UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  For the quarterly period ended March 31, 2000

                                       or

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

                    For the transition period from          to


                         Commission File Number 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
 incorporation or organization)                              Identification No.)


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

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


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.         Yes  [ X ]     No  [  ]

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

   Common Shares, $.01 par value                        3,737,519
   ----------------------------             --------------------------------
        (Title of Class)                     (outstanding at April 30, 2000)

<PAGE>

                         CATSKILL FINANCIAL CORPORATION
                                    FORM 10-Q
                                 March 31, 2000

INDEX
-----

PART I    FINANCIAL INFORMATION                                             Page
------    ---------------------                                             ----

Item 1.   Consolidated Interim Financial Statements

          Consolidated Statements of Financial Condition as of
          March 31, 2000 (Unaudited) and September 30, 1999..............     1

          Consolidated Statements of Income for the three months and six
          months ended March 31, 2000 and 1999 (Unaudited)...............     2

          Consolidated Statements of Changes in Shareholders' Equity
          for the six months ended March 31, 2000 and 1999
          (Unaudited)....................................................     3

          Consolidated  Statements  of Cash Flows for the six
           months ended March 31, 2000 and 1999 (Unaudited)........
                                                                              4

          Notes to Unaudited Consolidated Interim Financial Statements...     5

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations..........................................     6


Item 3.   Quantitative and Qualitative Disclosures about Market Risk.....    18

PART II.  OTHER INFORMATION
--------  -----------------

Item 1.   Legal Proceedings..............................................    21

Item 2.   Changes in Securities..........................................    21

Item 3.   Default on Senior Securities...................................    21

Item 4.   Submission of Matters to a Vote of Security Holders............    21

Item 5.   Other Information..............................................    22

Item 6.   Exhibits and Reports on Form 8-K...............................    22


          Signatures.....................................................    23



<PAGE>
<TABLE>
<CAPTION>

                         CATSKILL FINANCIAL CORPORATION
                 Consolidated Statements of Financial Condition
                 (In thousands, except share and per share data)

                                                      March 31,          September 30,
                                                        2000                  1999
                                                     ----------          -------------
<S>                                                  <C>                 <C>
Assets:                                              (Unaudited)
                                                     -----------
Cash and due from banks                              $     3,533         $     3,025
Securities available for sale, at fair value             156,557             165,833
Federal Home Loan Bank of NY stock, at cost                3,461               2,634
Loans receivable, net                                    160,663             150,821
Corporate-owned life insurance                            10,638              10,381
Accrued interest receivable                                2,624               2,576
Premises and equipment, net                                3,888               3,297
Other real estate owned                                      107                --
Other assets                                               4,631               3,014
                                                     -----------         -----------
Total assets                                         $   346,102         $   341,581
                                                     ===========         ===========

Liabilities and Shareholders' Equity:
Liabilities
Deposits:
Non-interest bearing                                 $     8,839         $     8,918
Interest bearing                                         212,706             210,146
                                                     -----------         -----------
Total deposits                                           221,545             219,064
Short-term borrowings                                     47,650              31,100
Long-term borrowings                                      15,000              25,000
Mortgagors' escrow deposits                                1,796               2,449
Other liabilities                                          4,005               4,756
                                                     -----------         -----------
Total liabilities                                    $   289,996         $   282,369
                                                     -----------         -----------
Shareholders' equity
Preferred stock, $.01 par value; authorized
5,000,000 shares                                            --                  --
Common stock, $.01 par value; authorized
15,000,000 shares; 5,686,750 shares issued
at March 31, 2000 and September 30, 1999                      57                  57

Additional paid-in capital                                55,132              55,114
Retained earnings, substantially restricted               41,388              39,997
Unallocated common stock acquired by ESOP                 (3,640)             (3,753)
Unearned management recognition plan                        (804)             (1,011)
Treasury stock, at cost (1,949,231 shares
at March 31, 2000 and 1,778,342
shares at September 30, 1999)                            (30,943)            (28,521)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                  <C>                 <C>
Accumulated other comprehensive income (loss)             (5,084)             (2,671)
                                                     -----------         -----------
Total shareholders' equity                                56,106              59,212
                                                     -----------         -----------
Total liabilities and shareholders' equity           $   346,102         $   341,581
                                                     ===========         ===========
</TABLE>


 See accompanying notes to unaudited consolidated interim financial statements.

                                       1
<PAGE>
<TABLE>
<CAPTION>
                         CATSKILL FINANCIAL CORPORATION
                        Consolidated Statements of Income
                 (In thousands, except share and per share data)

                                                          THREE MONTHS ENDED                         SIX MONTHS ENDED
                                                                March 31,                               March 31,
                                                        2000                  1999              2000                1999
                                                        ----                  ----              ----                ----
                                                               (Unaudited)                              (Unaudited)
<S>                                                 <C>                 <C>                <C>                 <C>
Interest and dividend income:
     Loans                                          $     3,103         $     2,778        $     6,109         $     5,542
     Securities available for sale
            Taxable                                       1,956               1,919              3,954               3,949
            Non-taxable                                     719                 537              1,437               1,028
     Investment securities held to maturity                --                    10               --                    43
     Federal funds sold and other                             2                   3                  3                   4
     Federal Home Loan Bank of NY stock                      57                  32                108                  67
                                                    -----------         -----------        -----------         -----------
          Total interest and dividend income              5,837               5,279             11,611              10,633

Interest expense:
     Deposits                                             2,075               2,118              4,159               4,344
     Short-term borrowings                                  701                 108              1,257                 180
     Long-term borrowings                                   221                 322                516                 651
                                                    -----------         -----------        -----------         -----------
          Total interest expense                          2,997               2,548              5,932               5,175
                                                    -----------         -----------        -----------         -----------
Net interest income                                       2,840               2,731              5,679               5,458

Provision for loan losses                                    50                  45                100                  90
                                                    -----------         -----------        -----------         -----------
     Net interest income after provision for
        loan losses                                       2,790               2,686              5,579               5,368
                                                    -----------         -----------        -----------         -----------


Non-interest income:
     Corporate-owned life insurance                         124                 120                257                 123
     Service fees on deposit accounts                       100                  90                206                 178
     Net securities gains (losses)                          (24)               --                 (117)                 22
     Other income                                            56                  44                109                  88
                                                    -----------         -----------        -----------         -----------
          Total non-interest income                         256                 254                455                 411
                                                    -----------         -----------        -----------         -----------

Non-interest expense:
     Salaries and employee benefits                         927                 881              1,854               1,752
     Advertising and business promotion                      51                  36                106                  58
     Net occupancy on premises                              123                  98                234                 193
     Federal deposit insurance premiums                      12                   6                 19                  13
     Postage and supplies                                    93                  91                179                 159
     Data processing fees                                   126                 146                258                 267
     Equipment                                               62                  35                120                  75
     Professional fees                                       63                  82                121                 141
     Other real estate operations, net                        2                  19                  3                  33
     Other                                                  148                 148                306                 316
                                                    -----------         -----------        -----------         -----------
          Total non-interest expense                      1,607               1,542              3,200               3,007
                                                    -----------         -----------        -----------         -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                 <C>                 <C>                <C>                 <C>


Income before taxes                                       1,439               1,398              2,834               2,772
          Income tax expense                                315                 357                608                 750
                                                    -----------         -----------        -----------         -----------
Net income                                          $     1,124         $     1,041        $     2,226         $     2,022
                                                    ===========         ===========        ===========         ===========
Basic earnings per common share                     $       .34         $       .27        $       .66         $       .53
Diluted earnings per common share                   $       .34         $       .27        $       .66         $       .52
Weighted Average Common Shares-Basic                  3,287,894           3,850,029          3,348,466           3,844,594
Weighted Average Common Shares-Diluted                3,287,894           3,916,756          3,378,275           3,898,120
</TABLE>


 See accompanying notes to unaudited consolidated interim financial statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>
                         CATSKILL FINANCIAL CORPORATION
           Consolidated Statements of Changes in Shareholders' Equity
          (In thousands, except share and per share data) (Unaudited)

                                                                                              Retained       Common        Unearned
                                                                              Additional     Earnings,        Stock       Management
                                                                    Common     Paid-in     Substantially   Acquired by   Recognition
                                                                    Stock      Capital      Restricted        ESOP           Plan
                                                                 -----------  -----------   ------------   ------------  -----------
<S>                                                                    <C>      <C>           <C>            <C>          <C>
     Balance at September 30, 1999                                     $ 57     $55,114       $39,997        $(3,753)     $(1,011)
     Comprehensive income:
              Net income                                                                        2,226
              Other comprehensive income (loss), net of tax:
                 Unrealized net losses arising during the
                    period on AFS securities (Pre-tax $4,139)
                 Reclassification adjustment for net losses
                    realized in net income (pre-tax $117)

              Other comprehensive losses

     Comprehensive loss

     Allocation of ESOP stock (11,373 shares)                                        40                          113

     Dividends paid on common stock ($.2425 per share)                                           (828)

     Purchase of common stock (200,000 shares)

     Grant of restricted stock (2,250 shares)                                                      (7)                        (29)

     Exercise of stock options
     (26,861 shares issued, net)
                                                                                    (22)
     Amortization of unearned MRP compensation                                                                                236
                                                                  ----------  -----------  -----------   -----------       ------

     Balance at March 31, 2000                                         $ 57     $55,132       $41,388        $(3,640)      $ (804)
                                                                       ====     =======       =======       ========      =======

     Balance at September 30, 1998                                     $ 57     $54,974       $37,374        $(3,981)     $(1,433)

     Comprehensive income:
              Net income                                                                        2,022
              Other comprehensive income (loss), net of tax:
                Unrealized net losses arising during the
                 period on AFS securities (Pre-tax $1,516)
                Reclassification adjustment for gains
                 realized in net income (pre-tax $22)

              Other comprehensive income (losses)

     Comprehensive income

     Allocation of ESOP stock (11,386 shares)                                        48                          114
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                    <C>      <C>           <C>            <C>          <C>
     Dividends paid on common stock ($.185 per share)                                            (733)

     Exercise of stock options (2,000 shares issued)                                               (7)

     Amortization of unearned MRP compensation                                                                                231
                                                                  ---------   -----------  -----------     ---------     ---------

     Balance at March 31, 1999                                         $ 57     $55,022       $38,656        $(3,867)     $(1,202)
                                                                       ====     =======       =======       ========     ========
</TABLE>


See accompanying notes to unaudited consolidated interim financial statements.


<PAGE>
<TABLE>
<CAPTION>
                         CATSKILL FINANCIAL CORPORATION
           Consolidated Statements of Changes in Shareholders' Equity
          (In thousands, except share and per share data) (Unaudited)

                                                                              Accumulated
                                                                 Treasury       Other
                                                                  Stock,     Comprehensive    Comprehensive
                                                                 at Cost      Income (Loss)       Income        Total
                                                               ------------  --------------- ---------------  ---------

<S>                                                                <C>         <C>              <C>            <C>
     Balance at September 30, 1999                                 $(28,521)   $ (2,671)                       $59,212
     Comprehensive income:
              Net income                                                                         $ 2,226         2,226
              Other comprehensive income (loss), net of tax:
                 Unrealized net losses arising during the
                    period on AFS securities (Pre-tax $4,139)                                     (2,483)
                 Reclassification adjustment for net losses
                    realized in net income (pre-tax $117)                                             70
                                                                                                  ------         --
              Other comprehensive losses                                         (2,413)          (2,413)       (2,413)
                                                                                                  ------
     Comprehensive loss                                                                           $ (187)
                                                                                                 =======
     Allocation of ESOP stock (11,373 shares)                                                                      153

     Dividends paid on common stock ($.2425 per share)                                                            (828)

     Purchase of common stock (200,000 shares)                       (2,888)                                    (2,888)

     Grant of restricted stock (2,250 shares)                            36

     Exercise of stock options
     (26,861 shares issued, net)                                        430                                        408

     Amortization of unearned MRP compensation                                                                     236
                                                                   --------     -------                        -------
     Balance at March 31, 2000                                     $(30,943)    $(5,084)                       $56,106
                                                                  =========    ========                        =======

     Balance at September 30, 1998                                 $(21,223)    $ 2,063                        $67,831

     Comprehensive income:
              Net income                                                                         $ 2,022         2,022
              Other comprehensive income (loss), net of tax:
                Unrealized net losses arising during the
                 period on AFS securities (Pre-tax $1,516)                                          (910)
                Reclassification adjustment for gains
                 realized in net income (pre-tax $22)                                                (13)
                                                                                                  ------
              Other comprehensive income (losses)                                  (923)            (923)         (923)
                                                                                                  ------         -----
     Comprehensive income                                                                        $ 1,099
                                                                                                 =======
     Allocation of ESOP stock (11,386 shares)                                                                      162
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                <C>         <C>              <C>            <C>
     Dividends paid on common stock ($.185 per share)                                                             (733)

     Exercise of stock options (2,000 shares issued)                     32                                         25

     Amortization of unearned MRP compensation                                       --                            231
                                                                  ---------     --------                       -------

     Balance at March 31, 1999                                     $(21,191)     $ 1,140                       $68,615
                                                                  =========      =======                       =======
</TABLE>




                                       3


<PAGE>
<TABLE>
<CAPTION>
                         CATSKILL FINANCIAL CORPORATION
                      Consolidated Statements of Cash Flows
                                 (In thousands)

                                                                                  Six Months Ended
                                                                                      March 31,
                                                                               2000              1999
                                                                             ---------         --------
<S>                                                                         <C>              <C>

CASH FLOWS FROM OPERATING ACTIVITIES:                                               (Unaudited)
 Net Income                                                                 $  2,226         $  2,022
 Adjustments  to  reconcile  net  income  to net  cash  provided  by
     operating activities:
  Depreciation                                                                   142              103
  Net accretion on securities                                                   (275)             (55)
  Provision for loan losses                                                      100               90
  MRP compensation expense                                                       236              231
  ESOP compensation expense                                                      153              162
  Increase in cash surrender values on COLI                                     (257)            (123)
  Losses on sale of other real estate owned                                     --                 13
  Write-down on other real estate owned                                         --                 17
  Losses (gains) on sales of securities                                          117              (22)
  Net increase in other assets                                                   (56)             (72)
  Net decrease in other liabilities                                             (751)             (54)
                                                                            --------         --------
 Net cash provided by operating activities                                     1,635            2,312
                                                                            --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity/calls/paydown of investment securities                   --              2,065
Net increase in loans                                                        (10,049)          (5,573)
Capital expenditures, net                                                       (733)            (173)
Purchase of corporate-owned life insurance                                      --            (10,000)
Purchase of Federal Home Loan Bank stock                                        (827)             (32)
Purchase of AFS securities                                                    (3,822)         (25,645)
Proceeds from sale of securities available for sale                            3,458            5,394
Proceeds from maturity/calls/paydown of AFS securities                         5,776           24,300
Proceeds from sale of other real estate owned                                   --                 10
                                                                            --------         --------
Net cash used by investing activities                                         (6,197)          (9,654)
                                                                            --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from stock option exercises                                         408               25
Net increase in deposits                                                       2,481            7,133
Net increase (decrease) in mortgagors' escrow deposits                          (653)             816
Net increase in short-term borrowings                                         16,550               60
Repayment of long-term borrowings                                            (10,000)            --
Cash dividends paid on common stock                                             (828)            (733)
Purchase of common stock for treasury                                         (2,888)            --
                                                                            --------         --------
Net cash provided by financing activities                                      5,070            7,301
                                                                            --------         --------
Net (decrease) increase in cash and cash equivalents                             508              (41)
Cash and cash equivalents at beginning of period                               3,025            2,795
                                                                            --------         --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                         <C>              <C>
Cash and cash equivalents at end of period                                  $  3,533         $  2,754
                                                                            ========         ========
Supplemental disclosure of cash flow information:
   Interest paid                                                            $  5,932         $  5,185
   Taxes paid                                                                    396              489
Transfer of loans to other real estate owned                                     107               32
Change in net unrealized gain (loss) on AFS securities,
net of change in deferred tax benefit of $1,609 and
$615, respectively                                                            (2,413)            (923)
</TABLE>

  See accompanying notes to unaudited consolidated interim financial statements

                                       4
<PAGE>
                         CATSKILL FINANCIAL CORPORATION
                         Notes to Unaudited Consolidated
                          Interim Financial Statements

Note 1. Basis of Presentation

         The unaudited  consolidated  interim financial  statements  include the
         accounts of Catskill  Financial  Corporation  (the  "Company")  and its
         wholly  owned  subsidiary,  Catskill  Savings  Bank (the  "Bank").  All
         intercompany   accounts  and  transactions   have  been  eliminated  in
         consolidation. Amounts in prior periods' unaudited consolidated interim
         financial statements are reclassified  whenever necessary to conform to
         the  current  period's  presentation.   In  management's  opinion,  the
         unaudited   consolidated   interim  financial  statements  reflect  all
         adjustments of a normal  recurring  nature,  and disclosures  which are
         necessary  for a fair  presentation  of the  results  for  the  interim
         periods   presented  and  should  be  read  in  conjunction   with  the
         consolidated  financial  statements  and related notes  included in the
         Company's 1999 Annual Report to Stockholders. The results of operations
         for the interim periods are not  necessarily  indicative of the results
         of operations  to be expected for the full fiscal year ended  September
         30, 2000.

Note 2. Earnings Per Share

         Basic earnings per share excludes  dilution and is computed by dividing
         income available to common  stockholders by the weighted average number
         of common shares outstanding for the period.  Unvested restricted stock
         is not considered  outstanding  and is only included in the computation
         of basic  earnings  per share on the date  that they are fully  vested.
         Diluted  earnings per share reflects the potential  dilution that could
         occur if  securities  or other  contracts  to issue  common  stock were
         exercised or converted into common stock or resulted in the issuance of
         common  stock that then shared in the  earnings of the entity,  such as
         the Company"s stock options and unvested restricted stock.  Unallocated
         ESOP shares are not included in the weighted  average  number of common
         shares  outstanding for either the basic or diluted  earnings per share
         calculations.

             The  following  sets  forth  certain   information   regarding  the
             calculation  of basic and diluted  earnings per share for the three
             month and six month periods ended March 31:

                 (in thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                                   Three Months Ended                     Six Months Ended
                                                                         March 31                               March 31
                                                             ------------------------------        -----------------------------
                                                                 2000              1999                2000            1999
                                                                -----              -----              -----            ----
<S>                                                         <C>                <C>                <C>              <C>
       Net income                                           $       1,124      $       1,041      $       2,226    $       2,022
                                                            =============      =============      =============    =============

       Weighted average common shares                           3,287,894          3,850,029          3,348,466        3,844,594

       Dilutive effect of potential common shares
                    related to stock compensation plans               ---             66,727             29,809           53,526
                                                            -------------         ----------         ----------       ----------

       Weighted average common shares including
                    potential dilution                          3,287,894          3,916,756          3,378,275        3,898,120
                                                                =========          =========          =========        =========

      Basic earnings per share                                   $ .34              $ .27              $ .66            $ .53

       Diluted earnings per share                                $ .34              $ .27              $ .66            $ .52

</TABLE>

                                        5
<PAGE>

                         CATSKILL FINANCIAL CORPORATION
                                    FORM 10-Q
                                 March 31, 2000


                   PART I - FINANCIAL INFORMATION (continued)

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations

GENERAL

Catskill  Financial  Corporation  (the  "Company" or "Catskill  Financial") is a
savings and loan holding company, which owns all of the outstanding common stock
of Catskill Savings Bank (the "Bank").

The Bank has been and continues to be a community oriented financial institution
offering a variety of financial  services.  The Bank attracts  deposits from the
general public and uses such deposits,  together with other funds,  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 its primary  market area.  The Bank's  primary  market
area is comprised of Greene and Schoharie Counties and southern Albany County in
New York,  which are serviced  through  seven banking  offices,  the most recent
having opened in February 2000.  The Bank's deposit  accounts are insured by the
Bank  Insurance  Fund  ("BIF")  of the  Federal  Deposit  Insurance  Corporation
("FDIC"),  and, as a federal  savings bank, the Bank is subject to regulation by
the Office of Thrift Supervision ("OTS").

The Company's profitability, like many financial institutions, is dependent to a
large extent upon its net interest income,  which is the difference  between the
interest it receives on interest earning assets,  such as loans and investments,
and the interest it pays on interest bearing  liabilities,  principally deposits
and borrowings.

Results of  operations  are also  affected by the  Company's  provision for loan
losses, non-interest expenses such as salaries and employee benefits,  occupancy
and other operating expenses and to a lesser extent, non-interest income such as
service charges on deposit accounts.

General economic conditions, competition and the monetary and fiscal policies of
the federal  government  also  significantly  affect  financial  institutions in
general,   including  the  Company.  The  demand  for  and  supply  of  housing,
competition among lenders,  interest rate conditions and funds  availability all
impact  lending   activities,   while  prevailing   market  rates  on  competing
investments,  customer  preference and the levels of personal income and savings
in the Bank's primary market area affect deposit inflows and outflows.

                                       6

<PAGE>

FORWARD-LOOKING STATEMENTS

            When used in this Form 10-Q or future  filings by the  Company  with
the Securities and Exchange Commission, in the Company's press releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized  executive officer,  the words or phrases "will likely
result",  "are expected to",  "will  continue",  "is  anticipated",  "estimate",
"project",   "believe",   or  similar   expressions  are  intended  to  identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigations Reform Act of 1995. In addition, certain disclosures and information
customarily provided by financial institutions, such as analysis of the adequacy
of the allowance for loan losses or an analysis of the interest rate sensitivity
of the Company's assets and  liabilities,  are inherently based upon predictions
of future events and circumstances.  Furthermore, from time to time, the Company
may  publish  other  forward-looking  statements  relating  to such  matters  as
anticipated financial performance, business prospects, and similar matters.

            The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking  statements. In order to comply with the terms of the
safe  harbor,  the  Company  notes  that a variety of  factors  could  cause the
Company's   actual  results  and  experience  to  differ   materially  from  the
anticipated   results  or  other   expectations   expressed  in  the   Company's
forward-looking  statements. Some of the risks and uncertainties that may affect
the operations, performance,  development and results of the Company's business,
the interest rate sensitivity of its assets and liabilities, and the adequacy of
its allowance for loan losses, include but are not limited to the following:

   o     Deterioration   in  local,   regional,   national  or  global  economic
         conditions  which could result,  among other things,  in an increase in
         loan  delinquencies,  a decrease in property values, or a change in the
         housing turnover rate;

   o     changes  in  market  interest  rates or  changes  in the speed at which
         market interest rates change;

   o     changes  in  laws  and  regulations  affecting  the  financial  service
         industry;

   o     changes in competition; and

   o     changes in consumer preferences.

            The Company wishes to caution readers not to place undue reliance on
any  forward-looking  statements,  which speak only as of the date made,  and to
advise readers that various  factors,  including  those described  above,  could
affect the Company's financial  performance and could cause the Company's actual
results or  circumstances  for future  periods to differ  materially  from those
anticipated or projected.

            The Company  does not  undertake,  and  specifically  disclaims  any
obligation, to publicly release any revisions to any forward-looking  statements
to  reflect  the   occurrence  of  anticipated   or   unanticipated   events  or
circumstances after the date of such statements.

                                       7
<PAGE>

FINANCIAL CONDITION

Total assets were $346.1 million at March 31, 2000, an increase of $4.5 million,
or 1.3% from the  $341.6  million  at  September  30,  1999.  The  increase  was
primarily in loans and was funded by higher short-term  borrowings and deposits,
as well as a reduction in the Company's securities portfolio.

Cash and cash  equivalents  were $3.5  million,  an increase of $.5 million,  or
16.7% from the $3.0 million at September 30, 1999. The increase was  principally
due to the  higher  amount of checks in process of  collection  between  the two
periods.

Securities available for sale ("AFS") were $156.6 million, down $9.2 million, or
5.5% from  $165.8  million,  due to sales,  mortgage-backed  securities  ("MBS")
payments and the increase in unrealized  losses on the AFS portfolio due in part
to rising  interest  rates.  In addition,  the  Company's AFS portfolio was also
adversely  impacted  by an  increase  in the level of  spreads  on fixed  income
securities over treasuries,  which increased  market yields and  correspondingly
decreased market values of its portfolio.  During the six months ended March 31,
2000,  the Company sold lower yielding  securities  and  reinvested  some of the
proceeds at higher  rates.  In addition,  the Company  invested  some of its MBS
prepayments  in new MBS's backed by adjustable  rate  mortgages  ("ARM's")  with
teaser rates, with the remaining balance,  along with some of the sales proceeds
used to fund loan growth.  The unrealized  losses on the Company's AFS portfolio
changed from $4.5 million or 2.6% of the  portfolio's  book cost to $8.5 million
or 5.2% of book cost due  principally to rising  interest rates and the increase
in the level of spreads over treasuries.

Loans  receivable  were $162.8  million at March 31,  2000,  an increase of $9.9
million or 6.5% over the $152.9  million at September  30, 1999.  The  following
table shows the loan portfolio composition as of the balance sheet dates shown:
<TABLE>
<CAPTION>

                                                          March 31,                                 September 30,
                                                            2000                                       1999
                                                -----------------------------            -------------------------------
                                                (In thousands)     % of Loans            (In thousands)       % of Loans
                                                                   ----------                                 ----------
<S>                                              <C>                  <C>                   <C>                  <C>
      Real Estate Loans
          One-to-four family                     $ 123,369            75.8%                 $ 121,151            79.2%
          Multi-family and commercial                8,428             5.2                      7,940             5.2
          Construction                               2,934             1.8                      3,176             2.1
                                                     -----          -------                     -----          ------
              Total real estate loans              134,731            82.8                    132,267            86.5
      Consumer Loans                                23,353            14.3                     19,729            12.9
      Commercial Loans                               4,648             2.9                        994              .6
                                                     -----         -------                        ---         -------
              Gross Loans                          162,732           100.0%                   152,990           100.0%
                                                                     =====                                      =====
      Net deferred loan costs (fees)                    94                                       (76)
                                                        --                                       ---
              Total loans receivable             $ 162,826                                 $ 152,914
                                                 =========                                 =========
</TABLE>
One-to-four  family real estate loans  increased  $2.2 million,  or 1.8%, as the
Company  continues  to  promote a 15 year  fixed rate  mortgage  product  with a

<PAGE>

preferred  rate for  borrowers  who have their  monthly  payments  automatically
deducted from a checking  account with the Bank.  Consumer loans  increased $3.6
million or 18.4% from  September  30, 1999,  due  principally  to an increase in
indirect  auto loans.  The Company began its indirect auto program in June 1998,
and still  originates only through a limited number of dealers in, or contiguous

                                       8
<PAGE>

to its market area. At March 31, 2000,  the Company had $6.1 million of indirect
consumer loans representing 25.9% of the consumer loan portfolio,  and less than
3.7% of the  Company's  gross loan  portfolio.  Commercial  loans now total $4.6
million,  up $3.6 million  from  September  30, 1999.  The increase is primarily
secured indirect lending to small businesses,  and is collateralized principally
by autos. At March 31, 2000, the Company had $3.2 million of indirect commercial
loans  representing  67.4% of its commercial loan portfolio,  and  approximately
1.9% of the Company's gross loan portfolio.

Non-performing  assets at March 31, 2000 were $391,000, or .11% of total assets,
compared to the  $544,000,  or .16% of total assets at September  30, 1999.  The
table   below  sets  forth  the  amounts  and   categories   of  the   Company's
non-performing assets.
<TABLE>
<CAPTION>
                                                              March 31,            September 30,
                                                               2000                   1999
                                                       ----------------------   -------------------
                                                                        (In thousands)
<S>                                                          <C>                      <C>
         Non-performing loans:
             One-to-four family                              $ 133                    $ 396
             Multi-family and commercial                       ---                    -----
             Consumer                                          151                      148
                                                            ------                    -----
                 Total non-performing loans                    284                      544

         Foreclosed assets, net:
             One-to-four family                                107                      ---
             Multi-family and commercial                       ---                      ---
                                                           -------                   ------
                 Total foreclosed assets, net                  107                      ---
                                                           -------                   ------
                 Total non-performing assets                 $ 391                    $ 544
                                                           =======                    =====

                 Total non-performing loans
                 as a % of total loans                        .17%                     .36%
</TABLE>

The decrease in non-performing  loans at March 31, 2000 as compared to September
30, 1999 was principally  due to the foreclosure of one loan,  which resulted in
the Company acquiring title to the mortgaged property.  The net realizable value
of the property,  totaling  $107,000,  was transferred to other real estate, and
since the net  realizable  value  exceeded the  Company's  carrying  value,  the
Company recorded no loss. In addition,  non-performing  loans decreased from the
payoff of several past due loans,  when the estates of deceased  borrowers  were
settled.

The following table summarizes the activity in other real estate for the periods
presented:
<PAGE>
<TABLE>
<CAPTION>
                                                               Six Months Ended March 31,
                                                             ------------------------------
                                                             2000                      1999
                                                             ----                      ----
                                                                      (In thousands)
<S>                                                       <C>                         <C>
          Other real estate beginning of
             period                                       $    ---                    $   53
          Transfer of loans to other real
             estate owned                                      107                        32
          Write-downs of other real estate                     ---                       (17)
          Sales of other real estate, net                      ---                       (23)
                                                           -------                    -------
          Other real estate end of period                    $ 107                    $   45
                                                             =====                    =======
</TABLE>

Additionally,  at March 31,  2000,  the  Company  had  identified  approximately
$245,000 in loans having more than normal credit risk, principally all of which,
were  secured by real  estate.  The Company  believes  that if  economic  and/or

                                       9
<PAGE>

business conditions change in its lending area, some of these loans could become
non-performing in the future.

The allowance for loan losses was $2.2 million, or 1.33%, of period end loans at
March 31,  2000,  and  provided  coverage  of  non-performing  loans of  761.6%,
compared to 1.37% and coverage of 384.7% as of September 30, 1999. The following
summarizes the activity in the allowance for loan losses:
<TABLE>
<CAPTION>

                                                                  Six Months Ended March 31,
                                                            -------------------------------------
                                                               2000                         1999
                                                            --------                       ------
                                                                      (In thousands)
<S>                                                         <C>                           <C>
        Allowance at beginning of the period                $ 2,093                       $ 1,950
            Charge-offs                                         (40)                          (36)
            Recoveries                                           10                            26
                                                           ---------                      --------
                Net charge-offs                                 (30)                          (10)
            Provision for loan losses                           100                            90
                                                           --------                      --------
        Allowance at end of the period                      $ 2,163                       $ 2,030
                                                            =======                       =======
</TABLE>

Total deposits were $221.5 million at March 31, 2000, up $2.4 million,  or 1.1%,
from the $219.1  million at September 30, 1999.  The  following  table shows the
deposit composition as of the two dates:
<TABLE>
<CAPTION>

                                                                March 31, 2000                        September 30, 1999
                                                       ----------------------------------     ---------------------------------
                                                        (In thousands)     % of Deposits      (In thousands)    % of Deposits
<S>                                                        <C>                  <C>             <C>                  <C>
         Savings                                           $ 80,661             36.4%           $ 81,894             37.4%
         Money market                                         6,192              2.8               6,435              2.9
         NOW                                                 17,176              7.8              14,833              6.8
         Non-interest demand                                  8,839              4.0               8,918              4.1
         Certificates of deposits                           108,677             49.0             106,984             48.8
                                                            -------            -----             -------            -----
                                                           $221,545            100.0%           $219,064            100.0%
                                                            =======            =====             =======            =====
</TABLE>

      The  increase in deposits was  generated  principally  by the  Middleburgh
      branch,  which opened in August 1999. In addition,  in February  2000, the
      Company  opened  its  seventh  full-service  branch in Oak  Hill,  and the
      Company  expects this branch to  contribute to its strategy of growing its
      core  deposits.  Core  deposits,  representing  all  deposits  other  than
      certificates of deposit, represent approximately 51.0% of total deposits.

      The Company  increased its  borrowings  with the Federal Home Loan Bank of
      New York ("FHLB"), to $62.7 million at March 31, 2000, an increase of $6.6
      million from the $56.1  million at  September  30,  1999.  The  additional

<PAGE>

      borrowings  were  used  to  fund  the  Company's  loan  growth  and  stock
      repurchases. At March 31, 2000, the Company still had additional available
      credit of $4.2 million under its overnight line and $6.9 million under its
      one-month advance program with the FHLB.

      Shareholders'  equity at March 31, 2000 was $56.1  million,  a decrease of
      $3.1  million or 5.2% from the $59.2  million at September  30, 1999.  The
      decrease was  principally  caused by the  Company's  repurchase of 200,000
      shares of its stock at a cost of $2.9 million and the $2.4 million adverse
      change in the Company's net  unrealized  gain (loss) on AFS securities net
      of taxes, due to recent increases in market interest rates, as well as the
      increase in the level of spreads over treasuries. Offsetting the decreases
      were the $1.4 million of net income  retained after cash dividends and the
      $.8 million  increase in  shareholders'  equity due to the amortization of
      restricted  stock awards,  release of shares under the Company's ESOP, and
      the proceeds from the exercise of stock options.

                                       10

<PAGE>


      Shareholders'  equity as a  percentage  of total assets was 16.2% at March
      31, 2000  compared to 17.3% at September  30, 1999.  Book value per common
      share was $15.01 at March 31,  2000,  down from  $15.15 at  September  30,
      1999,  due  principally  to  the  adverse  change  in  the  Company's  net
      unrealized gain (loss) in AFS securities, net of taxes.


COMPARISON  OF  OPERATING  RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
1999

General

For the three months ended March 31,  2000,  the Company  recorded net income of
$1,124,000,  an increase of $83,000, or 8.0%, compared to the three month period
ended March 31, 1999. Diluted earnings per share were $.34, an increase of 25.9%
compared to diluted  earnings per share of $.27 for the three months ended March
31,  1999.  Basic  earnings per share were $.34 for the three month  period,  an
increase of 25.9%  compared to $.27 for the  comparable  quarter.  For the three
months  ended  March 31,  2000,  weighted  average  common  shares - basic  were
3,287,894,  down  562,135,  or 14.6%  from  the  comparable  period,  due to the
Company's share repurchase programs.

Annualized  return on average  assets for the three  months ended March 31, 2000
and 1999,  was 1.32%  and  1.31%,  respectively,  and the  annualized  return on
average equity was 8.26% and 6.23%, respectively.

Net Interest Income

Net interest  income on a tax equivalent  basis for the three months ended March
31, 2000, was $3.2 million,  an increase of $195,000,  or 6.5%, when compared to
the three  months ended March 31, 1999.  The  increase  was  principally  volume
related as the Company  increased its average  earning assets $26.5 million,  or
8.7%, more than  offsetting the increase in interest  expense from the Company's
funding  of  its  stock  repurchase  program.   The  Company  funded  the  share
repurchases,   along  with  its  growth  in  earning  assets,  principally  with
borrowings and, to a lesser extent, deposit growth.

Interest  income for the three months ended March 31, 2000 was $6.2 million on a
tax equivalent  basis,  an increase of $644,000,  or 11.6%,  over the comparable
period last year.  The $26.5 million  increase in the average  volume of earning
assets had a direct  positive effect on interest income as the Company sought to
leverage its excess  capital.  The Company also  benefited from a 20 basis point
increase  in the  yield  on its  average  earning  assets  caused  primarily  by
increases in the yield earned on its loans, securities and MBS portfolios due to
higher market interest rates.

Average  earning  assets  increased  principally  in  the  loan  and  securities
portfolios, which on average grew 10.9% and 6.7%, respectively.  Loan growth was
principally in 15 year fixed rate one-to-four family mortgages and the Company's
indirect auto program. Yield on the average loan portfolio was 7.72%, up 6 basis
points from the  comparable  quarter due to an  increase  in the  percentage  of
higher yielding  consumer and commercial  loans.  Consumer and commercial  loans
represented 15.9% of average loans, up from 12.9% in the comparable quarter.

Average MBS were $69.1  million for the three months ended March 31, 2000,  down
$6.9 million or 9.1% from the comparable period due principally to payments. The
Company  used some of the  proceeds to fund higher  yielding  loans  rather than
purchase  additional MBS. The average yield on MBS was 6.74%, up 35 basis points
from the comparable  period,  as the interest rates on the Company's  MBS's with

                                       11

<PAGE>

underlying  teaser rate ARM's  purchased in prior  periods  continue to reset to
higher rates. Management expects the average yield of these ARM's to continue to
increase  as they  adjust to their  fully  indexed  rate;  however,  the  actual
increase will depend upon the level of the one-year  constant  maturity treasury
index when the rates adjust.

Average securities  increased $17.5 million,  or 21.1%, as the Company purchased
in 1999  longer  call  protected  bank  qualified  municipals  and  non-callable
corporate  securities  to  increase  yields and reduce  reinvestment  risk.  The
average yield on the  securities  portfolio for the three months ended March 31,
2000, was 7.61%, an increase of 18 basis points from the comparable  period,  as
the Company  replaced  securities  called  and/or  matured with higher  yielding
municipals and corporates.  Municipal  securities now represent 52.5% of average
securities, compared to 46.6% in the comparable period.

Interest expense for the three months ended March 31, 2000, was $3.0 million, an
increase of $449,000,  or 17.6%.  The increase was principally due to the higher
volume of average  interest-bearing  liabilities,  as well as an increase in the
Company's  cost of  funds.  Average  interest-bearing  liabilities  were  $277.3
million,  an increase of $33.9  million,  or 13.9%,  as the Company  borrowed in
order to fund its earning asset growth and the stock repurchase program. Average
short-term  borrowings  were $47.3  million for the three months ended March 31,
2000, up $38.4 million from the comparable three-month period. The cost of funds
increased 11 basis points to 4.35% as the Company's  short-term  borrowing costs
increased  103  basis  points  to 5.96% due to the  rising  level of  short-term
interest rates.  Somewhat offsetting the increase in short-term  borrowing costs
was a 19 basis  point drop in the cost of average  interest-bearing  deposits to
3.92% as the Company  benefited  from a 31 basis point decline in its average CD
costs.  The Company expects that the average cost of its CD portfolio will begin
to increase due to the rising level of interest rates and competitive pressures.

The Company's net yield on average earning assets was 3.88% for the three months
ended March 31, 2000,  down 11 basis  points  compared to the same period of the
prior year. The decrease was principally  caused by the reduced level of no cost
funding  sources  as the  Company  funded  its  stock  repurchase  program  with
short-term  borrowings,  which increased the percentage of earning assets funded
by interest-bearing  liabilities. For the three months ended March 31, 2000, the
Company had $53.4 million of average  earning  assets with no funding  costs,  a
decrease of $7.4 million, or 12.2%, from the three months ended March 31, 1999.

For more information on average balances, interest, yield and rate, please refer
to Table #1, included in this report.

Provision for Loan Losses

The Company  establishes  an  allowance  for loan losses based on an analysis of
risk factors in its loan portfolio.  This analysis  includes  concentrations  of
credit,  past loan loss  experience,  current  economic  conditions,  amount and
changes to the  composition  of loan  portfolio,  estimated fair market value of
underlying  collateral,   delinquencies  and  other  factors.  Accordingly,  the
calculation of the adequacy of the allowance for loan losses is not based solely
on the level of non-performing loans.

                                       12

<PAGE>

The  provision  for loan losses was  $50,000,  or .13% of average  loans for the
three months ended March 31, 2000, up $5,000 or 11.1% from the comparable period
of the prior year. The increase was principally based on loan growth, as well as
the change in portfolio mix as the  provision  annualized,  represented  .13% of
average loans in both  periods.  The Company had net  charge-offs  of $27,000 or
 .07% of average loans for the quarter,  compared to net  recoveries of $1,000 in
the comparable period.  Non-performing loans were $284,000 as of March 31, 2000,
or .17% of total loans,  a decrease of $468,000  from March 31, 1999,  when they
were .52% of total loans.  At March 31, 2000,  the allowance for loan losses was
$2,163,000,   or  1.33%,  of  period  end  loans,   and  provided   coverage  of
non-performing loans of 761.6% compared to 1.40% and 270.0%, respectively, as of
March 31, 1999.

Non-Interest Income

Non-interest  income was $256,000 for the three months ended March 31, 2000,  up
$26,000, or 10.2%,  excluding the $24,000 of security losses realized during the
current quarter; there were no gains or losses in the comparable period. Service
fees on deposit accounts increased  $10,000,  or 11.1%, as the Company continues
to promote  checking  accounts to increase its core  deposits.  The Company also
earned  $16,000 in fees from ATM surcharges  during the quarter on  non-customer
transactions; the Company did not charge this fee in the comparable period.

Non-Interest Expense

Non-interest  expense for the three months ended March 31, 2000 was  $1,607,000,
an increase of  $65,000,  or 4.2%,  over the  comparable  period last year.  The
increase was  principally  the cost  attributable to our new branch in Oak Hill,
which opened in February 2000, including promotional and start-up costs, as well
as the ongoing costs of our Middleburgh office, which opened in August 1999.

Salaries and employee  benefits for the three months ended March 31, 2000,  were
$927,000,  an increase of $46,000,  or 5.2%,  principally  from staffing our new
branches. Advertising, as well as occupancy and equipment were all higher due to
the new branches.

Income Tax Expense

Income tax expense for the three months ended March 31, 2000,  was  $315,000,  a
decrease  of  $42,000,  or 11.8%,  from the  comparable  period  last year.  The
Company's  effective  tax rates for the three  months  ended  March 31, 2000 and
1999, were 21.89% and 25.54%,  respectively.  The decrease in both the effective
tax rate and  income  tax  expense is  principally  the impact of the  Company's
tax-exempt securities, primarily bank qualified municipals.

COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND 1999

General

For the six months  ended March 31,  2000,  the Company  recorded  net income of
$2,226,000,  an increase of $204,000, or 10.0%, compared to the six month period
ended March 31, 1999. Diluted earnings per share were $.66, an increase of 26.9%
compared to diluted  earnings  per share of $.52 for the six months  ended March
31,  1999.  Basic  earnings  per share  were $.66 for the six month  period,  an

                                       13
<PAGE>

increase of 24.5% compared to $.53 for the comparable six month period.  For the
six months ended March 31, 2000,  weighted  average  common  shares - basic were
3,348,466,  down  496,128,  or  12.9%,  due to the  Company's  share  repurchase
programs.

Annualized  return on average assets for the six months ended March 31, 2000 and
1999, was 1.30% and 1.27%, respectively,  and return on average equity was 7.94%
and 6.01%, respectively.

Net Interest Income

Net interest income for the six months ended March 31, 2000, was $6.4 million on
a full tax equivalent basis, an increase of $419,000,  or 7.0%, when compared to
the six months ended March 31, 1999. The increase was principally volume related
as the Company increased its average earning assets $24.8 million, or 8.1%, more
than  offsetting the increase in interest  expense from the  borrowings  used to
fund its share  repurchases  and corporate  owned life insurance  ("COLI").  The
Company  funded the share  repurchases,  the COLI purchase and its earning asset
growth, principally with borrowings and, to a lesser extent, deposit growth.

Interest  income for the six months ended March 31, 2000 was $12.3  million on a
tax equivalent  basis, an increase of $1,176,000,  or 10.6%, over the comparable
period.  The $24.8 million,  or 8.1%,  increase in the average volume of earning
assets  had a  positive  effect  on  interest  income as the  Company  sought to
leverage its excess capital.  Furthermore, the Company benefited from a 17 basis
point increase in the yield on its average earning assets.

Average  earning  assets  increased  principally  in  the  loan  and  securities
portfolios, which on average grew 10.8% and 5.8%, respectively.  Loan growth was
principally due to the promotion of a 15 year fixed rate mortgage product, which
increased  volume,  but had an adverse impact on the loan portfolio  yield since
the loans  were  originated  at rates  below the  average  portfolio  yield.  In
addition, the Company, due to lower market interest rates in late 1998 and early
1999,  experienced  higher loan  prepayments,  and  refinancing  of its existing
portfolio,  which together with the loan promotion  caused the yield on the loan
portfolio to decrease 4 basis points to 7.70%.

Average MBS were $70.4  million for the six months  ended March 31,  2000,  down
$10.3 million,  or 12.8%, from the comparable  period.  The average yield on MBS
was 6.70%, up 35 basis points from the comparable  period,  as interest rates on
the Company's MBS ARM's purchased in prior periods with teaser rates continue to
reset to higher  rates.  Management  expects the average yield of these ARM's to
continue to increase as they adjust to their fully  indexed rate;  however,  the
actual  increase  will depend upon the level of the one-year  constant  maturity
treasury index when the rates adjust.

Average other  securities  increased  $19.7  million,  or 24.2%,  as the Company
purchased  in  1999  longer  call  protected   bank  qualified   municipals  and
non-callable  corporate  securities to increase  yields and reduce  reinvestment
risk if rates decline.  The average yield on the other securities  portfolio for
the six months ended March 31, 2000,  was 7.60%,  an increase of 17 basis points
from the comparable period, as the Company replaced securities called or matured
with higher  yielding  municipals.  Municipal  securities now represent 52.5% of
average other securities, compared to 45.9% in the comparable period.

Interest  expense for the six months ended March 31, 2000, was $5.9 million,  an
increase of $757,000, or 14.6%. The change was principally due to an increase in

                                       14
<PAGE>

the average volume of interest-bearing  liabilities offset somewhat by a 2 basis
point  decrease  in  the  Company's  cost  of  funds.  Average  interest-bearing
liabilities were $275.8 million,  an increase of $35.4 million, or 14.7%, as the
Company  borrowed in order to fund the  Company's  stock  repurchases,  its COLI
purchase and earning asset growth.  Average short-term  borrowings were up $36.1
million,  as the Company  funded its stock  repurchases  and its  earning  asset
growth,  as  well as  repaid  called  long-term  borrowings.  Average  long-term
borrowings were $19.7 million for the six months ended March 31, 2000, down $5.3
million  from the  comparable  six-month  period due to the  repayment of called
borrowings.  In addition,  the Company  continues to grow its core deposits with
average Now  accounts up $2.7  million,  or 19.8%,  and average  savings up $2.1
million, or 2.7%. The Company's cost of funds decreased 2 basis points to 4.30%,
as the Company  generally lowered its deposit costs in late 1998 and early 1999.
Average  deposit costs for the six-month  period ended March 31, 2000, were down
28 basis  points  to 3.92%,  more than  offsetting  the 72 basis  point  rise in
short-term borrowing costs due to an increase in short-term interest rates.

The Company's net yield on average  earning  assets was 3.86% for the six months
ended March 31, 2000,  down 5 basis points  compared to 3.91% for the comparable
period of the prior year. The decrease was  principally  caused by the Company's
stock  repurchase  program,  which reduced the level of no-cost funding sources,
and  increased the amount of earning  assets funded by average  interest-bearing
liabilities.  For the six months  ended  March 31,  2000,  the Company had $52.3
million of average  earning  assets with no funding  costs,  a decrease of $10.6
million, or 16.3%, from the six months ended March 31, 1999.

For more information on average balances, interest, yield and rate, please refer
to Table #2, included in this report.

Provision for Loan Losses

The provision for loan losses was $100,000,  or .13% annualized of average loans
for the six months ended March 31, 2000, up $10,000,  or 11.1%. The increase was
principally based on loan growth, as well as the change in portfolio mix, as the
provision represented .13% of average loans in both periods.

Non-Interest Income

Non-interest  income was $455,000  for the six months  ended March 31, 2000,  an
increase of $44,000,  or 10.7% from the six months  ended  March 31,  1999.  The
increase was  principally  due to two quarters of investment  performance on the
Company's  corporate-owned  life  insurance in this period  compared to only one
quarter in the prior period.  The cash  surrender  value  increased by $134,000.
Offsetting  most of  that  increase  was the  $139,000  change  in net  security
transactions.  In the six months  ended March 31,  2000,  the  Company  realized
losses of $117,000  compared to gains of $22,000 in the  comparable  period.  In
addition,  service fees on deposit accounts increased $28,000,  or 15.7%, as the
Company continues to promote checking related products to increase core deposits
and diversify its revenues. Furthermore, the Company earned $32,000 in fees from
ATM surcharges on non-customer transactions; the Company did not charge this fee
in the comparable period.

                                       15
<PAGE>

Non-Interest Expense

Non-interest expense for the six months ended March 31, 2000 was $3,200,000,  an
increase  of  $193,000,  or 6.4%,  over the  comparable  period  last year.  The
increase was  principally the cost  attributable to our two new branches,  which
opened in August 1999 and February 2000.

Salaries  and employee  benefits  were up $102,000,  or 5.8%,  principally  from
staffing the two new offices.  Advertising, as well as occupancy,  equipment and
supplies were all higher, principally from the new branches.

Income Tax Expense

Income tax expense for the six months  ended March 31,  2000,  was  $608,000,  a
decrease of  $142,000,  or 18.9%,  from the  comparable  period  last year.  The
Company's  effective tax rates for the six months ended March 31, 2000 and 1999,
were 21.45% and 27.06%,  respectively.  The decrease in both the  effective  tax
rate and income tax expense is principally the impact of the Company's  purchase
of tax-exempt  securities,  primarily bank qualified municipals,  as well as the
non-taxable increase in the cash surrender value of the COLI.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity  is the ability to generate  cash flows to meet  present and  expected
future funding needs.  Management monitors the Company's liquidity position on a
daily basis to evaluate its ability to meet  expected and  unexpected  depositor
withdrawals and to make new loans and or investments.

The Company's primary sources of funds for operations are deposits,  borrowings,
principal and interest payments on loans,  mortgage-backed  securities and other
securities available for sale.

Net cash provided by operating  activities  was  $1,635,000 for the three months
ended March 31, 2000,  a decrease of $677,000  from the  comparable  three month
period. The decrease was principally the change in other liabilities caused by a
decrease in official bank checks  outstanding.  Official  bank checks  decreased
principally  as a result  of the  Company's  payment  of real  estate  taxes for
mortgage  borrowers  using  escrowed  funds  earlier in  September  1999 than in
September 1998.

Investing activities used $6.2 million in the three months ended March 31, 2000,
as the Company increased its assets  principally from the $10.0 million increase
in loans,  $.8  million  purchase  of FHLB  stock  and $.7  million  in  capital
expenditures  principally  for the  construction  of a new full service  branch,
offset somewhat by a $5.4 million reduction in securities.  Financing activities
provided $5.1 million,  as the Company  experienced a $16.6 million  increase in
short-term  borrowings,  somewhat  offset by a $10.0 million payoff of long-term
borrowings. Furthermore, the Company experienced a $2.5 million deposit increase
and used $2.9  million to fund its stock  repurchase  program and $.8 million to
pay cash dividends.  For more details  concerning the Company's cash flows,  see
"Consolidated Statements of Cash Flows."

An  important  source  of the  Company's  funds  is the  Bank's  core  deposits.
Management  believes that a substantial  portion of the Bank's $221.5 million of
deposits   are  a  dependable   source  of  funds  due  to  long-term   customer
relationships.  The Company does not currently use brokered deposits as a source

                                       16
<PAGE>

of funds,  and as of March 31, 2000,  deposit accounts having balances in excess
of $100,000  totaled $23.6 million,  or 10.7%,  of total  deposits.  The Bank is
required  to  maintain  minimum  levels of liquid  assets as  defined by the OTS
regulations.  The  requirement,  which may be varied by the OTS  depending  upon
economic  conditions and deposit  flows,  is based upon a percentage of deposits
and short-term borrowings. The OTS required minimum liquidity ratio is currently
4%  measured  on a  monthly  basis  and for the  month of March  2000,  the Bank
exceeded that, maintaining an average liquidity ratio of 34.6%, primarily due to
the large percentage of its assets represented by AFS securities.

The Company  anticipates  that it will have sufficient funds to meet its current
commitments.  At March 31, 2000, the Company had  commitments to originate loans
of $3.6  million.  In  addition,  the Company had  undrawn  commitments  of $3.9
million on home equity and other lines of credit. Certificates of deposits which
are  scheduled  to mature in one year or less at March 31, 2000,  totaled  $80.9
million,  and  management  believes that a significant  portion of such deposits
will remain with the Company.

Although there are no minimum capital ratio  requirements  for the Company,  the
Bank is required to maintain minimum regulatory capital ratios. The following is
a summary of the Bank's  actual  capital  amounts and ratios at March 31,  2000,
compared to the OTS minimum capital requirements:

                                 Actual                       Minimum
                                 Amount        %               Amount      %
                                 ------       ---              ------     --
                                          (Dollars in thousands)

       Tangible Capital         $52,308      14.93%           $ 5,257     1.5%
       Core Capital              52,308      14.93             14,018     4.0
       Risk Based Capital        54,471      30.32             14,372     8.0

At March 31, 2000,  the Company had $4.9  million of available  resources at the
holding company level on an unconsolidated basis to use for direct activities of
the Company.  Furthermore,  the Company has the ability to obtain dividends from
the Bank to provide additional funds.  However,  OTS regulations require advance
OTS approval before the Bank can declare a dividend if dividends paid during the
two prior years plus the current  period exceed  dividends paid during that same
period. The Bank has already paid dividends to the Company in the past two years
in excess of that amount.  Therefore, OTS approval for additional dividends from
the Bank to the Company  would be required  unless and until the passage of time
and new net income from the Bank cause  cumulative  dividends on a rolling basis
to fall below that  threshold.  The  Company has  already  applied and  received
approval to declare and receive  dividends of $2.0 million in June and September
2000, as well as $1.0 million in December 2000.

Year 2000 Disclosure

Concerns  over the  arrival  of the Year  2000  ("Y2K")  and its  impact  on the
embedded computer technologies used by financial institutions, among others, led
bank  regulatory   authorities  to  require   substantial  advance  testing  and
preparations by all banking organizations, including the Company. As of the date
of this filing,  the Company has experienced no material  problems in connection
with the arrival of Y2K,  either in connection with the services and products it
provides to its  customers  or in  connection  with the services and products it
receives  from  third  party  vendors  or  suppliers.  However,  while  no  such
occurrence has developed,  Y2K issues may arise that may not become  immediately

                                       17
<PAGE>

apparent. Therefore, the Company will continue to monitor and work to remedy any
issues that arise.  Although the Company  expects that its business  will not be
materially impacted, such future events cannot be known with certainty.

                   PART I - FINANCIAL INFORMATION (continued)

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The  Company  believes  there have been no  material  changes  in the  Company's
interest  rate risk position  since  September  30, 1999,  however,  in a rising
interest rate  environment that we are currently  experiencing,  the Company net
interest income becomes more adversely  exposed to rising rates.  Other types of
market risk, such as foreign exchange rate risk and commodity price risk, do not
arise in the normal course of the Company's business activities.


                                       18
<PAGE>

               TABLE #1 AVERAGE BALANCES, INTEREST, YIELD AND RATE

      The following table presents, for the periods indicated,  the total dollar
      amount of interest  income from  average  interest-earning  assets and the
      resultant   yields,   as  well  as  the   interest   expense   on  average
      interest-bearing  liabilities,  expressed  both in dollars and rates.  Tax
      equivalent  adjustments,  principally  on  municipal  securities,  totaled
      $346,000 and $260,000 for the three-month periods ended March 31, 2000 and
      1999,  respectively.  All average  balances  are daily  average  balances.
      Non-accruing  loans have been  included  in the table as loans  receivable
      with interest earned recognized on a cash basis only.  Securities  include
      both the securities  available for sale portfolio and the held to maturity
      portfolio,   other  than  mortgage  backed   securities  which  are  shown
      separately.   Mortgage  backed  securities  are  primarily  classified  as
      available for sale.  Securities  available for sale are shown at amortized
      cost.
<TABLE>
<CAPTION>
                                                                       THREE MONTH PERIODS ENDED
                                                        March 31, 2000                         March 31, 1999
                                           -------------------------------------  ----------------------------------------
                                            Average                                Average
                                            Balance     Interest     Yield/Rate    Balance       Interest       Yield/Rate
                                            -------     --------     ----------    -------       --------       ----------
                                                                     (Dollars in Thousands)
<S>                                         <C>          <C>           <C>         <C>             <C>              <C>
Interest-Earning Assets
  Loans receivable, net                     $160,863     $ 3,103       7.72%       $145,027        $ 2,778          7.66%
  Mortgage-backed securities                  69,111       1,164       6.74%         76,017          1,215          6.39%
  Securities                                 100,593       1,914       7.61%         83,069          1,543          7.43%
  Federal funds sold and other                   112           2       7.18%             96              3         12.67%
                                         -----------    --------                  ---------       --------
  Total interest-earning assets              330,679       6,183       7.48%        304,209          5,539          7.28%
                                                          ------                                    ------
Allowance for loan losses                     (2,147)                                (1,995)
Other assets, net                             14,781                                 19,852
                                           ---------                              ---------
  Total Assets                              $343,313                               $322,066
                                            ========                               ========
Interest-Bearing Liabilities
  Savings deposits                          $ 80,755        $598       2.98%       $ 79,863           $585          2.97%
  Money market                                 6,083          47       3.11%          6,192             46          3.01%
  Now deposits                                16,725          81       1.95%         13,812             66          1.94%
  Certificates of deposit                    107,392       1,332       4.99%        107,680          1,406          5.30%
  Short-term borrowings                       47,324         701       5.96%          8,888            108          4.93%
  Long-term borrowings                        16,868         221       5.27%         25,000            322          5.22%
  Escrow and other                             2,176          17       3.14%          1,996             15          3.05%
                                           ---------    --------                  ---------       --------
  Total interest-bearing
liabilities                                  277,323       2,997       4.35%        243,431          2,548          4.24%
                                                         -------                                   -------
Non-interest bearing                           8,572                                  7,247
Other liabilities                              2,661                                  3,611
Shareholders' equity                          54,757                                 67,777
                                             -------                                -------
  Total Equity and Liabilities              $343,313                               $322,066
                                            ========                               ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>          <C>           <C>         <C>             <C>              <C>
  Net interest income                                     $3,186                                    $2,991
                                                          ======                                    ======
  Net interest rate spread                                             3.13%                                        3.04%
                                                                       ====                                         ====
  Net yield on average
interest-earning assets                                                3.88%                                        3.99%
                                                                       ====                                         ====
  Average interest earning
   assets to average interest
    bearing liabilities                       119.24%                                124.97%
                                              ======                                 ======
  Earning Assets/Total Assets                  96.32%                                 94.46%
                                               =====                                  =====
</TABLE>


                                       19
<PAGE>
               TABLE #2 AVERAGE BALANCES, INTEREST, YIELD AND RATE

      The following table presents, for the periods indicated,  the total dollar
      amount of interest  income from  average  interest-earning  assets and the
      resultant   yields,   as  well  as  the   interest   expense   on  average
      interest-bearing  liabilities,  expressed  both in dollars and rates.  Tax
      equivalent  adjustments,  principally  on  municipal  securities,  totaled
      $693,000 and $495,000 for the six month  periods  ended March 31, 2000 and
      1999,  respectively.  All average  balances  are daily  average  balances.
      Non-accruing  loans have been  included  in the table as loans  receivable
      with interest earned recognized on a cash basis only.  Securities  include
      both the securities  available for sale portfolio and the held to maturity
      portfolio,   other  than  mortgage  backed   securities  which  are  shown
      separately.   Mortgage  backed  securities  are  primarily  classified  as
      available for sale.  Securities  available for sale are shown at amortized
      cost.
<TABLE>
<CAPTION>
                                                                     SIX MONTH PERIODS ENDED
                                        --------------------------------------------------------------------------------
                                                     March 31, 2000                              March 31, 1999
                                        --------------------------------------      ------------------------------------
                                         Average                                    Average
                                         Balance      Interest      Yield/Rate      Balance       Interest    Yield/Rate
                                         -------      --------      ----------      -------       --------    ----------
                                                        (Dollars in Thousands)
<S>                                     <C>            <C>             <C>          <C>            <C>            <C>
Interest-Earning Assets
  Loans receivable, net                 $158,708       $ 6,109         7.70%        $143,273       $ 5,542        7.74%
  Mortgage-backed securities              70,364         2,357         6.70%          80,673         2,563        6.35%
  Securities                             100,902         3,835         7.60%          81,245         3,019        7.43%
  Federal funds sold and other                89             3         6.74%              78             4       10.28%
                                       ---------      --------                      --------       -------
  Total interest-earning assets          330,063        12,304         7.46%         305,269        11,128        7.29%
                                                        ------                                      ------
Allowance for loan losses                (2,131)                                     (1,980)
Other assets, net                         15,202                                      15,024
                                          ------                                      ------
  Total Assets                          $343,134                                    $318,313
                                        ========                                    ========
Interest-Bearing Liabilities
  Savings deposits                      $ 80,962        $1,207         2.98%        $ 78,831        $1,192        3.03%
  Money market                             6,170            95         3.08%           6,145            91        2.97%
  Now deposits                            16,119           157         1.95%          13,457           131        1.95%
  Certificates of deposit                107,208         2,666         4.97%         107,798         2,904        5.40%
  Short-term borrowings                   43,341         1,257         5.80%           7,194           180        5.02%
  Long-term borrowings                    19,670           516         5.25%          25,000           651        5.22%
  Escrow and other                         2,310            34         2.94%           1,938            26        2.69%
                                           -----      --------                         -----      --------
  Total interest-bearing
liabilities                              275,780         5,932         4.30%         240,363         5,175        4.32%
                                                       -------                                     -------
Non-interest bearing                       8,646                                       6,888
Other liabilities                          2,640                                       3,584
Shareholders' equity                      56,068                                      67,478
                                          ------                                      ------
  Total Equity and Liabilities          $343,134                                    $318,313
                                        ========                                    ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                     <C>            <C>             <C>          <C>            <C>            <C>
  Net interest income                                   $6,372                                      $5,953
                                                        ======                                      ======
  Net interest rate spread                                             3.16%                                      2.97%
                                                                       ====                                       ====
  Net yield on average
interest-earning assets                                                3.86%                                      3.91%
                                                                       ====                                       ====
  Average interest earning
   assets to average interest
   bearing liabilities                   119.68%                                     127.00%
                                         ======                                      ======
  Earning Assets/Total Assets             96.19%                                      95.90%
                                          =====                                       =====
</TABLE>

                                       20
<PAGE>

                         CATSKILL FINANCIAL CORPORATION
                                    FORM 10-Q

                                 MARCH 31, 2000



                           PART II - OTHER INFORMATION

            Item 1.     Legal Proceedings

            In the ordinary course of business,  the Company and the Bank may be
            subject to legal actions which involve  claims for monetary  relief.
            Management,  based on advice of counsel,  does not believe  that any
            currently known legal actions, individually or in the aggregate will
            have a material effect on its  consolidated  financial  condition or
            results of operation.

            Item 2.     Change in Securities
                                    None

            Item 3.     Defaults on Senior Securities
                                    Not Applicable

            Item 4.     Submission of Matters to a Vote of Security Holders


            At the annual  meeting of  shareholders  held on February  15, 2000,
            there were  3,400,051  voting shares  present in person or by proxy,
            which  represented  90.98%  of  the  Company's   outstanding  shares
            eligible  to vote of  3,737,108.  Votes were taken on the  following
            shareholder proposals:

                    Proposal #1  "Election  of two  directors  to serve  for
                                 three-year  terms  and until  their  successors
                                 have been duly elected and qualified."


                                            Votes
                                             For           %     Withheld     %
                                             ----        -----   ---------  ----

                     George P. Jones       3,378,684     99.4     21,367     .6

                     Hugh J. Quigley       3,378,784     99.4     21,267     .6


                    The Board of Directors of the Company currently  consists of
                    six  members.  In addition  to the  directors  named  above,
                    continuing  directors  are Wilbur J.  Cross,  Allan D. Oren,
                    Richard A. Marshall, and Edward P. Stiefel.

                                       21
<PAGE>




                    Proposal #2  "Ratification of the appointment of KPMG LLP
                                 as auditors for the Company for the fiscal year
                                 ending September 30, 2000."


                      Votes                   Votes
                       For          %        Against     %     Abstain     %
                      ----        ----       --------  ----    --------   ---

                    3,364,873     99.0       16,372    .5      18,806      .5


There were no broker non-votes for either proposal #1 or proposal #2.

Item 5.  Other Information
              None

Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits
            (11)  Computation of Net Income per Common Share
            (27)  Financial Data Schedule (included only in EDGAR filing)


                                       21

<PAGE>

                                   SIGNATURES


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


                                         CATSKILL FINANCIAL CORPORATION


Date: May 12, 2000                        /s/ Wilbur J. Cross
                                         --------------------
                                         Wilbur J. Cross
                                         Chairman of the Board, President
                                         and Chief Executive Officer
                                         (Principal Executive Officer)



Date: May 12, 2000                        /s/ David J. DeLuca
                                         --------------------
                                         David J. DeLuca
                                         Chief Financial Officer
                                         (Principal Financial and
                                         Accounting Officer)


                                       23