<PAGE>




                                  EXHIBIT 13

                         ANNUAL REPORT TO SHAREHOLDERS
<PAGE>

================================================================================

                          [LOGO] FINGER LAKES BANCORP

                                                --------------------------------
                                                Annual Report, December 31, 2000

================================================================================
<PAGE>

Table of Contents
================================================================================

                                                                            Page
                                                                            ----

President's Message

Selected Consolidated Financial Information

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Independent Auditors' Report

Consolidated Financial Statements

Notes to Consolidated Financial Statements

Common Stock Information

Directors and Officers

Corporate Information
<PAGE>

Dear Shareholder:

The year just concluded was one of mixed results. On the positive side, we
successfully completed our stock conversion, expanded our market area into
Auburn, grew both deposits and loans while maintaining outstanding loan quality,
and moved our service functions to an efficient new operations center. On the
negative side, our earnings were a disappointment.

Although we believe we accomplished much in 2000 to position ourselves for
future progress, our earnings did not meet our expectations. Net income after
tax for 2000 totaled $802,000, or $.24 per share. This compares to $1,305,000,
or $.38 per share for the previous year.

[The following information was represented as a bar chart in the original text.]

Assets

200.4   247.7   282.4   301.2   329.2
 '96     '97     '98     '99     '00

Earnings were adversely impacted by a number of factors. First, the rise in
interest rates through the latter part of 1999 and most of 2000, increased our
cost of funds more rapidly than the yields on loans and investments could
increase. As a result, our margins during the year compressed. Second, we
continued to incur expense on a foreclosed property that required environmental
remediation. A total of $240,000 of remediation expense was incurred in 2000.
The good news is that remediation, under the Department of Environmental
Conservation supervision, has been completed. And, although ongoing monitoring
is required, the site can now be sold.

Other factors impacted our 2000 financial results. Early in the year we
determined to change the direction of our efforts to sell investment products
and, accordingly, we established a relationship with a new partner. As a result
of start-up time and expense, fees earned on the sale of investment products was
minimal in 2000 compared to the previous year. In the higher interest rate
environment during 2000 our residential mortgage production was substantially
less compared to the previous year. Lower loan production reduced fees from the
origination and sale of mortgage loans.

The most significant activity of the year, of course, was the successful stock
conversion completed in the fourth quarter. Through the conversion we raised $14
million of new capital and obtained the additional benefits of enhanced
liquidity in our stock, broadening our shareholder base and positioning
ourselves to deliver shareholder value in the years ahead.

[The following information was represented as a bar chart in the original text.]

Deposits

153.8   186.5   202.4   208.1   228.5
 '96     '97     '98     '99     '00

In April 2000, we opened a full service banking office in Auburn. By year-end,
deposits in the branch totaled $13 million, an excellent result. In addition to
gaining good deposit growth, we are actively developing a portfolio of
commercial loans in that market.
<PAGE>

Deposit growth in 2000 was good in a year when many banking companies saw a
decline. At year-end, deposits totaled $228.5 million, up $20.3 million or 9.8%.
In addition, our focus on building checking accounts continues. In 2000, the
number of checking accounts grew by 9.1% and balances grew by $2.7 million or
11.1%.

[The following information was represented as a bar chart in the original text.]

Loans

 89.8   119.6   148.3   160.2   172.4
 '96     '97     '98     '99     '00

Similarly 2000 was a good year for our lending operations. Total loans increased
by $12.2 million to $172.4 million, a gain of 7.6%. Asset quality is important
to us and we achieved outstanding results. At year-end, non-performing loans
totaled $229,000 or 0.13% of total loans, down from $587,000 or 0.37% of total
loans one year ago. Reserves to total loans at year-end were .85% and reserves
to non-performing loans provided coverage of 6.4 times. We will continue to work
hard to maintain asset quality.

In November we moved our service operations from the basement of our Main Office
building to nearby leased space and in doing so have provided a proper work
environment for these important areas of our banking operation.

Ralph Springstead retired from our Board of Directors in June 2000 after 42
years of service as a Director. Ralph served as President and Chief Executive
Officer of the Bank for 30 years prior to his retirement in 1995. We thank Ralph
for his wonderful service as a Director for so many years.

At the beginning of this year, Richard J. Harrison resigned his position as a
Director of the Bank to join our Management Team as Executive Vice President,
Chief Credit Officer. Rick has 30 years of high level experience in large
financial companies and brings considerable strength to our Executive Officer
team.

With our footprint now clearly established throughout the Finger Lakes region,
the staff, officers and directors of our company are committed to build upon the
solid foundation established these past few years.

                                        Sincerely,


                                        /s/ G. Thomas Bowers

                                        G. Thomas Bowers
                                        President & Chief Executive Officer
<PAGE>

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
                  OF FINGER LAKES BANCORP, INC. AND SUBSIDIARY

      The following tables set forth selected consolidated historical financial
and other data of Finger Lakes Bancorp, Inc. and the Savings Bank of the Finger
Lakes for the periods and at the dates indicated. The information is derived in
part from, and should be read together with, the Consolidated Financial
Statements and Notes thereto of Finger Lakes Bancorp contained elsewhere in this
Annual Report.

<TABLE>
<CAPTION>
                                                                         At December 31,
                                                  ------------------------------------------------------------
                                                    2000         1999         1998         1997         1996
                                                  --------     --------     --------     --------     --------
                                                                         (In Thousands)
<S>                                               <C>          <C>          <C>          <C>          <C>
Selected Financial Condition Data:

  Total assets ..............................     $329,196     $301,120     $282,376     $247,708     $200,429
  Cash and cash equivalents .................        4,496        6,095        4,375        4,394        6,366
  Securities available for sale .............      131,322      118,750      115,333       99,880       83,830
  Securities held to maturity ...............        1,563        1,593        4,640       14,096       13,347
  Loans, net ................................      170,907      158,854      145,136      118,439       88,682
  Deposits ..................................      228,462      208,132      202,434      186,534      153,832
  Advances from Federal Home Loan Bank ......       60,243       69,960       54,815       36,721       23,800
  Stockholders' equity ......................       36,571       19,379       21,964       21,679       20,350

<CAPTION>
                                                                     Year Ended December 31,
                                                  ------------------------------------------------------------
                                                    2000         1999         1998         1997         1996
                                                  --------     --------     --------     --------     --------
                                                            (In Thousands, except per share amounts)
<S>                                               <C>          <C>          <C>          <C>          <C>
Selected Operating Data:

  Total interest income .....................     $ 22,445     $ 20,317     $ 18,645     $ 15,840     $ 13,560
  Total interest expense ....................       13,749       12,021       11,201        9,197        7,370
                                                  --------     --------     --------     --------     --------
   Net interest income ......................        8,696        8,296        7,444        6,643        6,190
  Provision for loan losses .................          260          200          240          120          483
                                                  --------     --------     --------     --------     --------
  Net interest income after provision for
   loan losses ..............................        8,436        8,096        7,204        6,523        5,707
  Noninterest income ........................        1,141        1,328        1,202          721        1,093
  Noninterest expense .......................        8,285        7,259        7,213        5,835        6,741
                                                  --------     --------     --------     --------     --------
  Income before income tax
   expense ..................................        1,292        2,165        1,193        1,409           59
  Income tax expense ........................          490          860          469          562           23
                                                  --------     --------     --------     --------     --------
  Net income ................................     $    802     $  1,305     $    724     $    847     $     36
                                                  ========     ========     ========     ========     ========
  Net income per share- basic(1) ............     $    .24     $    .38     $    .21     $    .24     $    .01
                                                  ========     ========     ========     ========     ========
  Net income per share - diluted (1) ........     $    .24     $    .38     $    .21     $    .24     $    .01
                                                  ========     ========     ========     ========     ========
  Dividends per share .......................     $    .24     $    .24     $    .23     $    .20     $    .20
                                                  ========     ========     ========     ========     ========
</TABLE>

----------
(1)   All per share items retroactively adjusted to reflect the exchange of
      existing shares of Finger Lakes Financial Corp for shares of Finger Lakes
      Bancorp. The exchange ratio was .9643.
<PAGE>

<TABLE>
<CAPTION>
                                                                   At or For the Year Ended December 31,
                                                        ----------------------------------------------------------
                                                         2000         1999         1998         1997         1996
                                                        ------       ------       ------       ------       ------
<S>                                                     <C>          <C>          <C>          <C>          <C>
Selected Ratios:

Performance Ratios:
  Return on assets (ratio of net income to
   average total assets) .........................        0.26%        0.44%        0.27%        0.40%        0.02%
  Return on stockholders' equity (ratio of net
   income to average equity) .....................        3.76         6.19         3.29         4.05         0.18
  Interest rate spread information (1):
   Average during period .........................        2.65         2.74         2.71         2.82         3.17
   End of period .................................        2.52         2.77         2.73         2.84         2.79
  Net interest margin
    (net interest income divided by
    average interest-earning assets) .............        2.91         2.93         2.96         3.14         3.48
  Noninterest expenses to average total
    assets .......................................        2.68         2.47         2.74         2.66         3.60
  Average interest-earning assets to
   average interest-bearing liabilities ..........      105.60       104.65       105.39       107.29       106.68
  Dividend payout ratio(2) .......................      100           63          110           83         2000

Asset Quality Ratios:
  Non-performing assets to total assets(3) .......        0.09%        0.32%        0.43%        0.50%        0.93%
  Allowance for loan losses to
   non-performing loans(3) .......................      641.05%      229.81%      115.75%      203.72%      118.52%
  Allowance for loan losses to
   loans, net ....................................        0.85%        0.84%        0.80%        0.96%        1.21%

Capital Ratios:
  Stockholders' equity to total assets
   at end of period ..............................       11.11%        6.43%        7.78%        8.75%       10.15%
  Average stockholders' equity to
   average assets ................................        6.91%        7.17%        8.36%        9.54%       10.85%

Other Data:
  Number of full service customer facilities
   at end of period ..............................        7            6            6            5            4
</TABLE>

----------
(1)   Interest rate spread represents the difference between the weighted
      average yield on average interest-earning assets and the weighted average
      cost of average interest-bearing liabilities.
(2)   Ratio does not reflect the waiver of dividends by Finger Lakes Financial
      Corp., M.H.C. on all of its shares.
(3)   Nonperforming loans consist of non-accrual loans and non-performing assets
      consist of non-performing loans, troubled debt restructurings and real
      estate owned.
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

      This discussion and analysis reflects Finger Lakes Bancorp's consolidated
financial statements and other relevant statistical data and is intended to
enhance your understanding of our financial condition and results of operations.
You should read the information in this section in conjunction with Finger Lakes
Bancorp's consolidated financial statements and their notes and the other
statistical data provided in this Annual Report. This Annual Report contains
certain "forward-looking statements" which may be identified by the use of such
words as "believe," "expect," "anticipate," "should," "planned," "estimated" and
"potential." Examples of forward-looking statements include, but are not limited
to, estimates with respect to our financial condition, results of operations and
business that are subject to various factors which could cause actual results to
differ materially from these estimates and most other statements that are not
historical in nature. These factors include, but are not limited to, general and
local economic conditions, changes in interest rates, deposit flows, demand for
mortgage and other loans, real estate values, and competition; changes in
accounting principles, policies, or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory, and
technological factors affecting our operations, pricing, products and services.

General

      Our results of operations depend primarily upon the results of operations
of our wholly-owned subsidiary, Savings Bank of the Finger Lakes, which depend
primarily on net interest income. Net interest income is the difference between
the interest income we earn on our interest-earning assets, consisting primarily
of loans and investment and mortgage-backed securities, and the interest we pay
on our interest-bearing liabilities, primarily savings accounts, time deposits
and borrowings. Our results of operations are also affected by our provision for
loan losses, other income and other expense. Other expense consists of
non-interest expenses, including salaries and employee benefits, occupancy,
professional fees, data processing fees, deposit insurance premiums, advertising
and other expenses. Other income consists of non-interest income, including
service charges and fees, gain on sale of loans and securities and other income.
Our results of operations may also be affected significantly by general and
local economic and competitive conditions, particularly those with respect to
changes in market interest rates, government policies and actions of regulatory
authorities.

      On November 11, 2000 we completed the "second-step" conversion and
reorganization of Finger Lakes Financial Corp., M.H.C., from a mutual holding
company into a full stock holding company, which resulted in Finger Lakes
Bancorp, Inc. succeeding as the stock holding company of Saving Bank of the
Finger Lakes. As part of this transaction, we sold 2,307,325 shares of common
stock for $7.00 per share in a public stock offering held in connection with the
reorganization. In addition, 1,180,052 minority shares were exchanged at a ratio
of .9643 resulting in total new shares outstanding of 3,445,110. The
accompanying consolidated financial statements include the accounts of Finger
Lakes Bancorp, Inc. (after the offering), Finger Lakes Financial Corp. (prior to
the offering) and the Savings Bank of the Finger Lakes.

Business Strategy

      We have several strategies designed to improve our profitability and
enhance our franchise in our market area which comprises the Finger Lakes region
of New York state. We seek to implement these strategies in a manner that is
consistent with safety and soundness. These strategies are discussed below. You
should be aware that we are subject to intense competition, and there can be no
assurances that we will successfully implement these strategies:

      Controlled growth while expanding our market area. We have sought to
increase our presence in the Finger Lakes region in New York by expanding our
branch network and by emphasizing a variety of loan products in addition to
traditional one- to four-family mortgage loans. As a result, our assets have
increased to $329.2 million at December 31, 2000, from $200.4 million at
December 31, 1996, an increase of 64.3%. During this period, we have increased
our total full-service offices from four to seven. Our growth has been targeted
to include those areas of the Finger Lakes region that have shown relative
economic strength. Management's goal is to continue to develop an increased
market presence in the Finger Lakes region.

      Complementing our traditional mortgage lending by increasing multi-family
and commercial real estate lending as well as non-mortgage lending, particularly
commercial business lending. To complement our traditional emphasis on one- to
four-family mortgage lending, we have sought to increase our multi-family and
commercial real estate lending as well as our non-mortgage lending, particularly
commercial business lending. At December 31, 2000, our multi-family and
commercial real estate loans totaled $35.7 million, or 20.75% of total loans. At
December 31, 2000, non-mortgage loans, consisting of commercial business,
consumer, mobile home and home equity loans totaled $49.2 million, or 28.58% of
total loans. Management has determined to emphasize its commercial business
lending activities, and in this regard, has added to its staff persons who are
charged with originating and servicing our commercial business loan portfolio.
Because the yields on these types of loans are generally higher than the yields
on one- to four-family mortgage loans, our goal over the next several years is
to increase the origination of these loans consistent with safety and soundness
considerations. Although these loans offer higher yields than one- to
four-family mortgage loans, they also involve greater risk.
<PAGE>

      Maintaining asset quality. Our high asset quality is a result of our
underwriting standards, the diligence of our loan collection department in
contacting delinquent borrowers and the stability of the local economy. We also
invest in mortgage-backed securities issued by Freddie Mac, Fannie Mae and
Ginnie Mae and other investment securities, primarily U.S. government and agency
obligations. We will only purchase investment securities rated "A" or higher by
Moodys Investment Rating Service. At December 31, 2000, our ratio of
non-performing assets to total assets was 0.09%, and our ratio of non-performing
loans to total loans was 0.13%.

      Increasing fee and servicing income. We have sought to increase and
diversify our sources of fee income. We receive fee income from the servicing of
loans sold in the secondary market and from fees on our deposit accounts. In
recent periods we have sold fixed rate mortgages into the secondary market
without recourse and on a servicing retained basis. At December 31, 2000
residential mortgage loans serviced for others totaled $40.7 million. Our fee
and servicing income has increased as a result of fees received from certain
deposit accounts. During the year ended December 31, 2000 service charges on
deposit accounts totaled $741,000 as compared to $653,000 and $453,000 during
the years ended December 31, 1999 and 1998, respectively. We also offer our
customers mutual funds, financial planning services and insurance and annuity
products through our wholly owned subsidiary SBFL Agency Inc, which is an
additional source of fee income.

Financial Condition

      Our total assets as of December 31, 2000 were $329.2 million, a net
increase of $28.1 million, or 9.3% from December 31, 1999. The increase was due
primarily to a $12.1 million or 7.6% increase in our loan portfolio. Our loan
growth is a result of competitive expansion into other markets within the Finger
Lakes region in New York attracting new commercial and personal lending
customers. With management's continued emphasis on lending activities, mortgage
loans increased by $1.5 million, home equity loans increased by $2.8 million,
mobile home loans increased by $3.9 million and commercial business loans
increased by $4.1 million. Securities classified as available for sale at
December 31, 2000 were $131.3 million, an increase of $12.6 million from
December 31, 1999, while securities classified as held to maturity at December
31, 2000 were $1.6 million, unchanged from December 31, 1999. In the fourth
quarter of 2000, we invested in $5.0 million of bank owned life insurance, as a
tax advantaged means of financing employee benefits. Other assets totaled $5.1
million at December 31, 2000, a decrease of $886,000 from 1999. This decrease is
primarily due to a reduction in our deferred tax position at year end.

      The growth in assets during 2000 was funded by a combination of a $20.3
million increase in total deposits and an increase in stockholders' equity of
$17.2 million, partially offset by a $9.7 million decrease in borrowed funds.
Certificates of deposit increased by $21.8 million and all other deposits
decreased by $1.4 million in 2000. Total deposit growth of $24.2 million in our
Auburn, Ithaca and Canandaigua markets is reflective of our expansion into those
markets and aggressively pricing deposits, particularly certificates of deposit.

      Stockholders' equity totaled $36.6 million as of December 31, 2000, an
increase of $17.2 million from December 31, 1999. The increase in stockholders'
equity resulted primarily from the successful completion of our stock offering
on November 13, 2000, which raised approximately $14.0 million in new capital.
Changes in the fair value of securities available for sale, net of related
deferred income taxes, increased equity by $2.6 million, and net income of
$802,000 ($519,000 after dividends) contributed to the increase in stockholders'
equity as well.
<PAGE>

Average Balances, Net Interest Income and Yields Earned and Rates Paid

      The following table presents for the periods indicated the total dollar
amount of interest from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin. No
tax-equivalent adjustments have been made and all average balances are daily
average balances. Non-accruing loans have been included in the yield
calculations in this table and dividends received are included as interest
income. Balance and yield/rate information as of December 31, 2000 is also
provided in the table.

<TABLE>
<CAPTION>
                                                     At December 31, 2000          Year Ended December 31, 2000
                                                    ----------------------    ------------------------------------
                                                                    Yield/    Average                       Yield/
                                                    Balance          Rate     Balance      Interest          Rate
                                                    -------          ----     -------      --------          ----
                                                                       (Dollars In Thousands)
<S>                                                <C>               <C>      <C>          <C>              <C>
Interest-earning assets:
  Loans(1) ...................................     $172,375          8.43%    $166,072     $  13,637          8.21%
  Securities (2) .............................      137,904          6.66      132,125         8,756          6.63
  Money market investments ...................           --            --          760            52          6.84
                                                                     ----     --------     ---------        ------
Total interest-earning assets ................      310,279          7.64      298,957        22,445          7.51
                                                                     ----                  ---------        ------
  Non-interest-earning assets ................       18,917                      9,977
                                                   --------                   --------
Total assets .................................     $329,196                   $308,934
                                                   ========                   ========

Interest-bearing liabilities:
Deposits(3) ..................................     $228,462          4.84      219,748     $   9,873          4.49
Borrowed funds ...............................       60,243          6.20       63,345         3,876          6.12
                                                   --------          ----     --------     ---------        ------
  Total interest-bearing liabilities .........      288,705          5.12      283,093        13,749          4.86
                                                                     ----                  ---------        ------
Non-interest-bearing liabilities .............        3,920                      4,491
                                                   --------                   --------
  Total liabilities ..........................      292,625                    287,584
  Stockholders' equity .......................       36,571                     21,350
                                                   --------                   --------
Total liabilities and stockholders' equity ...     $329,196                   $308,934
                                                   ========                   ========

Net interest income ..........................                                             $   8,696
                                                                                           =========
Interest rate spread(4) ......................                       2.52%                                    2.65%
                                                                     ====                                   ======
Net interest margin(5) .......................                                                                2.91%
                                                                                                            ======
Average interest-earning assets to
average interest-bearing liabilities .........                                                              105.60%
                                                                                                            ======
<CAPTION>
                                                       Year Ended December 31, 1999              Year Ended December 31, 1998
                                                   -----------------------------------       ------------------------------------
                                                   Average                      Yield/       Average                       Yield/
                                                   Balance      Interest         Rate        Balance      Interest          Rate
                                                   -------      --------         ----        -------      --------          ----
                                                                                (Dollars In Thousands)
<S>                                                <C>          <C>              <C>         <C>          <C>              <C>
Interest-earning assets:
  Loans(1) ...................................     $153,783     $  12,137          7.89%     $132,324     $  10,821          8.18%
  Securities (2) .............................      128,761         8,173          6.35       119,256         7,810          6.55
  Money market investments ...................          114             6          5.26           293            14          4.78
                                                   --------     ---------        ------                    ---------       ------
Total interest-earning assets ................      282,658        20,316          7.19       251,873        18,645          7.40
                                                                ---------        ------                    ---------       ------
  Non-interest-earning assets ................       11,101                                    11,519
                                                   --------                                  --------
Total assets .................................     $293,759                                  $263,392
                                                   ========                                  ========

Interest-bearing liabilities:
Deposits(3) ..................................     $208,166     $   8,660          4.16      $193,227     $   8,678          4.49
Borrowed funds ...............................       61,923         3,360          5.43        45,771         2,523          5.51
                                                   --------     ---------        ------                    ---------       ------
  Total interest-bearing liabilities .........      270,089        12,020          4.45       238,998        11,201          4.69
                                                                ---------        ------                    ---------       ------
Non-interest-bearing liabilities .............        2,601                                     2,369
                                                   --------                                  --------
  Total liabilities ..........................      272,690                                   241,367
  Stockholders' equity .......................       21,069                                    22,025
                                                   --------                                  --------
Total liabilities and stockholders' equity ...     $293,759                                  $263,392
                                                   ========                                  ========

Net interest income ..........................                  $   8,296                                 $   7,444
                                                                =========                                 =========
Interest rate spread(4) ......................                                     2.74%                                     2.71%
                                                                                 ======                                    ======
Net interest margin(5) .......................                                     2.93%                                     2.96%
                                                                                 ======                                    ======
Average interest-earning assets to
average interest-bearing liabilities .........                                   104.65%                                   105.39%
                                                                                 ======                                    ======
</TABLE>

----------
(1)   Includes premiums, net of deferred fees.
(2)   Includes securities available for sale and held to maturity at amortized
      cost and Federal Home Loan Bank stock at cost.
(3)   Includes noninterest-bearing deposits.
(4)   Represents the difference between the weighted average yield on
      interest-earning assets and the weighted average costs of average
      interest-bearing liabilities.
(5)   Net interest income divided by interest-earning assets.
<PAGE>

Rate/Volume Analysis

      The following table describes the extent to which changes in interest
rates and changes in volume of interest-related assets and liabilities have
affected interest income and expense during the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (change
in volume multiplied by prior year rate), (ii) changes in rate (change in rate
multiplied by prior year volume), and (iii) total change in rate and volume. The
combined effect of changes in both rate and volume has been allocated
proportionately to the change due to rate and the change due to volume.

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                                           -----------------------
                                                            2000 vs. 1999                        1999 vs. 1998
                                                            -------------                        -------------
                                                    Increase/(Decrease)                  Increase/(Decrease)
                                                          Due to                               Due to
                                                          ------        Total Increase/        ------           Total Increase/
                                                     Rate       Volume     (Decrease)      Rate      Volume       (Decrease)
                                                     ----       ------     ----------      ----      ------       ----------
                                                                                (In Thousands)
<S>                                                <C>          <C>          <C>          <C>        <C>            <C>
Interest-earning assets:

Loans ........................................     $   530      $  970       $1,500       $(394)     $ 1,710        $ 1,316
Securities ...................................         369         214          583        (244)         607            363
Money market investments .....................          12          34           46           1           (9)            (8)
                                                   -------      ------       ------       -----      -------        -------
   Total interest-earning assets .............         911       1,218        2,129        (637)       2,308          1,671
                                                   -------      ------       ------       -----      -------        -------

Interest-bearing liabilities:

Deposits .....................................         731         482        1,213        (663)         645            (18)
Borrowed funds ...............................         439          77          516         (37)         874            837
                                                   -------      ------       ------       -----      -------        -------
    Total interest-bearing liabilities .......       1,170         559        1,729        (700)       1,519            819
                                                   -------      ------       ------       -----      -------        -------

Increase (decrease) in net interest income ...     $  (259)     $  659       $  400       $  63      $   789        $   852
                                                   =======      ======       ======       =====      =======        =======
</TABLE>

Results of Operations

      Comparison of the years ended December 31, 2000 and 1999

      Net Interest Income. Our net interest income is determined by the interest
rate spread (i.e., the difference between yields earned on interest-earning
assets and rates paid on interest-bearing liabilities) and the relative amounts
of interest-earning assets and interest-bearing liabilities. Net interest income
amounted to $8.7 million in 2000, an increase of $400,000 from 1999. The
increase resulted from a $16.3 million increase in the total average
interest-earning assets, primarily from loan growth, offset by a $13.0 million
increase in average interest-bearing liabilities, the net of which contributed
to a $659,000 increase in net interest income. The average interest rate spread
in 2000 was 2.65% versus 2.74% in 1999. The average yield on interest-earning
assets increased 32 basis points, while the average cost of funds increased 41
basis points from 1999 to 2000, contributing to a $259,000 decrease in net
interest income in 2000. The increase in the average yield on interest earning
assets was attributable to a rising rate environment throughout 2000. The cost
of funds, correspondingly, increased as a result of the rate environment, as
well as deposit pricing strategies responding to increased competitive
pressures.

      Our net interest income was also impacted by the $14.0 million, net of
expenses, raised in our public stock offering during the fourth quarter of 2000.
We were able to pay down short term borrowings, and invest the remainder in
interest bearing assets, resulting in additional net interest income earned of
approximately $140,000.

      Interest Income. Total interest income in 2000 amounted to $22.4 million,
an increase of $2.1 million from 1999. Interest income on loans increased to
$13.6 million in 2000, an increase of $1.5 million from 1999. This improvement
was primarily attributable to loan growth as the average total outstanding loan
balance increased by $12.3 million to $166.1 million for 2000. In addition, the
average yield on loans grew to 8.21% in 2000 compared to 7.89% in 1999. Our
strategy is to emphasize the origination of commercial real estate loans and
commercial business loans, which typically yield higher interest rates. Interest
income on securities amounted to $8.8 million, an increase of $583,000 from the
prior year. This increase was attributed to growth in the portfolio as the
average outstanding securities balance increased by $3.4 million to $132.1
million for 2000, as well as an increase in the yield to 6.63%, from 6.35% in
1999.

      Interest Expense. Total interest expense in 2000 was $13.7 million, an
increase of $1.7 millions from 1999. In 2000, interest expense on deposits
amounted to $9.9 million while interest expense on borrowed funds amounted to
$3.8 million. Interest expense on deposits increased due to both growth in the
average outstanding deposit base of $11.6 million, as well as an increase in the
average cost of 33 basis points to 4.49%. Interest expense on borrowings
increased $516,000, from $3.4 million in 1999, due to a $1.4 million increase in
average outstanding borrowings, as well as an increase in the average cost of
borrowed funds of 69 basis points to 6.12% for the year ended December 31, 2000.
<PAGE>

      Provision for Loan Losses. Our provision for loan losses amounted to
$260,000 in 2000, an increase of $60,000 from the prior year. Our allowance for
loan losses amounted to $1.5 million as of December 31, 2000, or 0.85% of total
loans outstanding, as compared to $1.3 million or 0.84% at December 31, 1999.
The increase in the provision reflects the increase in the total average
outstanding loan portfolio, as well as greater emphasis on building our
commercial real estate and commercial business portfolios, which typically have
greater credit risk. Net charge-offs in 2000 were $142,000 versus $26,000 in
1999, representing 0.09% and 0.02%, respectively, of total average loans
outstanding. The increase in net charge-offs was primarily a result of a
significant 1999 recovery for $90,000 of a previously charged-off commercial
business loan, bringing total recoveries to $186,000 in 1999 as compared to
$47,000 in 2000. Also, gross loan charge-offs declined by $23,000 to $189,000 in
2000 from $212,000 in 1999 as we devoted greater resources to monitoring of
problem loans and collection efforts. The increase in the allowance for loan
losses in 2000 also reflects management's consideration of qualitative factors
including, but not limited to, the substantial growth in multi-family and
commercial business loans and entry into new markets. Management reviews the
adequacy of the allowance for loan losses quarterly through an asset
classification and review process and an analysis of the level of loan
delinquencies and general market and economic conditions.

      Noninterest Income. Noninterest income, consisting primarily of service
charges on deposit accounts, loan servicing fees, income from the sale of
annuities and mutual funds, and gains on loans and securities sold, was $1.1
million in 2000, a decrease of $187,000 or 14.1% compared to 1999. Service
charges and other fee income was $988,000 in 2000, a decrease of $38,000
compared to 1999. The decrease was due to a decision, through our wholly owned
subsidiary SBFL Agency, to change our broker/dealer relationship, in order to
provide a wider range of products for our customers. This decision resulted in a
reduction of $130,000 in fee income from our sales of annuities and mutual
funds. Net gains on sales of securities in 2000 were $50,000, as compared to
$77,000 in 1999. Net gains on sales of loans were $99,000 in 2000, as compared
to $224,000 in 1999. During 2000, we originated $5.2 million of loans held for
sale, versus $15.3 million in 1999, resulting in fewer sales, and reduced gains.

      Noninterest Expense. Noninterest expense amounted to $8.3 million in 2000,
compared to $7.3 million in 1999, an increase of 14.1%. This increase reflects
our investment in the future with increased staff, branch expansion, and
upgrading technological capabilities for data processing. Relating to a new
branch office in Auburn, New York were increases of $145,000 in salaries and
employee benefits expense and $87,000 in office occupancy and equipment expense.
Data processing expense amounted to $197,000, an increase of $38,000 or 24.0%.
This increase is primarily the result of additional processing costs associated
with the new branch office, and data communications upgraded throughout our
operating network. We recorded provisions for environmental remediation of real
estate owned of $180,000 during 2000, as compared to $90,000 in 1999. This
increase is primarily the result of management's determination of the provision
required each year to ensure that the accrual established for environmental
remediation as of December 31 is appropriate. See note 13 of the "Consolidated
Financial Statements." Professional fees of $417,000 in 2000, which includes
legal, consulting and accounting services, increased $70,000 or 20.1%, due to a
decision to outsource a portion of our technological requirements, such as
network and telecommunication management. Deposit insurance premiums, which
totaled $43,000 for 2000, decreased $77,000, reflecting a change in federal
deposit insurance rates that took effect January 1, 2000 for thrift
institutions. Marketing and advertising expense increased $72,000 to $320,000 in
2000, reflecting larger media expenditures in 2000 relating to the new branch
office in Auburn. Real estate owned expenses decreased $29,000 or 40.5% to
$43,000 in 2000 as compared to $72,000 in 1999, reflecting lower levels of
foreclosures in 2000. Other noninterest expense of $1.7 million in 2000 and $1.2
million in 1999 is comprised of expenses such as postage, office supplies,
telephone charges, loan servicing expenses, director's fees, insurance, and
third party check processing. The increase in other noninterest expense is
primarily due to the purchase of a Cleanup Cost Cap insurance policy relating to
the environmental remediation matter (see note 13 of the "Consolidated Financial
Statements), as well as increased costs life insurance policies.

      Income Taxes. Our recorded income tax expense was $490,000 for the year
ended December 31, 2000 on income before taxes for the year of $1.3 million,
reflecting an effective tax rate of 37.9%. In 1999, the effective rate was
39.7%.

Comparison of the years ended December 31, 1999 and 1998

      Net Interest Income Net interest income amounted to $8.3 million in 1999,
an increase of $852,000 from 1998. The increase resulted from a $30.8 million
increase in the total average interest-earning assets, primarily from loan
growth, offset by a $31.1 million increase in average interest-bearing
liabilities, the net of which contributed to an $807,000 increase in net
interest income. The average interest rate spread in 1999 was 2.74% versus 2.71%
in 1998. The average yield on interest-earning assets decreased 21 basis points,
while the average cost of funds decreased 24 basis points from 1998 to 1999, the
benefits of which contributed to a $45,000 increase in net interest income in
1999. The decline in the average yield on interest earning assets was
attributable to a declining rate environment through the second quarter of 1999
and increased competitive pressures. The cost of funds, correspondingly,
declined as a result of the rate environment, as well as deposit pricing
strategies designed to lower the overall cost of deposits.

      Interest Income. Total interest income in 1999 amounted to $20.3 million,
an increase of $1.7 million from 1998. Although the average yield on earning
assets declined to 7.19% in 1999 compared to 7.40% in 1998, interest income on
loans increased to $12.1 million in 1999, an increase of $1.3 million from 1998.
This improvement was attributable to loan growth as the average total
outstanding loan balance increased by $21.5 million to $153.8 million for 1999.
Interest income on securities amounted to $8.2 million, an increase of $363,000
from the prior year. This increase was attributed to growth in the portfolio as
the average outstanding securities balance increased by $9.5 million to $128.8
million for 1999.
<PAGE>

      Interest Expense. Total interest expense in 1999 was $12.0 million, an
increase of $819,000 from 1998. In 1999, interest expense on deposits amounted
to $8.7 million while interest expense on borrowed funds amounted to $3.4
million. Interest expense on deposits remained essentially flat year over year,
as an increase of $671,000 attributed to the growth in the average outstanding
deposit base was offset by a decrease of $689,000 attributed to the decline of
33 basis points in the average cost of deposits to 4.16%. However, interest
expense on borrowings increased $837,000, from $2.5 million in 1998, due to a
$16.1 million increase in average outstanding borrowings. The average cost of
borrowed funds decreased 8 basis points to 5.43% for the year ended December 31,
1999.

      Provision for Loan Losses. Our provision for loan losses amounted to
$200,000 in 1999, a decrease of $40,000 from the prior year. Our allowance for
loan losses amounted to $1.3 million as of December 31, 1999, or 0.84% of total
loans outstanding, as compared to $1.2 million or 0.80% at December 31, 1998.
The reduction in the provision reflects an improvement in the credit quality of
the portfolio in 1999 as non-performing loans decreased $429,000 to $587,000 at
December 31, 1999 from $1.0 million at December 31, 1998. Net charge-offs in
1999 were $27,000 versus $213,000 in 1998, representing 0.02% and 0.16%,
respectively, of total average loans outstanding. The decrease in net
charge-offs was primarily a result of a significant 1999 recovery for $90,000 of
a previously charged-off commercial business loan bringing total recoveries to
$186,000 in 1999 as compared to $80,000 in 1998. Also, gross loan charge-offs
declined by $81,000 to $212,000 in 1999 from $293,000 in 1998 as we devoted
greater resources to monitoring of problem loans and collection efforts. The
slight 4 basis point increase in the allowance for loan losses as a percentage
of total loans outstanding is a result of qualitative factors including, but not
limited to, the substantial growth in multi-family and commercial business loans
and entry into new markets. Management reviews the adequacy of the allowance for
loan losses quarterly through an asset classification and review process and an
analysis of the level of loan delinquencies and general market and economic
conditions.

      Noninterest Income. Noninterest income, consisting primarily of service
charges on deposit accounts, loan servicing fees, income from the sale of
annuities and mutual funds, and gains and losses on loans and securities sold,
was $1.3 million in 1999, an increase of $126,000 or 10.5% compared to 1998.
Service charges and other fee income were $1.0 million in 1999, an increase of
$224,000 over 1998. Net gains on sales of securities in 1999 were $77,000, as
compared to $106,000 in 1998. Net gains on sales of loans were $224,000 in 1999,
as compared to $277,000 in 1998.

      Noninterest Expense. Noninterest expense amounted to $7.3 million in 1999,
comparable to 1998. However, excluding provisions for environmental remediation,
expenses increased $576,000 or 8.7%. This increase reflects our investment in
the future with increased staff, branch expansion, and upgrading technological
capabilities for data processing. Increases of $269,000 in salaries and employee
benefits expense and $177,000 in office occupancy and equipment expense were
primarily the result of a full year of expenses including depreciation expense
relating to a new branch office in Canandaigua, New York. Data processing
expense amounted to $159,000, an increase of $40,000 or 33.6%. This increase is
primarily the result of additional processing costs associated with the new
branch office, and data communications upgraded at two branches in Ithaca, New
York. We recorded provisions for environmental remediation of real estate owned
of $90,000 during 1999, as compared to $620,000 in 1998. This decrease is
primarily the result of management's determination of the provision required
each year to ensure that the accrual established for environmental remediation
as of December 31 is appropriate. See note 13 of the "Consolidated Financial
Statements." Professional fees of $347,000 in 1999, which includes legal,
consulting and accounting services, remained consistent in 1999 as compared to
1998 as did deposit insurance premiums, which totaled $120,000 for 1999.
Marketing and advertising expense decreased $16,000 to $248,000 in 1999,
reflecting larger media expenditures in 1998 relating to the new branch office
in Canandaigua. Real estate owned expenses increased $63,000 to $72,000 in 1999
as compared to $9,000 in 1998, reflecting higher levels of foreclosure in 1999,
as well as fewer gains on sale of real estate owned. Other noninterest expense
of $1.2 million in 1999 is comprised of expenses such as postage, office
supplies, telephone charges, loan servicing expenses, directors fees, and third
party check processing charges and remains consistent with the prior year.

      Income Taxes. Our recorded income tax expense was $860,000 for the year
ended December 31, 1999 on income before taxes for the year of $2.2 million,
reflecting an effective tax rate of 39.7%. In 1998, the effective rate was
39.3%.
<PAGE>

Quantitative and Qualitative Disclosures About Market Risk

      The following table presents the difference between our interest-earning
assets and interest-bearing liabilities within specified maturities at December
31, 2000. This table does not necessarily indicate the impact that general
interest rate movements would have on our net interest income because the
repricing of certain assets and liabilities is subject to competitive pressure
and certain limitations. As a result, certain assets and liabilities indicated
as maturing or otherwise repricing within a stated period may in fact mature or
reprice at different times and at different volumes.

<TABLE>
<CAPTION>
                                                                               More than 1   More Than 3
                                                    Within 3     4 to 12         Year to       Years to         Over
                                                     Months       Months         3 Years        5 Years      Five Years      Total
                                                    --------     -------       -----------   -----------     ----------     --------
                                                                                 (Dollars In Thousands)
<S>                                                 <C>          <C>             <C>            <C>            <C>          <C>
Interest-earning assets:(1)
Mortgage loans(2) .............................     $10,092      $  26,478       $ 53,452       $ 28,588       $ 4,203      $122,813
Other loans(2) ................................      18,484          4,714         12,121          6,662         7,165        49,146
Securities available for sale(3)  .............      22,488         18,737         19,318         20,953        49,826       131,322
Securities held to maturity(3) ................          --             32             71             78         1,382         1,563
Federal Home Loan Bank Stock ..................          --             --             --             --         3,523         3,523
                                                    -------      ---------       --------       --------       -------      --------
   Total interest-earning assets ..............      51,064         49,961         84,962         56,281        66,099       308,367
                                                    -------      ---------       --------       --------       -------      --------

Interest-bearing liabilities:
Deposits:(4)
   NOW accounts ...............................         530          1,591          2,969          1,188           792         7,070
   Savings accounts ...........................       2,910          8,731         16,298          6,519         4,346        38,804
   Money market accounts ......................         611          1,832          3,420          1,368           912         8,143
   Certificates of deposit ....................      29,257         87,769         23,586         13,531           171       154,314
   Borrowings(5) ..............................       5,400          5,000          7,843         25,000        17,000        60,243
                                                    -------      ---------       --------       --------       -------      --------
     Total interest-bearing liabilities .......      38,708        104,923         54,116         47,606        23,221       268,574
                                                    -------      ---------       --------       --------       -------      --------
Excess (deficiency) of interest- earning
   assets over interest-bearing liabilities ...     $12,356      $ (54,962)      $ 30,846       $  8,675       $42,878      $ 39,793
                                                    =======      =========       ========       ========       =======      ========
Cumulative excess (deficiency) of
   interest-earning assets over
   interest-bearing liabilities ...............     $12,356      $ (42,606)      $(11,760)      $ (3,085)      $39,793
                                                    =======      =========       ========       ========       =======
Cumulative excess (deficiency)
   of interest-earning liabilities as a
   percentage of total assets .................        3.75%        (12.94)%        (3.57)%        (0.94)%       12.09%
                                                    =======      =========       ========       ========       =======
</TABLE>

----------
(1)   Adjustable- and floating-rate assets are included in the period in which
      interest rates are next scheduled to adjust rather than in the period in
      which they are due, and fixed-rate assets are included in the periods in
      which they are scheduled to be repaid based on scheduled amortization, in
      each case adjusted to take into account estimated prepayments. For
      fixed-rate mortgages and mortgage-backed securities, annual prepayment
      rates ranging from 5% to 25.5%, based on the type of loan or mortgage
      security and the coupon rate, were used.
(2)   Balances have been reduced for non-performing loans, which amounted to
      $229,000 at December 31, 2000.
(3)   Amounts shown are at carrying amounts.
(4)   Our negotiable order of withdrawal ("NOW") accounts, passbook savings
      accounts and money market deposit accounts are generally subject to
      immediate withdrawal. However, management considers a certain portion of
      these accounts to be core deposits having significantly longer effective
      maturities based on our retention of such deposits in changing interest
      rate environments. NOW accounts, passbook savings accounts and money
      market deposit accounts are assumed to be withdrawn at annual rates of 30%
      of the declining balance of such accounts during the period shown.
      Management believes these rates are indicative of expected withdrawal
      rates in a rising interest rate environment. If all of our NOW accounts,
      passbook savings account and money market accounts had been assumed to be
      subject to repricing within one year, the cumulative one-year deficiency
      of interest-earning assets to interest-bearing liabilities would have been
      $80.4 million or 24.4% of total assets.
(5)   Advances of $37 million are callable at the discretion of the FHLB in or
      after 2001. Such advances have a weighted average interest rate of 6.11%
      and mature from 2004 to 2010, if not called earlier.

      Certain shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, certain assets, such as adjustable-rate mortgage
loans, have features which restrict changes in interest rates on a short-term
basis and over the life of the asset. Further, in the event of a change in
interest rates, prepayment and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. Finally, the ability
of many borrowers to service their debt may decrease in the event of an interest
rate increase.

The OTS requires the Savings Bank of the Finger Lakes to measure interest rate
risk by computing estimated changes in the net portfolio value ("NPV") of cash
flows from assets, liabilities and off-balance sheet items in the event of a
range of assumed changes in market interest rates. These computations estimate
the effect on NPV of sudden and sustained 1% to 3% increases and decreases in
market interest rates. The Savings Bank of the Finger Lakes' Board of Directors
has adopted an interest rate risk policy which establishes maximum decreases in
estimated NPV in the event of 1%, 2% and 3% increases and decreases in market
interest rates, respectively. The following tables set forth those limits and
certain calculations, based on information provided to the Savings Bank of the
Finger Lakes by the OTS, with respect to the sensitivity of NPV to changes in
market interest rates at December 31, 2000.
<PAGE>

<TABLE>
<CAPTION>
      Basis Point             Estimated Net Portfolio Value                 NPV as % of PV of Assets
        Change                                                              ------------------------
       in Rates
       --------          ---------------------------------------
                          $ Amount      $ Change        % Change           NPV Ratio          BP Change
                          --------      --------        --------           ---------          ---------
         <S>             <C>            <C>               <C>               <C>               <C>
         +300            $  25,243      $ (9,894)         (28)%              8.06%            (246) bp

         +200               28,904        (6,233)         (18)               9.03             (149) bp

         +100               32,298        (2,839)          (8)               9.87              (65) bp

           NC               35,137                                          10.52

         -100               34,361          (776)          (2)              10.19              (33) bp

         -200               32,380        (2,757)          (8)               9.54              (98) bp

         -300               31,154        (3,983)         (11)               9.09             (143) bp
</TABLE>

      The table suggests that in the event of a 200 basis point change in
interest rates we would experience a decrease in NPV as a percentage of assets
to 9.03% from 10.52% in a rising interest rate environment and a decrease in NPV
as a percentage of assets to 9.54% from 10.52% in a decreasing interest rate
environment.

      The Board of Directors is responsible for reviewing asset liability
management policies. On at least a quarterly basis, the Board reviews interest
rate risk and trends, as well as liquidity and capital ratios and requirements.
Management is responsible for administering the policies and determinations of
the Board of Directors with respect to our asset and liability goals and
strategies.

Liquidity and Capital Resources

      Our liquidity management objective is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for expansion. Liquidity management addresses the ability to meet
deposit withdrawals on demand or at contractual maturity, to repay borrowings as
they mature, and to fund new loans and investments as opportunities arise. Our
primary sources of internally generated funds are principal and interest
payments on loans receivable, cash flows generated from operations, and cash
flows generated by investments. External sources of funds include increases in
deposits and advances from the FHLB.

      Savings Bank of the Finger Lakes is required under applicable federal
regulations to maintain specified levels of "liquid" investments in qualifying
types of United States Government, federal agency and other investments having
maturities of five years of less. OTS regulations at December 31, 2000 require
that a savings association maintain liquid assets of not less than 4% of its
average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. Monetary penalties may be imposed for failure to
meet applicable liquidity requirements. At December 31, 2000, Savings Bank of
the Finger Lakes' liquidity, as measured for regulatory purposes, was in excess
of the minimum OTS requirement. Savings Bank of the Finger Lakes received
approximately $11 million of the net proceeds from the stock offering. The
effects of the stock offering on liquidity are likely to decrease over time as
the offering proceeds are deployed into other investments and activities, such
as establishing or acquiring additional branch offices, funding new loans, and
funding the recognition and retention plan or for general corporate purposes.

      At December 31, 2000, we had loan commitments of $3.7 million and unused
lines of credit of $12.3 million extended to borrowers. We believe that we have
adequate resources to fund loan commitments as they arise. If we require funds
beyond our internal funding capabilities, additional advances from the FHLB are
available including a line of credit agreement with a maximum available limit of
$30.4 million. At December 31, 2000, approximately $117.0 million of time
deposits were scheduled to mature within a year, and we expect that a
substantial portion of these time deposits will be renewed upon maturity.

Impact of Inflation and Changing Prices

      The consolidated financial statements and related notes of Finger Lakes
Bancorp have been prepared in accordance with generally accepted accounting
principles ("GAAP"). GAAP generally requires the measurement of financial
position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time
due to inflation. The impact of inflation is reflected in the increased cost of
our operations. Unlike industrial companies, our assets and liabilities are
primarily monetary in nature. As a result, changes in market interest rates have
a greater impact on performance than the effects of inflation.

New Accounting Standards

      SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, requires that all derivatives be recognized as either
assets or liabilities in the statement of financial condition and that those
instruments be measured at fair value. The accounting for changes in the fair
value of a derivative (that is, gains and losses) depends on the intended use of
the derivative and the resulting designations. The Company's adoption on January
1, 2001 did not have a significant effect on the Company's financial position or
results of operations.
<PAGE>

MARKET FOR THE COMMON STOCK

      There is an established market for Finger Lakes Bancorp common stock which
is currently listed on the Nasdaq National Market under the symbol, "FLBC." At
December 31, 2000 Finger Lakes Bancorp had 12 market makers.

      The following table sets forth the high and low bid quotes for common
stock of Finger Lakes Bancorp and its predecessor prior to November 14, 2000,
Finger Lakes Financial Corp (SBFL) and the adjusted cash dividends per share
declared for the periods indicated. These quotations represent prices between
dealers and do not include retail markups, markdowns, or commissions and do not
reflect actual transactions. This information has been obtained from monthly
statistical summaries provided by the Nasdaq Stock Market. As of December 31,
2000 there were 3,445,110 shares of Finger Lakes Bancorp common stock
outstanding which were held by approximately 303 holders of record.

                                                                   Cash Dividend
                                            High Bid     Low Bid      Declared
                                            --------     -------      --------

Fiscal 2000
Quarter Ended December 31, 2000             $ 7.5625     $  6.500     $   0.06
Quarter Ended September 30, 2000            $ 7.0625     $  6.250     $   0.06
Quarter Ended June 30, 2000                 $ 8.3125     $  5.500     $   0.06
Quarter Ended March 31, 2000                $ 8.1875     $  5.750     $   0.06

Fiscal 1999
Quarter Ended December 31, 1999             $  9.750     $  7.000     $   0.06
Quarter Ended September 30, 1999            $ 11.000     $  8.125     $   0.06
Quarter Ended June 30, 1999                 $ 11.750     $ 10.500     $   0.06
Quarter Ended March 31, 1999                $ 15.750     $ 11.375     $   0.06

----------
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Finger Lakes Bancorp, Inc.:

We have audited the accompanying consolidated statements of financial condition
of Finger Lakes Bancorp, Inc. and subsidiary as of December 31, 2000 and 1999,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Finger Lakes
Bancorp, Inc. and subsidiary at December 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.


                                        /s/KPMG LLP
                                        ----------------------------------------

Syracuse, New York
January 26, 2001
<PAGE>

                           FINGER LAKES BANCORP, INC.

                 Consolidated Statements of Financial Condition

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                              Assets                             2000              1999
                                                                 ----              ----
<S>                                                         <C>                 <C>
Cash and cash equivalents                                   $   4,495,699         6,094,962
Securities available for sale, at fair value                  131,321,731       118,750,207
Securities held to maturity, fair value of $1,563,333
   in 2000 and $1,567,273 in 1999                               1,562,783         1,592,795

Loans                                                         172,374,860       160,203,637
     Less allowance for loan losses                             1,467,524         1,349,477
                                                            -------------       -----------

             Net loans                                        170,907,336       158,854,160

Accrued interest receivable                                     2,479,077         2,180,211
Federal Home Loan Bank stock, at cost                           3,523,000         3,523,000
Premises and equipment, net                                     4,813,729         4,149,400
Bank owned life insurance                                       5,003,333                --
Other assets                                                    5,088,937         5,975,410
                                                            -------------       -----------

             Total assets                                   $ 329,195,625       301,120,145
                                                            =============       ===========

     Liabilities and Stockholders' Equity

Liabilities:
     Deposits                                               $ 228,462,401       208,132,284
     Advances from Federal Home Loan Bank                      60,242,677        69,959,730
     Other liabilities                                          3,919,686         3,649,231
                                                            -------------       -----------

             Total liabilities                                292,624,764       281,741,245
                                                            -------------       -----------

Commitments and contingencies (notes 12 and 13)

Stockholders' equity:
     Preferred stock, $0.01 par value;1,000,000 shares
        authorized; none issued and outstanding                        --                --
     Common stock, $0.01 par value; 5,000,000 shares
        authorized; 3,445,110 and 3,570,000 issued
        and outstanding at December 31, 2000
        and 1999, respectively                                     34,451            35,700
     Additional paid-in capital                                20,068,434         4,786,957
     Retained earnings                                         18,780,317        18,261,689
     Accumulated other comprehensive loss                        (897,815)       (3,524,843)
     Unallocated shares of ESOP                                (1,414,526)         (180,603)
                                                            -------------       -----------

             Total stockholders' equity                        36,570,861        19,378,900
                                                            -------------       -----------

             Total liabilities and stockholders' equity     $ 329,195,625       301,120,145
                                                            =============       ===========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

                           FINGER LAKES BANCORP, INC.

                        Consolidated Statements of Income

              For the Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                               2000            1999           1998
                                                               ----            ----           ----
<S>                                                         <C>             <C>            <C>
Interest income:
     Loans                                                  $13,636,565     12,137,138     10,821,304
     Securities                                               8,756,166      8,173,120      7,810,063
     Federal funds sold and other
        short-term investments                                   51,965          6,187         14,085
                                                            -----------     ----------     ----------
                 Total interest income                       22,444,696     20,316,445     18,645,452
                                                            -----------     ----------     ----------

Interest expense:
     Deposits                                                 9,872,931      8,660,307      8,678,198
                                                            -----------     ----------     ----------
     Borrowings                                               3,876,430      3,360,357      2,523,136
                                                            -----------     ----------     ----------
                 Total interest expense                      13,749,361     12,020,664     11,201,334
                                                            -----------     ----------     ----------

             Net interest income                              8,695,335      8,295,781      7,444,118

Provision for loan losses                                       260,000        200,000        240,000
                                                            -----------     ----------     ----------
             Net interest income after
                 provision for loan losses                    8,435,335      8,095,781      7,204,118
                                                            -----------     ----------     ----------

Noninterest income:
     Service charges and other fee income                       988,406      1,026,636        803,134
     Net gain on sales of loans                                  98,941        224,351        276,612
     Net gain on sales of securities available for sale          50,383         77,137        106,231
     Other                                                        3,524             --         15,722
                                                            -----------     ----------     ----------

                 Total noninterest income                     1,141,254      1,328,124      1,201,699
                                                            -----------     ----------     ----------

Noninterest expenses:
     Salaries and employee benefits                           3,820,318      3,591,839      3,322,895
     Office occupancy and equipment                           1,575,984      1,387,261      1,209,563
     Provision for environmental remediation
       of real estate owned                                     180,000         90,000        620,000
     Deposit insurance premiums                                  43,388        119,947        112,400
     Professional fees                                          416,790        347,007        342,144
     Marketing and advertising                                  320,184        247,907        264,185
     Data processing                                            197,134        158,934        119,188
     Real estate owned                                           42,944         72,150          8,650
     Other                                                    1,688,025      1,243,493      1,214,198
                                                            -----------     ----------     ----------

                 Total noninterest expense                    8,284,767      7,258,538      7,213,223
                                                            -----------     ----------     ----------
             Income before income tax
                 expense                                      1,291,822      2,165,367      1,192,594

Income tax expense                                              489,980        860,426        468,565
                                                            -----------     ----------     ----------

             Net income                                     $   801,842      1,304,941        724,029
                                                            ===========     ==========     ==========
             Net income per common share:
                 Basic                                      $      0.24           0.38           0.21
                                                            ===========     ==========     ==========
                 Diluted                                    $      0.24           0.38           0.21
                                                            ===========     ==========     ==========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

                           FINGER LAKES BANCORP, INC.

                Consolidated Statements of Stockholders' Equity

              For the Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                                        Unallo-
                                                                                       Accumulated       cated
                                                        Additional                        other          shares
                                           Common         paid-in        Retained      comprehensive       of
                                            stock         capital        earnings      income(loss)       ESOP             Total
                                            -----         -------        --------      ------------       ----             -----
<S>                                      <C>            <C>             <C>             <C>            <C>              <C>
Balance, December 31, 1997               $    35,700     4,675,886      16,787,342         433,012       (252,844)      21,679,096

Comprehensive income:
   Net income                                     --            --         724,029              --             --          724,029
   Unrealized loss on securities
     available for sale, net of taxes             --            --              --        (277,607)            --         (277,607)
                                                                                                                        ----------
   Total comprehensive income                                                                                              446,422

Allocation of shares under ESOP                   --        73,370              --              --         36,120          109,490

Cash dividends declared,
  $0.23 per share                                 --            --        (271,412)             --             --         (271,412)
                                         -----------    ----------      ----------      ----------     ----------       ----------

Balance, December 31, 1998                    35,700     4,749,256      17,239,959         155,405       (216,724)      21,963,596

Comprehensive loss:
   Net income                                     --            --       1,304,941              --             --        1,304,941
   Unrealized loss on securities
     available for sale, net of taxes             --            --              --      (3,680,248)            --       (3,680,248)
                                                                                                                        ----------
   Total comprehensive loss                                                                                             (2,375,307)
                                                                                                                        ----------
Allocation of shares under ESOP                   --        37,701              --              --         36,121           73,822

Cash dividends declared,
  $0.24 per share                                 --            --        (283,211)             --             --         (283,211)
                                         -----------    ----------      ----------      ----------     ----------       ----------

Balance, December 31, 1999                    35,700     4,786,957      18,261,689      (3,524,843)      (180,603)      19,378,900

Comprehensive income:
   Net income                                     --            --         801,842              --             --          801,842
   Unrealized gain on securities
     available for sale, net of taxes             --            --              --       2,627,028             --        2,627,028
                                                                                                                        ----------
   Total comprehensive income                                                                                            3,428,870
                                                                                                                        ----------
Issuance of 2,307,325 shares                  (1,249)   15,265,146              --              --             --       15,263,897

Purchase of 184,586 shares by ESOP                --            --              --              --     (1,292,102)      (1,292,102)

Allocation of shares under ESOP                   --        16,331              --              --         58,179           74,510

Cash dividends declared,
  $0.24 per share                                 --            --        (283,214)             --             --         (283,214)
                                         -----------    ----------      ----------      ----------     ----------       ----------

Balance, December 31, 2000               $    34,451    20,068,434      18,780,317        (897,815)    (1,414,526)      36,570,861
                                         ===========    ==========      ==========      ==========     ==========       ==========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

                              FINGER LAKES BANCORP

                      Consolidated Statements of Cash Flows

              For the Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                              2000             1999              1998
                                                              ----             ----              ----
<S>                                                       <C>               <C>              <C>
Cash flows from operating activities:
     Net income                                           $    801,842        1,304,941           724,029
     Adjustments to reconcile net income
        to net cash provided by operating activities:
           Depreciation and amortization                       739,869          668,929           597,548
           Amortization of loan fees and other, net            106,441         (171,724)          283,635
           Provision for loan losses                           260,000          200,000           240,000
           Provision for environmental remediation             180,000           90,000           620,000
           Proceeds from sales of loans                      5,305,432       14,224,557        21,411,559
           Loans originated for sale                        (5,188,487)     (15,262,000)      (15,221,497)
           Net gain on sales of loans                          (98,941)        (224,351)         (276,612)
           Net gain on sales of securities available
               for sale                                        (50,383)         (77,137)         (106,231)
           Net loss (gain) on sales of real
               estate owned                                     23,097           15,311           (33,333)
           Allocation of ESOP                                   74,510           73,822           109,490
           Deferred income taxes                                (1,872)         (65,993)         (199,081)
           Increase in accrued interest
               receivable                                     (298,866)        (272,509)         (101,550)
           Decrease (increase) in other assets                (943,313)          25,257           113,906
           Increase in other liabilities                        90,455          517,056            13,070
                                                           -----------      -----------      ------------

                    Net cash provided by
                       operating activities                    999,784        1,046,159         8,174,933
                                                           -----------      -----------      ------------

Cash flows from investing activities:
     Proceeds from maturities of and principal
        collected on securities available for sale           9,845,925       25,395,980        35,669,146
     Proceeds from maturities of and principal
        collected on securities held to maturity                30,000        4,021,823        10,100,000
     Proceeds from sales of securities
        available for sale                                   5,162,044       18,413,431        51,605,954
     Purchases of securities available for sale            (23,155,407)     (53,261,255)     (103,170,611)
     Purchases of securities held to maturity                       --         (969,395)         (640,000)
     Loans originated and purchased                        (36,527,007)     (45,427,221)      (59,177,514)
     Principal collected on loans                           23,864,315       32,528,962        26,044,180
     Purchase of bank owned life insurance                  (5,000,000)              --                --
     Proceeds from sales of real estate owned                  283,636          256,788           277,784
     Purchases of FHLB stock                                        --         (582,200)         (869,700)
     Purchases of premises and equipment, net               (1,404,198)        (262,415)       (1,503,334)
                                                           -----------      -----------      ------------

                    Net cash used in
                       investing activities                (26,900,692)     (19,885,502)      (41,664,095)
                                                           -----------      -----------      ------------
</TABLE>

                                                                     (Continued)
<PAGE>

                           FINGER LAKES BANCORP, INC.

                Consolidated Statements of Cash Flows, Continued

<TABLE>
<CAPTION>
                                                           2000             1999             1998
                                                           ----             ----             ----
<S>                                                   <C>               <C>              <C>
Cash flows from financing activities:
     Net increase (decrease) in savings,
        demand and money market accounts              $ (1,439,464)       1,005,839          749,899
     Net increase in time deposits                      21,769,581        4,692,474       15,149,726
     Net increase (decrease) in short term
        FHLB advances                                  (18,700,000)       3,100,000      (16,008,000)
     Long term advances from FHLB                       10,000,000       23,000,000       35,000,000
     Repayments of long term advances
        from FHLB                                       (1,017,053)     (10,955,531)        (897,730)
     Principal payments on ESOP debt                            --               --         (252,844)
     Net proceeds from stock offering                   13,971,795               --               --
     Common stock dividends paid                          (283,214)        (283,211)        (271,412)
                                                      ------------      -----------      -----------

               Net cash provided by
                    financing activities                24,301,645       20,559,571       33,469,639
                                                      ------------      -----------      -----------

Net increase (decrease) in cash and cash
     equivalents                                        (1,599,263)       1,720,228          (19,523)

Cash and cash equivalents at beginning
     of year                                             6,094,962        4,374,734        4,394,257
                                                      ------------      -----------      -----------

Cash and cash equivalents at end of year              $  4,495,699        6,094,962        4,374,734
                                                      ============      ===========      ===========

Supplemental disclosure of cash flow information:
        Cash paid during the year for:
           Interest                                   $ 13,933,874       11,843,376       10,994,155
                                                      ============      ===========      ===========

           Income taxes                               $    540,000          545,000          582,011
                                                      ============      ===========      ===========

        Non-cash investing activities:
           Transfer of loans to real estate
               owned                                  $    330,325          289,786          233,448
                                                      ============      ===========      ===========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

                           FINGER LAKES BANCORP, INC.

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

(1)   Summary of Significant Accounting Policies

      Organization

      Finger Lakes Bancorp, Inc. (the Bancorp), through its wholly-owned
      subsidiary Savings Bank of the Finger Lakes, FSB (the Bank), provides
      financial services to individuals and businesses primarily in the Finger
      Lakes region of Upstate New York. The Bancorp and Bank, which are subject
      to regulation by certain federal agencies including the Office of Thrift
      Supervision (OTS), are referred to herein as the Company.

      Reorganization and Second Step Conversion

      On January 31, 2000, Finger Lakes Financial Corporation, M.H.C. (the
      Mutual Holding Company) adopted a Plan of Conversion and Reorganization to
      convert from a federally chartered mutual holding company to a state
      chartered capital stock holding company known as Finger Lakes Bancorp,
      Inc.

      The conversion to a full stock holding company was completed on November
      13, 2000. This resulted in Finger Lakes Bancorp, Inc. succeeding Finger
      Lakes Financial Corp. (the Financial Corp.) (a federally chartered stock
      holding company formed in August 1998 to hold all outstanding shares of
      the Bank's common stock) as the stock holding company of Savings Bank of
      the Finger Lakes. Finger Lakes Bancorp, Inc. sold 2,307,325 shares of
      Company stock for $7.00 per share in a public stock offering to its
      depositors. In addition, 1,180,052 minority shares of Finger Lakes
      Financial Corp. were exchanged into new shares of Finger Lakes Bancorp,
      Inc. at a ratio of .9643 resulting in total new shares outstanding of
      3,445,110.

      The Reorganization was accounted for as a change in corporate form with no
      resulting change in the historical basis of the Company's assets,
      liabilities and equity. All references in the consolidated financial
      statements and notes thereto to share data (including number of shares,
      per-share amounts, stock option and stock grant data, and fair value of
      the Company's common stock) have been restated giving retroactive
      recognition to the exchange ratio.

      Basis of Presentation

      The accompanying consolidated financial statements include the accounts of
      the Bancorp (after the offering), the Financial Corp. (prior to the
      offering) and the Bank (for all periods presented). All intercompany
      accounts and transactions have been eliminated in consolidation.

      The preparation of the consolidated financial statements in conformity
      with accounting principles generally accepted in the United States of
      America requires management to make estimates and assumptions that affect
      the reported amounts of assets, liabilities, income and expense, and the
      disclosure of contingent assets and liabilities. Actual results could
      differ from those estimates.

      Cash and Cash Equivalents

      Cash and cash equivalents include cash on hand, due from banks, federal
      funds sold and other short-term investments with maturities of less than
      90 days.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

      Summary of Significant Accounting Policies, Continued

      Securities

      The Company classifies its debt securities as either available for sale or
      held to maturity. Held to maturity securities are those securities that
      the Company has the intent and the ability to hold until maturity. All
      other securities are classified as available for sale.

      Available for sale securities are recorded at fair value. Held to maturity
      securities are recorded at amortized cost. Unrealized holding gains and
      losses, net of the related tax effect, on available for sale securities
      are excluded from earnings and are reported as accumulated other
      comprehensive income or loss in stockholders' equity until realized.
      Realized gains or losses on securities sold are recognized on the trade
      date using the specific identification method.

      A decline in the fair value of any available for sale or held to maturity
      security below cost that is deemed other than temporary is charged to
      earnings, resulting in the establishment of a new cost basis for the
      security.

      Interest income includes the amortization of premiums and accretion of
      discounts as an adjustment to yield using the interest method.

      Loans

      Loans are reported at the principal amount outstanding, net of unearned
      discount and net deferred fees or costs. Loan origination and commitment
      fees and certain direct origination costs are deferred and amortized over
      the contractual life of the related loans using the interest method.
      Mortgage loans held for sale are reported at the lower of aggregate cost
      or market value as determined by outstanding commitments from investors
      or, in the absence of such commitments, the current investor yield
      requirements. The Company generally retains the servicing rights to loans
      sold.

      Generally, the Company places all loans 90 days or more past due on
      non-accrual status. In addition, the Company places any loan on
      non-accrual status if any part of it is classified as doubtful or loss or
      if any part has been charged off. When a loan is placed on non-accrual
      status, any accrued interest is reversed. Subsequent payments are either
      applied to the outstanding principal balance or recorded as interest
      income, depending on the assessment of the ultimate collectibility of the
      loan.

      Allowance for Loan Losses

      The allowance for loan losses is increased by loan loss provisions charged
      to operations based upon management's evaluation of the loan portfolio,
      historical loan loss experience, current economic conditions and such
      other factors as management considers appropriate to estimate loan losses.
      Management believes that the allowance for loan losses is adequate. Losses
      on loans (including impaired loans) are charged to the allowance when all
      or a portion of a loan is deemed to be uncollectible. Recoveries of loans
      previously charged off are credited to the allowance when realized. While
      management uses available information to identify losses on loans, future
      additions to the allowance may be necessary based on changes in economic
      conditions. In addition, various regulatory agencies, as an integral part
      of their examination process, periodically review the Company's allowance
      for loan losses. Such agencies may require the Company to recognize
      additions to the allowance at the time of their examination.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(1)   Summary of Significant Accounting Policies, Continued

      Allowance for Loan Losses, Continued

      Management considers a loan impaired when, based on current information
      and events, it is probable that the Company will be unable to collect all
      principal and interest due under the original terms of the loan agreement.
      Accordingly, the Company measures certain impaired commercial loans at the
      present value of future cash flows discounted using the loan's effective
      interest rate; or at the loan's observable market price; or at the fair
      value of the collateral, if the loan is collateral dependent. Impairment
      losses are included in the allowance for loan losses. In considering loans
      for evaluation of impairment, management generally excludes large groups
      of smaller balance, homogeneous loans, such as residential mortgage loans,
      home equity loans and consumer loans. These loans are collectively
      evaluated for impairment. When a loan is impaired and the future repayment
      of the recorded balance is doubtful, interest payments received are
      applied to principal and no interest income is recognized. If the recorded
      loan balance is expected to be paid, interest income is recognized on a
      cash basis.

      Mortgage Servicing Rights

      The Company recognizes, as separate assets, the rights to service mortgage
      loans sold when those rights are retained by the Company. Servicing assets
      are amortized in proportion to and over the estimated period of net
      servicing income.

      The Company stratifies its servicing assets by underlying loan type,
      primarily 15 and 30 year amortizing loans. The estimated fair value of
      each stratum is determined through a discounted cash flow analysis of
      future cash flows, incorporating numerous assumptions, including servicing
      income, servicing costs, market discount rates, and prepayment speeds.

      The Company assesses impairment of servicing assets based on the fair
      value of the related servicing rights on a stratum-by-stratum basis, with
      any impairment recognized in earnings through a valuation allowance for
      each impaired stratum. The valuation allowance is then adjusted in
      subsequent periods to reflect changes in the measurement of impairment.
      There was no allowance for impairment of servicing assets at December 31,
      2000 and 1999.

      Real Estate Owned

      Real estate owned consists of property acquired through, or by deed in
      lieu of, foreclosure and is recorded at the lower of cost or fair value.
      Write-downs to fair value which are required at the time of foreclosure
      are charged to the allowance for loan losses. After transfer, the property
      is carried at the lower of cost or fair value, less estimated selling
      expenses. Adjustments to the carrying value of such properties that result
      from subsequent declines in value are charged to operations in the period
      in which the declines occur.

      Provisions for environmental remediation costs related to real estate
      owned are recorded when it is probable that remedial efforts will be
      required and the costs can be reasonably estimated.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(1)   Summary of Significant Accounting Policies, Continued

      Premises and Equipment

      Land is carried at cost and buildings, furniture, fixtures and equipment
      are carried at cost less accumulated depreciation. Depreciation is
      calculated on a straight-line basis over estimated useful lives of assets
      ranging from three to forty years.

      Bank Owned Life Insurance

      The bank owned life insurance ("BOLI") was purchased as a financing tool
      for employee benefits. The value of life insurance financing is the tax
      preferred status of increases in life insurance cash values and death
      benefits and the cash flow generated at the death of the insured. The
      purchase of BOLI results in an interest sensitive asset on the Company's
      consolidated statements of financial condition that provides monthly
      tax-fee income to the Company. The largest risk to the BOLI program is
      credit risk of the insurance carriers. To mitigate this risk, annual
      financial condition reviews are completed on all carriers. BOLI is carried
      as an asset on the Company's consolidated statements of financial
      condition at current cash surrender value. Increases in cash surrender
      value are reported as other noninterest income in the Company's
      consolidated income statements.

      Federal Home Loan Bank (FHLB) Stock

      As a member of the FHLB system, the Company is required to maintain an
      investment in FHLB stock equal to the greater of 1% of the aggregate
      outstanding mortgage loans held by the Company, or 5% of total outstanding
      advances. FHLB stock is a non-marketable security and, accordingly, is
      carried at cost.

      Income Taxes

      Income taxes are accounted for under the asset and liability method.
      Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to temporary differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases. Deferred tax assets and liabilities are measured
      using enacted tax rates expected to apply to taxable income in the years
      in which those temporary differences are expected to be recovered or
      settled. The effect on deferred tax assets and liabilities of a change in
      tax rates is recognized in income tax expense in the period that includes
      the enactment date.

      Pension Plan

      The Company has a defined benefit pension plan covering substantially all
      employees. The plan provides pension benefits that are based on each
      employee's years of service and average compensation prior to retirement.
      The Company's funding policy is to contribute annually at least the
      minimum amount required by law. The Retirement System for Savings
      Institutions serves as Plan Trustee and Administrator.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(1)   Summary of Significant Accounting Policies, Continued

      Stock Option and Management Recognition Plans

      The Company has a stock option plan and a management recognition plan for
      officers and key employees. The Company has elected to continue to apply
      the provisions of Accounting Principles Board (APB) Opinion No. 25,
      Accounting for Stock Issued to Employees, and related interpretations and
      provide pro forma net income and pro forma earnings per share disclosures
      for employee stock option grants as if the fair-value-based method defined
      in Statement of Financial Accounting Standards (SFAS) No. 123 had been
      applied. Accordingly, no compensation expense has been recorded for the
      stock option plan and compensation expense for the management recognition
      plan is recognized on a straight-line method over the vesting period.

      Net Income Per Common Share

      Basic net income per common share is computed by dividing net income by
      the weighted average number of total common shares outstanding during the
      period. Diluted net income per common share reflects the effects of
      incremental common shares (computed using the treasury stock method) that
      would be issuable upon exercise of dilutive stock options.

      Financial Instruments With Off-Balance Sheet Risk

      The Company does not engage in the use of derivative financial
      instruments. The Company's only financial instruments with off-balance
      sheet risk are commercial letters of credit and mortgage and commercial
      loan commitments. These off-balance sheet items are shown in the Company's
      consolidated statement of financial condition upon funding.

      Business Segments

      The Company engages in the traditional operations of a community banking
      enterprise, principally the delivery of loan and deposit products and
      other financial services. Management makes operating decisions and
      assesses performance based on an ongoing review of the Company's community
      banking operations, which constitute the Company's only operating segment
      for financial reporting purposes.

      Reclassifications

      Certain items in the prior year financial statements have been
      reclassified in order to be consistent with the current year's
      presentation.

      New Accounting Standards

      SFAS No. 133, Accounting for Derivative Instruments and Hedging
      Activities, as amended, requires that all derivatives be recognized as
      either assets or liabilities in the statement of financial condition and
      that those instruments be measured at fair value. The accounting for
      changes in the fair value of a derivative (that is, gains and losses)
      depends on the intended use of the derivative and the resulting
      designations. The Company's adoption on January 1, 2001 did not have a
      significant effect on the Company's financial position or results of
      operations.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(2)   Securities

      The aggregate amortized cost and fair value of securities are as follows:

<TABLE>
<CAPTION>
                                                Amortized   Unrealized     Unrealized
                                                  Cost         Gains         Losses       Fair Value
                                                  ----         -----         ------       ----------
<S>                                           <C>              <C>         <C>           <C>
  December 31, 2000
    Securities Available for Sale
         Debt securities:
            U.S. Government and
               agency bonds                   $ 45,447,864          --       852,833      44,595,031

            Mortgage-backed securities:
               Collateralized mortgage
                   obligations                  49,611,476     113,297       492,918      49,231,855
               FNMA                             11,614,485      21,379       158,750      11,477,114
               FHLMC                             3,906,309      13,588        25,307       3,894,590
               GNMA                              8,518,572      41,675         2,746       8,557,501
            Corporate bonds                      6,460,540      39,139        39,579       6,460,100
            Asset-backed securities              5,652,240      14,285         1,236       5,665,289
                                              ------------     -------     ---------     -----------
                     Total debt
                       securities              131,211,486     243,363     1,573,369     129,881,480

         Equity securities                       1,606,602          86       166,437       1,440,251
                                              ------------     -------     ---------     -----------

                     Total securities
                       available for sale     $132,818,088     243,449     1,739,806     131,321,731
                                              ============     =======     =========     ===========

    Securities Held to Maturity
         Municipal bonds                      $  1,562,783       1,491           941       1,563,333
                                              ============     =======     =========     ===========

December 31, 1999
    Securities Available for Sale
         Debt securities:
            U.S. Government and
               agency bonds                   $ 45,400,944          --     2,854,708      42,546,236
            Mortgage-backed securities:
               Collateralized mortgage
                   obligations                  51,996,360       1,658     1,856,404      50,141,614
               FNMA                             12,307,199          --       488,636      11,818,563
               FHLMC                             4,585,345       1,728        92,363       4,494,710
               GNMA                              3,949,078          --       138,987       3,810,091
            Corporate bonds                      4,729,416          --       170,461       4,558,955
                                              ------------     -------     ---------     -----------

                       Total debt
                         securities            122,968,342       3,386     5,601,559     117,370,169
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(2)   Securities, Continued

<TABLE>
<CAPTION>
                                          Amortized   Unrealized   Unrealized
                                            Cost         Gains       Losses      Fair Value
                                            ----         -----       ------      ----------
<S>                                     <C>              <C>       <C>           <C>
December 31, 1999, Continued
     Equity securities                     1,656,602        61       276,625       1,380,038
                                        ------------     -----     ---------     -----------

               Total securities
                 available for sale     $124,624,944     3,447     5,878,184     118,750,207
                                        ============     =====     =========     ===========

Securities Held to Maturity
        Municipal bonds                 $  1,592,795        --        25,522       1,567,273
                                        ============     =====     =========     ===========
</TABLE>

Proceeds from the sale of securities available for sale for the years ended
December 31, 2000,1999, and 1998 were $5,162,044, $18,413,431, and $51,605,954,
respectively. Gross gains and losses realized on those sales follow:

                                         2000            1999            1998
                                         ----            ----            ----

Gross realized gains                    $50,383         81,423          313,068
Gross realized losses                        --         (4,286)        (206,837)
                                        -------         ------         --------

     Net gains realized                 $50,383         77,137          106,231
                                        =======         ======         ========

The contractual maturities of debt securities at December 31, 2000 are as
follows:

<TABLE>
<CAPTION>
                                    Available for Sale             Held to Maturity
                                    ------------------             ----------------
                               Amortized                      Amortized
                                 Cost          Fair Value       Cost        Fair Value
                                 ----          ----------       ----        ----------
<S>                          <C>              <C>             <C>           <C>
One year or less             $    221,258         220,815        31,666        31,666
After one year through
    five years                 14,651,534      14,596,790       150,000       150,000
After five years through
    ten years                  45,159,859      44,353,953     1,206,116     1,206,666
After ten years                71,178,835      70,709,922       175,001       175,001
                             ------------     -----------     ---------     ---------

        Total                $131,211,486     129,881,480     1,562,783     1,563,333
                             ============     ===========     =========     =========
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(2)   Securities, Continued

      Expected maturities will differ from contractual maturities because
      issuers may have the right to call or prepay the obligation with or
      without prepayment penalties.

      At December 31, 2000 and 1999, securities carried at $42,132,832 and
      $46,119,705, respectively, were pledged to secure advances from the FHLB
      of New York.

      At December 31, 2000, approximately 39% of the Company's collateralized
      mortgage obligation (CMO) portfolio was invested in private issues versus
      approximately 61% invested in government agency issues. Private issue
      CMO's have greater risk associated with them; however those issues in
      which the Company has invested have the highest Standard & Poor's rating
      of AAA.

(3)   Loans

      Loans consist of the following at December 31, 2000 and 1999:

                                                   2000               1999
                                                   ----               ----
Mortgage loans:
     One to four family                        $  84,489,638      $  90,705,678
     Multi-family and commercial                  35,723,197         28,041,856
     Construction                                  2,754,775          2,695,125
                                               -------------      -------------

         Total mortgage loans                    122,967,610        121,442,658

Commercial business                               13,987,167          9,895,868
Home equity and property improvement loans        21,042,842         18,234,697
Mobile home loans                                  8,429,048          4,500,533
Consumer loans                                     5,761,535          5,966,557
                                               -------------      -------------

         Total loans                             172,188,202        160,040,313

Premiums, net of deferred fees                       186,658            163,324
Allowance for loan losses                         (1,467,524)        (1,349,477)
                                               -------------      -------------

         Net loans                             $ 170,907,336      $ 158,854,160
                                               =============      =============

The following table summarizes activity in the allowance for loan losses:

                                        2000             1999            1998
                                        ----             ----            ----

Balance, beginning of year          $ 1,349,477       1,175,758       1,148,786
Provision for loan losses               260,000         200,000         240,000
Loans charged-off                      (188,579)       (211,984)       (293,134)
Recoveries                               46,626         185,703          80,106
                                    -----------       ---------       ---------

Balance, end of year                $ 1,467,524       1,349,477       1,175,758
                                    ===========       =========       =========
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(3)   Loans, Continued

      Substantially all of the Company's loan portfolio is located in New York
      State, with the greatest concentration in Ontario, Seneca and Tompkins
      Counties. Accordingly, the ultimate collectibility of a substantial
      portion of the Company's loan portfolio is susceptible to changes in
      market conditions in these areas.

      The principal balance of all loans not accruing interest amounted to
      approximately $229,200 and $586,700 at December 31, 2000 and 1999,
      respectively. The interest income forgone for non-accruing loans was
      $33,207, $64,744 and $78,166 for the years ended December 31, 2000, 1999,
      and 1998, respectively. At December 31, 2000 and 1999, the recorded
      investment in loans that are considered impaired was $133,339 and
      $169,924, respectively. The Company has provided an allowance for loan
      losses of $55,381 and $50,977 at December 31, 2000 and 1999, respectively,
      for these loans. The average recorded investment in such impaired loans
      was approximately $126,292 in 2000, $206,500 in 1999 and $331,700 in 1998.
      No interest income was recognized on impaired loans (while such loans were
      considered impaired) in 2000 and 1999 compared to $12,912 in 1998.

      Proceeds from the sale of residential and commercial mortgage loans to
      FNMA and others were $5,305,432 in 2000, $14,224,557 in 1999 and
      $21,411,559 in 1998. The net gain on sale of such loans was $98,941,
      $224,351 and $276,612 for the years ended December 31, 2000, 1999, and
      1998 respectively. Loans serviced for others, amounting to $41,713,848 and
      $39,081,954 at December 31, 2000 and 1999, respectively, are not included
      in the consolidated financial statements. Originated mortgage servicing
      rights of $264,469 and $253,785 are included in other assets at December
      31, 2000 and 1999, respectively. The net carrying value of these servicing
      rights approximated fair value. Residential mortgage loans held for sale
      were $271,199 and $454,700 at December 31, 2000 and 1999, respectively.

(4)   Premises and Equipment

      Premises and equipment consist of the following:

                                                       2000              1999
                                                       ----              ----

Land                                                $  113,000           113,000
Building                                             4,026,208         3,328,317
Furniture, fixtures and equipment                    3,628,562         2,958,367
                                                    ----------         ---------

                                                     7,767,770         6,399,684
Less accumulated depreciation and
    amortization                                     2,954,041         2,250,284
                                                    ----------         ---------

Premises and equipment, net                         $4,813,729         4,149,400
                                                    ==========         =========

Depreciation and amortization expense for the years ended December 31, 2000,
1999, and 1998 was $739,869, $668,929 and $597,548, respectively.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(5)   Deposits

      Deposits and the applicable weighted average interest rates at December
      31, 2000 and 1999 are summarized as follows:

<TABLE>
<CAPTION>
                                                   2000                       1999
                                                   ----                       ----
                                                        Weighted                    Weighted
                                                         Average                     Average
                                         Amount       Interest Rate     Amount    Interest Rate
                                         ------       -------------     ------    -------------
<S>                                   <C>                 <C>        <C>              <C>
Demand deposits and NOW
     accounts                         $ 27,201,736        1.05%       24,474,602      1.17%
                                      ------------        ----       -----------      ----

Savings accounts                        38,804,433        2.44%       46,093,326      2.40%
Money market accounts                    8,142,522        4.13%        5,020,227      3.07%
                                      ------------        ----       -----------      ----

                                        46,946,955        2.73%       51,113,553      2.46%
                                      ------------        ----       -----------      ----

Certificates of deposit maturing:
     12 months or less                 117,025,990                    98,308,695
     13-24 months                       18,358,133                    24,778,136
     25-36 months                        5,227,714                     3,742,491
     37-48 months                        1,314,876                     4,007,255
     49-60 months                       12,215,703                     1,634,750
     61 months or longer                   171,294                        72,802
                                      ------------                   -----------
                                       154,313,710        6.16%      132,544,129      5.34%
                                      ------------        ----       -----------      ----

                                      $228,462,401        4.85%      208,132,284      4.15%
                                      ============        ====       ===========      ====
</TABLE>

      Certificates of deposit equal to or greater than $100,000 amounted to
      $26,725,418 and $24,599,864 at December 31, 2000 and 1999, respectively.
      Deposit balances up to $100,000 are FDIC insured.

      Interest on deposits is summarized as follows:

                                         2000            1999            1998
                                         ----            ----            ----

NOW accounts                          $  289,135         279,365         394,664
Savings accounts                       1,115,551       1,280,547       1,365,558
Money market accounts                    265,079         106,266          38,124
Certificates of deposit                8,203,166       6,994,129       6,879,852
                                      ----------       ---------       ---------

                                      $9,872,931       8,660,307       8,678,198
                                      ==========       =========       =========
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(6)   Advances from Federal Home Loan Bank

      The Company utilizes advance programs offered by the FHLB of New York
      including a variable rate line of credit agreement with a maximum
      available limit of $30,406,500. The agreement, which expires October 13,
      2001, is renewable on an annual basis. Advances are collateralized by the
      Company's investment in FHLB stock, a blanket lien on the Bank's 1-4
      family mortgage loans and investment securities.

      Total outstanding advances from the FHLB at December 31, 2000 and 1999 are
      as follows:

<TABLE>
<CAPTION>
                                            2000                          1999
                                --------------------------     --------------------------
                                               Weighted                       Weighted
                                                Average                        Average
                                   Amount    Interest Rate       Amount     Interest Rate
                                   ------    -------------       ------     -------------
<S>                             <C>              <C>           <C>             <C>
Overnight line of credit        $ 5,400,000      6.35%          2,100,000      5.10%
Due in:
   2000                                  --        --          17,000,000      5.79%
   2001                           5,000,000      5.88%          5,000,000      5.88%
   2002                           2,842,677      6.39%          3,859,730      6.36%
   2003                           5,000,000      5.78%         20,000,000      5.52%
   2004                          10,000,000      6.01%         10,000,000      6.01%
   2005                          15,000,000      6.95%                 --        --
   2007                           2,000,000      5.65%          2,000,000      5.65%
   2009                                  --        --          10,000,000      5.01%
   2010                          15,000,000      5.81%                 --        --
                                -----------      ----          ----------      ----

                                $60,242,677      6.20%         69,959,730      5.64%
                                ===========      ====          ==========      ====
</TABLE>

      Advances of $37,000,000 at December 31, 2000 are callable at the
      discretion of the FHLB in or after 2001. Such advances have a weighted
      average interest rate of 6.11% and mature from 2004 to 2010, if not called
      earlier.

      During 2000 and 1999, advances from the FHLB had an average outstanding
      balance of approximately $63,294,000 and $61,923,000, respectively, with
      the maximum amount outstanding at any month end of $69,811,385 in 2000 and
      $69,959,730 in 1999. Such borrowings had a weighted-average borrowing rate
      of 6.12% for 2000 and 5.43% for 1999.

(7)   Income Taxes

      Total income taxes for the years ended December 31, 2000, 1999 and 1998
      were allocated as follows:

                                           2000           1999           1998
                                           ----           ----           ----
Income from operations                  $  489,980        860,426       468,565
Stockholders' equity, for
     unrealized gain/(loss) on
     securities available for sale       1,751,352     (2,453,498)     (185,264)
                                        ----------     ----------       -------

Total income taxes                      $2,241,332     (1,593,072)      283,301
                                        ==========     ==========       =======
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(7)   Income Taxes, Continued

      The components of income tax expense (benefit) attributable to income from
      operations follow:

                                           Current        Deferred        Total
                                           -------        --------        -----
Year ended December 31, 2000:
     Federal                                418,594        (34,379)      384,215
     State                                   73,258         32,507       105,765
                                          ---------       --------       -------

                                            491,852         (1,872)      489,980
                                          =========        =======       =======

Year ended December 31, 1999:
     Federal                              $ 782,650       (114,246)      668,404
     State                                  143,769         48,253       192,022
                                          ---------       --------       -------

                                          $ 926,419        (65,993)      860,426
                                          =========        =======       =======
Year ended December 31, 1998:
     Federal                              $ 492,296       (128,696)      363,600
     State                                  175,350        (70,385)      104,965
                                          ---------       --------       -------

                                          $ 667,646       (199,081)      468,565
                                          =========       ========       =======

      The actual tax expense differs from the "expected" tax expense computed by
      applying the U.S. Federal corporate income tax rate of 34% to income
      before income taxes as follows:

<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                                    2000           1999           1998
                                                    ----           ----           ----
<S>                                              <C>              <C>            <C>
Computed "expected" tax
         expense                                 $ 439,219        736,225        405,482
Increase (decrease) in taxes resulting from:
         State income tax expense,
            net of federal
            income tax benefit                      69,805        125,005         69,277
         Other, net                                (19,044)          (804)        (6,194)
                                                 ---------        -------        -------

                                                 $ 489,980        860,426        468,565
                                                 =========        =======        =======

Effective tax rate:                                   37.9%          39.7%          39.3%
                                                      ====           ====           ====
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(7)   Income Taxes, Continued

      The tax effects of temporary differences that give rise to significant
      portions of the deferred tax assets and deferred tax liabilities at
      December 31, 2000 and 1999 are presented below:

                                                           2000          1999
                                                           ----          ----
Deferred tax assets:
     Excess of allowance for loan losses
         over tax bad-debt reserves                     $  469,644       428,547
     Net unrealized loss on securities
         available for sale                                598,542     2,349,894
     Supplemental retirement benefits                       75,565        76,480
     Postretirement benefits                               134,258       133,910
     Deferred compensation                                  89,005        65,562
     Accrued environmental remediation costs               191,452       266,373
     New York State tax credits                             71,921        77,762
     Other                                                      --        25,463
                                                        ----------     ---------

               Total deferred tax assets                 1,630,387     3,423,991
                                                        ----------     ---------

Deferred tax liabilities:
     Premises and equipment, principally due to
         differences in depreciation                       106,260       155,777
     Mortgage servicing rights                             103,011        98,849
     Other                                                   1,231            --
                                                        ----------     ---------

               Total deferred tax liabilities              210,502       254,626
                                                        ----------     ---------

               Net deferred tax assets included
                 in other assets                        $1,419,885     3,169,365
                                                        ==========     =========

      As a thrift institution, the Bank is subject to special provisions in the
      Federal and New York State tax laws regarding its allowable tax bad debt
      deductions and related tax bad debt reserves. The Bank currently
      calculates its Federal reserve using a loss experience method and its New
      York State reserve using a percentage of taxable income method. These
      reserves consist of a defined base-year amount, plus additional amounts
      ("excess reserves") accumulated after the base year, in each case as
      defined for Federal and New York State tax purposes. SFAS No. 109 requires
      recognition of deferred tax liabilities with respect to such excess
      reserves, as well as any portion of the base-year amount which is expected
      to become taxable (or "recaptured") in the foreseeable future. For New
      York State purposes, recognition of deferred tax liabilities is not
      required on excess reserves resulting from use of the percentage of
      taxable income method unless all or a portion is expected to become
      taxable in the foreseeable future.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(7)   Income Taxes, Continued

      In accordance with SFAS No. 109, deferred tax liabilities have not been
      recognized with respect to the Federal base-year reserve of approximately
      $3,025,000, and the state base-year reserve of approximately $3,240,000 at
      December 31, 2000, since the Bank does not expect that these amounts will
      become taxable in the foreseeable future. Under Federal and New York State
      tax law, as amended, events that would result in taxation of these
      reserves include redemption of the Bank's stock, payment of dividends or
      distributions in excess of earnings and profits, or failure by the
      institution to qualify as a bank for Federal income tax purposes. The
      unrecognized deferred tax liability at December 31, 2000 with respect to
      the Federal base-year reserve was $1,030,000. The unrecognized deferred
      tax liability at December 31, 2000 with respect to the state base-year
      reserve and the excess reserve resulting from use of the percentage of
      taxable income method was $160,000 (net of Federal benefit).

      Realization of deferred tax assets is dependent upon the generation of
      future taxable income or the existence of sufficient taxable income within
      a loss carryback period. A valuation allowance is recognized when it is
      more likely than not that some portion of the deferred tax assets will not
      be realized. In assessing the need for a valuation allowance, management
      considers the scheduled reversal of the deferred tax liabilities, the
      level of historical taxable income and projected future taxable income
      over the periods in which the temporary differences comprising the
      deferred tax assets will be deductible. Based on its assessment,
      management determined that no valuation allowance is necessary at December
      31, 2000 and 1999.

(8)   Retirement Plans

      The following table sets forth the defined benefit pension and other
      postretirement plan benefit obligations, fair value of plan assets and
      funded status, as of and for the years ended December 31, 2000 and 1999,
      using the most recent actuarial data measured at October 1, 2000 and 1999:

<TABLE>
<CAPTION>
                                                    Pension Benefits          Postretirement Benefits
                                                    ----------------          -----------------------
                                                 2000            1999            2000         1999
                                                 ----            ----            ----         ----
<S>                                          <C>               <C>             <C>           <C>
Change in benefit obligation:
 Benefit obligation at beginning of year     $ 2,235,295       2,338,585       352,482       666,771
 Service cost                                    110,723         101,828            --        33,123
 Interest cost                                   170,413         150,864        26,624        42,815
 Curtailment                                          --              --            --      (232,831)
 Actuarial (gain)/loss                           (35,775)       (211,701)       46,791      (141,240)
 Benefits paid                                  (155,821)       (144,281)      (37,719)      (16,156)
                                             -----------       ---------       -------       -------

     Benefit obligation at end of year         2,324,835       2,235,295       388,178       352,482
                                             -----------       ---------       -------       -------

Change in plan assets:
  Fair value of plan assets at beginning
         of year                               3,213,016       2,851,610            --            --
  Actual return on plan assets                   547,317         505,687            --            --
  Employer contribution                               --              --        37,719        16,156
  Benefits paid                                 (155,821)       (144,281)      (37,719)      (16,156)
                                             -----------       ---------       -------       -------

     Fair value of plan assets at end
         of  year                              3,604,512       3,213,016            --            --
                                             -----------       ---------       -------       -------
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(8)   Retirement Plans, Continued

<TABLE>
<CAPTION>
                                                  Pension Benefits         Postretirement Benefits
                                                  ----------------         -----------------------
                                                2000           1999          2000          1999
                                                ----           ----          ----          ----
<S>                                         <C>               <C>          <C>           <C>
Funded status                                 1,279,677       977,721      (388,178)     (352,482)
Unamortized net  obligation at
     transition                                      --            --         8,104         8,683
Unrecognized net (gain) loss subsequent
     to transition                           (1,092,078)     (794,630)       46,791            --
                                            -----------       -------      --------      --------

     Prepaid (accrued) benefit cost at
        year-end                            $   187,599       183,091      (333,283)     (343,799)
                                            ===========       =======      ========      ========
</TABLE>

      Pension Plan

      Pension plan expense (benefit) consists of the following in 2000, 1999 and
      1998:

<TABLE>
<CAPTION>
                                                2000           1999           1998
                                                ----           ----           ----
<S>                                          <C>             <C>            <C>
Service cost                                 $ 110,723        101,828         69,996
Interest on projected benefit obligation       170,413        150,864        143,289
Expected return on plan assets                (251,242)      (222,442)      (233,416)
Amortization of net transition asset                --        (19,826)       (22,283)
Amortization of unrecognized gain              (34,402)            --        (32,979)
Amortization of unrecognized
         prior service cost                         --            485            590
Termination benefits charge                         --             --         64,561
                                             ---------       --------       --------

Net periodic pension expense (benefit)       $  (4,508)        10,909        (10,242)
                                             =========       ========       ========

Weighted average discount rate                    7.75%          7.75%          6.50%
                                                  ====           ====           ====

Expected long-term rate of return                 8.00%          8.00%          8.00%
                                                  ====           ====           ====
</TABLE>

      The projected benefit obligation for the pension plan assumed a long-term
      rate of increase in future compensation levels of 5.5%, 5.5% and 4.5% for
      2000, 1999 and 1998, respectively.

      Postretirement Plan

      Net periodic postretirement benefit cost included the following in 2000,
      1999 and 1998:

                                                 2000         1999         1998
                                                 ----         ----         ----

Service cost                                    $    --       33,123      25,051
Interest cost                                    26,624       42,815      37,889
Net curtailment charge                               --       26,672          --
Net amortization and deferral                       579       21,381      17,033
                                                -------      -------      ------

         Net periodic postretirement
             benefit cost                       $27,203      123,991      79,973
                                                =======      =======      ======
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(8)   Retirement Plans, Continued

      For measurement purposes, an annual rate of increase in the per capita
      cost of average health care benefits for retirees of 6.5% was assumed at
      December 31, 2000 and 1999. The rate is assumed to decrease gradually to
      5.0% over the next five years and remain at that level thereafter. The
      health care cost trend assumption affects the amounts reported. To
      illustrate, increasing the assumed health care cost trend rates by 1% in
      each year would increase the accumulated postretirement benefit obligation
      at December 31, 2000 by $22,300, and the net periodic postretirement
      benefit cost by $1,454 for the year then ended.

      The weighted average discount rate used in determining the accumulated
      postretirement obligation was 8.00%, 7.75% and 6.50% for 2000, 1999 and
      1998, respectively.

      During 1999, the Company curtailed the postretirement plan by
      discontinuing to offer postretirement benefits to employees. As a result,
      the Company incurred a $26,672 net curtailment charge which represented
      the accelerated amortization of substantially all of the transition
      obligation less the reduction in the projected benefit obligation.

      401(k) Plan

      The Company has a 401(k) plan covering substantially all employees. The
      Company currently does not match employee contributions to the 401(k)
      plan. Participants vest immediately in their own contributions and over a
      period of six years in any Company contributions. Expense for this plan
      was $10,200, $7,900 and $7,300 for the years ended December 31, 2000, 1999
      and 1998, respectively.

      Supplemental Employee Retirement Plan (SERP)

      The Company maintains a nonqualified SERP for key executives. The
      following table sets forth the changes the SERP's benefit obligation and
      plan assets for 2000 and 1999, using the most recent actuarial data
      measured at December 31, 2000 and 1999:

                                                             2000         1999
                                                             ----         ----
Change in benefit obligation:
     Benefit obligation at beginning of year              $ 415,542     418,453
     Interest cost                                           30,647      26,032
     Actuarial loss                                           2,194      16,076
     Benefits paid                                          (43,893)    (45,019)
                                                          ---------    --------

         Benefit obligation at end of year                  404,490     415,542
                                                          ---------    --------

Change in plan assets:
     Fair value of plan assets at beginning of year              --          --
     Employer contributions                                  43,893      45,019
     Benefits paid                                          (43,893)    (45,019)
                                                          ---------    --------

         Fair value of plan assets at end of year                --          --
                                                          ---------    --------
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(8)   Retirement Plans, Continued

      Supplemental Employee Retirement Plan (SERP), Continued

                                                           2000          1999
                                                           ----          ----

Funded status                                            (404,490)     (415,542)
Unamortized net obligation at transition                  284,250       303,200
Unrecognized net loss subsequent to transition             16,315        14,121
Unrecognized prior service cost                           (89,807)      (98,271)
                                                        ---------      --------

     Accrued benefit cost at year end                   $(193,362)     (196,492)
                                                        =========      ========

      Annual expense related to the SERP consists of the following in 2000, 1999
      and 1998:

                                             2000          1999          1998
                                             ----          ----          ----

Interest cost                              $ 30,647       26,032        27,452
Amortization of net transition obligation    18,950       18,950        18,950
Unrecognized prior service cost              (8,464)      (8,464)       (8,464)
                                           --------       ------        ------
Net periodic pension expense               $ 41,133       36,518        37,938
                                           ========       ======        ======

Weighted average discount rate                 8.00%        7.75%         6.50%
                                           ========       ======        ======

(9)   Employee Stock Ownership Plan

      The Company has a noncontributory employee stock ownership plan (ESOP)
      covering substantially all employees. The Company reports compensation
      expense equal to the current market price of the shares released to
      participants each year. In 1995, the ESOP borrowed $471,980 to purchase
      91,026 shares of the Company's common stock. The loan currently bears
      interest at 7.75% and is payable in quarterly installments of $9,030. In
      2000, the ESOP borrowed an additional $1,292,102 to purchase 184,586
      shares of the Company's common stock. This loan currently bears interest
      at 9.50% and is payable in quarterly installments of $21,535. At December
      31, 2000, 71,155 shares had been released or were committed to be released
      to employees with the remaining 204,457 unallocated shares held in trust.
      The fair value of the unallocated shares on December 31, 2000 was
      $1,533,000. Compensation expense amounted to $74,510, $73,822 and $109,490
      for the years ended December 31, 2000, 1999 and 1998, respectively.

(10)  Stock Option and Management Recognition Plans

      In accordance with the 1996 Stock Option Plan (the "SOP"), the Company's
      Board of Directors may grant stock options to officers and key employees
      to purchase up to 113,787 shares of authorized but unissued common stock.
      Options are granted with an exercise price equal to the fair market value
      at the date of grant. All stock options granted prior to 2000 have
      ten-year terms and vest and become fully exercisable after five years from
      the date of grant. Options granted in 2000 have ten-year terms and become
      fully vested in six months.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(10)  Stock Option and Management Recognition Plans, continued

      The following table shows the per share weighted average fair value of
      stock options granted, with their underlying assumptions, using the Black
      Scholes option-pricing model:

<TABLE>
<CAPTION>
                                                                  2000          1999          1998
                                                                  ----          ----          ----
<S>                                                             <C>           <C>           <C>
Per share weighted average
         fair value of options granted during the year          $ 0.99        $ 1.86        $ 3.64

Expected dividend yield                                           3.20%         2.89%         2.01%
Risk free interest rate                                           5.50%         6.50%         5.25%
Assumed volatility                                               34.64%        37.02%        38.24%
Expected life                                                    10 years      10 years      10 years
</TABLE>

      The Company applies APB Opinion No. 25 in accounting for its SOP and
      accordingly, no compensation cost has been recognized for stock options in
      the financial statements. Had the Company recognized compensation cost
      based on the fair value at the grant date for its stock options under SFAS
      No. 123, the Company's net income and net income per share would have been
      reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                      2000          1999         1998
                                                                      ----          ----         ----
<S>                                                                <C>            <C>          <C>
Net income                                         As reported     $ 801,842      1,304,941    724,029
                                                     Pro forma       787,844      1,285,456    701,684

Net income per common share - basic                As reported     $    0.24           0.38       0.21
                                                     Pro forma          0.23           0.38       0.21

Net income per common share - dilted               As reported     $    0.24           0.38       0.21
                                                     Pro forma          0.23           0.38       0.20
</TABLE>

      Because the Company's stock options have characteristics significantly
      different from those of traded options for which the Black-Scholes model
      was developed, and because changes in the subjective input assumptions can
      materially affect the fair value estimate, the existing models, in
      management's opinion, do not necessarily provide a reliable single measure
      of the fair value of its stock options.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(10)     Stock Option and Management Recognition Plans, continued

Stock option activity for the years ended December 31, 2000, 1999 and 1998
follows:

                                                                    Weighted-
                                                     Number of       average
                                                      shares      exercise price
                                                      ------      --------------

Balance at December 31, 1997                          105,397        $ 9.22
         Granted                                        8,389         17.85
         Forfeited                                     (1,928)        (8.30)
                                                      -------        ------
Balance at December 31, 1998                          111,858        $ 9.88

         Granted                                          964          9.33
         Forfeited                                     (1,928)       (20.62)
         Cancelled                                     (5,785)       (18.65)
                                                      -------        ------

Balance at December 31, 1999                          105,109        $ 9.20

         Granted                                       30,856        $ 6.97
         Forfeited                                     (8,678)        (9.45)
         Cancelled                                    (13,500)       (15.04)
                                                      -------        ------

Balance at December 31, 2000                          113,787        $ 7.88
                                                      =======        ======

      The range of exercise prices and weighted-average remaining contractual
      life of outstanding options was $6.94 - $11.93 and seven years at December
      31, 2000 and $7.00 - $15.04 and six years at December 31, 1999,
      respectively. At December 31, 2000 and 1999, the number of options
      exercisable was 63,800 and 56,300 respectively.

      The Company also has a Management Recognition Plan (MRP) pursuant to which
      the Company's Board of Directors may award shares of common stock to
      officers and key employees. In 1996, the Company contributed funds to an
      irrevocable trust held by an independent third party, which purchased
      45,515 issued and outstanding shares for $8.75 per share. As of December
      31, 2000, all shares had been granted to employees with original vesting
      periods of three to five years. Compensation expense in the amount of the
      fair market value of the common stock at the date of the grant to the
      officer or employee is recognized prorata over the vesting period. MRP
      expense included in salaries and employee benefits in the consolidated
      statement of income was $106,000 in 2000, 1999 and 1998.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(11)  Net Income Per Common Share

      The following is a summary of the net income per share calculation for the
      years ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                     2000                                   1999
                                                     ----                                   ----
                                                   Weighted                               Weighted
                                                    Average   Per-Share                    Average    Per-Share
                                     Income         Shares      Amount      Income         Shares      Amount
                                     ------         ------      ------      ------         ------      ------
<S>                                <C>            <C>           <C>       <C>            <C>           <C>
Net income per share - basic
    Weighted average shares                       3,390,047                              3,405,689
                                                  ---------                              ---------
    Income available
       to common
       shareholders                $  801,842     3,390,047     $0.24     $1,304,941     3,405,689     $0.38
                                   ----------     ---------     =====     ----------     ---------     =====

Effect of dilutive securities:
    Common stock options                                157                                 17,762
                                                  ---------                              ---------

Net income per share - diluted     $  801,842     3,390,204     $0.24     $1,304,941     3,423,451     $0.38
                                   ==========     =========     =====     ==========     =========     =====
</TABLE>

                                                     1998
                                                     ----
                                                   Weighted
                                                    Average   Per-Share
                                     Income         Shares      Amount
                                     ------         ------      ------
Net income per share - basic
    Weighted average shares                       3,398,137
                                                  ---------
    Income available
       to common
       shareholders                $  724,029     3,398,137     $0.21
                                   ----------     ---------     =====

Effect of dilutive securities:
    Common stock options                             42,412
                                                  ---------

Net Income per share - diluted     $  724,029     3,440,549     $0.21
                                   ==========     =========     =====

(12)  Commitments and Contingencies

      The Company is a party to financial instruments with off-balance sheet
      risk in the normal course of business to meet the financing needs of its
      customers. These financial instruments are primarily commitments to extend
      credit. These instruments involve, to varying degrees, elements of credit
      and interest rate risk and at December 31, 2000 and 1999 are not reflected
      in the consolidated statements of financial condition.

      The following is a summary of the maximum credit exposure of each class of
      lending related off-balance sheet financial instruments outstanding at
      December 31:

                                                           2000          1999
                                                           ----          ----
Commitments to originate loans:
   Fixed rate mortgage loans                            $   48,000     1,108,450
   Adjustable rate mortgage loans                           40,000       144,000
   Fixed rate commercial real estate loans                 324,000            --
   Adjustable rate commercial real estate loans          2,890,000     1,223,000
   Commercial loans                                        100,000       300,000
   Consumer home equity loans                              255,500       324,100
                                                        ----------     ---------
                                                        $3,657,500     3,099,550
                                                        ==========     =========
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(12)  Commitments and Contingencies - continued

                                                      2000               1999

Unused lines of credit:
     Construction loans                            $   219,475           994,955
     Commercial lines of credit                      4,145,441         5,355,963
     Home equity lines of credit                     7,331,503         7,859,186
     Other                                             557,567           503,219
                                                   -----------        ----------
                                                   $12,253,986        14,713,323
                                                   ===========        ==========

Outstanding letters of credit                      $    10,000            90,000
                                                   ===========        ==========

Commitments to sell loans:
     Fixed rate mortgage loans                     $   104,200           666,720
                                                   ===========        ==========

      Commitments to extend credit are agreements to lend to a customer as long
      as there is no violation of any condition established in the contract.
      Commitments generally have fixed expiration dates or other termination
      clauses and may require payment of a fee. Since certain commitments are
      expected to expire without being drawn upon, the total commitment amounts
      do not necessarily represent future cash requirements. Commitments to
      originate fixed rate mortgage loans at December 31, 2000 have rates of
      7.75%.

      The Company evaluates each customer's credit worthiness on a case-by-case
      basis. The amount of collateral obtained, if deemed necessary by the
      Company upon extension of credit, is based on management's credit
      evaluation of the customer. Substantially all commitments to extend
      credit, if funded, will represent loans secured by real estate. At
      December 31, 2000, the Company had no significant concentrations of credit
      risk in the loan portfolio outside the natural geographic concentration
      pertaining to the communities that the Company serves.

      The Company enters into forward contracts for future delivery of
      residential mortgage loans at a specified yield to reduce the interest
      rate risk associated with fixed rate residential mortgages held for sale
      and commitments to fund residential mortgages. Credit risk arises from the
      possible inability of the other parties to comply with the contract terms.
      Substantially all of the Company's contracts are with FNMA, a U.S.
      government-sponsored agency.

      At December 31, 2000, the Company occupied branch facilities under
      noncancelable operating leases. Office occupancy and equipment expense
      includes rental expense of $306,449, $272,251 and $243,420 for the years
      ended December 31, 2000, 1999 and 1998, respectively. The approximate
      future minimum annual rental payments under the existing terms of such
      leases at December 31, 2000 are as follows: $288,204, $284,250, $296,360
      and $308,480 for the years ending December 31, 2001, 2002, 2003, and 2004,
      respectively, and $2,378,798 in later years.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(13)  Environmental Matter

      In April 1989, the Company foreclosed on property that had been a dry
      cleaning and laundry facility. Environmental investigations revealed
      groundwater and soil contamination and the Company incurred in excess of
      $500,000 in remediation costs through 1992. During the period from 1993 to
      1998 the Company had discussions with the Department of Environmental
      Commission (DEC) and performed periodic soil testing to determine if the
      property could be sold. In October 1998, further testing revealed a new
      and more volatile contaminant in the soil. As a result, the Company
      recorded a provision of $620,000 in December 1998 and $90,000 in 1999. The
      Company received approval from the DEC of a Design Report and Construction
      Plan in May 2000, and subsequently executed a contract on July 21, 2000
      for Remedial Construction, which began in August 2000. As a result of the
      discussions with the DEC, the Company recorded an additional provision of
      $180,000 in 2000. The remediation work has now been completed.

      At December 31, 2000, the Company had a $492,000 accrual in other
      liabilities for the estimated billings associated with the final
      remediation efforts. Management for the Company believes that the recorded
      liability should be adequate to cover reasonably anticipated liabilities
      in connection with this matter. However, it is possible that the Company's
      liability exposure for the site will exceed the amounts reserved and
      insured.

(14)  Stockholders' Equity and Regulatory Capital Requirements

      Other Comprehensive Income

      The components of other comprehensive income (loss) for 2000, 1999 and
      1998 are as follows:

<TABLE>
<CAPTION>
                                                                2000           1999           1998
                                                                ----           ----           ----
<S>                                                          <C>            <C>             <C>
Unrealized holding gains (losses) arising
   during year (pre-tax unrealized holding
   gain (loss) was $4,428,763 in 2000, ($6,056,610)
   in 1999, and ($356,447) in 1998)                          $2,657,258     (3,633,966)     (213,868)

Less: reclassification adjustment for net realized gains
   included in net income (pre-tax of $50,383 in 2000,
   $77,137 in 1999, and $106,231 in 1998)                        30,230         46,282        63,739
                                                             ----------     ----------      --------

Change in unrealized gains on securities,
   available for sale, net of taxes                          $2,627,028     (3,680,248)     (277,607)
                                                             ==========     ==========      ========
</TABLE>

      Dividends

      The Mutual Holding Company, which prior to the stock offering owned
      2,389,948 shares of stock in the Financial Corp., waived receipt of its
      dividend, thereby reducing the actual dividend payments. The amount of
      dividends waived by the Mutual Holding Company was $573,600 in 2000 and
      1999, and $550,000 in 1998. The Company's ability to pay dividends is
      primarily dependent upon the ability of its subsidiary bank to pay
      dividends to the Company. The payment of dividends by the Bank is subject
      to continued compliance with minimum regulatory capital requirements. In
      addition, regulatory approval is generally required prior to the Bank
      declaring dividends in an amount in excess of net income for that year
      plus net income retained in the preceding two years.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(14)  Stockholders' Equity and Regulatory Capital Requirements, Continued

      Liquidation Account

      In order to grant priority in the Conversion to the eligible depositors,
      the Bank established a liquidation account at the time of conversion in an
      amount equal to its total retained earnings at November 10, 1994. In the
      event of a future liquidation of the converted bank (and only in such
      event), eligible account holders who continue to maintain accounts shall
      be entitled to receive a distribution from the liquidation account. The
      total amount of the liquidation account will be decreased (as balances of
      eligible accounts are reduced) on annual determination dates. No cash
      dividends may be paid to the stockholders and no shares may be repurchased
      by the Company if such actions would reduce the Bank's stockholders'
      equity below the amount required for the liquidation account. At December
      31, 2000, the amount remaining in this liquidation account was
      approximately $17.1 million.

      Regulatory Capital Requirements

      The Bank is subject to various regulatory capital requirements
      administered by the federal banking agencies. Failure to meet minimum
      capital requirements can initiate certain mandatory-and possibly
      additional discretionary-actions by regulators that, if undertaken, could
      have a direct material effect on the Bank's financial statements. Under
      capital adequacy guidelines and the regulatory framework for prompt
      corrective action, the Bank must meet specific capital guidelines that
      involve quantitative measures of the Bank's assets, liabilities, and
      certain off-balance-sheet items as calculated under regulatory accounting
      practices. The Bank's capital amounts and classification are also subject
      to qualitative judgments by the regulators about components, risk
      weightings, and other factors. Under the OTS capital regulations in effect
      at December 31, 2000, the Bank was required to maintain a minimum ratio of
      tangible capital to tangible assets of 1.5%; a minimum leverage ratio of
      core (Tier 1) capital to total adjusted tangible assets of 4.0%; and a
      minimum ratio of total capital (core capital and supplementary capital) to
      risk-weighted assets of 8.0%, of which 4.0% must be core (Tier 1) capital.

      The regulations establish a framework for the classification of savings
      institutions into five categories: well capitalized, adequately
      capitalized, undercapitalized, significantly undercapitalized, and
      critically undercapitalized. Generally, an institution is considered well
      capitalized if it has a core (Tier 1) capital ratio of at least 5.0%; a
      core (Tier 1) risk-based capital ratio of at least 6.0%; and a total
      risk-based capital ratio of at least 10.0%.

      Management believes that, as of December 31, 2000 and 1999, the Bank meets
      all capital adequacy requirements to which it is subject. Further, the
      most recent OTS notification categorized the Bank as a well-capitalized
      institution under the prompt corrective action regulations. There have
      been no conditions or events since that notification that management
      believes have changed the Bank's capital classification.

      The following is a summary of the Bank's actual regulatory capital amounts
      and ratios as of December 31, 2000 and 1999, compared to the OTS
      requirements for minimum capital adequacy and for classification as a
      well-capitalized institution. OTS capital regulations apply at only the
      Bank level as the OTS does not impose capital requirements at the holding
      company level.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(14)  Stockholders' Equity and Regulatory Capital Requirements, Continued

      Regulatory Capital Requirements, Continued

<TABLE>
<CAPTION>
                                                               Minimum
                                       Actual                Requirement            Well Capitalized
                                       ------                -----------            ----------------
                              Amount         Ratio      Amount         Ratio       Amount       Ratio
                              ------         -----      ------         -----       ------       -----
<S>                         <C>             <C>        <C>             <C>       <C>            <C>
December 31, 2000

Total capital (to risk
   weighted assets)         $34,764,000     20.68%     13,446,720      8.00%     16,808,400     10.00%
Tier 1 capital (to risk
   weighted assets)          34,308,000     20.41%      6,723,360      4.00%     10,085,040      6.00%
Tier 1 capital (to
   average assets)           34,308,000     10.34%     13,277,800      4.00%     16,597,250      5.00%
Tangible capital             34,308,000     10.34%      4,979,175      1.50%             --        --
</TABLE>

      2000 Adjusted Tangible Assets were $331,945,000. 2000 Risk Weighted Assets
      were $168,084,000.

<TABLE>
<CAPTION>
                                                               Minimum
                                       Actual                Requirement            Well Capitalized
                                       ------                -----------            ----------------
                              Amount         Ratio      Amount         Ratio       Amount       Ratio
                              ------         -----      ------         -----       ------       -----
<S>                         <C>             <C>        <C>             <C>       <C>            <C>
December 31, 1999

Total capital (to risk
    weighted assets)        $23,034,000     16.66%     11,058,800      8.00%     13,823,500     10.00%
Tier 1 capital (to risk
    weighted assets)         22,597,000     16.35%      5,529,400      4.00%      8,294,100      6.00%
Tier 1 capital (to
    average assets)          22,597,000      7.41%     12,202,480      4.00%     15,253,100      5.00%
Tangible capital             22,597,000      7.41%      4,575,930      1.50%             --        --
</TABLE>

      1999 Adjusted Tangible Assets were $305,062,000. 1999 Risk Weighted Assets
      were $138,235,000.

      Regulatory capital ratios of the Company at December 31, computed on a
      consolidated basis are summarized below:

                                                              2000         1999
                                                              ----         ----
Total capital (to risk weighted assets)                      22.78%       16.81%
Tier 1 capital (to risk weighted assets)                     22.51%       16.50%
Tier 1 capital (to average assets)                           11.33%        7.46%
Tangible capital                                             11.33%        7.46%

(15)  Fair Value of Financial Instruments

      The following methods and assumptions were used by the Company in
      estimating its fair value disclosure for financial instruments:

      Securities

      Fair values for securities are based on quoted market prices. Where quoted
      market prices are not available, fair values are based on quoted market
      prices of comparable instruments.
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(15)  Fair Value of Financial Instruments, Continued

      Loans

      The fair values of variable rate loans that reprice frequently and have no
      significant credit risk, approximate carrying amounts. Fair values of
      fixed rate residential mortgage loans are based on quoted market prices of
      similar loans sold in the secondary market, adjusted for differences in
      loan characteristics. The fair values of other loans are estimated through
      discounted cash flow analyses using interest rates currently being offered
      for loans with similar terms and credit quality.

      Delinquent loans are valued using the discounted cash flow methods
      described above. While credit risk is a component of the discount rate
      used to value loans, delinquent loans are presumed to possess additional
      risk. Therefore, the calculated fair values of loans delinquent more than
      30 days are reduced by an allocated amount of the general allowance for
      loan losses.

      Deposits

      The fair values of demand deposits, savings accounts and money market
      accounts are, by definition, equal to the amounts payable on demand at the
      reporting date (e.g., their carrying amounts). The fair value of fixed
      maturity time deposits is estimated using a discounted cash flow approach
      that applies interest rates currently being offered on certificates of
      deposits to a schedule of weighted average expected monthly maturities.

      Advances from FHLB

      The fair value of advances from the FHLB is estimated using a discounted
      cash flow approach that applies interest rates currently being offered for
      advances with similar terms.

      The estimated fair value of the Company's financial assets and liabilities
      are as follows:

<TABLE>
<CAPTION>
                                          December 31, 2000               December 31, 1999
                                          -----------------               -----------------
                                      Carrying                        Carrying
                                      amounts         Fair value       amounts       Fair value
                                      -------         ----------       -------       ----------
<S>                                 <C>              <C>             <C>             <C>
Financial assets:
     Securities                     $132,884,514     132,885,064     120,343,002     120,317,480
     Loans                           170,907,336     170,079,990     158,854,160     158,867,205

Financial liabilities:
     Deposits:
       Demand deposit accounts,
         savings and money
         market accounts              74,148,691      74,148,691      75,588,155      75,588,155
       Certificates of deposit       154,313,710     154,409,907     132,544,129     132,598,680
     Advances from FHLB               60,242,677      60,571,463      69,595,730      70,897,337
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(15)  Fair Value of Financial Instruments, Continued

      Other Financial Instruments

      Based on the characteristics of cash, cash equivalents, accrued interest
      receivable, and FHLB stock, the carrying amounts approximate the fair
      values. The fair values of commitments to extend credit are equal to the
      deferred fees outstanding, as the contractual rates and fees approximate
      those currently charged to originate similar commitments.

      Fair value estimates are made at a specific point in time, based on
      relevant market information and information about the financial
      instrument. These estimates are subjective in nature and involve
      uncertainties and matters of significant judgment and, therefore, cannot
      be determined with precision. Changes in assumptions could significantly
      affect the estimates.

(16)  Condensed Parent Company Only Financial Information

      The following condensed statements of financial condition of Finger Lakes
      Bancorp as of December 31, 2000 and 1999 and the condensed statements of
      income and condensed statements of cash flows for 2000, 1999 and 1998
      should be read in conjunction with the consolidated financial statements
      and related notes.

                                                             December 31,
                                                             ------------
                                                        2000            1999
                                                        ----            ----

Condensed Statements of Financial Condition
      Assets:
           Cash                                      $ 3,242,590     $   210,690
           Notes receivable from
           subsidiary                                  1,415,049         180,603
           Other assets                                   10,211          49,746
           Investment in subsidiary                   33,495,654      19,237,662
                                                     -----------     -----------

                                                     $38,163,504     $19,678,701
                                                     ===========     ===========

      Liabilities and stockholders' equity:
           Note payable to subsidiary$                 1,592,643     $   299,801
           Stockholders' equity                       36,570,861      19,378,900
                                                     -----------     -----------

                                                     $38,163,504     $19,678,701
                                                     ===========     ===========
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(16)  Condensed Parent Company Only Financial Information, Continued

      Condensed Statements of Income

<TABLE>
<CAPTION>
                                                               December 31,
                                                      ------------------------------
                                                   2000            1999            1998
                                                   ----            ----            ----
<S>                                             <C>            <C>              <C>
Income                                          $  29,638      $    15,958      $   3,596

Expense                                            47,261           22,340          4,553
                                                ---------      -----------      ---------

    Loss before income taxes and
       equity in undistributed earnings
        of subsidiary                             (17,623)          (6,382)          (957)

Income tax benefit                                  7,620            2,591             --
                                                ---------      -----------      ---------

    Loss before equity in undistributed
       earnings of subsidiary                     (10,003)          (3,791)          (957)

Equity in undistributed earnings
       of subsidiary                              811,845        1,308,732        724,986
                                                ---------      -----------      ---------

Net income                                      $ 801,842      $ 1,304,941      $ 724,029
                                                =========      ===========      =========
<CAPTION>
Condensed Statements of Cash Flows

                                                   2000            1999            1998
                                                   ----            ----            ----
<S>                                             <C>            <C>              <C>
Cash flows from operating activities:
    Net income                                  $ 801,842      $ 1,304,941      $ 724,029
    Adjustments to reconcile net income
       to net cash provided by/(used in)
       operating activities:
           Equity in undistributed earnings
            of subsidiary                        (811,845)      (1,308,732)      (724,985)
           Other, net                              37,902            9,598        (59,345)
                                                ---------      -----------      ---------

              Net cash provided by
                   (used in) operating
                   activities                      27,899            5,807        (60,301)
                                                ---------      -----------      ---------
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

(16)  Condensed Parent Company Only Financial Information, Continued

      Condensed Statements of Cash Flows, Continued

<TABLE>
<CAPTION>
                                                    2000             1999          1998
                                                    ----             ----          ----
<S>                                            <C>               <C>            <C>
Cash flows from investing activities:

    Capitalization of Bank                      (10,742,976)            --             --
    Note receivable issued to subsidiary         (1,292,102)            --       (225,754)
    Principal collected on note receivable           57,656         36,121          9,030
                                               ------------      ---------      ---------

         Net cash provided by (used in)
           investing activities                 (11,977,422)        36,121       (216,724)
                                               ------------      ---------      ---------

Cash flows from financing activities:

    Increase in note payable to subsidiary        1,292,842         10,150        289,651
    Capitalization of Company                            --             --        500,000
    Net proceeds from stock offering             13,971,795             --             --
    Cash dividends paid                            (283,214)      (283,211)       (70,803)
                                               ------------      ---------      ---------

         Net cash (used in) provided by
           financing activities                  14,981,423       (273,061)       718,848
                                               ------------      ---------      ---------

Net (decrease) increase in cash and
  cash equivalents                                3,031,900       (231,133)       441,823

Cash and cash equivalents at beginning
  of  period                                        210,690        441,823             --
                                               ------------      ---------      ---------

Cash and cash equivalents at end
  of period                                    $  3,242,590      $ 210,690      $ 441,823
                                               ============      =========      =========
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

Quarterly Summarized Financial Information (Unaudited)

Selected quarterly financial data for fiscal 2000 and 1999 follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                         2000
                                                         ----

By Quarter                             1         2         3         4        Year
                                       -         -         -         -        ----
<S>                                 <C>        <C>       <C>       <C>       <C>
   Interest income                  $5,335     5,486     5,717     5,907     22,445
   Interest expense                  3,175     3,330     3,568     3,676     13,749
                                    ------     -----     -----     -----     ------
   Net interest income               2,160     2,156     2,149     2,231      8,696

   Provision for loan
     losses                             60        30        60       110        260

   Noninterest income                  250       261       263       367      1,141
   Noninterest expense               2,083     2,046     1,963     2,193      8,285
                                    ------     -----     -----     -----     ------

   Income before income
     tax expense                       267       341       389       295      1,292

   Income tax expense                  103       127       149       111        490
                                    ------     -----     -----     -----     ------

   Net income                       $  164       214       240       184        802
                                    ======     =====     =====     =====     ======

   Net income per common share:

     Basic                          $ 0.05      0.06      0.07      0.06       0.24
     Diluted                        $ 0.05      0.06      0.07      0.06       0.24
                                    ======     =====     =====     =====     ======
<CAPTION>
                                                         1999
                                                         ----

By Quarter                             1         2         3         4        Year
                                       -         -         -         -        ----
<S>                                 <C>        <C>       <C>       <C>       <C>
   Interest income                  $4,871     4,987     5,208     5,251     20,317
   Interest expense                  2,910     2,950     3,050     3,111     12,021
                                    ------     -----     -----     -----     ------

   Net interest income               1,961     2,037     2,158     2,140      8,296

   Provision for loan
     losses                             75        50        35        40        200

   Noninterest income                  303       363       307       355      1,328
   Noninterest expense               1,734     1,850     1,797     1,878      7,259
                                    ------     -----     -----     -----     ------

   Income before income
     tax expense                       455       500       633       577      2,165

   Income taxes                        182       200       260       218        860
                                    ------     -----     -----     -----     ------

   Net income                       $  273       300       373       359      1,305
                                    ======     =====     =====     =====     ======

   Net incomeper common
     share:

     Basic                          $ 0.08      0.08      0.11      0.11       0.38
     Diluted                        $ 0.08      0.08      0.11      0.11       0.38
                                    ======     =====     =====     =====     ======
</TABLE>
<PAGE>

                           FINGER LAKES BANCORP, INC.

              Notes to Consolidated Financial Statements, Continued

Quarterly Summarized Financial Information (Unaudited) - Continued

<TABLE>
<CAPTION>
                                                                1998
                                                                ----

By Quarter                                    1         2         3          4         Year
                                              -         -         -          -         ----
<S>                                        <C>        <C>       <C>        <C>        <C>
   Interest income                         $4,443     4,551     4,693      4,959      18,646
   Interest expense                         2,617     2,730     2,885      2,969      11,201
                                           ------     -----     -----      -----      ------

   Net interest income                      1,826     1,821     1,808      1,990       7,445

   Provision for loan
     losses                                    60        60        60         60         240

   Noninterest income                         238       322       285        356       1,201
   Noninterest expense                      1,562     1,623     1,661      2,367       7,213
                                           ------     -----     -----      -----      ------

   Income/(loss) before income
     tax expense                              442       460       372        (81)      1,193

   Income tax expense                         176       184       142        (33)        469
                                           ------     -----     -----      -----      ------

   Net income/(loss)                       $  266       276       230        (48)        724
                                           ======     =====     =====      =====      ======

   Net income/(loss) per common
     share:

     Basic                                 $ 0.07      0.08      0.07      (0.01)       0.21
     Diluted                               $ 0.07      0.08      0.07      (0.01)       0.21
                                           ======     =====     =====      =====      ======
</TABLE>
<PAGE>

                              CORPORATE INFORMATION

                           Finger Lakes Bancorp, Inc.

<TABLE>
<S>                                            <C>                                          <C>
Directors

G. Thomas Bowers                               James E. Hunter                              Arthur W. Pearce
Chairman, President &                          Director, NYS Agricultural Experiment        Retired Senior Vice President
Chief Executive Officer                        Station                                      M & T Bank

Michael J. Hanna                               Ronald C. Long                               Joan C. Rogers
Director of Athletics                          President, Long Milk Hauling & Trucking      Retired Vice President
Hobart & William Smith Colleges                Owner, R. C. Long Construction               BJR Broadcasting

Chris M. Hansen                                Bernard G. Lynch
Retired Owner                                  Retired President
C. M. Hansen Farms, Inc.                       Lynch Furniture Stores

Officers

G. Thomas Bowers                               Terry L. Hammond                             Richard J. Harrison
Chairman, President &                          Executive Vice President &                   Executive Vice President &
Chief Executive Officer                        Chief Financial Officer                      Chief Credit Officer

Thomas A. Mayfield                             Leslie J. Zornow
Senior Vice President & Senior Loan Officer    Senior Vice President, Retail Banking
<CAPTION>
                                                 Savings Bank of the Finger Lakes
<S>                                            <C>                                          <C>
Officers

G. Thomas Bowers                               Diana R. Johnson                             Assistant Vice Presidents
Chairman, President &                          Vice President & Controller
Chief Executive Officer                                                                     David R. Caster, Asset Management
                                                                                            Kathleen M. Fay, Loan Servicing
Terry L. Hammond                               Richard R. Sisson                            Susan M. Hibbard, Branch Manager
Executive Vice President &                     Vice President, Community Lending            Kelly J. Mittiga, Branch Manager
Chief Financial Officer                                                                     R. David Patz, Commercial Lending
                                                                                            Beth M. Putnam, Branch Manager
                                                                                            Nancee K. Scott, Branch Manager
Richard J. Harrison                            Dale E. Sollenberger
Executive Vice President &                     Vice President, Information Technology
Chief Credit Officer                                                                        Bank Officers

Thomas A. Mayfield                             Nancy L. Baker                               Tyna L. Borrelli
Senior Vice President & Senior Loan Officer    Vice President, Project Management           Margaret R. Bouchey
                                                                                            Kerth M. Friel
Leslie J. Zornow                               Peter W. Hin                                 Molly Mahoney
Senior Vice President, Retail Banking          Vice President, Commercial Lending           Mary H. Raeman
                                                                                            Thomas J. Short
Robert F. Eberle                               Timothy J. McLoughlin                        Pennie L. Smith
Vice President, Operations                     Vice President, Commercial Lending           Jane C. Spano
</TABLE>
<PAGE>

                              CORPORATE INFORMATION

<TABLE>
<CAPTION>
<S>                                            <C>                                          <C>
Tompkins County Advisory Board

Stanley Goldberg                               Robert Lama                                  William Zikakis
Bishop's Hardware Home Center                  The Lama Agency                              Buttermilk Development

Bruce Kane                                     Libby Long
Certified Public Accountant                    David Long Appraisal

Executive Offices                              NASDAQ Trading Symbol                        Transfer Agent

470 Exchange Street                            "FLBC" - Finger Lakes Bancorp, Inc.          American Stock Transfer & Trust
Geneva, New York  14456                                                                     40 Wall Street
(315) 789-3838                                                                              New York, New York  10005

Banking Offices
                                                                                            Stockholder Relations
Main Office                                    South Meadow Branch Office
470 Exchange Street                            702 South Meadow Street                      Terry L. Hammond
Geneva, New York  14456                        Ithaca, New York  14850                      Executive Vice President &
(315) 789-3838                                 (607) 272-2211                               Chief Financial Officer
Nancee Scott, Manager                          Beth Putnam, Manager                         Savings Bank of the Finger Lakes
                                                                                            470 Exchange Street
Pyramid Branch Office                          Canandaigua Branch Office                    Geneva, New York  14456
Rts. 5 & 20                                    659 South Main Street                        (315) 789-3838
Geneva, New York  14456                        Canandaigua, New York  14424                 thammond@sbfl.com
(315) 789-6004                                 (716) 393-0660
Kelly Mittiga, Manager                         Susan Hibbard, Manager                       Auditors

Seaway Branch Office                           Auburn Branch Office                         KPMG LLP
Rts. 5 & 20                                    108 Genesee Street                           113 South Salina Street
Waterloo, New York  13165                      Auburn, New York  13021                      Syracuse, New York  13104
(315) 539-0200                                 (315) 253-3355
Molly Mahoney, Manager                         Pennie Smith, Manager                        Counsel

Ithaca Commons Branch Office                   10K Availability                             Luse Lehman Gorman Pomerenk & Schick
301 East State Street                                                                       5335 Wisconsin Avenue, N.W.
Ithaca, New York  14850                        Copies of the Finger Lakes                   Suite 400
(607) 272-1111                                 Bancorp, Inc. Form 10-K for the              Washington, D.C.  20015
Jane Spano, Manager                            year ended December 31, 2000 are
                                               available free of charge to                  Market Makers
                                               stockholders upon written request
                                               to:                                          Friedman, Billings, Ramsey & Co.
                                                                                            Sandler O'Neill & Partners, LP
                                               Savings Bank of the Finger Lakes             Tucker Anthony, Inc.
                                               470 Exchange Street
                                               Geneva, New York  14456
                                               Attn:  Terry L. Hammond
</TABLE>