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 December 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  February 4, 2000
-----------------------------                  --------------------
Common Stock, $0.01 par value                       1,762,228



<PAGE>


                         Peekskill Financial Corporation

                                    Form 10-Q

                  Three and Six Months Ended December 31, 1999

                         Part I - Financial Information

ITEM 1 - FINANCIAL STATEMENTS  (Unaudited)                                Page

      Consolidated Balance Sheets at December 31, 1999
         and June 30, 1999                                                  3

      Consolidated Statements of Income for the three and six
         months ended December 31, 1999 and 1998                            4

      Consolidated Statements of Changes in Stockholders'
         Equity for the six months ended December 31, 1999 and 1998         5

      Consolidated Statements of Cash Flows for the six
         months ended December 31, 1999 and 1998                            6

     Notes to Consolidated Interim Financial Statements                     7

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF                            9
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK                                                 15

                           Part II - Other Information

Other Information                                                          16

Signatures                                                                 17

                                       2


<PAGE>


Part I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

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

<TABLE>
<S>                                                              <C>                    <C>
                                                                 December 31, 1999      June 30, 1999
                                                                 -----------------      -------------
Assets:
Cash and due from banks..................................            $  2,433              $    957
Interest-bearing deposits................................               8,006                 3,200
Securities:
  Held-to-maturity, at amortized cost (fair value of
     $112,073 at December 31, 1999 and $118,675
     at June 30, 1999)...................................             114,290               119,122
  Available-for-sale, at fair value (amortized cost of
     $16,500 at December 31, 1999 and June 30, 1999).....              15,082                15,673
                                                                     --------              --------
    Total securities.....................................             129,372               134,795
                                                                     --------              --------

Loans, net of allowance for loan losses of $772 at
     December 31, 1999 and $742 at June 30, 1999.........              68,048                63,436
Federal Home Loan Bank stock.............................               1,550                 1,463
Accrued interest receivable..............................               1,105                 1,094
Office properties and equipment, net.....................               1,069                 1,114
Deferred income taxes, net...............................               1,044                   814
Other assets.............................................                  32                    59
                                                                     --------              --------
  Total assets...........................................            $212,659              $206,932
                                                                     ========              ========

Liabilities and Stockholders' Equity:
Liabilities:
  Depositor accounts.....................................            $152,651              $148,693
  Securities repurchase agreements and other borrowings..              31,000                28,000
  Mortgage escrow deposits...............................               1,847                 1,692
  Other liabilities......................................               1,178                 1,196
                                                                     --------              --------
    Total liabilities....................................             186,676               179,581
                                                                     --------              --------

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...............................              40,325                40,305
Unallocated common stock held by employee stock
  ownership plan ("ESOP")................................              (2,624)               (2,706)
Unamortized awards of common stock under recognition
  and retention plan ("RRP").............................                (719)                 (771)
Treasury stock, at cost (2,337,522 shares at December 31,
  1999 and 2,211,922 shares at June 30, 1999)............             (35,846)              (34,204)
Retained earnings........................................              25,696                25,183
Accumulated other comprehensive loss, net of tax benefit.                (890)                 (497)
                                                                     --------              --------
   Total stockholders' equity............................              25,983                27,351
                                                                     --------              --------

   Total liabilities and stockholders' equity............            $212,659              $206,932
                                                                     ========              ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       3

<PAGE>

<TABLE>
<CAPTION>

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

                                                For the Three Months          For the Six Months
                                                  Ended December 31,           Ended December 31,
                                            ---------------------------     ------------------------
                                               1999            1998            1999          1998
                                            ------------    -----------     -----------   ----------
<S>                                           <C>             <C>            <C>           <C>
Interest and dividend income:
 Loans..................................      $ 1,260         $ 1,032        $ 2,489       $ 2,022
 Securities.............................        2,050           2,196          4,112         4,485
 Interest-bearing deposits and other....          118             142            182           218
                                              -------         -------        -------       -------
  Total interest and dividend income....        3,428           3,370          6,783         6,725
                                              -------         -------        -------       -------
Interest expense:
 Depositor accounts.....................        1,547           1,508          3,057         3,021
 Securities repurchase agreements and
     other borrowings...................          371             222            733           404
                                              -------         -------        -------       -------
  Total interest expense................        1,918           1,730          3,790         3,425
                                              -------         -------        -------       -------
  Net interest income...................        1,510           1,640          2,993         3,300
Provision for loan losses ..............           15              15             30            30
                                              -------         -------        -------       -------

  Net interest income after
   provision for loan losses............        1,495           1,625          2,963         3,270
                                              -------         -------        -------       -------
Non-interest income.....................           72              69            143           132
                                              -------         -------        -------       -------
Non-interest expense:
  Compensation and benefits.............          489             451            954           906
  Occupancy costs.......................          107             101            223           213
  Professional fees.....................           48              41             97            79
  Computer service fees.................           66              55            122           107
  Federal deposit insurance costs.......           36              36             72            72
  Safekeeping and custodial expenses....           28              27             53            56
  Other.................................          144             189            289           352
                                              -------         -------        -------       -------
    Total non-interest expense..........          918             900          1,810         1,785
                                              -------         -------        -------       -------

Income before income tax expense........          649             794          1,296         1,617
Income tax expense......................          250             350            500           717
                                              -------         -------        -------       -------

  Net income............................      $   399         $   444        $   796       $   900
                                              =======         =======        =======       =======

Earnings per share (Note 3):
  Basic.................................      $  0.27         $  0.18        $  0.53       $  0.36
  Diluted...............................         0.27            0.18           0.52          0.35

</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       4

<PAGE>

<TABLE>
<CAPTION>
                 Peekskill Financial Corporation and Subsidiary
           Consolidated Statements of Changes in Stockholders' Equity
                                   (Unaudited)
                        (In thousands, except share data)

                                                     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...................     ---        ---       ---         ---           ---       796       ---               796
    Other comprehensive loss.....
                                                                                                        (393)             (393)
                                                                                                                      --------
         Total comprehensive
    income.......................                                                                                          403
    Dividends paid ($0.18 per
    share).......................     ---        ---       ---         ---           ---      (283)      ---              (283)
    Amortization of RRP awards...     ---        ---       ---         104           ---       ---       ---               104
    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 (8,200 shares)...     ---         24        82         ---           ---       ---       ---               106
                                   ------    -------   -------      ------      --------   -------     -----           -------
 Balance at December 31, 1999....  $   41    $40,325   $(2,624)     $ (719)     $(35,846)  $25,696     $(890)          $25,983
                                   ======    =======   =======      ======      ========   =======     =====           =======

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

    Net income...................     ---        ---       ---         ---           ---       900       ---               900
    Other comprehensive loss.....                                                                       (124)             (124)
                                                                                                                      --------
         Total comprehensive
    income.......................                                                                                          776
    Dividends paid ($0.18 per
    share).......................     ---        ---       ---         ---           ---      (464)      ---              (464)
    Amortization of RRP awards...     ---        ---       ---          97           ---       ---       ---                97
    RRP award (2,500 treasury
    shares)......................     ---         14       ---         (44)           30       ---       ---               ---
    Tax benefit from vesting of
       RRP awards................     ---         36       ---         ---           ---       ---       ---                36
    Purchase of 56,000 treasury
       shares....................     ---        ---       ---         ---          (857)      ---       ---              (857)
    ESOP shares committed to be
       released (8,200 shares)...     ---         41        82         ---           ---       ---       ---               123
                                   ------    -------   -------      ------      --------   -------     -----           -------
 Balance at December 31, 1998....  $   41    $40,272   $(2,788)     $ (869)     $(18,557)  $24,944     $(126)          $42,917
                                   ======    =======   =======      ======      ========   =======     =====           =======


</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       5

<PAGE>
<TABLE>
<CAPTION>

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

                                                                   For the Six Months Ended
                                                                         December 31,
                                                                   ------------------------
                                                                       1999         1998
                                                                   ----------    ----------
<S>                                                                 <C>            <C>
Cash flows from operating activities:
  Net income.................................................       $   796        $   900
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Provision for loan losses................................            30             30
    Depreciation and amortization expense....................            51             50
    ESOP and RRP expense.....................................           210            220
    Net amortization and accretion of deferred fees, discounts
       and premiums..........................................           (13)            (4)
    Net increase in accrued interest receivable..............           (11)          (116)
    Net decrease (increase) in other assets..................            27             (8)
    Deferred tax benefit.....................................           (41)           (66)
    Net (decrease) increase in other liabilities.............           (13)           222
                                                                    -------        -------
      Net cash provided by operating activities..............       $ 1,036        $ 1,228
                                                                    -------        -------

Cash flows from investing activities:
  Purchases of securities:
    Held-to-maturity.........................................        (9,896)       (20,358)
    Available-for-sale.......................................           ---        (17,500)
  Proceeds from principal payments, maturities and
    calls of securities:
    Held-to-maturity.........................................        14,752         37,008
    Available-for-sale.......................................           ---          4,500
  Originations of loans, net of principal collections........        (4,642)        (5,037)
  Proceeds from sale of real estate owned....................           ---             94
  Purchase of FHLB stock.....................................           (87)           ---
  Purchases of office properties and equipment...............            (7)           (41)
                                                                    -------        -------
     Net cash provided by (used in) investing activities.....           120         (1,334)
                                                                    -------        -------

Cash flows from financing activities:
  Net increase in depositor accounts.........................         3,958          4,508
  Net increase in mortgage escrow deposits...................           155             64
  Proceeds from securities repurchase agreements and
     other borrowings........................................         6,000         10,000
  Repayments of securities repurchase agreements and
     other borrowings........................................        (3,000)           ---
  Treasury stock purchases...................................        (1,704)        (2,207)
  Dividends paid.............................................          (283)          (464)
                                                                    -------        -------
     Net cash provided by financing activities...............         5,126         11,901
                                                                    -------        -------

Net increase in cash and cash equivalents....................         6,282         11,795
Cash and cash equivalents at beginning of period.............         4,157          4,626
                                                                    -------        -------
Cash and cash equivalents at end of period...................       $10,439        $16,421
                                                                    =======        =======
Supplemental information:
  Interest paid..............................................       $ 3,741        $ 3,385
  Income taxes paid..........................................           579            702
  Decrease in liability for treasury stock purchased, not
     yet settled.............................................          ---           1,350
                                                                    =======        =======

</TABLE>

     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 six  months  ended
December 31, 1999 are not necessarily indicative of results that may be expected
for the entire fiscal year ending June 30, 2000.


NOTE 2.  Stockholders' Equity

         From July 1, 1999  through  December  31,  1999,  the  Holding  Company
purchased  129,600 shares for treasury at a cost of $1.7 million,  or $13.15 per
share. At December 31, 1999, 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 per share.

         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
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

                                       7

<PAGE>

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, 1999,  the Bank had  approximately  $2.7 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.

Note 3.  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 six month periods ended  December
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 Six Months
                                                    Ended December 31,             Ended December 31,
                                                   --------------------           --------------------
                                                      1999       1998                1999       1998
                                                   ----------  --------           ----------  --------
                                                                      (In thousands)
<S>                                                <C>            <C>             <C>            <C>
Weighted average common shares outstanding
   for computation of basic EPS (1)                   1,461          2,482           1,496          2,499

Common-equivalent shares due to the dilutive
   effect of stock options and RRP awards (2)            24             44              27             67
                                                      -----          -----           -----          -----
Weighted average common shares for
   computation of diluted EPS                         1,485          2,526           1,523          2,566
                                                      =====          =====           =====          =====
<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>

                                       8

<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 December  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; 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.

Comparison of Financial Condition at December 31, 1999 and June 30, 1999

         Total  assets at  December  31, 1999 were  $212.7  million  compared to
$206.9 million at June 30, 1999, an increase of $5.7 million.  This increase was
due primarily to a $6.3 million increase in cash and cash equivalents and a $4.6
million  increase in net loans,  partially  offset by a $5.4 million decrease in
total  securities.  The funding of the asset growth was  accomplished  by a $3.0
million increase in securities  repurchase agreements and other borrowings and a
$4.0 million increase in depositor accounts.  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 loans decreased $195,000, or 17.3%, to $935,000 at
December 31, 1999 from $1.1 million at June 30, 1999. At December 31, 1999,  the
Company classified  $264,000 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  $563,000 at December 31, 1999 and $382,000 at June 30,
1999.  One-to-four  family  mortgage  loans past due more than 90 days but still
accruing  interest totaled $108,000 at December 31, 1999 compared to $432,000 at
June  30,  1999.  The  allowance  for  loan  losses  was  $772,000  or  82.6% of
non-performing  loans at  December  31,  1999,  compared to $742,000 or 65.7% of
non-performing  loans  at June  30,  1999.

                                       9

<PAGE>

There were no loan  charge-offs  or recoveries in the six months ended  December
31,  1999.  The Bank had no real estate  owned at December 31, 1999 and June 30,
1999.

         Stockholders'  equity decreased $1.4 million from $27.4 million at June
30, 1999 to $26.0 million at December 31, 1999. The decrease  primarily reflects
treasury  stock  purchases  of $1.7  million  and  dividends  paid of  $283,000,
partially offset by net income of $796,000.  Book value per share increased from
$14.49 at June 30,1999 to $14.74 at December 31, 1999.


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

         Net income decreased  $45,000 to $399,000,  or $0.27 per diluted share,
for the quarter ended December 31, 1999, compared to net income of $444,000,  or
$0.18 per diluted share,  for the same period last year.  Basic EPS amounts were
$0.27 and $0.18 for the quarters ended December 31, 1999 and 1998, respectively.
The decrease in net income is primarily  attributable to a $130,000  decrease in
net  interest  income,  partially  offset by a $100,000  decrease  in income tax
expense. The higher basic and diluted EPS amounts in the current quarter reflect
the  substantially  lower number of shares  outstanding,  due to treasury  stock
purchases made over the past year.

         Net interest income decreased  $130,000 in the current quarter compared
to the quarter ended  December 31, 1998,  reflecting a 29 basis point decline in
the net  yield on  average  interest-earning  assets  to  2.93%  in the  current
quarter.  The decreases in the net yield and in net interest  income reflect the
$15.4 million  decline in average net earning  assets from $41.6 million for the
three months ended  December 31, 1998 to $26.2 million for the current  quarter,
mostly attributable to the utilization of $17.7 million to purchase common stock
for treasury. Interest and dividend income remained constant at $3.4 million for
the quarters ended December 31, 1999 and 1998. Average  interest-earning  assets
increased $2.4 million and the average yield increased 4 basis points.  Interest
expense  increased  $188,000 to $1.9 million for the quarter ended  December 31,
1999 compared to the same quarter last year.  This increase was due primarily to
a $19.4  million  increase  in average  interest-bearing  liabilities  partially
offset by a 4 basis point decrease in the average cost.

         The  provision  for loan  losses was  $15,000  for the  quarters  ended
December 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 $18,000 for the quarter ended December
31, 1999 compared to the prior year quarter.  The increase was caused  primarily
by  increases  of $38,000 in  compensation  and  benefits,  $11,000 in  computer
service  fees and $7,000 in  professional  fees,  partially  offset by a $45,000
decrease  in other  non-interest  expenses.  The  increase in  compensation  and
benefits  is due to normal  salary  increases.  The  $45,000  decrease  in other
non-interest  expenses is  primarily  due to expenses of  approximately  $25,000
relating

                                       10

<PAGE>

to the Company's Modified Dutch Auction, that were incurred in the quarter ended
December 31, 1998.

         Income tax expense for the quarter  ended  December 31, 1999  decreased
$100,000  compared  to the same  period  last  year.  The  decrease  is due to a
$145,000  decrease  in pre-tax  income and the  establishment  of a real  estate
investment  trust  ("REIT") in the fourth  quarter of fiscal 1999. The Company's
effective  tax rate was 38.5% in the  current  quarter  compared to 44.1% in the
quarter ended December 31, 1998, primarily due to the effect of the REIT.

Comparison of Operating  Results for the Six Months Ended  December 31, 1999 and
1998

         Net income decreased $104,000 to $796,000,  or $0.52 per diluted share,
for the six months ended December 31, 1999,  compared to $900,000,  or $0.35 per
diluted  share,  for the six months ended  December 31, 1998.  Basic EPS amounts
were  $0.53 and $0.36  for the six  months  ended  December  31,  1999 and 1998,
respectively. The decrease in net income is primarily attributable to a $307,000
decrease in net  interest  income,  partially  offset by a $217,000  decrease in
income tax  expense.  The higher  basic and  diluted  EPS amounts in the current
six-month period reflect the substantially  lower number of shares  outstanding,
due to treasury stock purchases made over the past year.

         Net  interest  income  decreased  $307,000  for  the six  months  ended
December 31, 1999 compared to the six months ended December 31, 1998, reflecting
a 37 basis point decline in the net yield on average  interest-earning assets to
2.91% in the six months ended  December 31, 1999. The decreases in the net yield
and in net  interest  income  reflect the $15.5  million  decline in average net
earning  assets from $41.9 million for the six months ended December 31, 1998 to
$26.4 million for the current six months, mostly attributable to the utilization
of $17.7 million to purchase  common stock for  treasury.  Interest and dividend
income  increased  $58,000 to $6.8 million for the six months ended December 31,
1999   compared  to  the  six  months   ended   December   31,   1998.   Average
interest-earning  assets increased $4.0 million,  partially offset by an 8 basis
point decrease in the average yield. Interest expense increased $365,000 to $3.8
million for the six months ended  December 31, 1999  compared to the same period
last year.  The increase was caused  primarily  by a $20.9  million  increase in
interest-bearing  liabilities,  partially offset by a 10 basis point decrease in
the average rate.

         The  provision  for loan losses was $30,000 for the  six-month  periods
ended December 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.

         For the  six  months  ended  December  31,  1999  non-interest  expense
increased  $25,000  compared to the same period in 1998. The increase was caused
primarily by  increases  of $48,000 in  compensation  and  benefits,  $18,000 in
professional  fees and $15,000 in computer  service fees,  partially offset by a
$63,000  decrease  in other  non-interest  expenses.  The  $48,000  increase  in
compensation  and  benefits  is due to  normal  salary  increases.  The  $63,000

                                       11

<PAGE>

decrease  in  other  non-interest  expenses  is  primarily  due to  expenses  of
approximately  $25,000,  relating to the Company's Modified Dutch Auction,  that
were incurred in the quarter ended December 31, 1998.

         Income tax expense decreased $217,000 for the six months ended December
31,  1999  compared  to the same  period a year ago.  The  decrease  is due to a
$321,000  decrease in pre-tax  income and the effect of the REIT.  The Company's
effective tax rate was 38.6% for the six months ended December 31, 1999 compared
to 44.3% for the same period in 1998.

                                       12

<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>

                                                                                    Six Months Ended
                                                     ---------------------------------------------------------------------------
                                                                    December 31,                          December 31,
                                                                        1999                                  1998
                                                     ---------------------------------------- ----------------------------------
                                                        Average                      Average     Average                Average
                                                     Balance  (1)   Interest       Yield/Rate  Balance (1) Interest   Yield/Rate
                                                     ------------  ----------     ----------- ------------ --------- -----------
                                                                             (Dollars in thousands)
<S>                                                   <C>           <C>               <C>      <C>         <C>            <C>
Interest-earning assets:
   Loans (2)....................................       $ 66,156      $ 2,489           7.52%    $ 50,810    $ 2,023        7.96%
   Mortgage-backed securities(3)................        109,498        3,341           6.10      123,219      3,913        6.35
   Other debt securities(3).....................         23,043          771           6.69       18,551        571        6.16
   Other interest-earning assets................          6,716          182           5.42        8,794        218        4.96
                                                       --------      -------                    --------    -------
     Total interest-earning assets..............        205,413        6,783           6.60      201,374      6,725        6.68
                                                                     -------                                -------
Non interest-earning assets.....................          3,118                                    2,688
                                                       --------                                 --------
     Total assets...............................       $208,531                                 $204,062
                                                       ========                                 ========

Interest-bearing liabilities:
   Regular savings and club accounts............       $ 50,605      $   703           2.78%    $ 50,383    $   699        2.77%
   Money market and NOW accounts (5)............         18,268          236           2.58       14,705        194        2.64
   Savings certificates and other...............         82,879        2,188           5.11       78,205      2,128        5.44
   Securities repurchase agreements and other            28,571          733           5.13       16,143        404        5.00
                                                       --------      -------                    --------    -------
borrowings......................................
     Total interest-bearing liabilities.........        180,323        3,790           4.20      159,436      3,425        4.30
                                                                     -------                                -------
Non interest-bearing liabilities................          1,391                                    1,577
                                                       --------                                 --------
     Total liabilities..........................        181,714                                  161,013
Stockholders' equity............................         26,817                                   43,049
                                                       --------                                 --------
     Total liabilities and stockholders' equity.       $208,531                                 $204,062
                                                       ========                                 ========
Net earning assets..............................       $ 26,369                                 $ 41,938
                                                       ========                                 ========
Net interest income.............................                     $ 2,993                                $ 3,300
                                                                     =======                                =======
Net interest rate spread........................                                       2.40%                               2.38%
                                                                                       ====                                ====
Net yield on average interest-earning assets(4).                                       2.91%                               3.28%
                                                                                       ====                                ====
Average interest-earning assets to average
 interest-bearing liabilities...................         1.14x                                    1.26x
                                                         ====                                     ====
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                     ---------------------------------------------------------------------------
                                                                    December 31,                          December 31,
                                                                        1999                                  1998
                                                     ---------------------------------------- ----------------------------------
                                                        Average                      Average     Average                Average
                                                     Balance  (1)   Interest       Yield/Rate  Balance (1) Interest   Yield/Rate
                                                     ------------  ----------     ----------- ------------ --------- -----------
                                                                             (Dollars in thousands)
<S>                                                   <C>           <C>               <C>      <C>         <C>            <C>
Interest-earning assets:
   Loans (2)....................................       $ 67,181      $ 1,260           7.50%    $ 52,044    $ 1,032        7.93%
   Mortgage-backed securities(3)................        107,132        1,657           6.19      119,061      1,879        6.31
   Other debt securities(3).....................         23,373          393           6.73       20,605        317        6.15
   Other interest-earning assets................          8,278          118           5.70       11,849        142        4.79
                                                       --------      -------                    --------    -------
     Total interest-earning assets..............        205,964        3,428           6.66      203,559      3,370        6.62
                                                                     -------                                -------
Non interest-earning assets.....................          3,179                                    2,704
                                                       --------                                 --------
     Total assets...............................       $209,143                                 $206,263
                                                       ========                                 ========

Interest-bearing liabilities:
   Regular savings and club accounts............        $49,986        $ 347          2.78%      $49,691      $ 345       2.78%
   Money market and NOW accounts (5)............         18,490          116           2.51       15,192        100        2.63
   Savings certificates and other...............         84,140                        5.15       78,792                   5.39
                                                                       1,084                                  1,062
   Securities repurchase agreements and other            28,750          371           5.16       18,250        223        4.89
                                                       --------      -------                    --------    -------
borrowings......................................
     Total interest-bearing liabilities.........        181,366        1,918           4.23      161,925      1,730        4.27
                                                                     -------                                -------
Non interest-bearing liabilities................          1,445                                    1,426
                                                       --------                                 --------
     Total liabilities..........................        182,811                                  163,351
Stockholders' equity............................         26,332                                   42,912
                                                       --------                                 --------
     Total liabilities and stockholders' equity.       $209,143                                 $206,263
                                                       ========                                 ========
Net earning assets..............................       $ 26,229                                 $ 41,634
                                                       ========                                 ========
Net interest income.............................                     $ 1,510                                $ 1,640
                                                                     =======                                =======
Net interest rate spread........................                                       2.43%                               2.35%
                                                                                       ====                                ====
Net yield on average interest-earning assets(4).                                       2.93%                               3.22%
                                                                                       ====                                ====
Average interest-earning assets to average
 interest-bearing liabilities...................         1.14x                                    1.26x
                                                         ====                                     ====
<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 six months and three months ended December 31,
    1999 include non-interest bearing checking deposits of $1.3 million and
    $1.6 million, respectively.  Excluding these deposits, the average rate
    would be 2.78% for the six months ended December 31, 1999 and 2.75% for
    the three months ended December 31, 1999.
</FN>
</TABLE>

                                       13

<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 $52.0  million at December 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  $6.0  million  of such
borrowings  outstanding  at  December  31, 1999 and none at June 30,  1999.  The
Company  also had  $25.0  million  of  borrowings  under  securities  repurchase
agreements at December 31, 1999, 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 December 1999,
the Bank's  average  daily  total  liquidity  ratio was 16.8%,  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  $6.2 million,  from $4.2 million at June 30, 1999 to $10.4 million at
December  31,  1999.  The  temporary  increase in cash and cash  equivalents  at
year-end 1999 was due, in part, to Year 2000  contingency  planning for possible
depositor withdrawals.

         The Company anticipates that it will have sufficient funds available to
meet its current  commitments and other funding needs. At December 31, 1999, the
Company had commitments to originate loans of $1.3 million. Savings certificates
scheduled  to mature in one year or less at  December  31,  1999  totaled  $65.7
million.  Management  believes  that a  significant  portion  of such  depositor
accounts will remain with the Company.

         At December  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

                                       14

<PAGE>

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,  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 December 31, 1999, the
Bank had both  tangible  and core  capital  of  $26.9  million  (12.6%  of total
adjusted  assets);  Tier I risk-based  capital of $26.9 million  (43.1% of total
risk-weighted  assets);  and total risk-based capital of $27.7 million (44.3% 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
December 31, 1999 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.

                                       15

<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

         Annual Meeting

                  The Annual  Meeting  for the fiscal  year ended June 30,  2000
         will be held on October 18, 2000 at the main office of the Company.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a.       Exhibits:

                  27.      Financial Data Schedule

         b.       Reports on Form 8-K

                  None

                                       16


<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:  February 11, 2000                    BY:  /s/ Eldorus Maynard
                                                 -------------------
                                                 Eldorus Maynard
                                                 Chairman of the Board and
                                                 Chief Executive Officer


DATE:  February 11, 2000                    BY:  /s/ William J. LaCalamito
                                                 -------------------------
                                                 William J. LaCalamito
                                                 President
                                                 (principal financial officer)

                                       17