United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-Q

[x] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934

For the Quarterly Period Ended September 30, 1999

[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number 0-27178

Peekskill Financial Corporation
- --------------------------------------------------------------------------------
(Exact name of the registrant as specified in its charter)

Delaware 13-3858258
- --------------------------------------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)

1019 Park Street, Peekskill, New York 10566
- --------------------------------------------------------------------------------
(Address of principal executive offices)

(914) 737-2777
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes [ x ] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Class: at November 4, 1999
- --------------------------------------------------------------------------------
Common Stock, $0.01 par value 1,812,028

Peekskill Financial Corporation

Form 10-Q

Quarterly Period Ended September 30, 1999

Part I - Financial Information

ITEM 1 - FINANCIAL STATEMENTS (Unaudited) Page

Condensed Consolidated Balance Sheets at September 30, 1999
and June 30, 1999 3

Condensed Consolidated Statements of Income for the three
months ended September 30, 1999 and 1998 4

Condensed Consolidated Statements of Changes in Stockholders'
Equity for the three months ended September 30, 1999 and 1998 5

Condensed Consolidated Statements of Cash Flows for the three
months ended September 30, 1999 and 1998 6

Notes to Condensed Consolidated Interim Financial Statements 7

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 15

Part II - Other Information

Other Information 16

Signatures 18

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)

September 30, June 30,
1999 1999
-------- --------
Assets:
Cash and due from banks.................................. $ 801 $ 957
Interest-bearing deposits................................ 1,210 3,200
Securities:
Held-to-maturity, at amortized cost (fair value of
$116,515 at September 30, 1999 and $118,675
at June 30, 1999)................................... 117,914 119,122
Available-for-sale, at fair value (amortized cost of
$16,500 at September 30, 1999 and June 30, 1999).... 15,388 15,673
-------- --------
Total securities..................................... 133,302 134,795

Loans, net of allowance for loan losses of $757 at
September 30, 1999 and $742 at June 30, 1999........ 67,249 63,436
Federal Home Loan Bank stock, at cost.................... 1,465 1,463
Accrued interest receivable.............................. 1,031 1,094
Office properties and equipment, net..................... 1,096 1,114
Deferred income taxes, net............................... 930 814
Other assets............................................. 82 59
-------- --------
Total assets........................................... $207,166 $206,932
======== ========

Liabilities and Stockholders' Equity:
Liabilities:
Depositor accounts..................................... $150,013 $148,693
Securities repurchase agreements and other borrowings.. 28,000 28,000
Mortgage escrow deposits............................... 1,137 1,692
Other liabilities...................................... 1,466 1,196
-------- --------
Total liabilities.................................... 180,616 179,581
-------- --------
Stockholders' equity (Note 2):
Preferred stock (par value $0.01 per share; 100,000
shares authorized; none issued or outstanding)........ --- ---
Common stock (par value $0.01 per share; 4,900,000
shares authorized; 4,099,750 shares issued)............ 41 41
Additional paid-in capital............................... 40,307 40,305
Unallocated common stock held by employee stock
ownership plan ("ESOP")................................ (2,665) (2,706)
Unamortized awards of common stock under recognition
and retention plan ("RRP")............................. (771) (771)
Treasury stock, at cost (2,280,122 shares at September 30,
1999 and 2,211,922 shares at June 30, 1999)............ (35,099) (34,204)
Retained earnings........................................ 25,435 25,183
Accumulated other comprehensive loss..................... (698) (497)
-------- --------
Total stockholders' equity............................ 26,550 27,351
-------- --------
Total liabilities and stockholders' equity............ $207,166 $206,932
======== ========

See accompanying notes to unaudited condensed consolidated financial statements.

Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)

For the Three Months
Ended September 30,
--------------------
1999 1998
------ ------
Interest and dividend income:
Loans.................................. $ 1,229 $ 990
Securities............................. 2,062 2,289
Interest-bearing deposits and other.... 64 76
------ ------
Total interest and dividend income.... 3,355 3,355
------ ------
Interest expense:
Depositor accounts..................... 1,510 1,513
Securities repurchase agreements and
other borrowings...................... 362 182
------ ------
Total interest expense................ 1,872 1,695
------ ------

Net interest income................... 1,483 1,660

Provision for loan losses .............. 15 15
------ ------
Net interest income after
provision for loan losses............ 1,468 1,645
------ ------
Non-interest income..................... 71 63
------ ------
Non-interest expense:
Compensation and benefits............. 465 455
Occupancy costs....................... 116 112
Computer service fees................. 56 52
Professional fees..................... 49 38
Federal deposit insurance costs....... 36 36
Safekeeping and custodial services.... 25 29
Other................................. 145 163
------ ------
Total non-interest expense.......... 892 885
------ ------
Income before income tax expense..... 647 823
Income tax expense...................... 250 367
------ ------
Net income............................ $ 397 $ 456
====== ======
Earnings per share (Note 3):
Basic................................. $0.26 $0.18
Diluted............................... 0.25 0.18

See accompanying notes to unaudited condensed consolidated financial statements.

Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
(In thousands, except share data)

Unallocated Unamortized
Common Awards of Accumulated
Additional Stock Common Other Total
Common Paid-in Held Stock Treasury Retained Comprehensive Stockholders'
Stock Capital By ESOP Under RRP Stock Earnings Loss Equity
-------- --------- ----------- ------------ ---------- --------- ------------- ------------

Balance at June 30, 1999........ $ 41 $40,305 $ (2,706) $ (771) $(34,204) $25,183 $ (497) $27,351

Net income................... --- --- --- --- --- 397 --- 397
Other comprehensive loss..... (201) (201)
-------
Total comprehensive
income....................... 196
Dividends paid ($0.09 per
share)....................... --- --- --- --- --- (145) --- (145)
Amortization of RRP awards... --- --- --- 52 --- --- --- 52
RRP award (4,000 treasury
shares)...................... --- (10) --- (52) 62 --- --- ---
Purchase of 72,200 treasury
shares.................... --- --- --- --- (957) --- --- (957)
ESOP shares committed to be
released (4,100 shares). --- 12 41 --- --- --- --- 53
------ ------- -------- --------- -------- ------- -------- -------
Balance at September 30, 1999... $ 41 $40,307 $ (2,665) $ (771) $(35,099) $25,435 $ (698) $26,550
====== ======= ======== ========= ======== ======= ======== =======

Balance at June 30, 1998........ $ 41 $40,181 $ (2,870) $ (922) $(17,730) $24,508 $ (2) $43,206

Net income................... --- --- --- --- --- 456 --- 456
Other comprehensive income... 65 65
-------
Total comprehensive
income....................... 521
Dividends paid ($0.09 per
share)....................... --- --- --- --- --- (233) --- (233)
Amortization of RRP awards... --- --- --- 48 --- --- --- 48
RRP award (2,500 treasury
shares)...................... --- 14 --- (44) 30 --- --- ---
Purchase of 38,000 treasury
Shares.................... --- --- --- --- (612) --- --- (612)
ESOP shares committed to be
released (4,100 shares). --- 26 41 --- --- --- --- 67
------ ------- -------- --------- -------- ------- -------- -------
Balance at September 30, 1998... $ 41 $40,221 $ (2,829) $ (918) $(18,312) $24,731 $ 63 $42,997
====== ======= ======== ========= ======== ======= ======== =======

See accompanying notes to unaudited condensed consolidated financial statements.

Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

For the Three
Months Ended
September 30,
--------------------
1999 1998
-------- ---------
Cash flows from operating activities:
Net income............................................... $ 397 $ 456
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses.............................. 15 15
Depreciation and amortization expense.................. 26 24
ESOP and RRP expense................................... 105 115
Net amortization and accretion of deferred fees,
discounts and premiums............................... (6) (59)
Net decrease in accrued interest receivable............ 63 55
Net increase in other assets........................... (23) (66)
Deferred tax expense................................... 2 13
Net increase in other liabilities...................... 270 166
------- ------
Net cash provided by operating activities............ 849 719
------- ------

Cash flows from investing activities:
Purchases of securities:
Held-to-maturity....................................... (6,935) (7,436)
Available-for-sale..................................... --- (9,992)
Proceeds from principal payments, maturities
and calls of securities:
Held-to-maturity....................................... 8,115 15,893
Available-for-sale..................................... --- 3,000
Originations of loans, net of principal collections...... (3,829) (4,297)
Purchases of office properties and equipment............. (8) (20)
------- ------
Net cash used in investing activities................. (2,657) (2,852)
------- ------
Cash flows from financing activities:
Net increase in depositor accounts....................... 1,319 608
Net decrease in mortgage escrow deposits................. (555) (658)
Proceeds from Federal Home Loan Bank advance............. --- 1,000
Treasury stock purchases................................. (957) (1,962)
Dividends paid........................................... (145) (233)
------- ------
Net cash used in financing activities................. (338) (1,245)
------- ------
Net decrease in cash and cash equivalents.................. (2,146) (3,378)
Cash and cash equivalents at beginning of period........... 4,157 4,626
------- ------
Cash and cash equivalents at end of period................. $ 2,011 $ 1,248
======= =======

Supplemental information:
Interest paid............................................ $ 1,847 $ 1,697
Income taxes paid........................................ 28 318
Decrease in liability for treasury
stock purchased, not yet settled ..................... --- 1,350
======= =======

See accompanying notes to unaudited condensed consolidated financial statements.

PEEKSKILL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. Basis of Presentation

Peekskill Financial Corporation (the "Holding Company") was
incorporated in September 1995 and on December 29, 1995 became the holding
company for First Federal Savings Bank (the "Bank") upon the completion of the
Conversion of the Bank from a mutual savings bank to a stock savings bank (the
"Conversion"). The Holding Company and the Bank (collectively, the "Company")
are located in Peekskill, New York and the Holding Company's principal business,
subsequent to the Conversion, is the ownership of its wholly-owned subsidiary,
the Bank. The accompanying unaudited condensed consolidated financial statements
include the accounts of the Holding Company and the Bank.

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the
financial statements and related management's discussion and analysis of
financial condition and results of operations of the Company as of and for the
year ended June 30, 1999 included in the Form 10-K filed with the Securities and
Exchange Commission. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included herein. The results of operations for the three months ended
September 30, 1999 are not necessarily indicative of results that may be
expected for the entire fiscal year ending June 30, 2000.

NOTE 2. Stockholders' Equity

At September 30, 1999, the Company had 2,280,122 common shares held for
treasury at a cost of $35.1 million, or $15.39 per share. On August 31, 1999,
the Holding Company announced its intention to repurchase up to 100,000 shares
of its common stock in the open market over a one-year period, of which 46,900
shares had been repurchased as of September 30, 1999. Shares are purchased at
prevailing market prices from time to time depending on market conditions.

For income tax purposes, certain capital distributions made by a thrift
institution, such as the Bank, may be deemed to have been made from the thrift's
bad debt reserves. An amount equal to approximately one and one-half times the
amount of such a distribution would be included in the thrift's taxable income,
attributable to the "recapture" of a portion of its tax bad debt reserves.
Distributions resulting in taxable income include distributions in excess of the

thrift's current and accumulated earnings and profits, as calculated for federal
income tax purposes; distributions in redemption of the thrift's stock; and
distributions in partial or complete liquidation of the thrift. However,
dividends paid from the thrift's current or accumulated earnings and profits do
not result in taxable income from bad debt reserve recapture.

All dividends paid to date by the Bank to the Holding Company have been
paid from the Bank's current and accumulated earnings and profits. The Holding
Company has relied on dividends from the Bank as the principal source of funding
for its more recent stock repurchases. Since the Bank intends to limit future
dividend payments to amounts that will not result in the recapture of tax bad
debt reserves, the amount of additional funds which may be available to the
Holding Company for future stock repurchases will generally be limited to the
amount of the Bank's current and accumulated earnings and profits. At June 30,
1999, the Bank had approximately $3.4 million in current and accumulated
earnings and profits from which it could pay dividends without causing the
recapture of any portion of its bad debt reserves. Subsequent to June 30, 1999,
the Bank has paid dividends to the Holding Company of $1.0 million.

Note 3. Earnings Per Share

The Company reports both basic and diluted earnings per share ("EPS")
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." Basic EPS excludes dilution and is computed by dividing
net income available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
(such as stock options) were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Diluted EPS is computed by dividing net income by the weighted average
number of common shares outstanding for the period plus common-equivalent shares
computed using the treasury stock method.

The table below summarizes the number of shares utilized in the
Company's EPS calculations for the three month periods ended September 30, 1999
and 1998. For purposes of computing basic EPS, net income applicable to common
stock equaled net income for both periods presented.

For the Three Months
Ended September 30,
--------------------
1999 1998
--------- ---------
(In thousands)

Weighted average common shares outstanding
for computation of basic EPS (1) 1,531 2,516

Common-equivalent shares due to the dilutive
effect of stock options and RRP awards (2) 29 86
----- -----

Weighted average common shares for
computation of diluted EPS 1,560 2,602
===== =====

(1) Excludes unvested RRP awards and unallocated ESOP shares that have not been
committed to be released.

(2) Computed using the treasury stock method.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Forward-Looking Statements

The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for periods subsequent to September 30, 1999. The Company
cautions that these forward-looking statements are subject to numerous
assumptions, risks and uncertainties, and that statements for subsequent periods
are subject to greater uncertainty because of the likelihood of changes in
underlying factors and assumptions. Actual results could differ materially from
forward-looking statements.

In addition to those factors previously disclosed by the Company and
those factors identified elsewhere herein, the following factors could cause
actual results to differ materially from such forward-looking statements:
pricing pressures on loan and deposit products; actions of competitors; changes
in local and national economic conditions; customer deposit disintermediation;
changes in customers' acceptance of the Company's products and services; the
extent and timing of legislative and regulatory actions and reforms; and Year
2000 related costs and issues substantially different from those now
anticipated.

The Company's forward-looking statements speak only as of the date on
which such statements are made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changing or unanticipated
events or circumstances.

Comparison of Financial Condition at September 30, 1999 and June 30, 1999

Total assets at September 30, 1999 were $207.2 million compared to
$206.9 million at June 30, 1999, an increase of $234,000. This increase was due
primarily to a $3.8 million increase in net loans, partially offset by a $2.1
million decrease in cash and cash equivalents, and a $1.5 million decrease in
total securities. Management intends to continue its current strategy of
increasing the loan portfolio (primarily through the origination of residential
mortgage loans), as market conditions permit, by introducing new products and
stimulating loan demand through advertising. Total liabilities increased $1.0
million from June 30, 1999 to September 30, 1999, due primarily to a $1.3
million increase in depositor accounts.

Total non-performing assets decreased $175,000, or 15.5%, from $1.1
million at June 30, 1999 to $955,000 at September 30, 1999. At September 30,
1999, the Company classified $273,000 of participation interests in certain
residential mortgage loans purchased from Thrift Association Service Corporation
on non-accrual status, as compared to $316,000 at June 30, 1999. In addition,
the Company had three loans, with principal balances totaling $382,000, on
non-accrual status at both September 30, 1999 and June 30, 1999. One-to-four
family mortgage loans past due more than 90 days but still accruing interest
totaled $300,000 at September 30, 1999 compared to $432,000 at June 30, 1999.
The Company had no real estate owned at September 30, 1999 and June 30, 1999.
The allowance for loan losses was $757,000 or 79.3% of non-performing loans at
September 30, 1999, compared to $742,000 or 65.7% of non-performing loans at
June 30, 1999. There were no loan charge-offs or recoveries in the three months
ended September 30, 1999 and 1998.

Stockholders' equity decreased $801,000 from $27.4 million at June 30,
1999 to $26.6 million at September 30, 1999. The decrease primarily reflects
treasury stock purchases of $957,000, dividends paid of $145,000 and a $201,000
decrease attributable to the net unrealized loss on securities
available-for-sale, partially offset by net income of $397,000. Book value per
share increased from $14.49 at June 30,1999 to $14.59 at September 30, 1999.

Comparison of Operating Results for the Three Months Ended September 30, 1999
and 1998

Net income decreased $59,000 to $397,000, or $0.25 per diluted share,
for the quarter ended September 30, 1999, compared to net income of $456,000, or
$0.18 per diluted share, for the same period last year. Basic earnings per share
amounts were $0.26 and $0.18 for the quarters ended September 30, 1999 and 1998,
respectively. The $59,000 decrease in net income was caused primarily by a
$177,000 decrease in net interest income, partially offset by a $117,000
decrease in income tax expense. The increase in both diluted and basic earnings
per share is due to a decrease in the number of common shares outstanding.

Net interest income decreased $177,000 in the current quarter compared
to the quarter ended September 30, 1998. Interest and dividend income remained
constant at $3.4 million for the quarters ended September 30, 1999 and 1998.
Average interest-earning assets increased

$6.4 million, offset by a decrease of 21 basis points in the average yield.
Interest expense increased $177,000 to $1.9 million for the quarter ended
September 30, 1999 compared to the same quarter last year. This increase was due
primarily to a $22.1 million increase in average interest-bearing liabilities
partially offset by a 14 basis point decrease in the average cost.

The provision for loan losses was $15,000 for the quarters ended
September 30, 1999 and 1998. Management's ongoing evaluation of the adequacy of
the allowance for loan losses is based on an assessment of local economic and
real estate market conditions, loan portfolio growth and the level of
non-performing loans.

Non-interest expense increased $7,000 for the quarter ended September
30, 1999 compared to the prior year quarter. The increase was caused primarily
by increases of $10,000 in compensation and benefits, $11,000 in professional
fees and $4,000 in computer service fees, partially offset by an $18,000
decrease in other non-interest expenses.

Income tax expense for the quarter ended September 30, 1999 decreased
$117,000 compared to the same period last year. The decrease is due to a
$176,000 decrease in pre-tax income and the establishment of a real estate
investment trust ("REIT") in the fourth quarter of fiscal 1999. The Company's
effective tax rate was 38.6% in the current quarter compared to 44.6% in the
quarter ended September 30, 1998, primarily due to the effect of the REIT. The
REIT is expected to continue to produce substantial tax savings and a lower
effective tax rate for the Company.

The following table shows the Company's average consolidated balances,
interest income and expense, and average rates (annualized) for the periods
indicated.

Three Months Ended
----------------------------------------------------------------------------
September 30, 1999 September 30, 1998
------------------------------------- ------------------------------------
Average Average Average Average
Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate
----------- -------- ---------- ----------- -------- ----------
(Dollars in thousands)

Interest-earning assets:
Loans (2).................................... $ 65,294 $ 1,229 7.53% $ 49,722 $ 990 7.97%
Mortgage-backed securities(3)................ 112,236 1,684 6.00 127,202 2,035 6.40
Other debt securities(3)..................... 22,531 378 6.71 16,854 254 6.02
Other interest-earning assets................ 4,455 64 5.75 4,347 76 7.00
-------- ------- -------- -------
Total interest-earning assets.............. 204,516 3,355 6.56 198,125 3,355 6.77
------- -------
Non interest-earning assets..................... 3,063 2,678
-------- --------
Total assets............................... $207,579 $200,803
======== ========

Interest-bearing liabilities:
Regular savings and club accounts............ $51,206 $ 356 2.78% $ 50,933 $ 354 2.78%
Money market and NOW accounts................ 17,037 119 2.79 14,178 94 2.64
Savings certificates and other............... 81,569 1,035 5.08 77,370 1,065 5.51
Securities repurchase agreements and other 28,250 362 5.13 13,500 182 5.39
borrowings................................. -------- ------ -------- ------
Total interest-bearing liabilities......... 178,062 1,872 4.21 155,981 1,695 4.35
------ ------
Non interest-bearing liabilities................ 2,282 1,665
-------- --------
Total liabilities.......................... 180,344 157,646
Stockholders' equity............................ 27,235 43,157
-------- --------
Total liabilities and stockholders' equity. $207,579 $200,803
======== ========
Net earning assets.............................. $ 26,454 $ 42,144
======== ========
Net interest income............................. $ 1,483 $ 1,660
======= =======
Net interest rate spread........................ 2.35% 2.42%
==== ====
Net interest margin(4).......................... 2.90% 3.35%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 1.15x 1.27x
==== ====

<FN>

(1) Average balances are calculated using end-of-month balances, producing
results which are not materially different from average daily balances.
(2) Balances are net of deferred loan fees and loans in process. Non-accrual
loans are included in the balances.
(3) Balances represent amortized cost. Yields are not stated on a
tax-equivalent basis, as the Company does not invest in tax-exempt
securities.
(4) Represents net interest income divided by average total interest-earning
assets.
</FN>

Liquidity and Capital Resources

The Company's primary sources of funds are depositor accounts from its
market area; proceeds from principal and interest payments on loans,
mortgage-backed securities and other debt securities; and borrowings from the
Federal Home Loan Bank of New York ("FHLB") and other sources. While maturities
and scheduled payments on loans and securities are a predictable source of
funds, deposit flows and loan and securities prepayments are greatly influenced
by general interest rates, economic conditions and competition.

The primary investing activities of the Company are the origination of
mortgage loans and the purchase of securities, and its primary financing
activity is the attraction of depositor accounts.

The Bank may borrow from the FHLB of New York subject to an overall
limitation of 25% of total assets or $52.3 million at September 30, 1999. Funds
may be borrowed through a combination of FHLB advances and overnight borrowings
under a $15.5 million line of credit. The Bank had no such borrowings
outstanding at September 30, 1999 and June 30, 1999.

At September 30, 1999, the Company had $28.0 million of securities
repurchase agreements and other borrowings. The Company has utilized borrowings
as a funding source in order to supplement retail deposit growth and may engage
in additional borrowings, from time to time, as conditions warrant.

The Bank is required to maintain a minimum level of liquid assets as
defined by OTS regulations, based upon a percentage of liquid assets to
depositor accounts and short-term borrowings. For the month of September 1999,
the Bank's average daily total liquidity ratio was 12.2%, compared to the
minimum OTS requirement of 4.0%.

The Company's most liquid assets are cash and cash equivalents, which
consist of interest-bearing deposits in other financial institutions and
short-term highly liquid investments with original maturities of less than three
months that are readily convertible to known amounts of cash. The level of these
assets is dependent on cash flows from the Company's operating, financing and
investing activities during any given period. Cash and cash equivalents
decreased $2.1 million, from $4.1 million at June 30, 1999 to $2.0 million at
September 30, 1999.

The Company anticipates that it will have sufficient funds available to
meet its current commitments and other funding needs. At September 30, 1999, the
Company had commitments to originate loans of $2.9 million. Savings certificates
which are scheduled to mature in one year or less at September 30, 1999 totaled
$64.4 million. Management believes that a significant portion of such depositor
accounts will remain with the Company.

At September 30, 1999, the Bank's capital exceeded each of the OTS
minimum capital requirements and the requirements for classification as a
"well-capitalized" institution. The

current minimum regulatory capital ratio requirements are 1.5% for tangible
capital, 4.0% for Tier I (core) capital and 8.0% for total risk-based capital.
In order to be considered well-capitalized, an institution must maintain a core
capital ratio of at least 5.0%; a Tier I risk-based capital ratio of at least
6.0%; and a total risk-based capital ratio of at least 10.0%. At September 30,
1999, the Bank had both tangible and core capital of $27.0 million (13.0% of
total adjusted assets); Tier I risk-based capital of $27.0 million (43.7% of
total risk-weighted assets); and total risk-based capital of $27.8 million
(44.9% of total risk-weighted assets).

Impact of Year 2000 Issue

Like other financial institutions, the Company relies on computers for
the daily conduct of its business, all its transaction processing and for
general data processing. The "Year 2000 Issue" arose because many existing
computer programs use only the last two digits to refer to a year. Therefore,
these computer programs may not properly recognize a year that begins with "20"
instead of the familiar "19", causing the programs to fail or create erroneous
results.

The Company has initiated formal communications with all its
significant suppliers to determine the extent to which the Company is vulnerable
to those third parties' failure to remediate their own Year 2000 Issue. The
Company's data processing for its core banking applications is performed by a
third party vendor. These core applications are the Company's mission-critical
systems for purposes of its Year 2000 plan. At this time, the vendor has
asserted that it is Year 2000 compliant and the Company, in conjunction with
other customers of this vendor, has tested the remediated system. The testing of
the Company's data processing vendor is complete and no significant problems
were encountered. The Company currently believes that, with modifications to
existing software and conversions to new software, the Year 2000 Issue will be
mitigated without causing a material adverse impact on its operations.

Contingency plans have been developed for all mission-critical areas of
the Company's operations. The contingency plan for the Company's data processing
function involves the manual processing of transactions by the Company's
employees. Contingency plans for the other mission-critical areas involve having
secondary providers ready if problems with primary providers are encountered.

The Company utilizes both internal and external resources to reprogram,
or replace, and test all software for Year 2000 modifications. Related costs are
expensed as incurred, except for costs incurred in the purchase of new software
or hardware, which are capitalized. At September 30, 1999, the cumulative costs
incurred to address the Year 2000 Issue amounted to approximately $160,000.
Costs incurred to date are primarily related to computer hardware purchases, and
management does not expect that additional costs to be incurred in connection
with the Year 2000 Issue will have a material impact on the Company's financial
condition or results of operations. Since substantially all of the Company's
loans are residential mortgages, the ability of the Company's borrowers to
become Year 2000 compliant is not a significant concern.

The estimated costs and timetable for the Year 2000 modifications are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those plans. Specific factors with respect to both the
Company and its suppliers that might cause such material differences include,
but are not limited to, the availability and cost of personnel trained in this
field, the ability to locate and correct all relevant computer codes, testing
complications and similar uncertainties. In addition, there can be no guarantee
that the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company's interest rate risk
position since June 30, 1999. Other types of market risk, such as foreign
currency exchange rate risk and commodity price risk, do not arise in the normal
course of the Company's business activities.

Annual Meeting

The Annual Meeting for the fiscal year ended June 30, 2000 will be held
on October 18, 2000 at the main office of the Company.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, the Company is involved as plaintiff or
defendant in various legal proceedings arising in the normal course of
its business. While the ultimate outcome of these various legal
proceedings cannot be predicted with certainty, it is the opinion of
management that the resolution of these legal actions should not have a
material effect on the Company's financial condition or results of
operations.

Item 2. CHANGES IN SECURITIES

None

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

a. The annual meeting of stockholders was held on October 20, 1999

b. The matters approved by stockholders at the annual meeting and
the number of votes cast for, against or withheld (as well as
the number of abstentions and broker non-votes) as to each
matter are set forth below:

Election of the following persons to serve a three year term as
directors of the Company:

FOR WITHHELD
Edward H. Dwyer 1,533,675 64,200
John A. McGurty, Jr. 1,532,025 65,850

Ratification of the appointment of KPMG Peat Marwick LLP as auditors
for the Company for the fiscal year ending June 30, 2000:

For 1,575,425
Against 19,050
Abstain 3,400

Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits:

27. Financial Data Schedule

b. Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

PEEKSKILL FINANCIAL CORPORATION
(Registrant)

DATE: November 5, 1999 BY: /s/ Eldorus Maynard
-------------------
Eldorus Maynard
Chairman of the Board and
Chief Executive Officer

DATE: November 5, 1999 BY: /s/ William J. LaCalamito
-------------------------
William J. LaCalamito
President
(principal financial officer)