<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the Fiscal Year Ended December 31, 2001

                                       OR

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

  For the transaction period from                     to
                                  -------------------    ----------------------

                        Commission File Number: 000-23601

                            PATHFINDER BANCORP, INC.
            ---------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                                                                 <C>
                            Federal                                               16-1540137
--------------------------------------------------------------      --------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)      (I.R.S. Employer Identification Number)

          214 West First Street, Oswego, NY                                         13126
      -----------------------------------------                                  ------------
       (Address of Principal Executive Office)                                    (Zip Code)
</TABLE>

                                 (315) 343-0057
               ---------------------------------------------------
               (Registrant's Telephone Number including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None
                                      ----

           Securities Registered Pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
               ---------------------------------------------------
                                (Title of Class)

     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 twelve months (or for such shorter period that the
Registrant was required to file reports) and (2) has been subject to such
requirements for the past 90 days.
YES   X      NO
     ---    ----

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]

     As of February 28, 2002, there were 2,894,220 shares issued and 2,600,995
shares outstanding of the Registrant's Common Stock. The aggregate value of the
voting stock held by non-affiliates of the Registrant, computed by reference to
the average bid and asked prices of the Common Stock as of February 28, 2002
($13.20) was $9,271,667.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Sections of Annual Report to Stockholders for the fiscal year ended
     December 31, 2001 (Parts II and IV).
2.   Proxy Statement for the 2002 Annual Meeting of Stockholders (Parts I and
     III).

<PAGE>


                                     PART I
                                     ------

ITEM 1. Business
----------------

General

Pathfinder Bancorp, Inc.

     Pathfinder Bancorp, Inc. (the "Company") is a Federal corporation. On June
19, 2001, the Company completed its conversion from a Delaware chartered company
to a federal charter. As a result of the charter conversion the Company's
chartering authority and primary federal regulator is the Office of Thrift
Supervision. References to the Company include the Company before or after the
charter conversion. The only significant asset of the Company is its investment
in Pathfinder Bank (the "Bank"). The Company is majority owned by Pathfinder
Bancorp, MHC, a Federal-chartered mutual holding company (the "Mutual Holding
Company"). On December 30, 1997 the Company acquired all of the issued and
outstanding common stock of the Bank in connection with the Bank's
reorganization into the two-tier form of mutual holding company ownership. At
that time, each share of outstanding Bank common stock was automatically
converted into one share of Company common stock, par value $.10 per share (the
"Common Stock"). Upon completion of the charter conversion, the outstanding
shares of common stock, par value $.10 per share became, by operation of law,
common stock, par value of $.01 per share of the Company on a one-for-one basis.
At February 28, 2002 the Mutual Holding Company held 1,583,239 shares of Common
Stock and the public held 1,017,756 shares of Common Stock (the "Minority
Shareholders").

     The Company's executive office is located at 214 West First Street, Oswego,
New York and the telephone number at that address is (315) 343-0057.

Pathfinder Bank

     The Bank is a New York-chartered savings bank headquartered in Oswego, New
York. The Bank has five full-service offices located in its market area
consisting of Oswego County and the contiguous counties. The Bank's deposits are
insured by the Federal Deposit Insurance Corporation ("FDIC"). The Bank was
chartered as a New York savings bank in 1859 as Oswego City Savings Bank. The
Bank is a consumer-oriented institution dedicated to providing mortgage loans
and other traditional financial services to its customers. The Bank is committed
to meeting the financial needs of its customers in Oswego County, New York, the
county in which it operates. At December 31, 2001, the Bank had total assets of
$244.4 million, total deposits of $169.6 million, and shareholders' equity of
$22.2 million.

     The Bank is primarily engaged in the business of attracting deposits from
the general public in the Bank's market area, and investing such deposits,
together with other sources of funds, in loans secured by one- to four-family
residential real estate. At December 31, 2001, $151.0 million, or 90.4%, of the
Bank's total loan portfolio consisted of loans secured by real estate, of which
$111.2 million, or 73.7%, were loans secured by one- to four-family residences,
$29.2 million, or 19.3%, were secured by commercial real estate, $1.3 million,
or 0.9%, were secured by multi-family properties and $9.3 million, or 6.1%, of
total real estate loans, were secured by second liens on residential properties.
The Bank also originates commercial and consumer loans which totaled $14.4
million and $3.3 million, respectively, or 10.5%, of the Bank's total loan
portfolio. The Bank invests a portion of its assets in securities issued by the
United States Government, state and municipal obligations, corporate debt
securities, mutual funds, and equity securities. The Bank also invests in
mortgage-backed securities primarily issued or guaranteed by the United States
Government or agencies thereof. The Bank's principal sources of funds are
deposits, principal and interest payments on loans and borrowings from the
Federal Home Loan Bank of New York ("FHLBNY") and correspondent financial
institutions. The principal source of income is interest on loans and investment
securities. The Bank's principal expenses are interest paid on deposits, and
employee compensation and benefits.

     The Bank's executive office is located at 214 West First Street, Oswego,
New York, and its telephone number at that address is (315) 343-0057.

     In April 1999 the Bank established Pathfinder REIT, Inc. as the Bank's
wholly-owned real estate investment trust subsidiary. At December 31, 2001
Pathfinder REIT, Inc. held $27.5 million in mortgage and mortgage related

<PAGE>

assets. All disclosures in the Form 10-K relating to the Bank's loans and
investments includes loan and investments that are held by Pathfinder REIT, Inc.

Market Area and Competition

     The economy in the Bank's market area is manufacturing-oriented and is also
significantly dependent upon the State University of New York College at Oswego.
The major manufacturing employers in the Bank's market area are National Grid,
Alcan, Constellation, Nestle, NRG and Huhtamaki, a food container manufacturer.
The Bank is the second largest financial institution headquartered in Oswego
County. However, the Bank encounters competition from a variety of sources. The
Bank's business and operating results are significantly affected by the general
economic conditions prevalent in its market areas.

     The Bank encounters strong competition both in attracting deposits and in
originating real estate and other loans. Its most direct competition for
deposits has historically come from commercial and savings banks, savings
associations and credit unions in its market area. Competition for loans comes
from such financial institutions as well as mortgage banking companies. The Bank
expects continued strong competition in the foreseeable future, including
increased competition from "super-regional" banks entering the market by
purchasing large banks and savings banks. Many such institutions have greater
financial and marketing resources available to them than does the Bank. The Bank
competes for savings deposits by offering depositors a high level of personal
service and a wide range of competitively priced financial services. The Bank
competes for real estate loans primarily through the interest rates and loan
fees it charges and advertising, as well as by originating and holding in its
portfolio mortgage loans which do not necessarily conform to secondary market
underwriting standards.

Lending Activities

     Loan Portfolio Composition. The Bank's loan portfolio primarily consists of
one-to-four family mortgage loans secured by residential and investment
properties, as well as mortgage loans secured by multi-family residences and
commercial real estate. To a lesser extent the Bank's loan portfolio also
includes consumer and business loans. The Bank originates loans for retention in
its portfolio and for sale in the secondary market. During 2001, the Bank sold
approximately $14.0 million of loans in the secondary market. The loan sales
resulted in approximately $129,000 in capitalized servicing rights. At December
31, 2001, $5.3 million, or 3.0%, of the Bank's total one-to-four family real
estate portfolio consisted of loans held for sale. In recent years, the Bank has
not purchased loans originated by other lenders.

                                       2

<PAGE>

     Analysis of Loan Portfolio. The following table sets forth the composition
of the Bank's loan portfolio in dollar amounts and in percentages of the
portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                  ------------------------------------------------------------
                                                         2001                 2000                 1999
                                                  ------------------   ------------------   ------------------
                                                   Amount    Percent    Amount    Percent    Amount    Percent
                                                  --------   -------   --------   -------   --------   -------
                                                                    (Dollars in Thousands)
<S>                                               <C>         <C>      <C>         <C>      <C>         <C>
Real estate loans:
   First mortgage loans/(1)//(3)/ ...........     $141,710     84.8%   $124,636     83.6%   $110,374     84.4%
   Second mortgage loans/(2)/ ...............        9,262      5.5       9,978      6.7       9,492      7.3
                                                  --------    -----    --------    -----    --------    -----
Total real estate loans                            150,972     90.3     134,614     90.3     119,866     91.7
                                                  --------    -----    --------    -----    --------    -----

Commercial and consumer loans:
   Consumer .................................        3,353        2       3,009        2       3,494      2.7
   Lease financing ..........................          244      0.2         237     0.02         278      0.2
   Commercial business loans ................       14,113      8.4      12,636      8.5       8,357      6.4
                                                  --------    -----    --------    -----    --------    -----
      Total commercial  and consumer
         loans ..............................       17,710     10.6      15,882     10.7      12,129      9.3
                                                  --------    -----    --------    -----    --------    -----
      Total loans receivable                       168,682    100.9     150,496      101     131,995      101

Less:
   Unearned premium and
      origination costs (fees) ..............           38       --        (120)    (0.1)        (84)    (0.1)
   Allowance for loan losses ................       (1,679)    (0.9)     (1,274)    (0.9)     (1,150)    (0.9)
                                                  --------    -----    --------    -----    --------    -----
      Total loans receivable, net                 $167,041    100.0%   $149,102    100.0%   $130,761    100.0%
                                                  ========    =====    ========    =====    ========    =====

<CAPTION>
                                                           Years Ended December 31,
                                                  ---------------------------------------
                                                         1998                 1997
                                                  ------------------   ------------------
                                                   Amount    Percent    Amount    Percent
                                                  --------   -------   --------   -------
                                                          (Dollars in Thousands)
<S>                                               <C>         <C>      <C>         <C>
Real estate loans:
   First mortgage loans/(1)//(3)/ ...........     $109,372     85.3%   $102,403     84.2%
   Second mortgage loans/(2)/ ...............        9,631      7.5       9,561      7.9
                                                  --------    -----    --------    -----
Total real estate loans                            119,003     92.8     111,964     92.1
                                                  --------    -----    --------    -----

Commercial and consumer loans:
   Consumer .................................        4,085      3.2       4,291      3.5
   Lease financing ..........................          350      0.3         564      0.5
   Commercial business loans ................        5,900      4.6       5,908      4.9
                                                  --------    -----    --------    -----
      Total commercial  and consumer
         loans ..............................       10,335      8.1      10,763      8.9
                                                  --------    -----    --------    -----
      Total loans receivable                       129,338    100.9     122,727      101

Less:
   Unearned premium and
      origination costs (fees) ..............         (199)    (0.2)       (314)    (0.3)
   Allowance for loan losses ................         (939)    (0.7)       (828)    (0.7)
                                                  --------    -----    --------    -----
      Total loans receivable, net                 $128,200    100.0%   $121,585    100.0%
                                                  ========    =====    ========    =====
</TABLE>

----------
/(1)/Includes $106.0 million, $29.2 million and $1.3 million of one- to
     four-family residential loans, commercial real estate and multi-family
     loans, respectively, at December 31, 2001.
/(2)/Includes $3.3 million and $6.0 million of home equity line of credit loans
     and home equity fixed rate, fixed term loans, respectively, at December 31,
     2001.
/(3)/Includes $5.3 million of mortgage loans held for sale at December 31, 2001.

                                       3

<PAGE>

     Loan Maturity Schedule. The following table sets forth certain information
as of December 31, 2001, regarding the dollar amount of loans maturing in the
Bank's portfolio based on their contractual terms to maturity. Demand loans
having no stated schedule of repayments and no stated maturity, and overdrafts
are reported as due in one year or less. Adjustable and floating rate loans are
included in the period in which interest rates are next scheduled to adjust
rather than the period in which they contractually mature, and fixed rate loans
are included in the period in which the final contractual repayment is due.

<TABLE>
<CAPTION>
                                                       One       Three      Five       Ten
                                                     Through    Through    Through    Through    Beyond
                                          Within      Three      Five        Ten      Twenty     Twenty
                                         One Year     Years      Years      Years      Years      Years      Total
                                         --------    -------    -------    -------    -------    -------    --------
                                                                     (In Thousands)
<S>                                      <C>         <C>        <C>        <C>        <C>        <C>        <C>
Real estate loans:
  First mortgage loans .............     $28,342     $22,802    $32,858    $13,936    $32,768    $11,042    $141,748
  Second mortgage loans ............       3,317         418      1,184      3,824        519         --       9,262
    Commercial and consumer loans ..      11,316       1,616      3,094      1,278        407         --      17,711
                                         -------     -------    -------    -------    -------    -------    --------
    Total loans ....................     $42,975     $24,836    $37,136    $19,038    $33,694    $11,042    $168,721
                                         =======     =======    =======    =======    =======    =======    ========
</TABLE>

     The following table sets forth at December 31, 2001, the dollar amount of
all fixed rate and adjustable rate loans due or repricing after December 31,
2002.

                                               Fixed     Adjustable      Total
                                              -------    ----------    --------
                                                       (In Thousands)
Real estate loans:
   First mortgage loans ................      $71,892     $41,515      $113,407
   Second mortgage loans ...............        5,945          --         5,945
    Commercial and consumer loans ......        6,394          --         6,394
                                              -------     -------      --------
     Total loans .......................      $84,231     $41,515      $125,746
                                              =======     =======      ========

     One- to Four-Family Residential Mortgage Loans. The Bank's primary lending
activity is the origination of first mortgage loans secured by one- to
four-family residential properties. A portion of one- to four-family mortgage
loans originated by the Bank are secured by non-owner occupied homes which are
primarily used to furnish housing to students attending the SUNY College at
Oswego. The Bank generally retains in its portfolio all ARM loans that it
originates. However, the Bank generally underwrites its loans so as to be
eligible for resale in the secondary mortgage market. At December 31, 2001,
approximately 95.1% of the Bank's one- to four-family residential real estate
loans were secured by owner-occupied properties.

     Fixed-rate one- to four-family residential mortgage loans originated by the
Bank are originated with terms of up to 30 years (although fixed rate loans held
in portfolio are generally limited to terms of 20 years or less), amortize on a
monthly basis, and have principal and interest due each month. Such real estate
loans often remain outstanding for significantly shorter periods than their
contractual terms to maturity, particularly in a declining interest rate
environment. Borrowers may refinance or prepay loans at their option. One- to
four-family residential mortgage loans originated by the Bank customarily
contain "due-on-sale" clauses which permit the Bank to accelerate the
indebtedness of the loan upon transfer of ownership of the mortgaged property.
Due-on-sale clauses are an important means of increasing the interest rate on
existing mortgage loans during periods of rising interest rates. An origination
fee of up to 3% is charged on fixed-rate mortgage loans. As a result of the low
interest rate environment that has existed in recent years, many of the Bank's
borrowers have refinanced their mortgage loans with the Bank at lower interest
rates. During the years ended December 31, 2001 and 2000, 72.0% and 12.8%,
respectively, of the Bank's one- to four-family mortgage loan originations
consisted of fixed-rate loans.

     The Bank also originates ARM loans which serve to reduce interest rate
risk. The Bank currently originates one-year ARM loans which adjust each year at
200 basis points (100 basis points equal 1%) above the adjusted six month moving
average of the six-month Treasury bill auction discount rate. The Bank also
offers loan products whereby the

                                       4

<PAGE>

interest is fixed for the first three or five years and adjusts annually
thereafter. These loan products typically are originated with terms up to 30
years. ARM loans are originated with terms ranging from 5 to 30 years. ARM loans
originated by the Bank provide for maximum periodic interest rate adjustment of
2 percent per year and an overall maximum interest rate increase which is
determined at the time the loan is originated. However, ARM loans may not adjust
to a level below the initial rate. ARMs may be offered at an initial rate below
the prevailing market rate. The Bank's one- to four-family ARM loan originations
totaled $9.1 million, $20.0 million, and $9.0 million, during the years 2001,
2000 and 1999, respectively. The Bank requires that borrowers qualify for ARM
loans based upon the loan's fully indexed rate.

     At December 31, 2001, $60.4 million, or 54.3%, of the Bank's one- to
four-family loan portfolio consisted of ARM loans. ARM loans generally pose a
credit risk in that as interest rates rise, the amount of a borrower's monthly
loan payment also rises, thereby increasing the potential for delinquencies and
loan losses. At the same time, the marketability of such loans may be adversely
affected by higher rates.

     The Bank also originates loans to finance the construction of one- to
four-family owner-occupied residences. Funds are disbursed as construction
progresses. Loans to finance one- to four-family construction typically provide
for a six-month construction phase during which interest accrues and which is
deducted from the funds disbursed. Upon completion of the construction phase the
loan automatically converts to permanent financing. At December 31, 2001, the
Bank held $3.9 million of one- to four-family construction loans.

     The Bank's lending policies require private mortgage insurance for loan to
value ratios in excess of 80%.

     Commercial Real Estate Loans. Loans secured by commercial real estate
constituted approximately $29.2 million, or 17.5%, of the Bank's total loan
portfolio at December 31, 2001. At December 31, 2001, substantially all of the
Bank's commercial real estate loans were secured by properties located within
the Bank's market area. At December 31, 2001, the Bank's commercial real estate
loans had an average principal balance of $192,000. At that date, the largest
commercial real estate loan had a principal balance of $1.1 million, and was
secured by four retail business properties located in Oswego County. This loan
is currently performing in accordance with the original terms. Commercial real
estate loans are generally offered with adjustable interest rates tied to a
market index which currently is the adjusted six month moving average of the six
month Treasury bill auction discount rate, with an overall interest rate cap
which is determined at the time the loan is originated. Commercial real estate
loans may not adjust to a level below the initial rate. The Bank generally
offers commercial real estate loans with from one to five year adjustment
periods. The Bank generally makes commercial real estate loans up to 75% of the
appraised value of the property securing the loan. An origination fee of up to
2% of the principal balance of the loan is typically charged on commercial real
estate loans. Commercial real estate loans originated by the Bank generally are
underwritten to mature between 5 and 20 years with an amortization schedule of
between 10 and 30 years. The Bank has in the past sold loan participations to
other financial institutions and expects to do so in the future as opportunities
arise.

     In underwriting commercial real estate loans the Bank reviews the expected
net operating income generated by the real estate to support debt service, the
age and condition of the collateral, the financial resources and income level of
the borrower and the borrower's experience in owning or managing similar
properties. The Bank generally obtains personal guarantees from all commercial
borrowers. Loans secured by commercial real estate generally involve a greater
degree of risk than one- to four-family residential mortgage loans and carry
larger loan balances. This increased credit risk is a result of several factors,
including the concentration of principal in a limited number of loans and
borrowers, the effects of general economic conditions on income producing
properties, and the increased difficulty of evaluating and monitoring these
types of loans. Furthermore, the repayment of loans secured by commercial real
estate is typically dependent upon the successful operation of the related real
estate. If the cash flow from the property is reduced, the borrower's ability to
repay the loan may be impaired.

     Multi-Family Real Estate Loans. Loans secured by multi-family real estate
(real estate containing five or more dwellings) constituted approximately $1.3
million, or 7.6%, of the Bank's total loan portfolio at December 31, 2001. At
December 31, 2001, the Bank had a total of 11 loans secured by multi-family real
estate properties. The Bank's multi-family real estate loans are secured by
multi-family rental properties (primarily townhouses and walk-up apartments). At
December 31, 2001, substantially all of the Bank's multi-family real estate
loans were secured by

                                       5

<PAGE>

properties located within the Bank's market area. At December 31, 2001, the
Bank's multi-family real estate loans had an average principal balance of
approximately $115,000 and the largest multi-family real estate loan had a
principal balance of $357,000, and was performing in accordance with its terms.
Multi-family real estate loans generally are offered with adjustable interest
rates tied to the adjusted six month moving average of the six month Treasury
Bill auction discount rate index with an overall interest rate cap which is
determined at the time the loan is originated. Multi-family real estate loans
may not adjust below the initial rate. Multi-family real estate loans are
underwritten to mature between 5 and 20 years, and to amortize over 10 to 30
years. An origination fee of 1% is generally charged on multi-family real estate
loans.

     In underwriting multi-family real estate loans, the Bank reviews the
expected net operating income generated by the real estate to support the debt
service, the age and condition of the collateral, the financial resources and
income level of the borrower and the borrower's experience in owning or managing
similar properties. The Bank generally requires a debt service coverage ratio of
at least 120% (net of operating expenses) of the monthly loan payment. The Bank
makes multi-family real estate loans up to 75% of the appraised value of the
property securing the loan. The Bank generally obtains personal guarantees from
all multi-family real estate borrowers.

     Loans secured by multi-family real estate generally involve a greater
degree of credit risk than one- to four-family residential mortgage loans and
carry larger loan balances. This increased credit risk is a result of several
factors, including the concentration of principal in a limited number of loans
and borrowers, the effects of general economic conditions on income producing
properties, and the increased difficulty of evaluating and monitoring these
types of loans. Furthermore, the repayment of loans secured by multi-family real
estate and commercial real estate is typically dependent upon the successful
operation of the related real estate property. If the cash flow from the project
is reduced, the borrower's ability to repay the loan may be impaired.

     Second Mortgage Loans. The Bank also offers home equity loans and equity
lines of credit collateralized by a second mortgage on the borrower's principal
residence. The Bank's home equity lines of credit are secured by the borrower's
principal residence with a maximum loan-to-value ratio, including the principal
balances of both the first and second mortgage loans of 80%, or up to 90% where
the Bank has made the first mortgage loan. At December 31, 2001, the disbursed
portion of home equity lines of credit totaled $3.3 million. Home equity lines
of credit are offered on an adjustable rate basis with interest rates tied to
the prime rate as published in The Wall Street Journal, plus up to 50 basis
points and with terms of up to 15 years.

     Home equity loans are fixed rate loans with terms generally up to 10 years,
although on occasion the Bank may originate a home equity loan with a term of up
to 15 years.

     Consumer Loans. As of December 31, 2001, consumer loans totaled $3.4
million, or 2.0%, of the Bank's total loan portfolio. The principal types of
consumer loans offered by the Bank are unsecured personal loans, and loans
secured by deposit accounts. Other consumer loans are offered on a fixed rate
basis with maturities generally of less than five years.

     The underwriting standards employed by the Bank for consumer loans include
a determination of the applicant's credit history and an assessment of ability
to meet existing obligations and payments on the proposed loan. The stability of
the applicant's monthly income may be determined by verification of gross
monthly income from primary employment, and additionally from any verifiable
secondary income. Creditworthiness and the employment history of the applicant
are of primary consideration in originating consumer loans.

     Commercial Business Loans. The Bank currently offers commercial business
loans to businesses in its market area and to deposit account holders. At
December 31, 2001, the Bank had commercial business loans outstanding with an
aggregate balance of $14.4 million, of which $8.4 million consisted of
commercial lines of credit. The average commercial line of credit balance was
approximately $12,000. Commercial lines of credit generally have variable rates
of interest tied to the prime rate and adjust monthly. The lines of credit are
generally collateralized by current assets of the borrower and renewed on an
annual basis. The average commercial business loan balance was approximately
$45,000. Commercial business loans generally have fixed rates of interest. The
loans are generally of short duration with average terms of five years, but
which may range up to 15 years.

                                       6

<PAGE>

     Underwriting standards employed by the Bank for commercial business loans
include a determination of the applicant's ability to meet existing obligations
and payments on the proposed loan from normal cash flows generated by the
applicant's business. The financial strength of each applicant also is assessed
through a review of financial statements provided by the applicant.

     Commercial business loans generally bear higher interest rates than
residential loans, but they also may involve a higher risk of default since
their repayment is generally dependent on the successful operation of the
borrower's business. The Bank generally obtains guarantees from the borrower, a
third party, or the Small Business Administration, as a condition to originating
its commercial business loans.

     Loan Originations, Solicitation, Processing, and Commitments. Loan
originations are derived from a number of sources such as existing customers,
developers, walk-in customers, real estate broker referrals, and commissioned
mortgage loan originators. Upon receiving a loan application, the Bank obtains a
credit report and employment verification to verify specific information
relating to the applicant's employment, income, and credit standing. In the case
of a real estate loan, an independent appraiser approved by the Bank appraises
the real estate intended to secure the proposed loan. A loan processor in the
Bank's loan department checks the loan application file for accuracy and
completeness, and verifies the information provided. Mortgage loans of up to
$275,000 may be approved by any designated loan officer; mortgage loans in
excess of $275,000 must be approved by the Board of Directors. Commercial loans
of up to $50,000 unsecured, or $75,000 (if secured by other than real estate)
may be approved by the Bank's President or the Executive Vice President. These
individuals and the lending staff may join their limits to a total approval
amount of $150,000 unsecured, and $250,000 secured. Loans in excess of these
limits must be approved by either the entire Board of Directors, or a
subcommittee of the Board of Directors. The Board of Directors, at their monthly
meeting, will review and verify that management's approvals of loans are made
within the scope of management's authority. Fire and casualty insurance is
required at the time the loan is made and throughout the term of the loan, and
upon request of the Bank, flood insurance may be required. After the loan is
approved, a loan commitment letter is promptly issued to the borrower. At
December 31, 2001, the Bank had commitments to originate $34.0 million of loans.

     If the loan is approved, the commitment letter specifies the terms and
conditions of the proposed loan including the amount of the loan, interest rate,
amortization term, a brief description of the required collateral, and required
insurance coverage. The borrower must provide proof of fire and casualty
insurance on the property (and, as required, flood insurance) serving as
collateral, which insurance must be maintained during the full term of the loan.
Title insurance, title search, or an opinion of counsel as to the validity of
title are required on all loans secured by real property. In recent years, the
Bank has not purchased loans originated by other lenders.

                                       7

<PAGE>

     Origination, Repayment and Sale of Loans. The table below shows the Bank's
loan origination, repayment and sales activity for the periods indicated.

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                ----------------------------------------------------
                                                  2001       2000       1999       1998       1997
                                                --------   --------   --------   --------   --------
                                                                   (In Thousands)
<S>                                             <C>        <C>        <C>        <C>        <C>
Loan receivable, beginning of period ........   $150,496   $131,995   $129,338   $122,727   $110,017
Originations:
  Real estate:
   First mortgage/(1)//(3)/ .................     44,510     30,627     26,987     34,908     26,281
   Second mortgage/(2)/ .....................      1,871      2,721      1,408      1,516      2,178
  Commercial and consumer loans:
   Consumer loans ...........................      1,960      1,784      1,299      2,412      2,306
   Lease financing ..........................         --         --         --         --        300
   Commercial ...............................      6,003      3,812      5,210      6,849      3,525
                                                --------   --------   --------   --------   --------
     Total originations .....................     54,344     38,944     34,904     45,685     34,590

  Transfer of mortgage loans to foreclosed
   real estate ..............................        348        638         93        563        374
  Repayments ................................     21,796     18,930     26,201     29,969     21,506
  Loan sales ................................     13,975        875      5,993      8,542         --
                                                --------   --------   --------   --------   --------
Net loan activity ...........................     18,225     18,501      2,617      6,611     12,710
                                                --------   --------   --------   --------   --------
   Total loans receivable at end of period ..   $168,721   $150,496   $131,995   $129,338   $122,727
                                                ========   ========   ========   ========   ========
</TABLE>

----------
/(1)/Includes $22.0 million, and $8.1 million in one- to four-family
     residential loans and commercial real estate loans, respectively, for the
     year ended December 31, 2001.
/(2)/Includes $1.5 million in home equity loans and a net change of $84,000 in
     home equity lines of credit for the year ended December 31, 2001.
/(3)/Includes $18.5 million of mortgage loans held for sale originated during
     the year ended December 31, 2001.

     Loan Origination Fees and Other Income. In addition to interest earned on
loans, the Bank generally receives loan origination fees. To the extent that
loans are originated or acquired for the Bank's portfolio, SFAS 91 requires that
the Bank defer loan origination fees and costs and amortize such amounts as an
adjustment of yield over the life of the loan by use of the level yield method.
ARM loans originated below the fully indexed interest rate will have a
substantial portion of the deferred amount recognized as income in the initial
adjustment period. Fees deferred under SFAS 91 are recognized into income
immediately upon prepayment or the sale of the related loan. At December 31,
2001, the Bank had $38,000 of net deferred loan origination costs. Loan
origination fees and costs vary with the volume and type of loans and
commitments made and purchased, principal repayments, and competitive conditions
in the mortgage markets, which in turn respond to the demand for and
availability of money.

     In addition to loan origination fees, the Bank also receives other fees,
service charges, and other income that consist primarily of deposit transaction
account service charges, late charges and income from REO operations. The Bank
recognized fees and service charges of $946,000, $816,000 and $993,000, for the
fiscal years ended December 31, 2001, 2000 and 1999, respectively.

     Loans-to-One Borrower. With certain limited exceptions, a New York
chartered savings bank may not make unsecured loans or extend unsecured credit
for commercial, corporate or business purposes (including lease financing) to a
single borrower, which in the aggregate exceed 15% of the Bank's net worth. At
December 31, 2001, the Bank's largest lending relationship totaled $3.2 million
and consisted of loans secured by retail businesses and properties. The Bank's
second largest lending relationship totaled $2.9 million and consisted of loans
secured by commercial retail businesses and properties. The Bank's third largest
lending relationship totaled $2.6 million and consisted of loans secured by
retail businesses and properties. The Bank's fourth largest lending relationship
totaled $2.4 million and was secured by a retail office plaza, retail business
property and residence. The Bank's fifth largest lending relationship totaled
$1.4 million and consisted of loans secured by retail business property and
one-to four-residential properties. All of the above loans are also secured by
underlying personal guarantees. At December 31, 2001 all of the aforementioned
loans were performing in accordance with their terms.

                                       8

<PAGE>

Delinquencies and Classified Assets

     Delinquencies. The Bank's collection procedures provide that when a loan is
15 days past due, a computer-generated late notice is sent to the borrower
requesting payment. If the delinquency continues, at 30 days a delinquent notice
is sent and personal contact efforts are attempted, either in person or by
telephone, to strengthen the collection process and obtain reasons for the
delinquency. Also, plans to arrange a repayment plan are made. If a loan becomes
60 days past due, and no progress has been made in resolving the delinquency,
the Bank will send a 10-day demand letter and personal contact is attempted, and
the loan becomes subject to possible legal action if suitable arrangements to
repay have not been made. When a loan continues in a delinquent status for 90
days or more, and a repayment schedule has not been made or kept by the
borrower, generally a notice of intent to foreclose is sent to the borrower for
mortgage loans, and a final demand letter is presented to the borrower of
non-real estate loans, giving 30 days to repay all outstanding interest and
principal. If not cured, foreclosure proceedings or other appropriate legal
actions are initiated to minimize any potential loss.

     Non-Performing Assets. Loans are reviewed on a regular basis and are placed
on a non-accrual status when, in the opinion of management, the collection of
additional interest is doubtful. Loans are placed on non-accrual status when
either principal or interest is 90 days or more past due or less than 90 days,
in the event the loan has been referred to the Bank's legal counsel for
foreclosure. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income. At December 31, 2001, the
Bank had non-performing assets of $2.8 million, and a ratio of non-performing
loans and real estate owned ("REO") of 1.13% total assets. Non-performing assets
increased $100,000, or 3.6%, from $2.7 million in 2000.

     Real estate acquired by the Bank as a result of foreclosure or by the deed
in lieu of foreclosure is classified as REO until such time as it is sold. These
properties are carried at the lower of their recorded amount or estimated fair
value less estimated costs to sell the property. REO totaled $632,000, $884,000
and $641,000 at December 31, 2001, 2000 and 1999, respectively.

     The largest component of REO consists of a real estate development project
which had a net book value of $297,000 at December 31, 2001. The Bank originally
entered into a $570,000 commercial real estate loan in 1988 for the development
of 49 single family residences. This loan was made under the "leeway provision"
of the New York State Banking Law. Under this provision of the Banking Law the
lending relationship was originally structured so that the Bank held title to
the property securing the loan subject to the fulfillment of the borrower's
obligations under the loan. In 1990, the developer became insolvent, was unable
to satisfy the terms of the loan and the Bank assumed control of the project. In
1998, the Bank established a wholly-owned subsidiary, whose sole business is the
ownership and final development of the Whispering Oaks real estate subdivision
in Baldwinsville, New York. This subsidiary was initially capitalized with
$50,000 in cash. It is anticipated that this capitalization, together with
interim financing to be provided by the Bank, will be sufficient to complete and
liquidate this asset. At December 31, 2001, the Bank had 12 lots remaining to be
sold. The proceeds from the sale of the lots are used to reduce the outstanding
balance of REO. The Bank believes it will fully recover its investment in this
property.

                                       9

<PAGE>

Delinquent Loans and Non-Performing Assets

     The following table sets forth information regarding the Bank's loans
delinquent 90 days or more, and real estate acquired or deemed acquired by
foreclosure at the dates indicated. When a loan is delinquent 90 days or
more,the Bank reverses all accrued interest thereon and ceases to accrue
interest thereafter. For all the dates indicated, the Bank did not have any
material restructured loans within the meaning of SFAS 15 and SFAS 114.

<TABLE>
<CAPTION>
                                                                              At December 31,
                                                            ----------------------------------------------------
                                                              2001       2000       1999       1998       1997
                                                            --------   --------   --------   --------   --------
                                                                            (Dollars In Thousands)
<S>                                                         <C>        <C>        <C>        <C>        <C>
Loans delinquent 90 days or more:
  Real estate loans .....................................   $  1,576   $  1,594   $  2,284   $  1,298   $  1,207
Commercial and Consumer loans ...........................        543        234        270        534        283
                                                            --------   --------   --------   --------   --------
    Total delinquent loans ..............................      2,119      1,828      2,554      1,832      1,490
Total REO ...............................................        632        884        641        742        767
                                                            --------   --------   --------   --------   --------
      Total nonperforming assets/(1)/ ...................   $  2,571   $  2,712   $  3,195   $  2,574   $  2,257
                                                            ========   ========   ========   ========   ========

Total loans delinquent 90 days or more
  to total loans receivable/(2)/ ........................        1.9%       1.2%       2.0%       1.4%       1.2%
Total loans delinquent 90 days or more to total assets           0.9%       0.8%       1.2%       0.9%       0.8%
Total nonperforming assets to total assets ..............        1.1%       1.2%       1.5%       1.3%       1.2%

Net loans receivable/(3)/ ...............................    167,041    149,102    130,761    128,200    121,585
                                                            --------   --------   --------   --------   --------
Total assets ............................................   $244,366   $231,847   $216,324   $203,252   $196,770
                                                            ========   ========   ========   ========   ========
</TABLE>

----------
/(1)/ Net of specific valuation allowances.
/(2)/ Net of unearned discount, and the allowance for loan losses.
/(3)/ Includes $297,000 of mortgage loans held for sale at December 31, 2001.

     During the year ended December 31, 2001, and year ended December 31, 2000,
respectively, additional gross interest income of $118,000 and $132,000 would
have been recorded on loans accounted for on a non-accrual basis if the loans
had been current throughout the period. No interest income on non-accrual loans
was included in income during the same periods.

     The following table sets forth information with respect to loans past due
30-89 days in the Bank's portfolio at the dates indicated.

                                                    At December 31,
                                      ------------------------------------------
                                       2001     2000     1999     1998     1997
                                      ------   ------   ------   ------   ------
                                                   (In Thousands)
Loans past due 30-89 days:
  Real estate loans ...............   $3,476   $2,493   $1,619   $2,010   $2,232
  Commercial and consumer loans ...      994      147      161      126      296
                                      ------   ------   ------   ------   ------
    Total past due 30-89 days .....   $4,470   $2,640   $1,780   $2,136   $2,528
                                      ======   ======   ======   ======   ======

     The following table sets forth information regarding the Bank's delinquent
loans 60 days and greater and REO at December 31, 2001.

<TABLE>
<CAPTION>
                                                                        At December 31, 2001
                                                                       ----------------------
                                                                       Balance         Number
                                                                       -------         ------
                                                                       (Dollars In Thousands)
<S>                                                                     <C>             <C>
Residential real estate:
  Loans 60 to 89 days delinquent ...................................    $  528           13
  Loans more than 90 days delinquent ...............................     1,576           34
Consumer and commercial business loans 60 days or more delinquent ..     1,083           21
Real estate owned ..................................................       632           12
                                                                        ------          ---
    Total ..........................................................    $3,819          115
                                                                        ======          ===
</TABLE>

                                       10

<PAGE>

     Classification of Assets. Federal regulations provide for the
classification of loans and other assets such as debt and equity securities
considered to be of lesser quality as "substandard," "doubtful," or "loss"
assets. An asset is considered "substandard" if it is inadequately protected by
the current net worth and paying capacity of the obligor or of the collateral
pledged, if any. "Substandard" assets include those characterized by the
"distinct possibility" that the savings institution will sustain "some loss" if
the deficiencies are not corrected. Assets classified as "doubtful" have all of
the weaknesses inherent in those classified "substandard," with the added
characteristic that the weaknesses present make "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable." Assets classified as "loss" are those considered
"uncollectible" and of such little value that their continuance as assets
without the establishment of a specific loss reserve is not warranted. Assets
that do not expose the savings institution to risk sufficient to warrant
classification in one of the aforementioned categories, but which possess some
weaknesses, are required to be designated "special mention" by management.

     When a savings institution classifies problem assets as either substandard
or doubtful, it is required to establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances that have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When a savings institution classifies
problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of the amount of the assets so classified, or
to charge off such amount. A savings institution's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by federal and state regulatory authorities, which can order
the establishment of additional general or specific loss allowances. The Bank
regularly reviews the problem loans in its portfolio to determine whether any
loans require classification in accordance with applicable regulations.

     The following table sets forth the aggregate amount of the Bank's
internally classified assets at the dates indicated.

                                           At December 31,
                              ------------------------------------------
                               2001     2000     1999     1998     1997
                              ------   ------   ------   ------   ------
                                           (In Thousands)
Substandard assets/(1)/ ...   $2,395   $1,770   $2,668   $2,482   $1,719
Doubtful assets ...........       30       34      110      103       55
Loss assets ...............       33       44        7       90       16
                              ------   ------   ------   ------   ------
 Total classified assets ..   $2,458   $1,848   $2,785   $2,675   $1,790
                              ======   ======   ======   ======   ======

----------
/(1)/Includes $297,000, $458,000, $510,000, $638,000,and $483,000 for a real
     estate development project classified as REO at December 31, 2001, 2000,
     1999, 1998 and 1997, respectively.

     Allowance for Loan Losses. Management's policy is to provide for estimated
losses on the Bank's loan portfolio based on management's evaluation of the
losses that may be incurred. The Bank reviews on a quarterly basis the loans in
its portfolio which have demonstrated delinquencies, including problem loans, to
determine whether any loans require classification or the establishment of
appropriate reserves or allowances for losses. Such evaluation, which includes a
review of all loans of which full collectibility of interest and principal may
not be reasonably assured, considers, among other matters, past loss experience,
present economic conditions and other factors deemed relevant by management.
Management calculates the general allowance for loan losses on past experience
as well as current delinquencies and the composition of the Bank's loan
portfolio. While both general and specific loss allowances are charged against
earnings, general loan loss allowances are included, subject to certain
limitations, as capital in computing risk-based capital under federal
regulations.

     In accordance with SFAS 114, a loan is considered impaired when each of the
following criteria are met: the loan is of a material size, the loan is
considered to be non-performing, and a loss is probable. The measurement of
impaired loans is generally based upon the present value of expected future cash
flows discounted at the historic effective interest rate, except that all
collateral-dependent loans are measured for impairment based on the fair value
of the collateral.

     Management will continue to review the entire loan portfolio to determine
the extent, if any, to which further additional loan loss provisions may be
deemed necessary. Management believes that the Bank's current allowance for

                                       11

<PAGE>

loan losses is adequate, however, there can be no assurance that the allowance
for loan losses will be adequate to cover losses that may in fact be realized in
the future or that additional provisions for loan losses will not be required.

     Analysis of the Allowance for Loan Losses. The following table sets forth
the analysis of the allowance for loan losses at or for the periods indicated.

<TABLE>
<CAPTION>
                                                                     At or for the Period Ended December 31,
                                                               ----------------------------------------------------
                                                                 2001       2000       1999       1998       1997
                                                               --------   --------   --------   --------   --------
                                                                             (Dollars In Thousands)
<S>                                                            <C>        <C>        <C>        <C>        <C>
Total loans receivable, net ................................   $167,041   $149,102   $130,761   $128,200   $121,585
Average loans outstanding ..................................    155,653    139,258    130,728    126,931    113,651
Allowance balance (at beginning of period) .................      1,274      1,150        939        828        907
Provision for losses:
  Real estate ..............................................        139         65        135         83        121
  Commercial and consumer loans ............................        569        179        238        298        140
Charge-offs:
  Real estate ..............................................        109         40         --        141         --
  Commercial and consumer loans ............................        256         99        190        140        358
Recoveries:
  Real estate ..............................................         --         --         --         --         --
  Commercial and consumer loans ............................         62         19         28         11         18
                                                               --------   --------   --------   --------   --------
Allowance balance (at end of period) .......................   $  1,679   $  1,274   $  1,150   $    939   $    828
                                                               ========   ========   ========   ========   ========

Allowance for loan losses as a percent of net loans
  receivable at end of period ..............................        1.0%       0.9%       0.9%       0.7%       0.7%
Loans charged off as a percent of average loans
  outstanding ..............................................        0.2%       0.1%       0.2%       0.1%       0.3%
Ratio of allowance for loan losses to total nonperforming ..
  loans at end of period/(1)/ ..............................       79.2%      69.7%      45.0%      51.3%      55.6%
Ratio of allowance for loan losses to total nonperforming
 assets at end of period/(1)/ ..............................       61.0%      47.0%      36.0%      36.5%      36.7%
</TABLE>

----------
/(1)/ Net of specific reserves.

                                       12

<PAGE>

     Allocation of Allowance for Loan Losses. The following table sets forth the
allocation of allowance for loan losses by loan category for the periods
indicated. The allocation of the allowance by category is not necessarily
indicative of future losses and does not restrict the use of the allowance to
absorb losses in any category.

<TABLE>
<CAPTION>
                                                                     At December 31,
                                             ------------------------------------------------------------------
                                                   2001                   2000                   1999
                                             --------------------   --------------------   --------------------
                                                      % of Loans             % of Loans             % of Loans
                                                        In Each                In Each                In Each
                                                      Category to            Category to            Category to
                                             Amount   Total Loans   Amount   Total Loans   Amount   Total Loans
                                             ------   -----------   ------   -----------   ------   -----------
                                                                 (Dollars in Thousands)
<S>                                          <C>         <C>        <C>        <C>        <C>         <C>
Balance at end of period applicable to:
  Real estate loans ......................   $  496       89.50%    $  466      89.39%     $  440      90.81%
  Commercial and consumer loans ..........    1,183       10.50        808      10.61         710       9.19
                                             ------      ------     ------     ------      ------     ------
    Total allowance for loan losses/(1)/..   $1,679      100.00%    $1,274     100.00%     $1,150     100.00%
                                             ======      ======     ======     ======      ======     ======

<CAPTION>
                                                          At December 31,
                                             -------------------------------------------
                                                   1998                  1997
                                             --------------------   --------------------
                                                      % of Loans             % of Loans
                                                        In Each                In Each
                                                      Category to            Category to
                                             Amount   Total Loans   Amount   Total Loans
                                             ------   -----------   ------   -----------
                                                        (Dollars in Thousands)
<S>                                           <C>       <C>          <C>       <C>
Balance at end of period applicable to:
  Real estate loans ......................    $380       92.01%      $462       91.23%
  Commercial and consumer loans ..........     559        7.99        366        8.77
                                              ----      ------       ----      ------
    Total allowance for loan losses/(1)/..    $939      100.00%      $828      100.00%
                                              ====      ======       ====      ======

</TABLE>

------------
/(1)/ Percentages include unearned discount and origination fees.

                                       13

<PAGE>

Investment Activities

     The investment policy of the Bank established by the Board of Directors
attempts to provide for the overall asset/liability management needs of the
Bank, maintain liquidity and maintain a high quality diversified investment
portfolio in order to obtain a favorable return on investment without incurring
undue interest rate and credit risk, provide collateral for pledging
requirements, and to complement the Bank's lending activities. At December 31,
2001, the Bank had investment securities with an aggregate amortized cost of
$53.3 million and a market value of $53.4 million. At December 31, 2001, the
Bank's amortized cost value of investment securities consisted of $20.9 million
of corporate debt issues and $12.0 million of securities issued or guaranteed by
the United States Government or agencies thereof and state and municipal
obligations. The corporate debt issues primarily consist of financial
corporation debt and industrial debentures (the largest single issuer was $3.0
million). These issues generally have maturities ranging up to 20 years. All
corporate debt investments at the time of their purchase have been rated as
investment grade by either Moody's or Standard & Poor's. Typically, such
investments yield 45-70 basis points more than Treasury securities with
comparable maturities. To a lesser extent, the Bank also invests in mutual funds
and equity securities. At December 31, 2001, the Bank held $3.2 million in
common stock, of which $2.3 million was Federal Home Loan Bank Stock, and $3.0
million in an equity mutual fund. At December 31, 2001, the Bank had invested
$14.5 million in mortgage-backed securities, net. Mortgage-backed securities,
like mortgage loans, amortize over the life of the security as the underlying
mortgages are paid down. The speed at which principal payments above normally
scheduled amortization occurs, is generally unpredictable. Historically, the
securities have paid down more rapidly in a falling interest rate environment,
thereby shortening the life of the security. Likewise, in a rising interest rate
environment, the life of the mortgage-backed security tends to extend. The
result is that, generally, the Bank will receive more investable funds in lower
interest rate environments and less investable funds during periods of higher
interest rates. The embedded option on the part of the underlying mortgagee to
prepay the loan, therefore, tends to impact the value of the security and can
adversely impact the Bank's net interest margin. The Bank's investments are,
generally, liquid, and therefore allow the Bank to respond more readily to
changing market conditions. The investment portfolio is accounted for in
accordance with FASB Statement 115.

     The Bank generally has maintained a portfolio of liquid assets that exceeds
regulatory requirements. Liquidity levels may be increased or decreased
depending upon the yields on investment alternatives and upon management's
judgment as to the attractiveness of the yields then available in relation to
other opportunities and its expectation of the yield that will be available in
the future, as well as management's projections as to the short term demand for
funds to be used in the Bank's loan origination and other activities. For
further information regarding the Bank's investments see Note 2 to the Notes to
Financial Statements.

     At December 31, 2001, the Company holds the following corporate debt
investments which exceed 10% of total capital.

   Issuer                  Book Value              Fair Market Value
-------------              ----------              -----------------

CNA Financial              $3,000,000                 $2,394,000

                                       14

<PAGE>

     Investment Portfolio. The following table sets forth the carrying value of
the Bank's investment portfolio at the dates indicated. At December 31, 2001,
the market value of the Bank's investments was approximately $53.4 million. The
market value of investments includes interest-earning deposits, and
mortgage-backed securities.

<TABLE>
<CAPTION>
                                                                     At December 31,
                                                               -----------------------------
                                                                 2001       2000       1999
                                                               -------    -------    -------
                                                                      (In Thousands)
<S>                                                            <C>        <C>        <C>
Investment securities:
  U.S. Government and agency obligations ...................   $ 5,971    $ 9,667    $11,167
  State and municipal obligations ..........................     6,012      6,405      6,695
  Corporate debt issues ....................................    20,949     23,027     21,302
  Equity securities ........................................     3,227      2,340      2,015
  Mutual funds .............................................     3,007      2,861      2,656
                                                               -------    -------    -------
                                                                39,166     44,300     43,835

Unrealized (loss)/gain on available for sale portfolio .....      (293)       (26)      (786)
                                                               -------    -------    -------
      Total investment securities ..........................    38,873     44,274     43,049
                                                               -------    -------    -------
      Total investments ....................................   $38,873    $44,274    $43,048
                                                               =======    =======    =======

Mortgage-backed securities, net:
  Adjustable rate ..........................................       633      1,284      1,602
  Fixed rate ...............................................    13,488     18,122     22,453
                                                               -------    -------    -------
                                                                14,121     19,406     24,055
Unrealized gain (loss) on available for sale portfolio .....       428         78       (707)
                                                               -------    -------    -------
      Total mortgage-backed securities, net ................   $14,549    $19,484    $23,348
                                                               =======    =======    =======
</TABLE>

     Investment Portfolio Maturities. The following table sets forth the
amortized cost, market value, average life in years, and annualized weighted
average yield of the Bank's investment portfolio excluding mortgage-backed
securities at December 31, 2001.

<TABLE>
<CAPTION>
                                                                                     Annualized
                                                                           Average    Weighted
                                                     Amortized    Market    Life       Average
                                                       Cost       Value     Years       Yield
                                                     ---------   -------   -------   ----------
                                                              (Dollars in Thousands)
<S>                                                   <C>        <C>         <C>       <C>
Investment securities:
  U.S. Government treasury .......................    $    19    $    18     7.88      10.9%
  U.S. Government agency .........................      5,952      6,037     6.90       4.7%
  State and municipal obligations ................      6,012      6,234     5.59       5.5%
  Corporate debt issues ..........................     20,949     20,114     8.94       6.4%
  Marketable equity securities ...................      6,235      6,470
                                                      -------    -------
    Total ........................................    $39,167    $38,873
                                                      -------    =======
  Unrealized loss on available for sale portfolio        (293)
                                                      -------
Carrying value of investment securities ..........    $38,873
                                                      =======
</TABLE>

                                       15

<PAGE>

     Securities Portfolio Maturities. The following table sets forth the
scheduled maturities, carrying values, market values and average yields for the
Bank's investment securities at December 31, 2001. Yield is calculated on the
amortized cost to maturity, and does not reflect adjustments to a fully
tax-equivalent basis.

<TABLE>
<CAPTION>
                                                                          At December 31, 2001
                                                  ---------------------------------------------------------------------
                                                     One Year or Less       One to Five Years       Five to Ten Years
                                                  ---------------------   ---------------------   ---------------------
                                                             Annualized              Annualized              Annualized
                                                              Weighted                Weighted                Weighted
                                                  Carrying     Average    Carrying     Average    Carrying     Average
                                                    Value       Yield       Value       Yield       Value       Yield
                                                  --------   ----------   --------   ----------   --------   ----------
                                                                         (Dollars in Thousands)
<S>                                                <C>         <C>         <C>          <C>        <C>         <C>
Investment Securities Available for Sale:
Debt investment securities:
---------------------------
  U.S. Agency securities ......................    $   --          --%     $1,442       5.248%     $ 4,490      4.510%
  U.S. Government securities ..................        --          --          --          --           19     10.877
  State and municipal obligations .............       739       5.622       3,088       5.617          928      5.447
  Corporate debt issues .......................       852       7.100       3,642       6.145        8,719      6.760
                                                   ------      ------      ------       -----      -------     ------
      Total ...................................    $1,591       6.415%     $8,172       5.790%     $14,146      5.966%
                                                   ------      ------      ------       -----      -------     ------
Equity and mortgage-backed securities:
--------------------------------------
  Mutual funds ................................    $3,007        .793%     $   --          --%     $    --         --%
  Mortgage-backed securities ..................         1      11.575         964       6.512        2,101      6.381
  Common stock ................................     3,228       7.137          --          --           --         --
                                                   ------      ------      ------       -----      -------     ------
      Total ...................................    $6,236       4.092%     $  964       6.512%     $ 2,101      6.381%
                                                   ------      ------      ------       -----      -------     ------
      Total investment securities .............    $7,827       4.557%     $9,136       5.867%     $16,257      6.020%
                                                   ======      ======      ======       =====      =======     ======
Unrealized gain on available for sale portfolio
      Total carrying value ....................

<CAPTION>
                                                                  At December 31, 2001
                                                  -------------------------------------------------------
                                                   More than Ten Years      Total Investment Securities
                                                  ---------------------   -------------------------------
                                                             Annualized                        Annualized
                                                              Weighted                          Weighted
                                                  Carrying    Average     Carrying   Market      Average
                                                    Value      Yield        Value    Value        Yield
                                                  --------   ----------   --------   -------   ----------
                                                                  (Dollars in Thousands)
<S>                                                <C>          <C>        <C>       <C>         <C>
Investment Securities Available for Sale:
Debt investment securities:
---------------------------
  U.S. Agency securities ......................    $    19      9.876%     $ 5,951   $ 6,038      4.702%
  U.S. Government securities ..................         --         --           19        18     10.877
  State and municipal obligations .............      1,257      5.030        6,012     6,234      5.468
  Corporate debt issues .......................      7,736      5.870       20,949    20,114      6.358
                                                   -------      -----      -------   -------     ------
      Total ...................................    $ 9,012      5.750%     $32,931   $32,404      5.899%
                                                   -------      -----      -------   -------     ------
Equity and mortgage-backed securities:
--------------------------------------
  Mutual funds ................................    $    --         --%     $ 3,007   $ 2,657       .793%
  Mortgage-backed securities ..................     11,056      6.732       14,121    14,549      6.665
  Common stock ................................         --         --        3,228     3,812      7.137
                                                   -------      -----      -------   -------     ------
      Total ...................................    $11,056      6.732      $20,356   $21,018      5.871%
                                                   -------      -----      -------   -------     ------
      Total investment securities .............    $20,068      6.315%     $53,287   $53,422      5.889%
                                                   =======      =====      =======   =======     ======
Unrealized gain on available for sale portfolio                                135
                                                                           -------
      Total carrying value ....................                            $53,422                5.889%
                                                                           =======               ======
</TABLE>

                                       16

<PAGE>

Sources of Funds

     General. Deposits are the primary source of the Bank's funds for lending
and other investment purposes. In addition to deposits, the Bank derives funds
from wholesale borrowed funds, the amortization and prepayment of loans and
mortgage-backed securities, the maturity of investment securities and the
results of operations. Scheduled loan principal repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are influenced significantly by general interest rates and market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources or on a longer term basis for general
business purposes.

     Deposits. Consumer and commercial deposits are attracted principally from
within the Bank's market area through the offering of a broad selection of
deposit instruments including noninterest-bearing demand accounts, NOW accounts,
passbook and club accounts, money management deposit accounts, term certificate
accounts and individual retirement accounts. While the Bank accepts deposits of
$100,000 or more, it generally does not currently offer premium rates for such
deposits. Deposit account terms vary according to the minimum balance required,
the period of time during which the funds must remain on deposit, and the
interest rate, among other factors. The Bank has a committee which meets weekly
to evaluate the Bank's internal cost of funds, surveys rates offered by
competing institutions, review the Bank's cash flow requirements for lending and
liquidity and the number of certificates of deposit maturing in the upcoming
week. This committee executes rate changes when deemed appropriate. The Bank
does not obtain funds through brokers, nor does it solicit funds outside its
market area.

     Deposit Portfolio. The following table sets forth information regarding
interest rates, terms, minimum amounts, account types and balances of the Bank's
savings and other deposits as of December 31, 2001:

<TABLE>
<CAPTION>
  Weighted                                                                                           Percentage
   Average                                                                Minimum                     of Total
Interest Rate        Minimum Term         Checking and Savings Deposits   Amount       Balances       Deposits
-------------    ---------------------    -----------------------------   -------   -------------    ----------
                                                                                    (In Thousands)
   <S>           <C>                      <C>                             <C>        <C>              <C>
   0.000%        None                     Non-interest demand account     $   50     $ 13,036           7.75%
   1.494         None                     NOW accounts                       500       15,231           9.06
   1.517         None                     Savings Accounts - Fixed Rate      100       41,676          24.79
   2.601         None                     Savings Account- Tiered Rate       100       19,140          11.38
   3.755         None                     Money Management Accounts        1,500        4,417           2.63

                                          Certificates of Deposit
                                          -----------------------

   1.999         30-Day                   Fixed term, fixed rate           2,500          540           0.32
   3.465         6 months                 Fixed term, fixed rate           2,500        8,818           5.24
   4.448         12 months                Fixed term, fixed rate           1,000       23,995          14.27
   4.472         15 months                Fixed term, fixed rate           1,000        3,861           2.30
   2.901         18 months                Fixed term, variable rate        1,000        1,366           0.81
   5.548         18 months                Fixed term, fixed rate           1,000        6,389           3.80
   5.981         24 months                Fixed term, fixed rate           1,000        5,019           2.98
   5.763         30 months                Fixed term, fixed rate           1,000        2,865           1.70
   6.009         36 months                Fixed term, fixed rate/(1)/      1,000        8,024           4.77
   5.928         48 months                Fixed term, fixed rate/(1)/      1,000        4,180           2.49
   6.291         60 months                Fixed term, fixed rate           1,000        1,966           1.17
   6.388         84 months                Fixed term, fixed rate           1,000        7,617           4.53
   3.045         60 through 120 months    Fixed term, fixed rate           1,000            4           0.00
                                                                                     --------         -------
                 TOTAL                                                               $168,144/(2)/    100.00%
                                                                                     ========         =======
</TABLE>

----------
/(1)/This deposit product allows the depositor to elect to adjust the interest
     rate paid once during the initial term of the deposit to the then
     prevailing rate.
/(2)/Excludes escrow accounts totalling $1,444,984 at December 31, 2001.

                                       17

<PAGE>

         The following table sets forth the change in dollar amount of savings
deposits in the various types of savings accounts offered by the Bank between
the dates indicated.

<TABLE>
<CAPTION>
                                 Balance         Percent              Balance    Percent              Balance    Percent
                                    at              of        Incr.     at         of        Incr.       at         of
                                 12/31/01        Deposits    (Decr)   12/31/00   Deposits   (Decr)    12/31/99   Deposits
                                 --------        --------   -------   --------   --------   -------   --------   --------
                                                                  (Dollars In Thousands)
<S>                              <C>             <C>        <C>       <C>        <C>        <C>       <C>        <C>
Club accounts.................   $    974          0.58%         16   $    958     0.60%        (44)  $  1,002     0.66%
Noninterest accounts..........     13,036          7.75       3,140      9,896     6.17         150      9,746     6.43
NOW accounts..................     15,231          9.06        (280)    15,511     9.67       1,515     13,996     9.24
Passbooks.....................     59,842         35.59       2,968     56,874    35.47      (1,555)    58,429    38.56
Money management accounts ....      4,417          2.63       4,417         --       --          --         --       --
Time deposits which mature:
Within 12 months..............     51,172         30.43        (604)    51,776    32.29       5,688     46,088    30.41
Within 12-36 months...........     16,713          9.94      (1,557)    18,270    11.39       2,080     16,190    10.68
Beyond 36 months..............      6,759          4.02        (320)     7,079     4.41         994      6,085     4.02
                                 --------        ------     -------   --------   ------     -------   --------   ------
Total.........................   $168,144/(1)/   100.00%    $ 7,780   $160,364   100.00%    $ 8,828   $151,536   100.00%
                                 ========        ======     =======   ========   ======     =======   ========   ======

<CAPTION>
                                           Balance    Percent              Balance
                                  Incr.       at        of        Incr.       at
                                 (Decr)    12/31/01   Deposits    (Decr)   12/31/97
                                 -------   --------   --------   -------   --------
<S>                              <C>       <C>        <C>        <C>       <C>
Club accounts.................   $    94   $    908     0.57%    $   115   $    792
Noninterest accounts..........       273      9,473     5.94       1,829      7,644
NOW accounts..................    (2,331)    16,327    10.23       3,021     13,306
Passbooks.....................    (4,893)    63,322    39.70         177     63,145
Money management accounts ....        --         --       --          --         --
Time deposits which mature:
Within 12 months..............    (5,716)    51,804    32.48      12,831     38,973
Within 12-36 months...........     2,799     13,391     8.40      (9,220)    22,611
Beyond 36 months..............     1,801      4,284     2.68      (1,303)     5,588
                                 -------   --------   ------     -------   --------
Total.........................   $(7,973)  $159,509   100.00%    $ 7,450   $152,059
                                 =======   ========   ======     =======   ========
</TABLE>

----------
/(1)/ Excludes escrow accounts totalling $1,444,984 as of December 31, 2001.

                                       18

<PAGE>

     The following table sets forth the certificates of deposit in the Bank
classified by rates as of the dates indicated:

                                                     At December 31,
                                         ---------------------------------------
                                          2001            2000            1999
                                         -------         -------         -------
                                                      (In Thousands)
Rate
----

3.00% or less ..................         $ 7,169         $     6         $    46
3.01 - 3.99% ...................          13,701              14              20
4.00 - 4.99% ...................          17,331           1,133          20,410
5.00 -5.99% ....................          17,284          20,353          43,059
6.00 -6.99% ....................          18,000          54,324           3,643
7.00 -7.99% ....................           1,159           1,169             767
                                         -------         -------         -------
                                         $74,644         $76,999         $67,945
                                         =======         =======         =======

     The following table sets forth the amount and maturities of certificates of
deposit at December 31, 2001.

<TABLE>
<CAPTION>
                                                                    Amount Due
                                        ------------------------------------------------------------------
                                        Less Than     1-2       2-3      3-4      4-5    After 5
                                        One Year     Years     Years    Years    Years    Years     Total
                                        ---------   -------   ------   ------   ------   -------   -------
Rate                                                              (In Thousands)
----
<S>                                      <C>        <C>       <C>      <C>      <C>      <C>        <C>
3.00% or less.......................     $ 6,173    $   996   $        $        $        $         $ 7,169
3.01 - 3.99%........................      10,658      2,079      694      239        3       28     13,701
4.00 - 4.99%........................      13,290      1,854    1,164      502       55      466     17,331
5.00 - 5.99%........................      11,938      1,917    1,590      735      790      314     17,284
6.00 - 6.99%........................       8,196      4,501    1,676      819    1,150    1,658     18,000
7.00 and above......................         917        153       89       --       --        -      1,159
                                         -------    -------   ------   ------   ------   ------    -------
                                         $51,172    $11,500   $5,213   $2,295   $1,998   $2,466    $74,644
                                         =======    =======   ======   ======   ======   ======    =======
</TABLE>

     The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of December 31,
2001.

                                                                   Certificates
                                                                    of Deposit
                                                                    of $100,000
Remaining Maturity                                                    or More
------------------                                                --------------
                                                                  (In Thousands)
Three months or less ......................................           $ 2,222
Three through six months ..................................             2,337
Six through twelve months .................................             2,750
Over twelve months ........................................             2,905
                                                                      -------
    Total .................................................           $10,214
                                                                      =======

     The following table sets forth the net changes in the deposit activities of
the Bank for the periods indicated:

                                                        At December 31,
                                              ---------------------------------
                                                2001        2000         1999
                                              --------    --------    ---------
                                                       (In Thousands)
Balance at beginning of period ...........    $160,364    $151,536    $ 159,509
Net deposits (withdrawals) ...............       1,680       2,975      (13,322)
Interest credited ........................       6,100       5,853        5,349
                                              --------    --------    ---------
Ending balance ...........................    $168,144     160,364      151,536
                                              --------    --------    ---------
Net increase (decrease) in deposits ......    $  7,780    $  8,828    $  (7,973)
                                              ========    ========    =========

Borrowings

     Savings deposits are the primary source of funds of the Bank's lending and
investment activities and for its general business purposes. Borrowed funds may
be used on a short-term basis to compensate for reductions in the availability
of funds from other sources or on a longer basis for general business purposes.
At December 31, 2001, the Bank had $3.6 million in funds obtained from
repurchase agreements outstanding and $45.9 million in term advances. The Bank
is a member of the Federal Home Loan Bank System.

                                       19

<PAGE>

     The following table summarizes the outstanding balance of short-term
borrowing of the Bank for the years indicated.

                                                        At December 31,
                                                --------------------------------
                                                 2001        2000         1999
                                                -------     -------     --------
                                                        (In thousands)
Overnight Line of Credit ...................    $    --     $ 5,600     $ 4,350
Term borrowings (original term)
   90 days or less .........................     10,718      16,407       9,612
   1 year ..................................      8,500      11,000      10,995
   2 year ..................................      1,000          --       2,700
                                                -------     -------     -------
     Balance at end of period ..............    $20,218     $33,007     $27,657
                                                =======     =======     =======

Daily average during the year ..............     15,240      32,911      18,148
Maximum month-end balance ..................     20,218      40,388      27,657
Weighted average rate during the year ......       4.56%       6.29%       5.42%
Year-end average rate ......................       4.19%       6.50%       5.06%

Personnel

     As of December 31, 2001, the Bank had 80 full-time and 8 part-time
employees. None of the Bank's employees is represented by a collective
bargaining group. The Bank believes its relationship with its employees to be
good.

REGULATION AND SUPERVISION

Regulation

     General. The Bank is a New York-chartered stock savings bank and its
deposit accounts are insured up to applicable limits by the FDIC through the
Bank Insurance Fund. The Bank is subject to extensive regulation by the
Department, as its chartering agency, and by the FDIC, as its deposit insurer.
The Bank is required to file reports with, and is periodically examined by, the
FDIC and the Superintendent concerning its activities and financial condition
and must obtain regulatory approvals prior to entering into certain
transactions, including, but not limited to, mergers with or acquisitions of
other banking institutions. The Bank is a member of the FHLB of New York and is
subject to certain regulations by the Federal Home Loan Bank System. On June 19,
2001 the Company and the Mutual Holding Company completed their conversion to
federal charters. Consequently, they are subject to regulations of the Office of
Thrift Supervision ("OTS") as savings and loan holding companies. Any change in
such regulations, whether by the Department, the FDIC, or the OTS could have a
material adverse impact on the Bank, the Company, or the Mutual Holding Company.

     Regulatory requirements applicable to the Bank, the Company and the Mutual
Holding Company are referred to below or elsewhere herein.

     New York Bank Regulation. The exercise by an FDIC-insured savings bank of
the lending and investment powers under the New York State Banking Law is
limited by FDIC regulations and other federal law and regulations. In
particular, the applicable provisions of New York State Banking Law and
regulations governing the investment authority and activities of an FDIC insured
state-chartered savings bank have been substantially limited by the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and the FDIC
regulations issued pursuant thereto.

     The Bank derives its lending, investment and other authority primarily from
the applicable provisions of New York State Banking Law and the regulations of
the Department, as limited by FDIC regulations. Under these laws and
regulations, savings banks, including the Bank, may invest in real estate
mortgages, consumer and commercial loans, certain types of debt securities,
including certain corporate debt securities and obligations of federal, state
and local governments and agencies, certain types of corporate equity securities
and certain other assets. Under the statutory authority for investing in equity
securities, a savings bank may invest up to 7.5% of its assets in corporate
stock, with an overall limit of 5% of its assets invested in Common Stock.
Investment in the stock of a single corporation is limited to the lesser of 2%
of the outstanding stock of such corporation or 1% of the savings bank's assets,
except as set forth below. Such equity securities must meet certain earnings
ratios and other tests of financial performance. A savings

                                       20

<PAGE>

bank's lending powers are not subject to percentage of assets limitations,
although there are limits applicable to single borrowers. A savings bank may
also, pursuant to the "leeway" power, make investments not otherwise permitted
under the New York State Banking Law. This power permits investments in
otherwise impermissible investments of up to 1% of assets in any single
investment, subject to certain restrictions and to an aggregate limit for all
such investments of up to 5% of assets. Additionally, in lieu of investing in
such securities in accordance with and reliance upon the specific investment
authority set forth in the New York State Banking Law, savings banks are
authorized to elect to invest under a "prudent person" standard in a wider range
of investment securities as compared to the types of investments permissible
under such specific investment authority. However, in the event a savings bank
elects to utilize the "prudent person" standard, it will be unable to avail
itself of the other provisions of the New York State Banking Law and regulations
which set forth specific investment authority. The Bank has not elected to
conduct its investment activities under the "prudent person" standard. A savings
bank may also exercise trust powers upon approval of the Department.

     New York State chartered savings banks may also invest in subsidiaries
under their service corporation investment authority. A savings bank may use
this power to invest in corporations that engage in various activities
authorized for savings banks, plus any additional activities which may be
authorized by the Banking Board. Investment by a savings bank in the stock,
capital notes and debentures of its service corporations is limited to 3% of the
bank's assets, and such investments, together with the bank's loans to its
service corporations, may not exceed 10% of the savings bank's assets.
Furthermore, New York banking regulations impose requirements on loans which a
bank may make to its executive officers and directors and to certain
corporations or partnerships in which such persons have equity interests. These
requirements include, but are not limited to, requirements that (i) certain
loans must be approved in advance by a majority of the entire board of trustees
and the interested party must abstain from participating directly or indirectly
in the voting on such loan, (ii) the loan must be on terms that are not more
favorable than those offered to unaffiliated third parties, and (iii) the loan
must not involve more than a normal risk of repayment or present other
unfavorable features.

     Under the New York State Banking Law, the Superintendent may issue an order
to a New York State chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts. Upon a finding by the Department that any
director, trustee or officer of any banking organization has violated any law,
or has continued unauthorized or unsafe practices in conducting the business of
the banking organization after having been notified by the Superintendent to
discontinue such practices, such director, trustee or officer may be removed
from office after notice and an opportunity to be heard. The Bank does not know
of any past or current practice, condition or violation that might lead to any
proceeding by the Superintendent or the Department against the Bank or any of
its directors, trustees or officers.

     Insurance of Accounts and Regulation by the FDIC. The Bank is a member of
the BIF, which is administered by the FDIC. Deposits are insured up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the U.S. Government. As insurer, the FDIC imposes deposit insurance
premiums and is authorized to conduct examinations of and to require reporting
by FDIC-insured institutions. It also may prohibit any FDIC-insured institution
from engaging in any activity the FDIC determines by regulation or order to pose
a serious risk to the FDIC. The FDIC also has the authority to initiate
enforcement actions against savings banks, after giving the Superintendent an
opportunity to take such action, and may terminate the deposit insurance if it
determines that the institution has engaged or is engaging in unsafe or unsound
practices or is in an unsafe or unsound condition.

     The FDIC establishes deposit insurance premiums based upon the risks a
particular bank or savings association poses to its deposit insurance funds.
Under the risk-based deposit insurance assessment system, the FDIC assigns an
institution to one of three capital categories based on the institution's
financial information, as of the reporting period ending six months before the
assessment period, consisting of: (i) well capitalized; (ii) adequately
capitalized; or (iii) undercapitalized and one of three supervisory
subcategories within each capital group. With respect to the capital ratios,
institutions are classified as well capitalized or adequately capitalized using
ratios that are substantially similar to the prompt corrective action capital
ratios discussed above. Any institution that does not meet these two definitions
is deemed to be undercapitalized for this purpose. The supervisory subgroup to
which an institution is assigned is based on a supervisory evaluation provided
to the FDIC by the institution's primary federal regulator and information that
the FDIC determines to be relevant to the institution's financial condition and
the risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
assessment

                                       21

<PAGE>

rate depends on the capital category and supervisory category to which it is
assigned. Under the final risk-based assessment system, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessments rates for deposit insurance currently range from 0 basis points to
27 basis points. The capital and supervisory subgroup to which an institution is
assigned by the FDIC is confidential and may not be disclosed. The Bank's rate
of deposit insurance assessments will depend upon the category and subcategory
to which the Bank is assigned by the FDIC. Any increase in insurance assessments
could have an adverse effect on the earnings of the Bank.

     Regulatory Capital Requirements. The FDIC has adopted risk-based capital
guidelines to which the Bank is subject. The guidelines establish a systematic
analytical framework that makes regulatory capital requirements more sensitive
to differences in risk profiles among banking organizations. The Bank is
required to maintain certain levels of regulatory capital in relation to
regulatory risk-weighted assets. The ratio of such regulatory capital to
regulatory risk-weighted assets is referred to as the Bank's "risk-based capital
ratio." Risk-based capital ratios are determined by allocating assets and
specified off-balance sheet items to four risk-weighted categories ranging from
0% to 100%, with higher levels of capital being required for the categories
perceived as representing greater risk.

     These guidelines divide a savings bank's capital into two tiers. The first
tier ("Tier I") includes common equity, retained earnings, certain
non-cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions. Savings banks are required to maintain a total risk-based
capital ratio of at least 8%, of which at least 4% must be Tier I capital.

     In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio (Tier I capital to adjusted total assets as specified in
the regulations). These regulations provide for a minimum Tier I leverage ratio
of 3% for banks that meet certain specified criteria, including that they have
the highest examination rating and are not experiencing or anticipating
significant growth. All other banks are required to maintain a Tier I leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The
FDIC and the other federal banking regulators have proposed amendments to their
minimum capital regulations to provide that the minimum leverage capital ratio
for a depository institution that has been assigned the highest composite rating
of 1 under the Uniform Financial Institutions Rating System will be 3% and that
the minimum leverage capital ratio for any other depository institution will be
4% unless a higher leverage capital ratio is warranted by the particular
circumstances or risk profile of the depository institution. The FDIC may,
however, set higher leverage and risk-based capital requirements on individual
institutions when particular circumstances warrant. Savings banks experiencing
or anticipating significant growth are expected to maintain capital ratios,
including tangible capital positions, well above the minimum levels.

     Limitations on Dividends and Other Capital Distributions. The FDIC has the
authority to use its enforcement powers to prohibit a savings bank from paying
dividends if, in its opinion, the payment of dividends would constitute an
unsafe or unsound practice. Federal law also prohibits the payment of dividends
by a bank that will result in the bank failing to meet its applicable capital
requirements on a pro forma basis. New York law also restricts the Bank from
declaring a dividend which would reduce its capital below (i) the amount
required to be maintained by state law and regulation, or (ii) the amount of the
Bank's liquidation account established in connection with the Reorganization.

     Prompt Corrective Action. The federal banking agencies have promulgated
regulations to implement the system of prompt corrective action required by
federal law. Under the regulations, a bank shall be deemed to be (i) "well
capitalized" if it has total risk-based capital of 10.0% or more, has a Tier I
risk-based capital ratio of 6.0% or more, has a Tier I leverage capital ratio of
5.0% or more and is not subject to any written capital order or directive; (ii)
"adequately capitalized" if it has a total risk-based capital ratio of 8.0% or
more, a Tier I risk-based capital ratio of 4.0% or more and a Tier I leverage
capital ratio of 4.0% or more (3.0% under certain circumstances) and does not
meet the definition of "well capitalized"; (iii) "undercapitalized" if it has a
total risk-based capital ratio that is less than 8.0%, a Tier I risk-based
capital ratio that is less than 4.0% or a Tier I leverage capital ratio that is
less than 4.0% (3.0% under certain circumstances); (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio that is less than
6.0%, a Tier

                                       22

<PAGE>

I risk-based capital ratio that is less than 3.0% or a Tier I leverage capital
ratio that is less than 3.0%; and (v) "critically undercapitalized" if it has a
ratio of tangible equity to total assets that is equal to or less than 2.0%.
Federal law and regulations also specify circumstances under which a federal
banking agency may reclassify a well capitalized institution as adequately
capitalized and may require an adequately capitalized institution to comply with
supervisory actions as if it were in the next lower category (except that the
FDIC may not reclassify a significantly undercapitalized institution as
critically undercapitalized).

     Based on the foregoing, the Bank is currently classified as a "well
capitalized" savings institution.

     Transactions With Affiliates. Under current federal law, transactions
between depository institutions and their affiliates are governed by Sections
23A and 23B of the Federal Reserve Act. An affiliate of a savings bank is any
company or entity that controls, is controlled by, or is under common control
with the savings bank, other than a subsidiary of the savings bank. In a holding
company context, at a minimum, the parent holding company of a savings bank and
any companies which are controlled by such parent holding company are affiliates
of the savings bank. Generally, Section 23A limits the extent to which the
savings bank or its subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of such savings bank's capital stock and
surplus and contains an aggregate limit on all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus. The term
"covered transaction" includes the making of loans or other extensions of credit
to an affiliate; the purchase of assets from an affiliate, the purchase of, or
an investment in, the securities of an affiliate; the acceptance of securities
of an affiliate as collateral for a loan or extension of credit to any person;
or issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate. Section 23A also establishes specific collateral requirements for
loans or extensions of credit to, or guarantees, acceptances on letters of
credit issued on behalf of an affiliate. Section 23B requires that covered
transactions and a broad list of other specified transactions be on terms
substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with nonaffiliates.

     Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers, and stockholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the board of directors of the savings bank. Any "interested"
director may not participate in the voting. The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive officers and principal stockholders must generally be made on terms
substantially the same as offered in comparable transactions to other persons.
Section 22(g) of the Federal Reserve Act places additional limitations on loans
to executive officers.

Federal Holding Company Regulation.

     General. The Company and the Mutual Holding Company are nondiversified
mutual savings and loan holding companies within the meaning of the Home Owners'
Loan Act. As such, the Company and the Mutual Holding Company are registered
with the OTS and are subject to OTS regulations, examinations, supervision and
reporting requirements. In addition, the OTS has enforcement authority over the
Company and the Mutual Holding Company, and their subsidiaries. Among other
things, this authority permits the OTS to restrict or prohibit activities that
are determined to be a serious risk to the subsidiary savings institution.

     Permitted Activities. Under OTS regulation and policy, a mutual holding
company and a federally chartered mid-tier holding company such as the Company
may engage in the following activities: (i) investing in the stock of a savings
association; (ii) acquiring a mutual association through the merger of such
association into a savings association subsidiary of such holding company or an
interim savings association subsidiary of such holding company; (iii) merging
with or acquiring another holding company, one of whose subsidiaries is a
savings association; (iv) investing in a corporation, the capital stock of which
is available for purchase by a savings association under federal law or under
the

                                       23

<PAGE>

law of any state where the subsidiary savings association or associations share
their home offices; (v) furnishing or performing management services for a
savings association subsidiary of such company; (vi) holding, managing or
liquidating assets owned or acquired from a savings subsidiary of such company;
(vii) holding or managing properties used or occupied by a savings association
subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix)
any other activity (A) that the Federal Reserve Board, by regulation, has
determined to be permissible for bank holding companies under Section 4(c) of
the Bank Holding Company Act of 1956, unless the Director, by regulation,
prohibits or limits any such activity for savings and loan holding companies; or
(B) in which multiple savings and loan holding companies were authorized (by
regulation) to directly engage on March 5, 1987; (x) any activity permissible
for financial holding companies under Section 4(k) of the Bank Holding Company
Act, including securities and insurance underwriting; and (xi) purchasing,
holding, or disposing of stock acquired in connection with a qualified stock
issuance if the purchase of such stock by such savings and loan holding company
is approved by the Director. If a mutual holding company acquires or merges with
another holding company, the holding company acquired or the holding company
resulting from such merger or acquisition may only invest in assets and engage
in activities listed in (i) through (xi) above, and has a period of two years to
cease any nonconforming activities and divest of any nonconforming investments.

     The Home Owners' Loan Act prohibits a savings and loan holding company,
directly or indirectly, or through one or more subsidiaries, from acquiring
another savings association or holding company thereof, without prior written
approval of the OTS. It also prohibits the acquisition or retention of, with
certain exceptions, more than 5% of a nonsubsidiary savings association, a
nonsubsidiary holding company, or a nonsubsidiary company engaged in activities
other than those permitted by the Home Owners' Loan Act; or acquiring or
retaining control of an institution that is not federally insured. In evaluating
applications by holding companies to acquire savings association, the OTS must
consider the financial and managerial resources, future prospects of the company
and association involved, the effect of the acquisition on the risk to the
insurance fund, the convenience and needs of the community and competitive
factors.

     The Office of Thrift Supervision is prohibited from approving any
acquisition that would result in a multiple savings and loan holding company
controlling savings association in more than one state, subject to two
exceptions: (i) the approval of interstate supervisory acquisitions by savings
and loan holding companies, and (ii) the acquisition of a savings institution in
another state if the laws of the state of the target savings institution
specifically permit such acquisitions. The states vary in the extent to which
they permit interstate savings and loan holding company acquisitions.

     Waivers of Dividends by Mutual Holding Company. Office of Thrift
Supervision regulations require the Mutual Holding Company to notify the OTS of
any proposed waiver of its receipt of dividends from the Company. The OTS
reviews dividend waiver notices on a case-by-case basis, and, in general, does
not object to any such waiver if: (i) the mutual holding company's board of
directors determines that such waiver is consistent with such directors'
fiduciary duties to the mutual holding company's members; (ii) for as long as
the savings association subsidiary is controlled by the mutual holding company,
the dollar amount of dividends waived by the mutual holding company are
considered as a restriction on the retained earnings of the savings association,
which restriction, if material, is disclosed in the public financial statements
of the savings association as a note to the financial statements; (iii) the
amount of any dividend waived by the mutual holding company is available for
declaration as a dividend solely to the mutual holding company, and, in
accordance with SFAS 5, where the savings association determines that the
payment of such dividend to the mutual holding company is probable, an
appropriate dollar amount is recorded as a liability; and (iv) the amount of any
waived dividend is considered as having been paid by the savings association in
evaluating any proposed dividend under OTS capital distribution regulations. The
Mutual Holding Company intends to waive dividends paid by the Company. Under OTS
regulations, our public stockholders would not be diluted because of any
dividends waived by the Mutual Holding Company (and waived dividends would not
be considered in determining an appropriate exchange ratio) in the event the
Mutual Holding Company converts to stock form.

     Conversion of the Mutual Holding Company to Stock Form. OTS regulations
permit the Mutual Holding Company to convert from the mutual form of
organization to the capital stock form of organization (a "Conversion
Transaction"). There can be no assurance when, if ever, a Conversion Transaction
will occur, and the Board of Directors has no current intention or plan to
undertake a Conversion Transaction. In a Conversion Transaction a new holding
company would be formed as the successor to the Company (the "New Holding
Company"), the Mutual Holding Company's corporate existence would end, and
certain depositors of the Bank would receive the right to subscribe for

                                       24

<PAGE>

additional shares of the New Holding Company. In a Conversion Transaction, each
share of common stock held by stockholders other than the Mutual Holding Company
("Minority Stockholders") would be automatically converted into a number of
shares of common stock of the New Holding Company determined pursuant an
exchange ratio that ensures that Minority Stockholders own the same percentage
of common stock in the New Holding Company as they owned in the Company
immediately prior to the Conversion Transaction. Under OTS regulations, Minority
Stockholders would not be diluted because of any dividends waived by the Mutual
Holding Company (and waived dividends would not be considered in determining an
appropriate exchange ratio), in the event the Mutual Holding Company converts to
stock form. The total number of shares held by Minority Stockholders after a
Conversion Transaction also would be increased by any purchases by Minority
Stockholders in the stock offering conducted as part of the Conversion
Transaction.

     New York State Bank Holding Company Regulation. In addition to the federal
regulation, a holding company controlling a state chartered savings bank
organized or doing business in New York State also may be subject to regulation
under the New York State Banking Law. The term "bank holding company," for the
purposes of the New York State Banking Law, is defined generally to include any
person, company or trust that directly or indirectly either controls the
election of a majority of the directors or owns, controls or holds with power to
vote more than 10% of the voting stock of a bank holding company or, if the
Company is a banking institution, another banking institution, or 10% or more of
the voting stock of each of two or more banking institutions. In general, a bank
holding company controlling, directly or indirectly, only one banking
institution will not be deemed to be a bank holding company for the purposes of
the New York State Banking Law. Under New York State Banking Law, the prior
approval of the Banking Board is required before: (1) any action is taken that
causes any company to become a bank holding company; (2) any action is taken
that causes any banking institution to become or be merged or consolidated with
a subsidiary of a bank holding company; (3) any bank holding company acquires
direct or indirect ownership or control of more than 5% of the voting stock of a
banking institution; (4) any bank holding company or subsidiary thereof acquires
all or substantially all of the assets of a banking institution; or (5) any
action is taken that causes any bank holding company to merge or consolidate
with another bank holding company. Additionally, certain restrictions apply to
New York State bank holding companies regarding the acquisition of banking
institutions which have been chartered five years or less and are located in
smaller communities. Officers, directors and employees of New York State bank
holding companies are subject to limitations regarding their affiliation with
securities underwriting or brokerage firms and other bank holding companies and
limitations regarding loans obtained from its subsidiaries.

     Financial Services Modernization Act. On November 12, 1999, the
Gramm-Leach-Bliley Act was signed into law, repealing provisions of the
depression-era Glass-Steagall Act, which prohibited commercial banks, securities
firms, and insurance companies from affiliating with each other and engaging in
each other's businesses. The major provisions of the Act took effect on March
12, 2000.

     The Act creates a new type of financial services company called a
"Financial Holding Company" (an "FHC"), a bank holding company with dramatically
expanded powers. FHCs may offer virtually any type of financial service,
including banking, securities underwriting, insurance (both agency and
underwriting) and merchant banking. The Federal Reserve serves as the primary
"umbrella" regulator of FHCs. Balanced against the attractiveness of these
expanded powers are higher standards for capital adequacy and management, with
heavy penalties for noncompliance.

     Bank holding companies that wish to engage in expanded activities but do
not wish to become financial holding companies may elect to establish "financial
subsidiaries," which are subsidiaries of national banks with expanded powers.
The Act permits financial subsidiaries to engage in the same types of activities
permissible for nonbank subsidiaries of financial holding companies, with the
exception of merchant banking, insurance underwriting and real estate investment
and development. Merchant banking may be permitted after a five-year waiting
period under certain regulatory circumstances.

     Implementing regulations under the Act have not yet been promulgated, and
though the Company cannot predict the full impact of the new legislation, there
is likely to be consolidation among financial services institutions and
increased competition for the Company. The Company expects to remain a bank
holding company for the time being and access its options as circumstances
change.

                                       25

<PAGE>

     Federal Securities Law. The Common Stock of the Company is registered with
the SEC under the Exchange Act, prior to completion of the Offering and
Reorganization. The Company is subject to the information, proxy solicitation,
insider trading restrictions and other requirements of the SEC under the
Exchange Act.

     The Company Common Stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Company may not be resold
without registration or unless sold in accordance with certain resale
restrictions. If the Company meets specified current public information
requirements, each affiliate of the Company is able to sell in the public
market, without registration, a limited number of shares in any three-month
period.

     Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain noninterest-bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At December 31, 2001, the Bank was in compliance with these
reserve requirements.

     Federal Regulation. Under the Community Reinvestment Act, as amended (the
"CRA"), as implemented by FDIC regulations, a savings bank has a continuing and
affirmative obligation, consistent with its safe and sound operation, to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the FDIC, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution. The CRA requires the FDIC to provide a written evaluation
of an institution's CRA performance utilizing a four-tiered descriptive rating
system. The Bank's latest CRA rating was "outstanding."

     New York State Regulation. The Bank is also subject to provisions of the
New York State Banking Law which impose continuing and affirmative obligations
upon banking institutions organized in New York State to serve the credit needs
of its local community ("NYCRA") which are substantially similar to those
imposed by the CRA. Pursuant to the NYCRA, a bank must file an annual NYCRA
report and copies of all federal CRA reports with the Department. The NYCRA
requires the Department to make a biennial written assessment of a bank's
compliance with the NYCRA, utilizing a four-tiered rating system and make such
assessment available to the public. The NYCRA also requires the Superintendent
to consider a bank's NYCRA rating when reviewing a bank's application to engage
in certain transactions, including mergers, asset purchases and the
establishment of branch offices or automated teller machines, and provides that
such assessment may serve as a basis for the denial of any such application.

     The Bank's NYCRA rating as of its latest examination was "satisfactory."

FEDERAL AND STATE TAXATION

     Federal Taxation. The following discussion of federal taxation is intended
only to summarize certain pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to the Company or the
Bank.

     Bad Debt Reserves. Prior to the Small-Business Job Protection Act of 1996
("1996 Act"), the Bank was permitted to establish a reserve for bad debts and to
make annual additions to the reserve. These additions could, within specified
formula limits, be deducted in arriving at the Bank's taxable income. As a
result of the 1996 Act, the Bank began using the specific charge off method in
computing its bad debt deduction beginning with its 1996 Federal tax return. In
addition, the federal legislation required the recapture (over a six year
period) of the excess of tax bad debt reserves at December 31, 1995 over those
established as of December 31, 1987.

     Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into taxable
income should the Bank fail to meet certain thrift asset and definitional tests.
New federal legislation eliminated these thrift related recapture rules.
However, under current law, pre-1988 reserves remain subject to recapture should
the Bank make certain non-dividend distributions.

                                       26

<PAGE>

     Minimum Tax. The Code imposes an alternative minimum tax ("AMT") at a rate
of 20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount. Certain payments of
alternative minimum tax may be used as credits against regular tax liabilities
in future years.

     Net Operating Loss Carryovers. A financial institution may carry back net
operating losses to the preceding five taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years ending after December 31, 2000.

     The Internal Revenue Service has examined the federal income tax return for
the year ended 1992. The statute of limitations has expired for all calendar
year-end tax returns through 1997. See Note 12 to the Financial Statements.

State Taxation

     New York Taxation. The Bank is subject to the New York State Franchise Tax
on Banking Corporations in an annual amount equal to the greater of (i) 8.5% of
the Bank's "entire net income" allocable to New York State during the taxable
year, or (ii) the applicable alternative minimum tax. The alternative minimum
tax is generally the greater of (a) 0.01% of the value of the Bank's assets
allocable to New York State with certain modifications, (b) 3% of the Bank's
"alternative entire net income" allocable to New York State, or (c) $250. Entire
net income is similar to federal taxable income, subject to certain
modifications and alternative entire net income is equal to entire net income
with certain modifications.

ITEM 2. Properties
------------------

     The Bank conducts its business through its main office located in Oswego,
New York, and four full service branch offices located in Oswego County. The
following table sets forth certain information concerning the main office and
each branch office of the Bank at December 31, 2001. The aggregate net book
value of the Bank's premises and equipment was $4.9 million at December 31,
2001. For additional information regarding the Bank's properties, see Note 5 to
Notes to Financial Statements.

LOCATION                    OPENING DATE    OWNED/LEASED    ANNUAL RENT
--------                    ------------    ------------    -----------

Main Office                     1874          Owned             --
-----------
214 West First Street
Oswego, New York  13126

Plaza Branch                    1989          Owned (1)       $18,000
------------
Route 104, Ames Plaza
Oswego, New York  13126

Mexico Branch                   1978          Owned             --
-------------
Norman & Main Streets
Mexico, New York  13114

Oswego East Branch              1994          Owned             --
------------------
34 East Bridge Street
Oswego, New York  13126

Fulton Branch                   1994          Owned             --
-------------
114 Oneida Street
Fulton, New York  13068

----------
(1)  The building is a leasehold improvement owned by the Bank. The underlying
     land is leased.

                                       27

<PAGE>

ITEM 3. Legal Proceedings
-------------------------

     There are various claims and lawsuits to which the Company is periodically
involved incident to the Company's business. In the opinion of management,
except as set forth below, such claims and lawsuits in the aggregate are
immaterial to the Company's consolidated financial condition and results of
operations.

     On November 28, 2001, the Company and its Board of Directors were named as
defendants in Jewelcor Management, Inc. ("Jewelcor") v. Pathfinder Bancorp,
                       ---------------------------------------------------
Inc., et al. This action was filed in the United States District Court, Northern
-----------
District. In its complaint, Jewelcor alleges that the Company's directors
breached their fiduciary duties to the Company by failing to consider an offer
from Fulton Savings Bank for the sale of the Company. Jewelcor is seeking
damages in excess of $1 million, punitive damages in excess of $10 million and
equitable relief. Management and the Board of Directors of the Company have
carefully reviewed Jewelcor's complaint and believes that it is without merit.
The Company intends to vigorously defend against the proceeding and expects to
prevail upon the merits.

ITEM 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

     No matters were submitted to a vote of stockholders during the fourth
quarter of the year under report.

                                     PART II

ITEM 5. Market for Company's Common Stock and Related Security Holder Matters
-----------------------------------------------------------------------------

     The "Market for Common Stock" section of the Company's Annual Report to
Stockholders is incorporated herein by reference.

ITEM 6.  Selected Financial Data
--------------------------------

     The selected financial information for the year ended December 31, 2001 is
filed as part of the Company's Annual Report to Stockholders and is incorporated
by reference.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
        of Operations
        -------------

     The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of the Company's Annual Report to Stockholders is
incorporated herein by reference.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
-------------------------------------------------------------------

     The information required by this item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report to Stockholders which is incorporated herein by
reference.

ITEM 8. Financial Statements and Supplementary Data
---------------------------------------------------

     The financial statements are contained in the Company's Annual Report to
Stockholders and are incorporated herein by reference.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
        Financial Disclosure
        --------------------

     None.

                                       28

<PAGE>

                                    PART III
                                    --------

ITEM 10. Directors and Executive Officers of the Company
--------------------------------------------------------

     (a) Information concerning the directors of the Company is incorporated by
reference hereunder in the Company's Proxy Materials for the Annual Meeting of
Stockholders.

     (b) Set forth below is information concerning the Principal Officers of the
Company at December 31, 2001.

<TABLE>
<CAPTION>
         Name           Age                Positions Held With the Company
---------------------   ---   ------------------------------------------------------------
<S>                     <C>   <C>
Chris C. Gagas          71    Chairman of the Board

Thomas W. Schneider     40    President and Chief Executive Officer

W. David Schermerhorn   41    Executive Vice President-Chief Credit Officer

James A. Dowd, CPA      34    Vice President, Chief Financial Officer and Trust Officer

Melissa A. Miller       44    Vice President, Secretary, Compliance Officer

Gregory L. Mills        41    Vice President, Director of Marketing, Branch Administrator,
                              Security Officer

Annette L. Burns, CPA   29    Controller

Anita J. Austin         52    Internal Auditor
</TABLE>

ITEM 11. Executive Compensation
-------------------------------

     Information with respect to management compensation and transactions
required under this item is incorporated by reference hereunder in the Company's
Proxy Materials for the Annual Meeting of Stockholders under the caption
"Compensation".

ITEM 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

     The information contained under the sections captioned "Stock Ownership of
Management" is incorporated by reference to the Company's Proxy Materials for
its Annual Meeting of Stockholders.

ITEM 13. Certain Relationships and Related Transactions
-------------------------------------------------------

     The information required by this item is set forth under the caption
"Certain Transactions" in the Definitive Proxy Materials for the Annual Meeting
of Stockholders and is incorporated herein by reference.

                                       29

<PAGE>

                                    PART IV
                                    -------

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------

     (a)(1) Financial Statements
            --------------------

The exhibits and financial statement schedules filed as a part of this Form 10-K
are as follows:

          (A)  Independent Auditors' Report;

          (B)  Consolidated Statements of Condition - December 31, 2001 and
               2000.

          (C)  Consolidated Statements of Income - years ended December 31,
               2001, 2000 and 1999.

          (D)  Consolidated Statements of Stockholders' Equity - years ended
               December 31, 2001, 2000 and 1999.

          (F)  Consolidated Statements of Cash Flows - years ended December 31,
               2001, 2000 and 1999; and

          (G)  Notes to Consolidated Financial Statements.

     (a)(2) Financial Statement Schedules
            -----------------------------

     All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to Consolidated
Financial Statements.

     (b) Reports on Form 8-K
         -------------------

     The Company has not filed a Current Report on Form 8-K during the fourth
quarter of the fiscal year ended December 31, 2001.

     (c) Exhibits
         --------

<TABLE>
<S>           <C>

     3.1      Certificate of Incorporation of Pathfinder Bancorp, Inc. (Incorporated
              herein by reference to the Company's Current Report on Form 8-K dated
              June 25, 2001)

     3.2      Bylaws of Pathfinder Bancorp, Inc. (Incorporated herein by reference
              to the Company's Current Report on Form 8-K dated June 25, 2001)

     4        Form of Stock Certificate of Pathfinder Bancorp, Inc. (Incorporated
              herein by reference to the Company's Current Report on Form 8-K dated
              June 25, 2001)

     10.1     Form of Pathfinder Bank 2001 Stock Option Plan (Incorporated herein by
              reference to the Company's S-4 file no. 333-36051)

     10.2     Form of Pathfinder Bank 2001 Recognition and Retention Plan
              (Incorporated by reference to the Company's S-4 file no. 333-36051)
</TABLE>

                                       30

<PAGE>

<TABLE>
<S>           <C>
     10.3     Employment Agreement between the Bank and Thomas W. Schneider,
              President and Chief Executive Officer (Incorporated by reference to
              the Company's S-4 file no. 333-36051)

     10.4     Employment Agreement between the Bank and W. David Schermerhorn,
              Executive Vice President - Loan Administration (Incorporated by
              reference to the Company's S-4 file no. 333-36051)

     13       Annual Report to Stockholders

     21       Subsidiaries of Company
</TABLE>

                                       31

<PAGE>

                                   Signatures

     Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                           Pathfinder Bancorp, Inc.


Date: March 25, 2002                       By: /s/ Thomas W. Schneider
                                           -------------------------------------
                                           Thomas W. Schneider
                                           President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<S>                                               <C>


                                                  By: /s/ Chris C. Gagas
                                                      -------------------------------------
                                                      Chris C. Gagas, Chairman of the Board

                                                  Date: March 25, 2002


By: /s/ Thomas W. Schneider                       By: /s/ Chris R. Burritt
    ----------------------------------------          -------------------------------------
    Thomas W. Schneider, President and Chief          Chris R. Burritt, Director
    Executive Officer

Date: March 25, 2002                              Date: March 25, 2002


By: /s/ James A. Dowd                             By: /s/ Raymond W. Jung
    ----------------------------------------          -------------------------------------
    James A. Dowd, Vice President, Chief              Raymond W. Jung, Director
    Financial Officer and Trust Officer

Date: March 25, 2002                              Date: March 25, 2002


By: /s/ Bruce E. Manwaring                        By: /s/ George P. Joyce
    ----------------------------------------          -------------------------------------
    Bruce E. Manwaring, Director                      George P. Joyce, Director

Date: March 25, 2002                              Date: March 25, 2002


By: /s/ L. William Nelson, Jr.                    By: /s/ Corte J. Spencer
    ----------------------------------------          -------------------------------------
    L. William Nelson, Jr., Director                  Corte J. Spencer, Director

Date: March 25, 2002                              Date: March 25, 2002


By: /s/ Steven W. Thomas                          By: /s/ Jannette Resnick
    ----------------------------------------          -------------------------------------
    Steven W. Thomas, Director                        Janette Resnick, Director

Date: March 25, 2002                              Date: March 25, 2002
</TABLE>

<PAGE>

                            Exhibit Index
                            -------------
<TABLE>
<S>           <C>
     3.1      Certificate of Incorporation of Pathfinder Bancorp, Inc. (Incorporated
              herein by reference to the Company's Current Report on Form 8-K dated
              June 25, 2001)

     3.2      Bylaws of Pathfinder Bancorp, Inc. (Incorporated herein by reference
              to the Company's Current Report on Form 8-K dated June 25, 2001)

     4        Form of Stock Certificate of Pathfinder Bancorp, Inc. (Incorporated
              herein by reference to the Company's Current Report on Form 8-K dated
              June 25, 2001)

     10.1     Form of Pathfinder Bank 2001 Stock Option Plan (Incorporated herein by
              reference to the Company's S-4 file no. 333-36051)

     10.2     Form of Pathfinder Bank 2001 Recognition and Retention Plan
              (Incorporated herein by reference to the Company's S-4 file no.
              333-36051)

     10.3     Employment Agreement between the Bank and Thomas W. Schneider,
              President and Chief Executive Officer (Incorporated herein by
              reference to the Company's S-4 file no. 333-36051)

     10.4     Employment Agreement between the Bank and W. David Schermerhorn,
              Executive Vice President - Loan Administration (Incorporated herein by
              reference to the Company's S-4 file no. 333-36051)

     13       Annual Report to Stockholders

     21       Subsidiaries of Company
</TABLE>