10-Q 1 a2071090z10-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ 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 Identification Number) incorporation or organization) 6 EXECUTIVE PLAZA, YONKERS, NEW YORK 10701 -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (914) 965-2500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

YONKERS FINANCIAL CORPORATION FORM 10-Q QUARTERLY PERIOD ENDED DECEMBER 31, 2001

1 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)

See accompanying notes to consolidated financial statements 2 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)

See accompanying notes to consolidated financial statements 3 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

See accompanying notes to consolidated financial statements. 4 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)

See accompanying notes to consolidated financial statements 5 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION Yonkers Financial Corporation (the "Company") was incorporated under the laws of the State of Delaware and on April 18, 1996 became the savings and loan holding company of The Yonkers Savings and Loan Association, FA (the "Association") in connection with the Association's conversion from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association (the "Conversion"). Concurrent with the Conversion, the Holding Company sold 3,570,750 shares of its common stock in a subscription and community offering at a price of $10 per share, resulting in net proceeds of $34.6 million. The assets of the Holding Company consist of the stock of the Association, certain short-term and other investments, and a loan to its Employee Stock Ownership Plan (the "ESOP"). Collectively, the Holding Company and the Association are referred to herein as the "Company". On March 31, 1999 the Association established a real estate investment trust, Yonkers REIT, Inc. (the "REIT"), a wholly owned subsidiary. On such date, $119.3 million in real estate loans was transferred from the Association to the REIT. On December 31, 2001 $87.1 million in real estate loans were held by the REIT. The assets transferred to the REIT are viewed by regulators as part of the Association's assets in consolidation. On November 13, 2001 Atlantic Bank of New York ("Atlantic') and the Company signed a definitive agreement whereby Atlantic Bank will acquire the Company for an aggregate purchase price of approximately $68.3 million or $29.00 per share cash for each common share outstanding of YFCB. Upon completion of the transaction, Yonkers Savings and Loan Association, FA, (the "Association") will merge into Atlantic Bank of New York. The transaction is subject to shareholder and regulatory approval and is expected to close in the first half of this year. The unaudited consolidated financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The results of operations for the three months ended December 31, 2001 are not necessarily indicative of the results of operations which may be expected for the fiscal year ending September 30, 2002. Certain financial information and footnote disclosures normally included in annual financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited interim consolidated financial statements presented herein should be read in conjunction with the annual consolidated financial statements of the Company as of and for the fiscal year ended September 30, 2001, included in the Form 10-K. (2) COMPREHENSIVE INCOME 6 Comprehensive income represents net income and certain amounts reported directly in stockholders' equity, such as the net unrealized gain or loss on securities available for sale. Total comprehensive loss for the quarter ended December 31, 2001 was $1.0 million consisting of $319,000 in net loss plus a net decrease of $711,000 in the after-tax net unrealized loss on available-for-sale securities. For the quarter ended December 31, 2000, total comprehensive income of $2.8 million consisted of net income of $860,000 less a net decrease of $1.9 million in the after-tax net unrealized gain on available-for-sale securities. (3) EARNINGS PER SHARE The Company reports both basic and diluted earnings per share ("EPS") in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period plus common-equivalent shares computed using the treasury stock method. Unallocated ESOP shares that have not been committed to be released to participants are excluded from outstanding shares in computing both basic and diluted EPS. The following is a summary of the number of shares utilized in the Company's EPS calculations for the three months ended December 31, 2001 and 2000. For purposes of computing basic EPS, net income applicable to common stock equaled net income for both periods presented.

(1) Excludes unvested MRP awards and unallocated ESOP shares that have not been committed to be released. (2) Computed using the treasury stock method. (3) Options to purchase 20,000 shares of common stock at prices between $16.63 per share and $21.63 per share were outstanding at December 31, 2000, but were not included in the computation of diluted EPS because the option exercise prices were greater than the average market price of the common shares for the quarter ended December 31, 2000. 7 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS When used in this Form 10-Q or future filings by the Company with the Securities and Exchange Commission, in the Company's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national economic conditions, changes in levels of market interest rates, credit risks of lending activities, and competitive and regulatory factors, could affect the Company's financial performance and could cause actual results for future periods to differ materially from those anticipated or projected. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2001 AND SEPTEMBER 30, 2001 Total assets at December 31, 2001 amounted to $579.0 million, representing an increase of $7.9 million from $571.1 at September 30, 2001. Asset growth during the period was funded primarily through growth in the Company's deposit base relating to the expansion of its retail franchise. Overall, total securities decreased $17.3 million to $107.1 million at December 31, 2001 from $124.4 million at September 30, 2001. Total cash and cash equivalents increased $16.7 million to $48.5 million at December 31, 2001 from $38.1 million at September 30, 2001. Net loans receivable, including those held for sale, increased $8.1 million to $400.9 million at December 31, 2001 from $392.8 million at September 30, 2000. The loan growth during the quarter represents loan originations of $49.0 million, offset by principal collections of $22.6 million and loans sold of $18.2 million. The merger agreement with Atlantic imposes limits on the Company's non-one to four family residential lending which may result in a reduction in originations prior to the completion of the merger. Total deposit liabilities increased $13.3 million to $402.8 million at December 31, 2001 from $389.5 million at September 30, 2001. Total borrowings decreased by $89,000 to 8 $129.5 million at December 31, 2001 from $129.6 million at September 30, 2001. Funds from deposit growth were primarily invested in new loans. Stockholders' equity decreased $898,000 to $41.7 million at December 31, 2001 from $42.6 million at September 30, 2001. The decrease is primarily attributable to a $711,000 decrease in the after-tax net unrealized gain on available-for-sale securities and a $531,000 decrease in net income retained after dividends partially offset by a $595,000 decrease in treasury stock. The ratio of stockholders' equity to total assets decreased to 7.2% from 7.5% at September 30, 2001. Book value per share based on outstanding shares but excluding options, decreased to $17.94 at December 31, 2001 from $19.11 at September 30, 2001. During the three months ended December 31, 2001 management exercised stock options resulting in a net decrease in the Company's treasury stock of 95,242 shares. At December 31, 2001, there remained outstanding under the Company's 1996 Stock Option and Incentive Plan, options to purchases 144,094 shares of which 107,118 were vested and 36,976 were unvested. See "Liquidity and Capital Resources" for information regarding the Association's regulatory capital amounts and ratios. ANALYSIS OF NET INTEREST INCOME The following table sets forth the Company's average balance sheets, average yields and costs (on an annualized basis), and certain other information for the three months ended December 31, 2001 and 2000. The yields and costs were derived by dividing interest income, or expense, by the average balance of assets or liabilities, respectively, for the periods shown. Substantially all average balances were computed based on daily balances. Interest income includes the effect of deferred fees, discounts, and premiums, which are considered yield adjustments. 9

(1) Balances are net of deferred loan fees and construction loans in process, and include loans receivable and loans held for sale. Non-accrual loans are included in the balances. (2) Average balances represent amortized cost. (3) Includes mortgage escrow accounts. (4) Average interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (5) Net interest margin represents net interest income divided by average total interest-earning assets. (6) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. 10 The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities affected the Company's interest income and interest expense during the three months ended December 31, 2001 compared to the same period in the prior year. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000 GENERAL. Net loss for the three months ended December 31, 2001 was ($319,000) or diluted EPS of ($0.15) compared to net income of $860,000 or diluted EPS of $0.41 for the quarter ended December 31, 2000. Basic EPS were ($0.15) for the quarter ended December 31, 2001 compared to $0.42 for the same period in 2000. The decrease in net income of $1.2 million reflects an increase of $2.6 million in non-interest expense, primarily merger related expenses, partially offset by a $741,000 decrease in income tax expense, a $368,000 increase in net interest income after provision for loan losses, and a $325,000 increase in non-interest income. NET INTEREST INCOME. Net interest income for the three months ended December 31, 2001 was $3.7 million, an increase of $376,000 from $3.4 million for the same period in 2000. The increase reflects the positive effect on net interest income of higher average interest-earning assets, primarily attributable to the investment of proceeds from deposit growth coupled with the increase in the average interest rate spread. The average interest rate spread for the three months ended December 31, 2001 was 2.34%, an increase from 2.21% for the 2000 quarter. The net interest margin for the three months ended December 31, 2001 was 2.69%, compared to 2.59% for the three months ended December 31, 2000. The increase in the average interest rate spread as well as the net interest margin for the 2001 11 quarter resulted primarily from a decline in interest rates which caused an 84 basis point decrease in the cost of funds, while the average rate earned on assets only decreased 72 basis points. INTEREST AND DIVIDEND INCOME. Interest and dividend income totaled $9.2 million for the three months ended December 31, 2001, a decrease of $335,000 compared to $9.5 million for the three months ended December 31, 2000. This decrease reflects the effect of a 72 basis point decrease in the average yield on such assets to 6.63% for the three months ended December 31, 2001 from 7.35% for the same period in the prior year, partially offset by a $36.2 million increase in total average interest-earning assets. Interest income on loans increased $461,000 for the three months ended December 31, 2001 compared to the same period in the prior year, reflecting the effect of a $27.1 million increase in the average balance, partially offset by a 4 basis point decrease in the average yield as the Company increased its holdings of non-residential loans during 2001. Non-residential loan growth may decline prior to the completion of the merger due to the merger activities with Atlantic. On a combined basis, interest and dividend income on mortgage-backed and other securities decreased $660,000 to $1.7 million for the three months ended December 31, 2001 from $2.3 million for the three months ended December 31, 2000. Interest on mortgage-backed securities decreased by $330,000 attributable to a 134 basis point decrease in the average yield and a $3.4 million decrease in the average balance. The decrease in the average balance of mortgage-backed securities was primarily attributable to principal repayments and sales of available for sale securities during the three months ended December 31, 2001. The lower average yield on mortgage-backed securities during the 2001quarter reflects the addition of lower-yielding adjustable rate products and the impact of higher premium amortization caused by increased repayments of principal. Interest on other securities decreased by $330,000, primarily attributable to a $8.0 million decrease in the average balance and a 190 basis point decrease in the average yield to 6.46% for the quarter ended December 31, 2001 from 8.36% for the same period in the prior year. Interest and dividend income on other earning assets decreased $136,000, primarily attributable to a $20.5 million decrease in the average balance and a 420 basis point decrease in the average yield. The decrease in the average yield primarily reflects the current lower interest rate environment attributable to decreases in short-term interest rates by the Federal Reserve Bank. INTEREST EXPENSE. Interest expense totaled $5.5 million for the three months ended December 31, 2001, a decrease of $711,000 from the prior year's quarter. Interest expense on deposits decreased $150,000 compared to the same period in the prior year, reflecting the effect of an 87 basis point decrease in the average rate on interest-bearing deposits to 3.60% for the three months ended December 31, 2001 from 4.47% for the three months ended December 31, 2000, partially offset by a $60.0 million increase in the average balance. The decrease in the average rate paid on deposits primarily reflects a 97 basis point decrease in the average rate paid on savings certificate accounts, coupled with a 75 basis point decrease in the average rate paid on NOW, club, and money market accounts and a 24 basis point decrease in the average rate paid on regular savings accounts. The increase in average interest-bearing deposits consisted of a $35.0 million increase in average regular savings accounts (to $92.6 million from $57.6 million), a $26.5 million increase in average savings certificate accounts (to $223.6 million from $197.1 million), slightly offset by a $1.5 million 12 decrease in average NOW, club and money market accounts (to $64.1 million from $65.6 million). Interest expense on borrowings decreased $561,000 to $2.0 million for the three months ended December 31, 2001 from $2.6 million for the three months ended December 31, 2000. Total borrowings averaged $129.5 million for the three months ended December 31, 2001 at an average rate of 6.33% compared to $160.6 million and 6.50%, respectively, for the prior-year quarter. See "Liquidity and Capital Resources" for further discussion of the Company's securities repurchase agreements. PROVISION FOR LOAN LOSSES. The Company records provisions for loan losses, which are charged to earnings, in order to maintain the allowance for loan losses at a level which is considered appropriate to absorb probable losses inherent in the existing loan portfolio. The provision in each period reflects management's evaluation of the adequacy of the allowance for loan losses. Factors considered include the volume and type of lending conducted, the Company's previous loan loss experience, the known and inherent risks in the loan portfolio, adverse situations that may affect the borrowers' ability to repay, the estimated value of any underlying collateral, and current economic conditions. The provision for loan losses was $83,000 and $75,000 for the three months ended December 31, 2001 and 2000, respectively. See "Asset Quality" for a further discussion of the Company's non-performing assets and allowance for loan losses. NON-INTEREST INCOME. Non-interest income for the three months ended December 31, 2001 increased $325,000 to $924,000, from $599,000 for the comparable period in 2000. The increase is primarily attributable to a $164,000 increase in other income primarily reflecting income from the Company's investment in bank owned life insurance purchased in 2001, a $126,000 increase in the net gain on sales of real estate mortgages held for sale, a $103,000 increase in service charges and fee income, partially offset by a $68,000 decrease in the net gain on sale of securities. The increase in net gain on sale of real estate mortgages held for sale reflects loans sold of $18.2 million for the three months ended December 31, 2001 as compared to sales of $8.9 million for the period ended December 31, 2000. The increase in sales volume is consistent with management's strategy to sell a portion of one-to-four family residential real estate originations in the secondary market and supplement its portfolio with higher yielding multi-family loans. The increase in service charges and fee income resulted from increases in transaction volume. The decrease in net gain on sale of securities reflects sales of $574,000 for the three months ended December 31, 2001, as compared to sales of $1.3 million for the period ended December 31, 2000. NON-INTEREST EXPENSE. Non-interest expense for the three months ended December 31, 2001 increased $2.6 million to $5.1 million compared to $2.5 million for the three months ended December 31, 2000. This increase primarily reflects $2.1 million in expenses incurred in the 2001 quarter relating to the announced merger with Atlantic Bank. Merger related expenses included increased funding of the Supplemental Executive Retirement Plan (SERP) of $1.6 million, $311,000 in investment banker fees, and $264,000 in legal fees. The increased funding of the SERP was required due to an increase in the chief executive officer's average income resulting from the exercise of his stock options in December 2001 after the Company's stock price had climbed following the announcement of the merger with Atlantic in the previous month. Compensation and benefits expense amounted to $1.8 million for the three months ended December 31, 2001, representing an increase of $325,000 from the prior year quarter. The increase in compensation and benefits expense primarily reflects merit and performance-based increases for management 13 and staff members as well as an $85,000 increase in ESOP related expenses resulting primarily from the appreciation in the Company's stock price. Other non-interest expense amounted to $601,000 for the three months ended December 31, 2001, representing an increase of $128,000 from the 2000 quarter. This increase in other non-interest expense primarily reflects temporary help fees and the costs attributable to expansion of the Company's business activities when compared to the prior year period. INCOME TAX EXPENSE. Income tax (benefit) expense was ($245,000) for the three months ended December 31, 2001 and $496,000 for the comparable 2000 period, reflecting effective tax rates of 43.4% and 36.6 %, respectively. The increase in the effective tax rate is primarily due to an increase in non-taxable income related to bank owned life insurance and municipal bonds. ASSET QUALITY Non-performing loans totaled $372,000 at December 31, 2001, compared to $552,000 at September 30, 2001 and $275,000 at December 31, 2000. The ratio of non-performing loans to total loans receivable was 0.09% at December 31, 2001, compared to 0.14% at September 30, 2001 and 0.07% at December 31, 2000. The allowance for loan losses was $2.1 million or 0.51% of total loans receivable at December 31, 2001, compared to $2.0 million or 0.51% of total loans receivable at September 30, 2001 and $1.8 million or 0.48% at December 31, 2000. The ratio of the allowance for loan losses to non-performing loans was 556.18% at December 31, 2001, compared to 362.68% at September 30, 2001 and 643.27% at December 31, 2000. The following table sets forth, certain asset quality ratios and other data at the dates indicated:

14 LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds are deposits and borrowings; principal and interest payments on loans and securities; and proceeds from sales of loans and securities. While maturities and scheduled payments on loans and securities provide an indication of the timing of the receipt of funds, other sources of funds such as loan prepayments and deposit inflows are less predictable due to the effects of changes in interest rates, economic conditions and competition. The main sources of liquidity for the Holding Company are net proceeds from the sale of stock and dividends received from the Association, if any. The main cash flows are payments of dividends to shareholders and repurchases of the Holding Company's common stock. The primary investing activities of the Company are the origination of real estate mortgage and other loans, and the purchase of mortgage-backed and other securities. At December 31, 2001, the Company had outstanding loan origination commitments of $33.2 million, unadvanced home equity lines of credit of $2.6 million and undisbursed construction loans in process of $7.4 million. The Company anticipates that it will have sufficient funds available to meet its current loan origination and other commitments. At December 31, 2001, the Company had the ability based on available collateral to obtain additional FHLB advances of approximately $81.4 million. Certificates of deposit scheduled to mature in one year or less from December 31, 2001 totaled $139.6 million. Based on the Company's most recent experience and pricing strategy, management believes that a significant portion of such deposits will remain with the Company. The Company's borrowings at December 31, 2001 consisted of $66.5 million in borrowings under securities repurchase agreements and FHLB advances of $63.0 million. In the case of its securities repurchase agreements, the Company borrows funds through the transfer of debt securities to the FHLB of New York, as counterparty, and concurrently agrees to repurchase the identical securities at a fixed price on a specified date. The Company accounts for these agreements as secured financing transactions since it maintains effective control over the transferred securities. Accordingly, the transaction proceeds are recorded as borrowings and the underlying securities continue to be carried in the Company's debt securities portfolio. Repurchase agreements are collateralized by the securities sold and, in certain cases, by additional margin securities. During the three months ended December 31, 2001, the average borrowings under these agreements amounted to $66.5 million and the maximum month-end balance outstanding was $66.5 million. Additional information concerning outstanding repurchase agreements with the FHLB of New York as of December 31, 2001 is summarized as follows: 15

(1) The weighted average remaining term to final maturity was approximately 6.1 years at December 31, 2001. Certain securities repurchase agreements are callable by the FHLB of New York, prior to the maturity date. The weighted average remaining term to maturity, giving effect to earlier call dates, was approximately 1.7 years at December 31, 2001. (2) Included in other liabilities in the consolidated balance sheet. (3) Represents the fair value of the mortgage-backed securities ($60.5 million) and other debt securities ($4.3 million) which were transferred to the counterparty, including accrued interest receivable of $401,000. These securities consist of available-for-sale securities and held-to-maturity securities with fair values of $58.3 million and $6.5 million, respectively. Information concerning FHLB advances outstanding and weighted average interest rates with the FHLB of New York are summarized as follows by remaining period to maturity:

The weighted average period to maturity date for the FHLB advances outstanding at December 31, 2001 was 3.9 years, with a weighted average period to call date of 3.7 years. During the three months ended December 31, 2001, the Company's average FHLB advances outstanding were $63.0 million, and the maximum month end balance outstanding was $63.1 million. At December 31, 2001, the Association exceeded all of its regulatory capital requirements with a tangible capital level of 6.7% of total adjusted assets, which is above the required level of 1.5%; core capital of 6.7% of total adjusted assets, which is above the required level of 4.0%; and total risk-based capital of 13.8%, which is above the required level of 8.0%. These regulatory capital requirements, which are applicable to the Association only, do not consider 16 additional capital held at the Holding Company level, and require certain adjustments to stockholder's equity to arrive at the various capital amounts. Part I. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's most significant form of market risk is interest rate risk, as the majority of the Company's assets and liabilities are sensitive to changes in interest rates. Other types of market risk, such as foreign exchange risk and commodity price risk, do not arise in the normal course of the Company's business activities. Management is responsible for monitoring and limiting the Company's exposure to interest rate risk within established guidelines while maximizing net interest income. The Company will continue to monitor its interest rate sensitivity with the primary objective to prudently structure the balance sheet so that movements of interest rates on assets and liabilities are highly correlated and produce a reasonable net interest margin even in periods of volatile interest rates. Further discussion on market risk is in the Company's Form 10-K for the year ended September 30, 2001. During the quarter ended December 31, 2001, there were no significant changes in the Company's assessment of market risk. PART II. OTHER INFORMATION ITEM 1. 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 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (b) Reports on Form 8-K During the quarter ended December 31, 2001, the Company filed three reports on Form 8-K. On November 7, 2001, the Company filed a form 8-K containing a press release announcing the Company's earnings for the quarter and fiscal year ended September 30, 2001. On November 16, 2001 the Company filed a form 8-K containing a press release announcing the definitive merger agreement with Atlantic Bank of New York. On November 29, 2001 the Company filed a form 8-K containing a press release announcing that the Company entered into a limited waiver agreement with Gould Investors LP. 18 SIGNATURES Pursuant to the requirements 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 ----------------------------- (Registrant) Date: February 14, 2002 /s/ RICHARD F. KOMOSINSKI -------------------------- Richard F. Komosinski, President and Chief Executive Officer (Principal Executive Officer) Date: February 14, 2002 /s/ JOSEPH D. ROBERTO ---------------------- Joseph D. Roberto Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer) 19

YONKERS FINANCIAL CORP 10-Q