requires that securities be
classified into three categories: trading, held to maturity, and available for
sale. Securities that are bought and held principally for the purpose of selling
them in the near term are classified as trading securities and are reported at
fair value with unrealized gains and losses included in earnings. Debt
securities for which the Company has the positive intent and ability to hold to
maturity are classified as held to maturity and reported at amortized cost. All
other securities not classified as trading or held to maturity are classified as
available for sale Available-for-sale securities are reported at fair value with
unrealized gains and losses included, on an after-tax basis, in a separate
component of stockholders' equity. At September 30, 2000, the Company had no
securities classified as trading. At September 30, 2000, $112.4 million or 87.4%
of the Company's mortgage-backed and other securities was classified as
available for sale. The remaining $16.2 million, or 12.6%, was classified as
held to maturity.
Mortgage-Backed Securities. The Company invests in mortgage-backed
securities in order to supplement loan production and achieve its
asset/liability management goals. The Company has also invested in
mortgage-backed securities, including collateralized mortgage obligations
("CMOs"), in order to take advantage of the spread between the yield on such
securities and the cost of borrowings from the FHLB and other "wholesale"
sources. In a number of instances, the expected maturity of the securities
purchased has been significantly longer than the term of the related borrowings.
Substantially all of the mortgage-backed securities owned by the Company
are issued, insured or guaranteed either directly or indirectly by a federal
agency or are rated "AA" or higher. As of September 30, 2000, the Company did
not have any mortgage-backed securities of a single issuer in excess of 10% of
the Company's stockholders' equity, except for federal agency obligations. At
September 30, 2000, the Company classified mortgage-backed securities of $15.7
million as held to maturity and $67.9 million as available for sale. Consistent
with its asset/liability management strategy, at September 30, 2000 $16.3
million, or 19.0%, of the Company's mortgage-backed securities had adjustable
interest rates.
23
<PAGE>
CMOs are securities derived by reallocating the cash flows from
mortgage-backed securities or pools of mortgage loans in order to create
multiple classes, or tranches, of securities with coupon rates and average lives
that differ from the underlying collateral as a whole. The term to maturity of
any particular tranche is dependent upon the prepayment speed of the underlying
collateral as well as the structure of the particular CMO. As a result, the cash
flows (and hence the values) of certain CMOs are subject to substantial change.
Management believes that CMOs at times represent attractive investment
alternatives relative to other investments due to the wide variety of maturity
and repayment options available through such investments. In particular, the
Company has from time to time concluded that short and intermediate duration
CMOs (seven-year or less estimated average life) represent a better combination
of rate and duration than adjustable-rate mortgage-backed securities. At
September 30, 2000, the Company held $2.3 million of CMOs, all of which were
classified as held-to-maturity.
Prior to the purchase of a CMO, the Company conducts an analysis of the
security to assess its price volatility. The analysis is designed to show the
expected change in the value of the security that would result from immediate
parallel shifts in the yield curve of plus or minus 100, 200 and 300 basis
points. The Company establishes risk tolerance levels for its CMO activities on
a periodic basis based on its overall asset/liability management goals and
market conditions.
The fair value of the Company's mortgage-backed securities, particularly
those carrying fixed rates, would decline significantly in the event of an
increase in interest rates. In addition, a decrease in interest rates could
result in an increase in prepayments on the fixed-rate portion of the Company's
mortgage-backed securities portfolio. Funds from such prepayments may be
reinvested at a lower yield. Similarly, a decline in interest rates would result
in the downward adjustment of the rates earned on the Company's adjustable-rate,
mortgage-backed securities portfolio resulting in lower yields and interest
income in future periods.
For additional information regarding the Company's mortgage-backed
securities portfolio, see Note 2 of the Notes to Consolidated Financial
Statements
24
<PAGE>
The following table sets forth the amortized cost and fair value of the
mortgage-backed securities portfolio, by accounting classification category and
by type of security, at the dates indicated.
<TABLE>
At September 30,
---------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ------------------------------ ------------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------------- ------------- -------------- -------------- -------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Held to Maturity
Pass-through securities $13,344 $13,323 $ 16,897 $16,934 $ 24,704 $ 25,231
CMOs 2,348 2,266 4,539 4,531 9,104 9,165
------- ------- ------- ------- ------- -------
Total 15,692 15,589 21,436 21,465 33,808 34,396
------- ------- ------- ------- ------- -------
Available for Sale
Pass-through securities 70,526 67,882 78,651 75,944 78,549 79,678
------- ------- ------- ------- ------- -------
Total 70,526 67,882 78,651 75,944 78,549 79,678
------- ------- ------- ------- ------- -------
Total mortgage-backed securities $86,218 $83,471 $100,087 $97,409 $112,357 $114,074
======= ======= ======== ======= ======== ========
</TABLE>
All mortgage-backed securities are guaranteed by, Ginnie Mae, Fannie Mae
or Freddie Mac, except for privately-issued securities with an amortized cost of
$60,000, $115,000, and $160,000 at September 30, 2000, 1999 and 1998,
respectively.
The following table sets forth certain information regarding the
amortized cost, fair value and weighted average yield of the Company's
mortgage-backed securities at September 30, 2000. The entire amortized cost and
fair value of such securities are reflected in the maturity period that includes
the final security payment date and, accordingly, no effect has been given to
periodic repayments or possible prepayments. In addition, under the structure of
some of the Company's CMOs, the Company's short- and intermediate-tranche
interests have repayment priority over the longer-term tranches of the same
underlying mortgage pool
<TABLE>
At September 30, 2000
-------------------------------------------------------------------------------
Held to Maturity Available for Sale
-------------------------------------------------------------------------------
Weighted Weighted
Amortized Fair Average Amortized Fair Average
Cost Value Yield Cost Value Yield
------------ ------------ ---------- ------------- ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Pass-through securities:
Due after 1 year but within 5 years $ 253 $ 257 7.90% $ -- $ -- --%
Due after 5 years but within 10 years 30 30 7.50 -- -- --
Due after 10 years 13,061 13,036 7.03 70,526 67,882 6.80
======= ======= ======= =======
Total $13,344 $13,323 7.05% $70,526 $67,882 6.80%
======= ======= ======= =======
CMOs:
Due after 1 year but within 5 years $ 181 $ 182 8.00% $ -- $ -- --%
Due after 5 years but within 10 years 9 9 5.75 -- -- --
Due after 10 years 2,158 2,075 5.51 -- -- --
======= ======= ======= =======
Total $ 2,348 $ 2,266 5.71% $ -- $ -- --%
======= ======= ======= =======
</TABLE>
25
<PAGE>
The following table sets forth the activity in the mortgage-backed
securities portfolio for the periods indicated.
<TABLE>
For the Year Ended September 30,
-------------------------------------------------------
2000 1999 1998
---------------- ---------------- ----------------
(In thousands)
<S> <C> <C> <C>
Amortized cost at beginning of year $100,087 $112,357 $ 92,954
-------- -------- --------
Purchases:
Pass-through securities:
Fixed rate -- 34,851 74,391
Adjustable rate -- -- --
-------- -------- --------
Total pass-through securities -- 34,851 74,391
CMOs -- -- --
--------- -------- --------
Total purchases -- 34,851 74,391
--------- -------- --------
Sales -- (15,377) (16,667)
Principal repayments (13,789) (31,414) (38,116)
Premium amortization, net of discount accretion (80) (330) (205)
-------- -------- --------
Amortized cost at end of year $ 86,218 $100,087 $112,357
======== ======== ========
</TABLE>
Other Securities. In addition to mortgage-backed securities, the Company
also invests in high-quality assets (primarily government and agency
obligations) with short and intermediate terms (typically seven years or less)
to maturity. At September 30, 2000, the Company did not own any investment
securities of a single issuer, which exceeded 10% of the Company's stockholders'
equity, other than U.S. Government or federal agency obligations. From time to
time, the Company holds high-grade corporate debt securities, as well as common
stocks and mutual fund shares. See Note 2 of the Notes to Consolidated Financial
Statements for additional information regarding the Company's securities
portfolio.
The following table sets forth the amortized cost and fair value of other
securities, by accounting classification category and by type of security, at
the dates indicated:
<TABLE>
At September 30,
---------------------------------------------------------------------
2000 1999 1998
---------------------------------------------------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- ------ --------- ----- --------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Available for Sale
U.S. Governmen $41,511 $39,655 $41,527 $40,156 $43,801 $44,810
Corporate bond $ 3,952 $ 3,997 --- --- --- ---
Equity securit 869 839 818 612 967 737
------- ------- ------- ------- ------- -------
Total 46,332 44,491 42,345 40,768 44,768 45,547
Held to Maturity
U.S. Governmen $ 500 $ 492 $ 500 $ 494 $ 9,495 $ 9,553
------- ------- ------- ------- ------- -------
Total other securities $46,832 $44,983 $42,845 $41,262 $54,263 $55,100
======= ======= ======= ======= ======= =======
</TABLE>
26
<PAGE>
The following table sets forth certain information regarding the
amortized cost, fair value and weighted average yield of other debt securities
at September 30, 2000, by remaining period to contractual maturity.
<TABLE>
At September 30, 2000
Held to Maturity Available for Sale
------------------------------------------------------------------------------------
Weighted Weighted
Amortized Fair Average Amortized Fair Average
Cost Value Yield Cost Value Yield
------------ ------------ ---------- ------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency securities:
Due after 1 year but within 5 years $500 $492 5.99% $ -- $ -- --%
Due after 5 years but within 10 years -- -- -- 3,998 3,943 7.58
Due after 10 years -- -- -- 37,513 35,712 7.23
==== ==== ======= =======
Total $500 $492 5.99% $41,511 $39,655 7.25%
==== ==== ======= =======
</TABLE>
Sources of Funds
General. The Company's primary sources of funds are deposits, borrowings,
payments (including prepayments) of loan principal, interest earned on loans and
securities, repayments of securities and other funds provided from operations.
Deposits. The Company offers a variety of deposit accounts having a wide
range of interest rates and terms. The Company's deposits consist of regular
savings (passbook) accounts, transaction (NOW and checking) accounts, money
market accounts, club accounts and certificate accounts. The Company only
solicits deposits in its market area and does not accept brokered deposits. The
Company relies primarily on competitive pricing policies, advertising and
customer service to attract and retain these deposits and provides incentives to
employees who refer new deposit customers to the Company.
The variety of deposit accounts offered by the Company has allowed it to
be competitive in obtaining funds and to respond with flexibility to changes in
consumer demand. As certain customers have become more interest rate conscious,
the Company has become more susceptible to short-term fluctuations in deposit
flows. The Company manages the pricing of its deposits in keeping with its
asset/liability management, profitability and growth objectives.
Management believes that the "core" portion of the Company's regular
savings, transaction, money market and club accounts can have a lower cost and
be more resistant to interest rate changes than certificate accounts and
therefore are relatively stable sources of deposits. The Company continues to
utilize customer service and marketing initiatives (including newspaper
advertisements) in an effort to maintain and increase the volume of such
deposits. However, the ability of the Company to attract and maintain these
accounts (as well as certificate accounts) has been and will continue to be
affected by market conditions.
27
<PAGE>
The following table sets forth the deposit activity of the Company for
the periods indicated.
<TABLE>
For the Year Ended September 30,
----------------------------------------------------
2000 1999 1998
--------------- --------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at beginning of year $272,974 $231,181 $207,933
Deposits 803,282 738,157 593,174
Withdrawals (763,073) (705,907) (578,982)
Interest credited 11,923 9,543 9,056
-------- -------- --------
Balance at end of year $325,106 $272,974 $231,181
======== ======== ========
Net increase during the year:
Amount $ 52,132 $ 41,793 $ 23,248
======== ======== ========
Percent 19.1% 18.1% 11.2%
======== ======== ========
</TABLE>
The following table sets forth the distribution of the Company's
deposit accounts and the related weighted average interest rates at the dates
indicated.
<TABLE>
At September 30,
-------------------------------------------------------------------------------------------------------
2000 1999 1998
-------------------------------- --------------------------------- --------------------------------
Percent Weighted Percent Weighted Percent Weighted
of Total Average of Total Average of Total Average
Amount Deposits Rate Amount Deposits Rate Amount Deposits Rate
------------ -------- -------- ------------- -------- -------- ------------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Checking accounts $ 11,669 3.6% -- % $ 10,769 4.0% --% $ 5,423 2.0% --%
NOW accounts 29,379 9.0 1.05 24,708 9.1 1.06 21,123 7.7 1.00
Money market accounts 34,087 10.5 3.25 33,429 12.3 3.19 27,613 10.1 3.64
Regular savings accounts 55,122 17.0 2.42 50,776 18.6 2.23 43,492 15.9 2.43
Club accounts 1,609 0.5 2.42 1,480 0.5 2.23 1,282 0.6 2.43
Savings certificate accounts 193,240 59.4 5.78 151,812 55.6 5.04 132,248 48.4 5.43
-------- ----- -------- ----- -------- ----
Total $325,106 100.0% 4.29 % $272,974 100.0% 4.10% $231,181 84.7% 4.10%
======== ===== ======== ===== ======== ====
</TABLE>
28
<PAGE>
The following table sets forth, by interest rate ranges, the amount of
savings certificate accounts outstanding at the dates indicated and the period
to maturity of savings certificate accounts outstanding at September 30, 2000.
<TABLE>
At September 30, 2000
------------------------------------------------------------------------------ Total at
Period to Maturity September 30,
------------------------------------------------------------------------------ ------------------------
Less than One to More than Percent
One Year Three Years Three Years Total of Total 1999 1998
-------------- -------------- ------------- --------------- -------------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
4.00% and below $ 1,512 $ 1,512 0.8% $ 2,619 $ --
4.01% to 5.00% 31,444 4,262 1,148 36,854 19.1 74,162 29,677
5.01% to 6.00% 57,968 18,451 2,301 78,720 40.8 66,586 82,960
6.01% to 7.00% 43,135 19,959 11,319 74,413 38.5 8,234 19,611
7.01% and above 507 801 433 1,741 0.9 211 --
-------- ------- ------- -------- ----- -------- --------
Total $134,566 $43,473 $15,201 $193,240 100.0% $151,812 $132,248
======== ======= ======= ======== ===== ======== ========
</TABLE>
The following table sets forth the maturity distribution and related
weighted average interest rates for savings certificate accounts with balances
less than $100,000, accounts of $100,000 or more, and total savings certificates
at September 30, 2000.
<TABLE>
Less than $100,000 $100,000 or more Total
---------------------- -------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Within three months $ 17,390 4.97% $ 3,381 5.28% $ 20,771 5.02%
After three but within six months 33,406 5.48 6,519 6.07 39,925 5.58
After six but within 12 months 61,393 5.77 12,477 6.07 73,870 5.82
-------- ------- --------
Total within one year 112,189 5.56 22,377 5.95 134,566 5.62
After one but within two years 29,854 5.96 5,968 6.38 35,822 6.03
After two but within three years 6,409 5.86 1,242 6.38 7,651 5.94
After three but within five years 12,505 6.42 2,696 6.58 15,201 6.45
--------- ------- --------
Total $160,957 5.71% $32,283 6.10% $193,240 5.78%
========= ======= ========
</TABLE>
29
<PAGE>
Borrowings. The Company's other available sources of funds include
securities repurchase agreements and advances from the FHLB of New York. The
Company uses borrowings when the rate and or maturities are believed to be more
favorable than those available on deposits. As a member of the FHLB of New York,
the Company is required to own capital stock in the FHLB of New York and is
authorized to apply for advances from the FHLB of New York. Each FHLB credit
program has its own interest rate, which may be fixed, or variable, and a range
of maturities. The FHLB of New York may prescribe the acceptable uses for these
advances, as well as limitations on the size of the advances and repayment
provisions. At September 30, 2000, the Company had a collateral pledge
arrangement with the FHLB of New York pursuant to which the Company may borrow
advances of up to $130.1 million. On such date, $72.4 million of FHLB advances
were outstanding. These advances were used to fund mortgage loans and to a
lesser extent securities.
The Company enters into securities repurchase agreements with the FHLB of
New York utilizing mortgage-backed and other securities as collateral. At
September 30, 2000, the Company had $85.0 million of outstanding borrowings
under securities repurchase agreements which were collateralized by
mortgage-backed and other debt securities with a total fair value of $95.0
million.
The following table sets forth information concerning the balances and
interest rates on borrowings at the dates and for the periods indicated.
<TABLE>
At or for the Year
Ended September 30,
--------------------------------------------------
2000 1999 1998
-------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C>
Securities repurchase agreements:
Balance at end of year $ 85,012 $ 99,987 $107,790
Average balance during year 99,756 82,681 81,892
Maximum outstanding at any month end 114,088 100,962 119,890
Weighted average interest rate at end of year 6.10% 5.53% 5.64%
Average interest rate during the year 5.92 5.48 5.76
FHLB advances:
Balance at end of year $ 72,400 $ 47,949 $ --
Average balance during year 71,052 14,475 4,139
Maximum outstanding at any month end 82,900 47,949 11,000
Weighted average interest rate at end of year 6.42% 5.19% --%
Average interest rate during the year 6.14 5.61 5.99
</TABLE>
See Note 7 of the Notes to the Consolidated Financial Statements for
further information concerning the Company's securities repurchase agreements
and FHLB advances.
30
<PAGE>
Subsidiaries
At September 30, 2000, the Association had two subsidiaries, Yonkers
Financial Services Corporation, which offers life insurance, annuities, and
mutual funds on an agency basis to the Association's customers and Yonkers REIT,
Inc., see Note 8 of the Notes to Consolidated Financial Statements.
Competition
The Company faces extremely strong competition both in originating real
estate loans and in attracting deposits. Competition in originating loans comes
primarily from mortgage bankers, commercial banks, insurance companies, credit
unions and other savings institutions, which also originate loans secured by
real estate located in the Company's market area. The Company competes for loans
principally on the basis of the interest rates and loan fees it charges, the
types of loans it originates and the quality of services it provides to
borrowers.
Competition for deposits is intense given the size of the New York market
and the fact that it is the home state for many large regional and money center
banks. Competition for deposits is principally from money market and mutual
funds, securities firms, commercial banks, credit unions and other savings
institutions located in the same communities. There is further competition for
deposits from institutions offering home and internet computer banking. The
ability of the Company to attract and retain deposits depends on its ability to
provide an investment opportunity that satisfies the requirements of investors
as to rate of return, liquidity, risk, convenient locations and other factors.
The Company is significantly smaller than most of its competitors, which due to
their size and economies of scale, generally offer a broader range of deposit
products than the Company. The Company competes for these deposits by offering
deposit accounts at competitive rates, convenient business hours, availability
of ATMs and a customer oriented staff. As of June 30, 1999, the latest date such
information was available, there were 406 other thrift, commercial bank and
credit union offices in Westchester County which compete for deposits. As of
June 30, 1999, the Company held approximately 1.1% of total deposits in
Westchester County.
Employees
At September 30, 2000, the Company had a total of 90 full-time and 14
part-time employees. None of the Company's employees are represented by any
collective bargaining agreement. Management considers its employee relations to
be good.
Regulation
General. Yonkers Savings is a federally chartered savings and loan
association, the deposits of which are federally insured and backed by the full
faith and credit of the United States Government. Accordingly, Yonkers Savings
is subject to broad federal regulation and oversight extending to all its
operations. Yonkers Savings is a member of the FHLB of New York and is subject
to certain limited regulation by the Board of Governors of the Federal Reserve
System ("Federal Reserve Board"). As the savings and loan holding company of
Yonkers Savings, the Holding Company also is subject to federal regulation and
oversight. The purpose of holding company regulation is to protect subsidiary
savings associations. Certain of these regulatory requirements and restrictions
are discussed below or elsewhere in this document.
31
<PAGE>
Federal Regulation of Savings Associations. The OTS has extensive
authority over the operations of savings associations. As part of this
authority, Yonkers Savings is required to file periodic reports with the OTS and
is subject to periodic examinations by the OTS and the FDIC. The last regular
OTS safety and soundness examination of Yonkers Savings was as of July 1, 2000.
When these examinations are conducted by the OTS and the FDIC, the examiners may
require Yonkers Savings to provide for higher general or specific loan loss
reserves. All savings associations are subject to a semi-annual assessment,
based upon the savings association's total assets, to fund the operations of the
OTS. Yonkers Savings' OTS assessment for the fiscal year ended September 30,
2000 was approximately $98,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including Yonkers Savings and the
Holding Company. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders and to initiate injunctive actions.
Yonkers Savings' general permissible lending limit for loans-to-one
borrower is equal to the greater of $500,000 or 15% of unimpaired capital and
surplus (except for loans fully secured by certain readily marketable
collateral, in which case this limit is increased to 25% of unimpaired capital
and surplus). At September 30, 2000, Yonkers Savings' lending limit under this
restriction was $5.2 million. Yonkers Savings is in compliance with the
loans-to-one borrower limitation.
Insurance of Accounts and Regulation by the FDIC. As insurer, the FDIC
imposes deposit insurance premiums and is authorized to conduct examinations of
and to require reporting by FDIC-insured institutions. It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious risk to the SAIF. The FDIC also has the
authority to initiate enforcement actions against savings associations, after
giving the OTS an opportunity to take such action, and may terminate the deposit
insurance if it determines that the institution has engaged in unsafe or unsound
practices or is in an unsafe or unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums, based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium, while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classifications of all insured
institutions are made by the FDIC for each semi-annual assessment period. At
September 30, 2000, the Association was classified as a well-capitalized
institution.
32
<PAGE>
The premium schedule for both Bank Insurance Fund ("BIF") and SAIF
insured institutions ranges from 0 to 27 basis points for each $100 in domestic
deposits. The Association's most recent assessment rate was 0 basis points.
However, SAIF-insured institutions are required to pay a Financing Corporation
(FICO) assessment, in order to fund the interest on bonds issued to resolve
thrift failures in the 1980s. Prior to January 2000, the assessment was about 6
basis points, while BIF-insured institutions paid an assessment equal to about
1.50 basis points for each $100 in domestic deposits. Effective January 1, 2000,
the assessment for SAIF-insured institutions was reduced to about 2 basis
points, when BIF-insured institutions were required to fully participate in the
assessment. These assessments, which may be revised based upon the level of BIF
and SAIF deposits, will continue until the FICO bonds mature in the year 2015.
Regulatory Capital Requirements. Federally insured savings associations,
such as Yonkers Savings, are required to maintain a minimum level of regulatory
capital. The OTS has established capital standards, including a tangible capital
requirement, a leverage ratio (or core capital) requirement and a risk-based
capital requirement applicable to such savings associations.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). At September 30, 2000, Yonkers
Savings had tangible capital of $34.6 million, or 6.6% of adjusted total assets,
which is $26.8 million above the minimum requirement of 1.5% in effect on that
date.
In addition, all intangible assets, other than a limited amount of
purchased mortgage servicing rights and credit card relationships, must be
deducted from tangible capital for calculating compliance with the requirement.
At September 30, 2000, Yonkers Savings had no intangible assets.
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. Debt and equity
investments in excludable subsidiaries are deducted from assets and capital. At
September 30, 2000, Yonkers Savings had two "includable" subsidiaries.
The capital standards also require core capital equal to at least 4% of
adjusted total assets. Core capital generally consists of tangible capital plus
certain intangible assets, including a limited amount of purchased mortgage
servicing rights and credit card relationships. At September 30, 2000, Yonkers
Savings had core capital equal to $34.6 million, or 6.6% of adjusted total
assets, which is $13.7 million above the minimum leverage ratio requirement of
4% in effect on that date.
33
<PAGE>
The OTS risk-based capital regulations require savings associations to
have total capital of at least 8% of risk-weighted assets. Total capital
consists of core capital, as defined above and supplementary capital.
Supplementary capital consists of certain permanent and maturing capital
instruments that do not qualify as core capital and general valuation loan and
lease loss allowances up to a maximum of 1.25% of risk-weighted assets.
Supplementary capital may be used to satisfy the risk-based capital requirement
only up to the amount of core capital. At September 30, 2000, Yonkers Savings
had no capital instruments that qualify as supplementary capital and $1.7
million of general loan loss reserves, which was less than 1.25% of
risk-weighted assets.
In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, are multiplied by a risk weight, ranging from
0% to 100%, based on the risk inherent in the type of asset. For example, the
OTS has assigned a risk weight of 50% for prudently underwritten permanent one-
to four-family first lien mortgage loans not more than 90 days delinquent and
having a loan to value ratio of not more than 80% at origination unless insured
to such ratio by an insurer approved by Fannie Mae or Freddie Mac.
At September 30, 2000, Yonkers Savings had total capital of $36.3 million
(including $34.6 million in core capital and $1.7 million in qualifying
supplementary capital) and risk-weighted assets of $238.6 million (including
$2.0 million in converted off-balance sheet items), or total capital of 15.2% of
risk-weighted assets. This amount was $17.3 million above the 8% requirement in
effect on that date.
The OTS is authorized to impose capital requirements in excess of these
standards on individual associations on a case-by-case basis. The OTS and FDIC
are authorized and, under certain circumstances required, to take certain
actions against savings associations that fail to meet their capital
requirements. The OTS is generally required to take action to restrict the
activities of an "undercapitalized association" (generally defined to be one
with less than either 4% core capital ratio, a 4% Tier 1 risk-based capital
ratio (the ratio of core capital to risk weighted assets) or an 8% risk-based
capital ratio). Any such association must submit a capital restoration plan and
until such plan is approved by the OTS may not increase its assets, acquire
another institution, establish a branch or engage in any new activities, and
generally may not make capital distributions. The OTS is authorized to impose
the additional restrictions that are applicable to significantly
undercapitalized associations.
The OTS is also generally authorized to reclassify the association into a
lower capital category and impose restrictions applicable to such category if
the institution is engaged in unsafe or unsound practices or is in a an unsafe
or unsound condition.
34
<PAGE>
The imposition by the OTS or the FDIC of any of these measures on the
Company or the Association may have a substantial adverse effect on operations
and profitability.
Limitations on Dividends and Other Capital Distributions. OTS regulations
impose various restrictions on associations with respect to their ability to
make distributions of capital which include dividends, stock redemptions or
repurchases, cash-out mergers and transactions charged to the capital account.
OTS regulations prohibit an association from declaring or paying any dividends
or from repurchasing any of its stock if, as a result, the regulatory capital of
the association would be reduced below the amount required to be maintained for
the liquidation account established in connection with its mutual to stock
conversion.
The Association may make a capital distribution without the approval of
the OTS provided we notify the OTS, 30 days before we declare the capital
distribution and we meet the following requirements: (i) we have a regulatory
rating in one of the two top examination categories, (ii) we are not of
supervisory concern, and will remain adequately- or well-capitalized, as defined
in the OTS prompt corrective action regulations, following the proposed
distribution, and (iii) the distribution does not exceed our net income for the
calendar year-to-date plus retained net income for the previous two calendar
years (less any dividends previously paid). If we do not meet the above stated
requirements, we must obtain the prior approval of the OTS before declaring any
proposed distributions.
Qualified Thrift Lender Test. All savings associations, including Yonkers
Savings, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations. This test requires a savings
association to have at least 65% of its portfolio assets (as defined by
regulation) in qualified thrift investments, primarily residential housing
related loans and investments. At September 30, 2000, Yonkers Savings met the
test and has always met the test since its effectiveness.
Any savings association that fails to meet the QTL test must convert to a
bank charter, unless it requalifies as a QTL within one year, and thereafter
remains a QTL. If an association does not requalify and converts to a national
bank charter, it must remain SAIF-insured until the FDIC permits it to transfer
to the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank. If any association that fails the QTL test is
controlled by a holding company, then within one year after the failure, the
holding company must register as a bank holding company and become subject to
all restrictions on bank holding companies. See "- Holding Company Regulation."
35
<PAGE>
Community Reinvestment Act. Under the Community Reinvestment Act ("CRA"),
every FDIC insured institution has a continuing and affirmative obligation
consistent with safe and sound banking practices, to help meet the credit needs
of its entire community, including low and moderate, income neighborhoods. The
CRA does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the OTS, in connection with
the examination of Yonkers Savings, to assess the institution's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications, such as a merger or the establishment
of a branch, by Yonkers Savings. An unsatisfactory rating may be used as the
basis for the denial of an application by the OTS. Yonkers Savings was examined
for CRA compliance by the OTS in June 1999 and received a rating of
satisfactory.
Transactions with Affiliates. Generally, transactions between a savings
association or its subsidiaries and its affiliates are required to be on terms
as favorable to the association as transactions with non-affiliates. In
addition, certain of these transactions, such as loans to an affiliate, are
restricted to a percentage of the association's capital. Affiliates of Yonkers
Savings include the Holding Company and any company which, is under common
control with Yonkers Savings. In addition, a savings association may not lend to
any affiliate engaged in activities not permissible for a bank holding company
or acquire the securities of most affiliates. Subsidiaries of a savings
association are generally not deemed affiliates; however, the OTS has the
discretion to treat subsidiaries of savings associations as affiliates on a
case-by-case basis.
Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.
Holding Company Regulation. The Holding Company is a unitary savings and
loan holding company subject to regulatory oversight by the OTS. As such, the
Holding Company is required to register and file reports with the OTS and is
subject to regulation and examination by the OTS. In addition, the OTS has
enforcement authority over the Holding Company and its non-savings association
subsidiaries (if any) which also permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary savings
association.
As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Holding Company and any of its subsidiaries (other than Yonkers Savings or
any other SAIF-insured savings association) would become subject to such
restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.
If Yonkers Savings fails the QTL test, the Holding Company must obtain
the approval of the OTS prior to continuing after such failure, directly or
through its other subsidiaries, any business activities other than those
approved for multiple savings and loan holding companies or their subsidiaries.
In addition, within one year of such failure the Holding Company must register
as, and will become subject to, the restrictions applicable to bank holding
companies. The activities authorized for a bank holding company are more limited
than are the activities authorized for a unitary or multiple savings and loan
holding company. See "- Qualified Thrift Lender Test."
36
<PAGE>
The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings association.
Federal Securities Law. The stock of the Holding Company is registered
with the SEC under the Exchange Act. The Holding Company is subject to the
information, proxy solicitation, insider trading restrictions and other
requirements of the SEC under the Exchange Act.
Holding Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Holding Company may not
be resold without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified public information
requirements, each affiliate is able to sell in the public market, without
registration, a limited number of shares in any three-month period.
Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At September 30, 2000, Yonkers Savings was in compliance
with these reserve requirements. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements that may be imposed by the OTS. See "- Liquidity."
Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB advances, before borrowing from the Federal Reserve Bank.
Federal Home Loan Bank System. Yonkers Savings is a member of the FHLB of
New York, which is one of 12 regional FHLBs that administer the home financing
credit function of savings associations. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations of the FHLB
System. It makes loans to members (i.e., advances) in accordance with policies
and procedures established by the board of directors of the FHLB, which are
subject to the oversight of the Federal Housing Finance Board. All advances from
the FHLB are required to be fully secured by sufficient collateral as determined
by the FHLB. In addition, all long-term advances are required to provide funds
for residential home financing.
As a member, Yonkers Savings is required to purchase and maintain stock
in the FHLB of New York. At September 30, 2000, Yonkers Savings held $9.3
million in FHLB stock, which was in compliance with this requirement. Dividends
paid by the FHLB of New York to the Association totaled $716,000 for the year
ended September 30, 2000, representing an increase of $266,000 from dividends
received in fiscal 1999.
Taxation
Federal. The Association and the Holding Company currently file
consolidated federal income tax returns. These returns are filed on a fiscal
year basis, as of September 30, using the accrual method of accounting.
37
<PAGE>
Savings associations such as the Association are permitted to establish
reserves for bad debts and to make annual additions thereto which, may, within
specified formula limits, be taken as a deduction in computing taxable income
for federal income tax purposes. The amount of the bad debt reserve deduction
for "non-qualifying loans" is computed under the experience method. The amount
of the bad debt reserve deduction for "qualifying real property loans"
(generally loans secured by improved real estate) is also computed under the
experience method. Under the experience method, the bad debt reserve deduction
is an amount determined under a formula based generally upon the bad debts
actually sustained by the savings association over a period of years.
Historically, a percentage of taxable income method was also available in
computing the qualifying loan bad debt deduction; however, under 1996 federal
tax legislation, this method is no longer available to the Association for tax
years ending on or after September 30, 1997.
The 1996 federal tax legislation also imposed a requirement to recapture
into taxable income the portion of the qualifying and non-qualifying loan
reserves in excess of the "base-year" balances of such reserves. For the
Association, the base-year reserves are the balances as of September 30, 1988.
Recapture of the excess reserves will occur over a six-year period which began
for the Association in the tax year ending September 30, 1999. The Association
previously established, and will continue to maintain, a deferred tax liability
with respect to its federal tax bad debt reserves in excess of the base-year
balances; accordingly, the legislative changes will have no effect on total
income tax expense for financial reporting purposes.
Also, under the 1996 legislation, the Association's base-year federal tax
bad debt reserves are "frozen" and subject to current recapture only in very
limited circumstances. Generally, recapture of all or a portion of the base-year
reserves will be required if the Association pays a dividend in excess of the
greater of its current or accumulated earnings and profits, redeems any of its
stock, or is liquidated. The Association has not established a deferred federal
tax liability under SFAS No. 109 for its base-year federal tax bad debt
reserves, as it does not anticipate engaging in any of the transactions that
would cause such reserves to be recaptured.
In addition to the regular income tax, corporations generally are subject
to a minimum tax. An alternative minimum tax is imposed at a minimum tax rate of
20% on alternative minimum taxable income, which is the sum of a corporation's
regular taxable income (with certain adjustments) and tax preference items, less
any available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax, and net operating losses can
offset no more than 90% of alternative minimum taxable income. The Association
and the Company have not been subject to the alternative minimum tax.
The Association has been audited by the IRS with respect to federal
income tax returns through September 30, 1992, and all deficiencies have been
satisfied. In the opinion of management, any examination of still open returns
would not result in a deficiency, which could have a material adverse effect on
the financial condition of the Company.
38
<PAGE>
New York State. The Association and the Holding Company currently file
combined New York State tax returns on a fiscal year basis. The Company is
subject to the New York State Franchise Tax on Banking Corporations in an annual
amount equal to the greater of (i) 9% of "entire net income" allocable to New
York State during the taxable year, or (ii) the applicable alternative minimum
tax. The alternative minimum tax is generally the greater of (a) 0.01% of the
value of assets allocable to New York State with certain modifications, (b) 3%
of "alternative entire net income" allocable to New York State, or (c) $250.
Entire net income is similar to federal taxable income, subject to certain
modifications (including the fact that net operating losses cannot be carried
back or carried forward). In addition, New York also imposes a Metropolitan
Commuter Transportation District surcharge of 17% that is assessed on the amount
of the New York State Franchise tax.
In July 1996, New York State enacted legislation to preserve the use of
the percentage of taxable income bad debt deduction for state tax purposes. In
general, the legislation provides for a deduction equal to 32% of the
Association's New York State taxable income, which is comparable to the
deductions permitted under the prior Federal tax law. The legislation also
provides for a floating base year, which will allow the Association to change
from the percentage of taxable income method to the experience method without
recapture of any reserve. Previously, the Association had established a deferred
New York State tax liability for the excess of its New York State tax bad debt
reserves over the amount of its base-year New York State reserves. Since the new
legislation effectively eliminated the reserves in excess of the base-year
balances, the Company reduced its deferred tax liability by $100,000 (with a
corresponding reduction in income tax expense) during the quarter ended
September 30, 1996.
Generally, New York State tax law has requirements similar to federal
requirements regarding the recapture of base-year tax bad debt reserves. One
notable exception is that, after the 1996 legislation, New York continues to
require that at least 60% of the Association's assets consist of specified
assets (generally, loans secured by residential real estate or deposits,
educational loans, cash and certain government obligations). The Association
expects to continue to meet the 60% requirement and does not anticipate engaging
in any of the transactions, which would require recapture of its base-year
reserves (such as changing to a commercial bank charter). Accordingly, under
SFAS No. 109, it has not provided any deferred tax liability on such reserves.
Delaware. As a Delaware company, the Company is exempted from Delaware
corporate income tax but is required to file an annual report with and pay an
annual fee to the State of Delaware. The Company is also subject to an annual
franchise tax imposed by the State of Delaware.
<PAGE>
Item 2. Properties
The following table sets forth information concerning the Company's
properties at September 30, 2000. The Company's premises had an aggregate net
book value of approximately $315,000 at that date
39
<TABLE>
Year Net Book Value at
Location Acquired/Leased Owned or Leased September 30, 1999
------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Corpoate Headquarters:
6 Executive Plaza 1996 Leased $114
Yonkers, New York 10701-9858
Main Office:
One Manor House Square 1976 Owned 112
Yonkers, New York 10701-2701
Full-Service Branches:
780 Palisde Avenue 1989 Leased 20
Yonkers, New York 10703
1759 Central Park Avenue 1977 Leased 33
Yonkers, New York 10710-2828
2320 Central Park Avenue 1986 Leased 36
Yonkers, New Yonkers 10710-1216
In-Store Branches:
1357 Route 9 1997 Leased --
Wappingers Falls, New York
12590
3303 Crompond Road 1998 Leased --
Yorktown Heights, New York
240 East Sanford Boulvard 1999 Leased --
Mr. Vernon, New York 10550
432 South Road, Route 9 1999 Leased --
Poughkeepsie, New York 12601
2094 East Main Street Route 6 1999 Leased --
Cortlandt Manor, New York 10567
</TABLE>
Yonkers Savings has entered into an agreement for in-store branching with
BJ's Wholesale Club, Inc. An in-store branch opened in December 1997 in BJ's
location in Wappingers Falls, New York; a second in-store branch opened in
October 1998 in Yorktown Heights, New York. The Association's agreement gives it
the right of first refusal to establish an in-store branch in any of BJ's
remaining or future clubs located in Dutchess, Putnam, Rockland, and Westchester
Counties, New York. In addition, in May 1999 a third in-store branch was opened
in a supermarket in Mt. Vernon, New York, in September 1999 a fourth was opened
in a supermarket in Poughkeepsie, New York, and in October 1999 a fifth was
opened in a supermarket in Cortlandt Manor, New York..
The Company believes that its current facilities are adequate to meet
present needs. In the future, the Company intends to continue to explore
branching opportunities to the extent they develop, although no specific
proposals are currently under consideration, other than the possibility of
additional in-store branches under the agreement described above.
40
<PAGE>
The Company also has ATMs located in eight branch offices and three
offsite locations, one located in a hospital and two in supermarkets.
The Company's depositor and borrower customer files are maintained by an
independent data processing company. The net book value of the computer
equipment utilized by the Company at September 30, 2000 was approximately
$368,000.
Item 3. Legal Proceedings
The Company is involved as plaintiff or defendant in various legal
proceedings arising in the normal course of its business. While the ultimate
outcome of these various legal proceedings cannot be predicted with certainty,
it is the opinion of management that the resolution of these legal actions
should not have a material effect on the Company's financial position, results
of operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended September 30,
2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Page 43 of the attached 2000 Annual Report to Stockholders is herein
incorporated by reference.
Item 6. Selected Financial Data
Page 5 of the attached 2000 Annual Report to Stockholders are herein
incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Pages 6 through 17 of the attached 2000 Annual Report to Stockholders are
herein incorporated by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The section "Interest Rate Risk Management", appearing on pages 14 and 15
of the attached 2000 Annual Report to Stockholders, is herein incorporated by
reference.
41
<PAGE>
Item 8. Financial Statements and Supplementary Data
Pages 18 through 40 of the attached 2000 Annual Report to Stockholders
are herein incorporated by reference.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
There has been no Current Report on Form 8-K filed within 24 months prior
to the date of the most recent financial statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
Information concerning directors of the Registrant is incorporated herein
by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held in January 2001, a copy of which will be
filed not later than 120 days after the close of the fiscal year.
Executive Officers Who Are Not Directors
The following are the Company's executive officers who are not also
directors as of September 30, 2000.
Joseph L. Macchia. Mr. Macchia, age 49, is the Senior Vice President and
Secretary to the Association and Senior Vice President and Secretary of the
Holding Company. Mr. Macchia has been the Secretary of the Holding Company since
its formation and was named Chief Operations Officer of the Association in
January 1997. Mr. Macchia is responsible for the Association's branch
administration and savings operations. He is also responsible for the
Association's Bank Secrecy Act compliance. Prior to such time, Mr. Macchia
served as the Association's Vice President. Mr. Macchia has been employed by the
Association since 1972.
Joseph D. Roberto. Mr. Roberto, age 48, is the Senior Vice President,
Treasurer and Chief Financial Officer of the Holding Company and Senior Vice
President, Treasurer and Chief Financial Officer of the Association. Mr. Roberto
has been the Chief Financial Officer and Treasurer of the Holding Company since
its formation. Mr. Roberto was appointed the Association's Vice President and
Treasurer in 1991 and Chief Financial Officer in 1995. Mr. Roberto is
responsible for the Accounting Department, interest rate risk and
asset/liability management as well as financial reporting. Prior to 1991, Mr.
Roberto served as the Association's Secretary and Treasurer. Mr. Roberto has
been employed by the Association since 1973.
42
<PAGE>
Philip Guarnieri. Mr. Guarnieri, age 43, is the Senior Vice President and
Chief Lending Officer of the Association. Mr. Guarnieri was appointed Vice
President and Chief Lending Officer in July 1996. Prior to joining the
Association, Mr. Guarnieri was the Vice President for loan origination at Home
Federal Savings Bank, Queens, New York. Mr. Guarnieri is responsible for the
administration of the Association's real estate lending programs.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Holding Company's equity securities, to file with the SEC reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Holding Company. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 2000 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were met. During the fiscal year ended
September 30, 1999, Gould Investors failed to timely file a Form 3 upon its
becoming the beneficial owner of more than 10% of the outstanding shares of the
Company's common stock.
Item 11. Executive Compensation
Information concerning executive compensation is incorporated herein by
reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in January 2001, a copy of which will be filed not later
than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in January 2001, a
copy of which will be filed not later than 120 days after the close of the
fiscal year.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held in January 2001, a copy of which will
be filed not later than 120 days after the close of the fiscal year.
43
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements
The following information appearing in the Company's 2000 Annual Report
to Stockholders is herein incorporated by reference
<TABLE>
Item Pages in Annual Report
---- ----------------------
<S> <C>
Independent Auditors' Report Page 42
Consolidated Balance Sheets as of September 30, 2000 Page 18
and 1999
Consolidated Statements of Income for the Years Page 19
Ended September 30, 2000, 1999 and 1998
Consolidated Statements of Changes in Stockholders' Page 20
Equity for the Years Ended September 30, 2000, 1999
and 1998
Consolidated Statements of Cash Flows for the Years Page 21
Ended September 30, 2000, 1999 amd 1998
Notes to Consolidated Financial Statements Pages 22 through 40
</TABLE>
(a) (2) Financial Statement Schedules
All financial statement schedules have been omitted as the required
information is not applicable or has been included in the Consolidated Financial
Statements.
44
<PAGE>
(a) (3) Exhibits
<TABLE>
Reference to
Prior Filing
Regulation S-K or Exhibit
Exhibit Number Attached
Number Document Hereto
--------------- -------- ---------------
<S> <C> <C>
3(a) Certificate of Incorporation *
3(b) By-Laws **
4 Instruments defining the rights of security holders, *
including debentures
9 Voting Trust Agreement None
10 Material Contracts
Employment Contract ***
Management Recognition Plan and Stock
Option and Incentive Plan *
Change-in-Control Severance Agreements ***
Amended and Restated Standstill Agreement ****
11 Statement re: computation of per share earnings Not required
12 Statement re: computation of ratios Not required
13 Annual Report to Security Holders 13
16 Letter re: change in certifying accountants None
18 Letter re: change in accounting principles None
19 Previously unfiled documents None
21 Subsidiaries of Registrant 21
22 Published report regarding matters submitted to vote None
of security holders
23 Consents of Experts and Counsel 23
24 Power of Attorney Not required
27 Financial Data Schedule None
99 Additional Exhibits None
</TABLE>
----------------
* Filed as exhibits to the Company's Form S-1 registration statement
filed on December 29, 1995 (File No. 33-81013) pursuant to Section 5 of the
Securities Act of 1933, as amended. All of such previously filed documents are
hereby incorporated herein by reference in accordance with Item 601 of
Regulation S-K.
** Filed as an exhibit to the Company's Form 8-K filed on July 29, 1999
(File No. 000-27716) pursuant to the Securities Exchange Act of 1934, as
amended. Such previously filed document is hereby incorporated herein by
reference in accordance with Item 601 of Regulation S-K.
*** Filed as exhibits to the Company's Form 10-K filed on December 28,
1999 (File No. 00027716) pursuant to the Securities Exchange Act of 1934, as
amended. All of such previously filed documents are hereby incorporated herein
by reference in accordance with Item 601 of Regulation S-K.
****Filed as exhibit to the Company's Form 8-K/A filed on February 29,
2000 (File No. 00027716) pursuant to the Securities Exchange Act of 1934, as
amended. All of such previously filed documents are hereby incorporated herein
by reference in accordance with Item 601 of Regulation S-K.
(b) Reports on Form 8-K
During the quarter ended September 30, 2000, the Company filed one
current Reports on Form 8-K. On July 25, 2000, the Company reported the issuance
of a press release announcing the Company's earnings for the quarter ended June
30, 2000.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
YONKERS FINANCIAL CORPORATION
By: /s/ Richard F. Komosinski
-------------------------------------
Richard F. Komosinski, President,
Chief Executive Officer and Director
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ Richard F. Komosinski /s/ William G. Bachop
-------------------------- -------------------------------------
Richard F. Komosinski, President, William G. Bachop, Chairman
Chief Executive Officer and Director
(Principal Executive and Operating Officer)
Date: December 29,2000 Date: December 29,2000
---------------- ----------------
/s/ Michael J. Martin /s/ Charles D. Lohrfink
------------------------------------- --------------------------------------
Michael J. Martin, Director Charles D. Lohrfink, Director
Date: December 29,2000 Date: December 29,2000
---------------- ----------------
/s/ Donald R. Angelilli /s/ Eben T. Walker
------------------------------------- --------------------------------------
Donald R. Angelilli, Director Eben T. Walker, Director
Date: December 29,2000 Date: December 29,2000
---------------- ----------------
/s/ P. Anthony Sarubbi /s/ Joseph D. Roberto
------------------------------------- --------------------------------------
P. Anthony Sarubbi, Director Joseph D. Roberto, Vice President,
Treasurer and Chief Financial
Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING
Date: December 29, 2000 OFFICER)
-----------------
Date: December 29,2000
----------------
/s/ Fredric H.Gould
--------------------------------------
Fredric H. Gould, Director
Date: December 29,2000
46
