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

                                    FORM 10-Q

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

                  For the quarterly period ended September 30, 1999

                                     0-24739
                             Commission File Number


                            CNY Financial Corporation
             (Exact name of registrant as specified in its charter)

             DELAWARE                                   16-1557490
  (State or other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                   Identification No.)



                              ONE NORTH MAIN STREET
                            CORTLAND, NEW YORK 13045
                    (Address of principal executive offices)

                                 (607) 756-5643
               Registrant's telephone number, including area code

                          COMMON STOCK, $0.01 PAR VALUE
           Securities registered pursuant to Section 12(g) of the Act

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 day. (X) Yes ( ) No.


As of October 21, 1999,  the  registrant  had  4,601,373  shares of Common Stock
outstanding.

<PAGE>


                                TABLE OF CONTENTS

Part I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements (unaudited)
                  Condensed Consolidated Balance Sheets....................... 1
                  Condensed Consolidated Statements of Income................. 2
                  Condensed Consolidated Statements of Stockholders'
                    Equity and Comprehensive Income........................... 3
                  Condensed Consolidated Statements of Cash Flows............. 4
                  Footnotes to Unaudited Condensed Consolidated
                    Financial Statements...................................... 5

         Item 2.  Management's Discussion and Analysis of Financial
                    Condition and Results of Operations....................... 6

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk..14

Part II. OTHER INFORMATION

         Item 4.  Submission of Matters to a Vote of Security Holders.........14


         Item 6.  (a)      Exhibits...........................................14
                  (b)      Reports of Form 8-K................................15
                           None

         Form 10-Q Signature Page.............................................16


<PAGE>

<TABLE>
<CAPTION>
                                CNY Financial Corporation and Subsidiary
                                  Condensed Consolidated Balance Sheet
                                             (In thousands)

                                                                          September 30,    December 31,
                                                                              1999             1998
-------------------------------------------------------------------------------------------------------
ASSETS                                                                     (unaudited)
<S>                                                                          <C>              <C>
Cash and due from banks                                                      $  5,963         $  4,432
Interest-bearing balances at financial institutions and federal funds sold        134           10,104
Securities available-for-sale, at fair value                                  108,501           88,437
Securities held-to-maturity (fair value of $7,337 at 1999 and $10,404
     at 1998)                                                                   7,387           10,318
Loans, net of deferred fees                                                   166,182          161,701
Less allowance for loan losses                                                  2,445            2,494
------------------------------------------------------------------------------------------------------
     Net loans                                                                163,737          159,207
Premises and equipment, net                                                     2,776            3,243
Federal Home Loan Bank stock, at cost                                           1,637            1,303
Other assets                                                                    6,159            4,142
------------------------------------------------------------------------------------------------------
                                                                             $296,294         $281,186
======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
     Non-interest bearing demand accounts                                    $ 13,016         $ 10,780
     Interest bearing deposits                                                183,397          185,234
------------------------------------------------------------------------------------------------------
Total deposits                                                                196,413          196,014
Advance payments by borrowers for property taxes and insurance                    882            1,450
Borrowings                                                                     20,200            1,000
Other liabilities                                                               3,502            3,652
------------------------------------------------------------------------------------------------------
     Total liabilities                                                        220,997          202,116
------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                     75,297           79,070
------------------------------------------------------------------------------------------------------
                                                                             $296,294         $281,186
======================================================================================================

See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial statements.
</TABLE>
                                                   1
<PAGE>

<TABLE>
<CAPTION>
                                CNY Financial Corporation and Subsidiary
                              Condensed Consolidated Statements of Income
                        Three and Nine Months Ended September 30, 1999 and 1998
                                   (In thousands, except share data)
                                              (Unaudited)

                                                          Quarter to Date             Year to Date
                                                          ---------------             ------------
                                                         1999         1998         1999         1998
-------------------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>          <C>          <C>
Interest income
     Loans                                            $    3,305   $    3,348   $    9,835   $   10,057
     Securities                                            1,752          961        4,765        2,709
     Other short-term investments                             17          133          151          324
-------------------------------------------------------------------------------------------------------
Total interest income                                      5,074        4,442       14,751       13,090
Interest expense
     Deposits                                              1,758        2,053        5,290        6,066
     Borrowings                                              208           11          290           11
-------------------------------------------------------------------------------------------------------
Total interest expense                                     1,966        2,064        5,580        6,077
-------------------------------------------------------------------------------------------------------
Net interest income                                        3,108        2,378        9,171        7,013
Provision for loan losses                                     --          100          100          250
-------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses        3,108        2,278        9,071        6,763
Non-interest income
     Service charges                                         250          157          640          561
     Net gain on sale of securities                           --           --           19           36
     Other                                                    35          660          133          743
-------------------------------------------------------------------------------------------------------
Total non-interest income                                    285          817          792        1,340
Non-interest expenses
     Salaries and employee benefits                        1,065        1,214        2,815        3,013
     Building, occupancy and equipment                       191          224          589          619
     Other                                                   836          515        2,380        1,659
-------------------------------------------------------------------------------------------------------
Total non-interest expenses                                2,092        1,953        5,784        5,291
-------------------------------------------------------------------------------------------------------
Income before income tax expense                           1,301        1,142        4,079        2,812
Income tax expense                                           561          576        1,697        1,192
-------------------------------------------------------------------------------------------------------
Net income                                            $      740   $      566   $    2,382   $    1,620
=======================================================================================================
Basic earnings per share                              $     0.17          N/A   $     0.52          N/A
Diluted earnings per share                            $     0.16          N/A   $     0.52          N/A
Weighted average diluted shares outstanding            4,535,104          N/A    4,606,462          N/A
=======================================================================================================

See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial statements.
</TABLE>
                                                   2
<PAGE>


<TABLE>
<CAPTION>
                                              CNY Financial Corporation and Subsidiary
                         Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income
                                                Nine Months Ended September 30, 1999
                                                            (Unaudited)
                                                 (In thousands, except share data)

                                                                             Accumulated                        Unearned
                                                      Additional                Other               Unallocated  Common
                                            Common      Paid-in   Retained  Comprehensive  Treasury    ESOP       Stock
                                            Stock       Capital   Earnings      Income       Stock    Shares     For PRRP   Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>        <C>          <C>         <C>       <C>         <C>       <C>
Balance at December 31, 1998               $     54    $ 51,289   $ 31,848     $  1,178    $ (1,067) $ (4,232)   $     --  $ 79,070
Treasury stock purchased (376,474
     shares)                                     --          --         --           --      (4,279)       --          --    (4,279)
ESOP shares released for allocation              --          37         --           --          --       160          --       197
Stock awarded under Personal Recognition
    and Retention Plan  (PRRP)
    (181,278 shares)                             --          30         --           --       2,175        --      (2,205)       --
Expense of PRRP                                  --          --         --           --          --        --         173       173
Dividend payments                                --          --       (794)          --          --        --          --      (794)
Comprehensive income:
   Change in net unrealized gain
      (loss) on securities, net of tax           --          --         --       (1,452)         --        --          --    (1,452)
   Net income                                    --          --      2,382           --          --        --          --     2,382
-----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income                       --          --      2,382       (1,452)         --        --          --       930
-----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999              $     54    $ 51,356   $ 33,436     $   (274)   $ (3,171) $ (4,072)   $ (2,032) $ 75,297
===================================================================================================================================

See accompanying notes to the unaudited condensed consolidated financial statements.
</TABLE>
                                                                 3
<PAGE>

<TABLE>
<CAPTION>
                               CNY Financial Corporation and Subsidiary
                            Condensed Consolidated Statements of Cash Flows
                             Nine Months Ended September 30, 1999 and 1998
                                            (In thousands)
                                              (Unaudited)

                                                                                  Year to Date
------------------------------------------------------------------------------------------------------
                                                                             1999               1998
------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES                                   $  3,479          $  4,781

CASH  FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from maturities and principle reductions of
          available-for-sale securities                                       48,518            13,161
     Purchase of securities available-for-sale                               (71,860)          (33,944)
     Purchase of held-to-maturity securities                                      --            (2,483)
     Proceeds from maturities and principle reductions of held-to-
          maturity securities                                                  2,914             3,440
     Purchase of FHLB stock                                                     (334)              (12)
     Net increase in loans                                                    (4,481)           (4,183)
     Proceeds from sale of real estate owned                                      80             1,003
     Premises and equipment expenditures                                        (155)             (158)
------------------------------------------------------------------------------------------------------
 Net cash used in investing activities                                       (25,318)          (23,176)
------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Increase in deposits                                                        399            42,002
     Decrease in advance payments by borrowers for property taxes and
          Insurance                                                             (568)             (576)
     Net increase in Federal Home Loan Bank advances                          19,200             1,000
     Cash dividends on common stock                                             (866)               --
     Treasury stock purchased                                                 (4,765)               --
------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                     13,400            42,426
------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                          (8,439)           24,031
Cash and cash equivalents at beginning of period                              14,536             8,079
------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $  6,097          $ 32,110
======================================================================================================

See accompanying notes to the unaudited condensed consolidated financial statements.
</TABLE>
                                                  4
<PAGE>


                    CNY Financial Corporation and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements


NOTE 1:  BASIS OF PRESENTATION

         The financial  information of CNY Financial  Corporation and subsidiary
         (the Company) included herein is unaudited;  however,  such information
         reflects all adjustments  (consisting of normal recurring  adjustments)
         which are, in the opinion of management, necessary for a fair statement
         of results for the interim  periods.  The results of the interim period
         ended September 30, 1999 are not necessarily  indicative of the results
         expected for the year ended December 31, 1999.

         The data in the condensed  consolidated  balance sheet for December 31,
         1998 was derived from the Company's 1998 Annual Report to Shareholders.
         That data, along with the other interim financial information presented
         in the condensed consolidated balance sheets, statements of income, and
         statements  of  cash  flows  should  be read in  conjunction  with  the
         consolidated   financial  statements,   including  the  notes  thereto,
         contained in the 1998 Annual Report to Shareholders.

NOTE 2:  EARNINGS PER SHARE

         Basic earnings per share is calculated by dividing net income available
         to  common  shareholders  by the  weighted  average  number  of  shares
         outstanding  during  the  period.  Prior to the  conversion  to a stock
         savings bank on October 6, 1998,  earnings per share are not applicable
         as the  mutual  savings  bank had no  shares  outstanding.  Unallocated
         shares held by the  Company's  ESOP are not  included  in the  weighted
         average number of shares  outstanding.  The following table  summarizes
         the computation of earnings per share for the period indicated:

<TABLE>
<CAPTION>
                                                   Three months ended                     Nine months ended
                                                   September 30, 1999                     September 30, 1999
                                       --------------------------------------------------------------------------------
                                         Income         Shares        Per-Share    Income         Shares      Per-Share
                                       (Numerator)  (Denominator)       Amount   (Numerator)  (Denominator)     Amount
                                       --------------------------------------------------------------------------------
                                                              (In thousands, except per share amounts)
         BASIC EPS
         <S>                            <C>              <C>           <C>        <C>             <C>          <C>
              Net income                $   740          4,467         $   0.17   $   2,382       4,593        $   0.52
         EFFECT OF DILUTIVE SECURITIES
              Options                                       50                                       10
              Unearned stock grants                         18                                        3
                                        ----------------------                    ---------------------
         DILUTED EPS                    $   740          4,535         $   0.16   $   2,382       4,606        $   0.52
                                        ===============================================================================
</TABLE>
                                        5
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS. GENERAL

         CNY Financial Corporation,  a Delaware corporation incorporated in 1998
(the "Company") is a bank holding company  headquartered  in Cortland,  New York
with total assets of over $295 million at September 30, 1999. Through its wholly
owned subsidiary, Cortland Savings Bank, which was founded in 1866 (the "Bank"),
the  Company  engages  in  full  service  community  banking.  The  Bank is also
headquartered  in  Cortland,  New York,  and has three full  service  offices in
Cortland County, and a loan production office in Ithaca, Tompkins County.

         The  Company  provides   community  banking   services,   primarily  to
individuals  and  small-to-medium-sized  businesses,  in Cortland County and the
neighboring counties.  These services include traditional  checking,  NOW, money
market,  savings and time deposit accounts. The Company offers home equity, home
mortgage,  commercial real estate,  commercial and consumer loans,  safe deposit
facilities and other services  specially tailored to meet the needs of customers
in its target markets.

         The  Company  commenced  operations  on October 6, 1998,  when the Bank
converted from a state chartered  mutual savings bank to a state chartered stock
savings bank.  References to the business  activities,  financial  condition and
operations  of the  Company  prior to October  6, 1998 refer to the Bank,  while
references  to the  Company on or after that date refer to both the  Company and
the Bank as consolidated, unless the context indicates otherwise.

         The Bank's results of operations depend principally on its net interest
income,  which is the  difference  between  the  income  earned on its loans and
securities  and its cost of funds,  principally  interest paid on deposits.  Net
interest  income is  dependent  on the amounts  and yields of  interest  earning
assets as compared to the amounts of and rates on interest bearing  liabilities.
Net interest  income is sensitive to changes in market rates of interest and the
Company's  asset/liability  management  procedures  in coping with such changes.
Results of operations  are also  affected by the provision for loan losses,  the
volume of  non-performing  assets and the  levels of  non-interest  income,  and
non-interest expense.

         Sources  of  non-interest  income  include  categories  such as deposit
account fees and other service charges, gains on the sale of securities and fees
for  banking  services  such as safe  deposit  boxes.  The  largest  category of
non-interest  expense is  compensation  and benefits  expense.  Other  principal
categories of non-interest  expense are occupancy  expense and real estate owned
expense,  which  represents  expense in connection  with real estate acquired in
foreclosure or in satisfaction of a debt owed to the Company.

FINANCIAL CONDITION

         Total  assets at  September  30, 1999 were $296.3  million  compared to
$281.2  million at December 31,  1998.  The primary  cause of the $15.1  million
increase  was a $17.1  million  increase in  securities,  which  totaled  $115.9
million at September 30, 1999.

         The Company  repositioned  a portion of its  invested  funds in 1999 to
take  advantage of higher rates  available by extending the average  maturity of
investments.  The Company also  expanded its  investment  program to enhance net
interest  income.  The Company  concentrated  its new securities  investments in
mortgage-backed  securities which tend to have higher yields than government and
corporate debt securities.  The mortgage-backed securities had terms to maturity
of 15 to 30  years,  and were  funded  by a  reduction  in cash  and  short-term
investments of $8.4 million and an increase in borrowings.

         Borrowings  were $20.2  million and $1.0 million at September  30, 1999
and December 31, 1998, respectively. This $19.2 million increase was required to
fund the growth in assets, and the stock repurchases  discussed in the following
paragraph.

         Stockholders'  equity was $75.3  million at September 30, 1999 compared
to $79.1  million at December 31,  1998.  The primary  contributor  to this $3.8
million  decline was  completion of the  Company's  previously  announced  share
repurchase programs. 162,208 shares of the Company's common stock were purchased
through  the  end  of  January,  at  an  average  price  of  $10.53  per  share.
Additionally,  the Company  repurchased 214,266 shares in May 1999 at a price of
$12.00 per share to be used for grants under the Company's Personnel Recognition
and Retention  Plan.  As of September  30, 1999, a total of 181,278  shares have
been granted to participants in this plan. One impact of these share repurchases
has been a significant  improvement  in the Company's book value per share which
was $15.45 at September 30, 1999 compared to $15.06 at the end of 1998.

OPERATING RESULTS

         Net income was $740,000 or $0.16 per diluted common share for the three
months  ended  September  30,  1999.  These  results  compare with net income of
$566,000  for the third  quarter  of 1998,  and  reflect a  $174,000,  or 30.7%,
increase.
                                        6
<PAGE>
         For the nine months ended September 30, 1999, the Company  reported net
income of $2.4 million, or $0.52 per share compared with net income for the same
period in 1998 of $1.6 million.

NET INTEREST INCOME

         The major source of earnings  for the Company is net  interest  income.
Net interest  income for the three months ended  September 30, 1999 and 1998 was
$3.1  million and $2.4  million,  respectively.  This  $730,000  improvement  is
primarily attributable to the investment of proceeds received from the Company's
initial public offering and the investment  program  discussed  previously.  The
investment  program,  which began late in March,  has improved the Company's net
interest income, but because the investments earn interest at a rate below those
earned on the Company's  loan  portfolio,  and the  borrowings  bear interest at
rates above the  Company's  deposits,  the  Company's  net  interest  margin has
declined  since the first  quarter of 1999.  Competitive  pressures  and overall
market  interest  rates have also  continued  to put  downward  pressure  on the
Company's loan rates. The Company's  annualized yield on loans was 8.13% for the
three months ended September 30, 1999, compared with 8.44% for the third quarter
of 1998.  These  reductions  were,  however,  offset  by the  investment  of the
proceeds  received from the  conversion,  which  resulted in  improvement in the
Company's net interest margin to 4.43% for the quarter ended September 30, 1999,
compared with 4.09% for the three month period ended September 30, 1998.

         The following tables set forth the average daily balances, net interest
income and expense and average yields and rates for the Company's earning assets
and interest bearing  liabilities for the indicated  periods.  No tax-equivalent
adjustments were made.
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED SEPTEMBER 30,
                                                ---------------------------------------------------------------
                                                            1999                            1998
                                                ---------------------------------------------------------------
                                                                        AVERAGE                         AVERAGE
                                                           AVERAGE       YIELD/            AVERAGE       YIELD/
                                                INTEREST   BALANCE       COST   INTEREST   BALANCE       COST
---------------------------------------------------------------------------------------------------------------
                                                                    (Dollars in thousands)
<S>                                             <C>        <C>           <C>    <C>        <C>           <C>
Loans (1)                                       $  3,305   $161,208      8.13%  $  3,348   $157,381      8.44%
Securities (2)                                     1,752    115,540      6.02        961     63,247      6.03
Other short-term investments                          17      1,412      4.78        133     10,241      5.15
--------------------------------------------------------------------------------------------------------------
Total interest-earning assets                      5,074    278,160      7.24%     4,442    230,869      7.63%
--------------------------------------------------------------------------------------------------------------
Non-interest-earning assets                                  12,448                          13,943
--------------------------------------------------------------------------------------------------------------
Total assets                                               $290,608                        $244,812
==============================================================================================================

Savings accounts (3)                            $    382   $ 64,759      2.34%  $    500   $ 72,674      2.73%
Money market accounts                                 70      9,794      2.84         57      8,255      2.74
NOW accounts                                          34     10,751      1.25         46     10,518      1.74
Certificates of deposits                           1,272    101,593      4.97      1,450    107,102      5.37
Borrowings                                           208     13,203      6.25         11        706      6.18%
--------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities              $  1,966    200,100      3.90%  $  2,064    199,255      4.11%
Non interest-bearing liabilities                             15,413                          13,696
--------------------------------------------------------------------------------------------------------------
Total liabilities                                           215,513                         212,951
Stockholders' equity                                         75,095                          31,861
--------------------------------------------------------------------------------------------------------------
Total liabilities and equity                               $290,608                        $244,812
==============================================================================================================

Net interest income/spread                      $  3,108                 3.34%  $  2,378                 3.52%

Net earning assets/net interest margin                     $ 78,060      4.43%             $ 31,614      4.09%

Ratio of average interest-earning assets
     to average interest-bearing liabilities                   1.39x                          1.16x
==============================================================================================================
</TABLE>
(1)  Average balances include loans held for sale and non-accrual  loans, net of
     the allowance for loan losses.

(FOOTNOTES CONTINUED ON NEXT PAGE)

                                       7
<PAGE>
(FOOTNOTES CONTINUED)
(2)  Securities are included at amortized  cost,  with net  unrealized  gains or
     losses  on  securities   available-for-sale  included  as  a  component  of
     non-earning assets. Securities include Federal Home Loan Bank stock.
(3)  Includes  advance  payments  for  taxes  and  insurance   (mortgage  escrow
     deposits).
<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED SEPTEMBER 30,
                                                -----------------------------------------------------------
                                                            1999                        1998
                                                -----------------------------------------------------------
                                                                    AVERAGE                         AVERAGE
                                                           AVERAGE   YIELD/            AVERAGE       YIELD/
                                                INTEREST   BALANCE   COST   INTEREST   BALANCE       COST
-----------------------------------------------------------------------------------------------------------
                                                                 (Dollars in thousands)
<S>                                             <C>        <C>       <C>    <C>        <C>           <C>
Loans (1)                                       $   9,835  $160,463   8.19% $ 10,057   $155,748      8.63%
Securities (2)                                      4,765   106,860   5.96     2,709     59,085      6.13
Other short-term investments                          151     4,441   4.55       324      8,315      5.21
----------------------------------------------------------------------------------------------------------
Total interest-earning assets                      14,751   271,764   7.26%   13,090    223,148      7.84%
----------------------------------------------------------------------------------------------------------
Non-interest-earning assets                                  12,294                      14,160
----------------------------------------------------------------------------------------------------------
Total assets                                               $284,688                    $237,308
==========================================================================================================

Savings accounts (3)                            $   1,146  $ 64,253   2.38% $  1,436   $ 67,248      2.85%
Money market accounts                                 164     8,458   2.59       171      8,300      2.75
NOW accounts                                          100    10,757   1.24       130      9,933      1.75
Certificates of deposits                            3,880   103,250   5.02     4,329    107,513      5.38
Borrowings                                            290     6,514   5.95        11        238      6.18
----------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities              $   5,580   193,232   3.86% $  6,077    193,232      4.20%
Non interest-bearing liabilities                             14,694                      12,851
----------------------------------------------------------------------------------------------------------
Total liabilities                                           207,926                     206,083
Stockholders' equity                                         76,762                      31,225
----------------------------------------------------------------------------------------------------------
Total liabilities and equity                               $284,688                    $237,308
==========================================================================================================

Net interest income/spread                      $   9,171             3.40% $  7,013                 3.64%

Net earning assets/net interest margin                     $ 78,532   4.51%            $ 29,916      4.20%

Ratio of average interest-earning assets
     to average interest-bearing liabilities                   1.41x                       1.15x
==========================================================================================================
</TABLE>
(1)  Average balances include loans held for sale and non-accrual  loans, net of
     the allowance for loan losses.
(2)  Securities are included at amortized  cost,  with net  unrealized  gains or
     losses  on  securities   available-for-sale  included  as  a  component  of
     non-earning assets. Securities include Federal Home Loan Bank stock.
(3)  Includes  advance  payments  for  taxes  and  insurance   (mortgage  escrow
     deposits).

         The  improvement in net interest income and net interest margin for the
nine months  ended  September  30, 1999  compared  with the first nine months in
1998,  as well as the  reduction in loan rates,  are  attributed  to the factors
discussed in the quarterly results.


CHANGES IN INTEREST INCOME AND EXPENSE

         One method of analyzing net interest  income is to consider how changes
in average  balances  and  average  rates from one period to the next affect net
interest  income.  The  following  table  shows the dollar  amount of changes in
interest income and expense by major  categories of interest  earning assets and
interest bearing liabilities  attributable to changes in volume or rate or both,
for the periods indicated.

                                       8
<PAGE>
         Volume variances are computed using the change in volume  multiplied by
the previous  year's rate. Rate variances are computed using the changes in rate
multiplied  by the previous  year's  volume.  The change in interest due to both
rate and volume has been  allocated  between  the factors in  proportion  to the
relationship of the absolute dollar amounts of the change in each.
<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
                                    ----------------------------------------------------------------
                                             1999 VS. 1998                   1999 VS. 1998
                                    ----------------------------------------------------------------
                                      INCREASE (DECREASE) DUE TO:     INCREASE (DECREASE) DUE TO:
                                     VOLUME       RATE      TOTAL     VOLUME      RATE       TOTAL
----------------------------------------------------------------------------------------------------
                                                           (In thousands)
INTEREST-EARNING ASSETS:
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>
Loans                                $    80    $  (123)   $   (43)   $   298    $  (520)   $  (222)
Securities                               793         (2)       791      2,132        (76)     2,056
Other short-term investments            (107)        (9)      (116)      (136)       (37)      (173)
----------------------------------------------------------------------------------------------------
Total interest-earning assets            766       (134)       632      2,294       (633)     1,661
----------------------------------------------------------------------------------------------------

INTEREST-BEARING LIABILITIES:
Savings accounts                         (51)       (67)      (118)       (62)      (228)      (290)
Money market accounts                     11          2         13          3        (10)        (7)
NOW accounts                               1        (13)       (12)        10        (40)       (30)
Certificate of deposit                   (73)      (105)      (178)      (168)      (281)      (449)
Borrowings                               197         --        197        279         --        279
----------------------------------------------------------------------------------------------------
Total interest-bearing liabilities        85       (183)       (98)        62       (559)      (497)
----------------------------------------------------------------------------------------------------
NET CHANGE IN NET INTEREST INCOME    $   681    $   (49)   $   730    $ 2,232    $   (74)   $ 2,158
====================================================================================================
</TABLE>

         PROVISION  FOR LOAN LOSSES.  No provision  for loan losses was recorded
for the three months ended  September  30, 1999 which was $100,000 less than the
amount  recorded  in the  third  quarter  of  1998.  For the nine  months  ended
September 30, 1999 and 1998, the Company recorded a provision for loan losses of
$100,000  and $250,000  respectively.  This level of  provision  was  considered
adequate given the Company's level of non-performing loans as shown in the table
under "Lending Activities."

         NON-INTEREST EXPENSES. Non-interest expenses were $2.1 million and $2.0
million for the three months ended  September  30, 1999 and 1998,  respectively.
The  primary  contributor  to this  $139,000  increase  was an increase in other
operating expenses partially offset by a reduction in personnel expenses.

         Salaries and employee benefits expense was $1.1 million for the quarter
ended September 30, 1999, compared with $1.2 million in the same period in 1998.
The primary contributor to this $149,000 decline was $406,000 of expense in 1998
related to the estimate of the cost of the termination of the Company's  defined
benefit plan,  partially offset by $178,000 of expenses related to the Company's
ESOP and stock  compensation plan and increased  staffing in 1999,  primarily in
the lending area.

         Other  non-interest  expenses  were  $836,000 for the third  quarter of
1999,  an increase of $321,000  from the $515,000  recorded for the three months
ended  September  30, 1998.  The primary  contributors  to this  increase were a
$135,000  increase in legal and  professional  fees due to a variety of matters,
including the establishment of a real estate investment trust in 1999, and other
costs associated with being a publicly-traded company.

         Other non-interest  expenses were $2.4 million and $1.7 million for the
nine  months  ended  September  30,  1999 and 1998,  respectively.  The  primary
contributors to this $721,000  increase were the legal and professional fees and
other costs discussed  above,  and the absence of a $208,000 gain on the sale of
one ORE property recognized in 1998.

         INCOME TAXES.  Income tax expense for the quarter  ended  September 30,
1999 was $561,000 compared with $576,000 for the same period in 1998. Income tax
expense  increased  $505,000 for the first nine months of 1999 when  compared to
the  same  period  in  1998.  This  increase  is  primarily  attributed  to  the
improvement in net income before taxes.

BUSINESS OF THE COMPANY

INVESTMENT ACTIVITIES

         GENERAL. The investment policy of the Company, which is approved by the
Board of Directors,  is based upon its  asset/liability  management goals and is
designed primarily to provide  satisfactory  yields,  while maintaining adequate

                                        9
<PAGE>
liquidity, a balance of high quality, diversified investments, and minimal risk.
The  Company   generally   classifies   its  new   securities   investments   as
available-for-sale  in  order  to  maintain  flexibility  in  satisfying  future
investment and lending requirements.

         The following table sets forth certain  information with respect to the
Company's securities portfolio.
<TABLE>
<CAPTION>
                                     SEPTEMBER 30, 1999         DECEMBER 31, 1998
                                    ------------------------------------------------
                                    AMORTIZED     FAIR        AMORTIZED       FAIR
                                      COST        VALUE         COST          VALUE
------------------------------------------------------------------------------------
                                                  (In thousands)
<S>                                 <C>         <C>           <C>           <C>
SECURITIES AVAILABLE-FOR-SALE:
U.S. Treasury securities            $  5,519    $  5,535      $  8,041      $  8,136
U.S. Government agencies              13,448      13,311         4,996         5,028
Corporate debt obligations            24,568      24,458        27,649        27,822
State and municipal sub-divisions      1,865       1,822           917           927
Mortgage-backed securities            60,462      58,765        42,801        43,041
------------------------------------------------------------------------------------
Total debt securities                105,862     103,891        84,404        84,954
Equity securities                      3,094       4,610         2,072         3,483
------------------------------------------------------------------------------------
Total available-for-sale             108,956     108,501        86,476        88,437
------------------------------------------------------------------------------------
SECURITIES HELD-TO-MATURITY:
U.S. Government agencies               1,000         992         1,505         1,507
Corporate debt obligations             1,854       1,856         2,858         2,878
State and municipal sub-divisions        743         743           747           764
Mortgage-backed securities             3,790       3,746         5,208         5,255
------------------------------------------------------------------------------------
Total held-to-maturity                 7,387       7,337        10,318        10,404
------------------------------------------------------------------------------------
TOTAL SECURITIES                    $116,343    $115,838      $ 96,794      $ 98,841
====================================================================================
</TABLE>
LENDING ACTIVITIES

         The loan  portfolio is the largest  category of the Company's  interest
earning assets.

         LOAN  PORTFOLIO  COMPOSITION.   The  following  table  sets  forth  the
composition of the Company's loan portfolio in dollar amounts and in percentages
at the dates indicated.

                               SEPTEMBER 30, 1999         DECEMBER 31, 1998
                             --------------------------------------------------
                                           PERCENT                     PERCENT
                              AMOUNT       OF TOTAL     AMOUNT         OF TOTAL
-------------------------------------------------------------------------------
                                           (Dollars in thousands)
Real estate loans:
Residential                  $105,518       63.44%     $101,885          62.96%
Construction                      487        0.29           145           0.09
Home equity                     6,593        3.96         6,804           4.20
Commercial mortgages           30,303       18.22        29,224          18.06
------------------------------------------------------------------------------
Total real estate loans       142,901       85.91       138,058          85.31
------------------------------------------------------------------------------
Other loans:
Guaranteed student loans          655        0.39         1,016           0.63
Property improvement loans        699        0.42           709           0.44
Automobile loans               11,228        6.75        10,854           6.71
Other consumer loans            4,139        2.49         4,597           2.84
Commercial loans                6,709        4.03         6,588           4.07
------------------------------------------------------------------------------
Total other loans              23,430       14.09        23,764          14.69
------------------------------------------------------------------------------
Total loans                   166,331      100.00%      161,822         100.00%
Less:
Deferred loan fees, net           149                       121
Allowance for loan losses       2,445                     2,494
------------------------------------------------------------------------------
Total loans, net             $163,737                  $159,207
==============================================================================

                                       10
<PAGE>
ASSET QUALITY

         NON-PERFORMING LOANS. Non-performing loans include: (1) loans accounted
for on a non-accrual  basis;  (2) accruing loans  contractually  past due ninety
days or more as to interest or  principal  payments;  (3) loans whose terms have
been  renegotiated  to provide a reduction  or deferral of interest or principal
because of a deterioration in the financial position of the borrower.

         The  following  table  provides  certain  information  on the Company's
non-performing loans at the dates indicated.
<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,  DECEMBER 31,
                                                                  1999           1998
         --------------------------------------------------------------------------------
                                                                 (Dollars in thousands)
<S>                                                              <C>            <C>
         Non-accrual loans:
         Residential mortgages                                   $   701        $   667
         Commercial mortgages                                         31            167
         ------------------------------------------------------------------------------
         Total real estate loans                                     732            834
         Commercial loans                                             58             71
         Other loans                                                  15             15
         ------------------------------------------------------------------------------
         Total non-accrual loans                                     805            920
         Accruing loans past due 90 days or more:                     --
         Residential mortgages                                        --             --
         Commercial mortgages                                         --             --
         ------------------------------------------------------------------------------
         Total real estate loans                                      --             --
         Commercial loans                                             --             11
         Other loans                                                  10              4
         ------------------------------------------------------------------------------
         Total loans past due 90 days or more and still
              accruing                                                10             15
         ------------------------------------------------------------------------------
         Total non-performing loans                                  815            935
         Real estate owned                                           305            260
         ------------------------------------------------------------------------------
         Total non-performing assets                             $ 1,120        $ 1,195
         ==============================================================================
         Non-performing loans as a percent of total loans           0.50%          0.58%
         Non-performing assets as a percent of total assets         0.38%          0.42%
         ==============================================================================
</TABLE>
         At September 30, 1999 there were no loans other than those  included in
the table with regard to which management had information  about possible credit
problems of the borrower that caused  management to seriously  doubt the ability
of the borrower to comply with present loan repayment terms.

         ALLOWANCE FOR LOAN LOSSES.  The allowance for loan losses is maintained
at a level  considered  adequate to provide for the inherent risk of loss in the
current loan  portfolio.  The level of the allowance is based upon  management's
periodic and comprehensive  evaluation of the loan portfolio, as well as current
economic  conditions.  Reports of  examination  furnished  by state and  federal
banking  authorities  are also  considered by  management in this regard.  These
evaluations  by management  in assessing  the adequacy of the allowance  include
consideration  of past loan loss  experience,  changes in the composition of the
loan portfolio, the volume and condition of loans outstanding and current market
and economic conditions.

         The  analysis  of the  adequacy  of the  allowance  is  reported to and
reviewed by the Loan  Committee of the Board of  Directors of the Bank  monthly.
Management  believes it uses a reasonable  and prudent  methodology  to estimate
probable  losses in the loan  portfolio,  and hence  assess the  adequacy of the
allowance  for loan losses.  However,  any such  assessment is  speculative  and
future  adjustments  may be necessary if economic  conditions  or the  Company's
actual  experience  differ  substantially  from the  assumptions  upon which the
evaluation  of the  allowance  was  based.  Moreover,  future  additions  to the
allowance  may be necessary  based on changes in economic and real estate market
conditions,   new  information  regarding  existing  loans,   identification  of
additional  problem  loans  and  other  factors,  both  within  and  outside  of
management's control.

         Loans  are  charged  to the  allowance  for  loan  losses  when  deemed
uncollectible by management,  unless  sufficient  collateral exists to repay the
loan.

                                       11
<PAGE>

         Set forth in the  following  table is an analysis of the  allowance for
loan losses.

<TABLE>
<CAPTION>
                                                                       THREE MONTH ENDED     NINE MONTHS ENDED
                                                                         SEPTEMBER 30,         SEPTEMBER 30,
                                                                       ----------------------------------------
                                                                        1999       1998       1999       1998
---------------------------------------------------------------------------------------------------------------
                                                                               (Dollars in thousands)
<S>                                                                    <C>        <C>        <C>        <C>
Allowance for loan losses, beginning of period                         $ 2,567    $ 2,325    $ 2,494    $ 2,143
Provision for loan losses                                                   --        100        100        250
---------------------------------------------------------------------------------------------------------------
Charge-offs:
Real estate                                                                 90         --        119         15
Commercial                                                                  --         --         --         46
Other                                                                       60         42        114         58
---------------------------------------------------------------------------------------------------------------
Total charge-offs                                                          150         42        233        119
Recoveries:
Real estate                                                                  3          3          4         54
Commercial                                                                   9          4         15         21
Other                                                                       16         17         65         58
---------------------------------------------------------------------------------------------------------------
Total recoveries                                                            28         24         84        133
---------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries)                                               122         18        149        (14)
---------------------------------------------------------------------------------------------------------------
Allowance for loan losses, end of period                               $ 2,445    $ 2,407    $ 2,445    $ 2,407
===============================================================================================================
Allowance for loan losses as a percent of total loans                     1.47%      1.49%      1.47%      1.49%
Allowance for loan losses as a percent of non-performing loans          300.00%    209.85%    300.00%    209.85%
Ratio of net charge-offs (recoveries) to average loans outstanding        0.07%      0.01%      0.09%     (0.01)%
===============================================================================================================
</TABLE>

SOURCES OF FUNDS

         DEPOSITS.  The  Company's  primary  source  of funds is  deposits.  The
Company  offers several types of deposit  programs to its  customers,  including
passbook and statement  savings  accounts,  NOW accounts,  money market  deposit
accounts,  checking accounts and certificates of deposit. The Company's deposits
are obtained predominantly from its Cortland County market area.

        The following table sets forth deposits at the dates indicated.

                                       SEPTEMBER 30, 1999  DECEMBER 31, 1998
----------------------------------------------------------------------------
                                                    (In thousands)
Non-interest bearing demand accounts        $   13,016          $    10,780
Savings accounts                                62,094               61,820
Certificates of deposit                        100,569              104,317
Money market accounts                           10,284                7,975
NOW accounts                                    10,450               11,122
---------------------------------------------------------------------------
Total deposits                              $  196,413          $   196,014
===========================================================================

         BORROWINGS. The Company maintains an available overnight line of credit
with the  Federal  Home  Loan  Bank of New York  (FHLB)  for use in the event of
unanticipated  funding  needs  which  cannot be  satisfied  from other  sources.
Additionally, the Company may borrow term advances for the FHLB. The Company had
$20.2 million of borrowings from the FHLB at September 30, 1999.

LIQUIDITY AND CAPITAL

         SHAREHOLDERS'  EQUITY AND CAPITAL  STANDARDS.  The Company and the Bank
are subject to capital adequacy requirements  established by the federal banking
agencies.

         At September  30, 1999,  the Company and Bank met all capital  adequacy
requirements to which they were subject.

                                       12
<PAGE>
         The following is a summary of the  Company's and Bank's actual  capital
amounts  and  ratios  compared  to  the  regulatory   minimum  capital  adequacy
requirements and the FDIC requirements for classification of the Bank as a "well
capitalized"  institution under prompt corrective action provisions  (dollars in
thousands):
<TABLE>
<CAPTION>
                                                                                                       To be classified as
                                                                             Minimum capital         well capitalized under
                                                                                 adequacy               prompt corrective
                                                        Actual                 requirements             action provisions
                                               -------------------------------------------------------------------------------
                                                 Amount         Ratio        Amount       Ratio         Amount        Ratio
------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>       <C>              <C>        <C>          <C>
At September 30, 1999: TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
     Company                                    $ 78,349         46.54%    $  13,469     => 8.00%           N/A
     Bank                                         63,191         38.92        12,988     => 8.00%      $ 16,235     =>  10.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
     Company                                      75,558         44.88         6,734     => 4.00%           N/A
     Bank                                         60,468         37.24         6,494     => 4.00%         9,741     =>   6.00%
TIER 1 CAPITAL (TO AVERAGE ASSETS):
     Company                                      75,558         26.54        11,388     => 4.00%           N/A
     Bank                                       $ 60,468         22.22%    $  10,885     => 4.00%      $ 13,607     =>   5.00%
==============================================================================================================================
</TABLE>
         OPERATING INVESTING AND FINANCING ACTIVITIES.  The Company's cash flows
are composed of three  classifications:  cash flows from  operating  activities,
cash flows from investing activities,  and cash flows from financing activities.
Net cash provided by operating  activities  consists primarily of earnings.  Net
cash provided by operating  activities was $3.5 million and $4.8 million for the
nine  months  ended  September  30,  1999 and 1998,  respectively.  The  primary
contributor  to this $1.3  million  decline  was the $3.1  million  of  proceeds
received from the sale of problem  loans in the first quarter of 1998  partially
offset by costs  associated with the Company's  initial public offering in 1998.
There were no such  transactions in 1999. Net cash used in investing  activities
consists  principally  of  securities  and loan  transactions.  Net cash used in
investing  activities  was $25.3  million and $23.2  million for the nine months
ended September 30, 1999 and 1998, respectively. The primary contributor to this
$2.1 million  increase  was the  investing  activity as discussed in  "Financial
Condition." Cash flows from financing  activities consist principally of deposit
flows and  borrowing  transactions.  Net cash of $13.4  million was  provided by
financing  transactions  in the  first  nine  months  of 1999  compared  to cash
provided by  financing  activities  of $42.4  million for the nine months  ended
September 30, 1998. This $29.0 million reduction is primarily  attributed to the
deposits received as orders for the Company's initial public offering in October
1998, partially offset by the $18.2 million increase in borrowings.

YEAR 2000 CONSEQUENCES

         The  information  contained  in this  section  represents  a Year  2000
Readiness  Disclosure under the Year 2000  Information and Readiness  Disclosure
Act.

         The operations of the Company are substantially dependent upon computer
data processing for its deposit accounts, loans, and financial records and other
matters.  Many computer systems and other equipment  containing  microchips will
not operate  accurately  after  January 1, 2000.  The Company has  undertaken  a
comprehensive  review of all systems believed to create potential risks in order
to eliminate any Year 2000 operating difficulties.

         Since the end of 1998,  the  Company has  continued  the testing of its
computer  chip  reliant  systems  and has not  identified  any  major or  costly
performance deficiencies. Testing has been substantially completed.

FORWARD-LOOKING STATEMENTS

         In this Form 10-Q, the Company,  when  discussing  the future,  may use
words  like  "will  probably  result",  "are  expected  to",  "may  cause",  "is
anticipated",  "estimate",  "project",  or similar words.  These words represent
forward-looking  statements.  In  addition,  any analysis of the adequacy of the
allowance  for loan losses or the interest  rate  sensitivity  of the  Company's
assets  and  liabilities,  represent  attempts  to  predict  future  events  and
circumstances and also represent forward-looking statements.

         Many  factors  could  cause  future  results  to  differ  from  what is
anticipated in the  forward-looking  statements.  For example,  future financial
results could be affected by (i) deterioration in local,  regional,  national or

                                       13
<PAGE>


global economic  conditions which could cause an increase in loan delinquencies,
a decrease in property  values,  or a change in the housing  turnover rate; (ii)
changes  in  market  interest  rates or  changes  in the  speed at which  market
interest  rates  change;  (iii)  changes in laws and  regulations  affecting the
financial service industry;  (iv) unforeseen business risks related to Year 2000
computer systems issues; (v) changes in competition and (vi) changes in consumer
preferences.

         Please  do  not  place   unjustified  or  excessive   reliance  on  any
forward-looking  statements.  They  speak  only as of the date  made and are not
guarantees,  promises or assurances of what will happen in the future.  Remember
that  various  factors,  including  those  described  above,  could  affect  the
Company's financial  performance and could cause the Company's actual results or
circumstances  for future periods to be materially  different from what has been
anticipated or projected.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         For information concerning CNY Financial Corporation's quantitative and
qualitative disclosures about market risk, refer to Item 7A of the CNY Financial
Corporation  Annual Report on Form 10-K for the year ended  December 31, 1998 as
filed with the  Securities  and  Exchange  Commission  on March 26, 1999 and the
sections of the Annual Report to Stockholders referenced therein and included in
such report on form 10-K,  particularly  the discussion at pages 9 and 10 of the
Annual Report to Stockholders under the caption "Asset/Liability  Management and
Market Risk." There have been no material changes since December 31, 1998.


PART II


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

         CNY Financial  Corporation  had a special  meeting of  stockholders  on
October 18, 1999. At the meeting, stockholders voted upon (i) the approval of an
amendment to our Stock Option Plan to provide for accelerated  vesting of awards
in the event of a change in control or  retirement;  and (ii) the approval of an
amendment  to our  Personnel  Recognition  and  Retention  Plan to  provide  for
accelerated vesting of awards in the event of a change in control or retirement.


         The votes cast on these matters were as follows:

                     The stock option plan amendment:
                              For                              3,108,936
                              Against                            428,675
                              Abstain                             36,188
                              Broker non-votes                      None

                     The Personnel Recognition and Retention Plan amendment:
                              For                              3,073,501
                              Against                            461,615
                              Abstain                             38,683
                              Broker non-votes                      None


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Documents filed as part of this report:

         3.0      Exhibits
                  --------

                  3.1   Certificate    of    Incorporation    of   the   Company
                        (incorporated   by  reference  to  Exhibit  3.1  of  the
                        Company's   Form   S-1   Registration   Statement   (No.
                        333-57259)   filed  with  the  Securities  and  Exchange
                        Commission on June 19, 1998).

                                       14
<PAGE>


                  3.2   Bylaws of the  Company  (incorporated  by  reference  to
                        Exhibit  3.2  of the  Company's  Form  S-1  Registration
                        Statement (No.  333-57259) filed with the Securities and
                        Exchange Commission on June 19, 1998).

                 27.1   Financial Data Schedule.

(b)      Reports on Form 8-K

         None.

                                       15
<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

<TABLE>
<CAPTION>

                            CNY FINANCIAL CORP.


<S>                         <C>                                    <C>
 By: Wesley D. Stisser /s/  WESLEY D. STISSER                      October 28, 1999
                            ------------------------------------   --------------------
                            President & Chief Executive Officer           (Dated)

     Steven A. Covert  /s/  STEVEN A. COVERT                       October 28, 1999
                            ------------------------------------   --------------------
                            Executive Vice President                      (Dated)
                            & Chief Financial Officer
</TABLE>

                                       16
<PAGE>


                                Index To Exhibits


     3.1        Certificate of Incorporation of the Company*
     3.2        Bylaws of the Company*
    27.1        Financial Data Schedule


*Previously filed.