UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 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 September 30, 1999

                                       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. 0-27650

                         CATSKILL FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

         DELAWARE                                      14-1788465
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

                       341 MAIN STREET, CATSKILL, NY 12414
                    (Address of principal executive offices)

        Registrant's telephone number, including area code: (518)943-3600

           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10K or any amendments to this
Form 10K. [X]

As of December  17,  1999,  the  aggregate  market value of voting stock held by
non-affiliates  (based upon reported  beneficial  ownership of all directors and
executive  officers of the  registrant;  this  determination  does not  however,
constitute  an  admission  of  affiliated  status  for any of  these  individual
stockholders)  of  the  registrant,   excluding  unallocated  ESOP  shares,  was
approximately $44.7 million.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

  Common Shares, $.01 par value                         3,789,211
        (Title of class)                      (outstanding at December 17, 1999)
<PAGE>
                       ANNUAL REPORT FOR 1999 ON FORM 10-K

                                TABLE OF CONTENTS

                                     PART I

Item 1            Business
Item 2.           Properties
Item 3.           Legal Proceedings
Item 4.           Submission of Matters to a Vote of Security Holders


                                     PART II

Item 5.           Market for Registrant's Common Equity
                    and Related Shareholder Matters
Item 6.           Selected Financial Data
Item 7.           Management's Discussion and Analysis of Financial
                     Condition and Results of Operations
Item 7A.          Quantitative and Qualitative Disclosures about Market Risks
Item 8.           Financial Statements and Supplementary Data
Item 9.           Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure


                                    PART III

Item 10.          Directors and Executive Officers of the Registrant
Item 11.          Executive Compensation
Item 12.          Security Ownership of Certain Beneficial
                  Owners and Management
Item 13.          Certain Relationships and Related Transactions


                                    PART IV

Item 14.          Exhibits and Financial Statement Schedules and Reports on
                     Reports on Form 8-K

                  SIGNATURES

                       DOCUMENTS INCORPORATED BY REFERENCE

     Documents                       Part of 10-K into which incorporated
     ---------                       ------------------------------------

Portions of the Annual Report to
 Stockholders for fiscal year
 ended September 30, 1999.                  Parts II and IV

Definitive Proxy Statement of the
Registrant dated January 14, 2000,
in connection with the Annual
Meeting of Stockholders to be
held February 15, 2000, which is
expected to be filed on/or about
January 14, 2000.                            Part III
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

General

Catskill  Financial  Corporation  (the  "Company" or "Catskill  Financial")  was
formed in December  1995 for the purpose of acquiring all of the common stock of
Catskill  Savings  Bank (the "Bank")  upon the  conversion  of the Bank from the
mutual to the stock form of  ownership.  The Company is  incorporated  under the
laws of the state of  Delaware,  is qualified to do business in the state of New
York, and generally is authorized to engage in any activity that is permitted by
the Delaware General  Corporation Law. On April 18, 1996, the Company  converted
to the stock  form of  ownership,  the  Company  acquired  all of the issued and
outstanding  shares of stock of the Bank, and the Company  completed its initial
public stock offering,  issuing  5,686,750 shares of $.01 par value common stock
at $10.00 per share.  Net  proceeds  to the  Company  were $54.9  million  after
conversion  and stock  offering  costs,  and $50.4 million  excluding the shares
acquired by the  Company's  newly  formed  Employee  Stock  Ownership  Plan (the
"ESOP").

The consolidated  financial  condition and operating  results of the Company are
primarily  dependent  upon  its  wholly  owned  subsidiary,  the  Bank,  and all
references to the Company and its financial data prior to April 18, 1996, except
where otherwise indicated, refer to the Bank and its financial data.

The Bank was organized in 1868,  as a state  chartered  mutual  savings bank. In
January 1996,  the Bank converted to a federally  chartered  stock savings bank.
The Bank is a member of the Bank Insurance Fund ("BIF"),  which is  administered
by the Federal Deposit Insurance Corporation ("FDIC"). Accordingly, its deposits
are insured up to applicable  limits by the FDIC,  which  insurance is backed by
the full faith and credit of the United  States.  The Company's  primary  market
area is comprised of Greene County and southern Albany and Schoharie Counties in
New York, serviced by the Bank's main office and five other banking offices.

The Bank has been and intends to continue to be a  community-oriented  financial
institution  offering financial services to meet the needs of the communities it
serves.  The Bank  attracts  deposits  from the  general  public  and uses  such
deposits, together with other funds such as borrowings, to originate one to four
family residential  mortgages and, to a lesser extent,  consumer (including home
equity lines of credit), commercial and multi-family real estate and other loans
in the Bank's primary market area.  The Bank offers  deposit  accounts  having a
range of  interest  rates and  terms.  The Bank only  solicits  deposits  in its
primary market area and does not have brokered deposits. The Bank is a member of
the Federal Home Loan Bank of New York ("FHLB").

Regulation

The  following is a summary of certain  statutes and  regulations  affecting the
Company and the Bank. The Bank, as a federally chartered,  FDIC insured, savings
bank,  derives  its  powers  principally  from  federal  law and is  subject  to
comprehensive  regulation of virtually every aspect of its business  operations.
The following summary is selective and should not be considered to be a complete
discussion of all regulation affecting the Company or the Bank.

General Bank Regulation. The Bank's primary federal bank regulator is the Office
of Thrift  Supervision  ("OTS").  The Bank is also subject to  regulation by the
FDIC as the insurer of its deposits.  The Bank must file  periodic  reports with
the OTS and is regularly examined by the OTS. As a result of these examinations,
the Bank can be required to adjust its loan  classifications  or  allowance  for
loan  losses,  take  other  actions  to correct  deficiencies  found  during the
examinations,  or cease  engaging in certain  activities.  The Bank is generally
permitted  to  open  deposit-taking   branches  throughout  the  United  States,
regardless of local laws regarding branching.

The OTS may institute  enforcement action against the Bank for violations of law
or for unsafe and unsound banking practices. Enforcement actions can include the
issuance of cease and desist orders, the commencement of removal  proceedings in
which an employee,  officer or director can be removed from involvement with the
Bank, the assessment of civil monetary  penalties,  and injunctive  relief.  The
FDIC may terminate the insurance of deposits,  after notice and hearing,  upon a
finding that an institution has engaged in unsafe and unsound practices,  cannot
continue  operations  because it is in an unsafe and unsound  condition,  or has
violated any applicable law, regulation, rule, order or condition imposed by the
OTS or FDIC. The FDIC may instead impose less severe sanctions.  Neither the OTS
nor the FDIC (which was also the Bank's  primary  federal  regulator  before the
Bank became a federal  savings  bank in January  1996) has ever  instituted  any
enforcement action against the Bank.

Federal law and OTS  regulations  limit the percentage of the Bank's assets that
can be invested in certain investments. For example,  commercial,  corporate and
business loans, other than those secured by real estate collateral,  are limited
in the aggregate to 10% of assets.  The purchase of below  investment grade debt
securities is prohibited. Loans secured by non-residential real property cannot,
in the  aggregate,  exceed  400% of  capital.  Consumer  loans  not  secured  by
residential real estate are generally limited, in the aggregate, to 35% of total
assets.  Loans secured by  residential  real  property,  and many other types of
loans  and  investments,  are not  subject  to any  percentage  of asset  limit.
Generally, the Bank may not lend more than 15% of unimpaired capital and surplus
to one borrower, representing a lending limit of $7.8 million per borrower, with
an additional 10% of unimpaired  capital and surplus being  permitted if secured
by certain  readily  marketable  collateral.  The Bank is in compliance with all
these limits. The Bank's largest loan to one borrower at September 30, 1999, was
a $1.0 million participation loan secured by a motel in Albany County.

The OTS also imposes a semi-annual  assessment on all OTS regulated institutions
to defer the cost of OTS regulation.  For the semi-annual  period ended December
31, 1999, the Bank's OTS assessment was $35,474.

The  Company  is a  unitary  savings  and  loan  holding  company,  and its sole
FDIC-insured  subsidiary,  the  Bank,  is  a  qualified  thrift  lender  ("QTL",
discussed in more detail  below).  Therefore,  the Company  generally  has broad
authority to engage in all types of business activities.  If the Company were to
acquire  another  insured  institution  as a separate  subsidiary or if the Bank
fails  to  remain a QTL,  the  Company's  activities  will be  similar  to those
permitted of multiple savings and loan holding companies. In general, a multiple
savings and loan holding  company (or subsidiary  thereof that is not an insured
institution)  may,  subject to OTS approval in most cases,  engage in activities
comparable to those  permitted  for bank holding  companies,  certain  insurance
activities, and certain activities related to the operations of its FDIC-insured
subsidiaries.

New Legislation. After the end of our 1999 fiscal year, President Clinton signed
the  Gramm-Leach-Bliley  Act which makes  substantial  changes in the  permitted
relationships  between banks,  securities firms,  insurance  companies and their
holding  companies.  The  statute  is too new to be able to fully  evaluate  its
effects on the Company and the Bank.  However,  the Company believes most of the
direct effects of the statute will be minimal  because it primarily  affects the
operations of much larger institutions.

One significant change in the law which could indirectly affect the Company is a
change in the ability to become a unitary savings and loan holding  company.  In
general, the Company, as a unitary savings and loan holding company, may engage,
through non-banking subsidiaries,  in whatever activities it wants to engage in.
The new law  protects  the  existing  rights of the  Company to engage in a wide
range of  activities.  However,  there can be no new  unitary  savings  and loan
holding companies and existing companies cannot take advantage of the old law by
acquiring a pre-existing  unitary savings and loan holding  company.  This could
adversely  affect the market  price of the stock of  existing  savings  and loan
holding  companies  because  acquisitions of them could cause them to lose their
broad powers to engage in non-banking activities.

Capital  Requirements.  The Bank is  subject  to  minimum  capital  requirements
imposed  by the OTS.  The Bank must  maintain  (i)  tangible  capital of 1.5% of
tangible  assets,  (ii) core capital of 4.0% of adjusted  tangible  assets,  and
(iii) a risk-based capital  requirement of 8.0% of risk-weighted  assets.  Under
current  law  and  regulations,  there  are  no  capital  requirements  directly
applicable to the Company.  The Bank  substantially  exceeds all minimum capital
standards  imposed by the OTS. At September  30,  1999,  the Bank had a tangible
capital ratio of 15.18%, a core capital ratio of 15.18% and a risk based capital
ratio of 31.75%.  OTS regulations  require that certain  institutions  with more
than  normal  interest  rate risk  must make a  deduction  from  capital  before
determining  compliance  with the  minimum  capital  requirements.  The Bank had
previously  been  exempt  from the  deduction  requirement  because it had total
assets less than $300 million and risk based capital in excess of 12%.  However,
the  Bank's  capital  ratios  are high  enough  that  even if the  exemption  is
withdrawn,  the  deduction  would  not  have a  material  effect  on the  Bank's
compliance with OTS capital requirements.

The OTS has the authority to require that an institution take prompt  corrective
action to solve problems if the institution is  undercapitalized,  significantly
undercapitalized  or  critically  undercapitalized.  Because of the Bank's  high
capital ratios,  the prompt  corrective  action  regulations are not expected to
have an effect on the Company.

Deposit Insurance  Premiums.  The FDIC's deposit insurance premiums are assessed
through a risk-based system under which all insured depository  institutions are
placed into one of nine  categories and assessed  insurance  premiums based upon
their  level  of  capital  and   supervisory   evaluation.   Under  the  system,
institutions  classified  as well  capitalized  and  considered  healthy pay the
lowest  premium.  The Bank is in this  category  and  currently  pays no deposit
insurance premiums. If the Bank's capital ratios substantially deteriorate or if
the Bank is found to be  otherwise  unhealthy,  the deposit  insurance  premiums
payable by the Bank could increase.  The Bank must,  however,  pay a part of the
costs of the "FICO" bonds sold in the late 1980s to finance the savings and loan
bailout.  The FICO bond  assessment for fiscal 1999 was  approximately  .012% of
insured deposits.

Dividend  Restrictions.  OTS regulates the amount of dividends and other capital
distributions  payable by the Bank to the Company.  In general, if the Bank will
satisfy all OTS capital requirements both before and after the distribution, the
Bank may make  capital  distributions  to the  Company  in any year equal to the
current  year's net income  plus  retained  net  income  for the  preceding  two
calendar years.  However,  the Bank must notify the OTS of the  distribution and
the OTS may object on safety and soundness grounds.

If any capital  distribution  will  exceed  these  limits,  or if the OTS either
considers the Bank a troubled or problem  institution or gives the Bank a rating
in less  than the two  highest  rating  categories,  then the Bank  must get OTS
approval  before  making  a  capital  distribution.  The  Bank is not  currently
required to obtain OTS approval  unless it exceeds the dollar  limits.  The Bank
paid $8.0 million in dividends to the Company in calendar year 1998, and expects
to pay  dividends of $9.0 million in calendar  year 1999,  $8.0 million of which
had  already  been paid by  September  30,  1999.  Since the  dividends  paid in
calendar  year 1998 and 1999 will exceed net income  earned  during those years,
dividends  payable to the Company in calendar year 2000 would be limited to that
year's net income, unless the Bank requests prior OTS approval.

Qualified  Thrift Lenders.  If the Bank fails to remain a QTL, as defined below,
it must either convert to a national bank charter or be subject to  restrictions
on its activities  specified by law and the OTS regulations,  which restrictions
would  generally limit  activities to those permitted for national banks.  Also,
three  years  after the  savings  institution  ceases  to be a QTL,  it would be
prohibited  from  retaining  any  investment  or  engaging in any  activity  not
permissible  for a national bank and would be required to repay any  outstanding
borrowings from any Federal Home Loan Bank.

A savings institution will be a QTL if its qualified thrift investments equal or
exceed 65% of its portfolio  assets on a monthly  average basis in nine of every
12 months.  Qualified  thrift  investments  include,  among others,  (i) certain
housing-related loans and investments (notably including residential one to four
family mortgage loans),  (ii) certain federal government and agency obligations,
(iii)  loans to purchase  or  construct  churches,  schools,  nursing  homes and
hospitals  (subject to certain  limitations),  (iv) consumer  loans  (subject to
certain limitations),  (v) shares of stock issued by any Federal Home Loan Bank,
and (vi)  shares of stock  issued by the FHLMC or the FNMA  (subject  to certain
limitations).  The Bank satisfied the QTL test at September 30, 1999, as well as
for every month during fiscal 1999.

Community Reinvestment Act. Under the Community Reinvestment Act (the "CRA"), as
implemented  by OTS  regulations,  the Bank  has a  continuing  and  affirmative
obligation  consistent with its safe and sound operation to help meet the credit
needs of its entire community,  including low and moderate income neighborhoods.
The Bank is periodically  examined by the OTS for compliance with the CRA. Under
recently  adopted rules the Bank's CRA  performance is now evaluated  based upon
the lending, investment and service activities of the Company. The Bank received
a `satisfactory' CRA rating from the OTS under the new rules.

Federal Reserve  Regulation.  Under Federal Reserve Board regulations,  the Bank
must   maintain   reserves   against   its   transaction   accounts   (primarily
interest-bearing  checking accounts) and non-personal time deposits.  The effect
of  the  reserve  requirements  is  to  compel  the  Bank  to  maintain  certain
low-yielding  reserve  deposits which are not available for investment in higher
yielding  assets.  However,  at the present time, in light of the Bank's current
cash and due from banks, the reserve requirements do not have a material adverse
effect on the Company.  The balances maintained to meet the reserve requirements
may be used to satisfy liquidity requirements imposed by the OTS. The Bank is in
compliance with its reserve requirements.

Taxation. The Company pays federal and New York State income taxes on its income
on terms  substantially  similar to other business  corporations.  Special rules
allowing the Bank a special deduction to create a tax bad debt reserve have been
abolished. Furthermore, the Bank must recapture, over a period of six years, any
additions  to its tax bad  debt  reserves  since  1988.  The  Bank  had  already
provided, as a provision for deferred taxes in accordance with SFAS No. 109, for
the tax  consequences  of the  Bank's  post-1987  additions  to the tax bad debt
reserve. Therefore, the recapture requirement will not have a material financial
statement impact.

Market Area

Catskill  (population of 11,965 in the 1990 census) is located  approximately 30
miles  south of  Albany  on the  western  banks of the  Hudson  River and is the
largest  municipality  in Greene  County.  Greene County extends from the Hudson
River west into the northern  Catskill  Mountains.  The Company's primary market
area is heavily dependent on tourism, does not have a substantial  commercial or
industrial base and has shown only limited  economic and  demographic  growth in
recent years.

Overall,  the population of Albany County has remained  relatively steady in the
last decade  while the more rural  Greene  County  benefited  from a  population
expansion.  In 1995, Greene County registered a 48,000 population count, a 10.1%
increase from 1985.

The business  sectors in Greene County which account for the largest  percentage
of earnings are state and local  government,  the service industry and wholesale
and retail trade.  Manufacturing  also  accounts for a noteworthy  percentage of
earnings in Greene County. The New York State Thruway, which runs through Greene
County, as well as the county's lower cost of living, are attractive features to
local  employers,   especially   distributors  such  as  United  Stationers  and
manufacturers such as Dynabil Industries.  Major sources of employment in Greene
County  include a state prison,  the county  government  and various health care
facilities, as well as various manufacturing companies.

Based on the FDIC  annual  deposit  summary  as of June 30,  1999,  which is the
latest  available  data,  there are a total of 20 branch  offices of  commercial
banks and thrift  institutions  in Greene County and 116 in Albany  County.  The
Company's  four offices in Greene County hold 30.1% of all deposits and 57.6% of
thrift institution  deposits. In Albany County, with a much larger deposit base,
the Company's share of all deposits was approximately 0.8%.

The Company's  newest office opened in August 1999, in Schoharie  County.  As of
June 30, 1999,  Schoharie  County had 12 offices  with total  deposits of $295.3
million.


Lending Activities

General. The Company's primary lending activity is the origination of fixed- and
adjustable rate, one to four family residential  mortgage loans for retention in
its  portfolio.  The  Company  also  originates  fixed-rate  consumer  loans and
adjustable-rate  home  equity line of credit  consumer  loans.  Adjustable  rate
mortgage  ("ARM") and consumer  loans  increase the  percentage of the Company's
loans  with  more  frequent  terms  to  repricing  or  shorter  maturities  than
fixed-rate,   one  to  four  family  mortgage  loans.   See  "-  Loan  Portfolio
Composition"  and "- One to Four Family  Residential  Real Estate  Lending."  In
addition, the Company originates  multi-family and commercial real estate loans.
Loan  originations  are  generated by the  Company's  marketing  efforts,  which
include  print and radio  advertising,  lobby  displays and direct  contact with
local  civic  organizations,  as well  as by the  Company's  present  customers,
walk-in  customers  and  referrals  from real  estate  agents and  builders.  At
September 30, 1999, the Company's gross loan portfolio totaled $153.0 million.

The  approval of the  Executive  Committee  of the Bank's  Board of Directors is
required for all real estate loans in excess of $150,000,  and consumer loans in
excess of $100,000.  Company  employees  with the authority to approve such real
estate  loans of $150,000 or less,  and  consumer  loans of $100,000 or less are
designated,  and their lending authority is defined, by the Executive Committee.
The Executive  Committee acts in accordance  with policies  established at least
annually by the Board of Directors.

The  aggregate  amount of loans  that the  Company  is  permitted  to make under
applicable federal regulations to any one borrower,  including related entities,
is generally  equal to 15% of unimpaired  capital and surplus.  At September 30,
1999, the maximum amount which the Company could have loaned to any one borrower
and the borrower's  related  entities was  approximately  $7.8 million.  At that
date, the Company's largest lending  relationship  (representing less than 1% of
the Company's  total loan  portfolio) was a $1.0 million  commercial real estate
loan secured by a motel  located in Albany  County,  New York.  At September 30,
1999,  there were only  thirteen  other  loans (or lending  relationships)  with
outstanding  balances in excess of $250,000,  aggregating $6.4 million,  or less
than 4.2% of the Company's total loan portfolio.
<PAGE>
Loan Portfolio Composition.  The following table presents information concerning
the  composition  of the  Company's  loan  portfolio  in dollar  amounts  and in
percentages as of the dates indicated.
<TABLE>
<CAPTION>
                                                                           September 30,
                                           ---------------------------------------------------------------------------
                                                   1999                        1998                      1997
                                           ---------------------       --------------------       -------------------
                                           Amount        Percent       Amount       Percent       Amount      Percent
                                           ------        -------       ------       -------       ------      -------
                                                                      (Dollars in thousands)
<S>                                          <C>          <C>           <C>          <C>           <C>         <C>
Real Estate Loans:
 One to four family....................      $121,151      79.19%       $113,423      81.02%       $102,232     80.69%
 Multi-family and commercial...........         7,940       5.19           6,389       4.56           4,691      3.70
 Construction..........................         3,176       2.07           1,182       0.85           1,306      1.03
                                             --------     ------        --------     ------        --------     -----
     Total real estate loans...........       132,267      86.45         120,994      86.43         108,229     85.42
                                             --------     ------        --------     ------        --------     -----

Commercial Loans.......................           994        .65             602        .43              63       .05
                                             --------     ------        --------     ------        --------     -----
Consumer Loans:
  Automobile...........................         7,947       5.20           6,301       4.50           6,655      5.25
  Home equity..........................         3,064       2.00           3,490       2.49           3,709      2.93
  Other secured........................         3,289       2.15           2,912       2.08           3,385      2.67
  Student..............................         2,707       1.77           2,795       2.00           2,658      2.10
  Other unsecured......................         2,355       1.54           2,366       1.69           1,316      1.04
  Mobile home..........................           367        .24             535        .38             687       .54
                                             --------     ------        --------     ------        --------     -----
     Total consumer loans..............        19,729      12.90          18,399      13.14          18,410     14.53
                                             --------     ------        --------     ------        --------     -----
Total Loans............................       152,990     100.00%        139,995     100.00%        126,702    100.00%
                                             --------     ======        --------     ======        --------    ======
Less:
 Net deferred fees.....................            76                        260                        476
 Allowance for loan losses.............         2,093                      1,950                      1,889
                                             --------                   --------                   --------
 Total loans receivable, net...........      $150,821                   $137,785                   $124,337
                                             ========                   ========                   ========
<PAGE>
<CAPTION>
                                                              September 30,
                                           ------------------------------------------------
                                                    1996                      1995
                                            --------------------       -------------------
                                            Amount       Percent       Amount      Percent
                                            ------       -------       ------      -------
                                                         (Dollars in thousands)
<S>                                           <C>           <C>         <C>        <C>
Real Estate Loans:
 One to four family....................       $100,383       80.34%     $ 95,588    79.04%
 Multi-family and commercial...........          5,115        4.09         5,132     4.24
 Construction..........................            423         .34           230      .19
                                              --------      ------      --------   ------
     Total real estate loans...........        105,921       84.77       100,950    83.47
                                              --------      ------      --------   ------

Commercial Loans.......................            ---         ---           ---      ---
                                              --------      ------      --------   ------
Consumer Loans:
  Automobile...........................          7,029        5.63         6,652     5.50
  Home equity..........................          4,368        3.50         5,393     4.46
  Other secured........................          2,965        2.37         2,970     2.46
  Student..............................          2,450        1.96         2,373     1.96
  Other unsecured......................          1,430        1.15         1,415     1.17
  Mobile home..........................            782         .62         1,185      .98
                                              --------      ------      --------   ------
     Total consumer loans..............         19,024       15.23        19,988    16.53
                                              --------      ------      --------   ------
Total Loans............................        124,945      100.00%      120,938   100.00%
                                              --------      ======       -------   ======
Less:
 Net deferred fees.....................            579                       624
 Allowance for loan losses.............          1,833                     1,950
                                              --------                  --------
 Total loans receivable, net...........       $122,533                  $118,364
                                              ========                  ========
</TABLE>
<PAGE>
The following table presents the composition of the Company's loan portfolios by
fixed- and adjustable-rate at the dates indicated.
<TABLE>
<CAPTION>
                                                                                                    September 30,
                                                 -------------------------------------------------------------------------
                                                                                                    (Dollars in thousands)
                                                         1999                      1998                      1997
                                                 --------------------       -------------------       -------------------
                                                 Amount       Percent       Amount      Percent       Amount      Percent
                                                 ------       -------       ------      -------       ------      -------
<S>                                                <C>        <C>             <C>        <C>            <C>        <C>
Fixed-Rate Loans:
 Real estate:
  One to four family.........................      $97,428     63.68%         $83,643     59.75%        $67,782     53.50%
  Multi-family and commercial................        3,987      2.61            3,395      2.43           1,850      1.46
  Construction...............................        3,060      2.00            1,079       .77           1,306      1.03
                                                   -------    ------          -------    ------         -------    ------
     Total real estate loans.................      104,475     68.29           88,117     62.95          70,938     55.99
                                                   -------    ------          -------    ------         -------    ------
 Consumer....................................       13,958      9.12           12,114      8.65          14,638     11.55
                                                   -------    ------          -------    ------         -------    ------
     Total fixed-rate loans..................      118,433     77.41          100,231     71.60          85,576     67.54

Adjustable-Rate Loans:
 Real estate:
  One to four family.........................       23,723     15.51           29,780     21.27          34,450     27.19
  Multi-family and commercial................        3,953      2.58            2,994      2.14           2,904      2.29
  Construction...............................          116       .08              103       .07             ---       ---
                                                   -------    ------          -------    ------         -------    ------
     Total real estate loans.................       27,792     18.17           32,877     23.48          37,354     29.48
                                                   -------    ------          -------    ------         -------    ------
 Consumer....................................        5,771      3.77            6,285      4.49           3,709      2.93
                                                   -------    ------          -------    ------         -------    ------
 Commercial..................................          994       .65              602       .43              63       .05
                                                   -------    ------          -------    ------         -------    ------
     Total adjustable-rate loans.............       34,557     22.59           39,764     28.40          41,126     32.46
                                                   -------    ------          -------    ------         -------    ------
     Total loans.............................      152,990    100.00%         139,995    100.00%        126,702    100.00%
                                                   -------    ======          -------    ======         -------    ======

Less:

 Net deferred fees...........................           76                        260                       476
 Allowance for loan losses...................        2,093                      1,950                     1,889
                                                   -------                    -------                   -------
    Total loans receivable, net..............      150,821                    137,785                   124,337
                                                   =======                    =======                   =======

<PAGE>
<CAPTION>
                                                                   September 30,
                                                 ------------------------------------------------
                                                              (Dollars in thousands)
                                                          1996                      1995
                                                  --------------------       -------------------
                                                  Amount       Percent       Amount      Percent
                                                  ------       -------       ------      -------
<S>                                                 <C>        <C>             <C>        <C>
Fixed-Rate Loans:
 Real estate:
  One to four family.........................       $63,491     50.81%         $53,993     44.65%
  Multi-family and commercial................         2,142      1.71            1,743      1.44
  Construction...............................           423      0.34              230       .19
                                                    -------    ------          -------    ------
     Total real estate loans.................        66,056     52.86           55,966     46.28
                                                    -------    ------          -------    ------
 Consumer....................................        14,656     11.73           14,595     12.06
                                                    -------    ------          -------    ------
     Total fixed-rate loans..................        80,712     64.59           70,561     58.34

Adjustable-Rate Loans:
 Real estate:
  One to four family.........................        36,892     29.53           41,595     34.40
  Multi-family and commercial................         2,973      2.38            3,389      2.80
  Construction...............................           ---       ---              ---      ---
                                                    -------    ------          -------    ------
     Total real estate loans.................        39,865     31.91           44,984     37.20
                                                    -------    ------          -------    ------
 Consumer....................................         4,368      3.50            5,393      4.46
                                                    -------    ------          -------    ------
 Commercial..................................           ---       ---              ---       ---
                                                    -------    ------          -------    ------
     Total adjustable-rate loans.............        44,233     35.41           50,377     41.66
                                                    -------    ------          -------    ------
     Total loans.............................       124,945    100.00%         120,938    100.00%
                                                    -------    ======          -------    ======

Less:

 Net deferred fees...........................           579                        624
 Allowance for loan losses...................         1,833                      1,950
                                                   --------                   --------
    Total loans receivable, net..............      $122,533                   $118,364
                                                   ========                   ========

</TABLE>
<PAGE>
The following table sets forth the contractual  maturities of the Company's loan
portfolio at September 30, 1999.  Loans which have  adjustable  or  renegotiable
interest  rates are shown as maturing in the period  during which the final loan
payment is due without  regard to rate  adjustments.  The table does not reflect
the  effects  of loan  amortization,  possible  prepayments  or  enforcement  of
due-on-sale clauses.
<TABLE>
<CAPTION>
                                                                      Due During Years Ending September 30,
                                                                      -------------------------------------
                                  2000(1)              2001                2002            2003-2004           2005-2009
                              ----------------   -----------------   ----------------   ----------------   -----------------
                                      Weighted            Weighted           Weighted           Weighted            Weighted
                                       Average             Average            Average            Average             Average
                              Amount    Rate     Amount     Rate     Amount    Rate     Amount    Rate     Amount     Rate
                              ------    ----     ------     ----     ------    ----     ------    ----     ------     ----
                                                                             (Dollars in thousands)
<S>                           <C>         <C>     <C>         <C>    <C>          <C>   <C>         <C>     <C>          <C>
        Real Estate
------------------------
One to Four Family             $7,003     7.35%   $ 7,481     7.34%  $ 7,855      7.38% $16,294     7.35%   $38,950      7.26%
Multi-family and                  336     8.73        387     8.69       572      8.88    2,712     8.57      1,450      8.50
Commercial..............
Construction............        3,078     7.82        ---       ---      ---       ---      ---       ---       ---       ---

         Commercial
------------------------
Lines of credit.........          994     9.64        ---       ---      ---       ---      ---       ---       ---       ---

          Consumer
------------------------
Consumer ...............        5,094     9.11      3,826     8.87     2,702      8.96    2,717     9.09      1,156      9.23
                              -------             -------            -------            -------             -------

     Total Loans........      $16,505     8.15%   $11,694     7.89%  $11,129      7.84% $21,723     7.72%   $41,556      7.36%
                              =======             =======            =======            =======             =======

<CAPTION>
                                        Due During Years Ending September 30,
                                        -------------------------------------
                                 2010-2014      2015 and following       Total
                              ----------------   -----------------   -----------------
                                      Weighted            Weighted            Weighted
                                       Average             Average             Average
                              Amount    Rate     Amount     Rate     Amount     Rate
                              ------    ----     ------     ----     ------     ----
                                               (Dollars in thousands)
<S>                           <C>          <C>    <C>          <C>   <C>         <C>
        Real Estate
------------------------
One to Four Family            $27,353      7.24%  $16,215      7.36% $121,151    7.30%
Multi-family and                1,340      8.75     1,143      8.59     7,940    8.63
Commercial..............
Construction............          ---       ---        98      7.30     3,176    7.81

         Commercial
------------------------
Lines of credit.........          ---       ---       ---       ---       994    9.64

          Consumer
------------------------
Consumer ...............        1,723      7.72     2,511      8.60    19,729    8.86
                              -------             -------            --------

     Total Loans........      $30,416      7.34%  $19,967      7.59% $152,990    7.60%
                              =======             =======            ========

</TABLE>
(1) Includes  demand loans,  loans having no stated  maturity and line of credit
    loans.
<PAGE>
One to Four Family Residential Real Estate Lending

The Company's  residential mortgage loan portfolio consists principally of loans
to purchase or refinance one to four family, owner-occupied residences and, to a
lesser extent,  secondary residences.  At September 30, 1999, $121.2 million, or
79.2%, of the Company's gross loans consisted of one to four family  residential
mortgage  loans.  Approximately  80.4%  of  the  Company's  one to  four  family
residential  mortgage  loans provide for fixed rates of interest.  The Company's
one to four family mortgage loans  typically  provide for repayment of principal
over a  period  not to  exceed  30  years.  The  Company's  one to  four  family
residential   mortgage   loans  are  priced   competitively   with  the  market.
Accordingly,  the Company  attempts to distinguish  itself from its  competitors
based on the quality of service.

The Company underwrites its one to four family residential  mortgage loans using
Federal National Mortgage Association  ("FNMA") secondary market standards.  The
Company  holds  in its  portfolio  all of the  one to  four  family  residential
mortgage loans it originates.  While the Company  currently does not sell loans,
and presently has no intention to do so,  management may consider  selling loans
in the future depending on market conditions and the asset/liability  management
of the Company. In underwriting one- to four-family  residential mortgage loans,
the Company  evaluates  both the  borrower's  credit history and ability to make
monthly payments,  and the value of the property  securing the loan.  Properties
securing ARM and all fixed-rate  loans are appraised by independent  appraisers.
The Company  requires  borrowers to obtain title insurance and hazard  insurance
(including flood insurance,  where appropriate) naming the Company as lienholder
in an amount  not less than the  amount of the loan,  or the  maximum  insurable
value of the property.

The Company  currently  offers  residential  ARM loans with interest  rates that
adjust  either  annually,  or every  three years with  adjustments  based on the
change in the comparable Treasury index. In addition, ARM loans originated prior
to 1990 were adjusted based upon a Federal Home Loan Bank Board index, which has
been  converted to a Federal  Housing  Finance  Board index.  One-year ARM loans
provide  for a 2.0%  periodic  cap and three year ARM loans  provide  for a 2.0%
periodic cap and both have  lifetime  caps of 6.0% over the initial  rate.  As a
consequence  of using caps, the interest rates on these loans may not be as rate
sensitive as is the Company's cost of funds.  Borrowers of residential ARM loans
are generally qualified at the maximum increase in rate which could occur at the
first  adjustment  period,  which may be lower than the fully indexed rate.  The
Company's  residential ARM loans are not convertible into fixed-rate  loans. ARM
loans  generally  pose greater  credit risks than  fixed-rate  loans,  primarily
because as interest  rates rise, the required  periodic  payment by the borrower
rises,  increasing the potential for default. As of September 30, 1999, however,
the Company had not experienced  default rates on these loans materially  higher
than on similar fixed rate loans.

The  Company's  one to four  family  mortgage  loans do not  contain  prepayment
penalties and do not permit  negative  amortization  of  principal.  Real estate
loans  originated  by the  Company  generally  contain  a "due on  sale"  clause
allowing  the  Company to declare the unpaid  principal  balance due and payable
upon the sale of the mortgaged  property.  The Company may waive the due on sale
clause  on  loans  held in its  portfolio  to  permit  assumptions  of  loans by
qualified borrowers.

The Company does not currently originate residential mortgage loans if the ratio
of the loan amount to the lower of appraised value, or the purchase price of the
property securing the loan (i.e., the "loan-to-value" ratio) exceeds 95%. If the
loan-to-value  ratio  exceeds 90%, the Company  requires that  borrowers  obtain
private mortgage  insurance in amounts intended to reduce the Company's exposure
to 80% or less of the lower of the appraised  value or the purchase price of the
real estate security.

The Company also offers  construction  loans to individuals for the construction
of their residences. The Company has occasionally made loans to builders for the
construction of homes including a limited amount of housing  construction  loans
to builders where the home has not been  pre-sold.  Generally,  no  construction
loan is  approved  unless  there  is  evidence  of a  commitment  for  permanent
financing  upon  completion  of the  residence,  whether  through the Company or
another financial institution. Construction loans generally require construction
stage inspections before funds may be released to the borrower. At September 30,
1999,  the  Company's  construction  loan  portfolio  totaled $3.2  million,  or
approximately  2.1% of its gross loan portfolio.  Although no construction loans
were  classified  as  non-performing  as of September  30, 1999,  these loans do
involve a higher level of risk than conventional one- to four-family residential
mortgage loans.  For example,  if construction is not completed and the borrower
defaults,  the  Company may have to hire  another  contractor  to  complete  the
project at a higher cost, or completion could be delayed.

Multi-Family and Commercial Real Estate Lending

The Company has  engaged in  multi-family  and  commercial  real estate  lending
secured  primarily  by  small  offices,   retail  establishments  and  apartment
buildings  located in the Company's  primary market area. At September 30, 1999,
the Company had  multi-family  and  commercial  real estate loans  totaling $8.0
million, which represented 5.2% of the Company's gross loan portfolio.

Multi-family  and  commercial  real  estate  loans  originated  by  the  Company
generally  have a variety  of rate  adjustment  features  and other  terms.  The
Company's  multi-family  and  commercial  real estate  loans  typically  are for
amounts less than  $250,000,  and  generally do not exceed 70% of the  appraised
value  of the  property  securing  the  loan.  The term of such  loans  does not
generally exceed 20 years.  The Company analyzes the financial  condition of the
borrower,  the borrower's credit history, the sufficiency and reliability of the
net income  generated  by the  property  securing  the loan and the value of the
property  itself.  The Company  generally  requires  personal  guarantees of the
borrowers  in  addition to the secured  property as  collateral  for such loans.
Appraisals on properties securing  multi-family and commercial real estate loans
are performed by independent appraisers.

Multi-family  and commercial real estate loans generally  present a higher level
of risk than loans secured by one to four family  residences.  This greater risk
is due to several factors, including the concentration of principal in a limited
number of loans and  borrowers,  the effect of general  economic  conditions  on
income  producing  properties  and the increased  difficulty  of evaluating  and
monitoring these types of loans. Furthermore,  the repayment of loans secured by
multi-family  and  commercial  real  estate  is  typically  dependent  upon  the
successful  operation of the related real estate project.  If the cash flow from
the project is reduced (for example, if leases are not obtained or renewed, or a
bankruptcy  court  modifies a lease term, or a major tenant is unable to fulfill
lease obligations), the borrower's ability to repay the loan may be impaired and
the value of the property may be reduced.

Consumer Lending

The Company currently originates  substantially all of its consumer loans in its
primary market area.  Management  believes that offering  consumer loan products
helps  expand the  Company's  customer  base and  creates  stronger  ties to its
existing  customer  base. In addition,  because  consumer  loans  generally have
shorter  terms to maturity or  adjustable  rates and may carry  higher  rates of
interest than do residential mortgage loans, they can be useful  asset/liability
and interest rate spread management tools. The Company originates consumer loans
principally on a direct basis,  in which the Company  extends credit directly to
the borrower.  At September  30, 1999,  the  Company's  consumer loan  portfolio
totaled $19.7 million,  or 12.9% of the gross loan portfolio.  Of consumer loans
at  September   30,   1999,   70.7%  were   fixed-rate   loans  and  29.3%  were
adjustable-rate loans.

The Company offers consumer loans for a variety of purposes. Consumer loan terms
vary  according to the type and value of  collateral,  contractual  maturity and
creditworthiness  of the  borrower.  Terms to maturity  range up to 25 years for
home equity lines of credit and 15 years for all other types of consumer  loans.
Unsecured  consumer  lines of credit are  extended to  borrowers  through  their
checking  account  maintained at the Company.  These credit lines currently bear
interest at 18.0% and are generally limited to $10,000.

Underwriting  standards  for  consumer  loans  include  a  determination  of the
applicant's  payment history on other debts and an assessment of ability to meet
existing   obligations   and   payments   on   the   proposed   loan.   Although
creditworthiness of the applicant is a primary  consideration,  the underwriting
process also  includes a  comparison  of the value of the  security,  if any, in
relation to the proposed loan amount.

At September 30, 1999,  automobile loans, the largest component of the Company's
consumer loan portfolio,  totaled $7.9 million,  or 40.3% of the Company's total
consumer  loan  portfolio and 5.2% of the Company's  gross loan  portfolio.  The
Company  originates  loans to purchase  both new and used  automobiles  at fixed
rates of interest and terms of up to six years. Generally, the Company's maximum
loan-to-value  ratio on new and used automobile  loans is 100% of the borrower's
cost,  which  includes such items as dealer options and sales tax. In June 1998,
the Company began  originating  consumer  loans,  principally  auto loans, on an
indirect  basis  through  a very  limited  number  of  dealers.  The  terms  are
substantially  the  same  as  its  direct  loans,  with  the  Company  generally
underwriting  the  loans  consistent  with its  existing  credit  standards.  At
September 30, 1999, the Company had $2.6 million of indirect loans, representing
32.3% of the $7.9 million  automobile  loans and less than 1.7% of the Company's
gross loan portfolio.

Advances on home equity lines of credit  represent the second largest  component
of the Company's  consumer loan  portfolio.  The Company's  home equity lines of
credit  are  secured by a lien on the  borrower's  residence  and are  generally
originated in amounts which, together with all prior liens on such residence, do
not exceed 90.0% of the appraised  value of the property  securing the loan. The
interest  rates for home equity  lines of credit  float at a stated  margin over
and/or  under the prime rate.  Home  equity  lines of credit  generally  require
interest only payments on the outstanding balance for the first ten years of the
loan,  after  which  the  outstanding  balance  may be  converted  into a  fully
amortizing,  adjustable-rate  loan with a term not in excess of 15 years.  As of
September 30, 1999, the Company had $3.1 million in outstanding advances on home
equity lines of credit,  with an  additional  $1.9 million of unused home equity
lines of credit.

Consumer loans may entail greater credit risk than do residential first mortgage
loans,  particularly  in the case of consumer  loans which are  unsecured or are
secured by rapidly depreciable  assets, such as automobiles.  In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding  loan balance as a result of high initial
loan-to-value  ratios,  repossession,  rehabilitation,  carrying costs,  and the
greater likelihood of damage, loss or depreciation of the underlying collateral.
Home equity line of credit loans are generally secured by subordinate  mortgages
which present  greater risks than first mortgage  liens.  At September 30, 1999,
$148,000,  or .75% of the Company's consumer loan portfolio was  non-performing,
approximately 46% of which were government  guaranteed  student loans. There can
be no assurances that additional delinquencies will not occur in the future.

Commercial Business Lending

Federal  regulations  authorize  federally-chartered  savings banks, such as the
Company,  to make non-real  estate  secured or unsecured  loans for  commercial,
corporate,  business and agricultural  purposes, up to a maximum of 10% of total
assets.  The Company engages in such  commercial  business  lending  principally
through  secured and  unsecured  lines of credit as well as through the New York
Business  Development  Corporation (the "NYBDC"),  a privately owned corporation
which provides loans,  management assistance,  counseling and a variety of other
financial  programs to small and medium  sized  businesses  located in New York.
Loans made through the NYBDC may be to businesses  located within or outside the
Company's  primary  market  area.  The  Company  is  one  of  119  participating
commercial  and  savings   banks.   At  September  30,  1999,  the  Company  had
approximately  $994,000 in commercial  business loans outstanding,  representing
less than 1.0% of its loan portfolio. In addition, certain commercial borrowers,
including  the  NYBDC,  had  unused  lines of  credit  totaling  $894,000  as of
September  30, 1999.  At September  30, 1999,  all of the  Company's  commercial
business loans were performing in accordance with their terms.

Loan Originations

Loan  originations  are developed from  continuing  business with depositors and
borrowers, referrals from real estate agents, advertising and walk-in customers.
All of the Company's loans are originated by its salaried employees,  except for
certain auto loans, which are generated on an indirect basis.

The Company's  ability to originate  loans is dependent upon demand for loans in
its  market.  Demand is  affected by the local  economy  and the  interest  rate
environment.  The Company  retains all new fixed-rate and  adjustable-rate  real
estate  loans in its  portfolio.  The  Company  does not sell  loans and has not
purchased any loans since fiscal 1993.

During the year ended September 30, 1999, the Company  originated  $38.7 million
of loans,  compared to $38.9  million and $21.2 million in fiscal 1998 and 1997,
respectively.  Management  attributes the increase in originations during fiscal
1999 and 1998 to the low interest rate  environment,  in which interest rates on
fixed rate loans were at the lowest levels since 1993.

In  periods  of  economic  uncertainty,   the  Company's  ability  to  originate
sufficient real estate loans with acceptable underwriting characteristics may be
substantially reduced or restricted. This could decrease net interest income, as
assets  may  have  to  be  invested  in  lower-yielding  securities  or  similar
investments.  While  the  Company  has  no  present  intention  to  sell  loans,
management  may  consider  selling  loans  in the  future  depending  on  market
conditions and the asset/liability management requirements of the Company.

The following table shows the loan originations, purchases, sales, and repayment
activities  of the  Company  for the  periods  indicated.  The  Company  did not
purchase or sell any loans during the periods presented.
<TABLE>
<CAPTION>
                                                                Years Ended September 30,
                                                          -----------------------------------
                                                            1999          1998         1997
                                                          --------      --------     --------
                                                                  (In thousands)
<S>                                                       <C>           <C>           <C>
Originations by type:
  One to four family and construction..............       $ 24,133      $ 24,051     $ 12,588
  Multi-family and commercial.......................         3,684         5,184          110
  Consumer..........................................        10,839         9,683        8,584
                                                          --------      --------     --------
         Total loans originated.....................        38,656        38,918       21,282
                                                          --------      --------     --------
Purchases:
  Total.............................................           ---           ---          ---
Sales:
  Total.............................................           ---           ---          ---
Repayments:
  Principal repayments..............................      (25,629)      (25,373)     (18,705)
  Increase (decrease) in other items, net...........          (32)         (252)        (820)
                                                          --------      --------     --------
         Net increase (decrease)....................      $ 12,995      $ 13,293      $ 1,757
                                                          ========      ========      =======
</TABLE>

Asset Quality

Generally, when a borrower fails to make a required payment on a loan secured by
residential real estate, the Company initiates collection  procedures by mailing
a  delinquency  notice  after  the  account  is 15 days  delinquent.  At 30 days
delinquent,  the  Company  attempts  to contact the  customer  by  telephone  to
investigate  the  delinquency  and a  personal  letter  is sent to the  customer
requesting  him or her to make  arrangements  to bring the loan current.  If the
delinquency  is not cured by the 45th day, the Company again attempts to contact
the customer by telephone  and another  personal  letter is sent.  After 60 days
delinquent, the Company may commence foreclosure proceedings.

With  respect  to  consumer  loans,  when a  borrower  fails to make a  required
payment,  the Company initiates  collection  procedures by mailing a delinquency
notice  after  the  account  is  10-15  days  delinquent,  and  again at 20 days
delinquent. At 25 days delinquent,  the Company attempts to contact the customer
by telephone to investigate the delinquency.  At 30 days delinquent,  a personal
letter is sent to the customer  requesting  him or her to make  arrangements  to
bring the loan current.  At 45 days  delinquent,  the Company again  attempts to
contact the customer by telephone to secure  payment.  If the delinquency is not
cured by the 60th day, the Company  refers the loan to its  attorney,  who sends
another  personal letter notifying the customer that no further payments will be
accepted by the Company absent a meeting between the customer and a Company loan
officer. If no satisfactory arrangements have been made by the last business day
of the fourth month, repossession of collateral, if possible, is undertaken and,
if necessary, legal proceedings are generally commenced to collect the loan.

The following  table sets forth the  Company's  loan  delinquencies  by type, by
amount and by percentage of that type at September 30, 1999.
<TABLE>
<CAPTION>
                                                   Loans Delinquent For:
                              -----------------------------------------------------------------
                                       60-89 Days                     90 Days and Over                Total Delinquent Loans
                              --------------------------------------------------------------------------------------------------
                                                    Percent                           Percent                            Percent
                                                    of Loan                           of Loan                            of Loan
                              Number     Amount     Category    Number     Amount     Category    Number      Amount    Category
                              ------     ------     --------    ------     ------     --------    ------      ------    --------
                                                                    (Dollars in thousands)
<S>                            <C>        <C>         <C>        <C>        <C>        <C>          <C>        <C>       <C>
One to four family real
 estate...................        5       $ 300       .25%          7       $ 396      .33%           12       $696      .57%
Multi-family and                 --          --        --          --          --       --            --         --       --
 Commercial real estate...       --          --        --          --          --       --            --         --       --
Commercial................       --          --        --          --          --       --            --         --       --
Consumer..................       13          47       .24          15         148      .75            28        195      .99
                               ----       -----                  ----       -----                   ----       ----
     Total................       18       $ 347       .23%         22       $ 544      .36%           40       $891      .58%
                               ====       =====                  ====       =====                   ====       ====
</TABLE>

Non-Performing  Assets. The table below sets forth the amounts and categories of
the Company's non-performing assets. Loans are placed on non-accrual status when
the loan is more than 90 days delinquent (except for FHA insured,  VA guaranteed
loans  and  government  guaranteed  student  loans)  or when the  collection  of
principal and/or interest in full becomes doubtful. When loans are designated as
non-accrual,  all accrued but unpaid interest is reversed against current period
income and subsequent  cash receipts  generally are applied to reduce the unpaid
principal  balance.  Foreclosed  assets include assets acquired in settlement of
loans.
<TABLE>
<CAPTION>
                                                                      September 30,
                                               ----------------------------------------------------------
                                                1999         1998         1997         1996          1995
                                               ------       ------       ------       ------       ------
                                                                (Dollars in thousands)
<S>                                            <C>          <C>          <C>          <C>          <C>
Non-performing loans:
  One to four family real estate ........      $  396       $  520       $  780       $1,008       $  784
  Multi-family and commercial real estate        --           --           --             78         --
  Consumer ..............................         148           71          137          283          251
                                               ------       ------       ------       ------       ------
     Total ..............................      $  544       $  591       $  917       $1,369       $1,035
                                               ------       ------       ------       ------       ------
Troubled debt restructured loans:
     Total ..............................        --           --           --           --           --
                                               ------       ------       ------       ------       ------
Foreclosed assets, net:
  One to four family real estate ........        --             53          225          334          326
  Multi-family and commercial real estate        --           --             23           23          158
                                               ------       ------       ------       ------       ------
     Total ..............................        --             53          248          357          484
                                               ------       ------       ------       ------       ------
Total non-performing assets .............      $  544       $  644       $1,165       $1,726       $1,519
                                               ======       ======       ======       ======       ======
Total as a percentage of total assets ...         .16%         .20%         .40%         .61%         .66%
                                               ======       ======       ======       ======       ======
</TABLE>

For the years ended  September 30, 1999,  1998 and 1997,  the  additional  gross
interest income which would have been recorded had the  non-accruing  loans been
current in accordance with their original terms amounted to $31,091, $28,053 and
$49,948, respectively.

Non-Accruing  Loans.  As of  September  30,  1999,  the Company had  $396,000 in
non-accruing  loans,  which  consisted  of 7  one-  to  four-family  residential
mortgage loans and represented .26% of the Company's gross loan portfolio.

Foreclosed  Assets.  As of  September  30, 1999,  the Company had no  foreclosed
assets.

Other Loans of Concern.  As of September 30, 1999,  there were $299,337 of other
loans (consisting of four one to four family real estate loans totaling $272,087
and five consumer loans totaling  $27,250) not included in  nonperforming  loans
above where known  information  about the possible  credit problems of borrowers
caused  management  to have doubts as to the  ability of the  borrower to comply
with  present  loan  repayment  terms.  These  loans  have  been  considered  by
management in conjunction with the analysis of the adequacy of the allowance for
loan losses.

Classified Assets.  Federal  regulations provide for the classification of loans
and other assets, such as debt and equity securities  considered to be of lesser
quality,  as  `substandard,'  `doubtful'  or  `loss.'  An  asset  is  considered
`substandard'  if it is  inadequately  protected  by the  current  net worth and
paying  capacity  of  the  obligor  or  of  the  collateral   pledged,  if  any.
`Substandard'  assets include those characterized by the `distinct  possibility'
that the insured  institution  will sustain `some loss' if the  deficiencies are
not  corrected.  Assets  classified  as  `doubtful'  have all of the  weaknesses
inherent in those classified  `substandard,' with the added  characteristic that
the weaknesses present make `collection or liquidation in full,' on the basis of
currently  existing facts,  conditions,  and values,  `highly  questionable  and
improbable.'  Assets  classified as `loss' are those considered  `uncollectible'
and  of  such  little  value  that  their  continuance  as  assets  without  the
establishment of a specific loss reserve is not warranted.

When an insured  institution  classifies problem assets as either substandard or
doubtful, it may increase general allowances for loan losses in an amount deemed
prudent by  management  to address the  increased  risk of loss on such  assets.
General  allowances  represent loss  allowances  which have been  established to
recognize  the inherent  risk  associated  with lending  activities,  but which,
unlike  specific  allowances,  have not been  allocated  to  particular  problem
assets. When an insured  institution  classifies problem assets as "loss," it is
required  either to establish a specific  allowance  for losses equal to 100% of
that  portion  of the asset so  classified  or to  charge-off  such  amount.  An
institution's  determination  as to the  classification  of its  assets  and the
amount of its valuation  allowances  is subject to review and  adjustment by the
OTS and the  FDIC,  which  may order  increases  in  general  or  specific  loss
allowances.

In accordance with its  classification  of assets policy,  the Company regularly
reviews the problem  assets in its  portfolio  to  determine  whether any assets
require classification in accordance with applicable  regulations.  On the basis
of  management's  review of its assets,  at September 30, 1999,  the Company had
classified $571,000 as substandard and none as doubtful or loss.

Allowance  for Loan  Losses.  At  September  30,  1999,  the Company had a total
allowance  for  loan  losses  of  $2,093,000,   representing   384.7%  of  total
non-performing  loans.  The allowance for loan losses is  established  through a
provision for loan losses based on management's  evaluation of the risk inherent
in its loan portfolio and changes in the nature and volume of its loan activity,
including those loans which are being specifically monitored by management. Such
evaluation,  which includes a review of loans for which full  collectibility may
not  be  reasonably   assured,   considers   among  other   matters,   the  loan
classifications  discussed  above,  the estimated  fair value of the  underlying
collateral,  economic  conditions,  historical loan loss  experience,  and other
factors  that  warrant  recognition  in  providing  for an  adequate  loan  loss
allowance.

Real estate properties  acquired through foreclosure are recorded at fair value,
less estimated  selling costs. If fair value, less selling costs, at the date of
foreclosure  is lower than the book balance of the related loan,  the difference
will be  charged  to the  allowance  for loan  losses  at the time of  transfer.
Valuations of the property are  periodically  updated by  management  and if the
value declines,  a specific  provision for losses on such property is charged to
operations.

The  determination of the adequacy of the allowance is necessarily  speculative,
and is based upon future loan  performance  outside the control of the  Company.
Adverse local,  regional or national  economic  conditions,  changes in interest
rates,  population,  products and other factors can all adversely  affect future
loan delinquency rates.  Unforeseen  conditions could require adjustments to the
allowance  through  additional  loan  loss  provisions.   Net  income  could  be
significantly   affected  if  circumstances   differ   substantially   from  the
assumptions used in determining the level of the allowance. In addition, federal
regulatory   agencies,   as  an  integral  part  of  the  examination   process,
periodically  review the Company's  allowance for loan losses. Such agencies may
require the Company to increase the allowance  based upon their  judgment of the
information available to them at the time of their examination.
<PAGE>
The following  table sets forth an analysis of the Company's  allowance for loan
losses.
<TABLE>
<CAPTION>
                                                                      Year Ended September 30,
                                               -------------------------------------------------------------------
                                                 1999           1998           1997          1996           1995
                                               -------        -------        -------        -------        -------
                                                                       (Dollars in thousands)
<S>                                            <C>            <C>            <C>            <C>            <C>
Balance at beginning of year ............      $ 1,950        $ 1,889        $ 1,833        $ 1,950        $ 1,746
Charge-offs:
  One to four family real estate ........           (6)           (58)          (162)          (237)           (12)
  Multi-family and commercial real estate         --             --              (30)          --             --
  Consumer ..............................          (89)           (90)           (90)           (86)           (50)
                                               -------        -------        -------        -------        -------
         Total charge-offs ..............          (95)          (148)          (282)          (323)           (62)
                                               -------        -------        -------        -------        -------
Recoveries:
  One to four family real estate ........            2           --                4           --                1
  Consumer ..............................           46             20             34             11             10
                                               -------        -------        -------        -------        -------
         Total recoveries ...............           48             20             38             11             11
                                               -------        -------        -------        -------        -------
Net charge-offs .........................          (47)          (128)          (244)          (312)           (51)
Provisions charged to operations ........          190            189            300            195            255
                                               -------        -------        -------        -------        -------
Balance at end of year ..................      $ 2,093        $ 1,950        $ 1,889        $ 1,833        $ 1,950
                                               =======        =======        =======        =======        =======

Ratio of net charge-offs to average loans
outstanding during the year .............          .03%           .10%           .19%           .26%           .04%
                                               =======        =======        =======        =======        =======
Ratio of net charge-offs to average
non-performing loans ....................         7.83%         21.39%         17.73%         18.60%          4.46%
                                               =======        =======        =======        =======        =======
</TABLE>
<PAGE>
The  distribution  of the  Company's  allowance  for loan  losses  at the  dates
indicated is summarized as follows:
<TABLE>
<CAPTION>
                                                              September 30,
                       --------------------------------------------------------------------------------------------
                                   1999                            1998                           1997
                       -----------------------------  -----------------------------  ------------------------------
                                            Percent                         Percent                        Percent
                                            of Loans                       of Loans                        of Loans
                                    Loan    in Each                Loan     in Each               Loan     in Each
                       Amount of  Amounts   Category  Amount of   Amounts  Category  Amount of   Amounts   Category
                       Loan Loss     By     to Total  Loan Loss     By     to Total  Loan Loss     by      to Total
                       Allowance  Category   Loans    Allowance  Category    Loans   Allowance  Category    Loans
                       ---------  --------   -----    ---------  --------    -----   ---------  --------    -----
                                                          (Dollars in thousands)
<S>                      <C>      <C>         <C>         <C>     <C>        <C>         <C>     <C>        <C>
One to four family       $1,110   $121,151     79.19%     $  947  $113,423    81.02%     $  573  $102,232    80.69%
 real estate.........
Multi-family and
  Commercial real
  Estate.............       201      7,940      5.19         196     6,389     4.56         470     4,691     3.70
Construction.........        16      3,176      2.07          24     1,182      .85         ---     1,306     1.03
Commercial...........        12        994       .65          12       602      .43         ---        63      .05
Consumer.............       335     19,729     12.90         293    18,399    13.14         288    18,410    14.53
Unallocated..........       419        ---       ---         478       ---      ---         558       ---      ---
                         ------   --------    ------      ------  --------   ------      ------  --------   ------
     Total...........    $2,093   $152,990    100.00%     $1,950  $139,995   100.00%     $1,889  $126,702   100.00%
                         ======   ========    ======      ======  ========   ======      ======  ========   ======

<CAPTION>
                                              September 30,
                       ------------------------------------------------------------
                                    1996                           1995
                       -----------------------------  -----------------------------
                                             Percent                        Percent
                                            of Loans                       of Loans
                                    Loan     in Each               Loan     in Each
                       Amount of   Amounts  Category  Amount of   Amounts  Category
                       Loan Loss     by     to Total  Loan Loss     by     to Total
                       Allowance  Category    Loans   Allowance  Category    Loans
                       ---------  --------    -----   ---------  --------    -----
                                        (Dollars in thousands)
<S>                        <C>     <C>        <C>         <C>     <C>         <C>
One to four family         $  496  $100,383    80.34%     $  737  $ 95,588     79.04%
 real estate.........
Multi-family and
  Commercial real
  Estate.............         528     5,115     4.09         443     5,132      4.24
Construction.........         ---       423      .34         ---       230       .19
Commercial...........         ---       ---      ---         ---       ---       ---
Consumer.............         250    19,024    15.23         220    19,988     16.53
Unallocated..........         559       ---      ---         550       ---       ---
                           ------  --------   ------      ------  --------    ------
     Total...........      $1,833  $124,945   100.00%     $1,950  $120,938    100.00%
                           ======  ========   ======      ======  ========    ======
</TABLE>
<PAGE>
Investment Activities

General. The Company must maintain minimum levels of investments that qualify as
liquid  assets  under  OTS  regulations.  Liquidity  may  increase  or  decrease
depending upon the  availability of funds and comparative  yields on investments
as compared  to the return on loans.  Historically,  the Company has  maintained
liquid  assets  at levels  above the  minimum  requirements  imposed  by the OTS
regulations  and above  levels  believed  adequate to meet the  requirements  of
normal operations, including potential deposit outflows. For September 1999, the
Company's average  regulatory  liquidity ratio (liquid assets as a percentage of
net withdrawable deposits and current borrowings excluding those whose remaining
maturity exceeds one year) was 37.8%.

Securities.  Federally  chartered  savings  institutions  have the  authority to
invest in various  types of liquid  assets,  including  United  States  Treasury
obligations,  securities of various federal agencies,  obligations of states and
political  subdivisions,  certain  certificates of deposits of insured Banks and
savings institutions,  certain bankers'  acceptances,  repurchase agreements and
federal funds.  Subject to various  restrictions,  federally  chartered  savings
institutions  also may invest their assets in investment  grade commercial paper
and  corporate  debt  securities  and mutual funds whose  assets  conform to the
investments  that  a  federally   chartered  savings  institution  is  otherwise
authorized to make  directly.  At September 30, 1999,  the Company's  securities
portfolio,  all of which is classified  as available for sale,  had an amortized
cost of $98.8 million, or 29.2% of total assets.

Generally, the investment policy of the Company is to invest funds not needed to
fund loans,  among various  categories of investments and maturities  based upon
the Company's  need for  liquidity,  to achieve the proper  balance  between its
desire to minimize risk and maximize yield, to provide collateral for borrowings
and to fulfill the Company's  asset/liability  management policies. Prior to the
Company's  initial  public  offering  and the  Company's  conversion  to a stock
institution,   the  Company's  investment  strategy  had  been  directed  toward
high-quality  assets  (primarily U.S.  Government  securities and federal agency
obligations   and  high  grade  corporate  debt   securities)   with  short  and
intermediate terms (five years or less) to maturity.  After the conversion,  the
Company has  extended the duration of its  portfolio by  purchasing  longer term
municipal and corporate debt  securities  with  maturities up to twenty years to
decrease  its asset  sensitivity,  leverage  its capital and  increase  interest
income.  Corporate debt securities  generally are considered of higher risk than
U.S.  Government  securities  and federal agency  obligations.  At September 30,
1999, the weighted average term to maturity of the security portfolio, excluding
other marketable equity securities,  was 15.51 years. See Note 5 of the Notes to
Consolidated  Financial  Statements for information  regarding the maturities of
the Company's securities available for sale portfolio.

Mortgage-Backed  Securities.  In order to supplement loan production and achieve
its  asset/liability  management  goals, the Company invests in  mortgage-backed
securities.  All of the  mortgage-backed  securities  owned by the  Company  are
issued, insured or guaranteed either directly or indirectly by a federal agency.
At  September  30,  1999,  the  Company  had $71.5  million  in  mortgage-backed
securities,  or 21.1% of total assets, all of which, are classified as available
for  sale.  See Note 5 of the Notes to  Consolidated  Financial  Statements  for
information regarding the maturities of the Company's mortgage-backed securities
portfolio.
<PAGE>
The  following  table  sets  forth  at  amortized  cost the  composition  of the
Company's   investment   securities,   mortgage-backed   securities   and  other
interest-earning assets at the dates indicated.
<TABLE>
<CAPTION>
                                                                    September 30,
                                        -------------------------------------------------------------------
                                                1999                    1998                    1997
                                        -------------------------------------------------------------------
                                        Amortized     % of      Amortized     % of     Amortized       % of
                                          Cost        Total        Cost       Total       Cost        Total
                                            ----        -----        ----       -----       ----        -----
                                                                 (Dollars in thousands)
<S>                                        <C>         <C>         <C>        <C>          <C>         <C>
Investment securities:
  U.S. government and federal
     agency obligations..............       $7,987       8.09%     $21,954     29.33%      $61,833      87.39%
  Corporate bonds....................       34,895      35.33       16,230     21.69         6,042       8.54
  State and municipal obligations....       53,354      54.02       34,414     45.98           194        .28
  Other..............................        2,532       2.56        2,242      3.00         2,682       3.79
                                           -------     ------      -------    ------       -------     ------
     Total investment securities.....      $98,768     100.00%     $74,840    100.00%      $70,751     100.00%
                                           =======     ======      =======    ======       =======     ======
Average remaining contractual
 life of securities..................          15.51 years            15.45 years               5.80 years

Federal Home Loan Bank of New York
stock, required by law...............      $ 2,634     100.00%     $ 1,954    100.00%      $ 1,762     100.00%
                                           =======     ======      =======    ======       =======     ======
Mortgage-backed securities:
  GNMA...............................      $37,632      52.62%     $41,828     47.12%      $41,450      49.41%
  FNMA...............................       23,441      32.77       31,151     35.09        29,920      35.67
  FHLMC..............................        9,561      13.37       15,691     17.68        12,416      14.80
  Other..............................          884       1.24           96       .11            97        .12
                                           -------     ------      -------    ------       -------     ------
     Total mortgage-backed
      securities.....................      $71,518     100.00%     $88,766    100.00%      $83,883     100.00%
                                           =======     ======      =======    ======       =======     ======
</TABLE>
<PAGE>
The  composition  and  maturities  of the  investment  securities  portfolio  by
contractual maturity are indicated in the following table.
<TABLE>
<CAPTION>
                                                                       September 30, 1999
                                       ---------------------------------------------------------------------------------
                                       Less Than        1 to 5        5 to 10         Over                 Total
                                         1 Year         Years          Years        10 Years      Investment  Securities
                                       Amortized      Amortized      Amortized     Amortized      Amortized        Fair
                                          Cost           Cost          Cost           Cost           Cost         Value
                                          ----           ----          ----           ----           ----         -----
                                                                     (Dollars in thousands)
<S>                                     <C>           <C>           <C>            <C>            <C>          <C>
U.S. government and federal
 agency obligations.................    $   ---         $  ---       $ 7,987        $   ---         $7,987      $ 7,991
Corporate bonds.....................        ---          6,292        14,677         13,926         34,895       33,762
State and municipal obligations.....        ---            178            23         53,153         53,354       50,213
Other...............................        ---            ---           ---          2,532          2,532        2,593
                                         ------        -------       -------        -------        -------      -------
  Total investment securities.......     $  ---        $ 6,470       $22,687        $69,611        $98,768      $94,559
                                         ======        =======       =======        =======        =======      =======
Weighted average tax equivalent
 yield..............................        ---          7.68%         7.45%          7.57%          7.56%
</TABLE>

The  Company's  securities  portfolio  at September  30,  1999,  did not contain
securities  of any issuer with an  aggregate  book value in excess of 10% of the
Company's equity,  excluding those issued by the United States Government or its
agencies.
<PAGE>
The following table sets forth the final contractual maturities of the Company's
mortgage-backed securities at amortized cost, at September 30, 1999.
<TABLE>
<CAPTION>
                                                             Due in                                 September 30,
                                  ------------------------------------------------------------          1999
                                  3 Years       3 to 5       5 to 10      10 to 20     Over 20       Amortized
                                  or Less        Years        Years        Years        Years          Cost
                                  -------        -----        -----        -----        -----          ----
                                                               (In thousands)
<S>                                <C>          <C>          <C>        <C>          <C>             <C>
GNMA...........................    $  7        $  ---        $ 136       $3,400      $34,089         $37,632
FNMA...........................     ---           726          ---        9,233       13,482          23,441
FHLMC..........................     ---           ---           17        5,956        3,588           9,561
Other..........................     ---           ---          ---          ---          884             884
                                   ----         -----        -----      -------      -------         -------
     Total.....................    $  7         $ 726        $ 153      $18,589      $52,043         $71,518
                                   ====         =====        =====      =======      =======         =======
</TABLE>

Sources of Funds

General.  The Company's  primary  sources of funds are deposits and  borrowings,
amortization  and prepayment of loan  principal,  maturities and  prepayments of
securities, short-term investments, and funds provided from operations.

Deposits.  The Company offers deposit  accounts having a range of interest rates
and terms.  The Company offers passbook and statement  savings  accounts,  money
market  savings  accounts,   both  interest  bearing  and  non-interest  bearing
transaction  accounts,  and certificate of deposit accounts currently ranging in
terms from three months to ten years.  The Company only  solicits  deposits from
its primary market area and does not have brokered deposits.  The Company relies
primarily on competitive  pricing policies,  advertising and customer service to
attract  and retain  these  deposits.  The  Company  generally  does not utilize
premiums or promotional  gifts for new accounts,  although one existing  program
for senior citizens does provide certain enumerated benefits,  such as discounts
on loans and safe  deposit  boxes,  free  travelers  checks,  money orders and a
variety of other services.

The flow of deposits is influenced significantly by general economic conditions,
changes in money market and prevailing  interest  rates,  and  competition.  The
variety  of  deposit  accounts  offered  by the  Company  has  allowed  it to be
competitive  in obtaining  funds and to respond with  flexibility  to changes in
consumer  demand.  In recent years,  the Company has become more  susceptible to
short-term fluctuations in deposit flows, as customers have become more interest
rate conscious.  The Company manages the pricing of its deposits in keeping with
its asset/liability management, liquidity and profitability objectives. Based on
its  experience,  the Company  believes  that its  passbook,  statement  savings
accounts,  money market savings accounts and transaction accounts are relatively
stable sources of deposits.  However,  the ability of the Company to attract and
maintain  certificates of deposits and the rates paid on those deposits has been
and will continue to be significantly affected by market conditions.
<PAGE>
The  following  table sets forth the  deposit  flows at the  Company  during the
periods indicated.
<TABLE>
<CAPTION>
                                                            Year Ended September 30,
                                                     --------------------------------------
                                                       1999           1998           1997
                                                     --------       --------       --------
                                                              (Dollars in thousands)
<S>                                                  <C>            <C>            <C>
Opening balance...............................       $209,977       $200,912       $196,753
Deposits......................................        379,260        310,108        254,977
Withdrawals...................................      (378,633)      (309,896)      (259,424)
Interest credited.............................          8,460          8,853          8,606
                                                     --------       --------       --------
Ending balance................................       $219,064       $209,977       $200,912
                                                     ========       ========       ========
Net increase..................................        $ 9,087        $ 9,065        $ 4,159
                                                     ========       ========       ========
Percent increase..............................          4.33%          4.51%          2.11%
                                                     ========       ========       ========
</TABLE>

The  following  table sets forth the dollar  amount of  deposits  in the various
deposit programs offered by the Company for the periods indicated.
<TABLE>
<CAPTION>
                                                            Year Ended September 30,
                                         ----------------------------------------------------------------
                                                1999                  1998                  1997
                                         ------------------     ------------------    ------------------
                                                    Percent               Percent               Percent
                                         Amount    of Total     Amount    of Total    Amount    of Total
                                         ------    --------     ------    --------    ------    --------
                                                             (Dollars in thousands)
<S>                                      <C>          <C>       <C>         <C>       <C>         <C>
Non-Certificate Deposits(1):
Statement savings accounts 3.05%......    $16,365       7.47%    $11,867      5.65%     $8,388      4.17%
Non-interest bearing demand accounts..      8,918       4.07       6,009      2.86       4,370      2.18
Passbook savings accounts 2.96%.......     65,529      29.91      66,208     31.53      71,060     35.37
NOW accounts 1.98%....................     14,833       6.77      12,396      5.91      10,438      5.20
Money market accounts 2.96%...........      6,435       2.94       5,949      2.83       7,115      3.54
                                         --------     ------    --------    ------    --------    ------

Total non-certificates................    112,080      51.16     102,429     48.78     101,371     50.46
                                         --------     ------    --------    ------    --------    ------
Certificates of Deposits:
 2.00 -  3.99%........................        ---        ---         ---       ---          20       .01
 4.00 -  5.99%........................    101,433      46.30     106,990     50.95      88,416     44.00
 6.00 -  7.99%........................      5,551       2.54         558       .27      11,105      5.53
                                         --------     ------    --------    ------    --------    ------

Total certificates....................    106,984      48.84     107,548     51.22      99,541     49.54
                                         --------     ------    --------    ------    --------    ------

Total deposits........................   $219,064     100.00%   $209,977    100.00%   $200,912    100.00%
                                         ========     ======    ========    ======    ========    ======
</TABLE>

(1) Interest rates shown are the Bank's stated rates as of September 30, 1999.
<PAGE>
The  following  table  shows rate and  maturity  information  for the  Company's
certificates of deposits as of September 30, 1999.
<TABLE>
<CAPTION>
                                   4.00-        6.00-                     Percent
                                   5.99%        7.99%        Total       of Total
                                   -----        -----        -----       --------
                                               (Dollars in thousands)
Certificate accounts maturing
in quarter ending:
-------------------------------
<S>                                 <C>             <C>       <C>          <C>
December 31, 1999..............      $23,370        $ ---      $23,370      21.84%
March 31, 2000.................       25,509          ---       25,509      23.84
June 30, 2000..................       16,055          ---       16,055      15.01
September 30, 2000.............       12,133          ---       12,133      11.34
December 31, 2000..............        9,022          ---        9,022       8.43
March 31, 2001.................        5,129          ---        5,129       4.79
June 30, 2001..................        2,226          ---        2,226       2.08
September 30, 2001.............        3,040          ---        3,040       2.84
December 31, 2001..............        1,916          ---        1,916       1.79
March 31, 2002.................        1,578          ---        1,578       1.47
June 30, 2002..................        2,223          ---        2,223       2.08
September 30, 2002.............          376          449          825        .77
Thereafter.....................        3,940           18        3,958       3.72
                                    --------        -----     --------     ------

   Total.......................     $106,517        $ 467     $106,984     100.00%
                                    ========        =====     ========     ======

   Percent of total............       99.56%         .44%
                                    ========        =====
</TABLE>

     The following table  indicates the amount of the Company's  certificates of
     deposits by time remaining until maturity as of September 30, 1999.
<TABLE>
<CAPTION>
                                                                       Maturity
                                                    -----------------------------------------------
                                                                   Over         Over
                                                    3 Months      3 to 6      6 to 12        Over
                                                    or Less       Months       Months     12 months       Total
                                                    -------       ------       ------     ---------       -----
                                                                           (In thousands)
<S>                                                    <C>          <C>          <C>          <C>          <C>
Certificates of deposits less than $100,000.....       $20,707      $22,970      $24,582      $26,192       $94,451
Certificates of deposits of $100,000 or more....         2,663        2,539        3,606        3,725        12,533
                                                       -------      -------      -------      -------      --------

Total certificates of deposits..................       $23,370      $25,509      $28,188      $29,917      $106,984
                                                       =======      =======      =======      =======      ========
</TABLE>

Borrowings.  Although  deposits are the Company's  primary source of funds,  the
Company may utilize borrowings as a funding source. As a member of the FHLB, the
Company has access to overnight funds of approximately $15.6 million, along with
an additional  line of $15.6 million for  one-month  advances.  At September 30,
1999,  the Company had  borrowings of $13.1 million under its overnight line and
$8.0 million under its one-month advance line.

In January  1998,  the  Company  began  converting  a portion of its  short-term
borrowings to long-term  borrowings  principally through convertible  (callable)
advances  with  the  FHLB.  The   borrowings  are  secured  by   mortgage-backed
securities,  and have contractual maturities of ten years, however, they include
options  which  give the  lender  the right to call the debt  after a  specified
lock-out period. The Company had $25 million of such borrowings at September 30,
1999, which had remaining  lockout periods ranging from one month to five years.
For  further  detail,  see  Notes  #15  and  #16 to the  Consolidated  Financial
Statements.
<PAGE>
Subsidiary and Other Activities

As a federally  chartered savings  association,  the Company is permitted by OTS
regulations  to invest up to 2% of its assets or $6.7 million at  September  30,
1999,  in the  stock  of, or loans to,  service  corporation  subsidiaries.  The
Company may invest an additional 1% of its assets in service  corporations where
such additional funds are used for inner-city or community  development purposes
and up to 50% of its total capital in conforming  loans to service  corporations
in which it owns more than 10% of the capital stock.  Federal  associations also
are permitted to invest an unlimited  amount in operating  subsidiaries  engaged
solely in activities which a federal  association may engage in directly.  As of
September 30, 1999, the Company had one subsidiary, Catskill Financial Services,
Inc., which commenced  operations in January 1998,  principally  selling Savings
Bank Life Insurance.

The  Company,  as a unitary  savings  and loan  holding  company,  is  generally
permitted  under federal law to engage,  through  non-banking  subsidiaries,  in
whatever business  activities it may choose to pursue. The Company currently has
no such subsidiaries.

Competition

The Company faces strong competition,  both in originating real estate and other
loans and in attracting  deposits.  Competition in originating real estate loans
comes primarily from other savings institutions, commercial banks, credit unions
and  mortgage  bankers  making  loans  secured  by real  estate  located  in the
Company's  primary market area. Other savings  institutions,  commercial  banks,
credit unions and finance  companies  provide  vigorous  competition in consumer
lending.

The Company attracts all of its deposits  through its branch offices,  primarily
from the  communities  in which those  branch  offices are  located;  therefore,
competition for those deposits is principally  from other savings  institutions,
commercial banks and credit unions located in the same communities.  The Company
competes  for these  deposits  by  offering  a variety of  deposit  accounts  at
competitive  rates,  convenient  business hours, and convenient branch locations
with  interbranch  deposit and withdrawal  privileges.  Automated teller machine
facilities are also available at five of the Company's offices. At September 30,
1999, the Company held approximately 30% of total financial institution deposits
and 57% of total thrift deposits in Greene County,  New York, and  approximately
 .09% of total financial institution deposits in Albany County, New York.

Employees

At September 30, 1999,  the Company had a total of 79  employees,  including six
part-time  employees.  The  Company's  employees  are  not  represented  by  any
collective  bargaining group.  Management considers its employee relations to be
good.
<PAGE>
ITEM 2.  PROPERTIES

The Company  conducts  its  business  at its main office and five other  banking
offices in its primary  market area. The Company does not own or lease any other
premises and operates  principally from the Company's main office. The following
table sets forth  information  relating to each of the  Company's  offices as of
September 30, 1999.  The Company also owns a parking lot located at 313-317 Main
Street,  Catskill,  New York, which is used to service the main office.  The net
book value of the Company's premises and equipment (including land, building and
leasehold  improvements and furniture,  fixtures and equipment) at September 30,
1999,  was  $3.3  million.  See  Note  9  of  Notes  to  Consolidated  Financial
Statements.  The Company  believes that its current  facilities  are adequate to
meet the present and foreseeable  needs of the Bank and the Company,  subject to
possible future expansion.
<TABLE>
<CAPTION>
                                                                                  Total                 Net Book
                                                                Owned          Approximate         Value or Leasehold
                                             Date                or               Square             Improvement at
              Location                     Acquired            Leased            Footage           September 30, 1999
              --------                     --------            ------            -------           ------------------
                                                                                                     (In thousands)
Main Office:
341 Main Street
<S>                                      <C>                   <C>                <C>                   <C>
Catskill, New York                       Prior to 1950          Owned             11,750                $  687

Branch Offices:
Route 9-W
Ravena, New York                             1972               Owned              2,822                   326

Route 9-W
Corner Boulevard Avenue
Catskill, New York                           1978               Owned              2,900                   667

Route 296
Windham, New York                            1996               Owned              3,620                   690

Route 30(1)
Middleburgh, New York                        1999               Owned              2,025                   676

Supermarket Branch:
Bryant's Supermarket(2)
Route 32
Greenville, New York                         1998              Leased                592                   251
                                                                                                        ------
                                                                                                        $3,297
                                                                                                        ======
</TABLE>
----------------
(1) Branch opened August 1999
(2) Branch opened April 1998 and lease term expires in April 2013
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

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

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

During the fourth quarter of fiscal 1999,  there were no matters  submitted to a
vote of shareholders of Catskill Financial Corporation.
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The following  information included in the Annual Report to Shareholders for the
fiscal year ended  September 30, 1999,  (the "Annual  Report"),  is incorporated
herein by reference:  "SHAREHOLDER INFORMATION", which appears on page 59 of the
Annual Report.

ITEM 6.  SELECTED FINANCIAL DATA

The following  information  included in the Annual Report is incorporated herein
by reference:  "SELECTED  CONSOLIDATED  FINANCIAL  INFORMATION" which appears on
pages 3 and 4 of the Annual Report.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following  information  included in the Annual Report is incorporated herein
by reference:  "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS",  which  appears  on pages 6 through  26 of the  Annual
Report.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The following  information  included in the Annual Report is incorporated herein
by reference:  "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -  Asset/Liability  Management",  which appears on pages 9
through 13 of the Annual Report.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following  information  included in the Annual Report is incorporated herein
by reference:  The  consolidated  statements of financial  condition of Catskill
Financial  Corporation and Subsidiary as of September 30, 1999 and 1998, and the
related consolidated  statements of income,  shareholders' equity and cash flows
for  each of the  years in the  three-year  period  ended  September  30,  1999,
together with the related notes and the  independent  auditors'  report thereon,
all of which appears on pages 27 through 58 of the Annual Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following information included in the Proxy Statement is incorporated herein
by  reference  a copy of  which  is  expected  to be  filed  within  120 days of
September  30,  1999 ("the  Proxy  Statement"):  `ELECTION  OF  DIRECTORS',  and
`INFORMATION  CONCERNING THE BOARD OF DIRECTORS AND EXECUTIVE  OFFICERS',  which
appears on pages 2 through 5 of the Proxy Statement.

ITEM 11.  EXECUTIVE COMPENSATION

The  information  included  on pages 8  through  14 of the  Proxy  Statement  is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following information included in the Proxy Statement is incorporated herein
by reference:  "VOTING  SECURITIES AND CERTAIN HOLDERS THEREOF" which appears on
pages 6 through 8 of the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  included  on page 16 of the Proxy  Statement  is  incorporated
herein by reference: "TRANSACTIONS WITH DIRECTORS AND OFFICERS."

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a) Listed below are all  financial  statements  and exhibits  filed as
part of this report:

              (1) The consolidated statements of financial condition of Catskill
Financial  Corporation and subsidiary as of September 30, 1999 and 1998, and the
related consolidated  statements of income,  shareholders' equity and cash flows
for  each of the  years in the  three-year  period  ended  September  30,  1999,
together with the related notes and the  independent  auditors'  report thereon,
appearing in the Annual Report on pages 27 through 58 are incorporated herein by
reference.

              (2)     Schedules omitted as they are not applicable

              (3)     Exhibits

              The following  exhibits are either filed as part of this report or
are incorporated herein by reference:
<TABLE>
<CAPTION>
Regulation S - K Exhibit
     Reference Number                                               Description
     ----------------                                               -----------
<S>                                       <C>
         3.1                              Certificate of Incorporation of Catskill Financial
                                          Corporation (incorporated by reference to Exhibit 3.1 to the
                                          Registration Statement on Form S-1 No. #33-81019, of Catskill
                                          Financial Corporation, filed on February 5, 1996,
                                          (hereinafter "Form S-1")

         3.2                              By laws of Catskill Financial Corporation (incorporated by
                                          reference to Exhibit 3.2 to Form S-1)

          4                               Specimen Stock Certificate (incorporated by reference to
                                          Exhibit 4 to Form S-1.)

         10.1                             Catskill Financial Corporation 1996 Stock Option and
                                          Incentive Compensation Plan (incorporated by reference to
                                          Proxy Statement for Special Meeting of Stockholders of
                                          Catskill Financial Corporation held on October 24, 1996.)

         10.2                             Employment agreement dated April 1, 1998, by and between
                                          Catskill Savings Bank and Wilbur J. Cross.  (incorporated by
                                          reference to Exhibit 10.2 to Form 10Q for the nine month
                                          period ended June 30, 1998.)

         10.3                             Catskill Financial Corporation Employee Stock ownership
                                          Plan (incorporated by reference to Exhibit 10.3 to Form S-1.)

         10.4                             Catskill Financial Corporation Management Recognition Plan
                                          (incorporated by reference to Proxy Statement for Special
                                          Meeting of Stockholders of Catskill Financial Corporation
                                          held on October 24, 1996.)

         10.5                             Trustees Deferred Compensation Plan of Catskill Savings
                                          Bank (incorporated by reference to Exhibit 10.7 to Form S-1.)

         10.6                             Employment agreement dated April 1, 1998, by and between
                                          Catskill Financial Corporation and Wilbur J. Cross.
                                          (Incorporated by reference to Exhibit 10.1 to Form 10Q for
                                          the nine month period ended June 30, 1998.)

         10.7                             Catskill Financial Corporation Supplemental Executive
                                          Retirement Plan.  (Incorporated by reference to Exhibit 10.3
                                          to Form 10Q for the nine month period ended June 30, 1998.)

         10.8                             Catskill Financial Corporation Supplemental Executive
                                          Retirement Plan Trust (incorporated by reference to Exhibit
                                          10.4 to Form 10Q for the nine month period ended June
                                          30, 1998.)

         10.9                             Employment Agreement dated August 1, 1998, by and between
                                          Catskill Savings Bank and David J. DeLuca (Incorporated by
                                          reference to Exhibit 10.9 to Form 10K for the year ended
                                          September 30, 1998.)

        10.10                             Schedule pursuant to instruction #2 of Item 601 of Regulation
                                          SK.  There is an employment agreement with Keith Lampman, an
                                          executive officer of the registrant, which is substantially
                                          identical to the agreement included as Exhibit 10.9.  The
                                          only differences are that the agreement is with Mr. Lampman,
                                          contains his residence address, refers to his title as "Vice
                                          President" and does not contain section 1(e)(3) as contained
                                          in the agreement included as Exhibit 10.9.

        10.11                             Employment Agreement dated February 1, 1999, by and between
                                          Catskill Savings Bank and Deborah S. Henderson.
                                          (Incorporated by reference to Exhibit 10.1 to Form 10Q for
                                          the six month period ended March 31, 1999.)

        10.12                             Catskill Savings Bank Director Death Benefit Plan
                                          (Incorporated by reference to Exhibit 10.1 to Form 10Q for
                                          the nine month period ended June 30, 1999.)

          11                              Computation of Net Income per Common Share

          13                              1999 Annual Report to security holders

          21                              Subsidiaries of the registrant

          23                              Consent of KPMG LLP

          27                              Financial Data Schedule
</TABLE>
<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          CATSKILL FINANCIAL CORPORATION
                                          ------------------------------
                                                  (Registrant)

                                          By:    /s/ Wilbur J. Cross
                                                 -------------------
                                          Wilbur J. Cross
                                          Director & Chairman of the Board,
                                          President & Chief Executive Officer

Date:  December 17, 1999

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.

<TABLE>
<CAPTION>
              Signature                                     Title                                 Date
              ---------                                     -----                                 ----
<S>                                         <C>                                            <C>
 /s/ Wilbur J. Cross                        Director & Chairman of the Board,
--------------------                        President and Chief
Wilbur J. Cross                             Executive Officer                              December 17, 1999


 /s/ David J. DeLuca                        Chief Financial Officer
--------------------                        (Principal Financial Officer
David J. DeLuca                             & Principal Accounting
                                            Officer)                                       December 17, 1999

 /s/ George P. Jones
--------------------
George P. Jones                             Director                                       December 17, 1999


 /s/ Richard A. Marshall
------------------------
Richard A. Marshall                         Director                                       December 17, 1999


/s/ Allan D. Oren
-----------------
Allan D. Oren                               Director                                       December 17, 1999


 /s/ Hugh J. Quigley
--------------------
Hugh J. Quigley                             Director                                       December 17, 1999


 /s/ Edward P. Stiefel
----------------------
Edward P. Stiefel, Esq.                     Director                                       December 17, 1999
</TABLE>