<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>d10k_june302002.txt
<DESCRIPTION>6-30-2002
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                  [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                     For the Fiscal Year Ended June 30, 2002

                                       OR

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

  For the transaction period from ___________________ to ______________________

                         Commission File Number: 0-25165

                           GREENE COUNTY BANCORP, INC.
                 ( Name of Small Business Issuer in its Charter)

      United States                                         14-1809721
  -------------------                                 ------------------
 (State or Other Jurisdiction               (I.R.S. Employer Identification No.)
 of Incorporation or Organization)

 302 Main Street, Catskill, New York                           12414
 -----------------------------------                   -------------------
 (Address of Principal Executive Office)                       (Zip Code)

                                 (518) 943-2600
                              ---------------------
                 (Issuer's Telephone Number including area code)


           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 $0.10 per share
                                (Title of Class)

     Check 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 past
twelve 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    /    NO
---------------

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not 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-KSB
or any amendments to this Form 10-KSB. [X]

     The Registrant's revenues for the fiscal year ended June 30, 2002 were
$14,389,771.

     As of September 16, 2002, there were issued and outstanding 2,024,835
shares of the Registrant's common stock of which 872,519 were shares of voting
stock held by non-affiliates of the Registrant. Computed by reference to the
closing price of Common Stock of $17.60 on such date, the aggregate value of
stock held by non-affiliates was $15,356,334.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Sections of Annual Report to Shareholders for the fiscal year ended
     June 30, 2002 (Part II).
2.   Proxy Statement for the 2002 Annual Meeting of Shareholders (Part III)


<PAGE>



                                     PART I

ITEM 1.       Business
------        ---------

     Greene County  Bancorp,  Inc. (the  "Company") was organized in December of
1998 at the  direction  of the Board of  Trustees  of The Bank of Greene  County
(formerly  Greene County Savings Bank) (the "Bank") for the purpose of acting as
the holding company of the Bank. In 2001, the Company converted its charter from
a Delaware corporation regulated by the New York Superintendent of Banks and the
Board of  Governors  of the  Federal  Reserve  System to a  federal  corporation
regulated by the Office of Thrift  Supervision  ("OTS").  At June 30, 2002,  the
Company's  assets  consisted  primarily of the outstanding  capital stock of the
Bank and cash and investments of $4.5 million.  At June 30, 2002, 872,519 shares
of the  Company's  common  stock,  par value  $0.10 per share,  were held by the
public,  128,000  shares were held as Treasury  stock and 1,152,316  shares were
held by Greene County  Bancorp,  MHC, the Company's  mutual holding company (the
"Mutual Company").  The Company's principal business is overseeing and directing
the business of the Bank and various Company investment securities.

     At June 30,  2002,  the Company  had  consolidated  total  assets of $220.2
million,  consolidated total deposits of $183.7 million, consolidated borrowings
from  Federal Home Loan Bank of $9.0  million and  consolidated  total equity of
$26.4 million.

     The  Company's  administrative  office  is  located  at  302  Main  Street,
Catskill, New York 12414-1317. Its telephone number is (518) 943-2600.

TTHE BANK OF GREENE COUNTY

     The Bank was  organized  in 1889 as The Building  and Loan  Association  of
Catskill, a New York-chartered  savings and loan association.  In 1974, the Bank
converted to a New York mutual savings bank under the name Greene County Savings
Bank.  In  conjunction  with the  reorganization  and the offering  completed in
December 1998, which resulted in the organization of the Company, (the "December
1998  Reorganization"),  the Bank changed its name to The Bank of Greene County.
The Bank's  deposits are insured by the Bank Insurance  Fund, as administered by
the Federal Deposit  Insurance  Corporation  ("FDIC"),  up to the maximum amount
permitted by law. The Bank's principal  business  consists of attracting  retail
deposits  from the general  public in the areas  surrounding  its  branches  and
investing  those  deposits,  together with funds  generated from  operations and
borrowings,  primarily  in  one-  to  four-family  residential  mortgage  loans,
commercial real estate loans,  consumer loans,  home equity loans and commercial
business  loans.  In  addition,  the Bank invests a  significant  portion of its
assets in investment securities and mortgage- and asset-backed  securities.  The
Bank's  revenues  are derived  principally  from the  interest on its  mortgage,
consumer and  commercial  loans and  securities,  and servicing fees and service
charges and other fees  collected on its deposit  accounts.  The Bank's  primary
sources of funds are deposits,  and principal and interest payments on loans and
investment  securities and mortgage- and  asset-backed  securities.  At June 30,
2002, the Bank had borrowed $9.0 million from the Federal Home Loan Bank.

     The Bank's administrative office is located at 302 Main Street, Catskill,
New York 12414-1317. Its telephone number is (518) 943-2600.

GREENE COUNTY BANCORP, MHC

     The Mutual Company was formed in December 1998 as part of the Bank's mutual
holding  company  reorganization.  In 2001, the Mutual Company  converted from a
state to a federal charter.  The OTS under the new charter  currently  regulates
the Mutual  Company.  The Mutual  Company  owns 53.5% of the common stock of the
Company.  The Mutual Company does not engage in any business activity other than
to hold the Company's common stock and to invest any liquid assets of the Mutual
Company,  which  amounted to $166,000 in cash and cash  equivalents  at June 30,
2002.


     The Mutual Company's  administrative  office is located at 302 Main Street,
Catskill, New York 12414-1317, and its telephone number at that address is (518)
943-2600.

MARKET AREA

     The Bank has been, and intends to continue to be, a community-oriented bank
offering a variety of financial services to meet the needs of the communities it
serves. The Bank currently  operates six full-service  banking offices in Greene
County  and  southern  Albany  County,  New York.  The  Bank's  primary  deposit
gathering area is currently  concentrated  around the areas within Greene County
and southern Albany County where its  full-service  banking offices are located,
namely the towns of Catskill,  Cairo,  Coxsackie,  Greenville,  Tannersville and
Westerlo.

     As of the 2000 census estimates,  the County population was 48,300 persons,
indicating an overall  increase in the  population  level of 8.0% since the last
census  conducted  in 1990.  Greene  County  is  primarily  rural  and the major
industry  consists of tourism  associated  with the several ski  facilities  and
festivals located in the Catskill Mountains. The County has no concentrations of
manufacturing    industry.     Greene    County    is    contiguous    to    the
Albany-Schenectady-Troy  metropolitan  statistical  area. The close proximity of
Greene  County  to the city of  Albany  has made it a  "bedroom"  community  for
persons  working in the Albany  capital  area.  Greene  County and the Coxsackie
Correctional  Facilities  are the largest  employers in the County.  Other large
employers  include  the  Hunter  Mountain  and Ski  Windham  resort  areas,  the
Catskill, Cairo-Durham, Greenville and Coxsackie-Athens Central School Districts
and Stiefel Labs, Inc.

COMPETITION

     The  Bank  faces  significant  competition  both  in  making  loans  and in
attracting  deposits.  The Bank's  market area has a high  density of  financial
institutions,  many of which are branches of significantly  larger  institutions
that  have  greater  financial  resources  than the  Bank,  and all of which are
competitors of the Bank to varying  degrees.  The Bank's  competition  for loans
comes  principally  from  commercial  banks,  savings  banks,  savings  and loan
associations, mortgage-banking companies, credit unions, insurance companies and
other financial service companies.  Its most direct competition for deposits has
historically  come  from  commercial  banks,  savings  banks,  savings  and loan
associations  and credit  unions.  The Bank  faces  additional  competition  for
deposits  from  non-depository  competitors  such as the mutual  fund  industry,
securities and brokerage  firms and insurance  companies.  Competition  may also
increase as a result of the lifting of restrictions on the interstate operations
of financial institutions.

     Competition  is likely to  increase  as a result  of the  enactment  of the
Gramm-Leach-Bliley  Act of 1999,  which  eases  restrictions  on entry  into the
financial services market by insurance companies and securities firms. Moreover,
to the extent that these changes  permit banks,  securities  firms and insurance
companies to affiliate, the financial services industry could experience further
consolidation.  This  could  result  in a growing  number  of  larger  financial
institutions  competing  in the Bank's  primary  market  area that offer a wider
variety of financial  services than the Bank currently  offers.  Competition for
deposits,  for the  origination  of loans and the  provision of other  financial
services may limit the Bank's growth and adversely  impact its  profitability in
the future.


LENDING ACTIVITIES

General
     The  principal  lending  activity  of  the  Bank  is the  origination,  for
retention in its  portfolio,  of fixed-rate and  adjustable-rate  mortgage loans
collateralized by one- to four-family residential real estate located within its
primary market area. To a lesser  extent,  the Bank also  originates  commercial
real estate loans,  home equity loans,  consumer loans and  commercial  business
loans. The Bank also offers a variety of line of credit products.

     In an  effort  to  manage  the  interest  rate  risk  associated  with  its
predominantly  fixed-rate  loan  portfolio,  the Bank  maintains  high levels of
liquidity,   and,  where   possible,   corresponds  the  funding  of  fixed-rate
residential  mortgages  with  FHLB  advances.  The Bank  also  seeks to  attract
checking and other transaction  accounts that generally have lower interest rate
costs and tend to be less interest rate sensitive when interest rates rise.




















Loan Portfolio Composition
     Set forth below is selected  information  concerning the composition of the
Bank's loan portfolio in dollar amounts and in  percentages  (before  deductions
for deferred fees and costs, unearned discounts and allowances for losses) as of
the dates indicated.







<PAGE>

<table>
<caption>

                                            At June 30,
                                               2002                     2001                     2000
                                       Amount      Percent      Amount       Percent      Amount       Percent
                                      ---------   ---------    ---------     --------     --------     --------
<s>                                   <C>           <C>         <C>          <C>          <C>         <C>
(Dollars in thousands)
Real estate loans:
  One- to four-family                   $98,834      76.19%      $86,336       77.84%      $80,696      81.54%
  Commercial                              8,764       6.76         5,239        4.72         4,702       4.75
  Construction and land                   3,003       2.31         1,979        1.78           616       0.62
  Multi-family                            1,657       1.28         1,213        1.09         1,253       1.27
                                      ---------   ---------    ---------     -------      --------    ---------

    Total real estate loans             112,258      86.54        94,767       85.43        87,267      88.18

Consumer loans
  Installment (1)                         5,611       4.32         6,128        5.53         4,865       4.92
  Home equity                             6,957       5.36         6,138        5.53         4,631       4.68
  Passbook                                  545       0.42           596        0.54           490       0.50
                                      ---------   ---------    ---------     -------      --------    ---------

    Total consumer loans                 13,113      10.10        12,862       11.60         9,986      10.10

Commercial business loans                 4,356       3.36         3,291        2.97         1,707       1.72
                                      ---------   ---------    ---------     -------      --------    ---------


Total consumer loans and
  commercial business loans              17,469      13.46        16,153       14.57        11,693      11.82
                                      ---------   ---------    ---------     -------      --------    ---------


Total gross loans                       129,727      100.0%      110,920       100.0%       98,960      100.0%
                                      ---------                ---------                  ---------


Less:
  Deferred fees and discounts              (285)                    (277)                     (275)
  Allowance for loan losses              (1,069)                    (886)                     (866)
                                      ---------                ---------                  --------


Total loans receivable, net            $128,373                 $109,757                   $97,819
                                      =========                =========                  ========
<fn>
(1) Includes direct automobile loans (on both new and used automobiles) and
personal loans.

</fn>
</table>


























<PAGE>

<table>
<caption>


                                                                                  At June 30,
                                                    2002                              2001                   2000
                                                   Amount       Percent        Amount      Percent     Amount   Percent
                                                  -------      ---------     --------     --------    --------  ---------
<S>                                               <C>          <C>           <C>          <C>         <C>       <C>
(Dollars in thousands)
Fixed-rate loans:
  Real estate loans:
     One- to four-family                          $91,586         70.60%      $77,852      70.19%      $69,360     70.08%
     Commercial                                     6,587          5.08         3,589       3.23         2,840      2.87
     Construction and land                          2,554          1.97         1,979       1.78           616      0.62
     Multi-family                                   1,442          1.11         1,175       1.06         1,124      1.14
                                                  -------      ---------     --------     --------    --------  ---------

  Total fixed-rate real estate loans              102,169         78.76        84,595      76.26        73,940     74.71

  Consumer loans
     Installment (1)                                5,611          4.32         6,128       5.53         4,865      4.92
     Home equity                                    6,957          5.36         6,138       5.53         4,631      4.68
     Passbook                                         545          0.42           596       0.54           490      0.50
  Commercial business loans                         4,356          3.36         3,291       2.97         1,707      1.72
                                                  -------      ---------        -----     --------    --------  ---------

Total fixed-rate loans                            119,638         92.22       100,748      90.83        85,633     86.53
                                                  -------      ---------     --------     --------    --------  ---------

Adjustable-rate loans Real estate loans:
     One- to four-family                            7,248          5.59         8,484       7.65        11,336     11.46
     Commercial real estate                         2,177          1.68         1,650       1.49         1,862      1.88
     Construction and land                            449          0.34           ---        ---           ---       ---
     Multi-family                                     215          0.17            38       0.03           129      0.13
                                                  --------      --------      --------     --------    --------  --------

Total adjustable-rate loans                        10,089          7.78        10,172       9.17        13,327     13.47

Total gross loans                                 129,727         100.0%      110,920      100.0%       98,960     100.0%
                                                  -------      ---------     --------     --------     -------  ---------


Less:
  Deferred fees and discounts                        (285)                       (277)                    (275)
  Allowance for loan losses                        (1,069)                       (886)                    (866)
                                                  -------                    --------                 --------


Total loans receivable, net                      $128,373                    $109,757                  $97,819
                                                  ========                   ========                 ========
<FN>
(1) Includes direct automobile loans (on both new and used automobiles) and
personal loans.
</FN>
</TABLE>



<PAGE>


One- to Four-Family Residential Loans.
     The Bank's primary lending  activity is the  origination,  for retention in
the  Bank's  portfolio,  of  one-  to  four-family  residential  mortgage  loans
collateralized   by  property  located  in  the  Bank's  primary  lending  area.
Generally, one- to four-family residential mortgage loans are made in amounts up
to 89.9%  of the  appraised  value  of the  property.  However,  the  Bank  will
originate one- to  four-family  residential  mortgage  loans with  loan-to-value
ratios of up to 95%, with private  mortgage  insurance.  Generally,  residential
mortgage  loans are  originated  for  terms of up to 30 years,  though in recent
years the Bank has been successful in marketing and originating  such loans with
15-year  terms.  One- to  four-family  fixed-rate  loans are offered with both a
monthly and bi-weekly  payment  feature.  The Bank  generally  requires fire and
casualty  insurance,  the  establishment  of a mortgage  escrow  account for the
payment  of real  estate  taxes,  hazard and flood  insurance,  as well as title
insurance on all properties collateralizing real estate loans made by the Bank.

     The Bank currently  offers one- to four-family  residential  mortgage loans
with fixed and  adjustable  interest  rates.  Originations  of fixed-rate  loans
versus  adjustable-rate loans are monitored on an ongoing basis and are affected
significantly by the level of market interest rates,  customer  preference,  the
Bank's  interest  rate gap  position,  and loan  products  offered by the Bank's
competitors.  Particularly,  in a  relatively  low  interest  rate  environment,
borrowers may prefer fixed-rate loans to  adjustable-rate  loans.  Single-family
residential real estate loans often remain outstanding for significantly shorter
periods than their  contractual  terms because borrowers may refinance or prepay
loans at their option. The average length of time that the Bank's  single-family
residential  mortgage loans remain  outstanding varies  significantly  depending
upon trends in market interest rates and other factors.

     The Bank's  adjustable-rate  mortgage  ("ARM") loans currently  provide for
maximum rate  adjustments of 150 basis points per year and 600 basis points over
the term of the loan. The Bank offers ARM loans with initial interest rates that
are below market,  referred to as "teaser rates." However,  in underwriting such
loans, borrowers are qualified at the full index rate. Generally, the Bank's ARM
loans adjust every year. After origination,  the interest rate on such ARM loans
is reset based upon a  contractual  spread or margin above the average  yield on
one-year United States Treasury securities, adjusted to a constant maturity (the
"U.S.  Treasury Constant  Maturity  Index"),  as published weekly by the Federal
Reserve Board.

     ARM loans  decrease the risk  associated  with  changes in market  interest
rates by  periodically  re-pricing,  but involve other risks because as interest
rates  increase,  the  underlying  payments  by  the  borrower  increase,   thus
increasing  the  potential for default by the  borrower.  At the same time,  the
marketability of the underlying  collateral may be adversely  affected by higher
interest  rates.  Upward  adjustment  of the  contractual  interest rate is also
limited by the maximum periodic and lifetime interest rate adjustment  permitted
by the  terms of the ARM  loans,  and,  therefore,  is  potentially  limited  in
effectiveness during periods of rapidly rising interest rates. At June 30, 2002,
5.59% of the Bank's loan portfolio consisted of one- to four-family  residential
loans with adjustable interest rates.

     The Bank  originates  construction to permanent loans to homeowners for the
purpose of construction of primary and secondary  residences.  The Bank issues a
commitment and has one closing which encompasses both the construction phase and
permanent financing.  The construction phase is a maximum term of six months and
the interest charged is the rate as stated in the commitment, with loan-to-value
ratios of up to 89.9% (or up to 95% with  private  mortgage  insurance),  of the
completed project.  The Bank began offering loans  collateralized by undeveloped
land during fiscal year 2001. The acreage associated with such loans is limited.
These land loans generally are intended for future sites of primary or secondary
residences.

     Construction lending generally involves a greater degree of risk than other
one- to four-family mortgage lending. The repayment of the construction loan is,
to a great degree,  dependent upon the  successful and timely  completion of the
construction of the subject property. Construction delays may further impair the
borrower's ability to repay the loan.

     The Bank's  residential  mortgage loan originations are generally  obtained
from the Bank's loan  representatives  operating in its branch  offices  through
their  contacts  with existing or past loan  customers,  depositors of the Bank,
attorneys and accountants who refer loan  applications  from the general public,
and  local  realtors.  The Bank  has  hired a loan  originator  who  calls  upon
customers during non-banking hours and at locations convenient to the customer.

     All one- to four-family  residential  mortgage loans originated by the Bank
include "due-on-sale"  clauses,  which give the Bank the right to declare a loan
immediately due and payable in the event that, among other things,  the borrower
sells or otherwise disposes of the real property subject to the mortgage and the
loan is not repaid.

     At June 30, 2002,  $98.8 million,  or 76.19% of the Bank's loan  portfolio,
consisted  of one- to  four-family  residential  mortgage  loans.  Approximately
$314,000 of such loans (representing seven loans) were included in nonperforming
loans as of that date.

Commercial Real Estate and Multifamily Loans.
     At June 30,  2002,  $ 8.8 million,  or 6.76%,  of the total loan  portfolio
consisted  of  commercial  real  estate  loans.   Office  buildings,   mixed-use
properties and other commercial properties  collateralize commercial real estate
loans. The Bank originates fixed- and adjustable-rate  commercial mortgage loans
with  maximum  terms  of up to 20  years.  The  maximum  loan-to-value  ratio of
commercial  real estate  loans is generally  75%. At June 30, 2002,  the largest
commercial  mortgage  loan  had  a  principal  balance  of  $861,900  and  was a
construction  loan for a  firehouse.  The were no  commercial  real estate loans
included in nonperforming loans.

     In underwriting commercial real estate loans, the Bank reviews the expected
net operating income generated by the real estate to ensure that it is generally
at least 110% of the amount of the monthly debt  service;  the age and condition
of the collateral; the financial resources and income level of the borrower; and
the borrower's  business  experience.  The Bank's policy is to require  personal
guarantees from all commercial real estate borrowers.

     Loans  collateralized  by commercial real estate  generally are larger than
one- to  four-family  residential  loans and  involve a greater  degree of risk.
Commercial  mortgage loans often involve large loan balances to single borrowers
or groups of related borrowers. Payments on these loans depend to a large degree
on the results of  operations  and  management  of the  properties or underlying
businesses, and may be affected to a greater extent by adverse conditions in the
real  estate  market or the  economy  in  general.  Accordingly,  the  nature of
commercial  real estate loans makes them more  difficult for Bank  management to
monitor and evaluate.

     The Bank originates a limited number of multi-family  loans,  which totaled
$1.7 million, or 1.28% of the Bank's total loans at June 30, 2002.  Multi-family
loans are generally  collateralized by apartment buildings located in the Bank's
primary market area. The were no  multi-family  loans included in  nonperforming
loans.  The  Bank's  underwriting   practices  and  the  risks  associated  with
multi-family  loans do not differ  substantially  from that of  commercial  real
estate loans.

Consumer Loans.
     The Bank's  consumer  loans consist of direct loan  installment  on new and
used  automobiles,  personal loans (either  secured or  unsecured),  home equity
loans,  and other consumer loans  (consisting of passbook loans,  unsecured home
improvement  loans and  recreational  vehicle loans).  At June 30, 2002 consumer
loans totaled $13.1  million,  or 10.10% of the total loan  portfolio.  Consumer
loans (other than home equity loans) are originated at fixed rates with terms to
maturity of one to five years.

     Consumer loans  generally have shorter terms and higher interest rates than
one- to  four-family  mortgage  loans.  In addition,  consumer  loans expand the
products and services offered by the Bank to better meet the financial  services
needs of its customers.  Consumer loans  generally  involve  greater credit risk
than  residential  mortgage  loans because of the  difference in the  underlying
collateral. Repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the  outstanding  loan balance because of the
greater likelihood of damage, loss or depreciation in the underlying collateral.
The remaining  deficiency often does not warrant further substantial  collection
efforts  against  the  borrower  beyond  obtaining  a  deficiency  judgment.  In
addition,  consumer loan collections depend on the borrower's personal financial
stability.  Furthermore,  the  application  of various  federal  and state laws,
including federal and state bankruptcy and insolvency laws, may limit the amount
that can be recovered on such loans.

     The  Bank's   underwriting   procedures  for  consumer  loans  includes  an
assessment  of  the  applicant's   credit  history  and  an  assessment  of  the
applicant's ability to meet existing and proposed debt obligations. Although the
applicant's  creditworthiness  is the primary  consideration,  the  underwriting
process  also  includes  a  comparison  of the  value of the  collateral  to the
proposed loan amount. The Bank underwrites its consumer loans internally,  which
the Bank  believes  limits its  exposure to credit risks  associated  with loans
underwritten or purchased from brokers and other external sources. At this time,
the Bank does not purchase loans from any external sources.

     The Bank  offers  fixed and  adjustable-rate  home  equity  loans  that are
collateralized  by the  borrower's  residence.  Home equity loans are  generally
underwritten  with terms not to exceed 15 years and under the same criteria that
the Bank uses to underwrite  one- to four-family  fixed rate loans.  Home equity
loans may be  underwritten  with terms not to exceed 15 years and with a loan to
value ratio of 80% when  combined  with the  principal  balance of the  existing
mortgage  loan.  The maximum amount of a home equity loan may not exceed $50,000
unless  approved by the Board of  Directors.  The Bank  appraises  the  property
collateralizing  the  loan  at  the  time  of  the  loan  application  (but  not
thereafter) in order to determine the value of the property  collateralizing the
home equity  loans.  At June 30, 2002,  the  outstanding  balance of home equity
loans totaled $7.0  million,  or 5.36% of the Bank's total loan  portfolio.  The
were no home equity loans included in nonperforming loans.

Commercial Business Loans.
     The Bank also originates  commercial business loans up to 10 years at fixed
and  adjustable-rates.  The Bank  attributes  growth  in this  portfolio  to its
ability to offer  borrowers  senior  management  attention as well as timely and
local  decision-making on commercial loan applications.  The decision to grant a
commercial business loan depends primarily on the creditworthiness and cash flow
of the borrower (and any guarantors) and secondarily on the value of and ability
to liquidate  the  collateral  which may consist of  receivables,  inventory and
equipment. The Bank generally requires annual financial statements,  tax returns
and personal guarantees from the commercial  business  borrowers.  The Bank also
generally requires an appraisal of any real estate that collateralizes the loan.
At June 30,  2002,  the  Bank had $4.4  million  of  commercial  business  loans
representing  3.36% of the total  loan  portfolio.  On such  date,  the  average
balance of the Bank's commercial business loans was approximately  $36,300.  The
largest  commercial  business  loan had a balance of $560,000 and  represented a
fire  truck  loan for a local  fire  district.  At June  30,  2002,  the  Bank's
commercial loan portfolio included 121 loans collateralized by real estate, fire
trucks,  or other equipment.  The were no commercial  business loans included in
nonperforming loans.

     Commercial   business   lending   generally   involves  greater  risk  than
residential  mortgage  lending and involves  risks that are different from those
associated with  residential  and commercial  real estate  lending.  Real estate
lending is generally  considered to be collateral based, with loan amounts based
on predetermined  loan-to-collateral  values,  and liquidation of the underlying
real estate collateral is viewed as the primary source of repayment in the event
of borrower default. Although commercial business loans may be collateralized by
equipment or other business  assets,  the liquidation of collateral in the event
of a  borrower  default is often an  insufficient  source of  repayment  because
equipment  and other  business  assets may be obsolete or of limited use,  among
other things.  Accordingly,  the repayment of a commercial business loan depends
primarily on the  creditworthiness  of the borrower (and any guarantors),  while
liquidation  of  collateral  is a  secondary  and often  insufficient  source of
repayment.

Loan Maturity Schedule.
     The  following  table sets forth  certain  information  as of June 30, 2002
regarding the amount of loans  maturing or  re-pricing in the Bank's  portfolio.
Adjustable-rate  loans are  included in the period in which  interest  rates are
next  scheduled  to adjust  rather  than the period in which they  contractually
mature,  and  fixed-rate  loans are  included  in the  period in which the final
contractual  repayment is due.  Lines of credit with no specified  maturity date
are included in the category "within one year".



     The following table illustrates the future maturities of such loans at June
30, 2002.

<table>
<caption>

                                             1 Year       3 Years      5 Years
                                  Within     Through      Through      Through      Beyond
                                  1 Year     3 Years      5 Years      10 Years     10 Years        Total
                                 --------   ---------    ---------   -----------   ----------   ------------
<S>                              <C>        <C>         <C>          <C>          <C>           <C>
(Dollars in thousands)
Real estate loans:
  One- to four-family             $6,844       $1,504       $2,911       $10,258      $77,317       $98,834
  Commercial                       1,693          332          149         1,137        5,453         8,764
  Construction and land              ---          ---          ---            80        2,923         3,003
  Multi-family                       236           33           59           ---        1,329         1,657
                                 --------   ---------   ----------   -----------   ----------   ------------

Total real estate loans            8,773        1,869        3,119        11,475       87,022       112,258

Consumer loans                     1,229        2,797        3,319         2,439        3,329        13,113

Commercial business loans            804          550        1,321           623        1,058         4,356

                                 --------   ---------   ----------   -----------   ----------   ------------

Total loan portfolio             $10,806       $5,216       $7,759       $14,537      $91,409      $129,727
                                 ========   =========   ==========   ===========   ==========   ============


</table>


     The total  amount of the above  loans due after  June 30,  2003  which have
predetermined  interest  rates is $117.1 million while the total amount of loans
due after such date which have adjustable interest rates is $1.8 million.

     The  following  table  sets  forth  the  loan   origination  and  repayment
activities of the Bank for the periods  indicated.  The Bank did not purchase or
sell any loans during the periods presented.
















<table>
<caption>


                                           For the Years Ended June 30,
                                      2002             2001             2000
                                   ----------       ----------       ---------
<S>                                <C>              <C>               <C>
(Dollars in thousands)
Originations by type:
  Adjustable rate loans
     One- to four-family                $466             $409            $541
     Commercial real estate            1,398              252              51
     Construction and land               449              ---             ---
     Multi-family                        185               10              17
                                   ----------       ----------       ---------

  Total adjustable rate loans          2,498              671             609

  Fixed rate loans
     One- to four-family              27,589           17,123          15,910
     Commercial real estate            5,496            1,485           1,682
     Construction and land             3,871            4,405           4,512
     Multi-family                        701              145             483
     Installment                       4,354            5,630           4,317
     Home equity                       3,800            3,311           1,610
     Passbook                            415              431             450
     Commercial business               4,099            3,286           2,235
                                    ---------       ----------       ---------

  Total fixed rate loans              50,325           35,816          31,199

  Total loans originated              52,823          $36,487         $31,808
                                    ---------       ----------       ---------


Repayments:
     One- to four-family              15,557           11,892           9,900
     Commercial real estate            3,369            1,200           1,016
     Construction and land             3,296            3,042           5,550
     Multi-family                        442              195              88
     Installment                       4,871            4,367           4,213
     Home equity                       2,981            1,804           1,668
     Passbook                            466              325             485
     Commercial business               3,034            1,702           1,758
                                    ---------       ----------       ---------


  Total repayments                    34,016           24,527          24,678
                                    ---------       ----------       ---------


Net increase in loans                $18,807          $11,960          $7,130
                                    =========       ==========       =========

</table>


Loan Approval Procedures and Authority.
     The Board of Directors  establishes the lending  policies and loan approval
limits of the Bank.  Loan  officers  generally  have the  authority to originate
mortgage  loans,  consumer  loans and  commercial  business  loans up to amounts
established for each lending officer.  The Executive Committee or the full Board
of Directors must approve all residential loans over $200,000.

     The Board annually  approves  independent  appraisers used by the Bank. For
larger  loans,  the Bank may  require an  environmental  site  assessment  to be
performed by an independent professional for all non-residential mortgage loans.
It is the Bank's policy to require hazard insurance on all mortgage loans.

Loan Origination  Fees and Other Income.
     In addition to interest earned on loans, the Bank receives loan origination
fees. Such fees and costs vary with the volume and type of loans and commitments
made and purchased,  principal  repayments,  and  competitive  conditions in the
mortgage markets, which in turn respond to the demand and availability of money.

     In addition to loan  origination  fees, the Bank also receives other income
that consists primarily of deposit transaction account service charges, ATM fees
and late  charges.  The Bank also  installs,  maintains  and  services  merchant
bankcard  equipment  for  local  retailers  and  is  paid  a  percentage  of the
transactions processed using such equipment.

Loans-to-One  Borrower.
     Savings banks are subject to the same loans to one borrower limits as those
applicable to national banks, which under current regulations  restrict loans to
one  borrower to an amount  equal to 15% of  unimpaired  capital and  unimpaired
surplus  on an  unsecured  basis,  and  an  additional  amount  equal  to 10% of
unimpaired  capital  and  unimpaired  surplus  if the loan is secured by readily
marketable  collateral  (generally,  financial  instruments and bullion, but not
real estate).  The Bank's policy provides that loans to one borrower (or related
borrowers) should not exceed 10% of the Bank's capital and reserves.

     At June 30, 2002,  the largest  aggregate  amount loaned by the Bank to one
borrower  consisted  of  a  commercial  realestate  loan  of  $861,000  for  the
construction of a firehouse.  The loan comprising the lending  relationship  was
performing in accordance with its terms as of June 30, 2002.

DELINQUENCIES AND CLASSIFIED ASSETS

Collection  Procedures.
     A computer  generated  late notice is sent and a 2% late charge is assessed
when a payment is 15 days late. A second notice will be incorporated in the next
month's  billing notice,  approximately  21 days after the due date of the first
late  payment.  Accounts  thirty  days or more past due will be  reviewed by the
collection  manager and receive  individual  attention  as  required,  including
collection letters and telephone calls. The collection manager in order to avoid
further  deterioration  will  closely  monitor  accounts  that have a history of
consistent late or delinquent  payments.  Accounts two or more payments past due
are reported to the Board of Directors for consideration of foreclosure  action.
With  respect to  consumer  loans,  a late  notice is sent and a late  charge is
assessed 10 days (or, in the case of home equity  loans,  15 days) after payment
is due. A second  notice is sent 15 days (in the case of home equity  loans,  25
days) thereafter.  The collection manager reviews loans 30 days or more past due
individually, following up with collection letters and telephone calls. Accounts
three or more  payments  past due are reported to the Board of Directors and are
subject to legal action and repossession of collateral.

Loans Past Due and Non-performing Assets.
     Loans are reviewed on a regular basis. Management determines that a loan is
impaired  or  non-performing  when it is probable at least a portion of the loan
will not be collected  due to an  irreversible  deterioration  in the  financial
condition of the borrower or the value of the underlying collateral. When a loan
is determined to be impaired,  the  measurement  of the loan is based on present
value of estimated future cash flows, except that all collateral-dependent loans
are  measured  for  impairment  based  on the  fair  value  of  the  collateral.
Management  places loans on nonaccrual status once the loans have become 90 days
or more delinquent.  Nonaccrual is defined as a loan in which  collectibility is
questionable and therefore  interest on the loan will no longer be recognized on
an accrual basis.  A loan does not have to be 90 days  delinquent in order to be
classified as  non-performing.  Interest on nonaccrual  loans is recognized on a
cash basis until such time as the  borrower  has brought the loan to  performing
status.  Other real estate owned is included in  non-performing  assets. At June
30,  2002,  the  Bank  had  non-performing  loans  of  $332,867  and a ratio  of
non-performing loans to total loans of 0.26%.

     Real  estate  acquired  as a result  of  foreclosure  or by deed in lieu of
foreclosure is classified as other real estate owned ("OREO") until such time as
it is sold. When real estate is acquired through  foreclosure or by deed in lieu
of  foreclosure,  it is  recorded  at its fair value,  less  estimated  costs of
disposal.  If the value of the property is less than the loan,  less any related
specific loan loss  provisions,  the difference is charged against the allowance
for loan losses. Any subsequent  write-down of OREO is charged against earnings.
At  June  30,  2002,   the  Bank's  OREO  totaled   $30,229  and  its  ratio  of
non-performing assets to total assets was 0.16%.

     The following table sets forth  delinquencies  in the Bank's loan portfolio
at June 30,  2002.  When a loan is  delinquent  90 days or more,  the Bank fully
reverses all accrued interest thereon and ceases to accrue interest  thereafter.
A loan is not  removed  from  nonaccrual  status  until the loan is current  and
evidence supports the borrower's  ability to maintain a current status. The Bank
also had a single one- to four-family  real estate loan that amounted to $51,599
classified as nonaccrual  which was in the 60 to 89 days delinquent  category at
June 30, 2002. For all the dates  indicated,  the Bank did not have any material
restructured loans.











<table>
<caption>

                                                                                    Percentage
                                                                     Dollar          of loan
                                                      Number         amount          category
                                                   ----------     ----------       ------------
<S>                                               <C>            <C>             <C>
60 to 89 days delinquent
Real estate:
    One- to four-family                                   9        $547,209              80.1%
    Commercial                                            1          33,551               4.9
    Construction and land                               ---             ---               ---
    Multi-family                                        ---             ---               ---
Installment                                               7          20,140               3.0
Home equity                                               2          82,037              12.0
Commercial business                                     ---             ---               ---
                                                  -----------    -----------      ------------

Total loan delinquency 60 to 89 days                     19         682,937             100.0

90 days and over delinquent
Real estate:
    One- to four-family                                   6         262,382              93.3
    Commercial                                          ---             ---               ---
    Construction and land                               ---             ---               ---
    Multi-family                                        ---             ---               ---
Home equity                                               5          18,886               6.7
Installment                                             ---             ---               ---
Commercial business                                     ---             ---               ---
                                                  -----------    -----------      ------------

Total loan delinquency 90 days and over                  11         281,268             100.0

Total loans delinquent over 60 days Real estate:
    One- to four-family                                  15         809,591              84.0
    Commercial                                            1          33,551               3.5
    Construction and land                               ---             ---               ---
    Multi-family                                        ---             ---               ---
Installment                                              12          39,026               4.0
Home equity                                               2          82,037               8.5
Commercial business                                     ---             ---               ---
                                                  ----------     -----------      ------------

Total loans delinquent over 60 days                      30        $964,205             100.0%
                                                  ==========     ===========      ============

</table>


<PAGE>


Nonaccrual Loans and Nonperforming Assets.
     The following table sets forth information  regarding  nonaccrual loans and
other  non-performing  assets at the dates  indicated.  The Bank had no accruing
loans delinquent more than 90 days at June 30, 2002, 2001, and 2000.





























<table>
<caption>

                                                              At June 30,
                                                   2002             2001            2000
                                                  ----------     -----------     ----------

<S>                                               <C>            <C>             <C>
Nonaccruing loans:
    Real estate loans
       One- to four-family                         $313,981         $660,607        $495,909
       Commercial real estate                           ---           71,711         155,002
    Installment and home equity                      18,886           11,150          20,801
    Commercial business                                 ---              ---             ---
                                                  -----------    -----------     -----------

Total nonaccruing loans                             332,867          743,468         671,712

Real estate owned:
    Real estate loans
       One- to four-family                              ---              ---          42,133
       Commercial real estate                        30,229           30,229             ---
    Commercial business                                 ---              ---         109,000
                                                  -----------     -----------     ----------

Total real estate owned                              30,229           30,229         151,133

                                                  -----------    -----------     -----------

Total non-performing assets                        $363,096         $773,697        $822,845
                                                  ===========    ===========     ===========


Total as a percentage of total assets                 0.16%             0.42%           0.49%



</table>



     During the year ended June 30, 2002,  gross interest income of $9,700 would
have been recorded on nonaccrual  loans under their  original terms if the loans
had been  current  throughout  the period.  No interest  income was  recorded on
nonaccrual  loans or on accruing loans more than 90 days  delinquent  during the
year ended June 30, 2002.

Classification of Assets.
     Consistent   with  regulatory   guidelines,   the  Bank  provides  for  the
classification  of loans and other assets  considered  to be of lesser  quality.
Such  ratings   coincide   with  the   "Substandard",   "Doubtful"   and  "Loss"
classifications  used by federal  regulators in their  examination  of financial
institutions.   Generally,   an  asset  is  considered   Substandard  if  it  is
inadequately  protected  by the  current  net worth and paying  capacity  of the
obligors  and/or  the  collateral  pledged.  Substandard  assets  include  those
characterized by the distinct possibility that the insured financial institution
will sustain some loss if the deficiencies are not corrected.  Assets classified
as Doubtful have all the weaknesses  inherent in assets  classified  Substandard
with the added  characteristic  that the weaknesses  present make  collection or
liquidation  in  full,  on  the  basis  of  currently  existing  facts,   highly
questionable  and  improbable.  Assets  classified as Loss are those  considered
uncollectible  and of such little value that their continuance as assets without
the establishment of a specific loss reserve and/or charge-off is not warranted.
Assets  that do not  currently  expose the  insured  financial  institutions  to
sufficient  risk  to  warrant   classification  in  one  of  the  aforementioned
categories but otherwise possess weaknesses are designated "Special Mention."

     When the Bank classifies  problem assets as either Substandard or Doubtful,
it  establishes a valuation  allowances  or "loss  reserves" in an amount deemed
prudent by management.  General  allowances  represent loss allowances that have
been  established  to  recognize  the  inherent  risk  associated  with  lending
activities,  but which, unlike specific  allowances,  have not been allocated to
particular problem assets. When the Bank classifies problem assets as "Loss," it
is required either to establish a specific allowance for losses equal to 100% of
the amount of assets so  classified,  or to charge-off  such amount.  The Bank's
determination  as to the  classification  of its  assets  and the  amount of its
valuation allowance is subject to review by its regulatory  agencies,  which can
order the establishment of additional  general or specific loss allowances.  The
Bank  reviews its  portfolio  monthly to  determine  whether any assets  require
classification in accordance with applicable regulations.  At June 30, 2002, the
Bank had $74,000 in loans  classified  as  Substandard  and no other  classified
assets.

Allowance for Loan Losses.
     The allowance for loan losses is  established  through a provision for loan
losses  based on  management's  evaluation  of the losses  inherent  in the loan
portfolio,  the composition of the loan portfolio,  specific  impaired loans and
current economic  conditions.  Such  evaluation,  which includes a review of all
loans on which full  collectibility  may not be  reasonably  assured,  considers
among other matters, the estimated net realizable value or the fair value of the
underlying collateral, economic conditions,  historical loan loss experience and
other factors that warrant recognition in providing for the loan loss allowance.
In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically  review the Bank's allowance for loan losses
and valuation of OREO. Such agencies may require the Bank to recognize additions
to the allowance based on their judgment about information  available to them at
the time of their  examination.  The allowance for loan losses is increased by a
provision for loan losses (which results in a charge to noninterest expense) and
is  reduced  by net  charge-offs.  At June 30,  2002,  the total  allowance  was
$1,068,734, which amounted to 0.83% of total net loans receivable and 321.07% of
nonperforming loans. Management will continue to monitor and modify the level of
the  allowance  for loan losses.  For the year ended June 30,  2002,  the Bank's
charge-offs amounted to $52,257. For the years ended June 30, 2001 and 2000, the
Bank's charge-offs amounted to $76,915 and $65,557, respectively.

     The Bank may require an environmental site assessment to be performed by an
independent  professional  for  non-residential  mortgage  loans. It is also the
Bank's policy to require title and hazard  insurance on all mortgage  loans.  In
addition,  the Bank may require  borrowers to make payments to a mortgage escrow
account for the payment of property  taxes.  Any  exceptions  to the Bank's loan
policies must be made in accordance with the limitations set out in each policy.
Typically,  the exception authority ranges from the Chief Lending Officer to the
Board of Directors, depending on the size and type of loan involved.

Analysis of the Allowance For Loan Losses.
     The  following  table sets forth the  analysis  of the  allowance  for loan
losses for the periods indicated.


<table>
<caption>


                                                                For the Years Ended June 30,
                                                            2002               2001             2000
                                                       ------------        ----------       -----------

<S>                                                    <C>                 <C>              <C>
Balance at the beginning of period                         $886,081          $866,443         $791,897

Charge-offs:
  One- to four-family real estate                               ---               ---              ---
  Commercial real estate                                        ---            26,432              ---
  Installment                                                49,877            50,483           65,557
  Home equity                                                 2,380               ---              ---
  Commercial business                                           ---               ---              ---
                                                       ------------        ----------       -----------

Total charge-offs                                            52,257            76,915           65,557

Recoveries:
  One- to four-family real estate                               ---               ---              ---
  Installment                                                16,010            36,553            5,103
                                                       ------------        ----------       -----------

Total recoveries                                             16,010            36,553            5,103

Net charge-offs                                              36,247            40,362           60,454
                                                         ------------      ----------       -----------

Additions charged to operations                             218,900            60,000          135,000
                                                       ------------        ----------       -----------

Balance at end of period                                  $1,068,734         $886,081         $866,443
                                                         ============      ==========       ===========


Ratio of net charge-offs to average loans outstanding         0.03%             0.04%            0.06%
Ratio of net charge-offs to nonperforming assets              9.98%             5.22%            7.35%
Allowance for loan loss to nonperforming loans              321.07%           119.18%          128.99%
Allowance for loan loss to net loans                          0.83%             0.81%            0.89%

</table>



<PAGE>


Allocation of Allowance for Loan Losses.
     The  following  table sets forth the  allocation  of the allowance for loan
losses by loan category for at the dates  indicated.  The allowance is allocated
to  each  loan  category  based  on  historical  loss  experience  and  economic
conditions.  The unallocated  portions of the allowance  represent  reserves for
unused lines of credit and losses inherent in the loan portfolio.

<table>
<caption>

                             June 30, 2002                       June 30, 2001                    June 30, 2000
                                                Percent                            Percent                            Percent
                                                of loans                           of loans                          of loans
                                      Loan      in each                   Loan      in each                  Loan     in each
                       Amount of     amounts    category     Amount of   amounts   category     Amount of  amounts    category
                       loan loss       by       to total     loan loss     by         to        loan loss     by      to total
                       allowance    category     loans       allowance  category    loans       allowance  category    loans

<S>                      <C>         <C>         <C>           <C>       <C>         <C>            <C>     <C>        <C>
(Dollars in thousands)
One- to four-family         $488     $98,834        76.2%        $467    $86,336      77.8%          $442   $80,696     81.5%
Commercial real              182       8,764         6.6          120      5,239       4.7            105     4,702      4.8
estate
Construction and land          7       3,003         2.3           13      1,979       1.8              4       616      0.6
Multi-family                  18       1,657         1.3           10      1,213       1.1             22     1,253      1.3
Installment                   92       5,611         4.3          100      6,128       5.5            121     4,865      4.9
Home equity                   38       6,957         5.4           32      6,138       5.5              1     4,631      4.7
Passbook                       1         545         0.4            1        596       0.6              1       490      0.5
Commercial business          191       4,356         3.3          136      3,291       3.0             72     1,707      1.7
Specific                      24         ---         ---          ---        ---       ---            ---       ---      ---
Unallocated                   28         ---         ---            7       ---        ---             98      ---       ---
                       ---------    --------   ---------     ---------  --------  ---------     ---------  --------  --------
Totals                    $1,069    $129,727       100.0%        $886   $110,920     100.0%          $866   $98,960    100.0%
                       =========    ========   =========     =========  ========  =========     =========  ========  ========

</table>


SECURITIES INVESTMENT ACTIVITIES

     Given the Bank's substantial  portfolio of fixed-rate  residential mortgage
loans, the Bank maintains high balances of liquid investments for the purpose of
mitigating interest rate risk. The Board of Directors establishes the securities
investment policy.  This policy dictates that investment  decisions will be made
based  on  the  safety  of the  investment,  liquidity  requirements,  potential
returns,  cash flow  targets,  and desired risk  parameters.  In pursuing  these
objectives,  management  considers  the  ability  of an  investment  to  provide
earnings  consistent with factors of quality,  maturity,  marketability and risk
diversification.

     The Bank's current policies generally limit securities  investments to U.S.
Government and agency securities, federal funds sold, municipal bonds, corporate
debt  obligations  and certain  mutual  funds.  In addition,  the Bank's  policy
permits investments in mortgage-backed  securities,  including securities issued
and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage
obligations ("CMOs"). The Bank's current securities investment strategy utilizes
a risk  management  approach of diversified  investing  among three  categories:
short-,  intermediate-  and  long-term.  The  emphasis  of this  approach  is to
increase overall investment securities yields while managing interest rate risk.
The Bank will  only  invest  in  securities  rated "A" or higher by at least one
nationally  recognized  rating agency (or securities  attaining such rating as a
result of guarantees by insurance  companies),  with the exception of occasional
investments in smaller  non-rated  local bonds.  The Bank does not engage in any
derivative or hedging transactions, such as interest rate swaps or caps.

     At June 30, 2002, the Bank had $66.1 million in investment  securities,  or
30.0%  of total  assets.  SFAS  No.  115  requires  the  Bank to  designate  its
securities as held to maturity, available for sale, or trading, depending on the
Bank's ability and intent  regarding its  investments.  As of June 30, 2002, the
entire investment  securities portfolio was classified as available for sale. At
June 30, 2002, the Bank's  mortgage-backed  securities  portfolio  totaled $19.6
million,  or  8.9%  of  total  assets  and the  Bank's  asset-backed  securities
portfolio totaled $0.8 million, or 0.4% of total assets.


<PAGE>


     Book Value of Investment Securities. The following table sets forth certain
information  regarding the  investment  securities  and other  interest  earning
assets as of the dates indicated.



<table>
<caption>

                                                                     At June 30,
                                               2001                      2000                     1999
                                               ----                      ----                     ----
                                        Book       Percent         Book       Percent
                                       value       of total        value       of           Book      Percent
                                                                              total        value     of total
                                     ----------   ----------     ---------   --------     --------   ---------
<S>                                  <C>             <C>          <C>          <C>         <C>         <C>
(Dollars in Thousands)
Investment securities, AFS
  U.S. Treasuries                          $---         ---%        $1,005       2.1%       $4,684       10.4%
  U.S. Government agencies               14,862        22.5          1,794       3.7         5,190       11.6
  State and political subdivisions        8,811        13.3          9,420      19.3         9,904       22.1
  Mortgage-backed securities             19,564        29.6          8,783      18.0         6,000       13.4
  Asset-backed securities                   818         1.3          3,300       6.7         4,915       11.0
  Corporate debt securities              20,760        31.4         23,432      47.9        12,812       28.6
  Equity securities and other             1,274         1.9          1,141       2.3         1,303        2.9
                                     ----------   ----------      ---------   --------     --------   ---------

Total investment securities, AFS        $66,089       100.0%       $48,875     100.0%      $44,808      100.0%
                                     ==========   ==========      =========   ========     ========   =========



</table>


Mortgage-Backed and Asset-Backed Securities.
     The Bank  purchases  mortgage-backed  securities  in order to: (i) generate
positive interest rate spreads with minimal  administrative  expense; (ii) lower
the Bank's  credit risk as a result of the  guarantees  provided by Freddie Mac,
Fannie  Mae,  and  GNMA;  and  (iii)  increase  liquidity.  At  June  30,  2002,
mortgage-backed  securities  (including  CMOs)  totaled $19.6 million or 8.9% of
total  assets,  all of which were  classified as available for sale. At June 30,
2002, $15.2 million of the  mortgage-backed  securities were adjustable rate and
$4.4 million  were fixed rate.  The  mortgage-backed  securities  portfolio  had
coupon rates ranging from 4.00% to 7.00%, a weighted  average yield of 4.02% and
a weighted average life (including pre-payment assumptions) of 2.5 years at June
30, 2002. The estimated market value of the Bank's mortgage-backed securities at
June 30, 2002 was $19.6 million, which was $204,760 more than cost.

     The pooling of mortgages  and the  issuance of a security  with an interest
rate  that is based on the  interest  rate on the  underlying  mortgages  create
mortgage-backed  securities.  Mortgage-backed  securities  typically represent a
participation  interest in a pool of  single-family  or multi-family  mortgages,
although the Bank focuses its investments on  mortgage-backed  securities backed
by  single-family  mortgages.  The issuers of such  securities  (generally  U.S.
Government agencies and government sponsored enterprises,  including Fannie Mae,
Freddie Mac and GNMA) pool and resell the participation interests in the form of
securities  to  investors,  such as the  Bank,  and  guarantee  the  payment  of
principal and interest to these investors.  Mortgage-backed securities generally
yield less than the loans that underlie such  securities  because of the cost of
payment  guarantees  and  credit  enhancements.  In  addition,   mortgage-backed
securities  are usually more liquid than  individual  mortgage  loans and may be
used to collateralize certain liabilities and obligations of the Bank.

     Investments  in  mortgage-backed  securities  involve  a risk  that  actual
prepayments will be greater than estimated over the life of the security,  which
may require  adjustments to the  amortization of any premium or accretion of any
discount  relating to such  instruments  thereby  altering the net yield on such
securities.  There is also reinvestment risk associated with the cash flows from
such  securities or in the event such securities are prepaid.  In addition,  the
market value of such securities may be adversely affected by changes in interest
rates.

     Management  reviews  prepayment  estimates   periodically  to  ensure  that
prepayment  assumptions are reasonable considering the underlying collateral for
the  securities at issue and current  interest  rates and to determine the yield
and estimated maturity of the Bank's  mortgage-backed  securities portfolio.  Of
the Bank's $19.6 million mortgage-backed  securities portfolio at June 30, 2002,
$1.4 million with a weighted  average yield of 6.08% had contractual  maturities
within five  years,  $2.9  million  with a weighted  average  yield of 5.40% had
contractual maturities of five to ten years and the remaining $15.3 million with
a weighted average yield of 3.57% had contractual maturities more than 10 years.
However,  the actual maturity of a security may be less than its stated maturity
due to prepayments of the underlying mortgages. Prepayments that are faster than
anticipated may shorten the life of the security and may result in a loss of any
premiums  paid and  thereby  reduce the net yield on such  securities.  Although
prepayments  of  underlying  mortgages  depend on many factors,  the  difference
between  the  interest  rates on the  underlying  mortgages  and the  prevailing
mortgage  interest rates  generally is the most  significant  determinant of the
rate of  prepayments.  During  periods of  declining  mortgage  interest  rates,
refinancing generally increases and accelerates the prepayment of the underlying
mortgages and the related security.  Under such  circumstances,  the Bank may be
subject to reinvestment  risk because,  to the extent that the Bank's securities
prepay  faster  than  anticipated,  the  Bank  may not be able to  reinvest  the
proceeds of such  repayments  and  prepayments  at a comparable  rate of return.
Conversely,  in a rising  interest  rate  environment  prepayments  may decline,
thereby  extending the estimated  life of the security and depriving the Bank of
the ability to reinvest cash flows at the increased rates of interest.

     At June 30, 2002, the Bank's portfolio of asset-backed  securities  totaled
$0.8 million, or 0.4% of total assets, all of which were classified as available
for sale. At June 30, 2002, all of the asset-backed  securities were fixed rate.
The portfolio had coupon rates ranging from 6.10% to 6.85%,  a weighted  average
yield of 5.23% and a weighted average life (including prepayment assumptions) of
3.0  years  at  June  30,  2002.  The  estimated  market  value  of  the  Bank's
asset-backed  securities portfolio at June 30, 2002 was $0.8 million,  which was
$13,311 more than cost at such date.

     Asset-backed  securities  are a type of  debt  security  collateralized  by
various loans and assets including:  automobile loans,  equipment leases, credit
card  receivables,  home equity and  improvement  loans,  manufactured  housing,
student  loans  and  other  consumer  loans.  In  the  case  of  the  Bank,  its
asset-backed   securities   are   collateralized   by   automobile   loans   and
second-mortgage loans.

     Asset-backed  securities  provide  the  Bank  with  a  broad  selection  of
fixed-income  alternatives,  most with higher credit  ratings and less downgrade
risk than  corporate  bonds and more  stable  cash flows than  mortgage  related
securities.  Prepayments and structure risk of asset-backed  securities are less
of a concern than CMO securities due to the shorter maturities of the underlying
collateral promoting greater stability of payments.

     Of the Bank's $0.8 million portfolio of asset-backed securities at June 30,
2002,  $0.1  million  with a  weighted  average  yield of 5.76% had  contractual
maturities within 5 years, no asset-backed  securities held in the portfolio had
contractual  maturities of 5 to 10 years,  and the remaining $0.7 million with a
weighted  average  yield of 5.17%  had  contractual  maturities  of more than 10
years.

SOURCES OF FUNDS

General.
     Deposits, repayments and prepayments of loans and securities, proceeds from
sales of securities,  and proceeds from maturing  securities and cash flows from
operations  are the  primary  sources  of the Bank's  funds for use in  lending,
investing and for other general purposes.

Deposits.
     The Bank  offers a variety of  deposit  accounts  with a range of  interest
rates and terms. The Bank's deposit  accounts consist of savings,  NOW accounts,
and money market  accounts,  certificates of deposit,  and  noninterest  bearing
checking accounts. The Bank also offers IRAs.

     At June 30, 2002,  deposits  totaled $183.7 million.  At June 30, 2002, the
Bank had a total of $62.6  million in  certificates  of deposit,  of which $49.1
million had maturities of one year or less.  Although the Bank has a significant
portion of its  deposits in  shorter-term  certificates  of deposit,  management
monitors activity on these accounts and, based on historical  experience and the
Bank's current pricing strategy, believes it will retain a large portion of such
accounts upon maturity.

     The flow of  deposits  is  influenced  significantly  by  general  economic
conditions,  changes  in money  market  rates,  prevailing  interest  rates  and
competition.  Deposits  are obtained  predominantly  from the areas in which the
Bank's  branch  offices are located.  The Bank relies  primarily on  competitive
pricing  of  its  deposit  products  and  customer  service  and   long-standing
relationships  with  customers  to attract and retain these  deposits;  however,
market  interest  rates and rates offered by competing,  financial  institutions
significantly affect the Bank's ability to attract and retain deposits. The Bank
uses  traditional  means of advertising its deposit  products,  including radio,
television, and print media. It generally does not solicit deposits from outside
its market  area.  While the Bank accepts  certificates  of deposit in excess of
$100,000, they are not subject to preferential rates. The Bank does not actively
solicit such deposits,  as they are more difficult to retain than core deposits.
Historically, the Bank has not used brokers to obtain deposits.

     The following  table sets forth the deposit  activities of the Bank for the
periods indicated.













<table>
<caption>

                                          For the Years Ended June 30,
                                       2002            2001         2000
                                     ----------     --------     ---------
<S>                                  <C>            <C>          <C>
(Dollars in thousands)
Opening balance                       $154,192       $133,460     $127,999
Deposits                               664,399        512,785      333,442
Withdrawals                            641,720        496,480      332,441
Interest credited                        6,843          4,427        4,460
Ending balance                         183,714        154,192      133,460
                                     ----------     ---------    ----------
Net increase                           $29,522        $20,732       $5,461
                                     ==========     =========    ==========


Percent increase                         19.15%        15.53%         4.27%

</table>

     The following  tables set forth  information,  by various rate  categories,
regarding the balance of deposits by types of deposit as of the dates indicated.

<table>
<caption>



                                                                      At June 30,
                                               2002                      2001                     2000
                                       Amount       Percent       Amount      Percent      Amount    Percent
                                     ----------    ---------     -------     -------      --------   -------
<S>                                  <C>           <C>           <C>         <C>          <C>         <C>
(Dollars in thousands)
Transaction and savings deposits
   Demand deposits                      $22,067        12.0%      $18,418      11.9%       $12,344       9.3%
   Savings deposits                      70,825        38.5        57,021      37.0         53,892      40.4
   NOW deposits                          14,294         7.8        11,446       7.4          9,090       6.8
   Money market deposits                 13,883         7.6         9,194       6.0          6,189       4.6
                                     ----------    --------      --------    -------      --------    -------

Total non-certificates of deposit      121,069         65.9%       96,079      62.3         81,515      61.1
                                     ----------    --------      --------    -------      --------    -------


Certificate of deposit
  0.00 - 2.99%                           26,024        14.2           100       0.1            ---       ---
  3.00 - 3.99%                           16,369         8.9           430       0.3             77       0.1
  4.00 - 5.99%                           20,252        11.0        57,583      37.3         51,868      38.8
  6.00 - 7.99%                              ---         ---           ---       ---            ---       ---
  8.00 - and over                           ---         ---           ---       ---            ---       ---
                                     ----------    --------      --------    -------      --------    -------

Total certificates of deposit            62,645        34.1        58,113      37.7         51,945      38.9
                                     ----------    --------      --------    -------      --------    -------


Total deposits                         $183,714       100.0%     $154,192     100.0%      $133,460     100.0%
                                     ==========    ========      ========    =======      ========    =======

</table>



<PAGE>



     The following  table sets forth the amount and remaining  maturities of the
Bank's certificates of deposit accounts at June 30, 2001.


<table>
<caption>



                                  0.00-         3.00-          4.00-        6.00% or                    Percent of
                                  2.99%         3.99%          5.99%        Greater       Total            Total
                               ----------     ---------     ---------      ---------     --------      -----------
<S>                            <C>            <C>           <C>            <C>           <C>           <C>
(Dollars in thousands)
Certificates of deposit
Maturity in quarter ended:
  September 30, 2002               $7,319        $2,136        $7,600           $---      $17,055            27.2%
  December 31, 2002                 9,553         3,063         4,398            ---       17,014            27.2
  March 31, 2003                    3,640         2,399         2,734            ---        8,773            14.0
  June 30, 2003                     2,973         1,207         2,103            ---        6,283            10.0
  September 30, 2003                1,741         1,326           462            ---        3,529             5.6
  December 31, 2003                   747         2,220           286            ---        3,253             5.2
  March 31, 2004                       28         1,685           254            ---        1,967             3.2
  June 30, 2004                        23           432           493            ---          948             1.5
  September 30, 2004                  ---           352           242            ---          594             1.0
  December 31, 2004                   ---         1,074           298            ---        1,372             2.2
  March 31, 2005                      ---            36           352            ---          388             0.6
  June 30, 2005                       ---           206           185            ---          391             0.6
  Thereafter                          ---           233           845            ---        1,078             1.7
                               ----------     ---------     ----------     ---------      -------       -----------

  Total                           $26,024       $16,369       $20,252           $---      $62,645           100.0%
                               ==========     =========     ==========     =========     ========       ===========


Percent of total                     41.6%         26.1%         32.3%           ---%       100.0%

</table>

Borrowed Funds.
     In the event that the Bank  requires  funds  beyond its ability to generate
them internally,  additional sources of funds are available through Federal Home
Loan Bank ("FHLB"). At June 30, 2002 the Bank had available an Overnight Line of
Credit and a One-Month Overnight Repricing Line of Credit, each in the amount of
$8,512,800  with the FHLB.  Residential  mortgages  are  pledged  by the Bank as
collateral to secure the Bank's line of credit and term  borrowing.  Interest on
the line is determined  at the time of  borrowing.  In addition to the overnight
line of credit  program,  the Bank also has  access to the FHLB's  Term  Advance
Program  under  which it can borrow at various  terms and  interest  rates.  The
advances are  collateralized  by all of the Company's  stock and deposits in the
FHLB  and a  general  lien  on  one-  to  four-family  mortgage  loans,  certain
multi-family loans and U.S. Government Agency obligations in an aggregate amount
equal up to 133% of outstanding advances.  The maximum amount that the FHLB will
advance to member institutions, including the Bank, fluctuates from time to time
in accordance with policies of the FHLB.

     The following table set forth certain information regarding borrowed funds.

Balance Outstanding at June 30, 2002:

<table>
<caption>

           Amount             Rate               Maturity date
     -------------       ---------------        --------------
<S>                     <C>                     <C>
       $4,000,000         2.19% - fixed           01/14/2003
        2,500,000         6.82% - fixed           09/02/2004
        2,500,000         6.80% - fixed           10/04/2005
     -------------
       $9,000,000
     =============
</table>


Average daily balance outstanding:                     $6,841,096
Maximum amount outstanding during the year             $9,000,000
Weighted average interest rate during the year               5.57%
Weighted average interest at end of year                     4.76%


PERSONNEL

     As of June 30, 2002,  the Bank had 74 full-time  employees and 12 part-time
employees.  The  Company has no  employees  who are not also Bank  employees.  A
collective  bargaining  unit  does  not  represent  the  employees  and the Bank
considers its relationship with its employees to be good.


FEDERAL AND STATE TAXATION

Federal Taxation

General.
     The Mutual Company,  the Company and the Bank are subject to federal income
taxation in the same general manner as other corporations,  with some exceptions
discussed below.  The following  discussion of federal taxation is intended only
to  summarize  certain  pertinent  federal  income  tax  matters  and  is  not a
comprehensive description of the tax rules applicable to these entities.

Method of Accounting.
     For federal income tax purposes,  the Company and the Bank currently report
income and  expenses  on the  accrual  method of  accounting  and use a tax year
ending June 30 for filing  consolidated  federal  income tax returns.  The Small
Business  Protection  Act of 1996 (the  "1996  Act")  eliminated  the use of the
reserve  method of  accounting  for bad debt  reserves by savings  institutions,
effective for taxable years beginning after 1995.

Bad Debt Reserves.
     Prior to the 1996 Act,  the Bank was  permitted  to establish a reserve for
bad debts and to make annual  additions to the reserve.  These additions  could,
within specified  formula limits,  be deducted in arriving at the Bank's taxable
income.  As a result of the 1996 Act, the Bank must use the specific  charge off
method in computing its bad debt  deduction  beginning with its 1996 federal tax
return.

Taxable  Distributions  and  Recapture.
     Prior to the 1996 Act, bad debt  reserves  created prior to January 1, 1988
were  subject to  recapture  into  taxable  income  should the Bank fail to meet
certain thrift asset and definitional tests. New federal legislation  eliminated
these thrift  related  recapture  rules.  However,  under current law,  pre-1988
reserves  remain  subject to  recapture  should the Bank redeem its common stock
pay, dividends or make distributions in excess of earnings and profits.

     At  June  30,  2002,  the  Bank's  total  federal   pre-1988   reserve  was
approximately  $2.1 million.  This reserve  reflects the  cumulative  effects of
federal tax deductions by the Bank for which no federal income tax provision has
been made.  A deferred  tax  liability  has not been  provided on this amount as
management  does not intend to redeem stock,  make  distributions  or take other
actions that would result in recapture of the reserve.

Minimum Tax.
     The Code imposes an  alternative  minimum tax ("AMT") at a rate of 20% on a
base of regular  taxable  income  plus  certain  tax  preferences  ("alternative
minimum taxable  income" or "AMTI").  The AMT is payable to the extent such AMTI
is in excess of an exemption amount. For all loss years except those originating
in 2001 and 2002, net operating  losses can offset no more than 90% of AMTI. For
loss years  originating  in 2001 and 2002,  you can offset 100% of  AMTI.Certain
payments of alternative  minimum tax may be used as credits  against regular tax
liabilities  in future years.  The Company and the Bank have not been subject to
the  alternative  minimum tax and has no such  amounts  available as credits for
carryover.

Net Operating Loss Carryovers.
     A  financial  institution  may  carry  back  net  operating  losses  to the
preceding Five taxable years and forward to the succeeding 20 taxable years.  At
June 30,  2002,  the Bank had no net  operating  loss carry  forward for federal
income tax purposes.

Corporate Dividends-Received Deduction.
     The Company may exclude from its income 100% of dividends received from the
Bank as a  member  of the same  affiliated  group of  corporations.  The  Mutual
Company owns less than 80% of the  outstanding  Common Stock of the Company.  As
such, the Mutual Company is not permitted to file a consolidated  federal income
tax return  with the  Company  and the Bank.  The  corporate  dividends-received
deduction is 80% in the case of dividends  received from corporations with which
a corporate  recipient does not file a  consolidated  return,  and  corporations
which own less than 20% of the stock of a  corporation  distributing  a dividend
may deduct only 70% of dividends received or accrued on their behalf.

State Taxation

New York State Taxation - General.
     The Company and the Bank report  income on a combined  fiscal year basis to
New York State.  The New York State  franchise  tax on banking  corporations  is
imposed  in an amount  equal to the  greater  of (a) 8.0%  "entire  net  income"
allocable to New York State (b) 3% of "alternative  entire net income" allocable
to New York State (c) 0.01% of the average value of assets allocable to New York
State or (d) $250. Entire net income is based on federal taxable income, subject
to certain  modifications.  Alternative entire net income is equal to entire net
income without  certain  modifications.  The Mutual Company files a separate New
York State franchise tax return.

Bad Debt Reserves.
     The Bank is allowed to utilize the  reserve  method of  accounting  for New
York State  franchise  tax  purposes  and is required  to  maintain  two reserve
accounts:  the Reserve for Losses on Nonqualifying  Loans (the "NY NQL Reserve")
and the  Reserve  for Losses on  Qualifying  Real  Property  Loans (the "NY QRPL
Reserve").  The  addition  to the NY NQL  Reserve  must be  computed  under  the
"experience  method".  The addition to the NY QRPL Reserve may be computed under
either the experience  method or the  "percentage of taxable income method" (the
"PTI method").  The deduction under the PTI method is equal to 32% of entire net
income  (before the  deduction  for the bad debt reserve  addition),  which must
first be allocated to the NY NQL Reserve.  The balance, if any, is the allowable
addition  to the NY QRPL  reserve,  subject  to a  limitation  based  upon 6% of
Qualifying Real Property Loans ("QRPL").

Recapture of New York State Bad Debt Reserves.
     If the Bank ceases to qualify as a "thrift  institution" (as defined in the
New  York  State  tax  law),  or fails to hold at  least  60% of its  assets  in
"Qualifying Assets", it will no longer be entitled to use the reserve method and
must  recapture  into  entire net income a portion of its NY QRPL  Reserve.  The
amount  subject to  recapture  is  generally  equal to the excess of the NY QRPL
Reserve over the federal QRPL Reserve as of December 31, 1995. The amount of the
Bank's NY QRPL Reserve subject to recapture is approximately $1.8 million. Since
it is the Bank's intention to continue to qualify as a thrift institution and to
meet the 60%  Qualifying  Asset  test,  a deferred  tax  liability  has not been
established  for the  $153,000  New York State tax that would  result  from such
failure.

Net Operating Loss Deductions.
     For New York State  franchise  tax  purposes,  the Bank is not  entitled to
carry back or forward net operating  losses  ("NOLs")  incurred in taxable years
ending before  January 1, 2001.  NOLs incurred in taxable years  beginning on or
after January 1, 2001 can be carried  forward to the succeeding 20 taxable years
and  carried  back to the Five  preceeding  years,  however  there is a  $10,000
limitation on carry-backs.


Corporate Dividends-Received Deduction.
     Similar to the federal rules,  the Company and the Bank file a combined New
York State franchise tax report and inter-company  dividends will be eliminated.
However, the Mutual Company does not own the requisite percentage (generally 80%
or more) of the  common  stock of the  Company  necessary  to file on a combined
basis with the Company.  As long as the Mutual Company owns more than 50% of the
common stock of the Company, it is entitled to a full exclusion from taxation of
dividend income related to subsidiary capital. The Mutual Company is entitled to
a 50% dividends-received deduction if it owns 50% or less of the common stock of
the Company.

                                   REGULATION

General

     The Bank is a New York-chartered  savings bank and the FDIC through the BIF
insures its deposit  accounts up to  applicable  limits.  The Bank is subject to
extensive   regulation   by  the  New  York  State   Banking   Department   (the
"Department"),  as  its  chartering  agency,  and by the  FDIC,  as its  deposit
insurer. The Bank is required to file reports with, and is periodically examined
by,  the  FDIC  and  the New  York  Superintendent  of  Banking  concerning  its
activities and financial condition and must obtain regulatory approvals prior to
entering into certain transactions,  including, but not limited to, mergers with
or acquisitions of other banking institutions.  The Bank is a member of the FHLB
of New York and is subject to certain  regulations by the Federal Home Loan Bank
System.  Both the Company  and the Mutual  Company,  as mutual  savings and loan
holding companies, are subject to regulation by the OTS and are required to file
reports with the OTS. Any change in such regulations, whether by the Department,
the FDIC,  or the OTS could  have a  material  adverse  impact on the Bank,  the
Company, or the Mutual Company.

     Certain of the regulatory requirements applicable to the Bank, the Company
and the Mutual Company are referred to below or elsewhere herein.

NEW YORK BANK REGULATION

     FDIC  regulations and other federal law and regulations  limit the exercise
by an FDIC-insured  savings bank of the lending and investment  powers under the
New York State Banking Law. In particular, the applicable provisions of New York
State  Banking  Law and  regulations  governing  the  investment  authority  and
activities   of  an  FDIC  insured   state-chartered   savings  bank  have  been
substantially limited by the Federal Deposit Insurance  Corporation  Improvement
Act of 1991 ("FDICIA") and the FDIC regulations issued pursuant thereto.

     The Bank derives its lending, investment and other authority primarily from
the applicable  provisions of New York State Banking Law and the  regulations of
the  Department,   as  limited  by  FDIC  regulations.   Under  these  laws  and
regulations,  savings  banks,  including  the Bank,  may  invest in real  estate
mortgages,  consumer and  commercial  loans,  certain types of debt  securities,
including  certain  corporate debt securities and obligations of federal,  state
and local governments and agencies, certain types of corporate equity securities
and certain other assets.  Under the statutory authority for investing in equity
securities,  a savings  bank may  invest up to 7.5% of its  assets in  corporate
stock,  with an overall  limit of 5% of its  assets  invested  in common  stock.
Investment in the stock of a single  corporation  is limited to the lesser of 2%
of the outstanding stock of such corporation or 1% of the savings bank's assets,
except as set forth below.  Such equity  securities  must meet certain  earnings
ratios and other tests of financial performance. A savings bank's lending powers
are not subject to percentage of assets  limitations,  although there are limits
applicable  to single  borrowers.  A  savings  bank may  also,  pursuant  to the
"leeway"  power,  make  investments  not otherwise  permitted under the New York
State  Banking Law. This power permits  investments  in otherwise  impermissible
investments of up to 1% of assets in any single  investment,  subject to certain
restrictions  and to an aggregate limit for all such  investments of up to 5% of
assets. Additionally, in lieu of investing in such securities in accordance with
and reliance  upon the specific  investment  authority set forth in the New York
State  Banking  Law,  savings  banks are  authorized  to elect to invest under a
"prudent person" standard in a wider range of investment  securities as compared
to  the  types  of  investments   permissible  under  such  specific  investment
authority.  However,  in the event a savings bank elects to utilize the "prudent
person"  standard,  it will be unable to avail itself of the other provisions of
the New York  State  Banking  Law and  regulations,  which  set  forth  specific
investment  authority.  The Bank  has not  elected  to  conduct  its  investment
activities under the "prudent person" standard. A savings bank may also exercise
trust powers upon approval of the Department.

     New York State  chartered  savings  banks may also  invest in  subsidiaries
under their service  corporation  investment  authority.  A savings bank may use
this  power  to  invest  in  corporations  that  engage  in  various  activities
authorized  for  savings  banks,  plus any  additional  activities  which may be
authorized by the Department. Investment by a savings bank in the stock, capital
notes and debentures of its service  corporations is limited to 3% of the bank's
assets,  and such  investments,  together  with the bank's  loans to its service
corporations,  may not exceed 10% of the savings bank's assets. Furthermore, New
York banking  regulations impose  requirements on loans which a bank may make to
its executive officers and directors and to certain corporations or partnerships
in which such persons have equity interests. These requirements include, but are
not limited to,  requirements that (i) certain loans must be approved in advance
by a majority of the entire board of  directors  and the  interested  party must
abstain from  participating  directly or  indirectly in the voting on such loan,
(ii) the loan must be on terms that are not more favorable than those offered to
unaffiliated  third  parties,  and (iii) the loan must not  involve  more than a
normal risk of repayment or present other unfavorable features.

INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC

     The Bank is a member of the BIF,  which is  administered  by the FDIC.  The
FDIC insures  deposits up to applicable  limits and such  insurance is backed by
the full faith and credit of the U.S.  Government.  As insurer, the FDIC imposes
deposit insurance  premiums and is authorized to conduct  examinations of and to
require  reporting  by  FDIC-insured  institutions.  It also  may  prohibit  any
FDIC-insured  institution  from engaging in any activity the FDIC  determines by
regulation  or order to pose a serious  risk to the FDIC.  The FDIC also has the
authority to initiate  enforcement  actions against savings banks,  after giving
the  Superintendent  an opportunity  to take such action,  and may terminate the
deposit  insurance  if it  determines  that the  institution  has  engaged or is
engaging  in  unsafe  or  unsound  practices,  or  is in an  unsafe  or  unsound
condition.

REGULATORY CAPITAL REQUIREMENTS

     The FDIC has adopted  risk-based  capital  guidelines for banks under their
supervision.  The guidelines  establish a systematic  analytical  framework that
makes  regulatory  capital  requirements  more  sensitive to differences in risk
profiles among banking  organizations.  The Bank is required to maintain certain
levels of regulatory capital in relation to regulatory risk-weighted assets. The
ratio of such regulatory capital to regulatory  risk-weighted assets is referred
to as the Bank's  "risk-based  capital  ratio".  Risk-based  capital  ratios are
determined by allocating  assets and specified  off-balance  sheet items to four
risk-weighted  categories ranging from 0% to 100%, with higher levels of capital
being required for the categories perceived as representing greater risk.

     These  guidelines  divide  Bank's  capital  into two tiers.  The first tier
("Tier I") includes common equity,  retained  earnings,  certain  non-cumulative
perpetual preferred stock (excluding auction rate issues) and minority interests
in  equity  accounts  of  consolidated  subsidiaries,  less  goodwill  and other
intangible  assets (except  mortgage  servicing rights and purchased credit card
relationships subject to certain limitations). Supplementary ("Tier II") capital
includes,  among other items,  cumulative  perpetual and long-term  limited-life
preferred  stock,  mandatory  convertible  securities,  certain  hybrid  capital
instruments, term subordinated debt and the allowance for loan and lease losses,
subject to certain  limitations,  less  required  deductions.  Savings banks are
required to maintain a total  risk-based  capital ratio of 8%, of which at least
4% must be Tier I capital.

     In addition,  the FDIC has  established  regulations  prescribing a minimum
Tier I leverage  ratio (Tier I capital to adjusted  total assets as specified in
the regulations).  These regulations provide for a minimum Tier I leverage ratio
of 3% for banks that meet certain specified  criteria,  including that they have
the  highest  examination  rating  and  are  not  experiencing  or  anticipating
significant  growth.  All other banks are required to maintain a Tier I leverage
ratio of 3% plus an additional  cushion of at least 100 to 200 basis points. The
FDIC may, however,  set higher leverage and risk-based  capital  requirements on
individual  institutions when particular  circumstances  warrant.  Savings banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.

     At June 30, 2002, the Bank exceeded all regulatory capital requirements.

STANDARDS FOR SAFETY AND SOUNDNESS

     The  federal  banking   agencies  have  adopted  a  final   regulation  and
Interagency   Guidelines   Prescribing   Standards   for  Safety  and  Soundness
("Guidelines")  to implement the safety and soundness  standards  required under
federal law. The  Guidelines  set forth the safety and soundness  standards that
the federal  banking  agencies use to identify  and address  problems at insured
depository institutions before capital becomes impaired. The standards set forth
in the Guidelines  address internal controls and information  systems;  internal
audit  system;  credit  underwriting;  loan  documentation;  interest  rate risk
exposure;  asset  growth;  compensation;  fees and  benefits.  The agencies also
adopted additions to the Guidelines, which require institutions to examine asset
quality and  earnings  standards.  If the  appropriate  federal  banking  agency
determines  that an  institution  fails to meet any standard  prescribed  by the
Guidelines,  the agency may require the  institution  to submit to the agency an
acceptable plan to achieve compliance with the standard,  as required by federal
law. The final regulations  establish deadlines for the submission and review of
such safety and soundness compliance plans.

LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS

     The FDIC has the  authority  to use its  enforcement  powers to  prohibit a
savings bank from paying dividends if, in its opinion,  the payment of dividends
would constitute an unsafe or unsound  practice.  Federal law also prohibits the
payment of  dividends by a bank that will result in the bank failing to meet its
applicable capital requirements on a pro forma basis. New York law restricts the
Bank from  declaring a dividend,  which would  reduce its capital  below (i) the
amount  required to be maintained by state and federal law and  regulations,  or
(ii) the amount of the Bank's liquidation account established in connection with
the December 1998  Reorganization.  New York law also  prescribes that dividends
declared by a stock savings bank in any calendar year shall not exceed the total
of its net profits for that year  combined  with its retained net profits of the
preceding two years, plus any required transfer to surplus or for the retirement
of any preferred stock, unless approved by the Superintendent.

PROMPT CORRECTIVE ACTION

     The federal banking agencies have promulgated  regulations to implement the
system  of  prompt   corrective  action  required  by  federal  law.  Under  the
regulations, a bank shall be deemed to be (i) "well capitalized" if it has total
risk-based  capital of 10.0% or more,  has a Tier I risk-based  capital ratio of
6.0% or more,  has a Tier I  leverage  capital  ratio of 5.0% or more and is not
subject to any written capital order or directive; (ii) "adequately capitalized"
if it has a total risk-based  capital ratio of 8.0% or more, a Tier I risk-based
capital  ratio of 4.0% or more and a Tier I  leverage  capital  ratio of 4.0% or
more (3.0% under  certain  circumstances)  and does not meet the  definition  of
"well  capitalized";  (iii)  "undercapitalized"  if it  has a  total  risk-based
capital ratio that is less than 8.0%, a Tier I risk-based  capital ratio that is
less than 4.0% or a Tier I leverage  capital  ratio that is less than 4.0% (3.0%
under certain circumstances);  (iv) "significantly undercapitalized" if it has a
total  risk-based  capital  ratio  that is less than 6.0%,  a Tier I  risk-based
capital ratio that is less than 3.0% or a Tier I leverage  capital ratio that is
less  than  3.0%;  and (v)  "critically  undercapitalized"  if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%.  Federal law
and regulations also specify  circumstances under which a federal banking agency
may reclassify a well capitalized  institution as adequately capitalized and may
require an adequately capitalized institution to comply with supervisory actions
as if it  were  in the  next  lower  category  (except  that  the  FDIC  may not
reclassify  a   significantly   undercapitalized   institution   as   critically
undercapitalized).

     Based  on the  foregoing,  the  Bank  is  currently  classified  as a "well
capitalized" savings institution.

ACTIVITES AND INVESTMENTS OF INSURED STATE-CHARTERED BANKS

     Federal law  generally  limits the  activities  and equity  investments  of
FDIC-insured,  state-chartered  banks to those that are permissible for national
banks,  notwithstanding  state  laws.  Under  regulations  dealing  with  equity
investments,  an insured state bank  generally may not,  directly or indirectly,
acquire or retain any equity investment of a type, or in an amount,  that is not
permissible  for a national bank. An insured state bank is not prohibited  from,
among  other  things,  (i)  acquiring  or  retaining  a majority  interest  in a
subsidiary;  (ii)  investing  as a limited  partner  in a  partnership  the sole
purpose  of which is the  direct  or  indirect  investment  in the  acquisition,
rehabilitation,  or new construction of a qualified  housing  project,  provided
that such limited partnership  investments may not exceed 2% of the bank's total
assets;  (iii)  acquiring up to 10% of the voting stock of a company that solely
provides or reinsures directors',  trustees',  and officers' liability insurance
coverage  or  bankers'  blanket  bond  group  insurance   coverage  for  insured
depository institutions;  and (iv) acquiring or retaining the voting shares of a
depository institution if certain requirements are met.

     Federal law and FDIC regulations permit certain exceptions to the foregoing
limitation.  For example,  certain  state-chartered banks, such as the Bank, may
continue to invest in common or preferred stock listed on a National  Securities
Exchange  or the  National  Market  System of  NASDAQ,  and in the  shares of an
investment  company  registered  under the  Investment  Company Act of 1940,  as
amended.  As of June  30,  2002,  the Bank had no  securities  pursuant  to this
exception.



TRANSACTIONS WITH AFFILIATES

     Under current federal law, transactions between depository institutions and
their  affiliates  are governed by Sections  23A and 23B of the Federal  Reserve
Act. An affiliate of a savings bank is any company or entity that  controls,  is
controlled  by, or is under common  control with the savings bank,  other than a
subsidiary.  In a holding  company  context,  at a minimum,  the parent  holding
companies of a savings bank and any companies that are controlled by such parent
holding  company are  affiliates  of the savings  bank.  Generally,  Section 23A
limits the extent to which the savings  bank or its  subsidiaries  may engage in
"covered  transactions" with any one affiliate to an amount equal to 10% of such
savings bank's capital stock and surplus, and contains an aggregate limit on all
such  transactions with all affiliates to an amount equal to 20% of such capital
stock and surplus. The term "covered  transaction"  includes the making of loans
or other  extensions of credit to an  affiliate;  the purchase of assets from an
affiliate, the purchase of, or an investment in, the securities of an affiliate;
the  acceptance  of  securities  of an  affiliate  as  collateral  for a loan or
extension of credit to any person;  or issuance of a guarantee,  acceptance,  or
letter  of  credit  on behalf  of an  affiliate.  Section  23A also  establishes
specific  collateral  requirements  for loans or  extensions  of  credit  to, or
guarantees,  acceptances  on letters of credit issued on behalf of an affiliate.
Section  23B  requires  that  covered  transactions  and a broad  list of  other
specified transactions be on terms substantially the same, or no less favorable,
to  the  savings  bank  or  its   subsidiary   as  similar   transactions   with
nonaffiliates.

     Further,  Section 22(h) of the Federal Reserve Act restricts a savings bank
with  respect  to  loans  to  directors,   executive  officers,   and  principal
stockholders.  Under Section 22(h),  loans to directors,  executive officers and
stockholders  who  control,  directly  or  indirectly,  10% or  more  of  voting
securities  of a savings  bank,  and  certain  related  interests  of any of the
foregoing,  may not exceed,  together with all other  outstanding  loans to such
persons and affiliated  entities,  the savings bank's total capital and surplus.
Section 22(h) also prohibits  loans above amounts  prescribed by the appropriate
federal banking agency to directors,  executive  officers,  and stockholders who
control 10% or more of voting  securities  of a stock  savings  bank,  and their
respective  related  interests,  unless  such loan is  approved  in advance by a
majority  of the  board of  directors  of the  savings  bank.  Any  "interested"
director may not participate in the voting.  The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required,  is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive  officers and principal  stockholders  must generally be made on terms
substantially  the same as offered in comparable  transactions to other persons.
Section 22(g) of the Federal Reserve Act places additional  limitations on loans
to executive officers.

HOLDING COMPANY REGULATION

GENERALLY.
     Federal law allows a state savings bank, such as the Bank that qualifies as
a "Qualified Thrift Lender" discussed below, to elect to be treated as a savings
association for purposes of the savings and loan holding  company  provisions of
the Home Owners' Loan Act (the  "HOLA").  Such  election  results in its holding
company being  regulated as a savings and loan holding company by the OTS rather
than as a bank holding company by the Federal Reserve Board. The Company and the
Mutual Company have made such election by converting from a Delaware corporation
and a New York  mutual  holding  company to a federal  corporation  and  federal
mutual holding  company,  respectively,  effective May 15, 2001. The Company and
the Mutual Company savings and loan holding  companies are within the meaning of
HOLA. As such, the Company and the Mutual  Company are  registered  with the OTS
and are subject to the OTS regulations, examinations, supervisions and reporting
requirements.  In addition,  the OTS has enforcement  authority over the Company
and the Mutual Company and any nonsavings institution subsidiaries.  Among other
things,  this authority permits the OTS to restrict or prohibit  activities that
are determined to be a serious risk to the subsidiary  savings  institution.  As
federal  corporations,  the Company and the Mutual  Company  are  generally  not
subject to state business organization law.

PERMISSIBLE ACTIVITIES.
     Under the HOLA and OTS regulations and policies, a federal mid-tier holding
company  such as the Company is  permitted  to,  among other  things:  (i) own a
savings  association or savings bank; (ii) acquire a mutual  institution;  (iii)
merge with or acquire another mutual holding company,  one of whose subsidiaries
is a savings institution;  (iv) acquire  non-controlling amounts of the stock of
savings  institutions  and savings  institution  holding  companies,  subject to
certain  restrictions;  (v) invest in any corporation that a savings association
may invest in under  federal law or under the law of any state where the savings
association has its home office; (vi) furnish or perform management services for
a savings institution  subsidiary;  (vii) hold, manage or liquidate assets owned
or acquired from a savings institution  subsidiary of such company;  (viii) hold
or manage  properties  used or occupied by a savings  institution  subsidiary of
such  company;  and (ix) act as trustee  under  deed or trust.  In  addition,  a
federal  mutual  holding  company  may  engage  in any  other  activity  that is
permissible for bank holding companies under the Bank Holding Company Act, or in
which multiple  savings and loan companies may engage.  Finally,  under recently
enacted financial  modernization  legislation,  federal mutual holding companies
may engage in any  activity  in which a  financial  holding  company may engage,
including  maintaining an insurance  agency,  escrow  business and  underwriting
securities and insurance.  Moreover, a federal mutual holding company may engage
in the  activities  of a  financial  holding  company  without  having  to  make
financial holding company election that is applicable to bank holding companies.
If a mutual holding company acquires or merges with another holding company, the
holding company  acquired or the holding  company  resulting from such merger or
acquisition may only invest in assets and engage in activities listed above, and
has a period of two years to cease any  nonconforming  activities  and divest of
any nonconforming investments.

HOLDING COMPANY REGULATORY CAPITAL REQUIREMENTS.
     The Company,  as a mutual savings and loan holding  company,  does not have
any regulatory capital requirements.

Mergers and Acquisitions.
     The Home  Owners' Loan Act  prohibits a savings and loan  holding  company,
including the Company and Mutual Holding  Company,  directly or  indirectly,  or
through one or more subsidiaries,  from acquiring another savings institution or
holding  company  thereof,  without prior written  approval of the OTS. The Home
Owners'  Loan Act also  prohibits  a  savings  and loan  holding  company  from,
directly or  indirectly,  acquiring  more than 5% of the voting stock of another
savings  association or savings and loan holding company, or from acquiring such
an institution or company by merger,  consolidation,  or purchase or its assets,
without the prior  written  approval of the OTS. In evaluating  applications  by
holding companies to acquire other financial institutions, the OTS considers the
financial and managerial  resources and future prospects of the acquiror and the
merging institution,  the convenience and needs of the community and competitive
factors.

     The OTS is prohibited from approving any acquisitions  that would result in
multiple savings and loan holding companies  controlling savings institutions in
more than one state,  subject to two exceptions:  (i) the approval of interstate
supervisory  acquisitions  by savings and loan holding  companies,  and (ii) the
acquisition  of a savings  institution in another state if the laws of the state
or target savings institution specifically permit such acquisitions.  The states
vary in the extent to which they  permit  interstate  savings  and loan  holding
company acquisitions.

PAYMENT OF CASH DIVIDENDS.
     OTS regulations generally do not restrict the ability of a savings and loan
holding  company  to pay  dividends.  However,  federal  and state law do impose
certain  limitations  on  the  payment  by the  Bank,  the  Company's  principal
operating subsidiary, of cash dividends to the Company (described herein).

WAVIERS OF DIVIDENDS BY THE MUTUAL COMPANY.
     OTS  regulations  require  the  Mutual  Company  to  notify  the OTS of any
proposed  waiver of its right to receive  dividends.  The OTS  reviews  dividend
waiver notices on a case-by-case basis, and, in general,  does not object to any
such waiver if: (i) the mutual holding  company's board of directors  determines
that such waiver is  consistent  with such  director's  fiduciary  duties to the
mutual holding company's  members;  (ii) for as long as the savings  association
subsidiary  is controlled by the mutual  holding  company,  the dollar amount of
dividends  waived by the mutual holding  company are considered as a restriction
to the  retained  earnings of the savings  association,  which  restriction,  if
material  is  disclosed  in the  public  financial  statements  of  the  savings
association  as a note to the  financial  statements;  (iii)  the  amount of any
dividend  waived by the mutual holding company is available for declaration as a
dividend solely to the mutual holding  company,  and, in accordance with SFAS 5,
where the savings  association  determines  that the payment of such dividend to
the mutual holding company is probable, an appropriate dollar amount is recorded
as a  liability;  and (iv) the amount of any waived  dividend is  considered  as
having been paid by the savings  association in evaluating any proposed dividend
under OTS capital distribution regulations.

CONVERSION OF THE MUTUAL COMPANY TO STOCK FORM.
     OTS regulations permit the Mutual Company to convert from the mutual to the
stock form of ownership (a "Conversion Transaction").  There can be no assurance
when, if ever, a Conversion  Transaction  will occur, and the Board of Directors
has no current  intention to plan to undertake a  Conversion  Transaction.  In a
Conversion Transaction a new holding company would be formed as the successor to
the Company (the "New Holding Company"),  the Mutual Holding Company's corporate
existence would end, and certain  depositors of the Bank would receive the right
to subscribe for additional  shares of the New Holding  Company.  Based upon the
current OTS policy, in a Conversion Transaction, each share of Common Stock held
by  the  Company's  public  stockholders  ("Minority   Shareholders")  would  be
automatically  converted  into a number of  shares  of  common  stock of the New
Holding  Company  determined  pursuant an exchange ratio that ensures that after
the Conversion Transaction,  subject to any adjustment to reflect the receipt of
cash in lieu of  fractional  shares,  the  percentage  of the to-be  outstanding
shares of the New Holding  Company issued to Minority  Shareholders  in exchange
for their  Common  Stock  would be equal to the  percentage  of the  outstanding
shares of Common Stock held by Minority  Shareholders  immediately  prior to the
Conversion Transaction. The total number of shares held by Minority Stockholders
after the Conversion Transaction would also be affected by any purchases by such
persons  in the  offering  that  would be  conducted  as part of the  Conversion
Transaction.

STOCK REPURCHASES.
     The OTS imposes no restrictions on stock repurchases by the Company.

QUALIFIED THRIFT LENDER TEST.
     In order for the  Company to be  regulated  as a savings  and loan  holding
company by the OTS (rather than as a bank holding company by the Federal Reserve
Board),  the  Bank  must  qualify  as a  "qualified  thrift  lender"  under  OTS
regulations or satisfy the "domestic  building and loan  association" test under
the Internal  Revenue Code.  Under the  qualified  thrift lender test, a savings
institution  is  required to  maintain  at least 65% of its  "portfolio  assets"
(total assets less: (i) specified liquid assets up to 20% of total assets;  (ii)
intangible,  including goodwill; and (iii) the value of property used to conduct
business)  in certain " qualified  thrift  investments"  (primarily  residential
mortgages and related investments, including certain mortgage-backed and related
securities)  in at least nine out of each 12 month  period.  The Bank  currently
maintains the majority of its portfolio assets in qualified  thrift  investments
and has met the qualified thrift lender test in each of the last 12 months.



FEDERAL SECURITIES LAW

     The  common  stock of the  Company  is  registered  with the SEC  under the
Securities  Exchange Act of 1934 (the "Exchange Act"). The Company is subject to
the  information,  proxy  solicitation,  insider trading  restrictions and other
requirements of the SEC under the Exchange Act.

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

Sarbanes-Oxley Act of 2002

     On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley Act of
2002  (the   "Sarbanes-Oxley   Act").  The   Sarbanes-Oxley   Act  represents  a
comprehensive  revision  of  laws  affecting  corporate  governance,  accounting
obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all
companies  with  equity  or debt  securities  registered  under  the  Securities
Exchange Act of 1934. In particular, the Sarbanes-Oxley Act establishes: (i) new
requirements  for  audit  committees,  including  independence,  expertise,  and
responsibilities;   (ii)   additional   responsibilities   regarding   financial
statements for the Chief Executive  Officer and Chief  Financial  Officer of the
reporting  company;  (iii) new standards for auditors and  regulation of audits;
(iv) increased  disclosure and reporting  obligations for the reporting  company
and their directors and executive officers;  and (v) new and increased civil and
criminal  penalties for violation of the securities laws. Many of the provisions
became  effective  immediately  while other  provisions  become effective over a
period of 30 to 270 days and are subject to  rulemaking  by the  Securities  and
Exchange  Commission.  Although  we  anticipate  that we will  incur  additional
expense in  complying  with the  provisions  of the  Sarbanes-Oxley  Act and the
resulting regulations, management does not expect that such compliance will have
a material impact on our results of operations or financial condition.

COMMUNITY REINVESTMENT ACT

     Under  the  Community   Reinvestment   Act,  as  amended  (the  "CRA"),  as
implemented by FDIC regulations, a savings bank has a continuing and affirmative
obligation,  consistent  with its safe and  sound  operation,  to help  meet the
credit  needs  of its  entire  community,  including  low  and  moderate  income
neighborhoods.  The CRA requires the FDIC, in connection with its examination of
a savings  institution 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  by such  institution.  The  Bank's  latest CRA rating was
"outstanding".

     The Bank is also subject to  provisions  of the New York State  Banking Law
which impose  continuing and affirmative  obligations upon banking  institutions
organized  in New York  State to serve the credit  needs of its local  community
("NYCRA") which are substantially similar to those imposed by the CRA. The NYCRA
also  requires  the  Superintendent  to  consider  a bank's  NYCRA  rating  when
reviewing  a bank's  application  to engage in certain  transactions,  including
mergers,  asset purchases and the  establishment  of branch offices or automated
teller machines,  and provides that such assessment may serve as a basis for the
denial of any such application.

     The Bank's NYCRA rating as of its latest examination was "outstanding".

FEDERAL HOME LOAN BANK SYSTEM

     The Bank is a member of the FHLB of New York,  which is one of 12  regional
FHLBs,   that   administers  the  home  financing  credit  function  of  savings
institutions.  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. These policies and procedures are subject
to the  regulation  and  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,  the Bank is required to purchase  and  maintain  stock in the
FHLB of New York. At June 30, 2002, the Bank had  $1,121,100 of FHLB stock.  The
dividend  rate from FHLB stock was 3.67% at June 30, 2002.  No assurance  can be
given that such dividends will continue in the future at such levels.

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

REPORTS TO SECURITY HOLDERS
     The Company files annual and quarterly reports with the SEC on Forms 10-KSB
and 10-QSB, respectively. The Company also files current reports on the Form 8-K
with the SEC.  Finally,  the Company  files  preliminary  and  definitive  proxy
materials with the SEC.

     The public may read and copy any  materials  filed by the Company  with the
SEC at the SEC's Public  Reference Room at 450 Fifth Street,  N.W.,  Washington,
D.C.  20549.  The public may obtain  information  on the operation of the Public
Reference  Room  by  calling  the  SEC  at  1-800-SEC-0330.  The  Company  is an
electronic  filer.  The SEC maintains an Internet  site that  contains  reports,
proxy and information  statements,  and other information regarding issuers that
file electronically with the SEC. The address of the site is http://www.sec.gov.

ITEM 2. PROPERTIES
------  ----------

     The Bank currently  conducts its business through six full-service  banking
offices.  Both the Company and the Bank maintain their executive  offices at the
Operations Center, 302 Main Street, Catskill, New York. The following table sets
forth the Bank's offices as of June 30, 2002. The Bank's current  facilities are
considered  by  management  to be  adequate  for the  needs  of the Bank and the
Company in the foreseeable future.


<TABLE>
<CAPTION>
                                               Original                        Net Book Value
                                 Leased          Year         Date of           Of Property or
                                   or         Leased or        Lease             Leasehold
Location                         Owned         Acquired      Expiration          Improvements
-----------------------------------------     ---------     ---------------    ---------------
<S>                             <C>            <C>          <C>                  <C>
(Dollars in thousands)
Main Office (1)
Main & Church Streets
Catskill, NY 12414               Owned            1963           ---                    $245

Full Service Branches
Coxsackie Branch
Route 385
West Coxsackie, NY 12051         Owned            1974           ---                    $111

Cairo Branch
Main Street
Cairo, NY 12413                  Owned            1988           ---                    $360

Greeneville Branch
Route 32
Greeneville, NY 12083            Owned            1997           ---                  $1,012

Tannersville Branch
Main Street
Tannersville, NY 12485           Owned            2000           ---                  $1,298

Westerlo Branch
Routes 141 & 143
Westerlo, NY 12193               Leased           2001      November 30, 2005           $100

Operations Center
302 Main Street
Catskill, NY 12414               Owned            1999           ---                    $554

<FN>
(1)     Includes adjacent parking lot.

</FN>
</table>


ITEM 3. Legal Proceedings
------  -----------------

     The Company is not  involved in any pending  legal  proceedings  other than
routine legal proceedings occurring in the ordinary course of business which, in
the aggregate, involve amounts which are believed by management to be immaterial
to the financial condition and results of operations of the Company.


ITEM 4. Submission of Matters to a Vote of Security Holders
------  ---------------------------------------------------

     No matters were submitted to a vote of shareholders during the fourth
quarter of the fiscal year under report.

                                     PART II

ITEM 5. Market for Company's Common Stock and Related Security Holder Matters
------  ---------------------------------------------------------------------

     The "Common Stock and Related Matters" section of the Company's Annual
Report to Shareholders is incorporated herein by reference.


ITEM 6. Management's Discussion and Analysis of Financial Condition and
        Results of Operations
------  ----------------------------------------------------------------

     The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of the Company's Annual Report to Shareholders is
incorporated herein by reference.


ITEM 7. Selected Financial Data
------  -----------------------

     The selected financial information for the year ended June 30, 2002 is
filed as part of the Company's Annual Report to Shareholders and is incorporated
by reference.


ITEM 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure
------  ----------------------------------------------------------------

         None.


                                    PART III

ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        With Section 16(a) of the Exchange Act
------  -----------------------------------------------------------------------

     The "Proposal I - Election of Directors" section of the Company's
definitive Proxy Statement for the Company's 2002 Annual Meeting of Shareholders
(the "2002 Proxy Statement") is incorporated herein by reference.


ITEM 10. Executive Compensation
-------  ----------------------

          The "Proposal I - Election of Directors" section of the Company's 2002
     Proxy Statement is incorporated herein by reference.

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management
-------   --------------------------------------------------------------

          The "Proposal I - Election of Directors" section of the Company's 2002
     Proxy Statement is incorporated herein by reference.

ITEM 12.  Certain Relationships and Related Transactions
-------   -----------------------------------------------

          The "Transactions with Certain Related Persons" section of the
     Company's 2002 Proxy Statement is incorporated herein by reference.



<PAGE>



ITEM 13.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-------   ----------------------------------------------------------------

     (a)(1)  Financial Statements

     The exhibits and financial statement schedules filed as a part of this Form
     10-KSB are as follows, all of which are included in the Annual Report to
     Shareholders (Exhibit 13):
<table>
                  <S>  <C>
                  (A)  Report of Independent Accountants

                  (B)  Consolidated Statements of Condition

                  (C)  Consolidated Statements of Operations

                  (D)  Consolidated Statements of Changes in Equity

                  (E)  Consolidated Statements of Cash Flows

                  (F)  Notes to Consolidated Financial Statements
</table>

     (a)(2)  Financial Statement Schedules

     All  financial  statement  schedules  have  been  omitted  as the  required
information is  inapplicable  or has been included in the Notes to  Consolidated
Financial  Statements.  The remaining information appearing in the Annual Report
to  Shareholders  for the year ended June 30,  2002 is not deemed to be filed as
part of this report except as expressly provided herein.

     (b)Reports on Form 8-K

     None

     (c)Exhibits

3.1  Certificate of Incorporation of Greene County Bancorp,  Inc.  (incorporated
     herein by reference to the Company's  registration  statement on SB-2, file
     No. 333-63681 (the "SB-2")).

3.2  Bylaws of Greene County Bancorp, Inc.  (incorporated herein by reference to
     the Company's SB-2)

4.0  Form of Stock  Certificate  of Greene County  Bancorp,  Inc.  (incorporated
     herein by reference to the Form SB-2)

10.1 Employment  Agreement  with J.  Bruce  Whittaker  (incorporated  herein  by
     reference to the Company's SB-2)

10.2 Employee  Stock  Ownership  Plan  (incorporated  herein by reference to the
     Company's SB-2)

13.0 Annual Report to Shareholders

21.0 Subsidiaries of the Company

23.0 Consent of Experts

99.1 Additional Exhibit





<PAGE>
































                                   SIGNATURES


     In accordance  with Section 13 or 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.

                                                     GREENE COUNTY BANCORP, INC.


Date: September 26, 2002                By:
                                            ------------------------------------
                                        /s/J. Bruce Whittaker
                                           President and Chief Executive Officer


     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.



By:                                                   By:
 ------------------------------                         ------------------------

 /s/Michelle Plummer                                  /s/Walter H. Ingalls
    Chief Financial Officer                              Chairman of the Board

Date:  September 26, 2002                             Date:  September 26, 2002


By:                                                   By:
  -----------------------------                        -------------------------

  /s/Paul Slutzky                                      /s/Raphael Klein
     Director                                              Director

Date:  September 26, 2002                             Date: September 26, 2002


By:                                                   By:
  -----------------------------                        -------------------------

  /s/David H. Jenkins, DVM                            /s/Dennis R. O'Grady
     Director                                            Director

Date:  September 26, 2002                             Date: September 26, 2002


By:
  -----------------------------
 /s/Martin C. Smith
    Director

Date:  September 26, 2002


<PAGE>

















                     Certification pursuant to Rule 13a-14
               of the Securities Exchange Act of 1934, as Amended,
                             as adopted pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002


I, J. Bruce Whittaker, Chief Executive Officer of Greene County Bancorp, Inc.,
   certify that:

     1.   I have  reviewed  this annual  report on Form 10-KSB of Greene  County
          Bancorp, Inc.;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report; and

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the period presented in
          this annual report.


                                                 -------------------------------
Date:  September 26, 2002                         /s/J. Bruce Whittaker

                                                 Chief Executive Officer









<PAGE>




                     Certification pursuant to Rule 13a-14
               of the Securities Exchange Act of 1934, as Amended,
                             as adopted pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002


I, Michelle Plummer, Chief Financial Officer of Greene County Bancorp, Inc.,
   certify that:

     1.   I have  reviewed  this annual  report on Form 10-KSB of Greene  County
          Bancorp, Inc.;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report; and

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the period presented in
          this annual report.




-------------------------                        -------------------------------
Date:  September 26, 2002                        /s/ Michelle Plummer

                                                 Chief Financial Officer






<PAGE>












                                   EXHIBIT 13
                          ANNUAL REPORT TO SHAREHOLDERS










<PAGE>



































                                   EXHIBIT 21

                           SUBSIDIARIES OF THE COMPANY




Company                                                Percent Owned


The Bank of Greene County                            100.0% owned by the Company










<PAGE>












































                                   EXHIBIT 23
                               CONSENT OF EXPERTS













<PAGE>


















                                   EXHIBIT 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement on Form S-8 (No.  333-51538)  of Greene  County  Bancorp,  Inc. of our
report dated July 26, 2002 relating to the financial statements of Greene County
Bancorp,  Inc.,  which  appears in the Annual Report to  Shareholders,  which is
included in this Form 10-KSB.

PricewaterhouseCoopers LLP
/s/

Albany, New York
September 26, 2002


<PAGE>

















































                                  EXHIBIT 99.1


      Certification of Chief Executive Officer and Chief Financial Officer
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      ---------------------------------------------------------------------



J. Bruce Whittaker, Chief Executive Officer and President and Michelle Plummer,
Chief Financial Officer and Treasurer of Greene County Bancorp, Inc. (the
"Company") each certify in his/her capacity as an officer of the Company that he
has reviewed the annual report on Form 10-KSB for the fiscal year ended June 30,
2002 and that to the best of his/her knowledge:


(1)  the report fully complies with the  requirements of Sections 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  the information contained in the report fairly presents, in all material
     respects, the financial condition and results of operations of the Company.



Date:  September 26, 2002                                  J. Bruce Whittaker,
                                                      -------------------------

                                                         Chief Executive Officer
                                                                   and President


Date:  September 26, 2002                                  Michelle Plummer,
                                                      --------------------------

                                                         Chief Financial Officer
                                                                   and Treasurer



</TEXT>
</DOCUMENT>
