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 June 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.

The  aggregate   market  value  of  the   registrant's   voting  stock  held  by
non-affiliates of the registrant was approximately  $58.2 million as of July 27,
1999. As of July 27, 1999, the  registrant had 4,874,563  shares of Common Stock
outstanding.



<PAGE>
<TABLE>
<CAPTION>

                                                           TABLE OF CONTENTS

Part I.       FINANCIAL INFORMATION
<S>               <C>                                                                                                 <C>
         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 Statement................................    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 6.  (a)      Exhibits................................................................................   14
                  (b)      Reports of Form 8-K.....................................................................   14
                           None

         Form 10-Q Signature Page..................................................................................   15
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                  CNY Financial Corporation and Subsidiary
                                    Condensed Consolidated Balance Sheet
                                               (In thousands)


                                                                                    June 30,    December 31,
                                                                                      1999         1998
-----------------------------------------------------------------------------------------------------------
<S>                                                                             <C>            <C>
ASSETS                                                                             (UNAUDITED)
Cash and due from banks                                                         $      5,614   $      4,432
Interest-bearing balances at financial institutions and federal funds sold                --         10,104
Securities available-for-sale, at fair value                                         106,811         88,437
Securities held-to-maturity (fair value of $7,593 at 1999 and $10,404
     at 1998)                                                                          7,643         10,318
Loans, net of deferred fees                                                          162,279        161,701
Less allowance for loan losses                                                         2,567          2,494
-----------------------------------------------------------------------------------------------------------
     Net loans                                                                       159,712        159,207
Premises and equipment, net                                                            2,803          3,243
Federal Home Loan Bank stock, at cost                                                  1,637          1,303
Other assets                                                                           5,887          4,142
-----------------------------------------------------------------------------------------------------------
                                                                                $    290,107   $    281,186
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
     Non-interest bearing demand accounts                                       $     11,758   $     10,780
     Interest bearing deposits                                                       185,473        185,234
-----------------------------------------------------------------------------------------------------------
Total deposits                                                                       197,231        196,014
Advance payments by borrowers for property taxes and insurance                         1,350          1,450
Borrowings                                                                            13,000          1,000
Other liabilities                                                                      3,154          3,652
-----------------------------------------------------------------------------------------------------------
     Total liabilities                                                               214,735        202,116
-----------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                            75,372         79,070
-----------------------------------------------------------------------------------------------------------
                                                                                $    290,107   $    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 Six Months Ended June 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                                                   $     3,242       $    3,332        $    6,530        $   6,709
     Securities                                                    1,569              900             3,013            1,748
     Other short-term investments                                     50              105               134              191
----------------------------------------------------------------------------------------------------------------------------
Total interest income                                              4,861            4,337             9,677            8,648
Interest expense
     Deposits                                                      1,757            2,003             3,532            4,013
     Borrowings                                                       65               --                82               --
----------------------------------------------------------------------------------------------------------------------------
Total interest expense                                             1,822            2,003             3,614            4,013
----------------------------------------------------------------------------------------------------------------------------
Net interest income                                                3,039            2,334             6,063            4,635
Provision for loan losses                                             25               75               100              150
----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses                3,014            2,259             5,963            4,485
Non-interest income
     Service charges                                                 219              218               390              404
     Net gain on sale of securities                                   19               30                19               36
     Other                                                            53               30                98               83
----------------------------------------------------------------------------------------------------------------------------
Total non-interest income                                            291              278               507              523
Non-interest expenses
     Salaries and employee benefits                                  822              960             1,750            1,772
     Building, occupancy and equipment                               176              126               398              340
     Other                                                           864              607             1,544            1,226
----------------------------------------------------------------------------------------------------------------------------
Total non-interest expenses                                        1,862            1,693             3,692            3,338
----------------------------------------------------------------------------------------------------------------------------
Income before income tax expense                                   1,443              844             2,778            1,670
Income tax expense                                                   550              283             1,136              616
----------------------------------------------------------------------------------------------------------------------------
Net income                                                   $       893       $      561        $    1,642        $   1,054
============================================================================================================================
Basic and diluted earnings per share                         $      0.19              N/A        $     0.35              N/A
============================================================================================================================
Weighted average basic shares outstanding                      4,579,831              N/A         4,650,741              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
                                                   Six Months Ended June 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 (207,196 shares)        --       --         --         --     (2,248)        --         --      (2,248)
ESOP shares released for allocation              --       16         --         --         --        107         --         123
Stock purchased and awarded under
    Personal Recognition and Retention Plan
    (PRRP)  (169,278 shares)                     --       --         --         --         --         --     (2,031)     (2,031)
Expense of PRRP                                  --       --         --         --         --         --         69          69
Dividend payments                                --       --       (459)        --         --         --         --        (459)
Comprehensive income:
   Change in net unrealized gain
      (loss) on securities, net of tax           --       --         --       (794)        --         --         --        (794)
   Net income                                    --       --      1,642         --         --         --         --       1,642
--------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income                       --       --      1,642       (794)        --         --         --         848
--------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999                     $   54  $51,305   $ 33,031    $   384    $(3,315)   $(4,125)   $(1,962)   $ 75,372
================================================================================================================================

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
                                 Six Months Ended June 30, 1999 and 1998
                                              (In thousands)
                                               (Unaudited)

                                                                                  Year to Date
----------------------------------------------------------------------------------------------------
                                                                                 1999         1998
----------------------------------------------------------------------------------------------------
<S>                                                                         <C>           <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES                                   $        929  $    4,252

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from maturities and principle reductions of available-for-
          sale securities                                                         41,219      12,664
     Purchase of securities available-for-sale                                   (60,611)    (14,697)
     Proceeds from maturities and principle reductions of held-to-
          maturity securities                                                      2,676          71
     Purchase of FHLB stock                                                         (334)        (12)
     Net increase in loans                                                          (578)     (1,403)
     Proceeds from sale of real estate owned                                          48         850
     Premises and equipment expenditures                                            (141)       (162)
----------------------------------------------------------------------------------------------------
 Net cash used in investing activities                                           (17,721)     (2,689)
----------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Increase in deposits                                                          1,217       2,181
     Decrease in advance payments by borrowers for property taxes and
          Insurance                                                                 (100)        (16)
     Net increase in Federal Home Loan Bank advances                              12,000          --
     Cash dividends on common stock                                                 (459)         --
     Treasury stock purchased                                                     (2,704)         --
     Stock purchased for PRRP plan                                                (2,031)         --
     Repayment of ESOP loan                                                          (53)         --
----------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                          7,870       2,165
----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                              (8,922)      3,728
Cash and cash equivalents at beginning of period                                  14,536       8,079
----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $      5,614  $   11,807
====================================================================================================

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 June
                  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                         Six months ended
                                                             June 30, 1999                             June 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                 $   893          4,580         $   0.19   $   1,642       4,651        $   0.35
                EFFECT OF DILUTIVE SECURITIES
                     Options                                         4                                       --
                     Unearned stock grants                           1                                       --
                                                ------------------------------             ------------ -------------
                DILUTED EPS                     $   893          4,585         $   0.19   $   1,642       4,651        $   0.35
                                                =================================================================================
</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 $290  million at June 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 result 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 June 30, 1999 were $290.1  million  compared to $281.2
million at December 31, 1998. The primary cause of the $8.9 million increase was
a $15.7 million increase in securities, which totaled $114.5 million at June 30,
1999.

         The Company  repositioned  a portion of its invested funds in the first
half of 1999 to take  advantage  of higher  rates  available  by  extending  the
average  maturity of investments and 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 $8.9 million and an increase in borrowings.  The Company  expects
to increase its securities portfolio through further purchases of $10 million to
$15 million of mortgage-backed securities.

         Borrowings  were $13.0  million  and $1.0  million at June 30, 1999 and
December 31, 1998,  respectively.  This $12.0  million  increase was required to
fund the growth in assets, and the stock repurchases  discussed in the following
paragraph.  Additional  borrowings  may be  required  to support  the  investing
activities discussed above.

         Stockholders'  equity was $75.4  million at June 30,  1999  compared to
$79.1 million at December 31, 1998. The primary contributor to this $3.7 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 June 30, 1999, a total of 169,278 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 $15.46 at June 30,
1999 compared to $15.06 at the end of 1998.

                                       6
<PAGE>
OPERATING RESULTS

         Net income was  $893,000 or $0.19 per common share for the three months
ended June 30, 1999.  These results  compare with net income of $561,000 for the
second quarter of 1998, and reflect a $332,000, or 59.2%, increase.

         For the six months ended June 30, 1999, the Company reported net income
of $1.6 million, or $0.35 per share compared with net income for the same period
in 1998 of $1.1 million.

NET INTEREST INCOME

         The major source of earnings  for the Company is net  interest  income.
Net  interest  income for the three months ended June 30, 1999 and 1998 was $3.0
million and $2.3 million,  respectively.  This $755,000 improvement is primarily
attributable  to the  investment  of  proceeds  received  from  the  conversion.
Competitive  pressures  and  overall  market  interest  rates  continued  to put
downward pressure on the Company's loan rates, however. The Company's annualized
yield on loans was 8.20% for the three months ended June 30, 1999, compared with
8.63% for the second quarter of 1998. This reduction was, however, offset by the
investment  of the proceeds  received  from the  conversion,  which  resulted in
improvement in the Company's net interest  margin to 4.54% for the quarter ended
June 30,  1999,  compared  with 4.22% for the three month  period ended June 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 JUNE 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)                                     $   3,242      $  158,522      8.20%     $   3,332      $ 154,795       8.63%
Securities (2)                                    1,569         105,614      5.96            900         58,885       6.13
Other short-term investments                         50           4,407      4.55            105          8,019       5.25
--------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                     4,861         268,543      7.26%         4,337        221,699       7.85%
--------------------------------------------------------------------------------------------------------------------------
Non-interest-earning assets                                      15,634                                  13,070
--------------------------------------------------------------------------------------------------------------------------
Total assets                                                 $  284,177                               $ 234,769
==========================================================================================================================

Savings accounts (3)                          $     386      $   64,309      2.41%     $     462      $  65,376       2.83%
Money market accounts                                47           7,413      2.54             57          8,263       2.77
NOW accounts                                         34          10,831      1.26             44          9,913       1.78
Certificates of deposits                          1,290         102,971      5.02          1,440        107,380       5.38
Borrowings                                           65           4,951      5.27             --             --         --
--------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities            $   1,822         190,475      3.84%     $   2,003        190,932       4.21%
Non interest-bearing liabilities                                 17,247                                  12,594
--------------------------------------------------------------------------------------------------------------------------
Total liabilities                                               207,722                                 203,526
Stockholders' equity                                             76,455                                  31,243
--------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity                                 $  284,177                               $ 234,769
==========================================================================================================================

Net interest income/spread                    $   3,039                      3.42%     $   2,334                      3.64%

Net earning assets/net interest margin                      $    78,068      4.54%                    $  30,767       4.22%

Ratio of average interest-earning assets
     to average interest-bearing liabilities                       1.41x                                   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>
                                                                         SIX MONTHS ENDED JUNE 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)                                     $   6,530      $ 159,163       8.27%     $   6,709       $154,919       8.73%
Securities (2)                                    3,013        101,810       5.97          1,748         56,879       6.20
Other short-term investments                        134          5,973       4.52            191          7,336       5.25
--------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                     9,677        266,946       7.31%         8,648        219,134       7.96%
--------------------------------------------------------------------------------------------------------------------------
Non-interest-earning assets                                     13,703                                   14,350
--------------------------------------------------------------------------------------------------------------------------
Total assets                                                 $ 280,649                                 $233,484
==========================================================================================================================

Savings accounts (3)                          $     764      $  63,635       2.42%     $     936       $ 64,276       2.94%
Money market accounts                                94          7,679       2.47            114          8,324       2.76
NOW accounts                                         66         10,701       1.24             84          9,636       1.76
Certificates of deposits                          2,608        103,531       5.08          2,879        107,722       5.39
Borrowings                                           82          3,041       5.44             --             --         --
--------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities            $   3,614        188,587       3.86%     $   4,013        189,958       4.26%
Non interest-bearing liabilities                                14,895                                   12,627
--------------------------------------------------------------------------------------------------------------------------
Total liabilities                                              203,482                                  202,585
Stockholders' equity                                            77,167                                   30,899
--------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity                                 $ 280,649                                 $233,484
==========================================================================================================================

Net interest income/spread                    $   6,063                      3.45%     $   4,635                      3.70%

Net earning assets/net interest margin                       $  78,359       4.58%                     $ 29,176       4.27%

Ratio of average interest-earning assets
     to average interest-bearing liabilities                      1.42x                                    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
six months ended June 30, 1999  compared  with the first six 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 JUNE 30,                SIX MONTHS ENDED JUNE 30,
                                        ----------------------------------------------------------------------------------
                                                      1999 VS. 1998                             1999 VS. 1998
                                        ----------------------------------------------------------------------------------
                                              INCREASE (DECREASE) DUE TO:                INCREASE (DECREASE) DUE TO:
                                          VOLUME         RATE          TOTAL          VOLUME         RATE          TOTAL
--------------------------------------------------------------------------------------------------------------------------
                                                                       (In thousands)
<S>                                     <C>            <C>           <C>            <C>           <C>            <C>
INTEREST-EARNING ASSETS:
Loans                                   $      79      $   (169)     $     (90)     $      181    $    (360)     $    (179)
Securities                                    695           (26)           669           1,332          (67)         1,265
Other short-term investments                  (42)          (13)           (55)            (33)         (24)           (57)
--------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                 732          (208)           524           1,480         (451)         1,029
--------------------------------------------------------------------------------------------------------------------------

INTEREST-BEARING LIABILITIES:
Savings accounts                               (8)          (68)           (76)             (9)        (163)          (172)
Money market accounts                          (5)           (5)           (10)             (9)         (11)           (20)
NOW accounts                                    4           (14)           (10)              8          (26)           (18)
Certificate of deposit                        (57)          (93)          (150)           (110)        (161)          (271)
Borrowings                                     65            --             65              82           --             82
--------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities             (1)         (180)          (181)            (38)        (361)          (399)
--------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN NET INTEREST INCOME       $     733     $     (28)     $     705      $    1,518    $     (90)     $   1,428
==========================================================================================================================
</TABLE>

         PROVISION  FOR LOAN LOSSES.  The  provision for loan losses was $25,000
for the three  months  ended June 30, 1999 and was $50,000  less than the amount
recorded in the second  quarter of 1998.  For the six months ended June 30, 1999
and 1998,  the  Company  recorded a provision  for loan  losses of $100,000  and
$150,000 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."

         OTHER OPERATING EXPENSE. Non-interest expense was $1.9 million and $1.7
million for the three  months  ended June 30, 1999 and 1998,  respectively.  The
primary contributor to this $169,000 increase was an increase in other operating
expenses partially offset by a reduction in personnel expenses.

         The  $138,000  decline in salaries and  employee  benefits  expense was
primarily  attributable to the recognition of a $140,000  benefit related to the
Company's  curtailment  of its  post-retirement  health  care plan in June.  The
modification to the plan was undertaken to eliminate  possible future  increases
in the cost of this employee benefit.

         Other  non-interest  expenses were  $864,000 for the second  quarter of
1999,  an increase of $257,000  from the $607,000  recorded for the three months
ended June 30, 1998. The primary  contributors  to this increase were a $209,000
gain on the sale of a piece of other real estate  owned in 1998,  which  reduced
the 1998 expenses, and a $123,000 increase in legal and professional fees due to
a variety of matters,  including the  establishment of a real estate  investment
trust in 1999,  the holding of our first  annual  meeting of  shareholders,  and
other  costs  associated  with being a  publicly-traded  company.  The  $354,000
increase in other operating  expenses for the six months ended June 30,1999 when
compared  with the first six  months of 1998  reflects  the  impact of the items
discussed under the quarterly results.

         INCOME  TAXES.  Income tax expense for the quarter  ended June 30, 1999
was $550,000 compared with $283,000 for the same period in 1998,  representing a
$267,000  increase.  Income tax  expense  increased  $520,000  for the first six
months of 1999 when  compared to the same period in 1998.  These  increases  are
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
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.

                                        9
<PAGE>


        The following table sets forth certain  information  with respect to the
Company's securities portfolio.

<TABLE>
<CAPTION>
                                                       JUNE 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                     $   6,524             $    6,562          $     8,041            $    8,136
U.S. Government agencies                        11,986                 11,889                4,996                 5,028
Corporate debt obligations                      25,073                 24,989               27,649                27,822
State and municipal sub-divisions                1,363                  1,331                  917                   927
Mortgage-backed securities                      58,433                 57,655               42,801                43,041
------------------------------------------------------------------------------------------------------------------------
Total debt securities                          103,379                102,426               84,404                84,954
Equity securities                                2,795                  4,385                2,072                 3,483
------------------------------------------------------------------------------------------------------------------------
Total available-for-sale                       106,174                106,811               86,476                88,437
------------------------------------------------------------------------------------------------------------------------
SECURITIES HELD-TO-MATURITY:
U.S. Government agencies                         1,005                    996                1,505                 1,507
Corporate debt obligations                       1,854                  1,857                2,858                 2,878
State and municipal sub-divisions                  744                    745                  747                   764
Mortgage-backed securities                       4,040                  3,995                5,208                 5,255
------------------------------------------------------------------------------------------------------------------------
Total held-to-maturity                           7,643                  7,593               10,318                10,404
------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES                             $ 113,817             $  114,404          $    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.

<TABLE>
<CAPTION>
                                                      JUNE 30, 1999                         DECEMBER 31, 1998
                                             ------------------------------------------------------------------------
                                                                     PERCENT                                  PERCENT
                                               AMOUNT                OF TOTAL             AMOUNT             OF TOTAL
---------------------------------------------------------------------------------------------------------------------
                                                                       (Dollars in thousands)
<S>                                          <C>                       <C>               <C>                    <C>
Real estate loans:
Residential                                  $ 102,663                 63.21%            $101,885               62.96%
Construction                                       489                  0.30                  145                0.09
Home equity                                      6,572                  4.05                6,804                4.20
Commercial mortgages                            29,192                 17.97               29,224               18.06
---------------------------------------------------------------------------------------------------------------------
Total real estate loans                        138,916                 85.53              138,058               85.31
---------------------------------------------------------------------------------------------------------------------
Other loans:
Guaranteed student loans                         1,190                  0.73                1,016                0.63
Property improvement loans                         664                  0.41                  709                0.44
Automobile loans                                10,742                  6.61               10,854                6.71
Other consumer loans                             4,124                  2.54                4,597                2.84
Commercial loans                                 6,785                  4.18                6,588                4.07
---------------------------------------------------------------------------------------------------------------------
Total other loans                               23,505                 14.47               23,764               14.69
---------------------------------------------------------------------------------------------------------------------
Total loans                                    162,421                100.00%             161,822              100.00%
Less:
Deferred loan fees, net                            142                                        121
Allowance for loan losses                        2,567                                      2,494
---------------------------------------------------------------------------------------------------------------------
Total loans, net                             $ 159,712                                   $159,207
=====================================================================================================================
</TABLE>

                                                          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>
                                                                 JUNE 30,          DECEMBER 31,
                                                                   1999               1998
       ----------------------------------------------------------------------------------------
                                                                    (Dollars in thousands)
<S>                                                                   <C>                 <C>
       Non-accrual loans:
       Residential mortgages                                     $    840             $   667
       Commercial mortgages                                           164                 167
       --------------------------------------------------------------------------------------
       Total real estate loans                                      1,004                 834
       Commercial loans                                                62                  71
       Other loans                                                     72                  15
       --------------------------------------------------------------------------------------
       Total non-accrual loans                                      1,138                 920
       Accruing loans past due 90 days or more:                        --
       Residential mortgages                                           --                  --
       Commercial mortgages                                            --                  --
       --------------------------------------------------------------------------------------
       Total real estate loans                                         --                  --
       Commercial loans                                                --                  11
       Other loans                                                      6                   4
       --------------------------------------------------------------------------------------
       Total loans past due 90 days or more and still
            accruing                                                    6                  15
       --------------------------------------------------------------------------------------
       Total non-performing loans                                   1,144                 935
       Real estate owned                                              315                 260
       --------------------------------------------------------------------------------------
       Total non-performing assets                                $ 1,459             $ 1,195
       ======================================================================================
       Non-performing loans as a percent of total loans              0.70%               0.58%
       Non-performing assets as a percent of total assets            0.50%               0.42%
       ======================================================================================
</TABLE>

        At June 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              SIX MONTHS ENDED
                                                                             JUNE 30,                      JUNE 30,
                                                                     -----------------------------------------------------
                                                                       1999            1998           1999          1998
--------------------------------------------------------------------------------------------------------------------------
                                                                                      (Dollars in thousands)
<S>                                                                  <C>             <C>            <C>          <C>
Allowance for loan losses, beginning of period                       $   2,569       $   2,230      $  2,494     $   2,143
Provision for loan losses                                                   25              75           100           150
--------------------------------------------------------------------------------------------------------------------------
Charge-offs:
Real estate                                                                 29              15            29            15
Commercial                                                                  --              23            --            46
Other                                                                       33              26            54            42
--------------------------------------------------------------------------------------------------------------------------
Total charge-offs                                                           62              64            83           103
Recoveries:
Real estate                                                                 --              28             1            51
Commercial                                                                   3               8             6            17
Other                                                                       32              48            49            67
--------------------------------------------------------------------------------------------------------------------------
Total recoveries                                                            35              84            56           135
--------------------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries)                                                27             (20)           27           (32)
--------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses, end of period                             $   2,567       $   2,325      $  2,567     $   2,325
==========================================================================================================================
Allowance for loan losses as a percent of total loans                     1.58%           1.46 %       1.58%          1.46 %
Allowance for loan losses as a percent of non-performing loans          224.39%         186.90 %     224.39%        186.90 %
Ratio of net charge-offs (recoveries) to average loans outstanding        0.02%          (0.01)%       0.02%         (0.02)%
==========================================================================================================================
</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.

                                       JUNE 30, 1999          DECEMBER 31, 1998
-------------------------------------------------------------------------------
                                                   (In thousands)
Non-interest bearing demand accounts      $  11,758                $   10,780
Savings accounts                             63,117                    61,820
Certificates of deposit                     103,848                   104,317
Money market accounts                         7,991                     7,975
NOW accounts                                 10,517                    11,122
-----------------------------------------------------------------------------
Total deposits                            $ 197,231                $  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
$13 million of borrowings from the FHLB at June 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 June  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 June 30, 1999:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
     Company                                    $ 77,601         47.76%    $  12,999     => 8.00%           N/A
     Bank                                         62,355         39.71        12,563     => 8.00%      $ 15,704     =>10.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
     Company                                      74,905         46.15         6,500     => 4.00%           N/A
     Bank                                         59,632         37.97         6,282     => 4.00%         9,423     => 6.00%
TIER 1 CAPITAL (TO AVERAGE ASSETS):
     Company                                      74,905         26.69        11,226     => 4.00%           N/A
     Bank                                       $ 59,632         22.21%    $  10,740     => 4.00%      $ 13,424     => 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 $929,000 and $4.3 million for the six
months ended June 30, 1999 and 1998,  respectively.  The primary  contributor to
this $3.3  million  decline was the $3.1 million of proceeds  received  from the
sale  of  problem  loans  in the  first  quarter  of  1998.  There  was no  such
transaction in 1999. Net cash used in investing  activities consists principally
of securities and loan transactions.  Net cash used in investing  activities was
$17.7  million and $2.7 million for the six months ended June 30, 1999 and 1998,
respectively.  The primary  contributor  to this $15.0 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 $7.9 million was provided by financing transactions in
the first six months of 1999 compared to cash  provided by financing  activities
of $2.2 million for the six months ended June 30, 1998. This $5.7 million change
is primarily  attributed  to the $12.0  million  borrowing  partially  offset by
treasury stock and stock grant plan purchases of $3.7 million, all as previously
discussed.

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 will continue through 1999.

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
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)

                                       13
<PAGE>

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 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).

              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.

                                       14
<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.


                          CNY FINANCIAL CORP.


By: Wesley D. Stisser /s/ WESLEY D. STISSER                     August 6, 1999
                      --------------------------------------- ------------------
                          President & Chief Executive Officer       (Dated)


    Steven A. Covert  /s/ STEVEN A. COVERT                      August 6, 1999
                      --------------------------------------- ------------------
                          Executive Vice President                   (Dated)
                          & Chief Financial Officer

                                       15
<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.