Attached files

file filename
EX-32.0 - SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - CLIFTON SAVINGS BANCORP INCclifton10kjune-10ex32.htm
EX-13 - ANNUAL REPORT TO SHAREHOLDERS - CLIFTON SAVINGS BANCORP INCclifton10kjune-10ex13.htm
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER - CLIFTON SAVINGS BANCORP INCclifton10kjune-10ex31.htm
EX-21.0 - LIST OF SUBSIDIARIES - CLIFTON SAVINGS BANCORP INCclifton10kjune-10ex21.htm
EX-23.0 - CONSENT OF PARENTEBEARD LLC - CLIFTON SAVINGS BANCORP INCclifton10kjune-10ex23.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CHIEF FINANCIAL OFFICER - CLIFTON SAVINGS BANCORP INCclifton10kjune-10ex312.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM 10-K
 
    /X/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended March 31, 2010
OR
 
    /__/
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                to               

Commission File No.  0-50358
 
          CLIFTON SAVINGS BANCORP, INC.         
(Exact Name of Registrant as Specified in Its Charter)

United States
34-1983738
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
   
1433 Van Houten Avenue, Clifton, New Jersey
07015
(Address of Principal Executive Offices)
(Zip Code)
 
Registrant’s telephone number, including area code:  (973) 473-2200

Securities registered pursuant to Section 12(b) of the Act:
   
Title of each class
Name of each exchange on which registered
Common Stock, par value $0.01 per share
Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨ No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes¨ No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ¨ No ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one)
 
Large Accelerated Filer                                         ¨                                Accelerated Filer                         x
Non-Accelerated Filer                                           ¨                                Smaller Reporting Company¨
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes¨ No x
 
As of September 30, 2009, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $89,567,188, based upon the closing price of $9.80 as quoted on the Nasdaq Global Select Market.
 
The number of shares outstanding of the registrant’s common stock as of April 30, 2010 was 26,390,140.  Of such shares outstanding, 16,791,758 shares were held by Clifton MHC.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the 2010 Annual Report to Stockholders and of the Proxy Statement for the 2010 Annual Meeting of Stockholders are incorporated by reference in Parts II and III, respectively, of this Form 10-K.
 

 
 

 

CLIFTON SAVINGS BANCORP, INC.
 
ANNUAL REPORT ON FORM 10-K
 
TABLE OF CONTENTS
 

   
Page
Part I
 
Item 1.
Business
1
Item 1A.
Risk Factors
16 
Item 1B.
Unresolved Staff Comments
18 
Item 2.
Properties
18 
Item 3.
Legal Proceedings
19 
Item 4.
(Removed and Reserved)
19 
     
Part II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
19 
Item 6.
Selected Financial Data
19 
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20 
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
20 
Item 8.
Financial Statements and Supplementary Data
20 
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
20 
Item 9A.
Controls and Procedures
20 
Item 9B.
Other Information
20 
    20 
Part III
 
Item 10.
Directors, Executive Officers and Corporate Governance
21 
Item 11.
Executive Compensation
21 
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
21 
Item 13.
Certain Relationships and Related Transactions, and Director Independence
22 
Item 14.
Principal Accountant Fees and Services
22 
    22 
Part IV
 
Item 15.
Exhibits, Financial Statement Schedules
23 


 
 

 

Note on Forward-Looking Statements
 
This report contains certain “forward-looking statements” within the meaning of the federal securities laws.  These statements are not historical facts, but, rather are statements based on Clifton Savings Bancorp, Inc.’ s (“Clifton Savings Bancorp”) current expectations regarding its business strategies, intended results and future performance.  Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain.  Factors which could affect actual results include interest rate trends, the general economic climate in the market area in which Clifton Savings Bancorp operates, as well as nationwide, Clifton Savings Bancorp’s ability to control costs and expenses, competitive products and pricing, loan delinquency rates and changes in federal and state legislation and regulation.  These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements.  Clifton Savings Bancorp assumes no obligation to update any forward-looking statements.

PART I

Item 1.  Business

General

Clifton Savings Bancorp was organized as a federal corporation at the direction of Clifton Savings Bank (referred to herein as “Clifton Savings”) in connection with the mutual holding company reorganization of Clifton Savings.  The reorganization was completed on March 3, 2004.  In the reorganization, Clifton Savings Bancorp issued a majority of its outstanding shares of common stock to Clifton MHC, the mutual holding company parent of Clifton Savings, and sold the remainder of its outstanding shares of common stock to the public.  So long as Clifton MHC exists, it will own at least a majority of Clifton Savings Bancorp’s common stock.  Clifton Savings Bancorp’s primary business activity is the ownership of the outstanding capital stock of Clifton Savings. Clifton Savings Bancorp neither owns nor leases any property but instead uses the premises, equipment and other property of Clifton Savings with the payment of appropriate rental fees, as required by applicable law and regulations.  In the future, Clifton Savings Bancorp may acquire or organize other operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so.  Clifton Savings Bancorp has no significant assets, other than all of the outstanding shares of Clifton Savings, and no significant liabilities.  Accordingly, the information set forth in this report, including the consolidated financial statements and related financial data, relates primarily to Clifton Savings.

Clifton Savings has served its customers in New Jersey since 1928.  On September 12, 2007, Clifton Savings converted from a New Jersey chartered savings and loan association to a federally chartered savings bank. In connection with the charter conversion, Clifton Savings changed its name to “Clifton Savings Bank.”  We operate as a community-oriented financial institution offering traditional financial services to consumers and businesses in our market area.  We attract deposits from the general public and primarily use those funds to originate one- to four-family, multi-family and commercial real estate, and consumer loans, which we hold for investment.

Subsidiary Activities

Clifton Savings Bancorp’s sole subsidiary is Clifton Savings.  Clifton Savings has one wholly owned subsidiary, Botany Inc., a New Jersey corporation that was formed in December 2004. Botany Inc. is treated under New Jersey tax law as a New Jersey investment company. At March 31, 2010, Botany Inc. held assets totaling
$190.0 million.

Available Information

Clifton Savings Bancorp’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge on our website, www.cliftonsavings.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission.  The information on our website shall not be considered as incorporated by reference into this Form 10-K.
 
 
 
1

 
Market Area

We are headquartered in Clifton, New Jersey, which is located in northeast New Jersey and situated approximately 20 miles west of New York City.  In addition to our main office located in Passaic County, we operate ten branch offices in Bergen and Passaic Counties, which, along with Essex, Morris, Hudson and Union Counties, comprise our primary market area.  The economy in our market area is primarily oriented to the service, manufacturing, medical and retail industries.  The area is also home to commuters working in the greater New York City metropolitan area.

Competition

Recent economic events have altered the competition for the attraction of deposits and origination of loans.

Deposits.  There are fewer competitors for deposits in our market area.  Our competition has shifted away from the larger regional and money center banks, money market funds and stock market to local community banks and larger thrift institutions. During the past year, competition for deposits has shifted back to the best pricing with less focus on the safety and soundness of the banks and the FDIC insurance limits. These factors continue to be beneficial to us as we maintain a highly competitive pricing strategy.

At June 30, 2009, which is the most recent date for which data is available from the Federal Deposit Insurance Corporation, we held approximately 1.46% of the deposits in our market area, which was the 15th largest market share out of the 57 institutions with offices in our market area.

Loans.  Local financial institutions still face stiff competition from other financial service providers particularly large national lenders.  Other competitors include credit unions and mortgage brokers who keep overhead costs down, and therefore the mortgage rates they offer down, by selling the loans and not holding or servicing them.

Stable Competition.  We expect competition to remain stable due to the uncertainty of future legislation and market forces. Although there are new entries into our market place, there has been a reduction in the number of competitors which consisted of both banks and non-financial institution competitors due to mergers and acquisitions in our market area.

Lending Activities

General.  Our loan portfolio consists primarily of one- to four-family mortgage loans.  To a much lesser extent, our loan portfolio includes multi-family and commercial real estate loans, construction and consumer loans.  Clifton Savings historically and currently only originates loans for investment purposes.  At March 31, 2010, Clifton Savings had no loans that were held for sale.

One- to Four-Family Residential Loans.  Our primary lending activity is the origination of mortgage loans to enable borrowers to purchase or refinance existing homes or to construct new residential dwellings.  We offer fixed-rate and adjustable-rate mortgage loans with terms of up to 30 years.  Borrower demand for adjustable-rate loans versus fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, the difference between the interest rates and loan fees offered for fixed-rate mortgage loans and the initial period interest rates and loan fees for adjustable-rate loans.  The relative amount of fixed-rate mortgage loans and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment and the effect each has on our interest rate risk.  The loan fees charged, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.
 

 
 
2

 
We offer fixed rate loans with terms of either 15, 20 or 30 years.  Our adjustable-rate mortgage loans are based on a 30 year amortization schedule and interest rates and payments on our adjustable-rate mortgage loans adjust annually after a one, five, seven or ten year initial fixed period. In addition, we offer adjustable-rate mortgage loans that adjust every three years after a three year initial fixed period.  Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate typically equal to 2.75% above either the one-year or three-year constant maturity Treasury index.  The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate cap is generally 6% over the initial interest rate of the loan.

We do not make conventional loans with loan-to-value ratios exceeding 95% and generally make loans with a loan-to-value ratio in excess of 80% only when secured by first liens on owner-occupied one- to four-family residences.  Loans with loan-to-value ratios in excess of 80% generally require private mortgage insurance or additional collateral.  We require all properties securing mortgage loans to be appraised by an appraiser approved by our Board of Directors.  We require title insurance on all first mortgage loans.  Borrowers must obtain hazard insurance (and flood insurance for loans on property located in a flood zone) prior to closing the loan.

In an effort to provide financing for low and moderate income first-time buyers, we offer a first-time home buyers program.  We offer residential mortgage loans through this program to qualified individuals and originate the loans using modified underwriting guidelines.  All of these loans have private mortgage insurance on the portion of the principal amount that exceeds 80% of the appraised value of the property at origination.

Multi-Family and Commercial Real Estate Loans.  We offer fixed and adjustable-rate mortgage loans secured by multi-family and commercial real estate.  Our multi-family and commercial real estate loans are generally secured by mixed-use properties with residential units as well as retail space.

We originate fixed rate multi-family and commercial real estate loans for terms up to 15 years, and adjustable-rate multi-family and commercial real estate loans for terms up to 25 years.  Interest rates and payments on our adjustable-rate mortgage loans adjust every five years after a five year initial fixed period, or every year after a ten year initial fixed period.  Interest rates and payments on our adjustable rate loans generally are adjusted to a rate typically equal to 3.00% above the five-year, or one-year, constant maturity Treasury index.  There is a 2.50% adjustment period rate cap.  There are no lifetime interest rate caps.  Loan amounts generally do not exceed 75% of the appraised value.

At March 31, 2010, we had ten loans with principal balances in excess of $500,000.  These loans included one loan secured by a mixed-use building that includes retail stores and two apartments  totaling $646,000, or 2.6% of total multi-family and commercial real estate loans; one loan secured by a mixed-use building  that includes a retail space and three office units totaling $679,000, or 2.8% of total multi-family and commercial real estate loans; one loan secured by one building with three retail spaces totaling $1.4 million, or 5.7% of total multifamily and commercial real estate loans and  one loan secured by a mixed-use building that includes a restaurant and one apartment totaling $567,000, or 2.3% of total multifamily and commercial real estate loans.  In addition, we had six loans secured by multi-family properties totaling $5.4 million, or 21.9% of total multi-family and commercial real estate loans.  At March 31, 2010, all of these loans were performing in accordance with their terms.

Residential Construction Loans.  To a much lesser extent, we originate loans to finance the construction of residential dwellings.  Construction/permanent loans generally provide for interest-only payments at fixed-rates of interest and have construction terms of six to twelve months.  At the end of the construction period, the loan generally converts into a permanent loan.  Construction loans generally provide for interest-only payments at variable rates of interest and have terms of twelve months.  At the end of the construction period, the loan is generally due and payable in full.  Construction loans generally may be considered for loan-to-value ratios of up to 70%.  Loan proceeds are disbursed in increments as construction progresses and as independent inspections warrant.  We use independent fee appraisers for construction disbursement purposes.  At March 31, 2010, all of these loans were performing in accordance with their terms.

Consumer Loans.  We offer a variety of consumer loans, including second mortgage loans, loans secured by passbook or certificate accounts, and home equity lines of credit.
 
 
 
3

 
The procedures for underwriting consumer loans secured by real estate include an assessment of the applicant’s payment history on other debts and the ability to meet existing obligations and payments on the proposed loans.  Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral to the proposed loan amount.

Loan Underwriting Risks.

Adjustable-Rate Loans.  While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, the increased mortgage payments required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults.  The marketability of the underlying property also may be adversely affected in a high interest rate environment.  In addition, although adjustable-rate mortgage loans help make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

While one- to four-family residential real estate loans are normally originated with terms up to 30-years, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full upon sale of the property pledged as security or upon refinancing the original loan.  Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans.

Multi-family and Commercial Real Estate Loans.  Loans secured by multi-family and commercial real estate generally involve a greater degree of risk than one- to four-family residential mortgage loans.  Of primary concern in multi-family and commercial real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project.  Payments on loans secured by income properties are often dependent on successful operation or management of the properties.  As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy.  In order to monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements and rent rolls on multi-family and commercial real estate loans.  Management performs annual reviews and prepare evaluations on all loans where the loan is secured by commercial or multi-family real estate.

Construction Loans.  Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate.  Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development and the estimated cost (including interest) of construction.  During the construction phase, a number of factors could result in delays and cost overruns.  If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the development.  If the estimate of value proves to be inaccurate, we may be confronted, at or prior to the maturity of the loan, with a project having a value which is insufficient to assure full repayment.  As a result of the foregoing, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of the borrower or guarantor to repay principal and interest.  If we are forced to foreclose on a project prior to, or at, completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Consumer Loans.  Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly.  In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower.  In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

 
 
4

 
Loan Originations and Purchases. Loan originations come from a number of sources.  The customary sources of loan originations include internet mortgage loan marketers, local mortgage brokers, advertising, referrals from customers, and personal contacts by our staff.  We generally retain for our portfolio all of the loans that we originate.  We occasionally purchase participation interests in real estate loans in our market area.  We occasionally purchase real estate loans to supplement our own originations on properties located primarily within the state of New Jersey and to a lesser extent loans on properties located within the fifteen states on the Eastern Seaboard.

Loan Approval Procedures and Authority.  Our policies and loan approval limits are established and approved by the Board of Directors.  All residential mortgage loans and all consumer loans require the approval of senior management and are ratified by the Loan Committee of the Board of Directors.  All other loans require the approval of the Loan Committee of the Board of Directors.  The Loan Committee usually meets weekly to review mortgage loans.

Loans to One Borrower.  The maximum amount that we may lend to one borrower and the borrower’s related entities is limited by regulation.  At March 31, 2010, our regulatory limit on loans to one borrower was $23.1 million.  At that date, our largest lending relationship was $2.9 million and consisted of one loan, which was performing according to the original repayment terms at March 31, 2010.

Loan Commitments. We issue commitments for fixed-rate and adjustable-rate mortgage loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers. Commitments, excluding lines of credit and loan purchases, as of March 31, 2010 totaled $3.7 million.

Non-Performing and Problem Assets. When a loan is over 15 days delinquent, we generally send the borrower a late charge notice. When the loan is 30 days past due, we generally mail the borrower a letter reminding the borrower of the delinquency and we attempt personal, direct contact with the borrower to determine the reason for the delinquency, to ensure that the borrower correctly understands the terms of the loan, and to emphasize the importance of making payments on or before the due date. If payment is not then received by the 45th day of delinquency, additional late charges and delinquency notices are issued. After the 90th day of delinquency, we will send the borrower a final demand for payment and refer the loan to legal counsel to commence foreclosure proceedings.

We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets.  Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold.  When property is acquired it is recorded at the fair market value less costs to sell at the date of foreclosure.  Holding costs and declines in fair value after acquisition of the property result in charges against income.

Under current accounting guidelines, a loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due under the contractual terms of the loan agreement.  We consider one- to four-family mortgage loans and consumer installment loans to be homogeneous and, therefore, we are not required to separately evaluate them for impairment, unless they are considered troubled debt restructurings, as discussed below.  All other loans are evaluated for impairment on an individual basis.

For economic reasons and to maximize the recovery of a loan, we work with borrowers experiencing financial difficulties, and will consider modifications to a borrower’s existing loan terms and conditions that we would not otherwise consider, commonly referred to as troubled debt restructurings. The Bank records an impairment loss, if any, based on the present value of expected future cash flows under the restructured terms discounted at the original loan’s effective interest rate. The Bank will report the loan as a troubled debt restructuring until the borrower has performed for twelve consecutive months, in accordance with the terms of the restructuring.

Investment Activities

We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities, deposits at the Federal Home Loan Bank of New York and certificates of deposit of federally insured institutions.  Within certain regulatory limits, we also may invest a portion of our assets in corporate securities.   We also are required to maintain an investment in Federal Home Loan Bank of New York stock.  While we maintain the authority under applicable law and our investment policies to include investments in derivative securities, we had no such investments at March 31, 2010.
 
 
 
5

 
At March 31, 2010, our investment portfolio consisted of federal agency debt securities with maturities of 15 years or less and mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae with stated final maturities of 30 years or less.  During the year ended March 31, 2010, we primarily purchased longer term mortgage-backed and agency securities in an effort to increase yield. Changes in general interest rates and market conditions may alter the prepayment rates and calls of these type of securities, which might cause actual maturities to differ from contractual maturities.

Our investment objectives are to provide and maintain liquidity, to maintain a balance of high quality diversified investments to minimize risk, to provide collateral for pledging requirements, to establish an acceptable level of interest rate risk, to provide an alternate source of low-risk investments when demand for loans is weak, and to generate a favorable return.  Clifton Savings’ Board of Directors has the overall responsibility for Clifton Savings’ investment portfolio, including approval of Clifton Savings’ investment policy and appointment of Clifton Savings’ Investment Committee.  The Investment Committee is responsible for approval of investment strategies and monitoring of the investment performance of Clifton Savings. Clifton Savings’ President is the designated investment officer and, in conjunction with the Chief Financial Officer, is responsible for the daily investment activities and is authorized to make investment decisions consistent with Clifton Savings’ investment policy.  The Investment Committee meets regularly with the President and Chief Financial Officer in order to review and determine investment strategies and transactions. The investment procedures for Botany Inc. are the same as for Clifton Savings except the full Board of Directors of Botany Inc. acts as the Investment Committee for Botany Inc.

Deposit Activities and Other Sources of Funds

General.  Deposits and loan repayments are the major sources of our funds for lending and other investment purposes.  Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

Deposit Accounts.  Substantially all of our depositors are residents of the State of New Jersey.  Deposits are attracted from within our primary market area through the offering of a broad selection of liquid and term deposit instruments.  These instruments consist of free checking accounts, business checking, NOW accounts which includes high yield (Crystal) checking, money market accounts, passbook and statement savings accounts, club and certificates of deposit.  We do not utilize brokered funds.   Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors.  In determining the terms of our deposit accounts, we consider the rates offered by our competition, profitability to us, matching deposit and loan products and customer preferences and concerns.  We review our deposit flows, mix and pricing weekly.  Our current strategy is to attract and retain deposits by offering competitive rates.

Borrowings.  The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions.  As a member, we are required to own capital stock in the Federal Home Loan Bank of New York and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.  Advances are made under several different programs, each having its own interest rate and range of maturities.  Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness.  Under its current credit policies, the Federal Home Loan Bank generally limits advances to 25% of an institution’s assets, and short-term borrowings of less than one year may not exceed 10% of the institution’s assets.  The Federal Home Loan Bank determines specific lines of credit for each member institution.

 
6

 

Personnel

As of March 31, 2010, we had 92 full-time employees and 18 part-time employees, none of whom is represented by a collective bargaining unit.  We believe our relationship with our employees is good.

Regulation and Supervision

General

As a federal mutual holding company, Clifton MHC is required by federal law to report to, and otherwise comply with the rules and regulations of, the Office of Thrift Supervision. Clifton Savings Bancorp, as a federally chartered corporation, is also subject to reporting to and regulation by the Office of Thrift Supervision.

Clifton Savings, as an insured federal savings association, is subject to extensive regulation, examination and supervision by the Office of Thrift Supervision, as its primary federal regulator, and the Federal Deposit Insurance Corporation, as the deposit insurer.  Clifton Savings is a member of the Federal Home Loan Bank System and, with respect to deposit insurance, of the Deposit Insurance Fund managed by the Federal Deposit Insurance Corporation.  Clifton Savings must file reports with the Office of Thrift Supervision and the Federal Deposit Insurance Corporation concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other savings associations.  The Office of Thrift Supervision and/or the Federal Deposit Insurance Corporation conduct periodic examinations to test Clifton Savings’ safety and soundness and compliance with various regulatory requirements.  This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors.  The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.  Any change in such regulatory requirements and policies, whether by the Office of Thrift Supervision, the Federal Deposit Insurance Corporation or Congress, could have a material adverse impact on Clifton MHC, Clifton Savings Bancorp, Clifton Savings and their operations.

Certain regulatory requirements applicable to Clifton Savings, Clifton Savings Bancorp and Clifton MHC are referred to below or elsewhere herein.  The description of statutory provisions and regulations applicable to savings associations and their holding companies set forth below and elsewhere in this document does not purport to be a complete description of such statutes and regulations and their effects on Clifton Savings, Clifton Savings Bancorp and Clifton MHC and is qualified in its entirety by reference to the actual statutes and regulations.

Holding Company Regulation

General.  Clifton MHC and Clifton Savings Bancorp are savings and loan holding companies within the meaning of federal law.  As such, Clifton MHC and Clifton Savings Bancorp are registered with the Office of Thrift Supervision and subject to Office of Thrift Supervision regulations, examinations, supervision and reporting requirements.  In addition, the Office of Thrift Supervision has enforcement authority over Clifton MHC, Clifton Savings Bancorp and their non-saving association subsidiary, Botany Inc.  Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to Clifton Savings.

Activities Restrictions Applicable to Mutual Holding Companies.  Pursuant to federal law and Office of Thrift Supervision regulations, a mutual holding company, such as Clifton MHC, may engage in the following activities:  (i) investing in the stock of a savings association; (ii) acquiring a mutual association through the merger of such association into a savings association subsidiary of such holding company or an interim savings association subsidiary of such holding company; (iii) merging with or acquiring another holding company, one of whose subsidiaries is a savings association; (iv) investing in a corporation, the capital stock of which is available for purchase by a savings association under federal law or under the law of any state where the subsidiary savings association or associations share their home offices; (v) furnishing or performing management services for a savings association subsidiary of such company; (vi) holding, managing or liquidating assets owned or acquired from a savings subsidiary of such company; (vii) holding or managing properties used or occupied by a savings association subsidiary of such company properties used or occupied by a savings association subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix) any other activity (A) that the Federal Reserve Board, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act, unless the Office of Thrift Supervision, by regulation, prohibits or limits any such activity for savings and loan holding companies; or (B) in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987; and (x) purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such savings and loan holding company is approved by the Office of Thrift Supervision.
 
 
 
7

 
The Gramm-Leach Bliley Act of 1999 was designed to modernize the regulation of the financial services industry by expanding the ability of bank holding companies to affiliate with other types of financial services companies such as insurance companies and investment banking companies.  The legislation also expanded the activities permitted for mutual savings and loan holding companies to also include any activity permitted a “financial holding company” under the legislation, including a broad array of insurance and securities activities.

Federal law prohibits a savings and loan holding company, including a federal mutual holding company, from, directly or indirectly or through one or more subsidiaries, acquiring more than 5% of the voting stock of another savings association, or savings and loan holding company thereof, without prior written approval of the Office of Thrift Supervision.  A savings and loan holding company is also prohibited from acquiring more than 5% of a non-subsidiary holding company, savings association or a company engaged in activities other than those authorized by federal law or acquiring or retaining control of a depository institution that is not insured by the Federal Deposit Insurance Corporation.   In evaluating applications by holding companies to acquire savings associations, the Office of Thrift Supervision must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

The Office of Thrift Supervision is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings associations in more than one state, except:  (i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (ii) the acquisition of a savings association in another state if the laws of the state of the target savings association specifically permit such acquisitions.  The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Although savings and loan holding companies are not currently subject to regulatory capital requirements or specific restrictions on the payment of dividends or other capital distributions, federal regulations do prescribe such restrictions on subsidiary savings associations.  Clifton Savings must notify the Office of Thrift Supervision 30 days before declaring any dividend and comply with the additional restrictions described below.  In addition, the financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the Office of Thrift Supervision and the agency has authority to order cessation of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution.

Stock Holding Company Subsidiary Regulation. The Office of Thrift Supervision has adopted regulations governing the two-tier mutual holding company form of organization and mid-tier stock holding companies that are controlled by mutual holding companies.  Under the rules, the stock holding company subsidiary holds all the shares of the mutual holding company’s savings association subsidiary and issues at least a majority of its own shares to the mutual holding company parent.  The stock holding company subsidiary is permitted to engage in activities that are permitted for its mutual holding company parent subject to the same terms and conditions.  Office of Thrift Supervision regulations specify that the stock holding company subsidiary must be federally chartered for supervisory reasons.

Waivers of Dividends.  Office of Thrift Supervision regulations require mutual holding companies to notify the agency if they propose to waive receipt of dividends from their stock holding company subsidiary.  The Office of Thrift Supervision reviews dividend waiver notices on a case-by-case basis and, in general, does not object to a waiver if:  (i) the waiver would not be detrimental to the safe and sound operation of the savings association; and (ii) the mutual holding company’s board of directors determines that their waiver is consistent with such directors’ fiduciary duties to the mutual holding company’s members. Clifton MHC anticipates that it will continue to waive dividends that Clifton Savings Bancorp pays, if any, subject to necessary Office of Thrift Supervision approvals.  The dividends waived are considered as a restriction on the retained earnings of Clifton Savings Bancorp.

 
8

 
Conversion to Stock Form.  Office of Thrift Supervision regulations permit Clifton MHC to convert from the mutual form of organization to the capital stock form of organization.  There can be no assurance when, if ever, a conversion transaction will occur and the Board of Directors has no present intention or plan to undertake a conversion transaction.  In a conversion transaction, a new holding company would be formed as the successor to Clifton MHC and Clifton Savings Bancorp, Clifton MHC’s corporate existence would end and certain depositors in Clifton Savings would receive a right to subscribe for shares of a new holding company.  In a conversion transaction, each share of common stock of Clifton Savings Bancorp held by stockholders other than Clifton MHC would be automatically converted into a number of shares of common stock of the new holding company based on an exchange ratio designed to ensure that stockholders other than Clifton MHC own the same percentage of common stock in the new holding company as they owned in Clifton Savings Bancorp immediately before conversion.  The total number of shares held by stockholders other than Clifton MHC after a conversion transaction would be increased by any purchases by such stockholders in the stock offering conducted as part of the conversion transaction.

Acquisition of the Company.  Under federal law, a notice or application must be submitted to the Office of Thrift Supervision if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company or savings association.  Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the outstanding voting stock of the company or institution, unless the Office of Thrift Supervision has found that the acquisition will not result in a change of control of Clifton MHC, Clifton Savings Bancorp or Clifton Savings.  Under federal law, the Office of Thrift Supervision generally takes into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition, prior to granting its approval.  Any company that acquires control would then be subject to regulation as a savings and loan holding company.

Federal Savings Association Regulation

Business Activities. The activities of federal savings banks are governed by federal law and regulations.  Those laws and regulations delineate the nature and extent of the business activities in which a federal savings bank may engage.  In particular, certain lending authority for federal savings banks, e.g., commercial, non-residential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets.

Capital Requirements.  The Office of Thrift Supervision capital regulations require savings associations to meet three minimum capital standards:  a 1.5% tangible capital to total assets ratio; a 4% Tier 1 capital to total assets leverage ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system); and an 8% risk-based capital ratio.  In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS system) and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard.  The Office of Thrift Supervision regulations also require that, in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.

The risk-based capital standard for savings associations requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital, less certain specified deductions from total capital such as reciprocal holdings of depository institution capital, instruments and equity investments) to risk-weighted assets of at least 4% and 8%, respectively.  In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet activities, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision capital regulation based on the risks believed inherent in the type of asset.  Core (Tier 1) capital is generally defined as common stockholders’ equity (including retained earnings), certain non-cumulative perpetual preferred stock and related surplus, and minority interests in equity accounts of consolidated subsidiaries less intangibles other than certain mortgage servicing rights and credit card relationships.  The components of supplementary capital (Tier 2 capital) currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses, limited to a maximum of 1.25% of risk-weighted assets, and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values.  Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital.

 
9

 
The Office of Thrift Supervision also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular circumstances.  At March 31, 2010, Clifton Savings met each of its capital requirements.

Prompt Corrective Regulatory Action.  The Office of Thrift Supervision is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization.  Generally, a savings association that has a ratio of total capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4% (3% or less for institutions with the highest examination rating) is considered to be “undercapitalized.”  A savings association that has a total risk-based capital ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized” and a savings association that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.”  Subject to a narrow exception, the Office of Thrift Supervision is required to appoint a receiver or conservator within specified time frames for an institution that is “critically undercapitalized.”  The regulation also provides that a capital restoration plan must be filed with the Office of Thrift Supervision within 45 days of the date a savings association is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.”  Compliance with the plan must be guaranteed by any parent holding company in an amount of up to the lesser of 5% of the savings association’s total assets when it was deemed to be undercapitalized or the amount necessary to achieve compliance with applicable capital regulations.  In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion.  The Office of Thrift Supervision could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors.  Significantly and undercapitalized institutions are subject to additional mandatory and discretionary restrictions.

Insurance of Deposit Accounts. Clifton Savings’ deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation.  The Deposit Insurance Fund is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged in 2006.

Under the Federal Deposit Insurance Corporation’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors, with less risky institutions paying lower assessments.  An institution’s assessment rate depends upon the category to which it is assigned.  For calendar 2008, assessments ranged from five to forty-three basis points of each institution’s deposit assessment base.  Due to losses incurred by the Deposit Insurance Fund in 2008 from failed institutions, and anticipated future losses, the Federal Deposit Insurance Corporation adopted an across the board seven basis point increase in the assessment range for the first quarter of 2009.  The Federal Deposit Insurance Corporation made further refinements to its risk-based assessment system effective April 1, 2009 that effectively made the range seven to 771/2 basis points.  The Federal Deposit Insurance Corporation may adjust the scale uniformly from one quarter to the next, except that no adjustment can deviate more than three basis points from the base scale without notice and comment rulemaking.  No institution may pay a dividend if in default of the federal deposit insurance assessment.

The Federal Deposit Insurance Corporation also imposed on all insured institutions a special emergency assessment of five basis points of total assets minus tier 1 capital, as of June 30, 2009 (capped at ten basis points of an institution’s deposit assessment base on the same date) in order to cover losses to the Deposit Insurance Fund.  That special assessment was collected on September 30, 2009.  The Federal Deposit Insurance Corporation provided for similar special assessments during the final two quarters of 2009, if deemed necessary.  However, in lieu of further special assessments, the Federal Deposit Insurance Corporation required insured institutions to prepay estimated quarterly risk-based assessments for the fourth quarter of 2009 through the fourth quarter of 2012.  The estimated assessments, which include an assumed annual assessment base increase of 5%, were recorded as a prepaid expense asset as of December 30, 2009.  As of December 31, 2009, and each quarter thereafter, a charge to earnings will be recorded for each regular assessment with an offsetting credit to the prepaid asset.

 
10

 
Due to the difficult economic conditions experienced throughout 2009, deposit insurance per account owner was raised to $250,000 for all types of accounts until January 1, 2014.  In addition, the FDIC adopted an optional Temporary Liquidity Guarantee Program by which, for a fee, noninterest bearing transaction accounts would receive unlimited insurance coverage until December 31, 2010 and certain senior unsecured debt issued by institutions and their holding companies between October 13, 2008 and June 30, 2009 would be guaranteed by the FDIC through June 30, 2012 or, in certain cases, until December 31, 2012.  Clifton Savings made the business decision to participate in the unlimited noninterest bearing transaction account coverage.   Clifton Savings, Clifton Savings Bancorp and Clifton MHC opted not to participate in the unsecured debt guarantee program.

The Federal Deposit Insurance Corporation has authority to increase insurance assessments.  A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of Clifton Savings.  Management cannot predict what insurance assessment rates will be in the future.

Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation or the Office of Thrift Supervision.  The management of Clifton Savings does not know of any practice, condition or violation that might lead to termination of deposit insurance.

Loans to One Borrower. Federal law provides that savings associations are generally subject to the limits on loans to one borrower applicable to national banks.  Generally, subject to certain exceptions, a savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.  An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral.  We have made no loan nor have we extended credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.

QTL Test.  Federal law requires savings associations to meet a qualified thrift lender test.  Under the test, a savings association is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, 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 securities but also defined to include education, credit card and small business loans) in at least 9 months out of each 12 month period.  Recent legislation has expanded the extent to which education loans, credit card loans and small business loans may be considered “qualified thrift investments.”

A savings association that fails the qualified thrift lender test is subject to certain operating restrictions and may be required to convert to a bank charter.  As of March 31, 2010, Clifton Savings maintained 96% of its portfolio assets in qualified thrift investments and, therefore, met the qualified thrift lender test.

Limitation on Capital Distributions. Office of Thrift Supervision regulations impose limitations upon all capital distributions by a savings association, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger.  Under the regulations, an application to and prior approval of the Office of Thrift Supervision is required prior to any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under Office of Thrift Supervision regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the Office of Thrift Supervision.  If an application is not required, the institution must still provide prior notice to the Office of Thrift Supervision of the capital distribution if, like Clifton Savings, it is a subsidiary of a holding company.  In the event Clifton Savings’ capital fell below its regulatory requirements or the Office of Thrift Supervision notified it that it was in need of increased supervision, Clifton Savings’ ability to make capital distributions could be restricted.  In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the Office of Thrift Supervision determines that such distribution would constitute an unsafe or unsound practice.

 
11

 
Standards for Safety and Soundness.  The federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness in various areas such as internal controls and information systems, internal audit, loan documentation and credit underwriting, interest rate exposure, asset growth and quality, earnings and compensation, fees and benefits.  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.  If the Office of Thrift Supervision determines that a savings association fails to meet any standard prescribed by the guidelines, the Office of Thrift Supervision may require the institution to submit an acceptable plan to achieve compliance with the standard.

Transactions with Related Parties. Clifton Savings’ authority to engage in transactions with “affiliates” (e.g., any entity that controls or is under common control with an institution, including Clifton Savings Bancorp and its other subsidiaries) is limited by federal law.  The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings association.  The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings association’s capital and surplus.  Certain transactions with affiliates are required to be secured by collateral in an amount and of a type specified by federal law.  The purchase of low quality assets from affiliates is generally prohibited.  The transactions with affiliates must be on terms and under circumstances that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies.  In addition, savings associations are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings association may purchase the securities of any affiliate other than a subsidiary.

The Sarbanes-Oxley Act of 2002 generally prohibits loans by Clifton Savings to its executive officers and directors.  However, the law contains a specific exception for loans by a depository institution to its executive officers and directors in compliance with federal banking laws.  Under such laws, Clifton Savings’ authority to extend credit to executive officers, directors and 10% shareholders (“insiders”), as well as entities such persons control, is limited.  The laws limit both the individual and aggregate amount of loans that Clifton Savings may make to insiders based, in part, on Clifton Savings’ capital level and requires that certain board approval procedures be followed.  Such loans are required to be made on terms substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment.  There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees.  Loans to executive officers are subject to additional restrictions based on the type of loan involved.

Enforcement.  The Office of Thrift Supervision has primary enforcement responsibility over savings associations and has the authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution.  Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors to institution of receivership, conservatorship or termination of deposit insurance.  Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregious cases.  The Federal Deposit Insurance Corporation has the authority to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular savings association.  If action is not taken by the Director, the Federal Deposit Insurance Corporation has authority to take such action under certain circumstances.  Federal law also establishes criminal penalties for certain violations.

Assessments.  Savings associations are required to pay assessments to the Office of Thrift Supervision to fund the agency’s operations.  The general assessments, paid on a semi-annual basis, are computed based upon the savings association’s (including consolidated subsidiaries) total assets, condition and complexity of portfolio.  The Office of Thrift Supervision assessments paid by Clifton Savings for the fiscal year ended March 31, 2010 totaled $223,000.

 
12

 
Regulatory Restructuring Legislation.  The Obama Administration has proposed, and the House of Representatives and Senate are currently considering, legislation that would restructure the regulation of depository institutions.  Proposals range from the merger of the Office of Thrift Supervision, which regulates federal savings associations, with the Office of the Comptroller of the Currency, which regulates national banks, to the elimination of the Federal Reserve Board as a holding company regulator for all holding companies with greater than $50 billion in assets in favor of the Federal Deposit Insurance Corporation for holding companies of state chartered banks and the Office of the Comptroller of the Currency for holding companies of national banks and federal savings associations.  Also proposed is the creation of a new federal agency to administer and enforce consumer and fair lending laws, a function that is now performed by the depository institution regulators.  Enactment of any of these proposals may revise the regulatory structure imposed on Clifton Savings, which could result in more stringent regulation.  At this time, Clifton Savings Bancorp has no way of predicting the contents of any final legislation, or whether any legislation will be enacted at all.

Federal Home Loan Bank System

Clifton Savings is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks.  The Federal Home Loan Bank provides a central credit facility primarily for member institutions.  Clifton Savings, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank.  Clifton Savings was in compliance with this requirement with an investment in Federal Home Loan Bank of New York stock of $7.2 million at March 31, 2010.

The Federal Home Loan Banks are required to provide funds for the resolution of insolvent thrifts in the late 1980s and to contribute funds for affordable housing programs.  These requirements could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and could also result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members.  If dividends were reduced, or interest on future Federal Home Loan Bank advances increased, Clifton Savings’ net interest income would likely also be reduced.

Federal Reserve System

The Federal Reserve Board regulations require savings associations to maintain non-interest earning reserves against their transaction accounts (primarily Negotiable Order of Withdrawal (NOW) and regular checking accounts).  The regulations generally provide that reserves be maintained against aggregate transaction accounts as follows:  a 3% reserve ratio is assessed on net transaction accounts up to and including $44.4 million; a 10% reserve ratio is applied above $44.4 million.  The first $10.3 million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements.  The amounts are adjusted annually.  Clifton Savings complies with the foregoing requirements.

Federal and State Taxation

Federal Income Taxation

General.  We report our income on a calendar year basis using the accrual method of accounting.  The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us.  Our federal income tax returns have been either audited or closed under the statute of limitations through tax year 2005.  For its 2010 fiscal year, Clifton Savings’ maximum federal income tax rate was 34%.

Bad Debt Reserves.  For fiscal years beginning before June 30, 1996, thrift institutions that qualified under certain definitional tests and other conditions of the Internal Revenue Code were permitted to use certain favorable provisions to calculate their deductions from taxable income for annual additions to their bad debt reserve. A reserve could be established for bad debts on qualifying real property loans, generally secured by interests in real property improved or to be improved, under the percentage of taxable income method or the experience method. The reserve for nonqualifying loans was computed using the experience method.  Federal legislation enacted in 1996 repealed the reserve method of accounting for bad debts and the percentage of taxable income method for tax years beginning after 1995 and required savings institutions to recapture or take into income certain portions of their accumulated bad debt reserves.  Approximately $6.4 million of our accumulated bad debt reserves would not be recaptured into taxable income unless Clifton Savings makes a “non-dividend distribution” to Clifton Savings Bancorp as described below.

 
13

 
Distributions.  If Clifton Savings makes non-dividend distributions to Clifton Savings Bancorp, the distributions will be considered to have been made from Clifton Savings’ unrecaptured tax bad debt reserves, including the balance of its reserves as of December 31, 1987, to the extent of the non-dividend distributions, and then from Clifton Savings’ supplemental reserve for losses on loans, to the extent of those reserves, and an amount based on the amount distributed, but not more than the amount of those reserves, will be included in Clifton Savings’ taxable income. Non-dividend distributions include distributions in excess of Clifton Savings’ current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation.  Dividends paid out of Clifton Savings’ current or accumulated earnings and profits will not be included in Clifton Savings’ taxable income.

The amount of additional taxable income triggered by a non-dividend distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Therefore, if Clifton Savings makes a non-dividend distribution to Clifton Savings Bancorp, approximately one and one-half times the amount of the distribution not in excess of the amount of the reserves would be includable in income for federal income tax purposes, assuming a 34% federal corporate income tax rate. Clifton Savings does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves.

State Taxation

New Jersey Taxation. Clifton Savings, Clifton Savings Bancorp and Clifton MHC are subject to New Jersey’s Corporation Business Tax at the rate of 9% on their taxable income, before net operating loss deductions and special deductions for federal income tax purposes.  For this purpose, “taxable income” generally means federal taxable income subject to certain adjustments (including addition of interest income on state and municipal obligations).  Botany Inc. is eligible to be taxed as a New Jersey Investment Company at a rate of 3.6%.

Executive Officers of the Registrant

The executive officers of Clifton Savings Bancorp, Clifton MHC, Clifton Savings, and Botany Inc. are elected annually by their respective Boards of Directors and serve at the Board’s discretion.  The executive officers of Clifton Savings Bancorp, Clifton MHC, Clifton Savings, and Botany Inc. are:

Name
   
Position
 
John A. Celentano, Jr.                                               
 
Chairman of the Board and Chief Executive Officer of Clifton Savings Bancorp and Clifton MHC and Chairman of the Board of Clifton Savings
Walter Celuch                                               
 
President and Corporate Secretary of Clifton Savings Bancorp, President of Clifton MHC, Chief Executive Officer and Secretary of Clifton Savings, and Director and Investment Officer of Botany Inc.
Bart D’Ambra                                               
 
Executive Vice President and Chief Operating Officer of Clifton Savings, Corporate Secretary of Clifton MHC and President and Chief Executive Officer of Botany Inc.
Stephen A. Hoogerhyde                                               
 
Executive Vice President and Chief Lending Officer of Clifton Savings
Christine R. Piano, CPA 
 
Chief Financial Officer and Treasurer of Clifton Savings Bancorp and Clifton MHC , Executive Vice President and Chief Financial Officer of Clifton Savings and Director, Chief Financial Officer, Treasurer and Secretary of Botany Inc.

 
14

 
Below is information regarding the executive officers of Clifton Savings Bancorp and Clifton Savings who are not also directors. Unless otherwise stated, each executive officer has held his or her current position for at least the last five years.  Ages presented are as of March 31, 2010.

Walter Celuch has been President and Corporate Secretary of Clifton Savings Bancorp since 2004 and has been President and Chief Executive Officer of Clifton Savings since January 1999.  Mr. Celuch served as Corporate Secretary of Clifton MHC from 2004 to 2006.  Prior to January 1999, Mr. Celuch served as the Senior Vice President and Chief Financial Officer of Clifton Savings.  Mr. Celuch has served with Clifton Savings for over 22 years. Mr. Celuch has been Director and Investment Officer of Botany Inc. since inception in December 2004. Age 62.

Bart D’Ambra has been Executive Vice President and Chief Operating Officer of Clifton Savings since March 2003 and Corporate Secretary of Clifton MHC since 2006.  Mr. D’Ambra served as Senior Vice President of Clifton Savings from April 2002 until March 2003.  Prior to April 2002, Mr. D’Ambra served Clifton Savings as a Vice President.  Mr. D’Ambra has served with Clifton Savings for over 17 years.  Mr. D’Ambra has been President and Chief Executive Officer of Botany Inc. since inception in December 2004. Age 61.

Stephen A. Hoogerhyde has been Executive Vice President and Chief Lending Officer of Clifton Savings since March 2003 and April 2002, respectively.  Mr. Hoogerhyde served as Senior Vice President from April 2002 until March 2003.  Prior to April 2002, Mr. Hoogerhyde served Clifton Savings as Vice President and Mortgage Officer.  Mr. Hoogerhyde has served with Clifton Savings for over 23 years.  Age 55.

Christine R. Piano, a certified public accountant, has been Chief Financial Officer and Treasurer of Clifton Savings Bancorp and Clifton MHC since 2004 and has been Executive Vice President and Chief Financial Officer of Clifton Savings since April 2003 and March 1999, respectively.  Ms. Piano served as Vice President from March 2000 to April 2003. Ms. Piano has served with Clifton Savings for over 11 years.  Ms. Piano has been Director, Chief Financial Officer, Treasurer and Secretary of Botany Inc. since inception in December 2004.  Age 46.

 
15

 

Item 1A.  Risk Factors

An investment in shares of our common stock involves various risks.  Before deciding to invest in our common stock, you should carefully consider the risks described below in conjunction with the other information in this annual report on Form 10-K and information incorporated by reference into this annual report on Form 10-K, including our consolidated financial statements and related notes.  Our business, financial condition and results of operations could be harmed by any of the following risks or by other risks that have not been identified or that we may believe are immaterial or unlikely.  The value or market price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.  The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements.

A continued deterioration in national and local economic conditions may negatively impact our financial condition and results of operations.
 
We currently are operating in a challenging and uncertain economic environment, both nationally and in the local markets that we serve. Financial institutions continue to be affected by sharp declines in financial and real estate values.  Continued declines in commercial and residential real estate values and home sales, and an increase in the financial stress on borrowers stemming from an uncertain economic environment, including rising unemployment, could have an adverse effect on our borrowers or their customers, which could adversely impact the repayment of the loans we have made. The overall deterioration in economic conditions also could subject us to increased regulatory scrutiny. In addition, a prolonged recession, or further deterioration in local economic conditions, could result in an increase in loan delinquencies; an increase in problem assets and foreclosures; and a decline in the value of the collateral for our loans.  Furthermore, a prolonged recession or further deterioration in local economic conditions could drive the level of loan losses beyond the level we have provided for in our loan loss allowance, which could necessitate our increasing our provision for loans losses, which would reduce our earnings.  Additionally, the demand for our products and services could be reduced, which would adversely impact our liquidity and the level of revenues we generate.
 

Changes in interest rates may hurt our profits and asset value.

Our net interest income is the interest we earn on loans and investments less the interest we pay on our deposits and borrowings. Our net interest spread is the difference between the yield we earn on our assets and the interest rate we pay for deposits and our borrowings.  Changes in interest rates could adversely affect our net interest spread and, as a result, our net interest income. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, one can rise or fall faster than the other, causing our net interest spread to expand or contract. Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in interest rates. As a result, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets, causing our net interest spread to contract until the yield catches up.  Changes in the slope of the “yield curve”—or the spread between short-term and long-term interest rates—could also reduce our net interest spread. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because our liabilities tend to be shorter in duration than our assets, when the yield curve flattens or even inverts, we could experience pressure on our net interest spread as our cost of funds increases relative to the yield we can earn on our assets.

Strong competition within our market area could hurt our profits and slow growth.

Although we consider ourselves competitive in Bergen and Passaic Counties, New Jersey, which we consider our core market area, we face intense competition both in making loans and attracting deposits.  Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which reduces net interest income.  Some of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide.  We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.  Our profitability depends upon our continued ability to compete successfully in our market area.

 
16

 
Clifton MHC’s majority control of our common stock enables it to exercise voting control over most matters put to a vote of stockholders, including preventing sale or merger transactions you may like or a second-step conversion by Clifton MHC.

Clifton MHC owns a majority of our common stock and, through its Board of Directors, is able to exercise voting control over most matters put to a vote of stockholders.  The same directors and officers manage Clifton Savings Bancorp, Clifton Savings and Clifton MHC.  As a federally chartered mutual holding company, the Board of Directors of Clifton MHC must ensure that the interests of depositors of Clifton Savings are represented and considered in matters put to a vote of stockholders of Clifton Savings Bancorp.  Therefore, the votes cast by Clifton MHC may not be in your personal best interests as a stockholder.  For example, Clifton MHC may exercise its voting control to defeat a stockholder nominee for election to the Board of Directors of Clifton Savings Bancorp.  In addition, stockholders will not be able to force a merger or second-step conversion (conversion to stock form) transaction without the consent of Clifton MHC.  Some stockholders may desire a sale or merger transaction, since stockholders typically receive a premium for their shares, or a second-step conversion transaction, since fully converted institutions tend to trade at higher multiples than mutual holding companies.

The Office of Thrift Supervision’s policy on remutualization transactions could prohibit the merger or an acquisition of us, which may lower our stock price.

Current Office of Thrift Supervision regulations permit a mutual holding company to be acquired by a mutual institution in a remutualization transaction.  However, the Office of Thrift Supervision has issued a policy statement indicating that it views remutualization transactions as raising significant issues concerning disparate treatment of minority stockholders and mutual members of the target entity and as raising issues concerning the effect on the mutual members of the acquiring entity.  Under certain circumstances, the Office of Thrift Supervision intends to give these issues special scrutiny and reject applications for the remutualization of a mutual holding company unless the applicant can clearly demonstrate that the Office of Thrift Supervision’s concerns are not warranted in the particular case.  Should the Office of Thrift Supervision prohibit or otherwise restrict these transactions in the future, our stock price may be adversely affected.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

We are subject to extensive government regulation, supervision and examination.  Such regulation, supervision and examination govern the activities in which we may engage, and is intended primarily for the protection of the deposit insurance fund and our depositors.  Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses.  Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

Recent legislative and regulatory initiatives may not stabilize the banking system.

The potential exists for additional federal or state laws and regulations regarding lending and funding practices and liquidity standards, and bank regulatory agencies are expected to be more active in responding to concerns and trends identified in examinations, including the expected issuance of many formal enforcement orders.  Actions taken to date, as well as potential actions, may not have the beneficial effects that are intended, particularly with respect to the extreme levels of volatility and limited credit availability currently being experienced.  In addition, new laws, regulations, and other regulatory changes will increase our Federal Deposit Insurance Corporation insurance premiums and may also increase our costs of regulatory compliance and of doing business, and otherwise affect our operations.  New laws, regulations, and other regulatory changes, along with negative developments in the financial industry and the domestic and international credit markets, may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability.  The current administration has also proposed, and Congress is considering, comprehensive legislation intended to modernize regulation of the United States financial system.  The legislation passed by the House of Representatives contains several provisions that would have a direct impact on our operations.  Under that legislation, the Office of Thrift Supervision would be consolidated with the Comptroller of the Currency into a new regulator, the National Bank Supervisor.  In addition, the proposed legislation would eliminate the status of “savings and loan holding company” and mandate that all companies that control an insured depository institution register as a bank holding company.  Registration as a bank holding company would represent a significant change, as material differences currently exist between savings and loan holding company and bank holding company supervision and regulation.  For example, bank holding companies above a specified asset size are subject to consolidated leverage and risk-based capital requirements whereas savings and loan holding companies are not subject to such requirements.  The House legislation would also create a new federal agency, the Consumer Financial Protection Agency, that would be dedicated to administering fair lending and consumer compliance laws with respect to financial products and services, which could result in new regulatory requirements and increased regulatory costs for us.  The Senate has passed legislation that would merge the Office of Thrift Supervision with the Comptroller of the Currency and make the Federal Deposit Insurance Corporation the regulator of savings and loan holding companies with under $50 billion in assets that control state chartered institutions.  The Senate bill would also establish a consumer protection agency housed in, but independent from, the Federal Reserve Board.  Any such legislation may have a substantial impact on our operations.  However, because the contents of any final legislation cannot be provided, the specific effects of the legislation cannot be evaluated at this time.

 
17

 
Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

We conduct our business through our main office and branch offices.  The following table sets forth certain information relating to these facilities as of March 31, 2010.
 
Location
   
Year
Opened
 
Net Book Value
as of
March 31, 2010
 
Square
Footage
 
Owned/
Leased
   
(Dollars in thousands)
                 
Main Office:
               
1433 Van Houten Avenue
 
1981
 
$2,223
 
10,460
 
Owned
                 
Branches:
               
Clifton:
               
1055 Clifton Avenue
 
1956
 
631
 
2,484
 
Owned
1 Village Square West
 
1928
 
155
 
1,550
 
Owned
319 Lakeview Avenue
 
1970
 
389
 
3,311
 
Owned
646 Van Houten Avenue
 
1968
 
1,145
 
1,081
 
Owned
387 Valley Road
 
1971
 
2
 
995
 
   Leased(1)
Garfield:
               
247 Palisade Avenue(2)
 
2004
 
1,004
 
3,130
 
Owned
369 Lanza Avenue
 
1977
 
943
 
2,174
 
Owned
Wallington:
               
55 Union Boulevard
 
2004
 
1,190
 
2,806
 
Owned
Wayne:
               
1158 Hamburg Turnpike
 
2003
 
--
 
1,617
 
    Leased(3)
Fair Lawn:
               
33-11 Broadway, Fair Lawn
 
2009
 
116
 
2,718
 
    Leased(4)
________________________
(1)      The lease expires in May 2011.
(2)      This branch replaced a previously leased facility which was opened in 1975.
(3)      The current lease expires in January 2013 with an option for an additional 5 years.
(4)      The current lease expires in June 2014 with an option for an additional 5 years.


 
18

 

Item 3.  Legal Proceedings

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business.  We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4.  (Removed and Reserved)

PART II
 
Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
The information regarding the market for Clifton Savings Bancorp’s common equity and related stockholder matters is incorporated herein by reference to the section captioned “Investor and Corporate Information” in Clifton Savings Bancorp’s 2010 Annual Report to Stockholders.

Clifton Savings Bancorp’s ability to pay dividends is dependent on dividends received from Clifton Savings, which is subject to a variety of limitations under the regulations of the Office of Thrift Supervision on the payment of dividends.  For a discussion of restrictions on the payment of cash dividends by Clifton Savings, see Part I, Item 1, “Business—Regulation and Supervision—Federal Savings Association Regulation—Limitation on Capital Distributions” in this Annual Report on Form 10-K.

The following table sets forth information regarding Clifton Savings Bancorp’s repurchases of its common stock during the quarter ended March 31, 2010.

Period
 
Total
Number of
Shares
Purchased
 
Average
Price Paid
Per Share
 
Total Number
Of Shares
Purchased
as Part of
Publicly
Announced Plans
or
Programs
 
Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
                 
January 1 - January 31, 2010
 
36,561
 
$9.14
 
36,561
 
88,505
February 1 - February 28, 2010
 
34,287
 
  8.74
 
34,287
 
54,218
                 
March 1 - March 31, 2010 (1)
 
56,218
 
  9.08
 
56,218
 
298,000
                 
Total
 
127,066
 
$9.00
 
127,066
   
_______________________
(1)  
On February 24, 2009, the Company announced that the Board of Directors had approved its eighth stock repurchase program authorizing the Company to repurchase up to 350,000 shares of the Company’s common stock, which was completed on March 1, 2010.
(2)  
On March 3, 2010, the Company announced that the Board of Directors had approved its ninth stock repurchase program authorizing the Company to repurchase up to 300,000 shares of the Company’s common stock.

Item 6.  Selected Financial Data

The information required by this item is incorporated herein by reference to the section captioned “Selected Consolidated Financial and Other Data” in the 2010 Annual Report to Stockholders.

 
19

 
Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information required by this item is incorporated herein by reference to the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2010 Annual Report to Stockholders.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is incorporated herein by reference to the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2010 Annual Report to Stockholders.

Item 8.  Financial Statements and Supplemental Data

The information regarding financial statements is incorporated herein by reference to the sections captioned “Report of Independent Registered Public Accounting Firm” and “Consolidated Financial Statements” in the 2010 Annual Report to Stockholders.

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

          (a)  
Disclosure Controls and Procedures
The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).  Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

          (b)  
Internal Controls Over Financial Reporting

 
Management’s annual report on internal control over financial reporting and the attestation report of the independent registered public accounting firm are incorporated herein by reference to the sections captioned “Management’s Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting,” respectively, in the 2010 Annual Report to Stockholders.

           (c)
 
Changes to Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2010 that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.  Other Information

None.

 
20

 
PART III

Item 10.  Directors, Executive Officers and Corporate Governance of the Registrant

Directors

The information relating to the directors of Clifton Savings Bancorp is incorporated herein by reference to the section captioned Items to be Voted Upon by Stockholders — Item 1 — Election of Directors” in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.

Executive Officers

The information relating to the executive officers of Clifton Savings Bancorp in Part I, Item 1, “Business — Executive Officers of the Registrant” in this Annual Report on Form 10-K is incorporated herein by reference.

Compliance with Section 16(a) of the Exchange Act

           The information regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the section captioned “Other Information Relating to Directors and Executive Officers — Section 16(a) Beneficial Ownership Reporting Compliance” in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.

Disclosure of Code of Ethics

Clifton Savings Bancorp has adopted a Code of Ethics and Business Conduct.  See Exhibit 14.1 to this Annual Report on Form 10-K.

Corporate Governance

For information regarding the Audit Committee and its composition and the audit committee financial expert, the section captioned “Corporate Governance and Board Matters—Committees of the Board of Directors—Audit/Compliance Committee” in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders is incorporated herein by reference.

Item 11.  Executive Compensation

The information regarding executive and director compensation is incorporated herein by reference to the sections captioned “Corporate Governance and Board Matters—Director Compensation for the 2010 Fiscal Year,” “Executive Compensation,” “Compensation Discussion and Analysis” and “Compensation Committee Report,” respectively, in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related
   Stockholder Matters

(a)           Security Ownership of Certain Beneficial Owners

 
Information required by this item is incorporated herein by reference to the section captioned Stock Ownership in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.

(b)           Security Ownership of Management

Information required by this item is incorporated herein by reference to the section captioned Stock Ownership in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.


 
21

 
(c)           Changes in Control

Management of Clifton Savings Bancorp knows of no arrangements, including any pledge by any person or securities of Clifton Savings Bancorp, the operation of which may at a subsequent date result in a change in control of the registrant.

(d)           Equity Compensation Plan Information

 
The following table sets forth information as of March 31, 2010 about Company common stock that may be issued under the Clifton Savings Bancorp, Inc. 2005 Equity Incentive Plan.  The plan was approved by the Company’s stockholders on July 14, 2005.

Plan Category
 
Number of securities
to be issued upon
the exercise of
outstanding options,
warrants and rights
 (a)
 
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
 
Number of securities
remaining available
for future issuance under equity compensation plans (excluding securities reflected in the column (a))
(c)
             
Equity compensation plans
approved by stockholders
 
1,327,940
 
$10.24
 
165,661
             
Equity compensation plans
not approved by stockholders
 
N/A
 
N/A
 
N/A
             
Total
 
1,327,940
 
$10.24
 
165,661


Item 13.  Certain Relationships and Related Transactions, and Director Independence

The information relating to certain relationships and related transactions is incorporated herein by reference to the section captioned “Other Information Relating to Directors and Executive Officers — Transactions with Related Persons” in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.  The information regarding director independence is incorporated herein by reference to the section captioned “Corporate Governance — Director Independence” in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.

Item 14.  Principal Accounting Fees and Services

The information relating to the principal accountant fees and expenses is incorporated herein by reference to the section captioned “Proposal 2 — Ratification of the Independent Registered Public Accounting Firm” in Clifton Savings Bancorp’s Proxy Statement for the 2010 Annual Meeting of Stockholders.


 
22

 

PART IV

Item 15.  Exhibits, Financial Statement Schedules

 
(a)
(1)
The following are filed as a part of this report by means of incorporation of Clifton Savings Bancorp’s 2010 Annual Report to Stockholders:

           Report of Independent Registered Public Accounting Firm

           Consolidated Statements of Financial Condition as of March 31, 2010 and 2009
 
 
Consolidated Statements of Income for Each of the Years in the Three-Year Period Ended March 31, 2010

 
Consolidated Statements of Changes in Stockholders’ Equity for Each of the Years in the Three-Year Period Ended March 31, 2010

 
Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period Ended March 31, 2010
 
 
Notes to Consolidated Financial Statements

 
(2)
All schedules are omitted as required information is either not applicable, or is presented in the consolidated financial statements.

(3)           Exhibits

             3.1
Charter of Clifton Savings Bancorp, Inc. (1)
3.2           Bylaws of Clifton Savings Bancorp, Inc. (2)
 
4.1
Specimen Stock Certificate of Clifton Savings Bancorp, Inc. (1)
 
10.1
Clifton Savings Bank, S.L.A. Employee Stock Ownership Plan and Trust (1)*
10.2         ESOP Loan Commitment Letter and ESOP Loan Documents (1)*
 
10.3
Amended and Restated Employment Agreement between Clifton Savings Bancorp, Inc. and John A. Celentano, Jr. (3)*
 
10.4
Amended and Restated Employment Agreement between Clifton Savings Bancorp, Inc. and Walter Celuch (3)*
 
10.5
Amended and Restated Employment Agreement between Clifton Savings Bank and John A. Celentano, Jr. (3)*
 
10.6
Amended and Restated Employment Agreement between Clifton Savings Bank and Walter Celuch (3)*
 
10.7
Amended and Restated Change in Control Agreement between Clifton Savings Bank and Bart D’Ambra (3)*
 
10.8
Amended and Restated Change in Control Agreement between Clifton Savings Bank and Stephen A. Hoogerhyde (3)*
 
10.9
Amended and Restated Change in Control Agreement between Clifton Savings Bank and Christine R. Piano (3)*
10.10       Amended and Restated Clifton Savings Bank Directors’ Retirement Plan (3)*
10.11       Clifton Savings Bank 401(k) Savings Plan (4)*
 
10.12
Amended and Restated Clifton Savings Bank Supplemental Executive Retirement Plan (3)*
 
10.13
Clifton Savings Bancorp, Inc. 2005 Equity Incentive Plan (5)*
 
10.14
Amendment to the Clifton Savings Bank Change in Control Severance Plan (3)*
 
13.0
Annual Report to Stockholders
 
14.1
Code of Ethics and Business Conduct (1)
 
21.0
List of Subsidiaries
 
23.0
Consent of ParenteBeard LLC
 
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
 
31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
                                         32.0  
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
_________________________
 *           Management contract or compensation plan arrangement.
(1)
Incorporated by reference to the Company’s 2004 Annual Report on Form 10-K filed on June 29, 2004.
(2)
Incorporated by reference to the Company’s Current Report on Form 8-K filed on October 26, 2007.
(3)
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on February 5, 2009.
(4)
Incorporated by reference to the Registration Statement on Form S-8 (No. 333-113302) filed on March 5, 2004.
(5)
Incorporated by reference to the Company’s Proxy Statement filed on June 10, 2005.
 

 
23

 

SIGNATURES

Pursuant to the requirements of 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.
 
  CLIFTON SAVINGS BANCORP, INC.  
       
Date:  June 9, 2010
By:
/s/ John A. Celentano, Jr.  
    John A. Celentano, Jr.  
    Chairman of the Board and Chief Executive Officer  
 
Pursuant to the requirements of 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.
 
Name
 
Title
 
Date
         
/s/ John A. Celentano, Jr.
 
Chairman of the Board and Chief Executive Officer
 
June 9, 2010
John A. Celentano, Jr.
  ( principal executive officer)    
         
/s/ Christine R. Piano
 
Chief Financial Officer and Treasurer
 
June 9, 2010
Christine R. Piano
   (principal financial and accounting officer)    
         
/s/ Thomas A. Miller
 
Director
 
June 9, 2010
Thomas A. Miller
       
         
 /s/ Cynthia Sisco Parachini    Director    June 9, 2010
 Cynthia Sisco Parachini        
         
 /s/ John H. Peto    Director    June 9, 2010
 John H. Peto        
         
 /s/ Charles J. Pivirotto    Director    June 9, 2010
 Charles J. Pivirotto                             
         
 /s/ Joseph C. Smith    Director    June 9, 2010
 Joseph C. Smith        
         
 /s/ John Stokes    Director    June 9, 2010
 John Stokes