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


                                    FORM 10-K

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

                  For the fiscal year ended June 30, 1999

                                       OR

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

                         Commission file number 0-27178

                         PEEKSKILL FINANCIAL CORPORATION
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

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

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

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

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
--------------------------------------------------------------------------------
                                (Title of Class)

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

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

         As of September 14, 1999,  there were issued and outstanding  1,828,228
shares of the  Registrant's  Common  Stock.  The  aggregate  market value of the
voting stock held by non-affiliates of the Registrant,  computed by reference to
the  average  of the  closing  bid and asked  prices of such stock on the Nasdaq
National  Market  System as of  September  14,  1999,  was  approximately  $24.0
million.
                       DOCUMENTS INCORPORATED BY REFERENCE

PART II of Form  10-K--Annual  Report to Stockholders  for the fiscal year ended
June 30, 1999.
PART III of Form  10-K--Proxy  Statement for the Annual Meeting of  Stockholders
for the fiscal year ended June 30, 1999.



<PAGE>

                         PEEKSKILL FINANCIAL CORPORATION
                           Annual Report on Form 10-K

                                      Page

                                     PART I

Item 1.  Business                                                             3
Item 2.  Properties                                                          34
Item 3.  Legal Proceedings                                                   35
Item 4.  Submission of Matters to a Vote of Security Holders                 35

                                     PART II

Item 5.  Market for the Registrant's Common Equity and Related Stockholder
         Matters                                                             35
Item 6.  Selected Financial Data                                             35
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                               35
Item 7A. Quantitative and Qualitative Disclosures About Market Risk          35
Item 8.  Financial Statements and Supplementary Data                         35
Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure                                                35

                                    PART III

Item 10. Directors and Executive Officers of the Registrant                  36
Item 11. Executive Compensation                                              36
Item 12. Security Ownership of Certain Beneficial Owners and Management      36
Item 13. Certain Relationships and Related Transactions                      36

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K    37

         Signatures                                                          39


<PAGE>


                                     PART I

Item 1.           Business

General

         Peekskill  Financial  Corporation  ("Peekskill"  or the  "Company") was
formed in 1995 at the direction of First Federal  Savings Bank ("First  Federal"
or  the  "Bank"),  formerly  First  Federal  Savings  and  Loan  Association  of
Peekskill,  for the  purpose of  becoming  a unitary  savings  and loan  holding
company and owning all of the  outstanding  stock of the Bank issued on December
29, 1995 in connection with the Bank's  conversion from the mutual to stock form
of organization (the  "Conversion").  The Company is incorporated under the laws
of the State of Delaware  and is  authorized  to do business in the State of New
York, and generally is authorized to engage in any activity that is permitted by
the Delaware General Corporation Law. Unless the context otherwise requires, all
references  herein  to the  Bank  or the  Company  include  both  entities  on a
consolidated basis.

         At June 30,  1999,  the  Company  had total  assets of $206.9  million,
deposits  of $148.7  million  and  stockholders'  equity of $27.4  million.  The
Company's  Common Stock is quoted on the Nasdaq National Market System under the
symbol "PEEK."

         First Federal was originally organized as a state chartered savings and
loan association in 1924. In 1954, it converted to a federally chartered savings
and loan  association.  In December 1995, the Bank became a federally  chartered
savings bank.  First Federal  serves the financial  needs of  communities in its
market area through its main office located at 1019 Park Street,  Peekskill, New
York and branch offices located at 1961 Commerce Street in Yorktown Heights, New
York and Cortlandt Town Center on Route 6 in Mohegan Lake, New York.

         First Federal's business involves attracting deposits from customers in
its market area and investing such funds primarily in mortgage-backed securities
and one-to-four  family  residential  mortgages.  At June 30, 1999, the Bank had
total  assets of $206.9  million  consisting  primarily  of  $110.7  million  of
mortgage-backed  securities  and $59.8 million of  one-to-four  family  mortgage
loans representing  91.9% of the total loan portfolio.  The Bank also held other
debt securities  (consisting  primarily of U.S.  Government Agency  obligations)
with a carrying value of $24.1 million at June 30, 1999.

         The Bank has sought to enhance its net income through the adoption of a
strategy  designed to  maintain  capital in excess of  regulatory  requirements,
limit loan delinquencies and enhance net interest spread while managing interest
rate risk.  This strategy  involves (i)  maintaining a substantial  portfolio of
mortgage-backed  and other debt  securities  having  terms to repricing of seven
years or less,  (ii)  controlling  operating  expenses,  (iii)  focusing  on the
origination of one-to-four  family  residential loans, (iv) limiting other types
of loans that could  increase  credit  risk or  operating  costs,  and (v) using
customer  service to build and  maintain  a  substantial  level of core  deposit
accounts.


                                       3
<PAGE>


         The  executive  offices of the Company and the Bank are located at 1019
Park Street, Peekskill, New York 10566, and the telephone number at that address
is (914) 737-2777.

         The  Company  and the  Bank  are  regulated  by the  Office  of  Thrift
Supervision  ("OTS").  The Bank is a member of the Federal Home Loan Bank System
("FHLB  System") and is a stockholder  in the Federal Home Loan Bank ("FHLB") of
New York.  The Bank is also a member of the Savings  Association  Insurance Fund
("SAIF")  and its deposit  accounts are insured up to  applicable  limits by the
Federal Deposit Insurance Corporation ("FDIC").

Forward-Looking Statements

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

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

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

Competition

         The Company faces  significant  competition for the loans it originates
and the  deposits it accepts.  The  Company's  market area has a high density of
financial  institutions,  from  small  community  banks  to  branches  of  large
non-local  institutions,  all of which  compete  with  the  Company  to  varying
degrees.  The Company's  competition  for loans comes  principally  from savings
banks,  savings  and  loan  associations,  commercial  banks,  mortgage  banking
companies and other institutional lenders. The Company successfully competes for
loans by emphasizing  the quality of its loan services and by charging loan fees
and  interest  rates that are  generally  competitive  within  its market  area.
Changes in the  demand  for loans  relative  to the  availability  of credit may
affect the level of  competition  from financial  institutions  that may be more
willing than the Company or its  competitors  to make credit  available but that
have not generally engaged in lending activities in the Company's market area in
the past. The Company's most direct  competition  for deposits has  historically
come from savings banks, savings and loan associations, and commercial banks, as
well as  money  market  funds,  stock  and  bond  mutual  funds,  and  brokerage
companies. The Company

                                        4
<PAGE>



competes for deposits by emphasizing product delivery and customer service,  and
offering products at generally competitive interest rates.

Market Area

         First Federal  conducts  business in Northern  Westchester,  Putnam and
Dutchess counties through its main office located in Peekskill, New York and two
branch offices located in Yorktown Heights, New York and Mohegan Lake, New York.
First Federal's primary market area consists of communities  within  Westchester
and Putnam  counties.  Peekskill is located  approximately 50 miles northwest of
the Borough of Manhattan in New York City.

         Peekskill  was  traditionally  a  small  town  whose  inhabitants  were
employed in small and medium sized  businesses in the  surrounding  communities.
However,  with the growth of the New York Metropolitan area and the expansion of
business  activities in the White Plains area,  Peekskill,  and particularly the
surrounding  communities,  have evolved into suburban bedroom communities.  More
recently, however,  Peekskill's market area has experienced limited economic and
demographic  growth. The city of Peekskill has a significant level of low-income
housing  and has  experienced  very  limited  levels  of  single-family  housing
construction in recent decades. In contrast, other portions of the Bank's market
area such as Yorktown and Putnam Valley have recently  experienced somewhat more
growth,  both  economically  and  demographically,   with  increased  levels  of
single-family housing construction.

         The local  communities  in and around  Peekskill  do not contain  major
employers.  Generally, residents commute to other areas of Westchester county to
work.  Major  employers   located  in  Westchester   County  include  the  local
government, IBM, U.S. Postal Service, NYNEX, and Pepsico, Inc.

         The population in Westchester  County has remained stable over the last
ten years with a 1%  increase in  population  from 1985 to 1994.  Putnam  County
experienced  a  10.5%  increase  in  population   over  the  same  period.   The
unemployment  rate for  Westchester  and  Putnam  Counties  was  5.4% and  4.9%,
respectively,  in December 1994. These figures are  representative  of the state
and U.S. unemployment rates for the same period.

Lending Activities

         Loan  Portfolio  Composition.  The Company's  loan  portfolio  consists
primarily of  conventional  first mortgage  loans secured by one-to-four  family
properties.  At June 30, 1999, the Company had net loans of $63.4 million, which
represents  30.7% of  total  assets.  The  percentage  distribution  of the loan
portfolio  at that date was as follows:  91.9% of  one-to-four  family  mortgage
loans,  the majority of which are owner  occupied;  3.7% of commercial  mortgage
loans; 2.6% of construction loans; 1.0% of multi-family mortgage loans; and 0.8%
of consumer loans.

                                       5

<PAGE>


          The following  table sets forth the  composition of the loan portfolio
in dollar amounts and percentages as of the dates  indicated.  In addition,  the
table sets forth the loan portfolio by fixed- and adjustable-rate balances as of
the dates indicated.

<TABLE>
<CAPTION>
                                                                         June 30,
                                      -----------------------------------------------------------------------------------
                                           1999             1998             1997             1996              1995
                                      ---------------- ---------------- ---------------- ---------------- ---------------
                                        Amount Percent Amount  Percent   Amount  Percent  Amount Percent  Amount Percent
                                      -------- ------- ------- -------- -------- ------- ------- -------- ------ --------
                                                                               (Dollars in thousands)
<S>                                    <C>     <C>     <C>      <C>     <C>        <C>    <C>     <C>    <C>       <C>
Real Estate Loans:
 One-to-four family................... $59,802   91.9% $46,271    95.1% $44,163     94.9% $38,644  95.5%  $40,112   95.2%
 Multi-family.........................     619    1.0      674     1.4      724      1.6      394   1.0       426    1.0
 Commercial...........................   2,389    3.7      507     1.0      531      1.1      285   0.7       308    0.7
 Construction.........................   1,709    2.6      676     1.4      670      1.4      579   1.4       725    1.7
                                       -------  -----  -------    ----  -------     ----  ------- -----   -------  -----
     Total real estate loans..........  64,519   99.2   48,128    98.9   46,088     99.0   39,902  98.6    41,571   98.6
                                       -------  -----  -------    ----  -------     ---- -------- -----   -------  -----
Other Loans:
  Passbook loans and other............     465    0.7      460    1.0       341     0.8       404   1.0       356    0.9
  Student.............................      77    0.1       63    0.1       102     0.2       143   0.4       215    0.5
                                       -------  -----  -------  -----   -------   -----  -------- -----   -------  -----
     Total consumer loans.............     542    0.8      523    1.1       443     1.0       547   1.4       571    1.4
                                       -------  -----  -------  -----   -------   -----  -------- -----   -------  -----
     Total loans......................  65,061  100.0%  48,651  100.0%   46,531   100.0%   40,449 100.0%   42,142  100.0%
                                                =====           =====             =====           =====            =====
Less:
 Construction loans in process........    (651)           (112)            (195)            (114)            (273)
 Allowance for loan losses............    (742)           (682)            (622)            (519)            (474)
 Net deferred loan origination fees ..    (232)           (226)            (207)            (259)            (335)
                                       -------         -------          -------          -------          -------
 Total loans, net..................... $63,436         $47,631          $45,507          $39,557          $41,060
                                       =======         =======          =======          =======          =======
Fixed-Rate Loans:
  Real estate loans................... $63,876   98.2% $47,252   97.1%  $45,015   96.7%  $38,770   95.8%  $40,297   95.6%
  Other loans.........................     542    0.8      523    1.1       443    1.0       547    1.4       571    1.4
                                       -------  -----  -------  -----   -------   ----   -------   ----   -------  -----
    Total fixed-rate loans............  64,418   99.0   47,775   98.2    45,458   97.7    39,317   97.2    40,868   97.0

Adjustable-Rate Loans:
  Real estate loans...................     643    1.0      876    1.8     1,073    2.3     1,132    2.8     1,274    3.0
                                       -------  -----  -------  -----   -------  -----   -------  -----   -------  -----
    Total loans....................... $65,061  100.0% $48,651  100.0%  $46,531  100.0%  $40,449  100.0%  $42,142  100.0%
                                       =======  =====  =======  =====   =======  =====   =======  =====   =======  =====
</TABLE>

                                       6
<PAGE>


         Loan Maturities.  The following table shows the contractual maturity of
the loan portfolio at June 30, 1999. All loans (including adjustable-rate loans)
are shown as maturing  in the period that  includes  the final  contractual  due
date,  as the table  does not  reflect  the  effects  of  periodic  amortization
payments, possible prepayments or enforcement of due-on-sale clauses.

                                                          Due  in
                                     ------------------------------------------
                                     Less than   More than 1   More than
                                      1 Year   Year to 5 Years  5 Years   Total
                                     --------- --------------- ---------  -----
                                                          (In thousands)
Mortgage loans:
  One-to-four family...............   $  140      $4,478       $55,184  $59,802
  Multi-family.....................      281         ---           338      619
  Commercial.......................      204         ---         2,185    2,389
  Construction.....................    1,709         ---           ---    1,709
                                      ------      ------       -------  -------
    Total mortgage loans...........    2,334       4,478        57,707   64,519

Other loans........................      500          42           ---      542
                                      ------      ------       -------  -------
    Total loans....................   $2,834      $4,520       $57,707  $65,061
                                      ======      ======       =======  =======



         The following  table sets forth,  by type of interest  rate, the dollar
amounts in each loan  category  at June 30, 1999 that are  contractually  due in
more than one year.
                                 Fixed       Adjustable        Total
                                 -------------------------------------
                                            (In thousands)
Mortgage loans:
  One-to-four family...........  $59,019        $643           $59,662
  Multi-family.................      338         ---               338
  Commercial...................    2,185         ---             2,185
                                 -------        ----           -------
    Total mortgage loans.......   61,542         643            62,185
Other loans....................       42         ---                42
                                 -------        ----           -------
    Total loans................  $61,584        $643           $62,227
                                 =======        ====           =======


         Loans-to-One-Borrower. Pursuant to Federal law, the aggregate amount of
loans  that the  Bank is  permitted  to make to any one  borrower  is  generally
limited to 15% of  unimpaired  capital and surplus (25% if the security for such
loan  has a  "readily  ascertainable"  value  or  30%  for  certain  residential
development  loans).  At June 30, 1999, based on the 15% limitation,  the Bank's
loans-to-one  borrower  limit was $4.1  million  and the largest  dollar  amount
outstanding to one borrower, or group of related borrowers,  was $626,000. These
loans, which are secured by one-to-four family properties in Westchester County,
New York, were performing in accordance with their contractual terms at June 30,
1999.

                                       7
<PAGE>


         Loan  Underwriting.  The Bank's  lending  practices  are subject to its
written  underwriting  standards and established  loan  origination  procedures.
Decisions on loan  applications  are made on the basis of detailed  applications
and property  valuations by independent  appraisers  (consistent with the Bank's
appraisal policy). The loan applications are designed primarily to determine the
borrower's  ability to repay and the more  significant  items on the application
are verified through use of credit reports,  financial  statements,  tax returns
and/or confirmations.

         Under the Bank's loan policy, the employee processing an application is
responsible  for  ensuring  that  all  documentation  is  obtained  prior to the
submission  of the  application  to an officer for  approval.  In  addition,  an
officer verifies that the application meets the Bank's  underwriting  guidelines
described  below.  All mortgage  loans must be approved by the Bank's  Executive
Committee  or  the  Board  of  Directors.  Various  officers  of the  Bank  have
individual loan approval authority for other loans.

         Generally, the Bank requires title insurance on properties securing its
mortgage  loans as well as fire and  extended  coverage  casualty  insurance  in
amounts  at least  equal to the  principal  amount  of the loan or the  value of
improvements  on the  property,  depending  on the type of loan.  The Bank  also
requires flood insurance to protect the property  securing its interest when the
property is located in a flood plain.

         One-to-Four Family Residential Real Estate Lending.  The cornerstone of
the Bank's lending  program is the  origination  of fixed-rate  loans secured by
mortgages on owner-occupied  one-to-four  family  residences.  At June 30, 1999,
$59.8  million,  or 91.9%,  of the Bank's loan  portfolio  consisted of mortgage
loans  secured  by  one-to-four  family  residences.  Substantially  all  of the
residential  loans  originated by the Bank are secured by properties  located in
its primary  lending  area.  All of the  one-to-four  family  residential  loans
originated  by the Bank are retained  and  serviced by it,  except for a limited
number of loans originated for the State of New York Mortgage Agency  ("SONYMA")
which are sold to SONYMA at closing.  In order to supplement  one-to-four family
residential loan products,  the Bank from time to time has purchased one-to-four
family  residential loan  participations,  although it has not done so in recent
years.  However,  depending  on future  market  conditions,  it may do so in the
future.

         The Bank currently  offers  conventional  fixed-rate loans with maximum
terms of up to 30 years.  The interest rate on such loans is generally  based on
competitive factors. The Bank does not offer adjustable-rate  residential loans,
although it may do so in the future, depending on market conditions.

         In underwriting  one-to-four  family residential real estate loans, the
Bank evaluates the  borrower's  ability to make  principal,  interest and escrow
payments, the value of the property that will secure the loan, the loan-to-value
ratio and debt-to-income  ratios. First Federal originates  residential mortgage
loans  with  loan-to-value  ratios of up to 90% for  owner-occupied  homes.  For
mortgage loans with  loan-to-value  ratios greater than 80%, the Bank originates
the loans with private  mortgage  insurance to reduce the Bank's exposure to 80%
or less.

                                       8
<PAGE>


         The Bank's residential  mortgage loans customarily  include due-on-sale
clauses  giving  the Bank the  right to  declare  the loan  immediately  due and
payable in the event that,  among other things,  the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid.

         The Bank also  originates  home equity  loans  secured by a lien on the
borrower's residence. Home equity loans are generally limited to $80,000 and are
originated  using  the same  underwriting  standards  applicable  to the  Bank's
one-to-four  family  residential  mortgage loans. The Bank currently offers home
equity  loans for terms of up to 7 years.  At June 30,  1999,  the Bank had $1.7
million of outstanding home equity loans (included in total  one-to-four  family
mortgage loans).

         Multi-Family and Commercial Real Estate Lending.  At June 30, 1999, the
Bank had $2.4 million in commercial real estate loans,  representing 3.7% of the
total loan portfolio,  and $619,000 in multi-family  loans, or 1.0% of the total
loan  portfolio.   The  Bank's   multi-family  loan  portfolio   consists  of  a
participation  interest  in a loan  secured  by an  apartment  complex  and  two
Bank-originated loans. The Bank's commercial real estate loan portfolio consists
of  participation  interests  in nine  loans  (eight  of  these  interests  were
purchased  in fiscal  year 1999) and three  Bank-originated  loans.  At June 30,
1999,  all of the Bank's  multi-family  and  commercial  real estate  loans were
performing in accordance with their contractual terms.

         The $1.9 million  increase in commercial  loans,  from $507,000 at June
30, 1998 to $2.4  million at June 30,  1999,  was due  primarily  to the Company
purchased  a $1.6  million  participation  interest  in eight  commercial  loans
originated by another institution. The loans comply with the Bank's underwriting
standards.

         Multi-family  and  commercial  real estate  loans  generally  present a
higher level of risk than loans secured by one-to-four family  residences.  This
greater risk is due to several factors,  including larger outstanding  balances,
the effects of general economic conditions on income-producing  properties,  and
the  increased  difficulty of evaluating  and  monitoring  these types of loans.
Furthermore,  the repayment of loans secured by multi-family and commercial real
estate is typically dependent upon the successful  operation of the related real
estate  project.  If the cash flow from the project is reduced (for example,  if
leases are not obtained or renewed),  the  borrower's  ability to repay the loan
may be impaired.

         While the Bank may continue to engage in  multi-family  and  commercial
real estate lending from time to time in the future,  it anticipates that future
volume will be modest.

         Construction  Lending. The Bank makes construction loans to individuals
for the  construction of their primary or secondary  residences and occasionally
to builders for the construction of new residences.

         Loans to individuals for the construction of their residences typically
have terms of up to 30 years and are structured to provide both construction and
"permanent"  financing.  The borrower makes  interest-only  payments  during the
construction period.  Residential  construction loans are generally underwritten
pursuant to the same  guidelines  used for  originating  conventional  permanent
residential loans. At June 30, 1999, the Bank had $957,000 of one-to-four family
residential  construction loans to borrowers intending to live in the properties
upon completion of construction.  Subject to future market conditions,  the Bank
intends to continue its construction  lending activities to persons intending to
be owner-occupants.

                                       9
<PAGE>


         On  occasion,   the  Bank  makes  loans  to  builders  to  finance  the
construction of one-to-four family residences.  These loans are made on the same
terms as loans to individuals for the construction of single-family  residences.
At June 30,  1999,  the Bank had four loans of this type  aggregating  $752,000.
While the Bank may  continue to engage in this type of lending from time to time
in the future,  the Bank currently expects that its total volume at any one time
will be limited.

         Residential   construction   lending  involves  several  risks.  First,
construction loans are generally more difficult to evaluate and monitor. Second,
a lender's  risk of loss on a  construction  loan is dependent  largely upon the
accuracy of the initial  estimate of the property's value upon completion of the
project and the  estimated  cost  (including  interest) of the  project.  If the
estimate of value proves to be  inaccurate,  the Bank may be  confronted,  at or
prior  to the  maturity  of the  loan,  with a  project  with a value  which  is
insufficient  to assure full repayment  and/or the possibility of having to make
substantial investments to complete the project.

         Other Loans.  The Bank offers  passbook,  home  improvement and student
loans for  personal and  educational  purposes.  At June 30,  1999,  other loans
totaled $542,000 or 0.8% of total loans outstanding. In the future, the Bank may
expand its consumer lending somewhat to increase home improvement loans.

         Originations and Repayments of Loans.  Real estate loans are originated
by First  Federal's  loan  officers.  In addition,  in the future,  the Bank may
utilize outside mortgage loan brokers in an attempt to increase loan production,
although  there are no specific plans to do so at this time.  Loan  applications
are taken at each of First Federal's offices and processed at the main office.

         The Bank's ability to originate loans is dependent upon competition and
customer  demand for loans in its market  area.  Demand is  affected by both the
local economy and the interest rate  environment.  See "Competition" and "Market
Area."  Historically,  virtually all loans originated by First Federal have been
retained in the portfolio.


                                       10
<PAGE>


         The following table shows the loan origination and repayment activities
of the Bank for the periods indicated.
                                                  Year Ended June 30,
                                               --------------------------
                                                 1999    1998       1997
                                               -------  -------   -------
                                                    (In thousands)
Originations by type:
  Mortgage loans:
    One-to-four family..................       $20,765  $ 9,161   $11,144
    Multi-family........................           ---      ---       364
    Commercial..........................         1,942      ---       276
    Construction........................         1,720      746       972
  Other loans...........................           446      479       529
                                               -------  -------   -------
    Total loans originated (1)..........        24,873   10,386    13,285
                                               -------  -------   -------
Principal Repayments:
  Mortgage loans:
    One-to-four family..................        (7,234)  (6,806)   (5,405)
    Multi-family........................           (55)     (50)      (34)
    Commercial..........................           (60)     (24)      (30)
    Construction........................          (687)    (740)     (881)
  Other loans...........................          (427)    (399)     (633)
                                               -------  -------   -------
    Total principal repayments..........        (8,463)  (8,091)   (6,983)
                                               -------  -------   -------
Loans transferred to real estate owned..           ---     (247)     (220)
                                               -------  -------   -------
    Net increase in total loans.........       $16,410  $ 2,120   $ 6,082
                                               =======  =======   =======

(1)  Amount for  fiscal  1999  includes  $1.6  million  for  purchases  of eight
     participation  interests in commercial  mortgage loans  originated by other
     lenders.

Asset Quality

         Loan Delinquencies. When a borrower fails to make a required payment on
a loan, the Bank attempts to cure the delinquency by contacting the borrower.  A
late notice is sent on all loans over 15 days delinquent. Additional written and
verbal  contacts may be made with the borrower  between 30 and 60 days after the
due date.  If the loan is  contractually  delinquent  90 days,  the Bank usually
sends  a  30-day  demand  letter  to  the  borrower  and,   after  the  loan  is
contractually delinquent 120 days, institutes appropriate action to foreclose on
the  property.  If  foreclosed,  the  property  is  sold at  auction  and may be
purchased by the Bank.

         Real estate  acquired by First Federal as a result of foreclosure or by
deed in lieu of foreclosure is classified as real estate owned until it is sold.
When a property is acquired or expected to be acquired by foreclosure or deed in
lieu of  foreclosure,  it is recorded at estimated fair value less the estimated
cost of disposition,  with the resulting write-down charged to the allowance for
loan losses.  After acquisition,  all costs incurred in maintaining the property
are expensed. Costs relating to the development and improvement of the property,
however, are capitalized.

                                       11
<PAGE>


         The following table sets forth  information  concerning the Bank's loan
delinquencies at June 30, 1999 and 1998:

                               Loans Delinquent For:
                    ----------------------------------------    Total Delinquent
                    60-89 Days             90 Days and Over           Loans
                    ----------------  ----------------------  ------------------
                    Number    Amount  Number (1)   Amount (1) Number      Amount
                    ------- --------  ----------- ----------  -------- ---------
                                        (Dollars in thousands)
One-to-four family
real estate loans:
  June 30, 1999        3       $ 97        15        $1,130      18    $1,227

  June 30, 1998        7      $ 313        16        $1,491      23    $1,804


(1)  Includes  three  participation  interests at June 30, 1999 for $316,000 and
     six  participation  interests  at June 30,  1998 for  $876,000  in  certain
     residential mortgage loans, as discussed below.

         Classification of Assets. Federal regulations require that each savings
association  classify  its own  assets  on a  regular  basis.  In  addition,  in
connection  with  examinations of savings  institutions,  OTS and FDIC examiners
have authority to identify  problem assets and, if appropriate,  require them to
be classified.  There are three classifications for problem assets: substandard,
doubtful,  and loss.  Substandard assets have one or more defined weaknesses and
are  characterized  by the distinct  possibility that the bank will sustain some
loss if the deficiencies are not corrected.  Doubtful assets have the weaknesses
of substandard assets, with the additional  characteristics  that the weaknesses
make collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable,  and there is a high probability of loss. An
asset  classified as loss is considered  uncollectible  and of such little value
that  continuance  as an asset on the balance  sheet of the  institution  is not
warranted.  Assets classified as substandard or doubtful require the institution
to establish prudent general  allowances for loan losses. If an asset or portion
thereof is classified as loss, the institution  must either  establish  specific
allowances for loan losses equal to 100% of the portion of the asset  classified
as loss,  or charge off such amount.  If an  institution  does not agree with an
examiner's  classification of an asset, it may appeal this  determination to the
District  Director of the OTS.  On the basis of  management's  review,  the Bank
classified $1.1 million of loans as substandard at June 30, 1999.  There were no
assets  classified  as  doubtful  or loss  at that  date.  The  foregoing  asset
classifications are generally consistent with those made by the OTS.

                                       12
<PAGE>


         Non-Performing  Assets.  The table  below  sets forth the  amounts  and
categories of non-performing assets at the dates indicated.  Loans are placed on
non-accrual  status when the  collection of principal  and/or  interest  becomes
doubtful.  Real estate owned  represents  properties  acquired in  settlement of
loans.

                                                          June 30,
                                           -------------------------------------
                                            1999   1998    1997    1996    1995
                                           ------ ------  ------  ------  ------
                                                    (Dollars in thousands)
Accruing loans past due more than 90 days:
  One-to-four family mortgage loans.......   $432   $370    $930  $1,252  $2,096

Non-accrual loans:
  One-to-four family mortgage loans.......    382    245     ---     ---     ---
  Participation interests in one-to-four
  family mortgage loans...................    316    876   1,074     ---     ---
                                           ------ ------  ------  ------  ------
Total non-performing loans................  1,130  1,491   2,004   1,252   2,096

Real estate owned:
  Single-family properties................    ---     94     220     ---     ---
                                           ------ ------  ------  ------  ------
Total non-performing assets............... $1,130 $1,585  $2,224  $1,252  $2,096
                                           ====== ======  ======  ======  ======
Total as a percentage of total assets.....   0.6%   0.8%    1.2%    0.7%    1.3%
                                             ===    ===     ===     ===     ===

         As of June 30, 1999, other than the participation  interests  discussed
below, the Bank's largest non-performing loan had a carrying value of $159,000.

         Included in the  Company's  loan  portfolio  are certain  participation
interests in loans originated by Thrift Association  Service Corporation ("TASCO
Loans")  for  which  the  FDIC,  as a  servicer  of these  loans,  disputed  its
obligation to pass-through  certain  principal and interest  payments whether or
not such amounts are collected from the borrowers.  The FDIC suspended  payments
beginning in 1996, but resumed making certain payments in 1997 and has continued
to do so. As a result, interest payments of $44,000 received in fiscal 1999 were
recognized as income on a cash basis. Foregone interest income was approximately
$22,000,  $76,000  and  $74,000  in fiscal  1999,  1998 and 1997,  respectively.
Interest  income for fiscal 1997 was also  reduced by the reversal of $67,000 in
interest previously received on the TASCO Loans.

         The  Company's  participation  interests  in the  TASCO  Loans  totaled
$643,000  and  $876,000 at June 30, 1999 and 1998,  respectively.  The  decrease
during  fiscal  1999  reflects  current  year  principal  payments,  as  well as
principal  reductions from the reclassification of $143,000 in interest payments
deferred in fiscal 1998 and 1997.  Based on the  present  payment  status of the
loans  underlying  the  participation   interests,   management  has  classified
participation  interests of $316,000 as  non-performing  at June 30,  1999.  All
participation interests were classified as non-performing at June 30, 1998.

         See  "Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations  - Asset  Quality" in the Annual  Report to  Stockholders
attached  hereto as  Exhibit  13,  for a further  discussion  of  non-performing
assets.

                                       13
<PAGE>


         Other Loans of Concern. As of June 30, 1999, there were no loans (other
than  non-performing  loans) with respect to which known  information  about the
possible  credit  problems of the  borrowers  or the cash flows of the  security
properties  have  caused  management  to have  concerns as to the ability of the
borrowers to comply with present  loan  repayment  terms and which may result in
the future inclusion of such loans in the non-performing asset categories.

         Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses  charged to earnings  based on  management's
evaluation  of the  risk  inherent  in the  loan  portfolio.  The  allowance  is
established  as an amount that  management  believes  will be adequate to absorb
probable  losses on existing  loans.  The allowance for loan losses  consists of
amounts  specifically  allocated to  non-performing  loans and potential problem
loans (if any) as well as allowances  determined  for each major loan  category.
Loan categories such as single-family  residential  mortgages and consumer loans
are generally evaluated on an aggregate or "pool" basis by applying loss factors
to the current  balances of the various  loan  categories.  The loss factors are
determined by management  based on an evaluation of historical loss  experience,
delinquency  trends,  volume  and type of  lending  conducted,  and the  current
economic conditions in the Bank's market area.

         While management  believes that it uses the best information  available
to determine the allowance for loan losses,  unforeseen  market conditions could
result in adjustments  to the allowance for loan losses,  and net earnings could
be  significantly  affected,  if  circumstances  differ  substantially  from the
assumptions  used in  making  the  final  determination.  In  addition,  various
regulatory  agencies,   as  an  integral  part  of  their  examination  process,
periodically  review the Bank's  allowance  for loan losses.  Such  agencies may
require  the  Bank to  recognize  additions  to the  allowance  based  on  their
judgments of information available to them at the time of examination.

         The  following  table sets forth  activity in the Bank's  allowance for
loan losses for the periods indicated.


                                               Year Ended June 30,
                                       ------------------------------------
                                       1999    1998    1997   1996    1995
                                       -----  ------  -----  ------  ------
                                              (Dollars in thousands)

Balance at beginning of year.........  $682    $622   $519    $474    $336
Provision for loan losses............    60      60    143      45     160

Charge-offs:
  One-to-four family mortgage loans..   ---     ---    (40)    ---     (22)
Balance at end of year...............  $742    $682   $622    $519    $474
                                       ====    ====   ====    ====    ====
Allowance for loan losses to:
  Non-performing loans ..............  65.7%  45.7%   31.0%   41.5%   22.6%
  Total loans, net ..................   1.2    1.4     1.4     1.3     1.2

                                       14
<PAGE>


         The following table sets forth the allowance for loan losses  allocated
by loan category,  the total loan amounts by category,  and the percent of loans
in each category to total loans at the dates indicated.
<TABLE>
<CAPTION>
                                                            June 30,
                    -----------------------------------------------------------------------------------
                                1999                        1998                        1997
                    --------------------------- --------------------------- ---------------------------
                                        Percent                     Percent                     Percent
                                       of Loans                    of Loans                    of Loans
                                Loan    in Each             Loan    in Each             Loan    in Each
                    Amount of  Amounts Category Amount of  Amounts Category Amount of  Amounts Category
                    Loan Loss    by    to Total Loan Loss    by    to Total Loan Loss    by    to Total
                    Allowance Category   Loans  Allowance Category   Loans  Allowance Category   Loans
                    --------- -------- -------- --------- -------- -------- --------- -------- --------
                                                      (Dollars in thousands)
<S>                   <C>     <C>        <C>       <C>     <C>       <C>      <C>     <C>        <C>
One-to-four family.   $671    $59,802    91.9%     $682    $46,271    95.1%    $622    $44,163    94.9%
Multi-family.......      6        619     1.0       ---        674     1.4      ---        724     1.6
Commercial.........     48      2,389     3.7       ---        507     1.0      ---        531     1.1
Construction.......     17      1,709     2.6       ---        676     1.4      ---        670     1.4
Other..............    ---        542     0.8       ---        523     1.1      ---        443     1.0
                      ----    -------   -----      ----    -------   -----     ----    -------   -----
    Total..........   $742    $65,061   100.0%     $682    $48,651   100.0%    $622    $46,531   100.0%
                      ====    =======   =====      ====    =======   =====     ====    =======   =====
</TABLE>

<TABLE>
<CAPTION>
                                            June 30,
                    -------------------------------------------------------
                                1996                        1995
                    --------------------------- ---------------------------
                                        Percent                     Percent
                                       of Loans                    of Loans
                                Loan    in Each             Loan    in Each
                    Amount of  Amounts Category Amount of  Amounts Category
                    Loan Loss    by    to Total Loan Loss    by    to Total
                    Allowance Category   Loans  Allowance Category   Loans
                    --------- -------- -------- --------- -------- --------
                                    (Dollars in thousands)
<S>                    <C>   <C>        <C>       <C>     <C>       <C>
One-to-four family.     $519  $38,644    95.5%     $474    $   ---   95.2%
Multi-family.......      ---      394     1.0       ---        426    1.0
Commercial.........      ---      285     0.7       ---        308    0.7
Construction.......      ---      579     1.4       ---        725    1.7
Other..............      ---      547     1.4       ---        571    1.4
                        ----  -------   -----      ----    -------  -----
    Total..........     $519  $40,449   100.0%     $474    $42,142  100.0%
                        ====  =======   =====      ====    =======  =====
</TABLE>


Investment Activities

         General. The Bank utilizes mortgage-backed and other debt securities in
virtually  all aspects of its  asset/liability  management  strategy.  In making
investment decisions, management considers, among other things, the Bank's yield
and interest rate  objectives,  its interest rate risk and credit risk position,
and its liquidity and cash flow. All investment transactions are ratified by the
Bank's Board of Directors or Executive Committee.

         First Federal must maintain  minimum levels of investments that qualify
as liquid  assets  under OTS  regulations.  Liquidity  may  increase or decrease
depending upon the  availability of funds and comparative  yields on investments
in relation  to the return on loans.  Cash flow  projections  are  reviewed  and
updated  regularly to assure that adequate  liquidity is maintained.  The Bank's
level of liquidity is a result of  management's  asset/liability  strategy.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Interest Rate Risk Management" in the Annual Report to Stockholders
attached hereto as Exhibit 13 and "Regulation - Liquidity."

         Federally  chartered savings  institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies,  certain savings certificates of insured
banks  and  savings  institutions,  certain  bankers'  acceptances,   repurchase
agreements  and  federal  funds.  Subject  to  various  restrictions,  federally
chartered savings institutions may also invest their assets in commercial paper,
investment  grade  corporate  debt  securities,  and mutual  funds whose  assets
conform to the investments  that a federally  chartered  savings  institution is
otherwise authorized to make directly.

                                       15

<PAGE>


         Securities  Portfolio  Composition.  The following table sets forth the
composition of the Bank's securities portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                           June 30,
                                 ----------------------------------------------------------
                                        1999                1998               1997
                                 ----------------- ------------------- --------------------
                                 Amortized   Fair    Amortized   Fair   Amortized   Fair
                                   Cost     Value      Cost      Value     Cost     Value
                                 -------- -------- ---------- -------- --------- ----------
                                                      (In thousands)
<S>                              <C>       <C>       <C>       <C>      <C>       <C>
Held-to-Maturity:
Mortgage-backed securities:
  Pass-through securities:
     Freddie Mac................  $27,642   $27,866   $43,258   $43,806  $57,834   $57,910
     Ginnie Mae.................   31,403    31,836    40,767    41,392   32,526    33,360
     Fannie Mae.................    9,269     9,132     7,370     7,429    8,056     8,030
  CMOs..........................   42,389    41,741    36,065    36,267   18,049    18,144
                                 --------  --------  --------  -------- --------  --------
                                  110,703   110,575   127,460   128,894  116,465   117,444
U.S. Government Agency and other
debt securities.................    8,419     8,100     7,986     7,989    9,985     9,904
                                 --------  --------  --------  -------- --------  --------
   Total held-to-maturity.......  119,122   118,675   135,446   136,883  126,450   127,348

Available-for-sale:
U.S. Government Agency and other
debt securities.................   16,500    15,673     8,500     8,498    2,999     2,983
                                 --------  --------  --------  -------- --------  --------
  Total securities.............. $135,622  $134,348  $143,946  $145,381 $129,449  $130,331
                                 ========  ========  ========  ======== ========  ========
</TABLE>

         Mortgage-Backed   Securities.   The  Bank  invests  in  mortgage-backed
pass-through  securities in order to supplement  loan production and achieve its
asset/liability  management goals. All of these securities owned by the Bank are
issued,  insured or guaranteed either directly or indirectly by a Federal agency
or are rated "AA" or higher.  However,  it should be noted that, while a Federal
guarantee  (direct or  indirect)  or a high  credit  rating may  indicate a high
degree of protection against default, such guarantees and ratings do not protect
the  securities  from  declines in value  based on changes in interest  rates or
prepayment speeds.  Reflecting its policy of maintaining a substantial portfolio
of investments having short to medium terms to repricing or maturity, the Bank's
mortgage-backed  pass-through securities portfolio at June 30, 1999 included (i)
$19.7 million of securities with remaining contractual  maturities of five years
or less and (ii) $34.2 million of  adjustable-rate  mortgage-backed  securities.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations-  Interest Rate Risk Management" in the Annual Report to Stockholders
attached hereto as Exhibit 13.

         In  addition  to  mortgage-backed  pass-through  securities,  the  Bank
invests in collateralized  mortgage  obligations  ("CMOs").  Unlike pass-through
securities   that  have  a   single-class   structure   resulting   in  pro-rata
distributions  to  all  security  holders,   CMOs  are  securities   derived  by
reallocating the cash flows from mortgage-backed securities or pools of mortgage
loans in order to create  multiple  classes,  or tranches,  of  securities  with
coupon rates and average lives that differ from the  underlying  collateral as a
whole.  The term to maturity of any  particular  tranche is  dependent  upon the
prepayment  speed of the  underlying  collateral as well as the structure of the
particular CMO. As a result of these factors, the estimated average lives of the
CMOs could be shorter than the  contractual  maturities as shown on the table on
page 18.  Although a significant  proportion of the Bank's CMOs are interests in
tranches  that have been  structured  (through the use of cash flow priority and
"support" tranches) to give somewhat more predictable cash flows, the cash flows
and hence the values of CMOs are subject to change.

                                       16
<PAGE>

         The Bank  invests  in CMOs as an  alternative  to  mortgage  loans  and
mortgage-backed   pass-through   securities  as  part  of  its   asset/liability
management   strategy.   Management  believes  that  CMOs  represent  attractive
investment alternatives relative to other investments due to the wide variety of
maturity  and  repayment  options   available   through  such  investments.   In
particular, the Bank has from time to time concluded that short and intermediate
duration CMOs (with an expected  average life of five years or less) represent a
better  combination  of rate and duration than  adjustable-rate  mortgage-backed
securities.  Because the Bank's CMOs are purchased as an alternative to mortgage
loans and because the Bank has the ability and intent to hold such securities to
maturity,  all CMOs are  classified as  held-to-maturity.  At June 30, 1999, the
Bank held CMOs with a  carrying  value of $42.4  million,  substantially  all of
which were of expected short and intermediate duration.

         The fair values of a significant portion of the Bank's  mortgage-backed
securities held-to-maturity have been from time to time significantly lower than
their carrying values.  However, for financial reporting purposes, such declines
in value are  considered  to be  temporary in nature since they have been due to
changes in interest  rates rather than credit  concerns.  At June 30, 1999,  the
total fair value of the Bank's mortgage-backed  securities  held-to-maturity was
$110.6  million,  or $128,000 less than total  amortized cost. See Note 2 of the
Notes to Consolidated Financial Statements.

         In contrast to  mortgage-backed  pass-through  securities in which cash
flow is  received  (and,  hence,  prepayment  risk is  shared)  pro-rata  by all
securities  holders,  the cash  flows  from  the  mortgages  or  mortgage-backed
securities  underlying  CMOs  are  segmented  and  paid  in  accordance  with  a
predetermined  priority to investors holding various tranches of such securities
or obligations.  A particular  tranche of a CMO may therefore  carry  prepayment
risk  that  differs  from  that of both  the  underlying  collateral  and  other
tranches.  It is the  Bank's  strategy  to  purchase  tranches  of CMOs that are
categorized as "planned amortization  classes," "targeted  amortization classes"
or "very accurately defined  maturities" and are intended to produce stable cash
flows in different interest rate environments.

         The following table sets forth mortgage-backed securities purchases and
principal  repayments  for  the  periods  indicated.  There  were  no  sales  of
mortgage-backed securities during these periods.


                                              Year Ended June 30,
                                       --------------------------------
                                          1999       1998        1997
                                       ---------   ---------   --------
                                                (In thousands)
Purchases:
  Adjustable-rate pass-throughs......   $ 4,857    $17,414    $ 2,000
  Fixed-rate pass-throughs...........     9,164      5,015      8,139
  CMOs ..............................    23,928     26,985      7,794
                                       --------    -------    -------
         Total purchases.............    37,949     49,414     17,933

Principal repayments.................   (54,706)   (38,419)   (19,689)
                                       --------    -------    -------
  Net (decrease) increase............  $(16,757)   $10,995    $(1,756)
                                       ========    =======    =======


                                       17

<PAGE>


         Portfolio  Maturities  and Yields.  The following  table sets forth the
contractual  maturities and weighted average yields of the Company's  securities
portfolio at June 30, 1999.  Mortgage-backed  securities  are  anticipated to be
repaid in  advance  of their  contractual  maturities  as a result of  projected
mortgage  loan  prepayments.  In  addition,  under the  structure of some of the
Bank's CMOs, the Bank's short- and intermediate-tranche interests have repayment
priority over the longer term tranches of the same underlying mortgage pool.

                                          Principal Balances Due in
                                ----------------------------------------------
                                  Less   1 Year   5 Years    More
                                  than      to       to      than
                                 1 Year  5 Years  10 Years  10 Years   Total
                                ------- -------- --------- ---------- --------
                                              (Dollars in thousands)
Mortgage-backed securities:
  Pass-through securities:
     Freddie Mac..............  $ 3,403  $13,469   $ 7,205   $3,845  $ 27,922
     Ginnie Mae...............      ---       36       717   30,611    31,364
     Fannie Mae...............      439    1,898     3,125    3,813     9,275
  CMOs........................      ---      ---       885   41,521    42,406
                                -------  -------  --------  -------  --------
     Total....................  $ 3,842  $15,403  $ 11,932  $79,790  $110,967
                                =======  =======  ========  =======  ========

     Weighted average yield...     6.07%    6.11%     6.38%    6.32%     6.29%
U.S. Government Agency and
  other debt securities.......   $  ---    $ 500    $9,000  $15,450   $24,950
                                 ======    =====    ======  =======   =======
     Weighted average yield...      ---%    6.21%     6.41%    6.44%     6.42%

                                       18

<PAGE>

         The Bank's  holdings of  mortgage-backed  securities  have increased in
recent years as a result of  increased  competition  for mortgage  loans and the
Bank's  increased  focus on its  asset/  liability  management.  Federal  agency
mortgage-backed  securities  carry  a yield  generally  lower  than  that of the
corresponding  type  of  residential  loan  due to the  implied  Federal  agency
guarantee fee and the retention of a servicing spread by the loan servicer.  The
Bank's other debt  securities also carry lower yields due to the implied Federal
agency  guarantee  and  because  such  securities  tend to have  shorter  actual
durations  than 30 year  loans.  Accordingly,  if the  proportion  of the Bank's
assets consisting of mortgage-backed  and other debt securities  increases,  the
Bank's asset yields would likely be somewhat adversely  affected.  The Bank will
evaluate  mortgage-backed  securities  purchases  in  the  future  based  on its
asset/liability   objectives,   market  conditions  and  alternative  investment
opportunities.

         Other Debt Securities. To date, the Bank's investment strategy has been
directed  toward  high-quality  assets  (primarily  U.S.  Government  and Agency
obligations)  with short and intermediate  terms (ten years or less) to maturity
and  liquidity  investments.  At June  30,  1999,  the Bank did not own any debt
securities of a single  issuer which  exceeded 10% of the Bank's  equity,  other
than U.S. Government or Federal Agency obligations.

         The following table sets forth the composition of the Bank's other debt
securities and other interest-earning assets at the dates indicated.
<TABLE>
<CAPTION>

                                                                         June 30,
                                                    --------------------------------------------------
                                                         1999             1998            1997
                                                    --------------- ---------------- -----------------
                                                    Amortized %of   Amortized % of   Amortized  % of
                                                       Cost   Total   Cost    Total    Cost     Total
                                                    -------- ------ --------- ------ --------- -------
                                                                     (Dollars in Thousands)
<S>                                                  <C>       <C>   <C>       <C>    <C>        <C>
Other debt securities:
  Held-to-maturity.................................. $ 8,419   33.8% $ 7,986   48.4%  $ 9,985    76.9%
  Available-for-sale(1).............................  16,500   66.2    8,500   51.6     2,999    23.1
                                                     -------  -----  -------  -----   -------   -----
     Total.......................................... $24,919  100.0% $16,486  100.0%  $12,984   100.0%
                                                     =======  =====  =======  =====   =======   =====

Average remaining life of other debt securities..... 151 mos.         74 mos.          81 mos.

Other interest-earning assets:
  FHLB stock........................................ $ 1,463         $ 1,463          $ 1,463
                                                     =======         =======          =======
  Interest-bearing deposits with banks.............. $ 3,200         $ 2,010          $ 3,680
                                                     =======         =======          =======
<FN>

(1)  The fair value of available-for-sale  securities at June 30, 1999, 1998 and
     1997 was $15.7 million, $8.5 million and $3.0 million, respectively.
</FN>
</TABLE>

                                       19

<PAGE>


Sources of Funds

         General.  The Bank's primary  sources of funds are depositor  accounts,
payments  (including  prepayments)  of loan  principal,  interest and  dividends
earned on loans and securities, repayments of securities,  borrowings, and funds
provided by operations.

         Depositor  Accounts.  First Federal  offers  various types of depositor
accounts with a variety of interest rates and terms.  These accounts  consist of
regular  savings and club accounts,  money market and NOW accounts,  and savings
certificates.  The Bank relies  primarily on  competitive  pricing  policies and
customer service to attract and retain these depositor accounts.

         The variety of deposit  accounts  offered by the Bank has allowed it to
be competitive in obtaining funds and to respond with  flexibility to changes in
customer demand.  As certain customers have become more interest rate conscious,
the Bank has become  more  susceptible  to  short-term  fluctuations  in deposit
flows.  The Bank manages the pricing of its  depositor  accounts in keeping with
its asset/liability management, profitability and growth objectives.

         Based on its experience, the Bank believes that substantial portions of
its regular savings,  club, money market and NOW accounts are relatively  stable
sources of funds. The Bank has used customer  service and marketing  initiatives
in an effort to maintain and increase the volume of these accounts. However, the
ability of the Bank to attract and maintain  these  accounts (as well as savings
certificates)   has  been  and  will  be  affected  by  competition  and  market
conditions. In particular,  the Bank believes that it would be very difficult to
increase rapidly the "core" portion of its regular  savings,  club, money market
and NOW accounts.  In total,  these  account types  increased by $4.9 million in
fiscal 1999 and  decreased by $872,000 and $4.8 million in fiscal 1998 and 1997,
respectively.  Management  believes  that  depositors  periodically  transfer  a
portion of these  account  balances  into  savings  certificates  as a result of
interest rate increases on alternate  investments.  In the future, the Bank will
continue  to  stress,   subject  to  market   conditions,   the   retention   of
non-certificate accounts.


                                       20
<PAGE>


         The following table sets forth the  distribution of depositor  accounts
and the related weighted average interest rates as of the dates indicated.
<TABLE>
<CAPTION>

                                                         June 30,
                                   ---------------------------------------------------
                                         1999              1998            1997
                                   ---------------- ----------------- ----------------
                                           Average            Average          Average
                                    Amount   Rate     Amount   Rate   Amount     Rate
                                   ------- -------- -------- -------- ------- --------
                                                  (Dollars in thousands)

<S>                                <C>       <C>    <C>       <C>    <C>         <C>
Money market and NOW ............. $ 18,264  2.80%  $ 13,196  2.85%  $ 10,989    2.85%
Regular savings...................   50,759  2.75     50,928  2.75     54,000    3.00
Club accounts.....................      751  2.75        710  2.75        717    3.00
                                   --------         --------         --------
                                     69,774  2.76     64,834  2.77     65,706    2.97
                                   --------         --------         --------

Savings certificates by
remaining period to maturity:
   Less than 1 year...............   65,425  5.16     58,118  5.53     53,825    5.53
   More than 1 year to 3 years....    9,393  5.49     11,889  6.43      9,707    6.26
   More than 3 years..............    4,101  5.89      5,017  6.25      3,180    6.17
                                   --------         --------         --------
                                     78,919  5.24     75,024  5.72     66,712    5.66
                                   --------         --------         --------
Total............................. $148,693  4.08%  $139,858  4.35%  $132,418    4.33%
                                   ========         ========         ========
</TABLE>

         The following table sets forth the deposit  activity at the Bank during
the periods indicated.

                                   Year Ended June 30,
                            --------------------------------
                               1999       1998      1997
                            ---------- ---------- ----------
                                  (Dollars in thousands)

Opening balance............ $ 139,858   $132,418   $128,304
Deposits(1)................   128,548    118,362    112,066
Withdrawals(1).............  (124,748)  (115,748)  (112,514)
Interest credited..........     5,035      4,826      4,562
                            ---------   --------   --------
Ending balance............. $ 148,693   $139,858   $132,418
                            =========   ========   ========
Net increase............... $   8,835   $  7,440    $ 4,114
                            =========   ========    =======

Percent increase...........      6.3%       5.6%       3.2%
                                 ===        ===        ===

(1)  Includes transfers of funds within the Bank.

                                       21

<PAGE>



         The following  table sets forth  information  about the Bank's  savings
certificates  greater than  $100,000 by remaining  period to maturity as of June
30, 1999:

                                                  Weighted
                                        Amount   Average Rate
                                       -------   ------------
                                        (Dollars in thousands)

Within three months..................   $2,071      4.96%
After 3 but within 6 months..........    4,060      4.96
After 6 but within 12 months.........    4,210      5.50
After 12 months......................    1,930      5.44
                                       -------      ----
  Total..............................  $12,271      5.22%
                                       =======      ====

         Borrowings.  First Federal's  other available  sources of funds include
borrowings  from the FHLB of New York. As a member of the FHLB of New York,  the
Bank is required to own capital  stock in the FHLB of New York and is authorized
to apply for advances from the FHLB of New York.  The Bank may borrow funds from
the FHLB of New York subject to an overall  limitation of 25% of total assets or
$51.7 million at June 30, 1999  (excluding  securities  repurchase  agreements).
Funds may be borrowed  through a  combination  of FHLB  advances  and  overnight
borrowings under a line of credit. Each FHLB credit program has its own interest
rate,  which may be fixed or variable,  with a range of maturities.  The FHLB of
New York may  prescribe  the  acceptable  uses for  these  advances,  as well as
limitations on the size of the advances and repayment provisions.  See Note 6 of
the Notes to Consolidated Financial Statements.

         The Bank has used FHLB  advances from time to time to provide funds for
investment  opportunities  and to fund deposit  outflows.  The Bank may also use
advances to extend the  maturity of its  liabilities  if deemed  appropriate  in
connection with its asset/liability management efforts.

         The Company began utilizing  repurchase  agreements as a funding source
in fiscal 1998 to supplement retail deposit growth. Proceeds from the borrowings
were  invested  in   fixed-rate   government   agency   bonds,   adjustable-rate
mortgage-backed securities and fixed-rate collateralized mortgage obligations at
an anticipated  average spread of approximately 90 basis points.  The spread was
conservatively achieved by closely matching the maturities of the securities and
borrowings.

                                       22
<PAGE>



         The following is a summary of borrowings from the FHLB at June 30:

                                                       1999          1998
                                                     --------      --------
                                                       (In thousands)
Securities repurchase agreements:
Final maturity in June 2005,
   callable quarterly at the FHLB's
   option beginning in June 1999,
   and bearing interest at 5.20%                      $ 3,000       $ 3,000
Final maturity in December 2008,
   callable quarterly at the FHLB's
   option beginning in November 2000,
   and bearing interest at 4.56%                        5,000           ---
Final maturity in December 2008,
   callable quarterly at the FHLB's
   option beginning in November 2001,
   and bearing interest at 4.72%                        5,000           ---
Final maturity in January 2008,
   callable quarterly at the FHLB's
   option beginning in January 2003,
   and bearing interest at 5.42%                       10,000        10,000
                                                     --------      --------
                                                       23,000        13,000
FHLB advance  maturing in June 2000
  and bearing  interest at an initial
  rate of 4.985% at June 30, 1999,
  adjusting thereafter to three-month
  Libor minus 14 basis points                           5,000           ---
                                                     ========      ========
    Total FHLB borrowings                            $ 28,000      $ 13,000
                                                     ========      ========

         The following table sets forth information  concerning the balances and
interest rates on FHLB borrowings for the periods  indicated.  Amounts in fiscal
1999  represent  securities  repurchase  agreements  and an FHLB advance,  while
amounts in fiscal 1998 represent only securities repurchase agreements.


                                                  Year Ended June 30,
                                         -----------------------------------
                                             1999         1998       1997
                                         ------------ ------------ ---------
                                                 (Dollars in thousands)

Maximum balance.........................   $28,000      $13,000      $---
Average balance.........................    19,563        4,567       ---
Year-end balance........................    28,000       13,000       ---
Interest rate at year end...............      5.04%        5.37%      ---%
Average interest rate during the year...      5.07         5.36       ---

Service Corporations

         As a federally  chartered  savings bank,  First Federal is permitted by
OTS  regulations  to invest up to 2% of its assets in the stock of, or loans to,
service corporation subsidiaries,  and may invest an additional 1% of its assets
in service  corporations  where such additional funds are used for inner-city or
community  development  purposes. At June 30, 1999, First Federal had no service
corporations subject to these limitations.

         In May 1999,  First  Federal  REIT,  Inc. was formed as a  wholly-owned
subsidiary of the Bank. The subsidiary is a real estate investment trust holding
a portion of the mortgage-related  assets reported in the consolidated financial
statements.

                                       23

<PAGE>


Employees

         At June 30, 1999,  the Bank had a total of 24 full-time and 4 part-time
employees.  None of the  Bank's  employees  are  represented  by any  collective
bargaining agreement. Management considers its employee relations to be good.

Regulation

         General.  First  Federal is a federally  chartered  savings  bank,  the
deposits of which are federally  insured and backed by the full faith and credit
of the United States Government.  Accordingly, First Federal is subject to broad
Federal regulation and oversight extending to all its operations.  First Federal
is a member of the FHLB of New York and is subject to certain limited regulation
by the Board of  Governors  of the  Federal  Reserve  System  ("Federal  Reserve
Board").  As the savings and loan holding company of First Federal,  the Company
also is  subject  to  federal  regulation  and  oversight.  The  purpose  of the
regulation of the Company and other holding  companies is to protect  subsidiary
savings  associations.  First  Federal's  deposits  are  insured by the  Savings
Association Insurance Fund ("SAIF"), which together with the Bank Insurance Fund
("BIF") are the two deposit funds  administered  by the FDIC.  As a result,  the
FDIC has  certain  regulatory  and  examination  authority  over First  Federal.
Certain of these regulatory requirements and restrictions are discussed below or
elsewhere in this document.

         Federal  Regulation  of  Savings  Associations.  The OTS has  extensive
authority  over  the  operations  of  savings  associations.  As  part  of  this
authority,  First Federal is required to file periodic  reports with the OTS and
is subject to periodic  examinations  by the OTS and the FDIC.  The last regular
OTS  examination  of First  Federal  was as of  December  31,  1997.  When these
examinations  are  conducted by the OTS and the FDIC,  the examiners may require
First Federal to provide for higher general or specific loan loss reserves.  All
savings  associations  are subject to a semi-annual  assessment,  based upon the
savings  association's  total assets,  to fund the  operations of the OTS. First
Federal's  OTS   assessment  for  the  fiscal  year  ended  June  30,  1999  was
approximately $54,000.

         The OTS also  has  extensive  enforcement  authority  over all  savings
institutions  and their  holding  companies,  including  First  Federal  and the
Company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate  injunctive  actions.  In  general,  these  enforcement  actions may be
initiated  for  violations  of laws and  regulations,  and for unsafe or unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,  including  misleading or untimely  reports  filed with the OTS.  Except
under certain  circumstances,  public disclosure of final enforcement actions by
the OTS is required.

         In addition,  the investment,  lending and branching authority of First
Federal is  prescribed  by Federal laws which  prohibit it from  engaging in any
activities not permitted by such laws. For instance,  no savings institution may
invest in  non-investment  grade  corporate debt  securities.  In addition,  the
permissible  level of  investment  by Federal  associations  in loans secured by
non-residential real property may not exceed 400% of total capital,  except with
approval of the OTS.  First  Federal is in compliance  with these  restrictions.
Federal savings associations are generally authorized to branch nationwide.

                                       24
<PAGE>


         First    Federal's    general    permissible    lending    limit    for
loans-to-one-borrower  is equal to the greater of $500,000 or 15% of  unimpaired
capital  and  surplus  (except  for  loans  fully  secured  by  certain  readily
marketable  collateral,  in  which  case  this  limit  is  increased  to  25% of
unimpaired capital and surplus). At June 30, 1999, First Federal's lending limit
under the 15% limitation was $4.1 million.  First Federal is in compliance  with
the loans-to-one borrower limitation.

         The OTS, as well as the other  Federal  banking  agencies,  has adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and  documentation,  asset quality,  earnings  standards,  internal
controls and audit systems,  interest rate risk exposure,  and  compensation and
other  employee  benefits.  Any  institution  that  fails to comply  with  these
standards must submit a compliance plan. A failure to submit a plan or to comply
with an  approved  plan will  subject  the  institution  to further  enforcement
action.

         Insurance of Accounts and  Regulation  by the FDIC.  First Federal is a
member of the SAIF,  which is administered by the FDIC.  Deposits are insured up
to applicable limits by the FDIC, and such insurance is backed by the full faith
and credit of the United States Government. As insurer, the FDIC imposes deposit
insurance  premiums and is authorized to conduct  examinations of and to require
reporting by FDIC-insured  institutions.  It also may prohibit any  FDIC-insured
institution  from engaging in any activity the FDIC  determines by regulation or
order to pose a serious risk to the SAIF or BIF. The FDIC also has the authority
to initiate enforcement actions against savings  associations,  after giving the
OTS an opportunity to take such action,  and may terminate the deposit insurance
if it determines that the institution has engaged in unsafe or unsound practices
or is in an unsafe or unsound condition.

         The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a total  risk-based  capital ratio of at least 10%) and  considered
healthy  pay the  lowest  premium.  Institutions  that are less than  adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
total  risk-based  capital ratio of less than 8%) and  considered of substantial
supervisory concern pay the highest premium. Risk classifications of all insured
institutions are made by the FDIC for each semi-annual assessment period.

         The FDIC is authorized to increase  assessment  rates,  on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

         The premium  schedule for BIF and SAIF insured  institutions  presently
ranges  from  0 to 27  basis  points.  However,  SAIF-insured  institutions  are
required to pay a Financing  Corporation ("FICO")  assessment,  in order to fund
the interest on bonds issued to resolve thrift failures in the 1980's, presently
equal to approximately 1.48 basis points on domestic deposits, while BIF-insured
institutions  presently pay an  assessment  equal to  approximately  0.013 basis
points on domestic  deposits  until the earlier of December 31, 1999 or the date
upon which the last savings  association  ceases to exist,  after which time the
assesment will be the same for all insured deposits.

                                       25
<PAGE>

         These assessments, which may be revised based upon the level of BIF and
SAIF deposits, will continue until the FICO bonds mature in the year 2017.

         Regulatory    Capital    Requirements.    Federally   insured   savings
associations, such as First Federal, are required to maintain a minimum level of
regulatory  capital.  The OTS has  established  capital  standards,  including a
tangible capital requirement, a leverage ratio (or core capital) requirement and
a risk-based capital requirement applicable to such savings associations.  These
capital  requirements  must be generally as stringent as the comparable  capital
requirements  for national  banks.  The OTS is also authorized to impose capital
requirements  in excess  of these  standards  on  individual  associations  on a
case-by-case basis.

         The capital  regulations  require  tangible capital of at least 1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common  stockholders'  equity  and  retained  earnings,   and  certain
noncumulative  perpetual preferred stock and related surplus.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights and credit card relationships, must be deducted from tangible capital for
calculating compliance with the requirement. At June 30, 1999, First Federal had
no intangible assets.

         The OTS regulations establish special  capitalization  requirements for
savings associations that own subsidiaries.  In determining  compliance with the
capital requirements,  all subsidiaries engaged solely in activities permissible
for national  banks or engaged in certain other  activities  solely as agent for
its customers are  "includable"  subsidiaries  that are consolidated for capital
purposes in proportion to the association's level of ownership.  Debt and equity
investments in excludable  subsidiaries are deducted from assets and capital. At
June 30, 1999,  First Federal's real estate  investment  trust was an includable
subsidiary  and,  accordingly,  the Bank's  investment in the subsidiary was not
deducted from regulatory capital.

         At June 30, 1999,  First Federal had tangible capital of $27.7 million,
or 13.4% of adjusted total assets,  which is  approximately  $24.5 million above
the minimum requirement of 1.5% of adjusted total assets in effect on that date.

         The capital standards also require core capital equal to at least 4% of
adjusted total assets.  Core capital generally consists of tangible capital plus
certain  intangible  assets,  including a limited  amount of purchased  mortgage
servicing rights and credit card relationships.  At June 30, 1999, First Federal
had core capital  equal to $27.7  million,  or 13.4% of adjusted  total  assets,
which is $19.4 million above the minimum  leverage  ratio  requirement  of 4% of
adjusted total assets in effect on that date.

          The OTS risk-based capital regulations require savings associations to
have  total  capital  of at  least 8% of  risk-weighted  assets.  Total  capital
consists  of  core  capital,  as  defined  above,  and  supplementary   capital.
Supplementary  capital  consists  of  certain  permanent  and  maturing  capital
instruments that do not qualify as core capital,  and general valuation loan and
lease  loss  allowances  up to a  maximum  of  1.25%  of  risk-weighted  assets.
Supplementary  capital may be used to satisfy the risk-based capital requirement
only up to the amount of core capital.  The OTS is also  authorized to require a
savings association to maintain an additional amount of total capital to account
for  concentration  of credit risk and the risk of  non-traditional  activities.
Certain  exclusions  from  capital  and assets are  required  to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and

                                       26

<PAGE>

nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal holdings of qualifying capital instruments.

         In  determining  the  amount  of  risk-weighted   assets,  all  assets,
including credit  equivalent  amounts for certain  off-balance  sheet items, are
multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent
in the type of asset. For example, the OTS has assigned a risk weight of 50% for
prudently  underwritten  permanent  one-to-four family first lien mortgage loans
not more than 90 days  delinquent and having a  loan-to-value  ratio of not more
than 80% at origination  unless insured to such ratio by an insurer  approved by
Fannie Mae or Freddie Mac.

         OTS regulations also require savings associations with more than normal
interest  rate risk  exposure  to deduct  from total  capital,  for  purposes of
determining compliance with the risk-based capital requirement,  an amount equal
to  50% of the  association's  interest-rate  risk  exposure  multiplied  by the
present value of its assets. This exposure is a measure of the potential decline
in the net  portfolio  value of a savings  association,  greater  than 2% of the
present value of its assets,  based upon a hypothetical 200 basis point increase
or decrease in interest  rates  (whichever  results in a greater  decline).  Net
portfolio  value is the  present  value of  expected  cash  flows  from  assets,
liabilities and off-balance sheet contracts.  Any savings  association with less
than $300 million in assets and a total  risk-based  capital  ratio in excess of
12% (such as First  Federal)  is exempt  from this  requirement  unless  the OTS
determines otherwise.  The OTS has indefinitely  deferred  implementation of the
interest rate risk component of the risk-based capital requirements.

         At June 30, 1999, First Federal had total  risk-based  capital of $28.4
million  (including  $27.7  million in core capital and  $742,000 in  qualifying
supplementary  capital)  and  risk-weighted  assets of $60.7  million,  or total
capital of 46.8% of  risk-weighted  assets.  This amount was $23.5 million above
the 8% requirement in effect on that date.

         The OTS and the FDIC are authorized  and,  under certain  circumstances
required, to take certain actions against savings associations that fail to meet
their  capital  requirements.  The OTS is  generally  required to take action to
restrict the activities of an "undercapitalized  association" (generally defined
to be  one  with  less  than  either  a 4%  core  capital  ratio,  a 4%  Tier  1
risked-based  capital ratio or an 8% total risk-based  capital ratio).  Any such
association  must  submit a capital  restoration  plan and,  until  such plan is
approved by the OTS, may not increase its assets,  acquire another  institution,
establish a branch or engage in any new  activities,  and generally may not make
capital   distributions.   The  OTS  is  authorized  to  impose  the  additional
restrictions that are applicable to significantly undercapitalized associations.

          As a condition to the approval of the capital  restoration  plan,  any
company  controlling  an  undercapitalized  association  must agree that it will
enter  into  a  limited  capital  maintenance  guarantee  with  respect  to  the
institution's achievement of its capital requirements.

         Any savings  association  that fails to comply with its capital plan or
is  "significantly  undercapitalized"  (i.e.,  Tier 1 risk-based or core capital
ratios of less than 3% or a total risk-based capital ratio of less than 6%) must
be made  subject  to one or more  additional  specified  actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with

                                       27
<PAGE>

certain  limited  exceptions,   within  90  days  after  it  becomes  critically
undercapitalized.  Any  undercapitalized  association  is  also  subject  to the
general enforcement authority of the OTS and the FDIC, including the appointment
of a conservator or a receiver.

         The OTS is also generally  authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.

         The imposition by the OTS or the FDIC of any of these measures on First
Federal may have a substantial adverse effect on First Federal's  operations and
profitability.  Stockholders of the Company do not have preemptive  rights,  and
therefore, if the Company is directed by the OTS or the FDIC to issue additional
shares of  common  stock,  such  issuance  may  result  in the  dilution  in the
percentage ownership of present shareholders.

         Limitations   on  Dividends  and  Other  Capital   Distributions.   OTS
regulations impose various  restrictions on savings associations with respect to
their ability to make distributions of capital,  which include dividends,  stock
redemptions or repurchases,  cash-out mergers and other transactions  charged to
the capital account.  OTS regulations  also prohibit a savings  association from
declaring or paying any dividends or from repurchasing any of its stock if, as a
result,  the regulatory  capital of the  association  would be reduced below the
amount  required to be maintained  for the  liquidation  account  established in
connection with its mutual-to-stock conversion.

         Generally,  savings  associations that meet their capital  requirements
before  and after the  proposed  distribution,  may make  capital  distributions
during any calendar year up to an amount equal to net income of the current year
plus retained net income for the preceding two years. Distributions in excess of
such amount require OTS approval. Distributions from the Bank to the Company may
also have income tax consequences. See "Federal and State Taxation."

         Liquidity.  All savings  associations,  including  First  Federal,  are
required  to  maintain  an average  daily  balance of liquid  assets  equal to a
certain  percentage of the sum of its average daily balance of net  withdrawable
deposit  accounts and borrowings  payable in one year or less. This liquid asset
ratio requirement may vary from time to time (between 4% and 10%) depending upon
economic  conditions  and  savings  flows of all  savings  associations.  At the
present  time,  the minimum  liquid asset ratio is 5%.  Penalties may be imposed
upon associations for violations of the liquid asset ratio requirement.  At June
30, 1999, First Federal was in compliance with this  requirement,  with a liquid
asset ratio of 16.6%.

         Qualified Thrift Lender Test. All savings associations, including First
Federal,  are required to meet a qualified  thrift lender  ("QTL") test to avoid
certain  restrictions  on  their  operations.   This  test  requires  a  savings
association  to have  at  least  65% of its  portfolio  assets  (as  defined  by
regulation) in qualified thrift investments on a monthly average for nine out of
every 12 months on a rolling basis. Such assets primarily consist of residential
housing related loans and  investments.  At June 30, 1999, First Federal met the
test and has always met the test since its effectiveness.

         Any savings association that fails to meet the QTL test must convert to
a national bank charter unless it requalifies as a QTL and thereafter  remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF.  If such an  association  has not yet  requalified  or  converted  to a
national  bank,  its  new  investments  and  activities  are  limited  to  those
permissible  for both a  savings

                                       28
<PAGE>

association  and a national  bank,  and it is limited to national bank branching
rights in its home state. In addition, the association is immediately ineligible
to receive any new FHLB  borrowings.  If such association has not requalified or
converted  to a national  bank within  three years  after the  failure,  it must
divest of all  investments  and  cease  all  activities  not  permissible  for a
national  bank.  In  addition,  it must  repay  promptly  any  outstanding  FHLB
borrowings,  which may result in prepayment  penalties.  If any association that
fails the QTL test is  controlled  by a holding  company,  then  within one year
after the failure,  the holding  company must register as a bank holding company
and become subject to all restrictions on bank holding companies. See "- Holding
Company Regulation."

         Community  Reinvestment  Act.  Under  the  Community  Reinvestment  Act
("CRA"),  every  FDIC-insured  institution  has  a  continuing  and  affirmative
obligation  consistent  with safe and sound  banking  practices to help meet the
credit  needs  of its  entire  community,  including  low  and  moderate  income
neighborhoods.  The CRA does not  establish  specific  lending  requirements  or
programs  for  financial   institutions  nor  does  it  limit  an  institution's
discretion  to develop the types of products and  services  that it believes are
best  suited  to its  particular  community,  consistent  with the CRA.  The CRA
requires the OTS, in connection with the examination of First Federal, to assess
the  institution's  record of meeting the credit needs of its  community  and to
take such record into account in its evaluation of certain applications, such as
a merger or the establishment of a branch, by the institution. An unsatisfactory
rating may be used as the basis for the denial of an application by the OTS.

         In 1995 the  Federal  banking  agencies,  including  the  OTS,  adopted
revisions  to the  CRA  regulations  and  the  methodology  for  determining  an
institution's  compliance  with the CRA. Due to the heightened  attention  being
given to the CRA in the past few  years,  the  Bank may be  required  to  devote
additional funds for investment and lending in its local community. The Bank was
examined for CRA compliance in May 1998 and received a rating of satisfactory.

         Transactions with Affiliates. Generally, transactions between a savings
association or its  subsidiaries  and its affiliates are required to be on terms
as  favorable  to  the  association  as  transactions  with  non-affiliates.  In
addition,  certain of these  transactions,  such as loans to an  affiliate,  are
restricted to a percentage  of the  association's  capital.  Affiliates of First
Federal  include the Company and any company which is under common  control with
First Federal. In addition,  a savings association may not lend to any affiliate
engaged in activities not  permissible for a bank holding company or acquire the
securities  of  most  affiliates.  Subsidiaries  of a  savings  association  are
generally not deemed  affiliates;  however,  the OTS has the discretion to treat
subsidiaries of savings associations as affiliates on a case-by-case basis.

         Certain  transactions with directors,  officers or controlling  persons
are also subject to conflict of interest  regulations enforced by the OTS. These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must be made on terms  substantially the same as for loans to unaffiliated
individuals.

         Holding Company  Regulation.  The Company is a unitary savings and loan
holding company subject to regulatory oversight by the OTS. As such, the Company
is  required  to  register  and  file  reports  with the OTS and is  subject  to
regulation  and  examination  by the OTS. In addition,  the OTS has  enforcement
authority over the Company and its non-savings association subsidiaries (if any)
which  also  permits  the  OTS to  restrict  or  prohibit  activities  that  are
determined to be a serious risk to the subsidiary savings association.

                                       29
<PAGE>

         As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions. If the Company acquires control of another
savings association as a separate subsidiary, it would become a multiple savings
and loan  holding  company,  and the  activities  of the  Company and any of its
subsidiaries  (other  than  First  Federal  or any  other  SAIF-insured  savings
association)  would  become  subject  to such  restrictions  unless  such  other
associations  each  qualify  as  a  QTL  and  were  acquired  in  a  supervisory
acquisition.

         If First  Federal  fails the QTL test,  the  Company  must  obtain  the
approval of the OTS prior to continuing after such failure,  directly or through
its other  subsidiaries,  any business  activities other than those approved for
multiple savings and loan holding companies or their subsidiaries.  In addition,
within one year of such  failure,  the Company must register as, and will become
subject  to,  the  restrictions  applicable  to  bank  holding  companies.   The
activities  authorized for a bank holding  company are more limited than are the
activities  authorized  for a  unitary  or  multiple  savings  and loan  holding
company. See "Qualified Thrift Lender Test."

         The Company must obtain approval from the OTS before acquiring  control
of  any  other  SAIF-insured   association.   Such  acquisitions  are  generally
prohibited  if they  result  in a  multiple  savings  and loan  holding  company
controlling  savings  associations  in  more  than  one  state.   However,  such
interstate  acquisitions are permitted based on specific state  authorization or
in a supervisory acquisition of a failing savings association.

         Federal Securities Law. The stock of the Company is registered with the
SEC under the Securities  Exchange Act of 1934, as amended (the "Exchange Act").
The Company is subject to the information,  proxy solicitation,  insider trading
restrictions and other requirements of the SEC under the Exchange Act.

         Company stock held by persons who are affiliates  (generally  officers,
directors and principal  stockholders)  of the Company may not be resold without
registration or unless sold in accordance with certain resale  restrictions.  If
the Company  meets  specified  current  public  information  requirements,  each
affiliate  of the  Company  is  able  to  sell  in the  public  market,  without
registration, a limited number of shares in any three-month period.

         Federal  Reserve  System.   The  Federal  Reserve  Board  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At June 30, 1999, First Federal was in compliance with these
reserve  requirements.  The balances maintained to meet the reserve requirements
imposed  by  the  Federal  Reserve  Board  may  be  used  to  satisfy  liquidity
requirements that may be imposed by the OTS.
See "- Liquidity."

         Savings  associations are authorized to borrow from the Federal Reserve
Bank  "discount   window,"  but  Federal  Reserve  Board   regulations   require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.

         Federal Home Loan Bank System. First Federal is a member of the FHLB of
New York, which is one of 12 regional FHLBs, that administers the home financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and

                                       30
<PAGE>

procedures, established by the board of directors of the FHLB, which are subject
to the oversight of the Federal  Housing  Finance  Board.  All advances from the
FHLB are required to be fully secured by sufficient  collateral as determined by
the FHLB. In addition,  all long-term advances are required to provide funds for
residential home financing.

         As a member,  First Federal is required to purchase and maintain  stock
in the FHLB of New York.  At June 30,  1999,  First  Federal had $1.5 million in
FHLB stock,  which was in compliance with this  requirement.  Over the past five
calendar years,  dividends  received by the Bank on its FHLB stock have averaged
7.03% (including 6.89% for calendar year 1998).

         Under  federal  law,  the FHLBs are  required to provide  funds for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately-priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction in value of First  Federal's FHLB stock may result in a  corresponding
reduction in First Federal's capital.

Federal and State Taxation

         Federal  Taxation.  The Bank and the Company  currently  file  separate
Federal  income tax returns.  These returns are filed on a  calendar-year  basis
using the accrual method of accounting.

         Savings  associations  such as the  Bank  are  permitted  to  establish
reserves for bad debts and to make annual  additions  thereto which may,  within
specified  formula limits,  be deducted in computing  taxable income for Federal
income tax purposes.  The amount of the bad debt deduction is presently computed
under the experience method, although a percentage-of-taxable-income  method was
also  available in computing  the  deduction  for tax years ended on or prior to
December 31, 1995. Under the experience  method,  the bad debt reserve deduction
is an amount  determined  under a  formula  based  generally  upon the bad debts
actually sustained by the savings association over a period of years.

         Tax legislation enacted in 1996 imposes a requirement to recapture into
taxable  income the  portion of the tax bad debt  reserves  for  qualifying  and
non-qualifying  loans in excess of the "base-year"  balances.  For the Bank, the
base-year  reserves are the  balances as of December 31, 1987.  Recapture of the
excess  reserves  will  occur  over  a  six-year  period.  The  Bank  previously
established,  and will  continue to  maintain,  a deferred  tax  liability  with
respect  to its  Federal  tax bad  debt  reserves  in  excess  of the  base-year
balances;  accordingly,  the recapture  requirement will have no effect on total
income tax expense for financial reporting purposes.

         Also, under the 1996 legislation,  the Bank's base-year Federal tax bad
debt reserves are "frozen" and subject to current recapture only in very limited
circumstances.  Generally,  recapture  of all  or a  portion  of  the  base-year
reserves  will be  required if the Bank pays a dividend in excess of its current
or accumulated earnings and profits (see below),  redeems any of its stock or is
liquidated.  The Bank has not established a deferred Federal tax liability under
Statement of Financial  Accounting  Standards ("SFAS") No. 109 for its base-year
Federal tax bad debt reserves,  as it does not anticipate engaging in any of the
transactions  that would cause such reserves to be recaptured.  The unrecognized
Federal deferred tax liability was $1.5 million at June 30, 1999.

                                       31
<PAGE>

         Distributions  by the  Bank to the  Company  in  excess  of the  Bank's
accumulated earnings and profits (as calculated for Federal income tax purposes)
would result in taxation of the Bank's tax bad debt reserves. All dividends paid
to date by the Bank to the  Company  have been paid from the Bank's  current and
accumulated  earnings  and  profits.  Since  the Bank  intends  to limit  future
dividend  payments to amounts  which will not result in the recapture of tax bad
debt  reserves,  the  amount of  additional  funds  which may be  available  for
dividend  payments to the Company will generally be limited to the amount of the
Bank's current and accumulated  earnings and profits. At June 30, 1999, the Bank
had approximately  $3.4 million in current and accumulated  earnings and profits
from which it could pay dividends  without  causing the recapture of any portion
of its tax bad debt reserves.

         In addition to the regular income tax, corporations,  including savings
associations such as the Bank,  generally are subject to the alternative minimum
tax.  This tax is imposed at a tax rate of 20% on  alternative  minimum  taxable
income, which is the sum of a corporation's regular taxable income (with certain
adjustments)  and tax  preference  items,  less  any  available  exemption.  The
alternative  minimum tax is imposed to the extent it exceeds  the  corporation's
regular  income  tax,  and net  operating  losses can offset no more than 90% of
alternative minimum taxable income. The Company and the Bank do not expect to be
subject to the alternative minimum tax.

         The Bank has been audited by the IRS with respect to Federal income tax
returns through December 31, 1993, and all deficiencies have been satisfied.  In
the opinion of  management,  any  examination  of still open  returns  would not
result  in a  deficiency  that  could  have a  material  adverse  effect  on the
financial condition of the Bank.

         New York Taxation.  The Bank and the Company  currently file a combined
New York state tax return on a calendar-year  basis.  The Bank is subject to the
New York State  Franchise Tax on Banking  Corporations in an annual amount equal
to the  greater of (i) 9% of "entire  net  income"  allocable  to New York State
during the taxable year,  or (ii) the  applicable  alternative  minimum tax. The
alternative  minimum tax is  generally  the greater of (a) 0.01% of the value of
assets  allocable  to New  York  State  with  certain  modifications,  (b) 3% of
"alternative entire net income" allocable to New York State, or (c) $250. Entire
net  income  is  similar  to  Federal   taxable   income,   subject  to  certain
modifications  (including  the fact that net operating  losses cannot be carried
back or carried forward).  Although the Bank has in the past been subject to the
9%  tax  on  entire  net  income,  it  expects  to be  subject  to the 3% tax on
alternative entire net income in the future, as a result of the recent formation
of a real estate investment trust. New York also imposes a Metropolitan Commuter
Transportation  District surcharge of 17% that is assessed on the New York State
Franchise Tax.

         In July 1996, New York State enacted legislation to preserve the use of
the percentage-of-taxable-income bad debt deduction for thrift institutions such
as the Bank. In general,  the legislation  provides for a deduction equal to 32%
of the  Bank's  New  York  State  taxable  income,  which is  comparable  to the
deductions  permitted under the prior law. The  legislation  also provides for a
floating   base   year,   which   allows   the   Bank   to   switch   from   the
percentage-of-taxable-income  method to the experience  method without recapture
of any reserve.  Previously,  the Bank had established a deferred New York State
tax  liability  for the excess of its New York State tax bad debt  reserves over
the amount of its base-year New York State reserves.  Since the 1996 legislation
effectively  eliminated  the reserves in excess of the base-year  balances,  the
Bank  reduced its  deferred  tax  liability  by $238,000  (with a  corresponding
reduction in income tax expense) during the quarter ended September 30, 1996.

                                       32
<PAGE>

         Generally,   New  York  State  has  requirements   similar  to  Federal
requirements  regarding the recapture of base-year  tax bad debt  reserves.  One
notable  exception is that,  after the 1996  legislation,  New York continues to
require that the Bank maintain its thrift institution  charter and hold at least
60% of its assets in specified assets  (generally,  loans secured by residential
real  estate  or  deposits,  educational  loans,  cash  and  certain  government
obligations).  The Bank expects to continue to meet the 60% requirement and does
not anticipate  engaging in any of the transactions that would require recapture
of the base-year  reserves.  Accordingly,  in conformity  with SFAS No. 109, the
related  state  deferred  tax  liability of  approximately  $0.6 million (net of
Federal tax effect) has not been recognized.

         Delaware  Taxation.  As a  Delaware  holding  company,  the  Company is
exempted  from Delaware  corporate  income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware.  The Company is also
subject to an annual franchise tax imposed by the State of Delaware.

                                       33
<PAGE>


Item 2. Properties

         The Bank  conducts  its  business  at its  main  office  and two  other
locations  in its market  area.  The  following  table  sets  forth  information
concerning  each of these  offices as of June 30, 1999.  At June 30,  1999,  the
total net book value of the Bank's office  properties  and equipment  (including
land, buildings,  leasehold improvements, and furniture, fixtures and equipment)
was $1.1 million, distributed as follows by location:

                                    Year      Owned or Net Book Value at
             Location             Acquired    Leased     June 30, 1999
-------------------------------   ---------  --------- ---------------
Main Office:

1019 Park Street                   1959      Owned         $136,000
Peekskill, New York

Full Service Branches:

1961 Commerce Street               1977      Leased          59,000
Yorktown Heights, New York

Cortlandt Town Center, Rte. 6      1997      Owned (1)      919,000
Mohegan Lake, New York


(1)  Building is owned; land is leased.

         Management  believes that the Bank's current facilities are adequate to
meet its present and foreseeable future needs.

         The Bank's  depositor and borrower  customer files are maintained by an
independent data processing company.

Item 3. Legal Proceedings

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

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

         No matter was  submitted  to a vote of  security  holders,  through the
solicitation of proxies or otherwise, during the quarter ended June 30, 1999.


                                       34

<PAGE>


                                     PART II


Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
         Matters

         Page 46 of the attached  1999 Annual Report to  Stockholders  is herein
incorporated by reference.

Item 6. Selected Financial Data

         Page 1 of the attached  1999 Annual  Report to  Stockholders  is herein
incorporated by reference.

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

         Pages 3 through 15 of the attached 1999 Annual  Report to  Stockholders
are herein incorporated by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         Pages 6 and 7 of the attached  1999 Annual Report to  Stockholders  are
herein incorporated by reference.

Item 8. Financial Statements and Supplementary Data

         Pages 16 through 43 of the attached 1999 Annual Report to  Stockholders
are herein incorporated by reference.

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

         There has been no  Current  Report  on Form 8-K filed  within 24 months
prior to the date of the most recent financial  statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.


                                       35

<PAGE>


                                    PART III


Item 10. Directors and Executive Officers of the Registrant

         Information concerning directors is incorporated herein by reference to
the definitive  Proxy Statement for the 1999 Annual Meeting of  Stockholders,  a
copy of which  will be filed  not  later  than 120 days  after  the close of the
fiscal year.

         Scott Nogles is Vice President of Finance of the Bank and Company.  Mr.
Nogles joined the company in 1996 as Controller, before which he was employed by
KPMG  LLP.  In his  capacity  as  Vice  President  of  Finance,  Mr.  Nogles  is
responsible  for the  accounting  department and the creation of the majority of
SEC documents.

Item 11. Executive Compensation

         Information concerning executive compensation is incorporated herein by
reference  to the  definitive  Proxy  Statement  for the 1999 Annual  Meeting of
Stockholders,  a copy of which  will be filed not later  than 120 days after the
close of the fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management

         Information  concerning security ownership of certain beneficial owners
and  management  is  incorporated  herein by reference to the  definitive  Proxy
Statement for the 1999 Annual Meeting of  Stockholders,  a copy of which will be
filed not later than 120 days after the close of the fiscal year.

Item 13. Certain Relationships and Related Transactions

         Information  concerning certain  relationships and related transactions
is  incorporated  herein by reference to the definitive  Proxy Statement for the
1999  Annual  Meeting of  Stockholders,  a copy of which will be filed not later
than 120 days after the close of the fiscal year.

                                       36

<PAGE>


                                     PART IV

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

(a)(1)   Financial Statements

         The   following   information   appearing  in  1999  Annual  Report  to
Stockholders is herein incorporated by reference:
                                                                     Pages in
Annual Report Section                                             Annual Report
---------------------------------------------------------------- ---------------

Independent Auditors' Report.......................................... 16

Consolidated Balance Sheets as of June 30, 1999 and 1998.............. 17

Consolidated Statements of Income for the Years
  Ended June 30, 1999, 1998 and 1997.................................. 18

Consolidated Statements of Changes in Stockholders' Equity for the
  Years Ended June 30, 1999, 1998 and 1997............................ 19

Consolidated Statements of Cash Flows for the Years
  Ended June 30, 1999, 1998 and 1997.................................. 20

Notes to Consolidated Financial Statements............................ 21-43

(a)(2) Financial Statement Schedules

         All  financial  statement  schedules  have been omitted as the required
information is not applicable or has been included in the consolidated financial
statements and notes thereto.

(a)(3) Exhibits

                                                              Reference to Prior
    Regulation                                                 Filing or Exhibit
   S-K Exhibit                                                       Number
      Number              Document                               Attached Hereto
--------------------------------------------------------------------------------
  2         Plan of acquisition, reorganization, arrangement,             None
            liquidation or succession

 3(a)       Articles of Incorporation                                       *

 3(b)       By-Laws                                                         *

 4          Instruments defining the rights of security holders,            *
            including debentures

 9          Voting Trust Agreement                                        None

10          Material contracts
              Savings and Investment Plan                                   *
              Retirement Income Plan                                        *
              Form of 1995 Stock Option and Incentive Plan                  *
              Employment Agreements of Eldorus Maynard and                  *
               William J. LaCalamito
              Employment Agreement of Scott Nogles                         10

                                       37
<PAGE>


              Supplemental Executive Retirement Agreements of              **
               Eldorus Maynard and William J. LaCalamito                   **
              Form of Recognition and Retention Plan                       **
              Employee Stock Ownership Plan

11          Statement regarding computation of per share earnings         None

13          Annual Report to Security Holders                              13

16          Letter regarding change in certifying accountants             None

18          Letter regarding change in accounting principles              None

21          Subsidiaries of Registrant                                     21

22          Published report regarding matters submitted to vote          None
            of security holders

23          Consents of Experts and Counsel                                23

24          Power of Attorney                                             None

27          Financial Data Schedule (EDGAR filing only)                    27

28          Information from reports furnished to state insurance         None
            regulatory authorities

99          Additional Exhibits                                           None


*    Filed as exhibits to the Company's Form S-1 registration statement filed on
     October 3, 1995 (File No. 33-97730) pursuant to Section 5 of the Securities
     Act of 1933. All of such previously filed documents are hereby incorporated
     herein by reference in accordance with Item 601 of Regulation S-K.

**   Filed as exhibits to the Company's Amendment No. 1 to Form S-1 registration
     statement filed on November 8, 1995 (File No. 33-97730) pursuant to Section
     5 of the Securities Act of 1933. All of such previously filed documents are
     hereby  incorporated  herein by  reference in  accordance  with Item 601 of
     Regulation S-K.

(b)  Reports on Form 8-K

         A  Current  Report  on Form 8-K was  filed on May 6,  1999 to  announce
earnings,  the  payment  of a cash  dividend  and  the  commencement  of a share
repurchase program.

                                       38
<PAGE>



                                   SIGNATURES

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

                         PEEKSKILL FINANCIAL CORPORATION


                                      By: /s/Eldorus Maynard
                                          -----------------------------------
                                          Eldorus Maynard, Chief Executive
                                            Officer and Chairman of the Board
                                           (Duly Authorized Representative)

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated.

/s/Dominick Bertoline                /s/ John H. McGurty
-----------------------------        ----------------------------
Dominick Bertoline, Director         John H. McGurty, Director

Date:    September 28, 1999          Date:    September 28, 1999


/s/Edward H. Dwyer                   /s/Eldorus Maynard
-----------------------------        ----------------------------
Edward H. Dwyer, Director            Eldorus Maynard, Chief Executive
                                     Officer and Chairman of the Board
Date:    September 28, 1999          (Principal Executive and Operating Officer)

                                     Date:    September 28, 1999



/s/Robert E. Flower                  /s/William J. LaCalamito
-----------------------------        ----------------------------
Robert E. Flower, Director           William J. LaCalamito, President
                                     and Chief Operating Officer
Date:    September 28, 1999          (Principal Financial and Accounting
                                     Officer)

                                     Date:    September 28, 1999



                                       39