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, 2002
                                       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>
<CAPTION>

<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]

   Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
YES     NO [X]

   As of March 18, 2003, there were 2,914,669 shares issued and 2,441,882 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 March 18, 2003 ($14.35)
was $12,321,517.

    The Form 10-K contains 38 pages. The Exhibit Index is located on page 38.

                      DOCUMENTS INCORPORATED BY REFERENCE

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

                                     PART I
                                     ------

ITEM 1. BUSINESS
----------------

GENERAL

PATHFINDER BANCORP, INC.

     Pathfinder Bancorp, Inc. (the "Company") is a Federal corporation. On July
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 business of the Company is its investment in
Pathfinder Bank (the "Bank") and Pathfinder Statutory Trust 1. 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"). At February 28, 2003, the Mutual
Holding Company held 1,583,239 shares of Common Stock and the public held
1,027,257 shares of Common Stock (the "Minority Shareholders").

     On June 26, 2002, the Company formed a wholly owned subsidiary, Pathfinder
Statutory Trust I, a Connecticut business trust. The trust issued $5,000,000 of
30-year floating rate Company-obligated pooled capital securities of Pathfinder
Statutory Trust I. The Company borrowed the proceeds of the capital securities
from its subsidiary by issuing floating rate junior subordinated deferrable
interest debentures having substantially similar terms. The capital securities
mature in 2032 and qualify as Tier 1 capital by the Federal Deposit Insurance
Company and the Office of Thrift Supervision. The capital securities of the
trust are a pooled trust preferred fund of Preferred Term Securities VI, Ltd.
and are tied to the 3 month LIBOR plus 3.45% with a five year call provision.
These securities are guaranteed by the Company.

     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 six 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, 2002, the Bank had total assets of
$279.1 million, total deposits of $204.5 million, and shareholders' equity of
$23.2 million.

     On October 25, 2002, Pathfinder Bank completed the purchase of assets and
the assumption of non-municipal deposits of the Lacona, New York branch of
Cayuga Bank (the "Branch Acquisition"). In addition, Pathfinder Bank formed a
limited purpose commercial bank subsidiary, Pathfinder Commercial Bank.
Pathfinder Commercial Bank was established to serve the depository needs of
public entities in its market area and it assumed the municipal deposit
liabilities acquired as part of the Branch Acquisition. The transaction included
approximately $26.4 million in deposits, $2.3 million in loans and $430,000 in
vault cash and facilities and equipment. The acquisition reflects a premium on
deposit liabilities assumed of approximately $2.4 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, 2002, $167.0 million, or 91.4% of the
Bank's total loan portfolio consisted of loans secured by real estate, of which
$123.2 million, or 73.8 %, were loans secured by one- to four-family residences,

                                        2
<PAGE>
$31.7 million, or 19.0%, were secured by commercial real estate and $973,000, or
..5%, were secured by multi-family properties. Additionally, $11.2 million, or
6.7 %, of total real estate loans, were secured by second liens on residential
properties that are classified in consumer loans. The Bank also originates
commercial and consumer loans that totaled $13.2 and $3.9 million, respectively,
or 9.4%, 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 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, 2002
Pathfinder REIT, Inc. held $27.8 million in mortgage and mortgage related
assets. All disclosures in the Form 10-K relating to the Bank's loans and
investments include 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, NRG and Huhtamaki. 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 generally originates loans for
retention in its portfolio and for sale in the secondary market. During 2002,
the Bank sold approximately $19.4 million of loans in the secondary market. The
loan sales resulted in approximately $152,000 in capitalized servicing rights.
At December 31, 2002, $3.6 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.

                                        3
<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,
-----------------------------------------------------------------------------------------
                                         2002              2001             2000
                                   Amount  Percent    Amount Percent    Amount  Percent
------------------------------------------------------------------------------------------
                                               (Dollars  in  Thousands)
<S>                              <C>        <C>     <C>        <C>     <C>        <C>
Real estate loans:
 First mortgage loans/(1)//(3)/. ..$155,835    85.3%  $141,710    84.8%  $124,636    83.6%
 Second mortgage loans/(2)/. . .     11,151     6.1      9,262     5.5      9,978     6.7
------------------------------------------------------------------------------------------
  Total real estate loans . . . .   166,986    91.4    150,972    90.3    134,614    90.3
------------------------------------------------------------------------------------------
Commercial and consumer loans:
 Consumer. . . . . . . . . . . .      3,917     2.2      3,353     2.0      3,009     2.0
 Lease financing . . . . . . . .        431     0.2        244     0.2        237     0.2
 Commercial business loans . . .     12,765     7.0     14,113     8.4     12,636     8.5
------------------------------------------------------------------------------------------
  Total commercial and
   consumer loans. . . . . . . . .   17,113     9.4     17,710    10.6     15,882    10.7
------------------------------------------------------------------------------------------
  Total loans receivable. . . . .   184,099   100.8    168,682   100.9    150,496   101.0
Less:
 Unearned premium and
  origination costs/(fees). . . .         -       -         38       -       (120)   (0.1)
 Allowance for loan losses . . .     (1,481)   (0.8)    (1,679)   (0.9)    (1,274)   (0.9)
------------------------------------------------------------------------------------------
Total loans receivable, net . .    $182,618   100.0%  $167,041   100.0%  $149,102   100.0%
==========================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                            1999                 1998
---------------------------------------------------------------------------
                                      Amount    Percent    Amount   Percent
===========================================================================
<S>                              <C>           <C>     <C>          <C>
Real  estate  loans:
 First  mortgage  loans            $110,374      84.4%  $109,372      85.3%
 Second  mortgage  loans              9,492       7.3      9,631       7.5
 ---------------------------------------------------------------------------
  Total  real  estate  loans        119,866      91.7    119,003      92.8
---------------------------------------------------------------------------
Commercial  and  consumer  loans:
 Consumer                             3,494       2.7      4,085       3.2
 Lease  financing                       278       0.2        350       0.3
 Commercial  business  loans          8,357       6.4      5,900       4.6
---------------------------------------------------------------------------
  Total  commercial  and
   consumer  loans                   12,129       9.3     10,335       8.1
 ---------------------------------------------------------------------------
 Total  loans  receivable           131,995     101.0    129,338     100.9
Less:
 Unearned  premium  and
  origination  costs/(fees)             (84)     (0.1)      (199)     (0.2)
 Allowance  for  loan  losses        (1,150)      0.9)      (939)     (0.7)
---------------------------------------------------------------------------
Total  loans  receivable,  net     $130,761     100.0%  $128,200     100.0%
===========================================================================
</TABLE>

/(1)/Includes  $123.2  million,  $31.7  million and $973,000 thousand of one- to
     four-family  residential  loans,  commercial  real  estate and multi-family
     loans,  respectively,  at  December  31,  2002.
/(2)/Includes  $4.4 million and $6.7 million of home equity line of credit loans
     and  home equity fixed rate, fixed term loans, respectively at December 31,
     2002.
/(3)/Includes $3.6 million of mortgage loans held-for-sale at December 31, 2002.

                                        4
<PAGE>

     LOAN MATURITY SCHEDULE. The following table sets forth certain information
as of December 31, 2002 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
                                          Through  Through  Through
                                  Within    Three     Five      Ten
                                One Year    Years    Years    Years
---------------------------------------------------------------------
                                            (In Thousands)
<S>                             <C>        <C>      <C>      <C>
Real estate loans:
 First mortgage loans . . . . . $  32,455  $19,494  $27,451  $13,955
 Second mortgage loans. . . . .     4,478      454    1,096    3,560
 Commercial and consumer loans.    11,403    1,488    2,722    1,196
---------------------------------------------------------------------
Total loans. . . . . . . . . .  $  48,336  $21,436  $31,269  $18,711
=====================================================================
</TABLE>

<TABLE>
<CAPTION>
                                  Ten
                              Through    Beyond
                               Twenty    Twenty
                                Years     Years     Total
----------------------------------------------------------
<S>                            <C>      <C>      <C>
Real estate loans:
 First mortgage loans. . . . . $48,005  $14,475  $155,835
 Second mortgage loans . . . .   1,563        0    11,151
 Commercial and consumer loans     304        0    17,113
----------------------------------------------------------
Total loans . . . . . . . . .  $49,872  $14,475  $184,099
==========================================================
</TABLE>

     The following table sets forth at December 31, 2002, the dollar amount of
all fixed rate and adjustable rate loans due or repricing after December 31,
2003:

<TABLE>
<CAPTION>
                                 Fixed    Adjustable    Total
----------------------------------------------------------------
                                        (In Thousands)
<S>                             <C>       <C>          <C>
Real estate loans:
 First mortgage loans . . . . .  $ 95,559  $    27,820  $123,379
 Second mortgage loans. . . . .     6,673            -     6,673
 Commercial and consumer loans.     5,712            -     5,712
----------------------------------------------------------------
Total loans. . . . . . . . . .   $107,944  $    27,820  $135,764
================================================================
</TABLE>

     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, 2002,
approximately 76.7% 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

                                        5
<PAGE>
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 1% 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 years ended December 31, 2002 and 2001, 60.3% and 72.0%,
respectively, of the Bank's one-to-four-family mortgage loan originations
consisted of fixed-rate loan.

     The Bank also originates ARM loans which serve to reduce interest rate
risk. The Bank currently originates 3/1 ARM and 5/1 ARM loans; mortgage loans in
which the interest rate is fixed for the first three or five years and adjusts
annually thereafter. This loan product typically is 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 $6.9 million, $9.1 million, and $2.0 million, during the
years 2002, 2001 and 2000, respectively. The Bank requires that borrowers
qualify for ARM loans based upon the loan's fully indexed rate.

     At December 31, 2002, $58.5 million, or 49.2 %, 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, 2002, the
Bank held $4.4 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 $31.7 million, or 17.2%, of the Bank's total loan
portfolio at December 31, 2002. At December 31, 2002, substantially all of the
Bank's commercial real estate loans were secured by properties located within
the Bank's market area. At December 31, 2002, the Bank's commercial real estate
loans had an average principal balance of $173,000. At that date, the largest
commercial real estate loan had a principal balance of $1.3 million, and was
secured by five retail business properties located in Oswego County. This loan
is currently performing in accordance with its 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

                                        6
<PAGE>
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
$973,000, or .5%, of the Bank's total loan portfolio at December 31, 2002. At
December 31, 2002, the Bank had a total of 8 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, 2002, substantially all of the Bank's multi-family real estate
loans were secured by properties located within the Bank's market area. At
December 31, 2002, the Bank's multi-family real estate loans had an average
principal balance of approximately $122,000 and the largest multi-family real
estate loan had a principal balance of $352,000, 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, 2002, the disbursed
portion of home equity lines of credit totaled $4.4 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, 2002, consumer loans totaled $3.9
million, or 2.1%, 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, and in the case of
home equity lines of credit, the Bank obtains a title guarantee, title search,
or an opinion as to the validity of title.

                                        7
<PAGE>

     COMMERCIAL BUSINESS LOANS. The Bank currently offers commercial business
loans to businesses in its market area and to deposit account holders. At
December 31, 2002, the Bank had commercial business loans outstanding with an
aggregate balance of $12.8 million, of which $8.1 million consisted of
commercial lines of credit. The average commercial line of credit balance was
approximately $80,000. 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
$39,000. 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. Lease financing arrangements are loans which are
secured by pools of leases for medical or dental equipment or leases to finance
the acquisition of business equipment.

     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 $325,000 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, the Executive Vice President and Senior
Commercial Lender. These individuals may join their limits to a total approval
amount of $225,000 unsecured, and $325,000 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. After the loan is approved, a loan
commitment letter is promptly issued to the borrower. At December 31, 2002, the
Bank had commitments to originate $15.3 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.

                                        8
<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,
--------------------------------------------------------------------------------------------
                                                2002       2001     2000      1999      1998
--------------------------------------------------------------------------------------------
                                                         (In  Thousands)
<S>                                       <C>       <C>       <C>       <C>       <C>
Loan receivable, beginning of period   . .  $169,538  $150,496  $131,995  $129,338  $122,727
Originations:
 Real estate:
  First mortgage/(1)//(3)  . . . . . . . .    73,778    44,510    30,627    26,987    34,908
  Second mortgage/(2). . . . . . . . . . .     2,645     1,871     2,721     1,408     1,516
 Commercial and consumer loans:
  Consumer loans . . . . . . . . . . . . .     1,697     1,960     1,784     1,299     2,412
  Lease financing. . . . . . . . . . . . .         -         -         -         -         -
  Commercial . . . . . . . . . . . . . . .     3,004     6,003     3,812     5,210     6,849
--------------------------------------------------------------------------------------------
   Total originations  . . . . . . . . . .    81,124    54,344    38,944    34,904    45,685

 Transfer of mortgage loans to
  foreclosed real estate . . . . . . . . .     1,138       348       638        93       563
 Repayments .  . . . . . . . . . . . . . .    45,984    20,979    18,930    26,161    29,969
 Loan sales .  . . . . . . . . . . . . . .    19,441    13,975       875     5,993     8,542
--------------------------------------------------------------------------------------------
  Net loan activity. . . . . . . . . . . .    14,561    19,042    18,501     2,657     6,611
--------------------------------------------------------------------------------------------
Total loans receivable at end of period.    $184,099  $169,538  $150,496  $131,995  $129,338
============================================================================================
</TABLE>
____________________________________
/(1)/Includes $10.7 million in commercial real estate loans for the year ended
     December 31, 2002.
/(2)/Includes $2.6 million in home equity loans and a net change of $l.1 million
     in home equity lines of credit for year ended December 31, 2002.
/(3)/Includes $12.1 million of mortgage loans held-for-sale originated during
     the year ended December 31, 2002.

     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,
2002, the Bank had $259,000 of net deferred loan origination costs. Loan
origination fees 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 $1.1 million, $934,000 and $853,000, for
the fiscal years ended December 31, 2002, 2001 and 2000, respectively.

     LOANS-TO-ONE BORROWER. Savings banks are subject to the same loans-to-one
borrower limits as those applicable to national banks, which under current
regulations restrict loans to one borrower to an amount equal to 15% of
unimpaired net worth on an unsecured basis. If the loan is secured by readily
marketable collateral, the bank is allowed to apply an additional amount equal
to 10% of unimpaired net worth. At December 31, 2002, the Bank's largest lending
relationship totaled $3.8 million and consisted of loans secured by a retail
business property and residence. The Bank's second largest lending relationship
totaled $3.5 million and consisted of loans secured by commercial retail
businesses and residential properties. The Bank's third largest lending
relationship totaled $3.2 million and consisted of loans secured by business
assets, equipment and real estate. The Bank's fourth largest lending
relationship totaled $2.8 million and was secured by retail business property.
The Bank's fifth largest lending relationship totaled $1.8 million and consisted
of loans secured by retail business property, retail office plaza and one-to
four- family residential properties. All of the above loans are also secured by
underlying personal guarantees. At December 31, 2002, the aforementioned loans
were performing in accordance with their terms with the exception of one credit
relationship which was delinquent at December 31, 2002. Subsequent to year end,
this credit relationship was modified and is now performing in accordance with
those terms.


                                        9
<PAGE>

DELINQUENCIES AND CLASSIFIED ASSETS

     DELINQUENCIES. The Bank's collection procedures provide that when a loan is
15 days past due, a courtesy phone call is made to the borrower. If the
delinquency continues, at 35 days a delinquent notice is sent and immediate
payment is demanded. If a loan becomes 40 days past due, and no progress has
been made in resolving the delinquency, the Bank will send a notice of
foreclosure or notice to commence another legal proceeding, if it is not a
mortgagee. When a loan continues in a delinquent status for 70 days or more, and
a repayment schedule has not been made or kept by the borrower, generally
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 or other colletions. Interest accrued and unpaid at the time a loan
is placed on non-accrual status is charged against interest income. At December
31, 2002, the Bank had non-performing assets of $3.1 million, and a ratio of
non-performing loans and real estate owned ("REO") of 1.11% total assets.
Non-performing assets increased $355,000, or 12.9%, from $2.8 million in 2001.

     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 $1.4 million,
$632,000 and $884,000 at December 31, 2002, 2001 and 2000, respectively.

     A component of REO consists of a real estate development project which had
a net book value of $297,000 at December 31, 2002. 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, 2002, the Bank had 10 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.

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,
-------------------------------------------------------------------------------------------------
                                                 2002       2001       2000       1999       1998
-------------------------------------------------------------------------------------------------
                                                         (Dollars  in  Thousands)
<S>                                      <C>        <C>        <C>        <C>        <C>
Loans delinquent, 90 days or more:
 Real estate loans . . . . . . . . . . .     $  1,483   $  1,576   $  1,594   $  2,284   $  1,298
 Commercial and consumer loans . . . . .          228        543        234        270        534
-------------------------------------------------------------------------------------------------
  Total delinquent loans. . . . . . . . .       1,711      2,119      1,828      2,554      1,832
 Total REO . . . . . . . . . . . . . . .        1,396        632        884        641        742
-------------------------------------------------------------------------------------------------
    Total nonperforming assets/(1)/ . . . .  $  3,107   $  2,751   $  2,712   $  3,195   $  2,574
=================================================================================================
Total loans delinquent 90 days or more
 to total loans receivable/(2)/ . . . . .         0.9%       1.3%       1.2%       2.0%       1.4%
Total loans delinquent 90 days or more
 to total assets . . . . . . . . . . . .          0.6%       0.9%       0.8%       1.2%       0.9%
Total nonperforming assets to total
 assets. . . . . . . . . . . . . .  . .           1.1%       1.1%       1.2%       1.5%       1.3%

Net loans receivable/(3)/. . . . . . . .      182,618    167,041    149,102    130,761    128,200
-------------------------------------------------------------------------------------------------
Total assets. . . . . . . . . . . . . .      $279,055   $244,366   $231,847   $216,324   $203,252
=================================================================================================
</TABLE>
                                       10
<PAGE>
________________________________
/(1)/Net of specific valuation allowances.
/(2)/Net of unearned discount, and the allowance for loan losses.
/(3)/Includes $3.6 million of mortgage loans held-for-sale.

      During the year ended December 31, 2002 and 2001, respectively, additional
gross interest income of $141,000 and $118,000 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.
<TABLE>
<CAPTION>
                                           At  December  31,
-------------------------------------------------------------------------
                                    2002    2001    2000    1999    1998
-------------------------------------------------------------------------
                                           (In Thousands)
<S>                             <C>     <C>     <C>     <C>     <C>
Loans past due 30-89 days:
 Real estate loans. . . . . . .   $2,234  $3,476  $2,493  $1,619  $2,010
 Commercial and consumer loans.    2,156     994     147     161     126
-------------------------------------------------------------------------
  Total past due 30-89 days. . .  $4,390  $4,470  $2,640  $1,780  $2,136
=========================================================================
</TABLE>

     The following table sets forth information regarding the Bank's delinquent
loans 60 days and greater and REO at December 31, 2002.

<TABLE>
<CAPTION>

                                    At  December  31,  2002
-----------------------------------------------------------
                                         Balance   Number
-----------------------------------------------------------
                                     (Dollars in Thousands)
<S>                                      <C>       <C>
Residential real estate:
 Loans 60 to 89 days delinquent. . . . .  $    368       6
 Loans more than 90 days delinquent. . .     1,483      24
Consumer and commercial business loans
  60 days or more delinquent. . . . . . .    1,577      22
Real estate owned . . . . . . . . . . .      1,396       7
-----------------------------------------------------------
Total . . . . . . . . . . . . . . . . .   $  4,824      59
===========================================================
</TABLE>

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.

                                       11
<PAGE>

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

<TABLE>
<CAPTION>
                                     At  December  31,
------------------------------------------------------------------
                            2002    2001    2000    1999    1998
------------------------------------------------------------------
                                      (In Thousands)
<S>                       <C>     <C>     <C>     <C>     <C>
Substandard assets/(1)/.  $2,828  $2,395  $1,770  $2,668  $2,482
Doubtful assets. . . . .      26      30      34     110     103
Loss assets. . . . . . .      70      33      44       7      90
------------------------------------------------------------------
Total classified assets.  $2,924  $2,458  $1,848  $2,785  $2,675
==================================================================
</TABLE>
_______________________________
/(1)/Includes $297,000 $297,000, $458,000, $510,000, and $638,000 for a real
     estate development project classified as REO at December 31, 2002, 2001,
     2000, 1999 and 1998, 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
potential 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. There were no impaired loans as of December 31, 2002.

     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 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,
--------------------------------------------------------------------------------------------------
                                                  2002       2001       2000       1999       1998
--------------------------------------------------------------------------------------------------
                                                               (Dollars in Thousands)
<S>                                           <C>        <C>        <C>        <C>        <C>
Total loans receivable, net. . . . . . . . .  $182,618   $167,041   $149,102   $130,761   $128,200
Average loans outstanding. . . . . . . . . .   177,047    155,653    139,258    130,728    126,931
Allowance balance (at beginning of period) .     1,679      1,274      1,150        939        828
Provision for losses:
 Real estate. . . . . . . . . . . . . . . . .      254        139         65        135         83
 Commercial and consumer loans. . . . . . . .    1,122        569        179        238        298
Charge offs:
 Real estate. . . . . . . . . . . . . . . . .       85        109         40          0        141
 Commercial and consumer loans. . . . . . . .    1,578        256         99        190        140
Recoveries:
 Commercial and consumer loans. . . . . . . .       89         62         19         28         11
--------------------------------------------------------------------------------------------------
Allowance balance (at end of period) . . . .  $  1,481   $  1,679   $  1,274   $  1,150   $    939
==================================================================================================

                                       12
<PAGE>
Allowance for loan losses as a percent of
 net loans receivable at end of period. . . .      0.8%       1.0%       0.9%       0.9%       0.7%
Loans charged off as a percent of average
 loans outstanding. . . . . . . . . . . . . .      0.9%       0.2%       0.1%       0.1%       0.2%
Ratio of allowance for loan losses to total
 nonperforming loans at end of period        .    86.6%      79.2%      69.7%      45.0%      51.3%
Ratio of allowance for loan losses to total
 nonperforming assets at end of period .          47.7%      61.0%      47.0%      36.0%      36.5%
</TABLE>

     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,
------------------------------------------------------------------------------------------------------------
                                                 2002                 2001                  2000
------------------------------------------------------------------------------------------------------------
                                                   %  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. . . . . . . . . . . .  $   303        90.52%  $   496        89.50%  $   466        89.39%
 Commercial and consumer loans. . . . . .    1,178         9.48     1,183        10.50       808        10.61
------------------------------------------------------------------------------------------------------------
  Total allowance for loan losses/(1)/ . . $ 1,481       100.00%  $ 1,679       100.00%  $ 1,274       100.00%
=============================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                1999                  1998
--------------------------------------------------------------------------------------
                                                  %  of  Loans           %  of  Loans
                                                      In  Each               In  Each
                                                  Category  to           Category  to
                                          Amount   Total Loans   Amount   Total Loans
--------------------------------------------------------------------------------------
<S>                                       <C>      <C>           <C>      <C>
Balance at end of period applicable to:
Real estate loans. . . . . . . . . . . .  $   440        90.81%  $   380        92.01%
Commercial and consumer loans. . . . . .      710         9.19       559         7.99
--------------------------------------------------------------------------------------
Total allowance for loan losses/(1)/ . . .$ 1,150       100.00%  $   939       100.00%
======================================================================================
</TABLE>
___________________________________________________
/(1)/ Percentages include unearned discount and origination fees.

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, and maintain liquidity, 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,
2002, the Bank had investment securities with an aggregate amortized cost of
$62.0 million and a market value of $62.5 million. At December 31, 2002, the
Bank's amortized cost value of investment securities consisted of $15.4 million
of corporate debt issues and $12.9 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 have been rated as investment grade by either Moody's
or Standard & Poor's. Typically, such investments yield 60-70 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, 2002,
the Bank held $6.2 million in common stock, of which $2.2 million was Federal
Home Loan Bank Stock. The Bank's mutual fund investments at December 31, 2002
consisted of $3.1 million in an equity mutual fund and $3.0 million in an
adjustable rate mortgage fund. At December 31, 2002, the Bank had invested $25.2
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

                                       13
<PAGE>
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, 2002, the Company holds the following corporate debt
investments which exceed 10% of total capital.

     Issuer     Book  Value     Fair  Market  Value
     -----------------------------------------------
     CNA  Financial     $2,999,626     $2,920,704

     INVESTMENT PORTFOLIO. The following table sets forth the carrying value of
the Bank's investment portfolio at the dates indicated. At December 31, 2002,
the market value of the Bank's investments was approximately $62.5 million. The
market value of investments includes interest-earning deposits, and
mortgage-backed securities.

<TABLE>
<CAPTION>
                                                       At  December  31,
------------------------------------------------------------------------------
                                                     2002      2001      2000
------------------------------------------------------------------------------
                                                         (In Thousands)
<S>                                               <C>       <C>       <C>
Investment securities:
 US Government and agency obligations . . . . . .  $ 4,378   $ 5,971   $ 9,667
 State and municipal obligations. . . . . . . . .    8,549     6,012     6,405
 Corporate debt issues. . . . . . . . . . . . . .   15,375    20,949    23,027
 Equity securities. . . . . . . . . . . . . . . .    6,225     3,227     2,340
 Mutual funds . . . . . . . . . . . . . . . . . .    3,070     3,007     2,861
------------------------------------------------------------------------------
                                                    37,597    39,166    44,300
Unrealized loss on available for sale portfolio.      (251)     (293)      (26)
------------------------------------------------------------------------------
 Total investment securities. . . . . . . . . . .   37,346    38,873    44,274
------------------------------------------------------------------------------
  Total investments. . . . . . . . . . . . . . . . $37,346   $38,873   $44,274
==============================================================================
Mortgage-backed securities, net:
 Adjustable rate. . . . . . . . . . . . . . . . .    3,423       633     1,284
 Fixed rate . . . . . . . . . . . . . . . . . . .   21,017    13,488    18,122
------------------------------------------------------------------------------
                                                   24,440    14,121    19,406
Unrealized gain on available for sale portfolio.      720       428        78
------------------------------------------------------------------------------
 Total mortgage-backed securities, net. . . . . .  $25,160   $14,549   $19,484
==============================================================================
</TABLE>
                                       14
<PAGE>

     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 at December 31, 2002.

<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   6.88   10.9%
 U.S. Government agency . . . . . . . . . . . . .    4,359     4,447   2.22    3.5%
 State and municipal obligations. . . . . . . . .    8,549     8,864   6.87    5.1%
 Corporate debt issues. . . . . . . . . . . . . .   15,375    15,270   8.11    6.3%
 Marketable equity securities . . . . . . . . . .    9,295     8,747
-----------------------------------------------------------------------------------
   Total. . . . . . . . . . . . . . . . . . . . . .$37,597   $37,346
----------------------------------------------------------   =======
 Unrealized loss on available for sale portfolio.    (251)
----------------------------------------------------------
Carrying value of investment securities. . . . .  $37,346
==========================================================
</TABLE>

     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, 2002. Yield is calculated on the
amortized cost to maturity, and does not reflect adjustments to a fully
tax-equivalent basis.

<TABLE>
<CAPTION>
                                                           December  31,  2002
----------------------------------------------------------------------------------------------
                                                   One year           One to           Five to
                                                   or  less      five  years        Ten  Years
----------------------------------------------------------------------------------------------
                                                 Annualized       Annualized        Annualized
                                                   Weighted         Weighted          Weighted
                                           Carrying Average Carrying Average Carrying  Average
                                              Value   Yield    Value   Yield    Value    Yield
                                            -------  ------  -------  ------  -------  -------
                                                          (Dollars in Thousands)
INVESTMENT SECURITIES AVAILABLE FOR SALE:
<S>                                         <C>      <C>     <C>      <C>     <C>      <C>
Debt investment securities:
------------------------------------------
 U.S. Agency securities . . . . . . . . . .  $ 2,014  3.505%  $ 2,327  3.495%  $    18   6.626%
 U.S. Government securities . . . . . . . .        -      -         -      -        19  10.853
 State and municipal obligations. . . . . .      937  7.860     3,388  4.923     1,330   4.287
 Corporate debt issues. . . . . . . . . . .      783  7.024     7,603  6.336     3,217   7.200
----------------------------------------------------------------------------------------------
  Total. . . . . . . . . . . . . . . . . .   $ 3,734  5.336%  $13,318  5.478%  $ 4,584   6.373%
----------------------------------------------------------------------------------------------
Equity and mortgage-backed securities:
------------------------------------------
 Mutual funds . . . . . . . . . . . . . . .  $ 6,118  1.401%        -      -         -       -
 Mortgage-backed securities . . . . . . . .        -      -     2,031  6.464     6,684   4.224
 Common stock . . . . . . . . . . . . . . .    3,117  3.977         -      -         -       -
----------------------------------------------------------------------------------------------
  Total. . . . . . . . . . . . . . . . . .   $ 9,295  2.277     2,031  6.464%  $ 6,684   4.224%
----------------------------------------------------------------------------------------------
Total investment securities. . . . . . . .   $13,029  3.164%  $15,349  5.606%  $11,268   5.105%
==============================================================================================
</TABLE>
                                       15
<PAGE>

<TABLE>
<CAPTION>
                                             More Than               Total
                                             Ten  Years      Investment  Securities
-------------------------------------------------------------------------------------
                                        Annualized                         Annualized
                                          Weighted                           Weighted
                                          Carrying  Average Carrying  Market  Average
                                             Value   Yield    Value    Value    Yield
-------------------------------------------------------------------------------------
                                                     (Dollars in Thousands)
INVESTMENT SECURITIES AVAILABLE FOR SALE:
<S>                                         <C>      <C>     <C>      <C>      <C>
Debt investment securities:
------------------------------------------
 U.S. Agency securities . . . . . . . . . .  $     -      -%  $ 4,359  $ 4,446   3.512%
 U.S. Government securities . . . . . . . .        -      -        19       18  10.854
 State and municipal obligations. . . . . .    2,894  4.430     8,549    8,864   4.979
 Corporate debt issues. . . . . . . . . . .    3,770  4.911    15,375   15,270   6.277
-------------------------------------------------------------------------------------
   Total.   . . . . . . . . . . . . . . . .  $ 6,664  4.673%  $28,302  $28,598   5.079%
-------------------------------------------------------------------------------------

Equity and mortgage-backed securities:
------------------------------------------
 Mutual funds . . . . . . . . . . . . . . .  $     -      -%  $ 6,118  $ 5,280   1.401%
 Mortgage-backed securities . . . . . . . .   15,723  5.349    24,438   25,160   5.079
 Common stock . . . . . . . . . . . . . . .        0      -     3,177    3,468   3.977
-------------------------------------------------------------------------------------
Total. . . . . .  . . . . . . . . . . . . .  $15,723  5.349%  $33,735  $33,908   4.307%
 -------------------------------------------------------------------------------------
Total investment securities. . . . . . . .  $22,527  5.146%  $62,037  $62,506   5.268%
===========================================================           ================
Unrealized gain on available
 for sale portfolio                                              469
                                                             -------
Total carrying value                                         $62,506            5.268%
                                                             =======           =======
</TABLE>

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 the amortization and prepayment of loans and mortgage-backed securities,
the maturity of investment securities and operations and from other borrowings.
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 market deposit, 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,
reviews 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.

                                       16
<PAGE>

     DEPOSIT PORTFOLIO. The following table sets forth information regarding
interest rates, terms, minimum amounts and balances of the Bank's savings and
other deposits as of December 31, 2002:
<TABLE>
<CAPTION>

<S>             <C>            <C>                           <C>       <C>          <C>
Weighted                                                                            Percentage
Average                        Checking and Savings          Minimum                of Total
Interest Rate.  Minimum Term   Deposits                      Amount    Balance      Deposits
-----------------------------------------------------------------------------------------------
                                                               (Balance in thousands)

0.000% . . . .  None           Non-interest demand account   $     50  $   15,764         7.77%
0.768% . . . .  None           NOW accounts                       500      15,404         7.59%
1.050% . . . .  None           Savings accounts - fixed           100      46,658        23.00%
1.320% . . . .  None           Savings accounts - tiered          100      18,859         9.30%
1.497% . . . .  None           Money management accounts        1,500      19,765         9.74%

                               Certificates of deposit:
1.793% . . . .  30-day         Fixed term, fixed rate           2,500       2,332         1.15%
1.457% . . . .  3 months       Fixed term, fixed rate           1,000         150         0.07%
1.896% . . . .  6 months       Fixed term, fixed rate           2,500       8,046         3.97%
2.254% . . . .  9 months       Fixed term, fixed rate           1,000          29         0.01%
2.976% . . . .  11 months      Fixed term, fixed rate           1,000         527         0.26%
2.729% . . . .  12 months      Fixed term, fixed rate           1,000      23,279        11.47%
3.142% . . . .  15 months      Fixed term, fixed rate           1,000       3,841         1.89%
2.101% . . . .  18 months      Fixed term, variable rate        1,000       1,201         0.59%
3.330% . . . .  18 months      Fixed term, fixed rate           1,000       4,792         2.36%
4.166% . . . .  24 months      Fixed term, fixed rate           1,000       5,839         2.88%
3.883% . . . .  30 months      Fixed term, fixed rate           1,000       2,347         1.16%
5.088% . . . .  36 months      Fixed term, fixed rate/(1)/      1,000      14,336         7.07%
5.050% . . . .  48 months      Fixed term, fixed rate/(1)/      1,000       7,593         3.74%
5.968% . . . .  60 months      Fixed term, fixed rate           1,000       2,665         1.31%
5.904% . . . .  84 months      Fixed term, fixed rate           1,000       9,450         4.66%
3.045% . . . .  60-120 months  Fixed term, fixed rate           1,000           4         0.01%
-----------------------------------------------------------------------------------------------
                               Total                                   $202,881/(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 the prevailing
     rate.
/(2)/Excludes escrow accounts totalling $1,640,784 at December 31, 2002.

     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
                                   At         of     Incr.         At         of     Incr.
                             12/31/02   Deposits    (Decr)   12/31/01   Deposits    (Decr)
------------------------------------------------------------------------------------------
                                               (Dollars in Thousands)
<S>                          <C>        <C>        <C>       <C>        <C>        <C>
Club Accounts . . . . . . .  $   1,135       0.56%  $   161   $     974      0.58%  $    16
Noninterest accounts. . . .     15,764       7.77     2,728      13,036      7.75     3,140
NOW accounts. . . . . . . .     15,404       7.59       173      15,231      9.06      (280)
Passbooks . . . . . . . . .     64,382      31.74     4,540      59,842     35.59     2,968
Money management accounts .     19,765       9.74    15,348       4,417      2.63     4,417
Time deposits which mature
 Within 12 months. . . . . .    48,721      24.01    (2,450)     51,172     30.43      (604)
 Within 12-36 months . . . .    24,622      12.14     7,909      16,713      9.94    (1,557)
 Beyond 36 months. . . . . .    13,088       6.45     6,329       6,759      4.02      (320)
------------------------------------------------------------------------------------------
Total . . . . . . . . . . .  $ 202,881/(1)/100.00%  $34,737   $ 168,144    100.00%  $ 7,783
==========================================================================================
</TABLE>
                                       17
<PAGE>

<TABLE>
<CAPTION>
                               Balance     Percent              Balance    Percent             Balance
                                    at          of     Incr.         At         of     Incr.         At
                              12/31/00    Deposits    (Decr)   12/31/99   Deposits    (Decr)   12/31/98
-------------------------------------------------------------------------------------------------------
                                                     (Dollars in Thousands)
<S>                          <C>          <C>        <C>       <C>        <C>        <C>       <C>
Club Accounts . . . . . . .  $      958       0.60%  $   (44)  $   1,002      0.66%  $    94   $     908
Noninterest accounts. . . .       9,893       6.17       147       9,746      6.43       273       9,473
NOW accounts. . . . . . . .      15,511       9.67     1,515      13,996      9.24    (2,331)     16,327
Passbooks . . . . . . . . .      56,874      35.47    (1,555)     58,429     38.56    (4,893)     63,322
Time deposits which mature
 Within 12 months. . . . . .     51,776      32.29     5,688      46,088     30.41    (5,716)     51,804
 Within 12-36 months . . . .     18,270      11.39     2,080      16,190     10.68     2,799      13,391
 Beyond 36 months. . . . . .      7,079       4.41       994       6,085      4.02     1,801       4,284
--------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . .    $160,361     100.00%  $ 8,825   $ 151,536    100.00%  $(7,973)  $ 159,509
========================================================================================================
</TABLE>
_____________________________________________________
/(1)/ Excludes escrow accounts totalling $1,640,784 at December 31, 2002.


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

<TABLE>
<CAPTION>
                    At  December  31,
-----------------------------------------
                 2002     2001     2000
-----------------------------------------
                  (In Thousands)
<S>             <C>      <C>      <C>
RATE
-----------------------------------------
3.00% or less.  $36,659  $ 7,169  $     6
3.01 - 3.99% .   14,776   13,701       14
4.00 - 4.99% .   16,334   17,331    1,133
5.00 - 5.99% .    8,168   17,284   20,353
6.00 - 6.99% .   10,198   18,000   54,324
7.00 - 7.99% .      296    1,159    1,169
-----------------------------------------
                $86,431  $74,644  $76,999
=========================================
</TABLE>
     The following table sets forth the amount and maturities of certificates of
deposit  at  December  31,  2002.

<TABLE>
<CAPTION>
                                                   Amount due
---------------------------------------------------------------------------------------
                        Less Than     1-2      2-3     3-4     4-5    After 5
                         One Year    Years    Years   Years   Years    Years     Total
---------------------------------------------------------------------------------------
                                               (Dollars in Thousands)
<S>                     <C>         <C>      <C>      <C>     <C>     <C>       <C>
3.00% or less. . . . .  $   31,539  $ 4,597  $   202  $  307  $   13  $      0  $36,659
3.01 - 3.99% . . . . .       6,867    4,190    2,284     828     323       284   14,776
4.00 - 4.99% . . . . .       3,720    1,608    6,297   2,839     434     1,436   16,334
5.00 - 5.99% . . . . .       1,989    1,665      757   1,217     173     2,367    8,168
6.00 - 6.99% . . . . .       4,443    1,946      943   1,060   1,665       141   10,198
7.00 and above . . . .         163       96       37       0       0         0      296
---------------------------------------------------------------------------------------
                        $   48,721  $14,102  $10,520  $6,252  $2,608  $  4,228  $86,431
=======================================================================================
</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,
2002.
<TABLE>
<CAPTION>
                            Certificates
                              Of Deposit
                             Of $100,000
Remaining Maturity               or More
------------------------------------------
                           (In thousands)
<S>                        <C>
Three months or less. . .  $         4,149
Three through six months.            3,317
Six through twelve months            3,223
Over twelve months. . . .            5,139
------------------------------------------
Total . . . . . . . . . .  $        15,828
==========================================
</TABLE>
                                       18
<PAGE>

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

<TABLE>
<CAPTION>
                                            At  December  31
-------------------------------------------------------------------
                                        2002      2001      2000
-------------------------------------------------------------------
                                             (In Thousands)
<S>                                   <C>       <C>       <C>
Balance at beginning of period . . .  $168,144  $160,364  $151,536
Net deposits . . . . . . . . . . . .    30,081     1,680     2,975
Interest credited. . . . . . . . . .     4,656     6,100     5,853
-------------------------------------------------------------------
Ending Balance . . . . . . . . . . .  $202,881   168,144   160,364
-------------------------------------------------------------------
Net increase/(decrease) in deposits.  $ 34,737  $  7,780  $  8,828
==================================================================
</TABLE>

BORROWINGS

     Savings  deposits are the primary source of funds of the Bank's lending and
investment  activities  and  for its general business purposes.  At December 31,
2002,  the  Bank  had  $3.4 million in funds obtained from repurchase agreements
outstanding,  $29.8  million  in  long-term  term advances and $5.0 million in a
pooled trust preferred security obligation.  The Bank is a member of the Federal
Home  Loan  Bank  System.

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

<TABLE>
<CAPTION>
                                               At  December  31
--------------------------------------------------------------------
                                          2002      2001      2000
--------------------------------------------------------------------
                                                (In Thousands)
<S>                                     <C>       <C>       <C>
Overnight Line of Credit . . . . . . .  $     -   $     -   $ 5,600
Term borrowings (original term)
90 days or less. . . . . . . . . . . .    2,700    10,718    16,407
1 year . . . . . . . . . . . . . . . .    7,000     8,500    11,000
2 year                                        -     1,000         -
--------------------------------------------------------------------
Balance at end of period . . . . . . .  $ 9,700   $20,218   $33,007
====================================================================
Daily average during the year. . . . .   13,716    15,240    32,911
Maximum month-end balance. . . . . . .   23,580    20,218    40,388
Weighted average rate during the year.     3.75%     4.56%     6.29%
Year-end average rate. . . . . . . . .     4.65%     4.19%     6.50%
</TABLE>

PERSONNEL

     As of December 31, 2002, the Bank had 94 full-time and 17 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

                                       19
<PAGE>

subject to certain regulations by the Federal Home Loan Bank System. On July 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 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

                                       20
<PAGE>

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 theinstitution'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 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.

                                       21
<PAGE>

     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 lessthan 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 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.

                                       22
<PAGE>

     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 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.

                                       23
<PAGE>

     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 generally intends to waive dividends paid by the Company
in excess of its operating cash requirements. 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
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.

                                       24
<PAGE>

     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.

     The Company has implemented all the provisions of this Act. The Company
expects to remain a bank holding company for the time being and access its
options as circumstances change.

     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, money management and NOW
checking accounts). At December 31, 2002, the Bank was in compliance with these
reserve requirements.

                                       25
<PAGE>

     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."

THE USA PATRIOT ACT

     In response to the events of September 11, 2001, the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, was signed into law on
October 26, 2001. The USA PATRIOT Act gives the federal government new powers to
address terrorist threats through enhanced domestic security measures, expanded
surveillance powers, increased information sharing and broadened anti-money
laundering requirements. By way of amendments to the Bank Secrecy Act, Title III
of the USA PATRIOT Act takes measures intended to encourage information sharing
among bank regulatory agencies and law enforcement bodies. Further, certain
provisions of Title III impose affirmative obligations on a broad range of
financial institutions, including banks, thrifts, brokers, dealers, credit
unions, money transfer agents and parties registered under the Commodity
Exchange Act.

     Among other requirements, Title III of the USA PATRIOT Act imposes the
following requirements with respect to financial institutions:

     Pursuant to Section 352, all financial institutions must establish
anti-money laundering programs that include, at minimum: (i) internal policies,
procedures, and controls; (ii) specific designation of an anti-money laundering
compliance officer; (iii) ongoing employee training programs; and (iv) an
independent audit function to test the anti-money laundering program.

     Section 326 authorizes the Secretary of the Department of Treasury, in
conjunction with other bank regulators, to issue regulations by October 26, 2002
that provide for minimum standards with respect to customer identification at
the time new accounts are opened.

                                       26
<PAGE>

     Section 312 requires financial institutions that establish, maintain,
administer, or manage private banking accounts or correspondence accounts in the
United States for non-United States persons or their representatives (including
foreign individuals visiting the United States) to establish appropriate,
specific, and, where necessary, enhanced due diligence policies, procedures, and
controls designed to detect and report money laundering.

     Financial institutions are prohibited from establishing, maintaining,
administering or managing correspondent accounts for foreign shell banks
(foreign banks that do not have a physical presence in any country), and will be
subject to certain record keeping obligations with respect to correspondent
accounts of foreign banks.

     Bank regulators are directed to consider a holding company's effectiveness
in combating money laundering when ruling on Federal Reserve Act and Bank Merger
Act applications.

                                       27
<PAGE>

     The federal banking agencies have begun to propose and implement
regulations pursuant to the USA PATRIOT Act. These proposed and interim
regulations would require financial institutions to adopt the policies and
procedures contemplated by the USA PATRIOT Act.

SARBANES-OXLEY ACT OF 2002

     On July 30, 2002, the President signed into law the Sarbanes-Oxley Act of
2002 ("Sarbanes-Oxley"), which implemented legislative reforms intended to
address corporate and accounting fraud. In addition to the establishment of a
new accounting oversight board that will enforce auditing, quality control and
independence standards and will be funded by fees from all publicly traded
companies, Sarbanes-Oxley places certain restrictions on the scope of services
that may be provided by accounting firms to their public company audit clients.
Any non-audit services being provided to a public company audit client will
require preapproval by the company's audit committee. In addition,
Sarbanes-Oxley makes certain changes to the requirements for audit partner
rotation after a period of time. Sarbanes-Oxley requires chief executive
officers and chief financial officers, or their equivalent, to certify to the
accuracy of periodic reports filed with the Securities and Exchange Commission,
subject to civil and criminal penalties if they knowingly or willingly violate
this certification requirement. The Company's Chief Executive Officer and Chief
Financial Officer have signed certifications to this Form 10-K as required by
Sarbanes-Oxley. In addition, under Sarbanes-Oxley, counsel will be required to
report evidence of a material violation of the securities laws or a breach of
fiduciary duty by a company to its chief executive officer or its chief legal
officer, and, if such officer does not appropriately respond, to report such
evidence to the audit committee or other similar committee of the board of
directors or the board itself.

     Under Sarbanes-Oxley, longer prison terms will apply to corporate
executives who violate federal securities laws; the period during which certain
types of suits can be brought against a company or its officers is extended; and
bonuses issued to top executives prior to restatement of a company's financial
statements are now subject to disgorgement if such restatement was due to
corporate misconduct. Executives are also prohibited from trading the company's
securities during retirement plan "blackout" periods, and loans to company
executives (other than loans by financial institutions permitted by federal
rules and regulations) are restricted. In addition, a provision directs that
civil penalties levied by the Securities and Exchange Commission as a result of
any judicial or administrative action under Sarbanes-Oxley be deposited to a
fund for the benefit of harmed investors. The Federal Accounts for Investor
Restitution provision also requires the Securities and Exchange Commission to
develop methods of improving collection rates. The legislation accelerates the
time frame for disclosures by public companies, as they must immediately
disclose any material changes in their financial condition or operations.
Directors and executive officers must also provide information for most changes
in ownership in a company's securities within two business days of the change.

     Sarbanes-Oxley also increases the oversight of, and codifies certain
requirements relating to audit committees of public companies and how they
interact with the company's "registered public accounting firm." Audit committee
members must be independent and are absolutely barred from accepting consulting,
advisory or other compensatory fees from the issuer. In addition, companies must
disclose whether at least one member of the committee is a "financial expert"
(as such term is defined by the Securities and Exchange Commission) and if not,
why not. Under Sarbanes-Oxley, a company's registered public accounting firm is
prohibited from performing statutorily mandated audit services for a company if
such company's chief executive officer, chief financial officer, comptroller,
chief accounting officer or any person serving in equivalent positions had been
employed by such firm and participated in the audit of such company during the
one-year period preceding the audit initiation date. Sarbanes-Oxley also
prohibits any officer or director of a company or any other person acting under
their direction from taking any action to fraudulently influence, coerce,
manipulate or mislead any independent accountant engaged in the audit of the
company's financial statements for the purpose of rendering the financial
statements materially misleading. Sarbanes-Oxley also requires the Securities
and Exchange Commission to prescribe rules requiring inclusion of any internal
control report and assessment by management in the annual report to
shareholders. Sarbanes-Oxley requires the company's registered public accounting
firm that issues the audit report to attest to and report on management's
assessment of the company's internal controls.

                                       28
<PAGE>

     Although we anticipate that we will incur additional expense in complying
with the provisions of the Sarbanes-Oxley Act and the resulting regulations,
management does not expect that such compliance will have a material impact on
our results of operations or financial condition.

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 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 must use the
small bank experience method in computing its bad debt deduction beginning with
its 1996 Federal tax return. In addition, the federal legislation requires 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 cease to retain a bank or thrift charter or make certain non-dividend
distributions.

     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. In 2002, net operating
losses can offset 100% of AMTI. Going forward, net operating losses can offset
no more than 90% of AMTI. 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 two taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after August 5, 1997.

     The Internal Revenue Service has examined the federal income tax return for
the fiscal year ended 1992; the New York State fiscal year-end tax returns for
1998 through 1999 are currently under examination by the New York State
Department of Taxation and Finance. See Note 13 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) 8.0% 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
without certain modifications. Net operating losses arising in 2001 and 2002 can
be carried forward to the succeeding 20 taxable years.

     The availability of Annual Report on Form 10-K may be accessed on the
Bank's website at www.pathfinderbank.com.

                                       29
<PAGE>

ITEM 2. PROPERTIES
-------------------

     The Bank conducts its business through its main office located in Oswego,
New York, and five 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, 2002. The aggregate net book
value of the Bank's premises and equipment was $5.6 million at December 31,
2002. For additional information regarding the Bank's properties, see Note 5 to
Notes to Financial Statements.

<TABLE>
<CAPTION>

LOCATION                   OPENING DATE  OWNED/LEASED   ANNUAL RENT
--------------------------------------------------------------------
<S>                        <C>           <C>            <C>
Main Office . . . . . . .       1874        Owned              -
-------------------------
214 West First Street
Oswego, New York  13126

Plaza Branch. . . . . . .       1989        Owned (1)          -
-------------------------
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  13069

Lacona Branch . . . . . .       2002        Owned              -
-------------------------
1897 Harwood Drive
Lacona, New York 13083

Fulton Branch . . . . . .       2003        Owned (2)          -
-------------------------
5 West First Street South
Fulton, New York  13069
</TABLE>

____________________________________
(1)  The building is owned; the underlying land is leased paying an annual rent
     of $17,300
(2)  The existing Fulton Branch will be moved to this location in 2003. The
     building is owned; the underlying land is leased paying an annual rent of
     $21,000

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  alleged  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 was
seeking  damages  in  excess  of  $1  million, punitive damages in excess of $10
million  and  equitable  relief.

                                       30
<PAGE>

     On January 13, 2003, the Company completed the purchase of 160,114 shares
of common stock at a price of $2.3 million, or $14.60 per share, from Jewelcor,
which is owned by Mr. Seymour Holtzman ("the Repurchase"). The Repurchase
represents approximately 6.1% of the Company's outstanding common stock as of
December 31, 2002. As part of the repurchase agreement, Jewelcor agreed to
stipulate to the discontinuance with prejudice of the lawsuit entitled "Jewelcor
Management, Inc. v. Pathfinder Bancorp, Inc.", and withdrew a shareholder
proposal previously submitted by Jewelcor. In addition, Mr. Holtzman and
Jewelcor, as well as those persons and entities who signed the Schedule 13D with
Mr. Holtzman with respect to the Company's common stock, agreed in writing, that
neither they nor their affiliates will purchase shares of the Company's common
stock for a period of five years.

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, 2002 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
                                       31
<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,  2002.

<TABLE>
<CAPTION>

         NAME          AGE                POSITIONS HELD WITH THE COMPANY
---------------------  ---  -----------------------------------------------------------
<S>                    <C>  <C>
Chris C. Gagas. . . .   72  Chairman of the Board

Thomas W. Schneider .   40  President and Chief Executive Officer

W. David Schermerhorn   42  Executive Vice President-Lending

James A. Dowd, CPA. .   35  Vice President, Chief Financial Officer and Trust Officer

Edward A. Mervine . .   46  Vice President, General Counsel

John Devlin . . . . .   38  Vice President, Senior Commercial Lender

Melissa A. Miller . .   45  Vice President, Secretary

Gregory L. Mills. . .   42  Vice President, Director of Marketing, Branch Administrator

Annette L. Burns, CPA   30  Controller

Anita J. Austin . . .   53  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.

ITEM 14. CONTROLS AND PROCEDURES
---------------------------------

   (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Under the supervision
and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we evaluated the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rule 13a-14(c) under the Exchange Act) as of a date (the "Evaluation Date")
within 90 days prior to the filing date of this report. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures were
effective in timely alerting them to the material information relating to us (or
our consolidated subsidiaries) required to be included in our periodic SEC
filings.

   (b) CHANGES IN INTERNAL CONTROLS. There were no significant changes made in
our internal controls during the period covered by this report or, to our
knowledge, in other factors that could significantly affect these controls
subsequent to the date of their evaluation.


   See the Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, which immediately precedes the signature page.

                                       32
<PAGE>

                                     PART IV

ITEM 15. 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, 2002 and 2001.

     (C)  Consolidated  Statements  of  Income  - years ended December 31, 2002,
          2001  and  2000.

     (D)  Consolidated Statements of Stockholders' Equity - years ended December
          31,  2002,  2001  and  2000.

     (E)  Consolidated Statements of Cash Flows - years ended December 31, 2002,
          2001  and  2000;  and

     (F)  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) Exhibits

  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)


 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

                                       33
<PAGE>
 99.1 Officers' Certification pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.

 (c) Reports on Form 8-K
     ---------------------
      The Company has two Current Reports on Form 8-K during the fourth quarter
      of the fiscal year ended December 31, 2002 dated October 28, 2002 and
      December 20, 2002 reporting press releases relating to the completion of
      the acquisition of the Lacona Branch of Cayuga Bank and the announcement
      of its Commercial Bank subsidiary and the announcement of a stock
      repurchase program and a dividend declaration.

                                       34
<PAGE>
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


   I, Thomas W. Schneider, President and Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-K of Pathfinder Bancorp,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
        information relating to the registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities,
        particularly during the period in which this quarterly report is being
        prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
        procedures as of a date within 90 days prior to the filing date of this
        quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
        effectiveness of the disclosure controls and procedures based on our
        evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

     a) all significant deficiencies in the design or operation of internal
        controls which could adversely affect the registrant's ability to
        record, process, summarize and report financial data and have identified
        for the registrant's auditors any material weaknesses in internal
        controls; and

     b) any fraud, whether or not material, that involves management or other
        employees who have a significant role in the registrant's internal
        controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


March 28, 2003                       /s/Thomas W. Schneider
--------------------------------------------------------------------------------
Date                                   Thomas  W.  Schneider
                              President  and  Chief  Executive  Officer


                                       35
<PAGE>
                                     ------
                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


   I, James A. Dowd, Vice President and Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-K of Pathfinder Bancorp,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
        information relating to the registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities,
        particularly during the period in which this quarterly report is being
        prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
        procedures as of a date within 90 days prior to the filing date of this
        quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
        effectiveness of the disclosure controls and procedures based on our
        evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):


     a) all significant deficiencies in the design or operation of internal
        controls which could adversely affect the registrant's ability to
        record, process, summarize and report financial data and have identified
        for the registrant's auditors any material weaknesses in internal
        controls; and

     b) any fraud, whether or not material, that involves management or other
        employees who have a significant role in the registrant's internal
        controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

March 28, 2003                                 /s/James A. Dowd
--------------------------------------------------------------------------------
Date                                             James A. Dowd
                                 Vice  President  and  Chief  Financial  Officer

                                       36
<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.


March 28, 2003                       /s/Thomas W. Schneider
--------------------------------------------------------------------------------
Date                                   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.



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

                    Date:  March 28, 2003
                           -------------

<TABLE>
<CAPTION>

<S>    <C>                                   <C>    <C>

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

Date:  March 28, 2003                        Date:  March 28, 2003

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

Date:  March 28, 2003                        Date:  March 28, 2003

By: .  /s/ Bruce Manwaring                   By:    /s/ George W. Joyce
-----------------------------------------    -------------------------------
       Bruce Manwaring                              George W. Joyce
       Director                                     Director

Date:  March 28, 2003                        Date:  March 28, 2003

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

Date:  March 28, 2003                        Date:  March 28, 2003

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

Date:  March 28, 2003                        Date:  March 28, 2003

</TABLE>

                                       37
<PAGE>

Exhibit  Index

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

99.1  Officers' Certification Pursuant to section 906 of the Sarbanes-Oxley Act
      of 2002
                                       38
<PAGE>