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, 2000

                                       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 5, 2000
--------------------------------------------------------------------------------
Common Stock, $0.01 par value                              1,762,228



<PAGE>


                         Peekskill Financial Corporation

                                    Form 10-Q

                   Three and Nine Months Ended March 31, 2000

                         Part I - Financial Information

ITEM 1 - FINANCIAL STATEMENTS  (Unaudited)                              Page

      Consolidated Balance Sheets at March 31, 2000
         and June 30, 1999                                                3

      Consolidated Statements of Income for the three and nine
         months ended March 31, 2000 and 1999                             4

      Consolidated Statements of Changes in Stockholders'
         Equity for the nine months ended March 31, 2000 and 1999         5

      Consolidated Statements of Cash Flows for the nine
         months ended March 31, 2000 and 1999                             6

     Notes to Consolidated Financial Statements                           7

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF                          8
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK                                               14

                           Part II - Other Information

Other Information                                                        15

Signatures                                                               16



                                       2
<PAGE>


Part I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

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


                                                            March 31,   June 30,
                                                              2000        1999
                                                            ---------  ---------
Assets:
Cash and due from banks..................................   $  1,105   $    957
Interest-bearing deposits................................      4,200      3,200
Securities:
  Held-to-maturity, at amortized cost (fair value of
     $111,050 at March 31,2000 and $118,675
     at June 30, 1999)...................................    113,669    119,122
  Available-for-sale, at fair value (amortized cost of
     $16,500 at March 31, 2000 and June 30, 1999)........     15,114     15,673
                                                            --------   --------
    Total securities.....................................    128,783    134,795
                                                            --------   --------

Loans, net of allowance for loan losses of $787 at
     March 31, 2000 and $742 at June 30, 1999............     67,161     63,436
Federal Home Loan Bank stock.............................      1,550      1,463
Accrued interest receivable..............................        981      1,094
Office properties and equipment, net.....................      1,044      1,114
Deferred income taxes, net...............................        986        814
Other assets.............................................         64         59
                                                            --------   --------
  Total assets...........................................   $205,874   $206,932
                                                            ========   ========

Liabilities and Stockholders' Equity:
Liabilities:
  Depositor accounts.....................................   $151,633   $148,693
  Securities repurchase agreements and other borrowings..     25,000     28,000
  Mortgage escrow deposits...............................      1,862      1,692
  Other liabilities......................................      1,288      1,196
                                                            --------   --------
    Total liabilities....................................    179,783    179,581
                                                            --------   --------

Stockholders' equity (Note 3):
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...............................     40,351     40,305
Unallocated common stock held by employee stock
  ownership plan ("ESOP")................................    (2,583)     (2,706)
Unamortized awards of common stock under recognition
  and retention plan ("RRP").............................      (668)       (771)
Treasury stock, at cost (2,337,522 shares at March 31,
  2000 and 2,211,922 shares at June 30, 1999)............   (35,846)    (34,204)
Retained earnings........................................     25,666     25,183
Accumulated other comprehensive loss, net of tax benefit.      (870)       (497)
                                                            --------   --------
   Total stockholders' equity............................     26,091     27,351
                                                            --------   --------

   Total liabilities and stockholders' equity............   $205,874   $206,932
                                                            ========   ========


See accompanying notes to unaudited consolidated financial statements.

                                       3
<PAGE>


                 Peekskill Financial Corporation and Subsidiary
                        Consolidated Statements of Income
                                   (Unaudited)
                      (In thousands, except per share data)

                                        For the Three Months For the Nine Months
                                           Ended March 31,      Ended March 31,
                                        -------------------- -------------------
                                            2000    1999        2000       1999
                                        --------- ---------- --------- ---------
Interest and dividend income:
 Loans..................................   $1,249  $1,032     $ 3,738    $ 3,054
 Securities.............................    2,040   2,163       6,152      6,648
 Interest-bearing deposits and other....      127     131         309        349
                                           ------  ------     -------    -------
  Total interest and dividend income....    3,416   3,326      10,199     10,051
                                           ------  ------     -------    -------

Interest expense:
 Depositor accounts.....................    1,550   1,468       4,607      4,489
 Securities repurchase agreements and
     other borrowings...................      384     292       1,117        696
                                           ------  ------     -------    -------
  Total interest expense................    1,934   1,760       5,724      5,185
                                           ------  ------     -------    -------

  Net interest income...................    1,482   1,566       4,475      4,866

Provision for loan losses ..............       15      15          45         45
                                           ------  ------     -------    -------
  Net interest income after provision
   for loan losses......................    1,467   1,551       4,430      4,821
                                           ------  ------     -------    -------
Non-interest income.....................       70      61         213        193
                                           ------  ------     -------    -------

Non-interest expense:
  Compensation and benefits.............      489     445       1,443      1,351
  Occupancy costs.......................      120     122         343        335
  Professional fees.....................      337      77         434        156
  Computer service fees.................       70      58         192        165
  Federal deposit insurance costs.......       24      37          96        109
  Safekeeping and custodial expenses....       29      23          82         79
  Other.................................      132     154         421        506
                                           ------  ------     -------    -------
    Total non-interest expense..........    1,201     916       3,011      2,701
                                           ------  ------     -------    -------

Income before income tax expense........
                                              336     696       1,632      2,313
Income tax expense......................      232     301         732      1,018
                                           ------  ------     -------    -------

  Net income............................   $  104  $  395     $   900    $ 1,295
                                           ======  ======     =======    =======

Earnings per share (Note 4):
  Basic.................................   $0.07    $0.20       $0.61      $0.56
  Diluted...............................    0.07     0.19        0.59       0.54


See accompanying notes to unaudited consolidated financial statements.

                                       4
<PAGE>




                 Peekskill Financial Corporation and Subsidiary
           Consolidated Statements 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      Loss          Equity
                                  --------  --------- ----------- -----------  ---------  --------- -------------- -------------
<S>                               <C>        <C>       <C>         <C>          <C>        <C>        <C>             <C>
 Balance at June 30, 1999........ $   41     $40,305   $ (2,706)   $  (771)     $(34,204)  $25,183    $   (497)       $ 27,351

    Net income...................    ---         ---        ---        ---           ---       900         ---             900
    Other comprehensive loss.....    ---         ---        ---        ---           ---       ---        (373)           (373)
                                                                                                                      --------
         Total comprehensive
    income.......................                                                                                          527
    Dividends paid ($0.27 per
    share).......................    ---         ---        ---        ---           ---      (417)        ---            (417)
    Amortization of RRP awards...    ---         ---        ---        155           ---       ---         ---             155
    RRP award (4,000 treasury
    shares)......................    ---         (10)       ---        (52)           62       ---         ---             ---
    Tax benefit from vesting of
       RRP awards................    ---           6        ---        ---           ---       ---         ---               6
    Purchase of 129,600 treasury
       shares....................    ---         ---        ---        ---        (1,704)      ---         ---          (1,704)
    ESOP shares committed to be
       released (12,300 shares)..    ---          50        123        ---           ---       ---         ---             173
                                  ------     -------   --------    -------      --------   -------    --------        --------
 Balance at March 31, 2000....... $   41     $40,351     (2,583)   $  (668)     $(35,846)  $25,666    $   (870)       $ 26,091
                                  ======     =======   ========    =======      ========   =======    ========        ========



 Balance at June 30, 1998........ $   41     $40,181   $ (2,870)   $  (922)     $(17,730)  $24,508    $     (2)       $ 43,206

    Net income...................    ---         ---        ---        ---           ---     1,295         ---           1,295
    Other comprehensive loss.....    ---         ---        ---        ---           ---       ---        (208)           (208)
                                                                                                                      --------
         Total comprehensive
    income.......................                                                                                        1,087
    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
                                  ------     -------   --------    -------      --------   -------    --------        --------
 Balance at March 31, 1999....... $   41     $40,290   $ (2,747)   $  (820)     $(33,183)  $25,106    $   (210)       $ 28,477
                                  ======     =======   ========    =======      ========   =======    ========        ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       5
<PAGE>


                 Peekskill Financial Corporation and Subsidiary
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (In thousands)

                                                                For the Nine
                                                                Months Ended
                                                                  March 31,
                                                            -------------------
                                                               2000      1999
                                                            --------- ---------
Cash flows from operating activities:
Net income................................................. $     900 $   1,295
 Adjustments to reconcile net income to net cash provided
 by operating activities:
 Provision for loan losses.................................        45        45
 Depreciation and amortization expense.....................        78        76
 ESOP and RRP expense......................................       328       328
 Net amortization and accretion of deferred fees, discounts
   and premiums............................................       (80)      (12)
 Net decrease (increase) in accrued interest receivable....       113       (22)
 Net increase in other assets..............................        (5)      (55)
 Deferred tax expense (benefit)............................        31       (91)
 Net increase in other liabilities.........................        92       524
                                                            --------- ---------
 Net cash provided by operating activities.................     1,502     2,088
                                                            --------- ---------
Cash flows from investing activities:
Purchases of securities:
  Held-to-maturity.........................................   (13,868)  (36,866)
  Available-for-sale.......................................       ---   (17,500)
Proceeds from principal payments,
  maturities and calls of securities:
  Held-to-maturity.........................................    19,389    51,042
  Available-for-sale.......................................       ---     9,500
Originations of loans, net of principal collections........    (3,769)   (7,964)
Proceeds from sale of real estate owned....................       ---        94
Purchase of FHLB stock.....................................       (87)      ---
Purchases of office properties and equipment...............        (8)     (102)
                                                            --------- ---------
  Net cash provided by (used in) investing activities......     1,657    (1,796)
                                                            --------- ---------
Cash flows from financing activities:
  Net increase in depositor accounts.......................     2,940     5,357
  Net increase in mortgage escrow deposits.................       170        95
  Proceeds from issuance of common stock...................       ---       243
  Proceeds from securities repurchase agreements and
    other borrowings.......................................     6,000    10,000
  Repayments of securities repurchase agreements and
    other borrowings.......................................    (9,000)      ---
  Treasury stock purchases.................................    (1,704)  (16,197)
  Dividends paid...........................................      (417)     (622)
                                                            --------- ---------
    Net cash used in financing activities..................    (2,011)   (1,124)
                                                            --------- ---------
Net increase in cash and cash equivalents..................     1,148      (832)
Cash and cash equivalents at beginning of period...........     4,157     4,626
                                                            --------- ---------
Cash and cash equivalents at end of period................. $   5,305 $   3,794
                                                            ========= =========

Supplemental information:
  Interest paid............................................ $   5,703 $   5,165
  Income taxes paid........................................       639       749
  Net decrease in liability for treasury stock purchased,
     not yet settled.......................................       ---      (396)
                                                            ========= =========

     See accompanying notes to unaudited consolidated financial statements.

                                       6
<PAGE>


                 PEEKSKILL FINANCIAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED 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 financial statements
include the accounts of the Holding Company and the Bank.

         The accompanying  unaudited condensed consolidated financial statements
have been prepared in accordance 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  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, 1999 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, 2000 are not necessarily  indicative of results that may be expected for the
entire fiscal year ending June 30, 2000.


NOTE 2.  Merger Agreement

         On February 16,  2000,  the Company  signed a  definitive  agreement to
merge with Sound Federal Bancorp,  the holding company for Sound Federal Savings
and Loan  Association.  As part of the transaction,  the Company's  stockholders
will receive $22 per share in cash. The transaction,  which is expected to close
in the  third  calendar  quarter,  is  subject  to  shareholder  and  regulatory
approval.


NOTE 3.  Stock Repurchases

         From July 1, 1999 through March 31, 2000, the Holding Company purchased
129,600 shares for treasury at a cost of $1.7 million,  or $13.15 per share.  At
March 31, 2000,  the Holding  Company has a total of  2,337,522  shares held for
treasury,  at a total cost of $35.8  million or $15.33

                                       7
<PAGE>


per share.  In  connection  with the merger  agreement  described in Note 2, the
Company  has agreed that it will not make  additional  stock  purchases  pending
consummation of the merger.

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,
2000 and 1999.  For purposes of computing  basic EPS, net income  applicable  to
common stock equaled net income for each period presented.

                                  For the Three Months     For the Nine Months
                                    Ended March 31,          Ended March 31,
                                  ---------------------   ---------------------
                                   2000       1999          2000         1999
                                  ------     ------        ------       ------
                                                (In thousands)
Weighted average common
   shares outstanding
   for computation of
   basic EPS (1)                   1,433      1,981         1,475        2,329

Common-equivalent shares
   due to the dilutive
   effect of stock options
   and RRP awards (2)                 83         53            51           59
                                  ------     ------        ------       ------
Weighted average common
   shares for computation
   of diluted EPS                  1,516      2,034         1,526        2,388
                                  ======     ======        ======       ======

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

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, 2000. 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.

                                       8
<PAGE>

         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; and the
extent and timing of legislative and regulatory actions and reforms.

         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.

Merger Agreement

         On February 16,  2000,  the Company  signed a  definitive  agreement to
merge with Sound Federal Bancorp,  the holding company for Sound Federal Savings
and Loan  Association.  As part of the transaction,  the Company's  stockholders
will receive $22 per share in cash. The transaction,  which is expected to close
in the  third  calendar  quarter,  is  subject  to  shareholder  and  regulatory
approval.

Comparison of Financial Condition at March 31, 2000 and June 30, 1999

         Total assets at March 31, 2000 were $205.9  million  compared to $206.9
million at June 30, 1999, a decrease of $1.0 million.  This  decrease  primarily
consists of a $6.0 million decrease in total  securities,  partially offset by a
$1.1 million  increase in cash and cash  equivalents and a $3.7 million increase
in net  loans.  The  decrease  in total  assets was  primarily  caused by a $3.0
million decrease in securities  repurchase agreements and other borrowings and a
$1.3  million  decrease  in  stockholders'  equity,  partially  offset by a $2.9
million increase in depositor accounts.

         Total non-performing loans decreased $237,000, or 20.9%, to $893,000 at
March 31,  2000 from $1.1  million  at June 30,  1999.  At March 31,  2000,  the
Company classified  $237,000 of participation  interests in certain  residential
mortgage  loans  purchased  from  Thrift  Association   Service  Corporation  as
non-accrual,  as compared to $316,000 at June 30, 1999.  Additional  non-accrual
mortgage loans totaled $550,000 at March 31, 2000 and $382,000 at June 30, 1999.
One-to-four  family mortgage loans past due more than 90 days but still accruing
interest  totaled  $106,000 at March 31,  2000  compared to $432,000 at June 30,
1999.  The  allowance  for loan losses was  $787,000 or 88.1% of  non-performing
loans at March 31, 2000,  compared to $742,000 or 65.7% of non-performing  loans
at June 30,  1999.  There were no loan  charge-offs  or  recoveries  in the nine
months ended March 31, 2000.
The Bank had no real estate owned at March 31, 2000 and June 30, 1999.

     Stockholders'  equity decreased $1.3 million from $27.4 million at June 30,
1999 to $26.1  million  at March  31,  2000.  The  decrease  primarily  reflects
treasury  stock  purchases  of $1.7  million  and  dividends  paid of  $417,000,
partially offset by net income of $900,000.  Book value per share increased from
$14.49 at June 30,1999 to $14.79 at March 31, 2000.

                                       9
<PAGE>


Comparison  of  Operating  Results for the Three Months Ended March 31, 2000 and
1999

         Net income decreased $291,000 to $104,000,  or $0.07 per diluted share,
for the quarter  ended March 31, 2000,  compared to net income of  $395,000,  or
$0.19 per diluted share,  for the same period last year.  Basic EPS amounts were
$0.07 and $0.20 for the  quarters  ended March 31, 2000 and 1999,  respectively.
The  decrease  in net income is  primarily  attributable  to $271,000 of non-tax
deductible merger-related expenses in the current year quarter.

         Net interest income  decreased  $84,000 in the current quarter compared
to the quarter ended March 31, 1999,  reflecting a 20 basis point decline in the
net yield on average  interest-earning  assets to 2.87% in the current  quarter.
The  decreases  in the net yield and in net  interest  income  reflect the $10.9
million  decline in average net earning  assets from $35.0 million for the three
months  ended March 31, 1999 to $24.1  million for the current  quarter,  mostly
attributable  to the  utilization of $17.7 million to purchase  common stock for
treasury. Interest and dividend income increased to $3.4 million for the quarter
ended  March  31,  2000  from  $3.3  million  for the year ago  period.  Average
interest-earning  assets  increased $2.3 million and the average yield increased
10 basis points.  Interest  expense  increased  $174,000 to $1.9 million for the
quarter  ended  March 31,  2000  compared to the same  quarter  last year.  This
increase   was  due   primarily   to  a  $13.1   million   increase  in  average
interest-bearing liabilities and an 8 basis point decrease in the average cost.

         The provision for loan losses was $15,000 for the quarters  ended March
31,  2000 and  1999.  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 $285,000 for the quarter ended March 31,
2000  compared to the prior year quarter.  The increase was caused  primarily by
increases of $260,000 in professional fees, $44,000 in compensation and benefits
and $12,000 in computer service fees,  partially offset by a $22,000 decrease in
other non-interest  expenses and a $13,000 decrease in Federal deposit insurance
costs.  The  increase  in  professional  fees is  primarily  due to  $271,000 in
merger-related  expenses  and the  increase  in  compensation  and  benefits  is
primarily due to normal salary increases.

         Income tax  expense for the  quarter  ended  March 31,  2000  decreased
$69,000  compared to the same period last year. The decrease is primarily due to
a  $360,000  decrease  in  pre-tax  income  and the  effect  of the real  estate
investment trust ("REIT") in the fourth quarter of fiscal 1999, partially offset
by the effect of non-tax deductible merger-related costs in the current quarter.
The Company's  effective tax rate was 69.0% in the current  quarter  compared to
43.2% in the quarter ended March 31, 1999.

                                       10
<PAGE>

Comparison  of  Operating  Results for the Nine Months  Ended March 31, 2000 and
1999

         Net income decreased $395,000 to $900,000,  or $0.59 per diluted share,
for the nine months ended March 31, 2000, compared to $1.3 million, or $0.54 per
diluted share,  for the nine months ended March 31, 1999. Basic EPS amounts were
$0.61 and $0.56 for the nine months ended March 31, 2000 and 1999, respectively.
The decrease in net income is primarily  attributable to a $391,000  decrease in
net interest income and a $310,000 increase in non-interest  expense,  partially
offset by a $286,000  decrease  in income  tax  expense.  The  higher  basic and
diluted EPS amounts in the current  nine-month  period reflect the substantially
lower number of shares  outstanding,  due to treasury stock  purchases made over
the past year.

         Net interest income decreased  $391,000 for the nine months ended March
31, 2000 compared to the nine months ended March 31, 1999, reflecting a 32 basis
point  decline in the net yield on average  interest-earning  assets to 2.90% in
the nine months ended March 31, 2000.  The decreases in the net yield and in net
interest  income reflect the $14.4 million decline in average net earning assets
from $39.2 million for the nine months ended March 31, 1999 to $24.8 million for
the current nine months, mostly attributable to the utilization of $17.7 million
to purchase common stock for treasury.  Interest and dividend  income  increased
$148,000 to $10.2  million for the nine months ended March 31, 2000  compared to
the nine months ended March 31, 1999. Average  interest-earning assets increased
$3.9 million, partially offset by a 3 basis point decrease in the average yield.
Interest  expense  increased  $539,000 to $5.7 million for the nine months ended
March 31, 2000  compared to the same period last year.  The  increase was caused
primarily  by  an  $18.2  million  increase  in  interest-bearing   liabilities,
partially offset by a 3 basis point decrease in the average rate.

         The  provision for loan losses was $45,000 for the  nine-month  periods
ended March 31, 2000 and 1999.  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.

         For the nine months ended March 31, 2000 non-interest expense increased
$310,000  compared to the same period in 1999. The increase was caused primarily
by increases  of $278,000 in  professional  fees,  $92,000 in  compensation  and
benefits and $27,000 in computer  service fees,  partially  offset by an $85,000
decrease in other  non-interest  expenses.  The increase in professional fees is
primarily  due to  $271,000  in  merger-related  expenses  and the  increase  in
compensation  and  benefits is primarily  due to normal  salary  increases.  The
$85,000  decrease  in  other   non-interest   expenses   reflects   expenses  of
approximately  $25,000,  relating to the Company's Modified Dutch Auction,  that
were incurred in the nine months ended March 31, 1999.

         Income tax expense  decreased  $286,000 for the nine months ended March
31,  2000  compared  to the same  period a year ago.  The  decrease  is due to a
$681,000 decrease in pre-tax income and the effect of the REIT, partially offset
by the effect of non-tax deductible merger-related costs in the current quarter.
The  Company's  effective tax rate was 44.9% for the nine months ended March 31,
2000 compared to 44.0% for the same period in 1999.


                                       11
<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,
                                                              2000                       1999
                                                ----------------------------- ---------------------------
                                                                      Average                    Average
                                                  Average              Yield/ Average             Yield/
                                                Balance (1) Interest   Rate  Balance(1) Interest   Rate
                                                ----------- --------- ------- -------- -------- ---------
                                                                    (Dollars in thousands)
<S>      <C>                                      <C>        <C>       <C>    <C>       <C>       <C>
Interest-earning assets:
   Loans (2)....................................  $ 66,308   $ 3,738   7.52%  $ 51,765  $ 3,054   7.87%
   Mortgage-backed securities(3)................   108,512     4,980   6.12    120,486    5,676   6.28
   Other debt securities(3).....................    23,189     1,172   6.74     20,302      972   6.38
   Other interest-earning assets................     7,400       309   5.57      8,992      349   5.17
                                                  --------   -------          --------  -------
     Total interest-earning assets..............   205,409    10,199   6.62    201,545   10,051   6.65
                                                             -------                    -------
Non interest-earning assets.....................     3,116                       2,745
                                                  --------                    --------
     Total assets...............................  $208,525                    $204,290
                                                  ========                    ========

Interest-bearing liabilities:
   Regular savings and club accounts............  $ 50,331   $ 1,049   2.78%  $ 50,426  $ 1,050   2.78%
   Money market and NOW accounts (5)............    18,632       358   2.56     15,135      301   2.65
   Savings certificates and other...............    83,218     3,200   5.13     78,580    3,138   5.32
   Securities repurchase agreements and other       28,400     1,117   5.24     18,200      696   5.10
borrowings......................................  --------   -------          --------  -------
     Total interest-bearing liabilities.........   180,581     5,724   4.23    162,341    5,185   4.26
                                                             -------                    -------
Non interest-bearing liabilities................     1,347                       1,663
                                                  --------                    --------
     Total liabilities..........................   181,928                     164,004
Stockholders' equity............................    26,597                      40,286
                                                  --------                    --------
     Total liabilities and stockholders' equity.  $208,525                    $204,290
                                                  ========                    ========
Net earning assets..............................  $ 24,828                    $ 39,204
                                                  ========                    ========
Net interest income.............................             $  4,475                   $ 4,866
                                                             ========                   =======
Net interest rate spread........................                       2.39%                      2.39%
                                                                       ====                       ====
Net yield on average interest-earning assets(4).                       2.90%                      3.22%
                                                                       ====                       ====
Average interest-earning assets to average
 interest-bearing liabilities...................    1.14x                                 1.24x
                                                    ====                                  ====
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                ---------------------------------------------------------
                                                            March 31,                  March 31,
                                                              2000                       1999
                                                ----------------------------- ---------------------------
                                                                      Average                    Average
                                                  Average              Yield/ Average             Yield/
                                                Balance (1) Interest   Rate  Balance(1) Interest   Rate
                                                ----------- --------- ------- -------- -------- ---------
                                                                    (Dollars in thousands)
<S>      <C>                                      <C>        <C>       <C>    <C>       <C>       <C>
Interest-earning assets:
   Loans (2)....................................  $ 66,883   $ 1,249   7.47%  $ 53,529  $ 1,032   7.71%
   Mortgage-backed securities(3)................   106,120     1,639   6.18    114,920    1,763   6.14
   Other debt securities(3).....................    23,529       401   6.82     23,982      400   6.67
   Other interest-earning assets................     9,870       127   5.15     11,690      131   4.48
                                                  --------   -------          --------  -------
     Total interest-earning assets..............   206,402     3,416   6.62    204,121    3,326   6.52
                                                             -------                    -------
Non interest-earning assets.....................     3,146                       2,871
                                                  --------                    --------
     Total assets...............................  $209,548                    $206,992
                                                  ========                    ========

Interest-bearing liabilities:
   Regular savings and club accounts............  $ 49,749   $   346   2.78%  $ 50,454  $   351   2.78%
   Money market and NOW accounts (5)............    19,452       122   2.51     15,998      107   2.68
   Savings certificates and other...............    84,312     1,082   5.15     79,684    1,010   5.07
   Securities repurchase agreements and other
borrowings......................................    28,750       384   5.13     23,000      292   5.08
                                                  --------   -------          --------  -------
     Total interest-bearing liabilities.........   182,263     1,934   4.24    169,136    1,760   4.16
                                                             -------                    -------
Non interest-bearing liabilities................     1,225                       1,747
                                                  --------                    --------
     Total liabilities..........................   183,488                     170,883
Stockholders' equity............................    26,060                      36,109
                                                  --------                    --------
     Total liabilities and stockholders' equity.  $209,548                    $206,992
                                                  ========                    ========
Net earning assets..............................  $ 24,139                    $ 34,985
                                                  ========                    ========
Net interest income.............................             $ 1,482                    $ 1,566
                                                             =======                    =======
Net interest rate spread........................                       2.38%                      2.36%
                                                                       ====                       ====
Net yield on average interest-earning assets(4).                       2.87%                      3.07%
                                                                       ====                       ====
Average interest-earning assets to average
 interest-bearing liabilities...................   1.13x                         1.21x
                                                   ====                          ====
<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.
(5)  Average  balances for the nine months and three months ended March 31, 2000
     include  non-interest  bearing  checking  deposits of $1.5 million and $2.0
     million, respectively.  Excluding these deposits, the average rate would be
     2.79% for the nine  months  ended  March  31,  2000 and 2.81% for the three
     months ended March 31, 2000.
</FN>
</TABLE>
                                       12
<PAGE>



Liquidity and Capital Resources

         The  Company'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 $51.7 million at March 31, 2000.  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, 2000 and June 30, 1999.  The Company had $25.0 million
of borrowings under securities repurchase agreements at March 31, 2000, compared
to $28.0  million at June 30,  1999.  The Company has utilized  borrowings  as a
funding  source in order to supplement  retail  deposit growth and may engage in
additional borrowings, 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 2000, the
Bank's average daily total  liquidity  ratio was 12.9%,  compared to the minimum
OTS requirement of 4.0%.

         The Company'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  Company's  operating,  financing and
investing  activities  during  any  given  period.  Cash  and  cash  equivalents
increased  $1.1  million,  from $4.2 million at June 30, 1999 to $5.3 million at
March 31, 2000.

         The Company anticipates that it will have sufficient funds available to
meet its current  commitments  and other funding  needs.  At March 31, 2000, the
Company had commitments to originate loans of $1.7 million. Savings certificates
scheduled to mature in one year or less at March 31, 2000 totaled $62.4 million.
Management  believes that a significant  portion of such depositor accounts will
remain with the Company.

         At March 31, 2000, 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,  4.0% for Tier I (core) capital and
8.0% for total risk-based capital.  In order to be considered  well-capitalized,


                                       13
<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,  2000,  the Bank had both  tangible  and core
capital of $26.8 million  (13.0% of total  adjusted  assets);  Tier I risk-based
capital  of $26.8  million  (43.8%  of total  risk-weighted  assets);  and total
risk-based capital of $27.6 million (45.1% of total risk-weighted assets).

Year 2000

         The Company's Year 2000 preparations  allowed it to transition into the
new year without  system  failures or  interruptions  in customer  service.  The
Company  is not  currently  aware of any Year 2000  issues  that have  adversely
affected its customers or key business relationships. However, the nature of the
Year 2000 issue is such that unanticipated  developments affecting the Company's
information  technology  systems,  and/or those of third parties,  upon which it
depends,  may come to light in the future.  The Company will continue to monitor
its systems for Year 2000 issues that may not have been immediately apparent, as
well  as  possible   adverse   effects  on  its   customers   and  key  business
relationships.  The  Company's  cumulative  Year 2000 costs of $160,000  through
March 31, 2000 were primarily for computer hardware  purchases.  Management does
not expect that any additional  significant costs will be incurred in connection
with the Year 2000 issue.

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,  1999.  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.


                                       14

<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

         None

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

         Special Meeting

                  A  Special  Meeting  will be held on May 15,  2000 at the main
         office of the  Company to approve and adopt the merger  agreement,  per
         the Company's proxy statement dated April 7, 2000.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a.       Exhibits:

                  27.      Financial Data Schedule

         b.       Reports on Form 8-K

                           On  January  31,  2000,  the  Company  issued a press
                  release announcing its second quarter results.

                           On February  17,  2000,  the  Company  issued a press
                  release announcing its merger with Sound Federal Bancorp.

                                       15

<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 12, 2000            BY:      /s/ Eldorus Maynard
                                        -------------------
                                        Eldorus Maynard
                                        Chairman of the Board and
                                        Chief Executive Officer


DATE:  May 12, 2000            BY:      /s/ William J. LaCalamito
                                        -------------------------
                                        William J. LaCalamito
                                        President
                                        (principal financial officer)

                                       16