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 June 30, 2000
                                                 -------------

                                       or

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

                   For the transition period from          to
                                                 ---------    ---------


                         Commission File 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 July 31, 2000)


<PAGE>



                         CATSKILL FINANCIAL CORPORATION
                                    FORM 10-Q
                                  June 30, 2000




INDEX
-----
<TABLE>
<CAPTION>
<S>         <C>                                                                        <C>
PART I        FINANCIAL INFORMATION                                                   Page
------        ---------------------

Item 1.       Consolidated Interim Financial Statements

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

              Consolidated Statements of Income for the three
              months and nine months ended June 30, 2000 and 1999
              (Unaudited)...........................................................    2


              Consolidated   Statements   of   Changes  in
              Shareholders'  Equity  for the  nine  months
              ended June 30, 2000 and 1999
              (Unaudited)...........................................................    3

              Consolidated Statements of Cash Flows for the nine
              months ended June 30, 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.............................................    7


Item 3.       Quantitative and Qualitative Disclosures about Market Risk............   19

PART II.      OTHER INFORMATION


Item 1.       Legal Proceedings.....................................................   22

Item 2.       Changes in Securities.................................................   22

Item 3.       Default on Senior Securities..........................................   22

Item 4.       Submission of Matters to a Vote of Security Holders...................   22

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

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


              Signatures............................................................   23
</TABLE>


<PAGE>

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


                                                                June 30,         September 30,
                                                                 2000               1999
                                                                -----               ----
                                                             (Unaudited)
                                                             -----------
<S>                                                         <C>                  <C>
Assets:

Cash and due from banks                                     $     3,585          $     3,025
Federal funds sold                                               44,500                  ---
                                                               --------         ------------
          Total cash and cash equivalents                        48,085                3,025
Securities available for sale, at fair value                     75,944              165,833
Federal Home Loan Bank of NY stock, at cost                       3,461                2,634
Loans receivable, net                                           167,196              150,821
Corporate-owned life insurance                                   10,761               10,381
Accrued interest receivable                                       1,546                2,576
Premises and equipment, net                                       3,822                3,297
Other real estate owned                                             ---                  ---
Other assets                                                      5,428                3,014
                                                              ---------           ----------
          Total assets                                      $   316,243          $   341,581
                                                               ========             ========

Liabilities and Shareholders' Equity:
Liabilities
   Deposits:
     Non-interest bearing                                   $     9,152          $     8,918
     Interest bearing                                           212,287              210,146
                                                               --------             --------
          Total deposits                                        221,439              219,064
   Short-term borrowings                                         20,000               31,100
   Long-term borrowings                                          15,000               25,000
   Mortgagors' escrow deposits                                    2,616                2,449
   Other liabilities                                              3,669                4,756
                                                              ---------           ----------
          Total liabilities                                 $   262,724          $   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 June 30, 2000 and September 30, 1999                        57                   57

   Additional paid-in capital                                    55,146               55,114
   Retained earnings, substantially restricted                   34,483               39,997
   Unallocated common stock acquired by ESOP                     (3,640)              (3,753)
   Unearned management recognition plan                            (685)              (1,011)
   Treasury  stock,  at cost (1,949,231 shares at
     June 30, 2000 and 1,778,342
     shares at September 30, 1999)                              (30,943)             (28,521)
   Accumulated other comprehensive income (loss)                   (899)              (2,671)
                                                            -----------           ----------
         Total shareholders' equity                              53,519               59,212
                                                              ---------            ---------
         Total liabilities and shareholders' equity         $   316,243          $   341,581
                                                               ========             ========
</TABLE>

 See accompanying notes to unaudited consolidated interim financial statements.

                                       1
<PAGE>



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



                                                                THREE MONTHS ENDED                           NINE MONTHS ENDED
                                                                     June 30,                                     June 30,
                                                             2000                1999                    2000                  1999
                                                             ----                ----                    ----                  ----
                                                                   (Unaudited)                                  (Unaudited)
<S>                                                   <C>                   <C>                   <C>                   <C>
Interest and dividend income:
     Loans                                            $     3,248           $     2,801           $     9,357           $     8,343
     Securities available for sale:
               Taxable                                      1,838                 1,992                 5,792                 5,941
               Non-taxable                                    609                   570                 2,046                 1,598
     Investment securities held to maturity                   ---                   ---                   ---                    43
     Federal funds sold and other                             124                     1                   127                     5
     Federal Home Loan Bank of NY stock                        57                    33                   165                   100
                                                     ------------          ------------           -----------          ------------
          Total interest and dividend income                5,876                 5,397                17,487                16,030

Interest expense:
     Deposits                                               2,118                 2,112                 6,277                 6,456
     Short-term borrowings                                    711                   124                 1,968                   304
     Long-term borrowings                                     198                   325                   714                   976
                                                      -----------           -----------            ----------            ----------
          Total interest expense                            3,027                 2,561                 8,959                 7,736
                                                       ----------            ----------             ---------             ---------
Net interest income                                         2,849                 2,836                 8,528                 8,294

Provision for loan losses                                      50                    50                   150                   140
                                                     ------------          ------------            ----------          ------------
     Net interest income after provision for
         loan losses                                        2,799                 2,786                 8,378                 8,154
                                                      -----------           -----------             ---------           -----------

Non-interest income:
     Corporate-owned life insurance                           123                   127                   380                   250
     Service fees on deposit accounts                         106                    92                   312                   270
     Net securities gains (losses)                        (11,683)                  ---               (11,800)                   22
     Other income                                              55                    40                   164                   128
                                                      -----------           -----------            ----------           -----------
          Total non-interest income                       (11,399)                  259               (10,944)                  670
                                                        ---------            ----------             ---------            ----------


Non-interest expense:
     Salaries and employee benefits                           936                   921                 2,790                 2,673
     Advertising and business promotion                        41                    31                   147                    89
     Net occupancy on premises                                119                   125                   353                   318
     Federal deposit insurance premiums                        12                     6                    31                    19
     Postage and supplies                                      85                    88                   264                   247
     Data processing fees                                     127                   131                   385                   398
     Equipment                                                 53                    46                   173                   121
     Professional fees                                         70                    74                   191                   215
     Other real estate operations, net                        (23)                   (1)                  (20)                   32
     Merger related transaction costs                         163                   ---                   163                   ---
     Other                                                    193                   156                   499                   472
                                                      -----------           -----------           -----------           -----------
          Total non-interest expense                        1,776                 1,577                 4,976                 4,584
                                                       ----------           -----------            ----------            ----------
Income (loss) before taxes (benefit)                      (10,376)                1,468                (7,542)                4,240
          Income tax expense (benefit)                     (3,917)                  369                (3,309)                1,119
                                                      -----------           -----------            ----------            ----------
Net income (loss)                                     $    (6,459)          $     1,099           $    (4,233)          $     3,121
                                                     ============           ===========           ===========            ==========
Basic earnings (loss) per common share                ($     1.96)          $       .29           ($     1.27)          $       .81
Diluted earnings (loss) per common share              ($     1.96)          $       .28           ($     1.27)          $       .80
Weighted Average Common Shares-Basic                    3,294,197             3,804,676             3,330,443             3,831,288
Weighted Average Common Shares-Diluted                  3,294,197             3,898,696             3,330,443             3,898,447

</TABLE>


 See accompanying notes to unaudited consolidated interim financial statements.

                                       2
<PAGE>



                      CATSKILL FINANCIAL CORPORATION

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

                                                                                          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 (loss):
              Net income (loss)                                                              (4,233)
              Other comprehensive income (loss), net of tax:
                 Unrealized net losses arising during the
                    period on AFS securities (pre-tax $8,847)
                 Reclassification adjustment for net losses
                    realized in net income (pre-tax $11,800)

              Other comprehensive income

   Comprehensive loss

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

   Dividends paid on common stock ($.375 per share)                                          (1,274)

   Purchase of common stock (200,000 shares)

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

   Exercise of stock options (26,861 shares issued, net)                          (8)

   Amortization of unearned MRP compensation                                                                               355
                                                                ----------   ---------     --------       -------      -------

   Balance at June 30, 2000                                           $ 57    $55,146       $34,483       $(3,640)      $ (685)
                                                                      ====    =======      =======       ========      =======

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

   Comprehensive income:
              Net income                                                                      3,121
              Other comprehensive income (loss), net of tax:
                Unrealized net losses arising during the
                 period on AFS securities (pre-tax $5,054)
                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

   Dividends paid on common stock ($.295 per share)                                          (1,162)

   Purchase of common stock (178,780 shares)
   Exercise of stock options (2,000 shares issued)                                               (7)

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

   Balance at June 30, 1999                                           $ 57   $55,022        $39,326       $(3,867)        $(1,086)
                                                                      ====   =======        =======      ========        ========

</TABLE>

<TABLE>
<CAPTION>

                                                                               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 (loss):
              Net income (loss)                                                                   $ (4,233)       (4,233)
              Other comprehensive income (loss), net of tax:
                 Unrealized net losses arising during the
                    period on AFS securities (pre-tax $8,847)                                       (5,692)
                 Reclassification adjustment for net losses
                    realized in net income (pre-tax $11,800)                                         7,464
                                                                                                  --------
              Other comprehensive income                                           1,772           1,772           1,772
                                                                                                  --------
   Comprehensive loss                                                                             $ (2,461)
                                                                                                 =========
   Allocation of ESOP stock (11,373 shares)                                                                          153

   Dividends paid on common stock ($.375 per share)                                                               (1,274)

   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                                           422

   Amortization of unearned MRP compensation                                                                         355
                                                                 ---------       -------                         -------
   Balance at June 30, 2000                                       $(30,943)         (899)                        $53,519
                                                                 =========       =======                         =======

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

   Comprehensive income:
              Net income                                                                           $ 3,121         3,121
              Other comprehensive income (loss), net of tax:
                Unrealized net losses arising during the
                 period on AFS securities (pre-tax $5,054)                                          (3,033)
                Reclassification adjustment for gains
                 realized in net income (pre-tax $22)                                                  (13)
                                                                                                   -------
              Other comprehensive income (losses)                                 (3,046)           (3,046)       (3,046)
                                                                                                   -------
   Comprehensive income                                                                             $   75
                                                                                                   =======
   Allocation of ESOP stock (11,386 shares)                                                                          162

   Dividends paid on common stock ($.295 per share)                                                               (1,162)

   Purchase of common stock (178,780 shares)                        (2,894)                                       (2,894)
   Exercise of stock options (2,000 shares issued)                      32                                            25

   Amortization of unearned MRP compensation                                                                         347
                                                                 ---------       -------                           -----
   Balance at June 30, 1999                                       $(24,085)        $(983)                        $64,384
                                                                 =========       =======                         =======
</TABLE>


 See accompanying notes to unaudited consolidated interim financial statements.

                                       3
<PAGE>


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

                                                                                 Nine Months Ended
                                                                                      June 30,
                                                                              2000                1999
                                                                            --------            --------
              CASH FLOWS FROM OPERATING ACTIVITIES:                                  (Unaudited)
<S>                                                                         <C>                <C>
 Net income (loss)                                                          $ (4,233)          $  3,121
 Adjustments to reconcile  net income  (loss) to net cash provided
     by operating activities:
  Depreciation                                                                   221                156
  Net accretion on securities                                                   (414)              (115)
  Provision for loan losses                                                      150                140
  MRP compensation expense                                                       355                347
  ESOP compensation expense                                                      245                251
  Increase in cash surrender values on COLI                                     (380)              (250)
  Losses (gains) on sale of other real estate owned                              (24)                28
  Losses (gains) on sales of securities                                       11,800                (22)
  Net increase in other assets                                                (2,565)              (312)
  Net decrease in other liabilities                                           (1,179)              (554)
                                                                             -------           --------
 Net cash provided by operating activities                                     3,976              2,790
                                                                             -------            -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity/calls/paydown of investment securities                    ---              2,065
Net increase in loans                                                        (16,632)            (8,221)
Capital expenditures, net                                                       (746)              (480)
Purchase of corporate-owned life insurance                                       ---            (10,000)
Purchase of Federal Home Loan Bank stock                                        (827)              (101)
Purchase of AFS securities                                                    (4,809)           (48,052)
Proceeds from sale of securities available for sale                           77,965              5,394
Proceeds from maturity/calls/paydown of AFS securities                         8,300             34,991
Proceeds from sale of other real estate owned                                    131                 25
                                                                          ----------       ------------
Net cash provided (used) by investing activities                              63,382            (24,379)
                                                                            --------          ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from stock option exercises                                         422                 25
Net increase in deposits                                                       2,375             10,102
Net increase in mortgagors' escrow deposits                                      167              1,870
Net increase (decrease) in short-term borrowings                             (11,100)            14,260
Repayment of long-term borrowings                                            (10,000)               ---
Cash dividends paid on common stock                                           (1,274)            (1,162)
Purchase of common stock for treasury                                         (2,888)            (2,894)
                                                                         -----------           --------
Net cash provided (used) by financing activities                             (22,298)            22,201
                                                                          ----------            -------
Net increase in cash and cash equivalents                                     45,060                612
Cash and cash equivalents at beginning of period                               3,025              2,795
                                                                           ---------            -------
Cash and cash equivalents at end of period                                  $ 48,085           $  3,407
                                                                            ========            =======
Supplemental disclosure of cash flow information:
   Interest paid                                                            $  8,925           $  7,717
   Taxes paid                                                                    596              1,234
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 expense (benefit) of
$1,181 and $(2,030), respectively                                              1,772             (3,046)
</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. Merger Agreement

               On June 7, 2000,  the Company  signed a  definitive  agreement by
               which Troy Financial Corporation ("Troy") will acquire all of the
               Company's  outstanding  shares for $23.00 in cash per share.  The
               transaction  (the  "Merger")  is  expected to close by the end of
               2000 and is subject to shareholder and regulatory approval.

               In connection with the Merger, the Company determined to sell its
               municipal and corporate bond portfolio, which had a book value of
               approximately $86.2 million, and represented  approximately 52.2%
               of its total securities  available for sale. The Merger agreement
               required  the Company to complete  the sale no later than 30 days
               from the  date of  agreement  and  further  provides  that if the
               aggregate  pre-tax  net  sales  proceeds  were  less  than  $73.2
               million,  the per share merger consideration would be reduced. On
               June 13, 2000,  the Company  completed the sale of the securities
               identified  in  the  Merger  agreement  for  approximately  $74.5
               million,  and  accordingly,  the Company does not anticipate that
               the amount per share will be reduced.

        Note 3. Earnings (Loss) Per Share

               Basic earnings (loss) per share excludes dilution and is computed
               by dividing income (loss) 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.  Furthermore,  for the  three  and nine  month
               periods  ended June 30,  2000,  weighted  average  common  shares
               including potential dilution,  excluded 76,459 and 45,292 shares,
               respectively,  because  they  would  have been  antidilutive  and
               reduced the  reported  diluted loss per share.  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.


                                       5
<PAGE>


The following sets forth certain information  regarding the calculation of basic
and diluted earnings (loss) per share for the three-month and nine-month periods
ended June 30:
<TABLE>
<CAPTION>

                                                    (in thousands, except share and per share data)

                                                                 Three Months Ended                      Nine Months Ended
                                                                      June 30                                 June 30
                                                                     ----------                               -------

                                                             2000                  1999               2000                1999
                                                             ----                 -----               ----                ----
 <S>                                                      <C>                  <C>                 <C>                  <C>
Net income (loss)                                        $    (6,459)         $     1,099         $    (4,233)         $     3,121
                                                         ===========          ===========         ===========          ===========

Weighted average common shares                             3,294,197            3,804,676           3,330,443            3,831,288

Dilutive effect of potential common shares
               related to stock compensation plans              --                 94,020                --                 67,159
                                                         -----------          -----------         -----------          -----------

Weighted average common shares including
               potential dilution                          3,294,197            3,898,696           3,330,443            3,898,447
                                                         ===========          ===========         ===========          ===========

Basic earnings (loss) per share                          $     (1.96)         $       .29         $     (1.27)         $       .81

Diluted earnings (loss) per share                        $     (1.96)         $       .28         $     (1.27)         $       .80
</TABLE>

                                       6
<PAGE>


                         CATSKILL FINANCIAL CORPORATION
                                    FORM 10-Q
                                  June 30, 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").

On June 7,  2000,  the  Company  signed a  definitive  agreement  by which  Troy
Financial  Corporation  ("Troy") will acquire all of the  Company's  outstanding
shares for $23.00 in cash per share.  The transaction (the "Merger") is expected
to  close  by the end of 2000  and is  subject  to  shareholder  and  regulatory
approval.

In connection with the Merger,  the Company determined to sell its municipal and
corporate bond portfolio, which had a book value of approximately $86.2 million,
and represented  approximately 52.2% of its total securities available for sale.
The Merger agreement  required the Company to complete the sale no later than 30
days from the date of  agreement  and  further  provides  that if the  aggregate
pre-tax net sales  proceeds were less than $73.2  million,  the per share merger
consideration would be reduced. On June 13, 2000, the Company completed the sale
of the securities  identified in the Merger  agreement for  approximately  $74.5
million,  and  accordingly,  the Company does not anticipate that the amount per
share  will be  reduced.  The  Company  realized a loss of  approximately  $11.7
million from the  securities  sale,  which has adversely  impacted the Company's
operating  performance for the three and nine-month periods ended June 30, 2000.
In  addition,  the  Company's  operating  earnings  for the  periods  were  also
adversely  impacted by $163,000 of  non-deductible  merger  related  transaction
costs.

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
Litigation 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.

FINANCIAL CONDITION
-------------------

Total assets were $316.2  million at June 30, 2000, a decrease of $25.4 million,
or 7.4% from the $341.6 million at September 30, 1999. The decrease reflects the
Company's  sale of a substantial  portion of its  securities  available for sale
portfolio, as the Company, in connection with the Merger, sold its corporate and
municipal bond portfolios.  Part of the proceeds were used to paydown short-term
borrowings,  which  reduced  the  Company's  leverage  and  the  balance  of the
proceeds,  or  approximately  $44.5  million,  were  invested in lower  yielding
Federal Funds.

                                       8
<PAGE>


Cash and cash equivalents were $48.1 million,  an increase of $45.1 million from
the $3.0 million at September 30, 1999. The increase was  principally in Federal
Funds, as the Company  reinvested part, or approximately  $44.5 million,  of the
proceeds from its securities portfolio sale.

Securities available for sale ("AFS") were $75.9 million, down $89.9 million, or
54.2% from $165.8 million.  The decrease was  principally  from the sale in June
2000 of the  Company's  corporate and municipal  bond  portfolios,  which had an
aggregate book value of approximately $86.2 million and resulted in net proceeds
of approximately  $74.5 million.  In addition to the security sale, the decrease
in the AFS portfolio was caused by the Company  investing  only a portion of the
cash flow  from its  mortgage-backed  securities  ("MBS")  portfolio  in new MBS
backed by  adjustable  rate  mortgages  ("ARM's")  with teaser  rates,  with the
balance used to fund loan growth.

Loans  receivable  were $169.4  million at June 30,  2000,  an increase of $16.5
million or 10.8% 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>


                                        June 30,                    September 30,
                                          2000                          1999
                                     --------------                 ------------
                                     (In thousands)   % of Loans   (In thousands)   % of Loans
                                                      ----------                    ----------
<S>                                     <C>              <C>          <C>                <C>
  Real Estate Loans
    One-to-four family                  $123,914         73.3%        $121,151           79.2%
    Multi-family and commercial            8,905          5.3            7,940            5.2
    Construction                           2,250          1.3            3,176            2.1
                                         -------        -----          -------      ---------
        Total real estate loans          135,069         79.9          132,267           86.5
 Consumer Loans                           27,456         16.2           19,729           12.9
 Commercial Loans                          6,623          3.9              994             .6
                                         -------        -----          -------      ----------
        Gross Loans                      169,148        100.0%         152,990          100.0%
                                                                                    ==========
Net deferred loan costs (fees)               248                          (76)
                                        --------                    ----------
        Total loans receivable          $169,396                    $  152,914
                                        ========                    ==========
</TABLE>


One-to-four  family real estate loans  increased  $2.7 million,  or 2.2%, as the
Company  continues  to  promote a 15 year  fixed rate  mortgage  product  with a
preferred  rate for  borrowers  who have their  monthly  payments  automatically
deducted from a checking  account with the Bank.  Consumer loans  increased $7.7
million or 39.1% 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
to, its market area. At June 30, 2000, the Company had $10.0 million of indirect
consumer loans representing 36.4% of the consumer loan portfolio,  and less than
5.9% of the  Company's  total loan  portfolio.  Commercial  loans now total $6.6
million,  up $5.6 million from September 30, 1999. The increase is primarily due
to an  increase  in  secured  indirect  lending  to  small  businesses,  and  is
collateralized  principally  by autos.  At June 30,  2000,  the Company had $5.0
million of indirect  commercial loans  representing 75.2% of its commercial loan
portfolio, and approximately 3.0% of the Company's total loan portfolio.

                                       9

<PAGE>


Non-performing  assets at June 30, 2000 were $494,000,  or .16% 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.

                                               June 30,       September 30,
                                                 2000             1999
                                               ----------------------------
                                                      (In thousand)

 Non-performing loans:
    One-to-four family                            $355             $396
    Multi-family and commercial                    --               --
    Consumer                                       139              148
                                                  ----             ----
        Total non-performing loans                 494              544
                                                  ----             ----
Foreclosed assets, net:
    One-to-four family                             --               --
    Multi-family and commercial                    --               --
                                                  ----             ----
        Total foreclosed assets, net               --               --
                                                  ----             ----
        Total non-performing assets               $494             $544
                                                  ====             ====
        Total non-performing loans
           as a % of total loans                   .29%            .36%


The decrease in  non-performing  loans at June 30, 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.

The following table summarizes the activity in other real estate for the periods
presented:

                                     Nine Months Ended June 30,
                                     --------------------------
                                        2000          1999
                                        ----          ----
                                          (In thousands)
Other real estate beginning of
 period                                 $ --         $  53

Transfer of loans to other real
   estate owned                          107            32

Sales of other real estate, net         (107)          (53)
                                       -----         -----
Other real estate end of period         $ --         $  32
                                       =====         =====

Additionally,  at June  30,  2000,  the  Company  had  identified  approximately
$180,000 in loans  having more than normal  credit risk,  substantially,  all of
which were secured by real estate.  The Company believes that if economic and/or
business conditions change in its lending area, some of these loans could become
non-performing in the future.

                                       10
<PAGE>


The allowance for loan losses was $2.2 million, or 1.30%, of period end loans at
June 30, 2000, and provided coverage of non-performing loans of 445.3%, 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:

                                                  Nine Months Ended June 30,
                                                  --------------------------
                                                    2000            1999
                                                -----------      ----------
                                               (In thousands)
Allowance at beginning of the period              $ 2,093         $ 1,950
    Charge-offs                                       (77)            (68)
    Recoveries                                         34              28
                                                  -------         -------
        Net charge-offs                               (43)            (40)
    Provision for loan losses                         150             140
                                                  -------         -------
Allowance at end of the period                    $ 2,200         $ 2,050
                                                  =======         =======

Total deposits were $221.4  million at June 30, 2000, up $2.3 million,  or 1.0%,
from the $219.1  million at September 30, 1999.  The  following  table shows the
deposit composition as of the two dates:
<TABLE>
<CAPTION>

                                        June 30, 2000               September 30, 1999
                               -----------------------------   -----------------------------
                               (In thousands)  % of Deposits  (In thousands)   % of Deposits
<S>                              <C>                 <C>        <C>                 <C>
Savings                          $ 81,816            36.9%      $ 81,894            37.4%
Money market                        5,708             2.6          6,435             2.9
NOW                                16,963             7.7         14,833             6.8
Non-interest demand                 9,152             4.1          8,918             4.1
Certificates of deposits          107,800            48.7        106,984            48.8
                                 --------           -----       --------           -----
                                 $221,439           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's borrowings,  which are with the Federal Home Loan Bank of New York
("FHLB"), were $35.0 million at June 30, 2000, down $21.1 million, or 37.6% from
the $56.1 million at September 30, 1999. The decrease was  principally  from the
Company's  sale of its corporate and municipal bond  portfolios,  as the Company
used part of the  proceeds to paydown all  short-term  borrowings  that could be
repaid.  In addition,  the Company has an additional  $5.0 million of borrowings
which mature in July,  and the Company  expects to reduce its Federal Funds Sold
and repay those as well.  At June 30,  2000,  the Company  still had  additional
available  credit of $21.9 million  under its  overnight  line and $11.9 million
under its one-month advance program with the FHLB.

Shareholders'  equity at June 30,  2000 was $53.5  million,  a decrease  of $5.7
million or 9.6% from the $59.2 million at September  30, 1999.  The decrease was
principally  caused by the after tax net loss of $4.2  million,  the cost of the
Company's  share  repurchases  of $2.9 million and cash  dividends  paid of $1.3
million.  Somewhat  offsetting the decreases were the $1.8 million  reduction in
the Company's net unrealized  loss on its AFS  securities  portfolio net of tax,
due to the portfolio sale and the $.9 million increase in  shareholders'  equity

                                       11
<PAGE>

due to the amortization of restricted stock awards,  release of shares under the
Company's ESOP, and proceeds from stock options exercises.

Shareholders' equity as a percentage of total assets was 16.9% at June 30, 2000,
as compared to 17.3% at  September  30,  1999.  Book value per common  share was
$14.32 at June 30, 2000, down from $15.15 at September 30, 1999, due principally
to the $7.4 million after tax security loss.


COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND
--------------------------------------------------------------------------------
1999
----

General
-------

For the three  months ended June 30,  2000,  the Company  recorded a net loss of
$6,459,000,  a decrease of $7,558,000  compared to net income of $1,099,000  for
the three month  period  ended June 30,  1999.  Diluted loss per share was $1.96
compared to diluted  earnings  per share of $.28 for the three months ended June
30, 1999.  Basic loss per share was $1.96 for the three month period compared to
basic  earnings  per  share of $.27 for the  comparable  quarter.  For the three
months  ended  June 30,  2000,  weighted  average  common  shares  - basic  were
3,294,197,  down  510,479,  or 13.4%  from  the  comparable  period,  due to the
Company's share repurchase programs.

Annualized return on average assets for the three months ended June 30, 2000 and
1999, was -7.63% and 1.35%,  respectively,  and the annualized return on average
equity was -48.08% and 6.35%, respectively.

The  Company's  reported  earnings  for the quarter  ended June 30,  2000,  were
adversely  impacted  by a  $7.4  million  after-tax  securities  loss  taken  to
facilitate the pending Merger.  In addition,  operating  earnings were adversely
impacted by $163,000 in after-tax merger related  transaction  costs.  Excluding
the after-tax  security loss and merger related costs,  the Company's  operating
earnings would have been  approximately  $1,105,000,  up .5% from the comparable
period, and diluted earnings per share would have been $.33 per share, up 17.9%.
Furthermore,  the annualized  return on average assets would have been 1.31% and
return on average equity would have been 8.23%.

Net Interest Income
-------------------

Net interest  income on a tax  equivalent  basis for the three months ended June
30, 2000, was $3.1 million, an increase of $29,000, or .9%, when compared to the
three months ended June 30, 1999. The increase was principally volume related as
the Company  increased its average  interest  earning assets $18.4  million,  or
5.9%, more than offsetting the increase in interest expense related to increased
short-term  borrowing  costs due to rising  interest  rates,  and the additional
borrowings  used to fund the Company's  stock  repurchases  and average  earning
asset growth.

Interest  income for the three  months ended June 30, 2000 was $6.2 million on a
tax  equivalent  basis,  an increase of $495,000,  or 8.7%,  over the comparable
period last year.  The $18.4 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 19 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.

                                       12
<PAGE>


Average earning assets  increased  principally in the loan  portfolio,  which on
average  grew  13.7%.  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 7.82%,  up 15 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  18.7% of average
loans, up from 12.8% in the comparable quarter.

Average MBS were $67.7  million for the three months  ended June 30, 2000,  down
$4.6 million or 6.3% 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 6.82%, up 36 basis points
from the comparable  period,  as the interest rates on the Company's  MBS's with
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  decreased $4.7 million, or 5.1%, as the Company sold in June
2000,  its  corporate  and  municipal  bond  portfolios  with  a book  value  of
approximately  $86.2  million.  Part  of  the  proceeds  were  used  to  paydown
short-term  borrowings  with the remaining  balance  invested in lower  yielding
Federal Funds.  The Company  expects that the  deleveraging of the balance sheet
along with the  reinvestment in Federal Funds will adversely impact its interest
income,  temporarily,  until its merger  with Troy is  consummated.  The average
yield on the securities  portfolio for the three months ended June 30, 2000, was
7.59%, an increase of 12 basis points from the comparable period, as the Company
replaced  securities  called and/or matured with higher  yielding  municipal and
corporate debt securities.

Interest expense for the three months ended June 30, 2000, was $3.0 million,  an
increase of $466,000,  or 18.2%.  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  $275.3
million,  an increase of $26.9  million,  or 10.8%,  as the Company  borrowed in
order to fund its earning asset growth and the stock repurchase program. Average
short-term  borrowings  were $44.9  million for the three  months ended June 30,
2000, up $34.9 million from the comparable three-month period. The cost of funds
increased 29 basis points to 4.42% as the Company's  short-term  borrowing costs
increased  140  basis  points  to 6.36% due to the  rising  level of  short-term
interest rates.  Somewhat offsetting the increase in short-term  borrowing costs
was a 2 basis  point drop in the cost of average  interest-bearing  deposits  to
3.97%. Average CD costs were essentially flat, however, 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 3.85% for the three months
ended June 30,  2000,  down 18 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 June 30, 2000, the
Company had $52.8 million of average  earning  assets with no funding  costs,  a
decrease of $8.5 million, or 13.9%, from the three months ended June 30, 1999.

                                       13
<PAGE>


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 current level of non-performing loans.

The  provision  for loan losses was $50,000 for the three  months ended June 30,
2000, the same as the  comparable  period of the prior year despite the decrease
in non-performing loans and net charge-offs due to loan growth and the change in
the portfolio  mix. The  provision  was .12%  annualized of average loans in the
current  period  compared  to .13% of  average  loans in the prior  period.  The
Company had net charge-offs of $13,000 or .03% of average loans for the quarter,
down  from  the  $30,000  or .08% of  average  loans in the  comparable  period.
Non-performing  loans were $494,000 as of June 30, 2000, or .29% of total loans,
a decrease of $114,000  from June 30, 1999,  when they were .41% of total loans.
At June 30, 2000,  the allowance for loan losses was  $2,200,000,  or 1.30%,  of
period  end loans,  and  provided  coverage  of  non-performing  loans of 445.3%
compared to 1.39% and 337.0%, respectively, as of June 30, 1999.

Non-Interest Income
-------------------

Non-interest  income,  excluding the loss of $11.7 million on the Company's sale
of its  corporate and  municipal  portfolios,  was $284,000 for the three months
ended June 30,  2000,  up $25,000,  or 9.7%.  Service  fees on deposit  accounts
increased  $14,000,  or 15.2%,  as the  Company  continues  to promote  checking
accounts to increase its core deposits.  The Company also earned $18,000 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 June 30,  2000,  excluding  the
$163,000 of merger related  transaction  costs,  was $1,613,000,  an increase of
$36,000,  or 2.3%,  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.

Income Tax (Benefit) Expense
----------------------------

Income tax benefit for the three  months ended June 30,  2000,  was  $3,917,000,
compared  to an income tax expense of  $369,000  in the  comparable  period last
year. The Company's effective tax rates for the three months ended June 30, 2000
and 1999, were -37.75% and 25.14%, respectively. The tax benefit realized on the
security  losses was less than the Company's  statutory rate due  principally to
the lack of carry  forward/carry  back  provisions  in New York State  franchise

                                       14
<PAGE>

taxes in calendar year 2000. The tax benefit was also adversely  impacted by the
non-deductibility of the $163,000 in merger related transaction costs.

COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 2000 AND 1999
--------------------------------------------------------------------------------

General
-------

For the nine months  ended June 30,  2000,  the  Company  recorded a net loss of
$4,233,000  compared to net income of $3,121,000 for the nine-month period ended
June 30, 1999.  The  Company's  reported  net loss for the period was  adversely
impacted by the previously  discussed $7.4 million in after-tax  security losses
and $163,000 in non-deductible  merger related transaction costs.  Excluding the
after-tax  securities  loss and merger costs,  operating  income would have been
approximately  $3,331,000.  Diluted loss per share was $1.27 compared to diluted
earnings per share of $.80 for the nine months  ended June 30, 1999.  Basic loss
per share was $1.27 for the nine month  period  compared to basic  earnings  per
share of $.81 for the  comparable  nine month period.  For the nine months ended
June 30, 2000,  weighted  average  common  shares - basic were  3,330,443,  down
500,845, or 13.1%, due to the Company's share repurchase programs.

Annualized  return on average assets for the nine months ended June 30, 2000 and
1999,  was  -1.65%  and 1.30%,  respectively,  and return on average  equity was
-10.21% and 6.19%,  respectively.  If you exclude  the  after-tax  impact of the
securities loss and merger costs, the annualized  return on average assets would
have been 1.30% and the return on average equity would have been 8.03%.

Net Interest Income
-------------------

Net interest income for the nine months ended June 30, 2000, was $9.5 million on
a full tax equivalent basis, an increase of $448,000,  or 4.9%, when compared to
the nine months ended June 30, 1999. The increase was principally volume related
as the Company increased its average earning assets $22.6 million, or 7.4%, 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 nine months ended June 30, 2000 was $18.5  million on a
tax equivalent  basis,  an increase of $1,671,000,  or 9.9%, over the comparable
period.  The $22.6 million,  or 7.4%,  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 an 18 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 11.7% and 1.9%, 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 had an increase of $7.6 million, or 40.4%, in its average
consumer and commercial loan portfolios due to its indirect lending program. The
yield on average loans increased 3 basis points as the higher yielding  consumer
and  commercial  portfolios  offset the lower yield on the  mortgage  portfolios

                                       15
<PAGE>

caused by lower  market  rates in late 1998 and early  1999,  which  resulted in
higher prepayments and/or refinancing of its existing portfolio.

Average MBS were $69.5  million for the nine months  ended June 30,  2000,  down
$8.4 million, or 10.8%, from the comparable period. The average yield on MBS was
6.74%, 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  $11.5  million,  or 13.6%,  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 had declined.  The average yield on the other securities portfolio
for the nine  months  ended June 30,  2000,  was 7.60%,  an increase of 15 basis
points from the comparable period, as the Company replaced  securities called or
matured with higher yielding municipals.

Interest  expense for the nine months ended June 30, 2000, was $9.0 million,  an
increase of $1,223,000,  or 15.8%. The change was principally due to an increase
in the average  volume of  interest-bearing  liabilities,  as well as an 8 basis
point increase in the Company's cost of funds due to rising short-term borrowing
costs. Average interest-bearing  liabilities were $275.6 million, an increase of
$32.5 million,  or 13.4%, 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 $35.7  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 $18.1 million for the nine months
ended June 30, 2000, down $6.9 million from the comparable nine-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 19.1%. The
Company's  cost of funds  increased 8 basis points to 4.34%,  as rapidly  rising
short-term  borrowing costs were somewhat offset by lower deposit costs. Average
deposit costs for the nine-month  period ended June 30, 2000, were down 19 basis
points to 3.94%,  which  somewhat  offset the 100 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 nine months
ended June 30, 2000,  down 9 basis points  compared to 3.95% 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 nine  months  ended June 30,  2000,  the Company had $53.8
million of average  earning  assets  with no funding  costs,  a decrease of $9.9
million,  or 15.6%,  from the $63.7  million for the nine months  ended June 30,
1999.

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

                                       16
<PAGE>


Provision for Loan Losses
-------------------------

The provision for loan losses was $150,000,  or .12% annualized of average loans
for the nine months ended June 30, 2000, up $10,000,  or 7.1%.  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 the comparable period.

Non-Interest Income
-------------------

Non-interest  income,  excluding the loss of $11.7 million on the Company's sale
of its corporate and municipal  bond  portfolios in June 2000,  was $739,000 for
the nine months ended June 30, 2000,  an increase of $69,000,  or 10.3% from the
nine  months  ended  June  30,  1999.  The  increase  was   principally  due  to
three-quarters of investment  performance on the Company's  corporate-owned life
insurance in this period compared to only two quarters in the prior period.  The
cash surrender value increased by $130,000. Offsetting most of that increase was
the  $139,000  change in net  security  transactions  other than the  previously
discussed  Merger  related  sale.  In the nine months ended June 30,  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
$42,000, or 15.6%, as the Company continues to promote checking related products
to increase core deposits and diversify its revenues.  Furthermore,  the Company
earned $51,000 in fees from ATM  surcharges on  non-customer  transactions;  the
Company did not charge this fee in the comparable period.

Non-Interest Expense
--------------------

Non-interest  expense,  excluding  the  $163,000 of merger  related  transaction
costs,  for the nine months ended June 30, 2000 was  $4,813,000,  an increase of
$229,000,  or 5.0%,  over the comparable  period last year. The increase was due
principally to the cost  attributable  to our two new branches,  which opened in
August 1999 and February 2000.

Salaries  and employee  benefits  were up $117,000,  or 4.4%,  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 (Benefit) Expense
----------------------------

Income tax benefit for the nine months ended June 30, 2000,  was  $3,309,000  as
compared to an income tax expense of  $1,119,000 in the  comparable  period last
year. The Company's  effective tax rates for the nine months ended June 30, 2000
and 1999, were -43.87% and 26.39%, respectively. The tax benefit realized on the
security  losses was less than the Company's  statutory rate due  principally to
lack of carry forward/carry back provisions in New York State franchise taxes in
calendar  year  2000.  The  tax  benefit  was  also  adversely  impacted  by the
non-deductibility of the $163,000 in merger related transaction costs.

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.

                                       17
<PAGE>


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

Net cash provided by operating  activities  was  $3,976,000  for the nine months
ended June 30, 2000, an increase of $1,186,000  from the  comparable  nine month
period.  The  increase  was  principally  caused  by the  Company's  sale of its
corporate and municipal  bond  portfolios,  which reduced the Company's  accrued
interest receivable balances.

Investing  activities  provided  $63.4 million in the nine months ended June 30,
2000, due principally to the sale of AFS  securities.  Proceeds from the sale of
AFS  securities  were  $78.0  million,  $74.5  million  of which  related to the
corporate and  municipal  bond sale in  connection  with the  Company's  pending
merger  with  Troy.  Somewhat  offsetting  the  cash  flow  from  the  Company's
securities  portfolio  were the $16.6  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.  Financing  activities used $22.3
million,  as the Company paid off $11.1  million in short-term  borrowings,  and
$10.0 million of long-term  borrowings.  Furthermore,  the Company experienced a
$2.4 million deposit increase and used $2.9 million to fund its stock repurchase
program and $1.3 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 $221.4 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
of funds, and as of June 30, 2000, deposit accounts having balances in excess of
$100,000  totaled  $26.2  million,  or  11.8%,  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 June 2000, the Bank exceeded
that,  maintaining  an average  liquidity  ratio of 50.5%,  primarily due to the
large  percentage  of its  assets  represented  by  Federal  Funds  Sold and AFS
securities.

The Company  anticipates  that it will have sufficient funds to meet its current
commitments. At June 30, 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 June 30, 2000, totaled $81.7 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 June 30,  2000,
compared to the OTS minimum capital requirements:


                                       18
<PAGE>


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

Tangible Capital          $44,324         14.03%     $ 4,738         1.5%
Core Capital               44,324         14.03       12,635         4.0
Risk Based Capital         46,128         30.50       11,626         8.0


At June 30, 2000,  the Company had $5.7  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 net income  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 additional 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 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
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

Due to the  Company's  sale  of its  corporate  and  municipal  bond  portfolios
discussed  previously  and the  reinvestment  of a significant  portion of those
proceeds in Federal  Funds  Sold,  the  Company  has  substantially  changed its
interest rate risk position since September 30, 1999.  Whereas the Company's net
interest  income was more exposed to rising rates,  prior to the portfolio sale,
the  Company's  net  interest  income  is now more at risk in a  declining  rate
environment, since its assets are now more rate sensitive. 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.

                                       19
<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
        $292,000 and $276,000 for the  three-month  periods  ended June 30, 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
                                                                   -------------------------------------------------------------
                                                                          June 30, 2000                             June 30, 1999
                                                                   ---------------------            -----------------------------
                                                      Average                                  Average
                                                      Balance      Interest   Yield/Rate       Balance     Interest    Yield/Rate
                                                      -------      --------   ----------       -------     --------    ----------
<S>                                                   <C>          <C>            <C>         <C>           <C>            <C>
                                                                 (Dollars in Thousands)
Interest-Earning Assets
  Loans receivable, net                               $166,074     $ 3,248        7.82%       $146,125      $ 2,801        7.67%
  Mortgage-backed securities                            67,664       1,153        6.82%         72,235        1,166        6.46%
  Securities                                            86,616       1,643        7.59%         91,286        1,705        7.47%
  Federal funds sold and other                           7,695         124        6.48%             49            1        8.19%
                                                    ----------     -------                  ----------     --------
  Total interest-earning assets                        328,049       6,168        7.52%        309,695        5,673        7.33%
                                                                    ------                                   ------
Allowance for loan losses                               (2,179)                                 (2,029)
Other assets, net                                       14,686                                  19,279
                                                     ---------                               ---------
  Total Assets                                        $340,556                                $326,945
                                                      ========                                ========
Interest-Bearing Liabilities
  Savings deposits                                    $ 81,094        $600        2.98%       $ 82,410         $611        2.97%
  Money market                                           5,987          46        3.09%          6,484           50        3.09%
  Now deposits                                          17,235          83        1.94%         14,613           71        1.95%
  Certificates of deposit                              107,942       1,367        5.09%        107,151        1,363        5.10%
  Short-term borrowings                                 44,928         711        6.36%         10,032          124        4.96%
  Long-term borrowings                                  15,000         198        5.31%         25,000          325        5.21%
  Escrow and other                                       3,103          22        2.85%          2,745           17        2.48%
                                                     ---------    --------                   ---------     --------
  Total interest-bearing liabilities                   275,289       3,027        4.42%        248,435        2,561        4.13%
                                                                   -------                                  -------
Non-interest bearing                                     8,693                                   8,101
Other liabilities                                        2,541                                   3,112
Shareholders' equity                                    54,033                                  67,297
                                                       -------                                 -------
  Total Equity and Liabilities                        $340,556                                $326,945
                                                      ========                                ========

  Net interest income                                               $3,141                                   $3,112
                                                                    ======                                   ======
  Net interest rate spread                                                        3.10%                                    3.20%
                                                                                  ====                                     ====
  Net yield on average interest-earning assets                                    3.85%                                    4.03%
                                                                                  ====                                     ====
 Average interest earning  assets to average
   interest bearing liabilities                        119.17%                                 124.66%
                                                       ======                                  ======

  Earning Assets/Total Assets                           96.33%                                  94.72%
                                                        =====                                   =====
</TABLE>

                                       20
<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   $985,000   and  $771,000  for  the
                      nine-month   periods   ended  June  30,   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>

                                                                                        NINE MONTH PERIODS ENDED
                                                                                ---------------------------------------------------
                                                                           June 30, 2000                     June 30, 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                                  $161,162        $ 9,357   7.74%        $144,225     $ 8,343       7.71%
  Mortgage-backed securities                               69,463          3,510   6.74%          77,860       3,729       6.39%
  Securities                                               96,087          5,478   7.60%          84,595       4,724       7.45%
  Federal funds sold and other                              2,652            127   6.40%              68           5       9.83%
                                                       ----------        -------              ----------    --------
  Total interest-earning assets                           329,364         18,472   7.48%         306,748      16,801       7.30%
                                                                          ------                              ------
Allowance for loan losses                                  (2,147)                                (1,996)
Other assets, net                                          15,033                                 16,440
                                                        ---------                              ---------
  Total Assets                                           $342,250                               $321,192
                                                         ========                               ========
Interest-Bearing Liabilities
  Savings deposits                                       $ 81,006         $1,807   2.98%        $ 80,024      $1,803       3.01%
  Money market                                              6,109            141   3.08%           6,258         141       3.01%
  Now deposits                                             16,491            240   1.94%          13,843         202       1.95%
  Certificates of deposit                                 107,452          4,033   5.01%         107,583       4,267       5.30%
  Short-term borrowings                                    43,850          1,968   5.99%           8,144         304       4.99%
  Long-term borrowings                                     18,113            714   5.27%          25,000         976       5.22%
  Escrow and other                                          2,575             56   2.90%           2,207          43       2.60%
                                                        ---------       --------               ---------    --------
  Total interest-bearing liabilities                      275,596          8,959   4.34%         243,059       7,736       4.26%
                                                                        --------                            --------

Non-interest bearing                                        8,662                                  7,292
Other liabilities                                           2,606                                  3,426
Shareholders' equity                                       55,386                                 67,415
                                                          -------                                -------
  Total Equity and Liabilities                           $342,250                               $321,192
                                                         ========                               ========

  Net interest income                                                     $9,513                              $9,065
                                                                          ======                              ======
  Net interest rate spread                                                         3.14%                                   3.04%
                                                                                   ====                                    ====
  Net yield on average interest-earning assets                                     3.86%                                   3.95%
                                                                                   ====                                    ====
  Average interest earning assets to average
interest bearing liabilities                              119.51%                                126.20%
                                                          ======                                 ======
  Earning Assets/Total Assets                              96.23%                                 95.50%
                                                           =====                                 ======
</TABLE>


                                       21

<PAGE>
                         CATSKILL FINANCIAL CORPORATION
                                    FORM 10-Q

                                  JUNE 30, 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
                             ---------------------------------------------------
                                            None

               Item 5.       Other Information
                                            None

               Item 6.       Exhibits and Reports on Form 8-K

                (a) Exhibits
                         (10.1)    Employment agreement dated April 1, 2000, by
                                   and between Catskill Savings Bank and Wilbur
                                   J. Cross
                         (11)      Computation of Net Income per Common Share
                         (27)      Financial Data Schedule

                (b) Reports on Form 8-K
                             On June  16,  2000,  the  Company  filed a Form 8-K
                             announcing   the   merger   with   Troy   Financial
                             Corporation.  The Form 8-K was  filed  pursuant  to
                             "Item  #5 Other  Events"  and did not  require  any
                             financial  statements,  however, it did include, as
                             exhibits,  the  Agreement  and Plan of Merger,  the
                             Stock  Option   Agreement  and  the  press  release
                             announcing the merger.


                                       22

<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: August 11, 2000                         /s/ Wilbur J. Cross
                                             -------------------------------
                                             Wilbur J. Cross
                                             Chairman of the Board, President
                                             and Chief Executive Officer
                                             (Principal Executive Officer)



Date: August 11, 2000                          /s/ David J. DeLuca
                                              -------------------------
                                              David J. DeLuca
                                              Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)



                                       22