PUBLIC DISCLOSURE

October 20, 2008

COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION

Walden Savings Bank 15 Scott's Corner Drive Montgomery, NY 12549 Docket #: 18043

Office of Thrift Supervision Northeast Region Harborside Financial Center, Plaza Five, Suite 1600 Jersey City, NJ 07311

NOTE: This document is an evaluation of this institution’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion, or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution.

Office of Thrift Supervision Department of the Treasury Northeast Region Jersey City Regional Office • Phone Number: (201) 413-1000 • Fax: (201) 413-7543 Harborside Financial Center Plaza Five, Suite 1600 Jersey City, NJ 073211

November 17, 2008

Board of Directors Walden Savings Bank 15 Scott's Corner Drive Montgomery, NY 12549

Enclosed is your institution’s first written Community Reinvestment Act (CRA) Performance Evaluation. The Office of Thrift Supervision (OTS) prepared the evaluation as of October 20, 2008. Pursuant to the provisions of the CRA and OTS regulations (12 C.F.R. 563e), your institution must make this evaluation and your institution’s CRA rating available to the public.

In accordance with 12 C.F.R. 563e, your institution must make this written CRA Performance Evaluation available to the public within 30 business days of receiving it. You must place the evaluation in your CRA public file at your home office and at each branch within this time frame. You may not alter or abridge the evaluation in any manner. At your discretion, you may retain previous written CRA Performance Evaluation(s) with the most recent evaluation in your CRA public file.

Your institution may prepare a response to the evaluation. You may place the response in each CRA public file along with the evaluation. In the event your institution elects to prepare such a response, please forward a copy of it to this office.

All appropriate personnel, particularly customer contact personnel, need to be aware of the responsibilities that the institution has to make this evaluation available to the public. Consequently, we suggest that your institution review internal procedures for handling CRA inquiries, including those pertaining to the evaluation and other contents of the CRA public file.

We strongly encourage the Board of Directors, senior management, and other appropriate personnel to review this document and to take an active interest and role in the CRA activities of your institution.

Sincerely,

Thomas S. Angstadt Assistant Director

Enclosure

ii Office of Thrift Supervision Evaluation Date: 10/20/2008 Intermediate Small Savings Association Performance Evaluation Docket Number: 18043

Table of Contents

GENERAL INFORMATION ...... 1 INSTITUTION ...... 2 OVERALL RATING ...... 2 SCOPE OF EXAMINATION ...... 2 DESCRIPTION OF INSTITUTION ...... 3 COMMUNITY DEVELOPMENT ...... 12 CRA RATING DEFINITIONS ...... 16

iii Office of Thrift Supervision Evaluation Date: 10/20/2008 Intermediate Small Savings Association Performance Evaluation Docket Number: 18043

General Information

The Community Reinvestment Act (CRA) requires each federal financial supervisory agency to use its authority when examining financial institutions to assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income (LMI) neighborhoods, consistent with safe and sound operation of the institution. Upon conclusion of such examination, the agency must prepare a written evaluation of the institution's record of meeting the credit needs of its community.

This document is an evaluation of the CRA performance of Walden Savings Bank. The Office of Thrift Supervision (OTS) prepared the evaluation as of October 20, 2008. OTS evaluates performance in assessment area(s) delineated by the institution rather than individual branches. This assessment area evaluation may include visits to some, but not necessarily all, of the institution's branches. OTS rates the CRA performance of an institution consistent with the provisions set forth in Appendix A to 12 C.F.R. Part 563e.

1 Office of Thrift Supervision Evaluation Date: 10/20/2008 Intermediate Small Savings Association Performance Evaluation Docket Number: 18043

Institution

Overall Rating

INSTITUTION'S CRA RATING: Satisfactory The Lending Test is rated: Satisfactory The Community Development Test is rated: Satisfactory

Walden Savings Bank (Walden or institution) demonstrated a satisfactory record of meeting the credit needs of the assessment area. The loan-to-deposit ratio improved during the review period and was sufficient. A substantial majority of loans were originated in the assessment area and the distribution of borrowers of different incomes was satisfactory. The geographic distribution improved and reflected a reasonable penetration among low- and moderate-income geographies.

The institution’s community development performance demonstrated a good response to community development needs. The institution was very responsive through its community development loans and provided reasonable levels of community development investments and services.

Scope of Examination

OTS evaluated Walden under the intermediate small bank CRA evaluation procedures. The review period for the loan data used in this evaluation was the 42-month period from January 1, 2005, through June 30, 2008. The review analyzed the institution’s residential loans. For purposes of this evaluation, residential loans are loans secured by home purchase, home refinance, and home improvement loans reported pursuant to the HMDA.

This is the first evaluation for the institution since the Metropolitan Statistical Area (MSA) boundary changes implemented by the Office of Management and Budget (OMB) took effect for all HMDA and CRA data collection commencing January 1, 2004. The new OMB statistical areas include redefined MSA boundaries and the creation of Metropolitan Divisions (MD). Where MSAs contained a population over 2.5 million, the MSAs were subdivided into two or more MDs, each consisting of one or more counties that represent an employment center within the larger MSA. Due to the OMB changes, many geographies reflect changes in the income-category level.

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Institution (continued)

Description of Institution

Walden is a federally chartered mutual savings bank that converted from a New York State chartered mutual savings bank on April 7, 2007. Walden’s main office/administrative headquarters are located in Montgomery, Orange County, NY. The institution also has eight full-service branch offices in Orange County and one full-service branch in Ulster County, NY. Walden’s newest locations include an office in Circleville, NY which was opened in July 2006 and an office in Middlehope, NY which was opened in August 2007. In June 2008, the office in Milton, NY was closed. The office in Walden, Orange County, is located in a moderate-income census tract (hereafter called geography), while the remaining offices are located in middle-income geographies.

The institution is a community-oriented thrift, with a primary objective of meeting the borrowing and deposit needs of its local customer base. Walden offers a variety of loan products, including mortgage loans to purchase, refinance, and construct one-to-four family dwellings. Multifamily mortgages, commercial mortgages, business loans, and Small Business Administration (SBA) loans are available. Secured and unsecured consumer loans are also offered. Deposit products include passbook and statement savings, personal and business checking, club accounts, educational savings, money market, certificates of deposit, and individual retirement accounts. The institution offers a number of different account access alternatives, including automated teller machines (ATMs), 24- hour telephone banking, debit cards, and internet banking with bill-pay programs.

As of June 30, 2008, Walden had total assets of $314 million and the total loan portfolio equaled $252 million. Table 1 indicates the dollar amount, percentage to total loans, and percentage to total assets of each loan category.

Table 1 - Walden Savings Bank’s Investment in Loans (6/30/2008 Thrift Financial Report) Loan Category Amount Percent of Percent of ($000’s) Total Loans Total Assets Residential Mortgage $132,572 52.6% 42.2% Nonresidential Mortgage 80,344 31.9% 25.6% Commercial Nonmortgage 19,141 7.6% 6.1% Consumer 19,887 7.9% 6.3% Total $251,944 100.0% 80.2%

Since the previous CRA evaluation, total assets have increased 47 percent or $101 million. The majority of the growth was in the residential and nonresidential mortgage portfolios which increased $54 million and $75 million, respectively. The commercial nonmortgage portfolio increased $9

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Institution (continued) million, while consumer loans increased $14 million. The majority of asset growth was funded by a $91 million increase in deposits.

There were no financial impediments noted that would prevent the institution from meeting community credit needs. Walden was rated Satisfactory as a result of the December 31, 2003 CRA evaluation conducted by the New York State Banking Department.

Description of Assessment Area

Walden’s assessment area (AA) consists of Orange County and the southern portion of Ulster County, NY. Orange County is located in the Poughkeepsie-Newburgh-Middletown, NY Metropolitan Statistical Area (MSA) #39100 (Poughkeepsie MSA) and Ulster County is in the Kingston, NY MSA #28740. The AA contains 86 geographies. Table 2 illustrates demographic data on population, families, and housing units within the AA.

Table 2 - Demographic Data (Based on 2000 U.S. Census Data) Demographic Data 2000 Census Population 422,760 Total Families 104,451 1-4 Family Units 131,282 Multi-family Units 17,087 % Owner-Occupied Units 63% % Rental-Occupied Units 30% % Vacant Housing Units 7% Weighted Average Median Housing $142,248

Table 3 indicates the number of geographies in each income level and compares it to the distribution of families living in those geographies and to 1-4 family dwellings located within those geographies.

Note: All demographic information throughout this report reflect updated U.S. census data resulting from the 2004 MSA boundary changes implemented by the OMB.

Table 3 - Distribution of Geographies, Families and Housing Units In the Assessment Area Geog Inc Level Geographies Total Area Families 1-4 Family Dwellings 2000 Census: # % # % # % Low 5 5.8% 5,837 5.6% 6,659 5.1% Moderate 14 16.3% 12,114 11.6% 15,891 12.1% Middle 49 57.0% 64,552 61.8% 80,518 61.3% Upper 18 20.9% 21,948 21.0% 28,214 21.5% Total 86 100.0% 104,451 100.0% 131,282 100.0%

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Institution (continued)

Nineteen of the geographies in the AA are low- to moderate-income (LMI). Twelve, or 63 percent, of these geographies are located in Middletown and Newburgh, NY where Walden does not have a physical presence. Currently 16 other FDIC insured institutions, with 44 offices, are located in these geographies.

According to 2000 census data, 37.8 percent of the families in the AA are classified as low- to moderate-income, with 7.2 percent of the families reporting income below the poverty level. The Department of Housing and Urban Development (HUD) annually adjusts the 2000 census data to update the income levels. The adjusted figures are used in the Lending to Borrowers of Different Incomes section of this Performance Evaluation. Table 3(a) indicates the median family income ranges of each income category based on the 2008 HUD adjustment; table 3(b) reflects the updated HUD median family income for each year during the review period; and table 3(c) shows the distribution of families in each income range of the AA.

Table 3(a) - Median Family Income Ranges (*) Income Category Poughkeepsie, NY MSA Kingston, NY MSA (As % of MSA Median) (#39100) (#28740) From To From To Low (< 50%) $1 $39,449 $1 $33,349 Moderate (50% - 79%) $39,450 $63,119 $33,350 $53,359 Middle (80% - 119%) $63,120 $94,679 $53,360 $80,039 Upper (>= 120%) $94,680 + $80,040 + * Based on HUD 2008 Median Family Income of the MSA/MD

Table 3(b) - Annual HUD Median Family Income Poughkeepsie Kingston MSA Year MSA Amount Amount 2005 $71,650 $59,300 2006 $73,400 $59,950 2007 $76,400 $63,500 2008 $78,900 $66,700

Table 3(c) - Distribution of Families In the Assessment Area Family Income Category 2000 Census Data (As a % of MSA Median) Number Percent Low (< 50%) 20,656 19.8% Moderate (50% - 79%) 18,817 18.0% Middle (80% - 119%) 25,130 24.1% Upper (>= 120%) 39,848 38.1% Total 104,451 100.0%

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Institution (continued)

Walden’s AA is located in the Hudson Valley Region in the State of New York. Located just 60 miles north of New York City, Orange County is one of two counties in the Poughkeepsie MSA and is often referred to as the Crossroads of the Northeast. According to 2007 estimates, the population of Orange County has increased 5.0 percent, since the 2000 census, to 377,169 residents. In 2007, retail trade was the largest of 20 major employment sectors, followed by the health care and social assistance sector. The area is home to the US Military Academy at West Point, the largest employer in the county. Other top employers include seven health care related companies, including the Orange Regional Medical Center and St. Luke’s Cornwall Hospital. The unemployment rate in 2007 was 4.3 percent which increased to 5.1 percent as of June 2008.

The Ulster County population has also grown since the 2000 census increasing 6.4 percent, to 181,860 residents. Retail trade was the largest employment sector in 2007, followed by the health care and social assistance sector. The unemployment rate was 4.3 percent in 2007, and by June 2008, had increased to 4.9 percent. The major employer in the Ulster portion of AA is the State University of New York (SUNY) in New Paltz. Forty-eight percent of the county’s population is located in 19 geographies included in the institution’s AA.

Walden faces strong competition for deposit and loan customers. As of June 30, 2007, (the most recent data available) there were 23 FDIC insured institutions in the AA. These financial institutions had 140 offices, with deposits totaling $5.7 billion. Walden’s share was $284 million or 5.0 percent of total deposits. During 2006, 360 HMDA lenders granted over 18 thousand loans totaling $3.3 billion in the AA.

A community contact for Orange County was reviewed in conjunction with this evaluation to determine credit needs. The contact indicated that the county continues in a growth mode, fueled by families moving from the New York City area. There is a need for home rehabilitation loans and several financial institutions are aggressively courting first time homebuyers.

Conclusions with Respect to Performance Tests

Loan to Deposit Ratio

Walden’s average loan-to-deposit ratio for the five quarters since the institution converted to a federal mutual savings bank was 81 percent. The ratio ranged from a low of 74 percent during June 2007 and increased each quarter, to a high of 88 percent as of June 2008.

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Institution (continued)

This is a marked improvement from the 57 percent average noted in the previous CRA evaluation. Since December 31, 2003, Walden experienced significant growth as total loans increased $152 million compared to a $91 million increase in total deposits.

There are three other OTS regulated financial institutions headquartered in Orange County, each with total assets less than $200 million. The average loan-to-deposit ratio for these institutions for the eight quarter period ended June 30, 2008, was 63 percent. A comparison to similar sized OTS institutions operating nationwide indicated that Walden’s 88 percent was comparable to the group’s 90 percent ratio.

The institution’s loan-to-deposit ratio reflected a strong lending volume and met the standard for satisfactory performance.

Lending in the Assessment Area

Walden is a traditional thrift, such that it specializes in residential mortgage loans. Table 4 illustrates the total number and dollar amount of HMDA-reportable loans (home purchase, refinance and home improvement loans) originated in and outside the AA during the 42-month review period ended June 30, 2008. For comparison purposes, the table reflects lending activity by each appropriate year during the review period.

Table 4 - Concentration of Residential Loans * 1/1/2005 – 6/30/2008 (Dollars in thousands) Period In Assessment Outside Assessment Total HMDA By Year Area Area Loans By Number: # % # % # 2005 159 94% 11 6% 170 2006 144 88% 20 12% 164 2007 161 88% 23 12% 184 1/1/08 – 6/30/08 81 90% 9 10% 90 Total 545 90% 63 10% 608 By $ Amount: $ Amt % $ Amt % $ Amt 2005 $24,282 91% $2,380 9% $26,662 2006 24,329 85% 4,231 15% 28,560 2007 27,622 86% 4,607 14% 32,229 1/1/08 – 6/30/08 13,689 89% 1,715 11% 15,404 Total $89,922 87% $12,933 13% $102,855

* Percents are based on total loans originated during applicable year

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Institution (continued)

Walden’s loan volume was relatively steady during the 42-month review period, as the institution originated 609 HMDA loans, or an average of 174 loans per year. However, the average number of originations per year is below the level noted in the prior evaluation, which was included a period of historically low mortgage interest rates and inordinately high levels of loan refinances.

Ninety percent of the loans by number and 87 percent by dollar amount were originated within the AA. The concentration of loans within the AA is comparable to the percentages noted in the previous evaluation. As with the overall lending volume, at 166 loans per year, the average number of loans originated within the AA declined from the level achieved during the previous review period.

Walden faced strong competition from commercial banks, thrift institutions, mortgage bankers, credit unions and finance companies During 2006, (the most recent available data) 360 HMDA lenders originated just over 18 thousand loans totaling $3.3 billion. The top 20 lenders captured 46 percent of the market. One of the top lenders was a locally based bank, two times larger than Walden. With 144 loans, Walden ranked 40th with a 0.79 percent share of the market.

The primary competition is aggressive national mortgage lenders and super regional banks. Some of the competitors are subprime lenders that routinely accept high levels of risk by extending loans to borrowers with severe historical and/or current credit problems. Many financial institutions, including Walden have chosen to implement controls that limit risk within their loan portfolios. While this is consistent with safe and sound banking practices, it restricts the institution’s ability to favorably compete with the aggressive subprime lenders.

With a vast majority of the loans originated within the AA, the institution exceeded the standard for satisfactory performance.

Lending to Borrowers of Different Incomes

As part of our lending analysis, we reviewed the bank’s lending activity with respect to the distribution of loans among borrowers of different income levels within the AA. Table 5 illustrates loan originations, categorized by borrower income level, that were reported by Walden during the review period, and compares this activity to the 2005 and 2006 aggregate lenders.

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Institution (continued)

Table 5 - Distribution of Walden Savings Bank’s HMDA-Reportable Loans By Borrower Income Level in the Assessment Area (Dollars in thousands) Borrower Review Period Aggregate Inc. Level 2005 2006 1/1/05 – 6/30/08 2005 2006 1/1/07 – 6/30/08 By Number: # % # % # % # % % by # % by # Low 9 5.7% 7 4.9% 19 7.9% 35 6.4% 3.5% 3.2% Moderate 30 18.9% 21 14.6% 60 24.8% 111 20.4% 16.5% 14.0% Middle 39 24.5% 38 26.4% 57 23.6% 134 24.6% 31.2% 29.8% Upper 74 46.5% 55 38.1% 78 32.1% 207 38.0% 44.2% 48.6% Income NA 7 4.4% 23 16.0% 28 11.6% 58 10.6% 4.6% 4.4% Total 159 100.0% 144 100.0% 242 100.0% 545 100.0% 100.0% 100.0% By $ Amt: $ % $ % $ % $ % % by $ % by $ Low $795 3.3% $630 2.6% $1,807 4.4% $3,232 3.6% 1.7% 1.5% Moderate 3,275 13.5% 2,129 8.8% 8,254 20.0% 13,658 15.2% 11.9% 9.9% Middle 5,006 20.6% 5,225 21.5% 9,216 22.3% 19,447 21.6% 28.1% 26.1% Upper 13,501 55.6% 10,525 43.2% 15,170 36.7% 39,196 43.6% 53.2% 57.5% Income NA 1,705 7.0% 5,820 23.9% 6,864 16.6% 14,389 16.0% 5.1% 5.0% Total $24,282 100.0% $24,329 100.0% $41,311 100.0% $89,922 100.0% 100.0% 100.0%

During the 42-month review period, Walden granted 146 loans totaling $6.9 million to LMI borrowers in the AA which equated to a penetration rate of 26.8 percent. The institution’s performance surpassed the 14.4 percent level noted in the prior evaluation by a wide margin and also exceeded the levels achieved by the aggregate lenders in 2005 and 2006 of 20.0 and 17.2 percent, respectively. At 18.8 percent, the dollar volume also exceeded the levels achieved by the aggregate lenders.

During 2006, 228 HMDA lenders granted over three thousand loans totaling $382 million to LMI borrowers in the AA. The top 20 lenders accounted for 48 percent of the loans. These lenders were primarily comprised of multi-billion dollar financial institutions and nationwide mortgage lenders and included one locally based bank with assets totaling $644 million. With 28 loans, Walden ranked 33rd with a 0.89 percent market share.

The distribution of loans reflected an excellent penetration among borrowers of different income levels and the institution exceeded the standard for satisfactory performance in this criterion.

Geographic Distribution of Loans

As part of our lending analysis, we reviewed the bank’s lending activity with respect to the distribution of loans among geographic areas of different income levels within the AA. Table 6 illustrates loan originations, categorized by geography income level, that were reported by Walden during the review period, and compares this activity to the 2005 and 2006 aggregate lenders. 9 Office of Thrift Supervision Evaluation Date: 10/20/2008 Intermediate Small Savings Association Performance Evaluation Docket Number: 18043

Institution (continued)

Table 6 - Distribution of Walden Savings Bank’s HMDA-Reportable Loans By Geography Income Level in the Assessment Area (Dollars in thousands) Geography Review Period Aggregate Inc. Level 2005 2006 1/1/07-6/30/08 1/1/05 – 6/30/08 2005 2006 By Number: # % # % # % # % % by # % by # Low 1 0.6% 1 0.7% 0 0.0% 2 0.4% 4.1% 4.2% Moderate 15 9.4% 15 10.4% 31 12.8% 61 11.2% 12.2% 12.0% Middle 115 72.4% 98 68.1% 181 74.8% 394 72.3% 62.9% 63.4% Upper 28 17.6% 30 20.8% 30 12.4% 88 16.1% 20.8% 20.4% Total 159 100.0% 144 100.0% 242 100.0% 545 100.0% 100.0% 100.0% By $ Amt: $ % $ % $ % $ % % by $ % by $ Low $50 0.2% $875 3.6% $0 0.0% $925 1.0% 3.4% 3.9% Moderate 1,907 7.9% 1,471 6.0% 3,914 9.5% 7,292 8.1% 9.3% 9.5% Middle 17,530 72.2% 16,864 69.4% 31,693 76.7% 66,087 73.5% 61.6% 62.0% Upper 4,795 19.7% 5,119 21.0% 5,704 13.8% 15,618 17.4% 25.7% 24.6% Total $24,282 100.0% $24,329 100.0% $41,311 100.0% $89,922 100.0% 100.0% 100.0%

Lending in low-income geographies was limited and at 0.4 percent and fell below the aggregate’s performance which was just over 4.0 percent in both 2005 and 2006. Lending in moderate-income geographies improved each year and, at an average of 11.2 percent, was slightly less that the aggregate’s performance. On a combined basis, 11.6 percent of the loans were provided in LMI geographies and this performance significantly exceeded the 0.9 percent level noted in the previous evaluation. However, the institution’s penetration remained below that of the aggregate which averaged 16.2 percent.

During 2006, 204 HMDA lenders granted three thousand loans totaling $451 million in LMI geographies. The top 20 lenders captured 53 percent of the market. These lenders were comprised of multi-billion dollar financial institutions and nationwide mortgage companies. With 16 loans, Walden ranked 45th with a 0.54 percent market share, surpassing the other locally based financial institutions.

The geographic distribution of loans improved significantly and met the standard for satisfactory performance.

Other Information

In order to better serve the credit needs in the AA, particularly for LMI families, Walden offered or participated in three flexible loan programs during the review period.

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Institution (continued)

• The institution’s First Time Home Buyer program includes a 5/5 adjustable-rate mortgage (ARM) with a reduced interest rate and a reduced application fee. The program also includes a no closing cost option and, with private mortgage insurance, is available with 5 percent down. Since 2006, Walden granted 39 loans totaling $7.4 million to first time home buyers. Twenty-one loans totaling $3.6 million were granted to LMI borrowers and five loans totaling $645 thousand were located in LMI geographies.

• Walden also partnered with the Orange County Rural Development Advisory Corporation to provide loans in conjunction with the organizations grant programs. Since 2006, the institution provided six loans totaling $714 thousand. The loans were made in conjunction with the New York Affordable Housing Corp (AHC) and the HOME program from the NY State Division of Housing and Community Renewal. Five loans for $645 thousand were provided to LMI borrowers and two loans for $177 thousand were granted in LMI geographies in the AA.

• Loans are available under Freddie Mac’s Home Possible program. This program provides low downpayment requirements and closing costs can be provided by a second lien or a gift from a local housing agency, nonprofit or relative. The program includes a home ownership education requirement. Since 2006, two loans totaling $398 thousand were granted.

All of these loans were included in Tables 4 through 6 in this report.

Walden also committed $500 thousand to a special loan program coordinated by the Orange County Office of Community Development (OCOCD). The OCOCD’s program was to provide grants for lead remediation in 1-4 family homes in the cities of Middletown, Newburgh, and Port Jervis in Orange County. Under the program, Walden will provide reduced rate loans up to $10 thousand, for terms of five to ten years to provide supplemental funding for lead remediation. While the program is in place, no requests for funding have been received.

Response to Complaints

During the review period, the institution received no known written complaints pertaining to its performance in helping to meet the credit needs within the AA.

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Institution (continued)

Community Development

Community development refers to affordable housing, community services targeted to low- or moderate-income individuals, activities that revitalize or stabilize low- or moderate-income geographies, and activities that promote economic development by financing businesses that meet size eligibility standards.

Walden demonstrated a good level of responsiveness in providing community development loans, investments and services within the AA and a broader statewide area.

Community Development Lending

During the review period, the institution provided or participated in 21 community development loans, totaling $15.7 million. These loans ranged in amount from $147 thousand to $2.5 million. The following is representative of these loans:

St. John Bosco Child and Family Services (St. John’s) – St. John’s is a not for profit organization that provides housing for abused children and counseling services for families dealing with domestic violence issues. During the review period Walden provided three loans for the purchase and renovation of properties located in the AA totaling $762 thousand and a $480 thousand line of credit to provide working capital while the organization waited for state funding.

Hudson Valley Domicile – In conjunction with a $1.5 million loan granted by the US Department of Agriculture’s Rural Development, Walden granted a $375 thousand loan to assist with the purchase of property and construction of an 87,000 square foot domed recreation center in Milton, NY. The multi-sports facility, which is located in the AA, will create nine full-time jobs and 15 part-time jobs.

Russell Inns – A $325 thousand loan for the purchase and rehabilitation of a property located in a low-income geography in the AA in Newburgh, NY. The property will house a bed and breakfast inn.

Community Preservation Corporation (CPC) - This is a consortium of financial entities and insurance companies that is the leading lending intermediary in the institution’s assessment area. It specializes in providing financing for construction and renovation of affordable housing. Its experience and expertise allow it to structure complex projects that combine private and public funds to undertake projects that would otherwise not be feasible. CPC projects can utilize federal tax credits, real estate tax abatements, public subsidies from New York State, as well as special arrangements with New York State retirement funds. These resources are then used to leverage 12 Office of Thrift Supervision Evaluation Date: 10/20/2008 Intermediate Small Savings Association Performance Evaluation Docket Number: 18043

Institution (continued) private sector funds. Walden’s community development lending to CPC includes loan participations as well as a direct line of credit. Loans totaled $11.5 million as follows:

• During the review period, the institution closed on ten participations with CPC for a total of $11.1 million. These participations include two projects located in Kingston and one project in Ellenville, NY in the northern portion of Ulster County, adjacent to the institution’s AA. The remaining projects were located in nearby Dutchess, Rockland, Sullivan, and Westchester Counties in the state of New York. • Since 1995, the institution has provided CPC a revolving line of credit for $450 thousand.

New York Business Development Corporation (NYBDC) – Walden is a member of this privately owned entity created under New York State law. NYBDC is funded by participating commercial and savings banks through lines of credit that provide a broad range of financing for small and midsize businesses within the state. Since 1999, Walden has provided a $67 thousand line of credit to NYBDC.

Community Development Investments

Walden provided support for community credit needs by purchasing two municipal bonds totaling $555 thousand. The funds were used to finance public improvements in moderate-income geographies in the AA.

Walden is also a generous provider to local organizations that directly benefit LMI individuals and families. During the review period, donations totaling $58 thousand were provided to 14 different organizations ranging from $100 to $20 thousand. A sample of the activities provided by these organizations included: • An organization that mentors youth between the ages of 6 through 16, helping children reach their potential through professionally supported, one-to-one relationships • A non-profit organization focused on providing educational and financial assistance to potential LMI homebuyers in Orange County • A foundation that manages funds for more than 80 organizations that provide a variety of services including educational scholarships, affordable housing, literacy programs, children and youth services, and senior services • A non-profit organization that distributes food to nearly 360 agencies in the Hudson Valley • A non-profit organization that provides therapeutic residential care, special education, group homes, and emergency shelter services for special need children and their families • An economic development agency that works to enhance the quality of life by providing assistance to new and expanding non-retail businesses, including but not limited to technical and financial assistance

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Institution (continued)

• A non-profit organization dedicated to providing decent affordable housing in partnership with families in need, restoring a sense of community with the common goal of strong neighborhoods and dignity through homeownership • A non-profit agency that provides a safe family-style residence for children in a supervised setting.

Community Development Services

Institution directors, officers, and employees are actively involved organizations that provide community development services in the AA, often serving as officers and directors of these organizations. Table 7 is representative of the institution’s community development services and strong participation in community development organizations:

Table 7 - Community Development Services Name of Organization Institution’s Employee Organization’s Purpose Involvement Walden Local Member and past Non-profit organization involved with the Development Corporation President revitalization of downtown Walden, NY Community Foundation of Vice President and A public charity that manages funds for Orange County Board Member more than 80 organizations that provide a variety of services including educational scholarships, affordable housing, literacy programs, children and youth services, and senior services Walden Community Member A partnership of Business Council and Community dedicated to serving the citizens and businesses of the Village of Walden Shawangunk Revolving Committee member Provides startup funding for businesses Loan Committee that will create new jobs in the Town of Shawangunk Cornell Cooperative Instructor Provides financial education and Extension budgeting for families, seniors and youth. Also participates in the home buyer education programs Montgomery Affordable Committee member Provide opportunity-based housing so Housing Committee families and the local workforce can continue to live in the town Big Brothers-Big Sisters Volunteers Seven employees participate in the school mentoring program Catch the Dream Orange Committee member Non-profit organization that provides County educational and financial assistance to potential homebuyers in Orange County/ Orange County Rural Board member Affordable housing organization that has Advisory Corp. rehabilitated or constructed more than 750 housing units for individuals, families, and seniors

14 Office of Thrift Supervision Evaluation Date: 10/20/2008 Intermediate Small Savings Association Performance Evaluation Docket Number: 18043

Institution (continued)

The institution also provided or participated in eleven seminars held throughout the AA at the institutions offices, at local town halls, churches and fire houses. These seminars addressed homebuyer education, financial education, and housing opportunities.

Fair Lending or Other Illegal Credit Practices Review

No violations of the substantive provisions of the anti-discrimination laws and regulations were identified during the concurrent examination where we evaluated compliance with consumer laws and regulations. Should the next independent examination find violations of the substantive provisions of the anti-discrimination laws and regulations, we will conduct a new evaluation taking into consideration the evidence of discriminatory or other illegal practices and assign a new rating accordingly.

15 Office of Thrift Supervision Evaluation Date: 10/20/2008 Intermediate Small Savings Association Performance Evaluation Docket Number: 18043

CRA Rating Definitions

There are five separate and distinct CRA assessment methods set forth in the CRA: the lending, investment, and service tests for large, retail institutions; the intermediate small institution test for intermediate small savings associations; the streamlined examination method for small institutions; the community development test for wholesale and limited purpose institutions; and the strategic plan option for all institutions. OTS will assign an institution one of the four assigned ratings required by Section 807 of the CRA:

1. “Outstanding record of meeting community credit needs.” 2. “Satisfactory record of meeting community credit needs.” 3. “Needs to improve record of meeting community credit needs.” 4. “Substantial noncompliance in meeting community credit needs.”

OTS judges an institution’s performance under the test and standards in the rule in the context of information about the institution, its community, its competitors, and its peers. Among the factors to evaluate in an examination are the economic and demographic characteristics of the assessment area(s); the lending, investment, service, and community development opportunities in the assessment area(s); the institution’s product offerings and business strategy; the institution’s capacity and constraints; the prior performance of the institution; in appropriate circumstances, the performance of a similarly situated institution; and other relevant information. An institution’s performance need not fit each aspect of a particular rating profile in order to receive that rating, and exceptionally strong performance with respect to some aspects may compensate for weak performance in others. The institution’s overall performance, however, must be consistent with safe and sound banking practices and generally with the appropriate rating profile. In addition, OTS adjusts the evaluation of an institution’s performance under the applicable assessment method in accordance with §563e.21 and §563e.28, which provide for adjustments on the basis of evidence of discriminatory or other illegal credit practices.

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