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


                                    Form 10-Q

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

                      For the Quarter Ended March 31, 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 the registrant as specified in its charter)

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

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

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

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

                           Yes   [  x   ]               No   [       ]

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

                                                          Shares Outstanding 
             Class:                                         at May 7, 1999
------------------------------------------           ---------------------------
Common Stock, $0.01 par value                                  1,962,528



<PAGE>


                         Peekskill Financial Corporation

                                    Form 10-Q

                   Three and Nine Months Ended March 31, 1999

                         Part I - Financial Information

ITEM 1 - FINANCIAL STATEMENTS  (Unaudited)                                  Page

     Condensed Consolidated Balance Sheets at March 31, 1999
         and June 30, 1998                                                    3

     Condensed Consolidated Statements of Income for the three and nine
         months ended March 31, 1999 and 1998                                 4

     Condensed Consolidated Statement of Changes in Stockholders'
         Equity for the nine months ended March 31, 1999                      5

     Condensed Consolidated Statements of Cash Flows for the nine
         months ended March 31, 1999 and 1998                                 6

     Notes to Condensed Consolidated Interim Financial Statements             7

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF                             11
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK                                                   18

                           Part II - Other Information

Other Information                                                            19

Signatures                                                                   21




<PAGE>


Part I.           FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

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


                                                           March 31,   June 30,
                                                             1999        1998
                                                           --------    --------
Assets:
Cash and cash equivalents................................   $ 3,794     $ 4,626
Securities:
  Held-to-maturity, at amortized cost (fair value of
     $122,378 at March 31, 1999 and $136,883
     at June 30, 1998)...................................   121,312     135,446
  Available-for-sale, at fair value (amortized cost of
     $16,500 at March 31, 1999 and $8,500 at
     June 30, 1998)......................................    16,150       8,498
                                                           --------    --------
    Total securities.....................................   137,462     143,944
                                                           --------    --------

Loans, net of allowance for loan losses of $727 at
     March 31, 1999 and $682 at June 30, 1998............    55,549      47,631
Federal Home Loan Bank stock.............................     1,463       1,463
Accrued interest receivable..............................     1,072       1,050
Real estate owned........................................       ---          94
Deferred income taxes, net...............................       600         362
Other assets.............................................     1,252       1,171
                                                           --------    --------
  Total assets...........................................  $201,192    $200,341
                                                           ========    ========

Liabilities and Stockholders' Equity:
Liabilities:
  Depositor accounts.....................................  $145,215    $139,858
  Securities repurchase agreements.......................    23,000      13,000
  Mortgage escrow deposits...............................     1,854       1,759
  Other liabilities......................................     2,646       2,518
                                                           --------    --------
    Total liabilities....................................   172,715     157,135
                                                           --------    --------

Stockholders' equity (Note 2):
Preferred stock (par value $0.01 per share; 100,000
  shares authorized; none issued or outstanding).........       ---         ---
Common stock (par value $0.01 per share; 4,900,000
  shares authorized; 4,099,750 shares issued)............        41          41
Additional paid-in capital...............................    40,290      40,181
Unallocated common stock held by employee stock
  ownership plan ("ESOP")................................    (2,747)     (2,870)
Unamortized awards of common stock under recognition
  and retention plan ("RRP").............................      (820)       (922)
Treasury stock, at cost (2,137,222 shares at March 31,
  1999 and 1,204,181 shares at June 30, 1998)............   (33,183)    (17,730)
Retained earnings........................................    25,106      24,508
Accumulated other comprehensive income (net unrealized
  loss on available-for-sale securities, net of taxes)...      (210)         (2)
                                                           --------    --------
   Total stockholders' equity............................    28,477      43,206
                                                           --------    --------

   Total liabilities and stockholders' equity............  $201,192    $200,341
                                                           ========    ========

         See  accompanying  notes to unaudited  condensed  consolidated  interim
financial statements.


<PAGE>


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

                                                      For the Three Months                   For the Nine Months
                                                        Ended March 31,                         Ended March 31,
                                               --------------------------------        --------------------------------
                                                    1999              1998                1999               1998
                                               ---------------    -------------        -------------      -------------
<S>                                             <C>                 <C>              <C>                <C>    
Interest and dividend income:
 Loans..................................          $   1,032            $  938           $  3,054            $ 2,785
 Securities.............................              2,163             2,188              6,648              6,318
 Interest-bearing deposits and other....                131                94                349                271
                                                  ---------            ------           --------            -------
  Total interest and dividend income....              3,326             3,220            10,051               9,374
                                                  ---------            ------           --------            -------

Interest expense:
 Depositor accounts.....................              1,468             1,438              4,489              4,314
 Securities repurchase agreements.......                292               102                690                102
 FHLB advances..........................                ---               ---                  6                ---   
                                                  ---------            ------           --------            -------
  Total interest expense................              1,760             1,540              5,185              4,416   
                                                  ---------            ------           --------            -------

  Net interest income...................              1,566             1,680              4,866              4,958

Provision for loan losses ..............                 15                15                 45                 45
                                                  ---------            ------           --------            -------

  Net interest income after
      provision  for loan losses........              1,551             1,665              4,821              4,913
                                                  ---------            ------           --------            -------

Non-interest income.....................                 61                54                193                166
                                                  ---------            ------           --------            -------

Non-interest expense:
  Compensation and benefits.............                445               527              1,351              1,428
  Occupancy costs.......................                122               115                335                316
  Professional fees.....................                 77                39                156                122
  Computer service fees.................                 58                46                165                134
  Federal deposit insurance costs.......                 37                36                109                108
  Safekeeping and custodial expenses....                 23                19                 79                 68
  Other.................................                154               154                506                438
                                                  ---------            ------           --------            -------
    Total non-interest expense..........                916               936              2,701              2,614   
                                                  ---------            ------           --------            -------

Income before income tax expense........                696               783              2,313              2,465
Income tax expense......................                301               346              1,018              1,072
                                                  ---------            ------           --------            -------

  Net income............................          $     395            $  437           $  1,295            $ 1,393
                                                  =========            ======           ========            =======

Earnings per share (Note 3):
  Basic.................................              $0.20             $0.16              $0.56              $0.51
  Diluted...............................               0.19              0.16               0.54               0.49  
                                                      =====             =====              =====              =====
</TABLE>



See accompanying  notes to unaudited  condensed  consolidated  interim financial
statements.


<PAGE>




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

<TABLE>
<CAPTION>

                                                      Unallocated Unamortized
                                                        Common    Awards of                          Accumulated
                                            Additional  Stock       Common                              Other         Total
                                  Common    Paid-in      Held       Stock      Treasury   Retained  Comprehensive  Stockholders'
                                   Stock    Capital    By ESOP    Under RRP     Stock     Earnings     Income         Equity
                                  --------  --------- ----------- -----------  ---------  --------- -------------- -------------
<S>                              <C>       <C>        <C>         <C>         <C>         <C>        <C>            <C>    
 Balance at June 30, 1998........ $   41    $40,181    $(2,870)    $(922)      $(17,730)   $24,508    $    (2)       $43,206

    Net income...................    ---        ---        ---       ---            ---      1,295        ---          1,295
                             
    Dividends paid ($0.27 per
        share)...................    ---        ---        ---       ---            ---       (622)       ---           (622)
    Amortization of RRP awards...    ---        ---        ---       146            ---        ---        ---            146
                                  
    RRP award (2,500 treasury                                                                                       
        shares)..................    ---         14        ---       (44)            30        ---        ---            ---
    Exercise of stock options
        (20,499 treasury shares).    ---        ---        ---       ---            318        (75)       ---            243
    Tax benefit from vesting of
        RRP awards...............    ---         36        ---       ---            ---        ---        ---             36
                                  
    Purchase of 956,040 treasury
        shares...................    ---        ---        ---       ---        (15,801)       ---        ---        (15,801)
                                  
    ESOP shares committed to be
        released (12,300 shares).    ---         59        123       ---            ---        ---        ---            182
                                  
    Change in net unrealized loss
        on available-for-sale
        securities, net of taxes.    ---        ---        ---       ---            ---        ---       (208)          (208)
                                  ------    -------    -------     -----       --------   --------    -------       --------

 Balance at March 31, 1999....... $   41    $40,290    $(2,747)    $(820)      $(33,183)   $25,106    $  (210)       $28,477
                                  ======    =======    =======     =====       ========   ========    ========      ========

</TABLE>


See accompanying  notes to unaudited  condensed  consolidated  interim financial
statements.


<PAGE>




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

                                                                 For the Nine Months Ended
                                                                          March 31,
                                                                   ----------------------
                                                                      1999        1998
                                                                   ----------  ----------
<S>                                                               <C>         <C>   
Cash flows from operating activities:
  Net income.................................................     $   1,295   $   1,393
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Provision for loan losses................................            45          45
    Depreciation and amortization expense....................            76          72
    ESOP and RRP expense.....................................           328         424
    Net amortization and accretion of deferred fees, discounts
       and premiums..........................................           (12)        (52)
    Net (increase) decrease in accrued interest receivable...           (22)        110
    Net (increase) decrease in other assets..................           (55)         41
    Deferred tax benefit.....................................           (91)        (39)
    Net increase in other liabilities........................           524         583
                                                                        ---         ---
      Net cash provided by operating activities..............         2,088       2,577
                                                                   --------    --------

Cash flows from investing activities:
  Purchases of securities:
    Held-to-maturity.........................................       (36,866)    (35,483)
    Available-for-sale.......................................       (17,500)    (11,600)
  Proceeds from principal payments, maturities 
     and calls of securities:
    Held-to-maturity.........................................        51,042      29,826
    Available-for-sale.......................................         9,500       4,600
  Originations of loans, net of principal collections........        (7,964)     (1,862)
  Proceeds from sales of real estate owned...................            94         220
  Purchases of office properties and equipment...............          (102)       (811)
                                                                       ----        ----
     Net cash used in investing activities...................        (1,796)    (15,110)
                                                                   --------    --------

Cash flows from financing activities:
  Net increase in depositor accounts.........................         5,357       5,120
  Net increase in mortgage escrow deposits...................            95          50
  Proceeds from issuance of common stock.....................           243         ---
  Proceeds from securities repurchase agreements.............        10,000      10,000
  Treasury stock purchases...................................       (16,197)     (3,044)
  Dividends paid.............................................          (622)       (771)
                                                                   --------    --------
     Net cash (used in) provided by financing activities.....        (1,124)     11,355
                                                                   --------    --------

Net decrease in cash and cash equivalents....................          (832)     (1,178)
Cash and cash equivalents at beginning of period.............         4,626       4,158
                                                                   --------    --------
Cash and cash equivalents at end of period...................       $ 3,794      $2,980
                                                                   ========    ========

Supplemental information:
  Interest paid..............................................       $ 5,165     $ 4,310
  Income taxes paid..........................................           749         740
  Net decrease in liability for treasury stock purchased, not
     yet settled.............................................          (396)        ---
  Increase in liability for securities purchased, not yet               ---         499
     settled.................................................
  Loans transferred to real estate owned.....................           ---         153
                                                                   ========    ========
</TABLE>


See accompanying  notes to unaudited  condensed  consolidated  interim financial
statements.


<PAGE>


                 Peekskill Financial Corporation and Subsidiary
          Notes to Condensed Consolidated Interim Financial Statements
                                   (Unaudited)

Note 1:  Basis of Presentation

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

         The accompanying  unaudited  condensed  consolidated  interim financial
statements have been prepared in conformity with generally  accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles  for  complete  financial  statements.   The  accompanying  unaudited
condensed   consolidated   interim  financial   statements  should  be  read  in
conjunction with the financial  statements and related  management's  discussion
and analysis of financial  condition and results of operations of the Company as
of and for the year ended June 30, 1998 included in the Form 10-K filed with the
Securities  and  Exchange  Commission.   In  the  opinion  of  management,   all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation  have been included herein.  The results of operations for the
nine months ended March 31, 1999 are not necessarily  indicative of results that
may be expected for the entire year ending June 30, 1999.


Note 2.  Stockholders' Equity

         From July 1, 1998 through March 31, 1999, the Holding Company purchased
956,040  shares for  treasury at a cost of $15.8  million,  or $16.53 per share.
From the date of the  Conversion  through  March 31, 1999,  the Holding  Company
purchased an aggregate of 2,157,721  shares for  treasury.  The Holding  Company
purchased these shares,  in open market  transactions,  at a total cost of $33.5
million or $15.53 per share. Included in the 956,040 shares purchased during the
nine months  ended March 31, 1999 was  800,040  shares  purchased  in a Modified
Dutch  Auction  Tender  Offer,  which was  completed  on  February 2, 1999 at an
average price of $16.75.

         On April 27,  1999,  the Holding  Company  announced  its  intention to
purchase 100,000 shares of its common stock in the open market from time to time
dependent upon market conditions.

         For income tax purposes, certain capital distributions made by a thrift
institution, such as the Bank, may be deemed to have been made from the thrift's
bad debt reserves.  An amount equal to approximately  one and one-half times the
<PAGE>

amount of such a distribution  would be included in the thrift's taxable income,
attributable  to the  "recapture"  of a  portion  of its tax bad debt  reserves.
Distributions resulting in taxable income include distributions in excess of the
thrift's current and accumulated earnings and profits, as calculated for Federal
income tax purposes;  distributions  in redemption  of the thrift's  stock;  and
distributions  in  partial  or  complete  liquidation  of the  thrift.  However,
dividends paid from the thrift's current or accumulated  earnings and profits do
not result in taxable income from bad debt reserve recapture.

         All dividends paid to date by the Bank to the Holding Company have been
paid from the Bank's current and accumulated  earnings and profits.  The Holding
Company has relied on dividends from the Bank as the principal source of funding
for its more recent  stock  repurchases.  Since the Bank intends to limit future
dividend  payments to amounts  that will not result in the  recapture of tax bad
debt  reserves,  the amount of  additional  funds which may be  available to the
Holding  Company for future stock  repurchases  will generally be limited to the
amount of the Bank's current and accumulated  earnings and profits.  At December
31, 1998, the Bank had  approximately  $17.1 million in current and  accumulated
earnings  and  profits  from which it could pay  dividends  without  causing the
recapture of any portion of its bad debt  reserves.  Subsequent  to December 31,
1998, the Bank has paid dividends to the Holding Company of $14.5 million.

Note 3.  Acquisition Offer and Related Matters

         On January 5, 1999,  the Company  received an  unsolicited  conditional
expression  of interest in acquiring  the Company for a cash  purchase  price of
$17.25 per share, from BRT Realty Trust ("BRT"). After review of the unsolicited
conditional  expression of interest,  the Board of Directors  determined  not to
pursue the  unsolicited  conditional  expression of interest and  reaffirmed its
position that the Company is not for sale.

         In  response  to the Board of  Directors'  decision  not to pursue  the
unsolicited  conditional expression of interest from BRT, a lawsuit,  purporting
to be on behalf of stockholders, was filed in the Chancery Court of the State of
Delaware.  The case, Michael Demetriou v. Eldorus Maynard,  William  LaCalamito,
Dominick  Bertoline,  Edward Dwyer,  Robert  Flower,  John McGurty and Peekskill
Financial Corporation, filed on January 8, 1999, alleged among other things that
the directors  violated  their  fiduciary  obligations  in  connection  with the
rejection of the unsolicited conditional expression of interest in acquiring the
Company.  On April 27, 1999,  the lawsuit was  dismissed by  stipulation  of the
parties  with no  payment  to the  plaintiff  of  damages  or his legal  fees in
connection with the dismissal.

         On January 13, 1999, the Company received a letter from BRT indicating,
among other things, that it was amenable to raising the price in its unsolicited
conditional  expression  of  interest.  In addition,  on January 19,  1999,  the
Company received a letter from Gould Investors, L.P., which is believed to be an
affiliate of BRT, demanding that the Company (1) halt the Modified Dutch Auction
Tender  Offer,  (2) hire a  financial  adviser to analyze  the fair value of the
Company,  (3) solicit  offers for the sale of the Company and, (4) if offers are
at or near a price indicated by the financial  advisers,  sell the Company.  The
Board considered these letters at length and, after review, continued to believe
that it was in the best interest of the  stockholders  for the Company to remain
independent and execute its business plan.


<PAGE>


Note 4.  Earnings Per Share

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

         The  table  below  summarizes  the  number of  shares  utilized  in the
Company's EPS calculations for the three- and nine-month periods ended March 31,
1999 and 1998.  For purposes of computing  basic EPS, net income  applicable  to
common stock equaled net income for each period presented.

<TABLE>
<CAPTION>

                                                 For the Three Months      For the Nine Months
                                                    Ended March 31,           Ended March 31,
                                              -------------------------   ------------------------
                                                  1999          1998         1999          1998
                                              ------------  -----------   -----------  -----------
                                                                 (In thousands)
<S>                                           <C>           <C>          <C>            <C>  
Weighted average common shares outstanding
   for computation of basic EPS (1)              1,981         2,667        2,329          2,745

Common-equivalent shares due to the dilutive
   effect of stock options and RRP awards (2)       53           103           59            110
                                                ------         -----        -----          -----

Weighted average common shares for
   computation of diluted EPS                    2,034         2,770        2,388          2,855
                                                ======        ======       ======         ======
<FN>

(1)  Excludes unvested RRP awards and unallocated ESOP shares that have not been
     committed to be released.
(2)  Computed using the treasury stock method.
</FN>
</TABLE>

Note 5.  Comprehensive Income

         The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which  establishes  standards  for the  reporting  and display of  comprehensive
income (and its  components)  in financial  statements.  The standard  does not,
however,  specify  when  to  recognize  or how to  measure  items  that  make up
comprehensive  income.  Comprehensive  income  represents net income and certain
amounts reported  directly in stockholders'  equity,  such as the net unrealized
gain or loss on  securities  available-for-sale.  While  SFAS  No.  130 does not
require a specific  reporting format, it does require that an enterprise display
an amount representing total comprehensive income for the period.


<PAGE>


         The  Company's  comprehensive  income  for the  three-  and  nine-month
periods ended March 31, 1999 and 1998 is summarized as follows:

                                    For the Three Months   For the Nine Months
                                       Ended March 31,        Ended March 31,
                                    ------------------  ----------------------
                                       1999     1998       1999        1998
                                    --------   -------  ----------   ---------
                                                    (In thousands)

Net income                           $ 395      $ 437     $ 1,295     $ 1,393

Net change in the after-tax
  unrealized gain or loss on
  available-for-sale securities        (84)       (14)       (208)         (5)
                                     -----      -----     -------     -------

Comprehensive income                 $ 311      $ 423     $ 1,087     $ 1,388
                                     =====      =====     =======     =======


<PAGE>


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

Forward-Looking Statements

         The Company has made, and may continue to make, various forward-looking
statements  with respect to earnings,  credit  quality and other  financial  and
business matters for periods  subsequent to March 31, 1999. The Company cautions
that these forward-looking statements are subject to numerous assumptions, risks
and  uncertainties,  and that  statements for subsequent  periods are subject to
greater  uncertainty  because of the likelihood of changes in underlying factors
and  assumptions.  Actual results could differ  materially from  forward-looking
statements.

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

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

Comparison of Financial Condition at March 31, 1999 and June 30, 1998

         Total assets at March 31, 1999 were $201.2  million  compared to $200.3
million at June 30,  1998,  an  increase  of  $851,000.  This  increase  was due
primarily to a $7.9  million  increase in net loans,  substantially  offset by a
$6.5 million decrease in total  securities and an $832,000  decrease in cash and
cash  equivalents.  Changes in the Company's  funding sources during the current
nine-month  period  included  a  $10.0  million  increase  in  borrowings  under
securities  repurchase  agreements  and a $5.4  million  increase  in  depositor
accounts,  partially offset by a $14.7 million decrease in stockholders' equity.
Management  intends to continue  its current  strategy  of  increasing  the loan
portfolio  (primarily through the origination of residential mortgage loans), as
market  conditions  permit,  by introducing  new products and  stimulating  loan
demand through advertising.

         Total  non-performing  assets  decreased  $38,000,  or 2.4%,  from $1.6
million at June 30, 1998 to $1.5 million at March 31,  1999.  At March 31, 1999,
the Company  held an  $841,000  participation  interest  in certain  residential
mortgage loans purchased from Thrift Association Service Corporation (the "TASCO
Loans").  These loans were placed on non-accrual status during the quarter ended
September  30,  1996.  As a servicer of these loans,  the FDIC is disputing  its
obligation to remit certain principal and interest payments on the loans whether
or not such  amounts  are  collected  from  the  borrowers.  The FDIC  suspended
payments  beginning in 1996, but resumed  making certain  principal and interest
payments in the quarter  ended June 30, 1997 and has  continued  to make current

<PAGE>

payments.  As a result,  interest payments of $34,000 received in the nine-month
period ended March 31, 1999 were recognized as income on a cash basis.  However,
the dispute over the  suspended  payments has not been  resolved,  and the TASCO
Loans of $841,000 at March 31, 1999 and  $876,000 at June 30, 1998 are  included
in the Company's total non-performing loans.

         The Bank had three loans, with principal balances totaling $382,000, on
non-accrual  status at March 31,  1999 and two loans,  with  principal  balances
totaling  $245,000 on non-accrual  status at June 30, 1998.  One-to-four  family
mortgage  loans past due more than 90 days but still accruing  interest  totaled
$324,000 at March 31, 1999  compared to $370,000 at June 30, 1998.  The Bank had
no real  estate  owned at March 31,  1999 and one  property  classified  as real
estate owned with a carrying  value of $94,000 at June 30, 1998.  The  allowance
for loan losses was $727,000 or 47.0% of non-performing loans at March 31, 1999,
compared to $682,000 or 45.7% of  non-performing  loans at June 30, 1998.  There
were no loan charge-offs or recoveries in the nine months ended March 31, 1999.

         Stockholders' equity decreased $14.7 million from $43.2 million at June
30, 1998 to $28.5  million at March 31, 1999.  The decrease  primarily  reflects
treasury  stock  purchases  of $15.8  million and  dividends  paid of  $622,000,
partially  offset by net income of $1.3 million.  Book value per share decreased
from  $14.92 at June  30,1998 to $14.51 at March 31,  1999.  The  treasury stock
purchases  include $13.5 million in the current  quarter upon  completion of the
Modified Dutch Auction Tender Offer.


Comparison  of  Operating  Results for the Three Months Ended March 31, 1999 and
1998

         Net income decreased $42,000 to $395,000, or $0.20 per basic share, for
the quarter ended March 31, 1999,  compared to net income of $437,000,  or $0.16
per basic  share,  for the same period  last year.  Diluted  earnings  per share
amounts  were $0.19 and $0.16 for the  quarters  ended  March 31, 1999 and 1998,
respectively.  The decrease is primarily  attributable to a $220,000 increase in
interest  expense,  partially  offset by a $106,000  increase  in  interest  and
dividend  income.  Net  income for the three  months  ended  March 31,  1998 was
reduced  by  $64,000  ($37,000  net of taxes)  for the full  vesting  of certain
shares,  under the Company's  recognition and retention plan ("RRP"), due to the
vesting of shares upon the death of a director.

         Net interest income decreased  $114,000 in the current quarter compared
to the quarter  ended March 31, 1998.  Interest and  dividend  income  increased
$106,000 to $3.3  million for the quarter  ended March 31, 1999  compared to the
quarter  ended March 31,  1998.  The  increase  was caused  primarily by a $14.5
million increase in average  interest-earning  assets,  partially offset by a 27
basis point decrease in the average yield on interest-earning  assets.  Interest
expense increased  $220,000 to $1.8 million for the quarter ended March 31, 1999
compared to the same quarter  last year.  This  increase was due  primarily to a
$23.9 million increase in average interest-bearing liabilities.
<PAGE>

         The provision for loan losses was $15,000 for the quarters  ended March
31,  1999 and  1998.  Management  continues  to  evaluate  the  adequacy  of the
allowance  for loan  losses  based  on local  economic  and real  estate  market
conditions, loan portfolio growth and the level of non-performing loans.

         Non-interest  expense decreased $20,000 for the quarter ended March 31,
1999 compared to the prior year quarter. The decrease was caused primarily by an
$82,000  decrease in compensation  and benefits  expense,  partially offset by a
$12,000 increase in computer service fees and a $38,000 increase in professional
fees. The decrease in compensation  and benefits expense was caused primarily by
the $64,000 charge to prior year earnings for vested RRP shares, as explained on
the previous  page.  The $38,000  increase in  professional  fees was  primarily
related to additional legal and investment banking expenses  attributable to the
unsolicited  conditional  expression of interest the Company received in January
1999 and the related lawsuit (see Note 3 of the Notes to Condensed  Consolidated
Interim Financial Statements).

         Income tax  expense for the  quarter  ended  March 31,  1999  decreased
$45,000  compared to the same period last year,  primarily  due to a decrease in
pre-tax  income.  The  effective tax rates were 43.2% and 44.2% for the quarters
ended March 31, 1999 and 1998, respectively.


Comparison  of  Operating  Results for the Nine Months  Ended March 31, 1999 and
1998

         Net income decreased $98,000 to $1.3 million, or $0.56 per basic share,
for the nine  months  ended  March  31,  1999,  compared  to net  income of $1.4
million,  or $0.51 per basic  share,  for the same  period  last  year.  Diluted
earnings per share  amounts were $0.54 and $0.49 for the nine months ended March
31, 1999 and 1998,  respectively.  The decrease is primarily  attributable  to a
$769,000  increase in interest  expense and an $87,000  increase in non-interest
expense,  partially  offset by a $677,000  increase  in  interest  and  dividend
income.

         Net interest income decreased $92,000 in the current  nine-month period
compared to the nine months ended March 31, 1998.  Interest and dividend  income
increased  $677,000 to $10.1  million  for the nine months  ended March 31, 1999
compared to the same period last year.  The increase  was caused  primarily by a
$17.8 million increase in average interest-earning assets, partially offset by a
15  basis  point  decrease  in the  average  yield on  interest-earning  assets.
Interest  expense  increased  $769,000 to $5.2 million for the nine months ended
March 31, 1999  compared to the same period  last year.  This  increase  was due
primarily to a $23.9 million increase in average interest-bearing liabilities.

         The  provision for loan losses was $45,000 for the  nine-month  periods
ended March 31, 1999 and 1998.  Management continues to evaluate the adequacy of
the  allowance  for loan losses based on local  economic and real estate  market
conditions, loan portfolio growth and the level of non-performing loans.

         Non-interest  expense increased $87,000 for the nine months ended March
31, 1999 compared to the prior year period. The increase was caused primarily by

<PAGE>

increases  of $31,000  in  computer  service  fees,  $68,000 in other  operating
expenses  and  $34,000  in  professional  fees,  partially  offset  by a $77,000
decrease in compensation and benefits expense.

         Income tax expense for the nine months  ended March 31, 1999  decreased
$54,000  compared to the same period last year,  primarily  due to a decrease in
pre-tax income. The effective tax rates were 44.0% and 43.5% for the nine months
ended March 31, 1999 and 1998, respectively.



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

<TABLE>
<CAPTION>
                                                                                   Nine Months Ended
                                                    ----------------------------------------------------------------------------
                                                                    March 31,                              March 31,
                                                                      1999                                   1998
                                                    ----------------------------------------- ----------------------------------
                                                       Average                     Average      Average                Average
                                                     Balance (1)    Interest     Yield/Rate    Balance (1)  Interest  Yield/Rate
                                                    ------------- ------------- ------------- ------------ --------- -----------
                                                                             (Dollars in thousands)
Interest-earning assets:
<S>      <C>                                         <C>            <C>             <C>       <C>         <C>           <C>  
   Loans (2)....................................       $ 51,765       $3,054          7.87%     $ 46,418    $ 2,785       8.00%
   Mortgage-backed securities(3)................        120,486        5,676          6.28       119,300      5,707       6.38
   Other debt securities(3).....................         20,302          972          6.38        12,555        611       6.49
   Other interest-earning assets................          8,992          349          5.17         5,458        271       6.62
                                                       --------      -------                    --------    -------
     Total interest-earning assets..............        201,545     $ 10,051          6.65%      183,731    $ 9,374       6.80%
                                                                    ========                                =======
Non interest-earning assets.....................          2,745                                    2,304
                                                       --------                                 --------
     Total assets...............................       $204,290                                 $186,035
                                                       ========                                 ========
Interest-bearing liabilities:
   Regular savings and club accounts............        $50,426       $1,050          2.78%      $53,280     $1,180       2.95%
   Money market and NOW accounts................         15,135          301          2.65        11,628        246       2.82
   Savings certificates and other...............         78,580        3,138          5.32        70,592      2,888       5.45
   Securities repurchase agreements.............         17,950          690          5.13         3,000        102       4.53
   FHLB advance.................................            250            6          3.20           ---                   ---
                                                       --------      -------                    --------    -------
     Total interest-bearing liabilities.........        162,341       $5,185          4.26%      138,500    $ 4,416       4.25%
                                                                      ======                                =======
Non interest-bearing liabilities................          1,663                                      977
                                                       --------                                 --------
     Total liabilities..........................        164,004                                  139,477
Stockholders' equity............................         40,286                                   46,558
                                                       --------                                 --------
     Total liabilities and stockholders' equity.       $204,290                                 $186,035
                                                       ========                                 ========
Net earning assets..............................        $39,204                                  $45,231
                                                       ========                                 ========
Net interest income.............................                      $4,866                                $ 4,958
                                                                      ======                                =======
Net interest rate spread........................                                      2.39%                               2.55%
                                                                                      ====                                ====
Net yield on average interest-earning assets(4).                                      3.22%                               3.60%
                                                                                      ====                                ====
Average interest-earning assets to average
 interest-bearing liabilities...................          1.24x                                    1.33x
                                                          ====                                     ====
</TABLE>
<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                    ----------------------------------------------------------------------------
                                                                    March 31,                              March 31,
                                                                      1999                                   1998
                                                    ----------------------------------------- ----------------------------------
                                                       Average                     Average      Average                Average
                                                     Balance (1)    Interest     Yield/Rate    Balance (1)  Interest  Yield/Rate
                                                    ------------- ------------- ------------- ------------ --------- -----------
                                                                             (Dollars in thousands)
Interest-earning assets:
<S>      <C>                                         <C>           <C>              <C>       <C>          <C>          <C>  
   Loans (2)....................................       $ 53,529      $ 1,032          7.71%     $ 47,064      $ 938       7.97%
   Mortgage-backed securities(3)................        114,920        1,763          6.14       123,744      1,967       6.36
   Other debt securities(3).....................         23,982          400          6.67        13,429        221       6.58
   Other interest-earning assets................         11,690          131          4.48         5,340         94       7.04
                                                       --------      -------                    --------    -------
     Total interest-earning assets..............        204,121      $ 3,326          6.52%      189,577    $ 3,220       6.79%
                                                                     =======                                =======
Non interest-earning assets.....................          2,871                                    2,462
                                                       --------                                 --------
     Total assets...............................       $206,992                                 $192,039
                                                       ========                                 ========

Interest-bearing liabilities:
   Regular savings and club accounts............        $50,454        $ 351          2.78%      $52,592      $ 370       2.81%
   Money market and NOW accounts................         15,998          107          2.68        12,035         83       2.76
   Savings certificates and other...............         79,684        1,010          5.07        73,084        985       5.39
   Securities repurchase agreements.............         23,000          292          5.08         7,500        102       5.44
                                                       --------      -------                    --------    -------
     Total interest-bearing liabilities.........        169,136      $ 1,760          4.16%      145,211    $ 1,540       4.24%
                                                                     =======                                =======
Non interest-bearing liabilities................          1,747                                    1,101
                                                       --------                                 --------
     Total liabilities..........................        170,883                                  146,312
Stockholders' equity............................         36,109                                   45,727
                                                       --------                                 --------
     Total liabilities and stockholders' equity.       $206,992                                 $192,039
                                                       ========                                 ========
Net earning assets..............................        $34,985                                  $44,366
                                                       ========                                 ========
Net interest income.............................                     $ 1,566                                $ 1,680
                                                                     =======                                =======
Net interest rate spread........................                                      2.36%                               2.55%
                                                                                      ====                                ====
Net yield on average interest-earning assets(4).                                      3.07%                               3.54%
                                                                                      ====                                ====
Average interest-earning assets to average
 interest-bearing liabilities...................          1.21x                                    1.31x
                                                          ====                                     ====
<FN>
(1)  Average  balances are calculated  using  end-of-month  balances,  producing
     results which are not materially different from average daily balances.
(2)  Balances  are net of deferred  loan fees and loans in process.  Non-accrual
     loans are included in the balances.
(3)  Balances   represent   amortized   cost.   Yields   are  not  stated  on  a
     tax-equivalent  basis,  as  the  Company  does  not  invest  in  tax-exempt
     securities.
(4)  Represents net interest  income  divided by average total  interest-earning
     assets.

</FN>
</TABLE>

<PAGE>



Liquidity and Capital Resources

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

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

         The Bank may  borrow  from the FHLB of New York  subject  to an overall
limitation of 25% of total assets or $49.7 million at March 31, 1999.  Funds may
be borrowed  through a combination  of FHLB  advances and  overnight  borrowings
under  a  $15.5  million  line  of  credit.  The  Bank  had no  such  borrowings
outstanding at March 31, 1999 and June 30, 1998.

         In January  1998,  the Company began to utilize  securities  repurchase
agreements as a funding source, in order to supplement retail deposit growth. At
March 31, 1999,  the Company had borrowed a total of $23.0  million and invested
the proceeds in  securities  and overnight  deposits.  The Company may engage in
other repurchase agreements, from time to time, as conditions warrant.

         The Bank is required to  maintain a minimum  level of liquid  assets as
defined  by OTS  regulations,  based  upon a  percentage  of  liquid  assets  to
depositor accounts and short-term  borrowings.  For the month of March 1999, the
Bank's average daily total  liquidity  ratio was 16.7%,  compared to the minimum
OTS requirement of 4.0%.

         The Bank's  most  liquid  assets are cash and cash  equivalents,  which
consist  of  interest-bearing  deposits  in  other  financial  institutions  and
short-term highly liquid investments with original maturities of less than three
months that are readily convertible to known amounts of cash. The level of these
assets is  dependent  on cash  flows from the Bank's  operating,  financing  and
investing  activities  during  any  given  period.  Cash  and  cash  equivalents
decreased $832,000,  from $4.6 million at June 30, 1998 to $3.8 million at March
31, 1999.

         The Bank  anticipates  that it will have sufficient  funds available to
meet its current  commitments  and other funding  needs.  At March 31, 1999, the
Bank had  commitments to originate loans of $5.5 million.  Savings  certificates
which are  scheduled  to mature  in one year or less at March 31,  1999  totaled
$63.8 million.  Management believes that a significant portion of such depositor
accounts will remain with the Bank.

         At  March 31, 1999, the Bank's capital exceeded each of the OTS minimum
capital   requirements   and   the   requirements   for   classification   as  a
"well-capitalized"  institution.  The current minimum  regulatory  capital ratio
requirements are 1.5% for tangible  capital,  3.0% for Tier I (core) capital and
8.0% for total risk-based capital.  In order to be considered  well-capitalized,
<PAGE>

an  institution  must  maintain a core capital  ratio of at least 5.0%; a Tier I
risk-based  capital ratio of at least 6.0%; and a total risk-based capital ratio
of at least  10.0%.  At March  31,  1999,  the Bank had both  tangible  and core
capital of $27.4 million  (13.8% of total  adjusted  assets);  Tier I risk-based
capital  of $27.4  million  (49.3%  of total  risk-weighted  assets);  and total
risk-based capital of $28.1 million (50.6% of total risk-weighted assets).

Impact of Year 2000 Issue

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

         The  Company  has  initiated   formal   communications   with  all  its
significant suppliers to determine the extent to which the Company is vulnerable
to those third  parties'  failure to  remediate  their own Year 2000 Issue.  The
Company's data processing is performed  almost entirely by a third party vendor.
At this time,  the vendor has asserted  that it is Year 2000  compliant  and the
Company,  in conjunction with other customers of this vendor,  has begun testing
the updated  system.  The testing of the  Company's  data  processing  vendor is
complete and no major problems were encountered.  The Company currently believes
that, with  modifications to existing  software and conversions to new software,
the Year 2000 Issue will be mitigated  without causing a material adverse impact
on its operations.  However, if such modifications and conversions are not made,
or are not completed  timely,  the Year 2000 Issue could have a material adverse
impact on the operations of the Company.

         The Company  will  utilize  both  internal  and  external  resources to
reprogram,  or  replace,  and test all  software  for Year  2000  modifications.
Related  costs are  expensed  as  incurred,  except  for costs  incurred  in the
purchase of new  software or hardware,  which are  capitalized.  To date,  costs
incurred and expensed relate to the dedication of internal resources employed in
the  assessment  of  and  development  of the  Company's  Year  2000  compliance
remediation  plan, as well as the testing of the hardware and software  owned or
licensed for its personal  computers.  Costs  incurred to date are not material,
and  management  does  not  expect  that  additional  costs  to be  incurred  in
connection with the Year 2000 Issue will have a material impact on the Company's
financial  condition or results of operations.  Since  substantially  all of the
Company's  loans  are  residential  mortgages,  the  ability  of  the  Company's
borrowers to become Year 2000 compliant is not a significant concern.

         The estimated costs and timetable for the Year 2000  modifications  are
based on management's  best  estimates,  which were derived  utilizing  numerous
assumptions  of future events  including the continued  availability  of certain
resources,  third party modification plans and other factors. However, there can
be no guarantee  that these  estimates will be achieved and actual results could
differ  materially  from those  plans.  Specific  factors in respect of both the
Company and its suppliers  that might cause such material  differences  include,
but are not limited to, the availability  and cost of personnel  trained in this
field,  the ability to locate and correct all relevant  computer codes,  testing
<PAGE>

complications and similar uncertainties.  In addition, there can be no guarantee
that the systems of other companies on which the Company's  systems rely will be
timely  converted,  or that a  failure  to  convert  by  another  company,  or a
conversion that is  incompatible  with the Company's  systems,  would not have a
material adverse effect on the Company.

         The Company plans to complete the Year 2000 project not later than June
30, 1999.  Contingency  plans have been developed for all mission critical areas
of the Bank's  operations.  The contingency  plan for the Bank's data processing
function involves the manual processing of transactions by the Bank's employees.
Contingency  plans for the other mission critical areas involve having secondary
providers ready if problems with primary providers are encountered.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         There have been no material changes in the Company's interest rate risk
position  since  June 30,  1998.  Other  types of market  risk,  such as foreign
currency exchange rate risk and commodity price risk, do not arise in the normal
course of the Company's business activities.


<PAGE>



                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

               The  Company  was a  defendant  in a lawsuit  resulting  from the
          rejection of an unsolicited  conditional  expression of interest.  For
          more information,  see Note 3 to the unaudited financial statements in
          Part 1. From time to time,  the Company is involved  as  plaintiff  or
          defendant in other legal  proceedings  arising in the normal course of
          its  business.  While the  ultimate  outcome  of these  various  legal
          proceedings  cannot be predicted with certainty,  it is the opinion of
          management  that the resolution of these legal actions should not have
          a material effect on the Company's  financial  condition or results of
          operations.

Item 2.  CHANGES IN SECURITIES

          None

Item 3.  DEFAULTS UPON SENIOR SECURITIES

          None

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

          None

Item 5.  OTHER INFORMATION

          None

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

          a. Exhibits:

               27. Financial Data Schedule

          b. Reports on Form 8-K

               1.   A Current  Report on Form 8-K was filed on January  13, 1999
                    to include a press  release  announcing  the rejection of an
                    unsolicited  acquisition  offer and the  continuation of its
                    previously announced Dutch Auction Tender Offer.

               2.   A Current  Report on Form 8-K was filed on January  19, 1999
                    to include a press release announcing the Company's plans to
                    remain  independent  and continue the  previously  announced
                    Dutch Auction Tender Offer.

               3.   A Current  Report on Form 8-K was filed on January  29, 1999
                    to include a press release  announcing the  oversubscription
                    of the Dutch Auction Tender Offer.

               4.   A Current  Report on Form 8-K was filed on  February 3, 1999
                    to include a press release  announcing  the final results of
                    the Dutch Auction Tender Offer.


<PAGE>


                                   SIGNATURES

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


                                            PEEKSKILL FINANCIAL CORPORATION
                                                     (Registrant)


DATE:  May 13, 1999                         BY:   /s/ Eldorus Maynard
       -------------------                        -------------------
                                                  Eldorus Maynard
                                                  Chairman of the Board and
                                                  Chief Executive Officer


DATE:  May 13, 1999                         BY:   /s/ William J. LaCalamito
       -------------------                        -------------------------
                                                  William J. LaCalamito
                                                  President
                                                  (principal financial officer)