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                             THE WILBER CORPORATION

          ANNUAL REPORT ON SECURITIES AND EXCHANGE COMMISSION FORM 10-K

                      for the Year-Ended December 31, 2005

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

<PAGE>

The  Annual  Report  on  Form  10-K  that  follows  is not  part  of  the  proxy
solicitation material.

<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

[X]   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
      ACT OF 1934
                  For the fiscal year ended December 31, 2005

                        Commission file number: 001-31896

                             The Wilber Corporation
             (Exact name of registrant as specified in its charter)

<TABLE>

<S>                                                             <C>
                           New York                                          15-6018501
(State or other jurisdiction of incorporation or organization)  (I.R.S. Employer Identification No.)

        245 Main Street, P.O. Box 430, Oneonta, NY                             13820
         (Address of principal executive offices)                            (Zip Code)
</TABLE>

                                  607-432-1700
              (Registrant's telephone number, including area code)

                                      None
     (Former name, former address and former fiscal year, if changed since
                                  last report)

               Securities registered pursuant to 12(b) of the Act:

<TABLE>
<S>                                        <C>
        Title of each class                Name of each exchange on which registered
Common Stock, $0.01 par value per share             American Stock Exchange
</TABLE>

Securities registered pursuant to 12(g) of the Act: None

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.
Yes [ ] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [X]

Indicate by check mark whether  registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of the registrant's knowledge, in definitive proxy
or  information  statements  incorporated  by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark  whether the  registrant  is a large  accelerated  filer,
accelerated  filer,  or  a  non-accelerated  filer.  See  definition  of  "Large
accelerated  filer and  accelerated  filer" in Rule 12b-2 of the  Exchange  Act.
(Check one).
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]


                                                                             1-K
<PAGE>

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]

As of June 30, 2005, the aggregate market value of the registrant's common stock
held by  non-affiliates  of the  registrant  was $79.4  million,  based upon the
closing price as reported on the American Stock Exchange  ("Amex(R)").  Although
Directors  and  Executive   Officers  of  the  registrant  were  assumed  to  be
"affiliates" for the purposes of this calculation,  the classification is not to
be  interpreted  as an  admission  of such  status.  There  were no  classes  of
non-voting common stock authorized on June 30, 2005.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

--------------------------------------------------------------------------------
                 Common Stock                   Outstanding at March 7, 2006
  (Common Stock, $0.01 par value per share)           11,145,937 shares
--------------------------------------------------------------------------------

Documents Incorporated by Reference

Portions of the  registrant's  definitive  Proxy Statement for the  registrant's
Annual Meeting of Shareholders to be held on April 29, 2006 are  incorporated by
reference.


2-K
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                                                                             3-K
<PAGE>

                             THE WILBER CORPORATION
                                    FORM 10-K
                                      INDEX

FORWARD-LOOKING STATEMENTS
--------------------------

                                     PART I
                                     ------

ITEM 1:    BUSINESS
-------
           A. General
           B. Market Area
           C. Lending Activities
                a. Loan Products and Services
                b. Loan Approval Procedures and Authority
                c. Credit Quality Practices
           D. Investment Securities Activities
           E. Sources of Funds
           F. Electronic and Payment Services
           G. Trust and Investment Services
           H. Insurance Services
           I. Supervision and Regulation
                a. The Company
                b. The Bank
                c. Subsidiaries
           J. Competition
           K. Legislative Developments

ITEM 1A:   RISK FACTORS
--------

ITEM 1B:   UNRESOLVED STAFF COMMENTS
--------

ITEM 2:    PROPERTIES
-------

ITEM 3:    LEGAL PROCEEDINGS
-------

ITEM 4:    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------

                                     PART II
                                     -------

ITEM 5:    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
-------    AND ISSUERS PURCHASES OF EQUITY SECURITIES

           A. Market Information; Dividends on Common Stock; and Recent Sales of
              Unregistered Securities
           B. Use of Proceeds from Registered Securities
           C. Purchases of Equity Securities by Issuer and Affiliated Purchasers

ITEM 6:    SELECTED FINANCIAL DATA
-------

ITEM 7:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------    RESULTS OF OPERATIONS

           A. General
           B. Performance Overview
           C. Financial Condition
                a. Comparison  of  Financial  Condition at December 31, 2005 and
                   December 31, 2004
           D. Results of Operations
                a. Comparison of Operating  Results for the Years Ended December
                   31, 2005 and December 31, 2004


4-K
<PAGE>

                b. Comparison of Operating  Results for the Years Ended December
                   31, 2004 and December 31, 2003
           E. Liquidity
           F. Capital Resources and Dividends

ITEM 7A:   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------

ITEM 8:    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------

ITEM 9:    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------    FINANCIAL DISCLOSURE

ITEM 9A:   CONTROLS AND PROCEDURES
--------

ITEM 9B:   OTHER INFORMATION
--------

                                 PART III
                                 --------

ITEM 10:   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------   A. Directors of the Registrant
           B. Executive  Officers of the  Registrant  Who Are Not  Directors
           C. Compliance With Section 16(a)

ITEM 11:   EXECUTIVE COMPENSATION
--------

ITEM 12:   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
--------   RELATED STOCKHOLDER MATTERS

ITEM 13:   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------

ITEM 14:   PRINCIPAL ACCOUNTING FEES AND SERVICES
--------

                                     PART IV
                                     -------

ITEM 15:   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
--------


                                                                             5-K
<PAGE>

                        FORWARD-LOOKING STATEMENTS

When we use words or phrases like "will  probably  result,"  "we expect,"  "will
continue," "we anticipate,"  "estimate,"  "project,"  "should cause," or similar
expressions  in this  report or in any  press  releases,  public  announcements,
filings with the  Securities  and  Exchange  Commission  (the  "SEC"),  or other
disclosures,  we are making  "forward-looking  statements"  as  described in the
Private  Securities  Litigation  Reform  Act  of  1995.  In  addition,   certain
information  we provide,  such as analysis of the adequacy of our  allowance for
loan losses or an analysis of the interest  rate  sensitivity  of our assets and
liabilities, is always based on predictions of the future. From time to time, we
may also publish other  forward-looking  statements about anticipated  financial
performance, business prospects, and similar matters.

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
forward-looking  statements. We want you to know that a variety of future events
and  uncertainties  could  cause our actual  results  and  experience  to differ
materially from what we anticipate when we make our forward-looking  statements.
Factors  that  could  cause  future  results  to vary  from  current  management
expectations  include,  but are not limited  to,  general  economic  conditions,
legislative and regulatory changes,  monetary and fiscal policies of the federal
government, changes in tax policies, tax rates and regulations of federal, state
and local tax authorities,  changes in consumer preferences, changes in interest
rates,  deposit  flows,  cost of funds,  demand  for loan  products,  demand for
financial  services,  competition,  changes in the quality or composition of the
Company's  loan and  investment  portfolios,  changes in accounting  principles,
policies or  guidelines,  and other  economic,  competitive,  governmental,  and
technological  factors affecting the Company's  operations,  markets,  products,
services and fees.

Please do not rely  unduly on any  forward-looking  statements,  which are valid
only as of the date made. Many factors,  including those described above,  could
affect  our  financial  performance  and  could  cause  our  actual  results  or
circumstances for future periods to differ materially from what we anticipate or
project.  We have no  obligation  to update any  forward-looking  statements  to
reflect  future  events  which  occur  after the  statements  are  made,  and we
specifically disclaim such obligation.


6-K
<PAGE>

                                     PART I
                                     ------

ITEM 1: BUSINESS

A. General

The Wilber Corporation (the "Company"),  a New York corporation,  was originally
incorporated  in 1928.  The Company  held and  disposed  of various  real estate
assets until 1974. In 1974,  the Company and its real estate assets were sold to
Wilber  National Bank (the "Bank"),  a national bank  established  in 1874.  The
Company's  real estate  assets  were used to expand the banking  house of Wilber
National Bank. The Company was an inactive subsidiary of the Bank until 1982. In
1983, under a plan of reorganization,  the Company was re-capitalized,  acquired
100% of the voting stock of the Bank, and  registered as a bank holding  company
within the meaning of the Bank Holding Company Act of 1956 ("BHCA").

The business of the Company  consists  primarily of the ownership,  supervision,
and control of the Bank. The Bank is chartered by the Office of the  Comptroller
of the Currency  ("the OCC"),  and its deposits are insured up to the applicable
limits of the Federal Deposit Insurance  Corporation ("the FDIC").  The Company,
through  the Bank and the  Bank's  subsidiaries  (collectively  "we" or  "our"),
offers a full range of  commercial  and consumer  financial  products  including
business, municipal, mortgage and consumer loans, deposits, trust and investment
services, and insurance. We serve our customers through twenty (20) full service
branch banking offices located in Otsego, Delaware, Schoharie, Chenango, Ulster,
and Broome counties, New York, an ATM network, and electronic / Internet banking
services.  In addition,  we operate an insurance sales office located in Walton,
New York (Delaware  County),  and two  representative  loan  production  banking
offices,  one in Kingston,  New York (Ulster County),  and one in Syracuse,  New
York  (Onondaga  County).  The Bank's main office is located at 245 Main Street,
Oneonta,  New York, 13820 (Otsego County). We employed 245 full-time  equivalent
employees at December 31, 2005. Our website address is www.wilberbank.com.

The Bank's subsidiaries include Wilber REIT, Inc., Western Catskill Realty, LLC,
and  Mang-Wilber,  LLC.  Wilber  REIT,  Inc.  is  wholly - owned by the Bank and
primarily  holds mortgage  related assets.  Western  Catskill  Realty,  LLC is a
wholly - owned real estate holding  company,  which primarily  holds  foreclosed
real estate. Mang-Wilber,  LLC is the Bank's insurance agency subsidiary,  which
is operated under a joint venture  arrangement with a regional insurance agency.
At December 31, 2005, the Bank owned a 62.7% membership interest in Mang-Wilber,
LLC.

Our principal business is to act as a financial  intermediary in the communities
we  serve  by  obtaining  funds  through  customer  deposits  and  institutional
borrowings,  lending the proceeds of those funds to our customers, and investing
excess funds in debt securities and short-term liquid  investments.  Our funding
base  consists  of  deposits  derived  principally  from  the  central  New York
communities   which  we  serve.  To  a  lesser  extent,  we  borrow  funds  from
institutional  sources,  principally  the  Federal  Home  Loan  Bank of New York
("FHLBNY").  We target our lending activities to consumers and municipalities in
the  immediate  geographic  areas and to small and  mid-sized  businesses in the
immediate   geographic  areas  and  broader  statewide  region.  Our  investment
activities  primarily  consist of purchases of U.S.  Treasury,  U.S.  Government
Agency  ("GinnieMae"),  U.S.  Government  Sponsored  Entities  ("FannieMae"  and
"FreddieMac"),  municipal,  mortgage-backed  and  high  quality  corporate  debt
instruments.  Through our Trust and  Investment  Division,  we provide  personal
trust,  agency,  estate  administration  and  retirement  planning  services for
individuals,  as  well  as  custodial  and  investment  management  services  to
institutions. We also offer stocks, bonds and mutual funds through a third party
broker-dealer  firm.  Through our subsidiary,  Mang-Wilber  LLC, we offer a full
line of life, health and property, and casualty insurance products.

B. Market Area

We primarily  operate in the small town and rural  markets to the north and west
of the Catskill Mountains in central New York. The regional economy is driven by
small not-for-profit  organizations;  farming;  hospitals;  small, independently
owned  retailers,  restaurants and motels;  light  manufacturing;  several small
colleges;  and tourism.  The National  Baseball Hall of Fame  (Cooperstown,  New
York), the National Soccer Hall of Fame (Oneonta, New York), several youth sport
camps,  and outdoor  recreation such as camping,  hunting,  fishing,  and skiing
bring  seasonal  activity to several  communities  within our market  area.  The
Bank's main office in Oneonta,  New York, is approximately 70 miles southwest of
Albany, New York, the state's capital, and 180 miles northwest of New York City.

Our  primary  market area  consists of four rural  counties in central New York,
namely  Otsego,  Delaware,   Schoharie  and  Chenango  Counties.  The  estimated
population of our four county primary  market area is 194,000.  Between 2000 and
2004, the area population increased by less than 1%. This compares to a national
average  of 1.3%  during  the  same  time  period.  Approximately  15.9%  of the
individuals  that reside in our four county primary market area are over the age
of 65, as compared to a national average of 12.4%. In 1999 (the latest available
statistics)  the  median  household  income  for  the  four  county  region  was
approximately  $34  thousand.  This is  approximately  80% of the United  States
national average


                                                                             7-K
<PAGE>

and 78% of the New York State average.  The local unemployment rate approximates
the national  average.  Our management  believes the demographic  profile of the
primary market area in which we operate has not materially changed through 2005.

We also  operate one  full-service  branch  office in Ulster  County,  New York.
Although  the  demographic  profile  of that  county  differs  from our  primary
four-county  market,  the town in which we operate  our branch is similar to our
primary  market.  The  full-service  branch  located in Johnson  City,  New York
(Broome  County),  and the  representative  loan  production  offices located in
Kingston,  New York (Ulster  County) and Syracuse,  New York (Onondaga  County),
operate in more densely populated markets.

C. Lending Activities

General.  The  Company,  through  the Bank,  engages  in a wide range of lending
activities,  including  commercial  lending  primarily  to small  and  mid-sized
businesses;   mortgage  lending  for  1-4  family  and  multi-family  properties
including  home  equity  loans;  mortgage  lending  for  commercial  properties;
consumer   installment  and  automobile   lending,   and  to  a  lesser  extent,
agricultural lending.

Over the  last  several  decades  we have  implemented  lending  strategies  and
policies that are designed to provide  flexibility to meet customer needs, while
minimizing losses associated with borrowers' inability or unwillingness to repay
loans.  The  loan  portfolio,  in  general,  is fully  collateralized,  and many
commercial loans are further secured by personal guarantees.  We do not commonly
grant unsecured loans to our customers.  Annually, we utilize the services of an
outside  consultant to conduct  reviews of the larger,  more complex  commercial
real estate and commercial loan  portfolios to ensure  adherence to underwriting
standards and loan policy guidelines.

We periodically participate in loan participations with other banks or financial
institutions both as an originator and as a participant. A participation loan is
generally  formed  when  the  aggregate  size  of  a  single  loan  exceeds  the
originating bank's regulatory maximum loan size or a self-imposed loan limit. We
typically  make  participation  loans for  commercial or commercial  real estate
purposes.  Although we do not always  maintain direct contact with the borrower,
credit underwriting  procedures and credit monitoring  practices associated with
participation  loans are identical in all material  respects to those  practices
and procedures followed for loans that we originate,  service,  and hold for our
own account.  We typically buy  participation  loans from other commercial banks
operating within New York State with whose management we are familiar. Our total
participation  loans represent less than 10% of the total loans  outstanding and
are comprised of approximately 20 borrowers.

If deemed  appropriate for the borrower and for the Bank, we place certain loans
in  Federal,  State or Local  Government  agency or  government  sponsored  loan
programs.  These  placements often help reduce our exposure to credit losses and
often provide our borrowers with lower interest rates on their loans.

a. Loan Products and Services

Residential Real Estate. We originate and hold residential real estate loans for
our loan portfolio. The terms on these loans are typically 15 - 30 years and are
usually  secured by a first lien position on the home of the borrower.  We offer
both  adjustable  rate and fixed rate loans and provide  monthly  and  bi-weekly
payment options. Our 1-4 family residential loan portfolio primarily consists of
owner-occupied,  primary  residence  properties and, to a lesser extent,  rental
properties  for  off-campus  student  housing,  which surround each of the local
colleges  within our market.  Our  property  appraisal  process,  debt-to-income
limits  for  borrowers,   and  established   loan-to-value  limits  dictate  our
residential real estate lending practices.

To be more competitive in the  interest-rate  sensitive 15 to 30-year fixed rate
residential   mortgage   market,   we  also  originate  loans  on  behalf  of  a
super-regional  bank based in the  Southeastern  United  States.  During 2002 we
entered into an agreement  with this bank to originate  residential  real estate
loans as their agent.

We originate and retain home equity  loans.  Our home equity loans are typically
granted as  adjustable  rate lines of credit.  The interest  rate on the line of
credit  adjusts twice per year and is tied to the Wall Street Journal Prime loan
rate.  The loan terms  generally  include a 2nd lien position on the  borrower's
residence and a 10-year interest only repayment  period. At the end of a 10-year
term, the home equity line of credit is either renewed by the borrower or placed
on a scheduled principal and interest payment plan by the Bank.

Commercial Real Estate. We originate commercial real estate loans to finance the
purchase of developed  real  estate.  To a lesser  extent,  we will also provide
financing for the  construction of commercial  real estate.  Our commercial real
estate loans are typically  larger than those made for residential  real estate.
The loans are often secured by properties whose


8-K
<PAGE>

tenants include "Main Street" type small  businesses,  retailers and motels.  We
also finance properties for commercial office and  owner-occupied  manufacturing
space.  Our  commercial  real  estate  loans are  usually  limited  to a maximum
repayment period of 20 years. Most of our commercial real estate loans are fully
collateralized  and further  secured by the personal  guarantees of the property
owners.  Construction loans are generally granted as a line of credit whose term
does not exceed 12 months.  We typically  advance  funds on  construction  loans
based upon an advance  schedule,  to which the  borrower  agrees,  and  physical
inspection of the premises.

Commercial  Loans.  In addition to commercial  real estate  loans,  we also make
various types of commercial  loans to qualified  borrowers,  including  business
installment  and  term  loans,   lines-of-credit,   demand  loans,  time  notes,
automobile dealer floor-plan financing, and accounts receivable financing.

Business installment and term loans are typically provided to borrowers for long
term working  capital or to finance the purchase of a piece of equipment,  truck
or automobile  utilized in their  business.  We generally  limit the term of the
borrowing to a period  shorter than the  estimated  useful life of the equipment
being  purchased.  We also place a lien on the equipment  being  financed by the
borrower.

Lines-of-credit  are typically  provided to meet the short-term  working capital
needs of the  borrowers  for  inventory  and  other  seasonal  aspects  of their
business.  We also  offer a cash  management  line of  credit  that is tied to a
borrower's primary demand deposit operating  account.  Each day, on an automated
basis,  the  borrower's  line of credit is paid down with the  excess  operating
funds available in the primary operating account. Upon complete repayment of the
line-of-credit,  excess operating funds are invested in investment securities on
a short-term basis, usually overnight, through a securities repurchase agreement
between the Bank and the customer.

Demand loans and time notes are often granted to borrowers to provide short term
or "bridge" financing for special orders, contracts or projects. These loans are
often secured with a lien on business assets, liquid collateral, and/or personal
guarantees.

On a limited  basis we also provide  inventory  financing  or "floor  plans" for
automobile dealers.  Floor plan lines of credit create unique risks that require
close oversight by the Bank's lending personnel.  Accordingly, we have developed
special  procedures  for floor  plan  lines of credit  to  assure  the  borrower
maintains sufficient inventory collateral at all times.

In 1997 we began offering accounts  receivable  financing to qualified borrowers
through  affiliation  with a third  party  vendor  specializing  in this type of
financing.  The program allows business  customers to borrow funds from the Bank
by assigning  their accounts  receivable to the Bank for billing and collection.
The program is supported by limited fraud and credit insurance.

Commercial  loans and commercial  real estate loans  generally  involve a higher
degree of risk and are more  complex  than  residential  mortgages  and consumer
loans.  Such loans typically  involve large loan balances to single borrowers or
groups of related  borrowers.  Commercial  loan repayment and interest terms are
often   established   to  meet  the  unique   needs  of  the  borrower  and  the
characteristics of the business.  Typically,  payments on commercial real estate
are dependent upon leases whose terms are shorter than the borrower's  repayment
period. This places significant  reliance upon the owner's successful  operation
and management of the property.  Accordingly,  the borrower and we must be aware
of the risks that affect the underlying business including,  but not limited to,
economic  conditions,  competition,  product  obsolescence,   inventory  cycles,
seasonality, and the business owner's experience and expertise.

Standby Letters of Credit.  We offer stand-by letters of credit for our business
customers.  Stand-by letters of credit are not loans. They are guarantees to pay
other creditors of the customer should the customer fail to meet certain payment
obligations required by the third party creditor. Those guarantees are primarily
issued to support  public and private  borrowing  arrangements,  including  bond
financing and similar transactions. Because the issuance of a stand-by letter of
credit creates a contingent liability for the Bank, they are underwritten in the
same  manner as loans.  Accordingly,  a stand-by  letter of credit  will only be
issued upon completing our credit review process.  We charge our customers a fee
for  providing  this  service,  which is based on the  principal  amount  of the
stand-by letter of credit.

Consumer  Loans.  We offer a variety of consumer loans to our  customers.  These
loans are usually provided to purchase a new or used  automobile,  motorcycle or
recreational vehicle, or to make a home improvement. We also make personal loans
to finance the  purchase of consumer  durables or other needs of our  customers.
The consumer  loans are  generally  offered for a shorter term than  residential
mortgages because the collateral  typically has an estimated useful life of 5 to
10 years and tends to depreciate rapidly.  Automobile loans comprise the largest
portion of our consumer loan  portfolio.  The financial  terms of our automobile
loans are determined by the age and condition of the vehicle, and the ability of
the borrower to make scheduled  principal and interest  payments on the loan. We
obtain a lien on the vehicle and  collision  insurance  policies are required on
these  loans.  Although  we lend  directly  to  borrowers,  the  majority of our
automobile


                                                                             9-K
<PAGE>

loans are originated through auto dealerships within our primary market area. We
commonly refer to these as indirect automobile or indirect installment loans.

We also provide an overdraft  line of credit product  called  ChequeMate,  which
provides our customers  with an option to eliminate  overdraft  fees should they
make an error in balancing  their  checking  account.  Our  ChequeMate  lines of
credit are typically unsecured and are generally limited to less than $4,000 per
account.

b. Loan Approval Procedures and Authority

General.  The Bank's Board of Directors delegates the authority to provide loans
to borrowers  through the Bank's loan policy.  The policy is modified,  reviewed
and approved on an annual basis to assure that  lending  policies and  practices
meet the needs of borrowers, mitigate perceived credit risk, and reflect current
economic  conditions.  Currently,  we use a four (4) tier  structure  to approve
loans.  First,  the full Board of Directors of the Bank has authority to approve
single loans or loans to any one borrower up to the Bank's legal lending  limit,
which was $10.3  million  for loans not  fully  secured  by  readily  marketable
collateral and $17.2 million for loans secured by readily marketable  collateral
at December 31, 2005.  The full Board of Directors  also approves  loans made to
members of the Board of  Directors,  their  family  members,  and their  related
businesses when the total loans exceed $500,000.  If conditions merit, the Board
of Directors may authorize exceptions to our loan policy.

Second,  the Board of Directors,  as required by the Bank's by-laws,  appoints a
Loan  and  Investment  Committee.  The  Loan and  Investment  Committee  must be
comprised  of at least three (3)  outside  directors  and meets on an  as-needed
basis,  generally  bi-weekly.  Its  lending  authority  for loans not secured by
readily  marketable  collateral  is limited to 50% of the Bank's  legal  lending
limit, which is approximately $5.2 million. The Committee may also approve loans
up to 100% of the Bank's legal  lending  limit if the loan is secured by readily
marketable  collateral  such as  stocks  and  bonds.  The  Loan  and  Investment
Committee is also  responsible  for  ratifying and affirming all loans made that
exceed $25,000, approving collateral releases, authorizing charge-offs in excess
of $10,000,  and annually  reviewing all lines of credit that exceed the lending
limit of the Officers'  Loan  Committee.  The actions of the Loan and Investment
Committee  are  reported  to and  ratified by the full Board of  Directors  each
month.

Third,  the Board of Directors has authorized the creation of the Officers' Loan
Committee. The Officers' Loan Committee is comprised of four (4) voting members,
the Bank's President and Chief Executive Officer,  the Chief Credit Officer, the
Senior Lender,  and the Vice President - Credit Risk  Management.  The Officers'
Loan Committee may approve  secured and unsecured  loans up to 25% of the Bank's
legal  lending  limit  (approximately  $2.6 million) and loans up to 100% of the
Bank's  legal  lending  limit  if the  loan is  secured  by  readily  marketable
collateral.  The Committee also has the authority to adjust loan rates from time
to time as  market  conditions  dictate.  Loan  charge-offs  up to  $10,000  and
collateral  releases  within  prescribed  limits  established  by the  Board  of
Directors are also approved by the Officers' Loan Committee.  All actions of the
Officers' Loan  Committee are reported to the Loan and Investment  Committee for
ratification.

Fourth, through the loan policy,  individual loan officers are provided specific
loan limits by category of loan.  Each  officer's  lending limits are determined
based  on the  individual  officer's  experience,  past  credit  decisions,  and
expertise.

Our goal for the loan  approval  process is to provide  adequate  review of loan
proposals while at the same time  responding  quickly to customer  requests.  We
complete a credit  review  and  maintain a credit  file for each  borrower.  The
purpose  of the file is to  provide  the  history  and  current  status  of each
borrower's  relationship and credit standing, so that a loan officer can quickly
understand  the borrower's  status and make a fully  informed  decision on a new
loan request.  We require that all business borrowers submit audited,  reviewed,
or compiled internal financial statements or tax returns no less than annually.

Loans to  Directors  and  Executive  Officers.  Loans to members of the Board of
Directors  (and their  related  interests)  are granted under the same terms and
conditions  as loans made to  unaffiliated  borrowers.  Any fee that is normally
charged  to other  borrowers  is also  charged  to the  members  of the Board of
Directors. Loans to Executive Officers are limited by banking regulations. There
is no regulatory  loan limit  established  for  Executive  Officers to purchase,
construct,  maintain or improve a  residence,  or to finance the  education of a
dependent.  However,  any  loans to  Executive  Officers  which  are not for the
construction,  improvement,  or purchase of a  residence,  not used to finance a
dependent's   education,   or  not  secured  by  readily  marketable  investment
collateral,  are limited to a maximum of $100,000.  In addition, we require that
all loans made to  Executive  Officers be reported to the Board of  Directors at
the next Board of Directors meeting.

c. Credit Quality Practices

General.  One of our key objectives is to maintain  strong credit quality of the
Bank's loan  portfolio.  We strive to accomplish this objective by maintaining a
diversified mix of loan types, limiting industry concentrations,  and monitoring
regional


10-K
<PAGE>

economic conditions.  In addition, we use a variety of strategies to protect the
quality of individual  loans within the loan portfolio  during the credit review
and approval  process.  We evaluate  both the primary and  secondary  sources of
repayment  and complete  financial  statement  review and cash flow analysis for
commercial  borrowers.  We also generally  require personal  guarantees on small
business  loans,   cross-collateralize   loan   obligations,   complete  on-site
inspections  of the  business,  and require  the company to adhere to  financial
covenants.  Similarly,  in the event a modification  to an  outstanding  loan is
requested,  we reevaluate  the loan under the proposed terms prior to making the
modification.  If we  approve  the  modification,  we  often  secure  additional
collateral or impose stricter financial  covenants.  In the event a loan becomes
delinquent,  we follow collection procedures to assure repayment.  If it becomes
necessary to repossess  or  foreclose  on  collateral,  we strive to execute the
proceedings  in a timely  manner and dispose of the  repossessed  or  foreclosed
property  quickly to minimize  the level of  non-performing  assets,  subsequent
asset deterioration, and costs associated with monitoring the collateral.

Delinquent  Loans and  Collection  Procedures.  When a borrower  fails to make a
required  payment on a loan, we take a number of steps to induce the borrower to
cure the delinquency  and restore the loan to current  status.  Our Chief Credit
Officer  continuously  monitors  the past  due  status  of the  loan  portfolio.
Individual  delinquencies  are reported to the  Directors'  Loan and  Investment
Committee  at each  meeting and the overall  delinquency  levels to the Board of
Directors  at  least  quarterly.   Separate  collection   procedures  have  been
established for residential  mortgage,  consumer,  and commercial and commercial
real estate loans.

On residential mortgage loans fifteen (15) days past due, we send the borrower a
notice  which  requests  immediate  payment.  At twenty (20) days past due,  the
borrower is usually  contacted  by  telephone  by an  employee of the Bank.  The
borrower's  response and promise to pay is recorded.  At sixty (60) days or more
past due, if satisfactory repayment arrangements are not made with the borrower,
generally,  an attorney  letter  will be sent and  foreclosure  procedures  will
begin.

On consumer  loans ten (10) days past due, we send the  borrower a notice  which
requests  immediate  payment.  If the loan  remains past due, an employee of the
Bank's Collection  Department or the approving Loan Officer will usually contact
the  borrower  before day thirty (30) of past due status.  Loans sixty to ninety
(60 - 90) days past due are generally subject to repossession of collateral.

We send past due notices to borrowers with commercial term loans,  demand notes,
and time notes (including commercial real estate) when the loan reaches ten (10)
days past due.  Between  day  fifteen  and day thirty (15 - 30),  borrowers  are
contacted by telephone by an employee of the Bank's Collection  Department or by
the approving  Loan Officer to attempt to return the account to current  status.
After thirty (30) days past due, the loan officer and senior loan officer decide
whether to pursue further action against the borrower.

Loan Portfolio  Monitoring  Practices.  Our loan policy  requires that the Chief
Credit  Officer  continually  monitor  the  status  of the  loan  portfolio,  by
regularly  reviewing  and  analyzing  reports,   which  include  information  on
delinquent loans,  criticized loans and foreclosed real estate. We risk rate our
loan  portfolios  and  individual  loans  based on  their  perceived  risks  and
historical  losses.  For  commercial  borrowers  whose  aggregate  loans  exceed
$50,000,  we assign an  individual  risk  rating  annually.  We arrive at a risk
rating based on current  payment  performance and payment  history,  the current
financial strength of the borrower, and the value of the collateral and personal
guarantee.  Loans classified as "substandard"  typically  exhibit some or all of
the following characteristics:

            o     the borrower lacks current financial information,
            o     the business of the borrower is poorly managed,
            o     the borrower's business becomes highly-leveraged or appears to
                  be insolvent,
            o     the borrower exhibits inadequate cash flow to support the debt
                  service,
            o     the loan is chronically delinquent, or
            o     the  industry  in  which  the  business  operates  has  become
                  unstable or volatile.

Loans we classify as "special mention" are loans that are generally  performing,
but the borrower's  financial  strength  appears to be  deteriorating.  Loans we
categorize  as a "pass"  are  generally  performing  per  contractual  terms and
exhibit none of the characteristics of special mention or substandard loans.

Allowance for Loan Loss. The allowance for loan losses is an amount which in the
opinion of management,  is necessary to absorb  probable  losses inherent in the
loan  portfolio.  We  continually  monitor  the  allowance  for loan  losses  to
determine  its  reasonableness.  At each  quarter end our Chief  Credit  Officer
prepares a formal  assessment of the allowance for loan losses and submits it to
the full Board of  Directors to determine  the  adequacy of the  allowance.  The
allowance is determined  based upon numerous  considerations.  For the consumer,
residential  mortgage,  and small  commercial  loans, we consider local economic
conditions,  the  growth and  composition  of the loan  portfolio,  the trend in
delinquencies, and


                                                                            11-K
<PAGE>

the trend in loan charge-offs and non-performing  loans. Based on these factors,
we estimate the probable or "embedded"  losses in the loan  portfolio.  On large
commercial loans, we take into consideration the specific characteristics of the
loan  including  the  borrower's  payment  history,  business  conditions in the
borrower's  industry,  the collateral and guarantees  securing the loan, and our
historical  experience  with  similarly  structured  loans.  We then  assign  an
estimated loss percentage  based on these  characteristics.  The adequacy of our
allowance for loan losses is also reviewed by the OCC on a periodic  basis.  Its
comments  and  recommendations  are  factored  into  the  determination  of  the
allowance for loan losses.

The  allowance  for loan losses is increased by the  provision  for loan losses,
which is recorded as an expense on our income  statement.  Loan  charge-offs are
recorded as a reduction in the allowance for loan losses.  Loan  recoveries  are
recorded as an increase in the allowance for loan losses.

Non-Performing  Loans.  There are three categories of non-performing  loans, (i)
those 90 or more days delinquent and still accruing  interest,  (ii) non-accrual
loans, and (iii) troubled debt restructured  loans ("TDR").  We place individual
loans on non-accrual status when timely collection of contractual  principal and
interest payments is doubtful.  This generally occurs when a loan becomes ninety
(90) days  delinquent.  When  deemed  prudent,  however,  we may place  loans on
non-accrual  status before they become 90 days delinquent.  Upon being placed on
non-accrual  status, we reverse all interest accrued in the current year against
interest  income.  Interest  accrued  and not  collected  from a  prior  year is
charged-off  through the allowance for loan losses.  If ultimate  repayment of a
non-accrual loan is expected, any payments received may be applied in accordance
with contractual terms. If ultimate repayment of principal is not expected,  any
payment  received on the non-accrual loan is applied to principal until ultimate
repayment becomes expected.

A loan is  considered  to be a TDR when we  grant a  special  concession  to the
borrower  because the borrower's  financial  condition has  deteriorated  to the
point  where  servicing  the  original  loan under the  original  terms  becomes
difficult  or  challenges  the  financial   viability  of  the  business.   Such
concessions include the reduction of interest rates, forgiveness of principal or
interest,  or other similar  modifications to the original terms. TDR loans that
are in compliance  with their modified terms and that yield a market rate may be
removed  from TDR  status  in the  calendar  year  after  the year in which  the
restructuring took place.

Our goal is to  minimize  the number of  non-performing  loans  because of their
negative impact on the Company's earnings.

Foreclosure  and  Repossession.  At times it becomes  necessary  to foreclose or
repossess  property that a delinquent  borrower pledged as collateral on a loan.
Upon  concluding  foreclosure or repossession  procedures,  we take title to the
collateral and attempt to dispose of it in the most efficient  manner  possible.
Real estate  properties  formerly pledged as collateral on loans,  which we have
acquired  through  foreclosure  proceedings  or  acceptance of a deed in lieu of
foreclosure  are called  Other Real  Estate  Owned  (hereinafter  referred to as
"OREO").  OREO is carried at the lower of the recorded investment in the loan or
the fair value of the real estate,  less  estimated  costs to sell.  Write-downs
from the unpaid loan balance to fair value are charged to the allowance for loan
losses.

Loan  Charge-Offs.  We  charge  off  loans or  portions  of  loans  that we deem
non-collectible  and can no longer  justify  carrying  as an asset on the Bank's
balance  sheet.  We determine if a loan should be  charged-off  by analyzing all
possible  sources of repayment.  Once the responsible Loan Officer or designated
Collections Department personnel determines the loan is not collectible,  he/she
completes a "Recommendation for Charge-off" form, which is subsequently reviewed
and approved by the Bank's Loan and  Investment  Committee  (or by the Officers'
Loan Committee for charge-offs less than $10,000).

D. Investment Securities Activities

General.  The Bank's Board of Directors has final  authority and  responsibility
for all aspects of the Bank's investment activities. It exercises this authority
by setting the Bank's  Investment  Policy each year and  appointing the Loan and
Investment  Committee to monitor adherence to the policy. The Board of Directors
delegates its powers by appointing  designated  investment  officers to purchase
and sell  investment  securities  for the  account of the Bank.  The CEO and the
Chief Investment Officer have the authority to make investment  purchases within
the limits set by the Board of Directors. All investment securities transactions
are  reviewed  monthly  by the Loan and  Investment  Committee  and the Board of
Directors.

The Bank's investment  securities portfolio is primarily comprised of high-grade
fixed income debt instruments.  Investment  purchases are generally made when we
have funds that exceed the  present  demand for loans.  Our  primary  investment
objectives are to:

            (i)   minimize risk through strong credit quality,
            (ii)  provide liquidity to fund loans and meet deposit run-off,
            (iii) diversify  the  Bank's  assets,
            (iv)  generate a favorable investment return,


12-K
<PAGE>

            (v)   meet the pledging  requirements of State, County and Municipal
                  depositors,
            (vi)  manage the risk associated with changing interest rates, and
            (vii) match the maturities of securities  with deposit and borrowing
                  maturities.

Our current  investment policy generally limits  securities  investments to U.S.
Government,  agency and sponsored entity securities,  corporate debt,  municipal
bonds, pass-through mortgage backed securities issued by Fannie Mae, Freddie Mac
or Ginnie Mae,  and  collateralized  mortgage  obligations  issued by these same
agencies.

The investment  securities we hold are classified as held-to-maturity,  trading,
or  available-for-sale,  depending  on the  purposes  for which  the  investment
securities  were acquired and are being held.  Securities  held-to-maturity  are
debt  securities  that the Company has both the  positive  intent and ability to
hold to maturity. These securities are stated at amortized cost. Debt and equity
securities  that are bought and held  principally for the purpose of sale in the
near term are  classified as trading  securities  and are reported at fair value
with  unrealized  gains  and  losses  included  in  earnings.  Debt  and  equity
securities not classified as either  held-to-maturity  or trading securities are
classified as available-for-sale  and are reported at fair value with unrealized
gains and losses excluded from earnings and reported net of taxes in accumulated
other  comprehensive  income or loss.  We hold the  majority  of our  investment
securities in the available-for-sale category.

On a daily  basis  we buy and  sell  overnight  federal  funds  to and  from our
correspondent  banks.  Federal funds are unsecured  general  obligations  of the
purchasing bank and therefore  subject to credit risk. To mitigate this risk, we
monitor the financial strength of our correspondent banks on a continuous basis.
Financial strength rating reports of each correspondent bank are reviewed by the
Bank's management on a quarterly basis.

From time to time we  purchase  and hold  certificates  of  deposit  with  banks
domiciled in the United States. These obligations are all insured by the FDIC.

On a limited basis, we also invest in permissible types of equity securities.

E. Sources of Funds

General. The Bank's lending and investment  activities are highly dependent upon
the Bank's  ability to obtain  funds.  Our  primary  source of funds is customer
deposits.  To a lesser extent we have borrowed funds from the FHLBNY and entered
into repurchase agreements to fund our loan and investment activities.

Deposits.  We offer a variety of deposit  accounts to our  customers.  The fees,
interest rates,  and terms of each deposit product vary to meet the unique needs
and  requirements of our depositors.  Presently,  we offer a variety of accounts
for  consumers,  businesses,  not-for-profit  organizations  and  municipalities
including: demand deposit accounts, interest bearing transaction accounts, money
market accounts,  statement  savings accounts,  passbook savings  accounts,  and
fixed and variable  rate  certificates  of deposit.  The majority of our deposit
accounts  are owned by  individuals  and  businesses  who reside near our branch
locations.  Municipal  deposits are generally  derived from the local and county
taxing  authorities,  school  districts  near our branch  locations,  and,  to a
limited  degree,  New York State public funds.  Accordingly,  deposit levels are
dependent upon regional  economic  conditions,  as well as more general national
and statewide economic conditions, local competition, and our pricing decisions.

Borrowed  Funds.  From  time to time we  borrow  funds to  finance  our loan and
investment  activities.  Most of our  borrowings  are  with  the  FHLBNY.  These
advances are secured by a general  lien on our  eligible 1-4 family  residential
mortgage portfolio or specific investment  securities  collateral.  We determine
the maturity and  structure of each advance  based on market  conditions  at the
time of borrowing and the interest rate risk profile of the loans or investments
being funded.

We also utilize repurchase and resale agreements to fund our loan and investment
activities.  Repurchase / resale agreements are contracts for sale of securities
owned or borrowed by us, with an agreement  with the counter party to repurchase
those securities at an agreed upon price and date. In addition,  when necessary,
we borrow  overnight  federal  funds from other banks or borrow  monies from the
Federal Reserve Bank's discount window.

Deposit  account  structures,  fees  and  interest  rates,  as well  as  funding
strategies, are determined by the Bank's Asset and Liability Committee ("ALCO").
The ALCO is  comprised  of the Bank's  senior  managers and meets on a bi-weekly
basis. The ALCO reviews general economic conditions,  the Bank's need for funds,
and local competitive  conditions prior to establishing  funding  strategies and
interest  rates  to be  paid.  The  actions  of the  ALCO  are  reported  to the
Directors' Loan and Investment Committee at their regularly scheduled meetings.


                                                                            13-K
<PAGE>

F. Electronic and Payment Services

General. We offer a variety of electronic services to our customers. Most of the
services are  provided for  convenience  purposes and are  typically  offered in
conjunction  with a deposit or loan  account.  Certain  electronic  and  payment
services are provided using  marketing  arrangements  and third party  services,
branded with the Bank's name.  These services  often provide us with  additional
sources of fee income or reduce our operating and transaction expenses. Our menu
of electronic and payment  services  include point of sale  transactions,  debit
card  payments,  ATMs,  merchant  credit  and debit  card  processing,  Internet
banking,  Internet bill pay services,  voice response,  wire transfer  services,
automated  clearing house services,  direct deposit of Social Security and other
payments, loan autodraft payments, and cash management services.

G. Trust and Investment Services

General.  We offer various  personal trust and investment  services  through our
Trust and Investment Division,  including both fiduciary and custodial services.
At December 31,  2005,  and  December  31,  2004,  we had  $309.920  million and
$322.248 million,  respectively,  of assets under management in the Bank's Trust
and Investment Division. The following chart summarizes the Trust and Investment
Division assets under management as of the dates noted:

Trust Assets Summary Table:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
dollars in thousands                                              December 31,
---------------------------------------------------------------------------------------------------------
                                                       2005                          2004
--------------------------------------------------------------------------------------------------------
                                               Number of      Estimated        Number of     Estimated
                                                Accounts     Market Value       Accounts   Market Value
--------------------------------------------------------------------------------------------------------
<S>                                                  <C>        <C>                <C>       <C>
Trusts                                               342        $166,041           337       $176,371
--------------------------------------------------------------------------------------------------------
Estates                                                8           4,522             8         1,851
--------------------------------------------------------------------------------------------------------
Custodian, Investment Management and Others          227         139,357           221       144,026
--------------------------------------------------------------------------------------------------------
Total                                                577        $309,920           566       $322,248
--------------------------------------------------------------------------------------------------------
</TABLE>

We also  provide  investment  services  through a third party  provider,  INVEST
Financial Corp., for the purchase of mutual funds and annuities.

H. Insurance Services

General.  In 1998,  the Bank  established  an insurance  agency  through a joint
venture with a regional independent  insurance agency. The agency,  Mang-Wilber,
LLC, is licensed to sell,  within New York  State,  various  insurance  products
including  life,  health,  property,  and  casualty  insurance  products to both
consumers and businesses.  The principal office of the agency is in Sidney,  New
York,  with  satellite  sales  offices in  Oneonta,  New York (the  Bank's  main
office),   Cobleskill,  New  York  and  Walton,  New  York  (doing  business  as
Mang-Sholes Insurance). Mang - Wilber, LLC, also owns a two-thirds interest in a
specialty-lines agency in Clifton Park (Saratoga County), New York.

We offer credit life and disability  insurance  through an affiliation  with the
New  York  Bankers  Association.  The  insurance  is  typically  offered  to and
purchased by consumers securing a mortgage or consumer loan through the Bank. In
addition,  we offer title insurance  through New York Bankers Title Agency East,
LLC. Title insurance is sold in conjunction  with origination of residential and
commercial mortgages.  We own an interest in New York Bankers Title Agency East,
LLC, and receive profit  distributions based upon the overall performance of the
agency.

I.    Supervision and Regulation

Set forth below is a brief description of certain laws and regulations governing
the Company, the Bank, and its subsidiaries. The description does not purport to
be complete,  and is qualified in its entirety by reference to  applicable  laws
and regulations.

a. The Company

Bank Holding Company Act. The Company is a bank holding company registered with,
and subject to  regulation  and  examination  by, the Board of  Governors of the
Federal Reserve System ("Federal Reserve Board") pursuant to the


14-K
<PAGE>

BHCA, as amended. The Federal Reserve Board regulates and requires the filing of
reports  describing  the  activities  of bank  holding  companies,  and conducts
periodic   examinations   to  test   compliance   with   applicable   regulatory
requirements.  The Federal  Reserve Board has  enforcement  authority  over bank
holding  companies,  including,  among other things, the ability to assess civil
money penalties,  to issue cease and desist or removal orders,  and to require a
bank holding company to divest subsidiaries.

The BHCA  prohibits a bank  holding  company from  acquiring  direct or indirect
ownership  or  control  of more than 5% of the  voting  shares  of any bank,  or
increasing such ownership or control of any bank,  without the prior approval of
the Federal Reserve Board. The BHCA further  generally  precludes a bank holding
company  from  acquiring  direct  or  indirect   ownership  or  control  of  any
non-banking  entity engaged in any activities other than those which the Federal
Reserve Board has determined to be so closely related to banking or managing and
controlling  banks as to be a proper  incident  thereto.  Some of the activities
that have been found to be closely  related to banking are:  operating a savings
association,  mortgage company, finance company, credit card company,  factoring
company,  or collection  agency;  performing  certain data processing  services;
providing  investment  and  financial  advice;  underwriting  and  acting  as an
insurance agent for certain types of credit-related insurance; real and personal
property leasing;  selling money orders,  travelers'  checks,  and United States
Savings Bonds; real estate and personal property  appraising;  and providing tax
planning and preparation and check guarantee services.

Under  provisions of the BHCA enacted as part of the  Gramm-Leach-Bliley  Act of
1999 ("GLBA"),  a bank holding  company may elect to become a financial  holding
company  ("FHC")  if  all  of  its  depository   institution   subsidiaries  are
well-capitalized and well-managed under applicable guidelines, as certified in a
declaration  filed with the Federal Reserve Board. In addition to the activities
listed  above,  FHC's may  engage,  directly  or  through a  subsidiary,  in any
activity that the Federal Reserve Board, by regulation or order,  has determined
to be  financial  in nature or  incidental  thereto,  or is  complementary  to a
financial  activity  and does not pose a risk to the  safety  and  soundness  of
depository  institutions or the financial system. Pursuant to the BHCA, a number
of  activities  are expressly  considered  to be financial in nature,  including
insurance and securities underwriting and brokerage. The Company has not elected
to become an FHC but  continues to evaluate the  opportunities  presented by FHC
registration.

The BHCA  generally  permits a bank  holding  company to acquire a bank  located
outside of the state in which the existing bank subsidiaries of the bank holding
company  are  located,  subject to deposit  concentration  limits and state laws
prescribing minimum periods of time an acquired bank must have been in existence
prior to the acquisition.

A bank holding  company  must serve as a source of strength  for its  subsidiary
bank. The Federal Reserve Board may require a bank holding company to contribute
additional  capital  to an  undercapitalized  subsidiary  bank.  The  Company is
subject  to  capital  adequacy  guidelines  for  bank  holding  companies  (on a
consolidated  basis),  which  are  substantially  similar  to the  FDIC-mandated
capital adequacy guidelines applicable to the Bank.

Federal  Securities Law. The Company is subject to the  information,  reporting,
proxy solicitation, insider trading, and other rules contained in the Securities
Exchange  Act of  1934  (the  "Exchange  Act")  and the  regulations  of the SEC
thereunder.

Sarbanes-Oxley  Act of 2002. The Company is subject to the Sarbanes-Oxley Act of
2002  (the   "Sarbanes-Oxley   Act").  The   Sarbanes-Oxley   Act  represents  a
comprehensive  revision  of  laws  affecting  corporate  governance,  accounting
obligations, and corporate reporting.  Specifically, the Sarbanes-Oxley Act: (i)
creates  a  new  federal   accounting   oversight  body;  (ii)  revamps  auditor
independence  rules;  (iii) enacts new corporate  responsibility  and governance
measures;  (iv) enhances disclosures by public companies,  their directors,  and
their executive  officers;  (v) strengthens the powers and resources of the SEC;
and (vi) imposes new  criminal  and civil  penalties  for  securities  fraud and
related wrongful conduct. The SEC has adopted in final form substantially all of
the new regulations  Congress  directed it to adopt in the  Sarbanes-Oxley  Act,
including:  standards of  independence  for directors who serve on the Company's
Audit  Committee;  disclosure  requirements as to whether at least one member of
the Company's  Audit Committee  qualifies as a "financial  expert" as defined in
the SEC  regulations,  and  whether  the  Company  has  adopted a code of ethics
applicable to its chief executive  officer,  chief financial  officer,  or those
persons performing similar functions;  and disclosure requirements regarding the
operations  of board  nominating  committees  and the  means,  if any,  by which
security holders may communicate with directors.

b. The Bank

The  following  discussion  is not,  and does  not  purport  to be,  a  complete
description of the laws and  regulations  applicable to the Bank.  Such statutes
and  regulations  relate to required  reserves,  investments,  loans,  deposits,
issuances of securities,  payments of dividends,  establishment of branches, and
other aspects of the Bank's  operations.  Any change in such laws or regulations
by the OCC, the FDIC, or Congress could materially adversely affect the Bank.


                                                                            15-K
<PAGE>

General.  The  Bank  is  a  national  bank  subject  to  extensive   regulation,
examination,  and supervision by the OCC, as its primary federal regulator,  and
by the FDIC, as its deposit insurer.  The Bank's deposit accounts are insured up
to applicable  limits by the Bank Insurance Fund of the FDIC. The Bank must file
reports  with the OCC and the  FDIC  concerning  its  activities  and  financial
condition  and  must  obtain  regulatory   approval  before  commencing  certain
activities  or  engaging  in  transactions  such as mergers  and other  business
combinations or the establishment,  closing, purchase or sale of branch offices.
This regulatory structure gives the regulatory  authorities extensive discretion
in the enforcement of laws and regulations and the supervision of the Bank.

Business Activities. The Bank's lending,  investment,  deposit, and other powers
derive from the  National  Bank Act and OCC  regulations.  These powers are also
governed to some extent by the FDIC under the Federal Deposit  Insurance Act and
FDIC  regulations.  The Bank may  make  mortgage  loans,  commercial  loans  and
consumer  loans,  and may invest in certain types of debt  securities  and other
assets.  The Bank may offer a variety of deposit  accounts,  including  savings,
certificate (time), demand, and NOW accounts.

Standards for Safety and Soundness.  The OCC has adopted guidelines  prescribing
safety and soundness  standards.  These guidelines  establish  general standards
relating to internal controls and information  systems,  internal audit systems,
loan documentation,  credit underwriting,  interest rate exposure, asset growth,
asset quality, earnings standards, compensation, fees, and benefits. In general,
the guidelines require  appropriate systems and practices to identify and manage
the  risks  and  exposures  specified  in the  guidelines.  The OCC may order an
institution  that has been given notice that it is not  satisfying  these safety
and soundness standards to submit a compliance plan, and if an institution fails
to do so, the OCC must issue an order directing action to correct the deficiency
and may issue an order directing other action. If an institution fails to comply
with  such an  order,  the OCC  may  seek to  enforce  such  order  in  judicial
proceedings and to impose civil money penalties.

Branching. Generally, national banks may establish branch offices within a state
to the same extent as commercial banks chartered under the laws of that state.

Transactions with Related Parties.  The Federal Reserve Act governs transactions
between the Bank and its affiliates. In general, an affiliate of the Bank is any
company that  controls,  is controlled  by, or is under common  control with the
Bank. Generally,  the Federal Reserve Act limits the extent to which the Bank or
its subsidiaries may engage in "covered  transactions" with any one affiliate to
10% of the Bank's capital stock and surplus,  and contains an aggregate limit of
20% of capital stock and surplus for covered  transactions  with all affiliates.
Covered transactions include loans, asset purchases, the issuance of guarantees,
and similar  transactions.  The Bank's  loans to insiders  must be made on terms
that are  substantially the same as, and follow credit  underwriting  procedures
that are not less stringent than, those  prevailing for comparable  transactions
with  unaffiliated  persons and that do not involve more than the normal risk of
repayment or present other unfavorable  features.  The loans are also subject to
maximum dollar limits and must generally be approved by the Board.

Capital Requirements.  Capital adequacy is measured within guidelines defined as
either  tier 1  capital  (primarily  stockholders'  equity)  or  tier 2  capital
(certain debt  instruments and a portion of the reserve for loan losses).  There
are two measures of capital  adequacy for banks:  the tier 1 leverage  ratio and
the risk-based requirements.  Most banks must maintain a minimum tier 1 leverage
ratio of 4%. In addition,  tier 1 capital must equal 4% of risk-weighted assets,
and total  capital (tier 1 plus tier 2) must equal 8% of  risk-weighted  assets.
Federal banking agencies are required to take prompt corrective action,  such as
imposing  restrictions,  conditions,  and prohibitions,  to deal with banks that
fail to meet their  minimum  capital  requirements  or are otherwise in troubled
condition.    The   regulators   have   also   established   different   capital
classifications for banking institutions,  the highest being "well capitalized."
Under regulations adopted by the federal bank regulators,  a banking institution
is considered well  capitalized if it has a total risk adjusted capital ratio of
10% or  greater,  a tier 1 risk  adjusted  capital  ratio of 6% or greater and a
leverage ratio of 5% or greater,  and is not subject to any regulatory  order or
written  directive  regarding  capital  maintenance.  The Bank qualified as well
capitalized  at December  31,  2005.  See Part II, Item 7.F.  entitled  "Capital
Resources and Dividends" and Note 13 of the  Consolidated  Financial  Statements
contained  in Part  II,  Item 8, of this  document  for  additional  information
regarding the Bank's capital levels.

Payment  of  Dividends.  The OCC  regulates  the amount of  dividends  and other
capital distributions that the Bank may pay to its stockholders. A national bank
may not pay  dividends  from  its  capital.  All  dividends  must be paid out of
undivided  profits.   In  general,   if  the  Bank  satisfies  all  OCC  capital
requirements  both  before  and  after a  dividend  payment,  the Bank may pay a
dividend to stockholders in any year equal to the current year's net income plus
retained net income for the preceding  two years.  A Bank may not declare or pay
any dividend if it is "undercapitalized" under OCC regulations. The OCC also may
restrict the Bank's ability to pay dividends if the OCC has reasonable  cause to
believe that such payment would constitute an unsafe and unsound  practice.  The
Bank is not undercapitalized  nor under any special  restrictions  regarding the
payment of dividends.


16-K
<PAGE>

Insurance of Deposit  Accounts.  The Bank is an insured  depository  institution
subject to assessment by, and the payment of deposit insurance  premiums to, the
FDIC.  Deposit  insurance  premiums  are  determined  by a  number  of  factors,
including the institution's capital ratio and supervisory  condition.  Since the
ratio of reserves to insured deposits in the Bank Insurance Fund of the FDIC was
at its statutory maximum, the Bank was not required to pay any deposit insurance
premiums during 2005, 2004, or 2003.  Although the Bank did not pay any premiums
during  these  periods,  the  FDIC did levy an  assessment  based on the  Bank's
deposit  accounts  under the  Deposit  Insurance  Funds  Act of 1996.  Under the
Deposit  Insurance  Funds  Act,  deposits  insured  by the Bank  Insurance  Fund
("BIF"),  such as the  deposits of the Bank,  are subject to an  assessment  for
payment on bond  obligations  financing  the  FDIC's  Savings  Association  Fund
("SAIF"). The rate is adjusted quarterly,  depending on the need of the fund. At
December  31,  2005,  the  assessment  rate was 1.34  cents per $100 of  insured
deposits. This compares to 1.46 cents and 1.52 cents per $100 of insured deposit
at December 31, 2004,  and  December  31,  2003,  respectively.  There can be no
assurance  that  the  Bank  will  continue  to not be  required  to pay  deposit
insurance  premiums.  If the Bank is required to pay deposit insurance premiums,
this  expense  could  adversely  affect the Bank's  earnings in future  periods.
Management  anticipates that the FDIC may begin assessing a premium for deposits
insured under the BIF during the last two quarters of 2006.

Federal Reserve System. All depository institutions must maintain with a Federal
Reserve Bank reserves against their transaction  accounts  (primarily  checking,
NOW,  and Super NOW  accounts)  and  non-personal  time  accounts.  Since  these
reserves are  maintained as vault cash or  non-interest-bearing  accounts,  they
have the effect of reducing an institution's  earnings. As of December 31, 2005,
the Bank was in compliance with applicable reserve requirements.

Loans to One Borrower.  The Bank  generally may not make a loan or extend credit
to a single or related  group of  borrowers  in excess of 15% of its  unimpaired
capital and surplus.  Up to an additional 10% of unimpaired  capital and surplus
can be lent if the  additional  amount is fully  secured by  readily  marketable
collateral. At December 31, 2005, the Bank's legal lending limit on loans to one
borrower  was $10.3  million for loans not fully  secured by readily  marketable
collateral and $17.2 million for loans secured by readily marketable collateral.
At that date,  the Bank did not have any loans or agreements to extend credit to
a single or related group of borrowers in excess of its legal lending limit.

Real Estate Lending Standards.  OCC regulations  generally require each national
bank to establish and maintain  written  internal real estate lending  standards
that are consistent with safe and sound banking practices and appropriate to the
size of the bank and the nature and scope of its real estate lending activities.
The standards also must be consistent with  accompanying  OCC guidelines,  which
include loan-to-value ratios for the different types of real estate loans

Community  Reinvestment Act. Under the federal  Community  Reinvestment Act (the
"CRA"), the Bank,  consistent with its safe and sound operation,  must help meet
the credit needs of its entire  community,  including  low and  moderate  income
neighborhoods.  The OCC  periodically  assesses the Bank's  compliance  with CRA
requirements.  The  Bank  received  a  SATISFACTORY  rating  for CRA on its last
performance evaluation conducted by the OCC as of August 11, 2003.

Fair Lending and Consumer  Protection  Laws.  The Bank must also comply with the
federal  Equal Credit  Opportunity  Act and the New York  Executive  Law,  which
prohibit  creditors  from  discrimination  in their  lending  practices on bases
specified in these  statutes.  In  addition,  the Bank is subject to a number of
federal  statutes  and  regulations  implementing  them,  which are  designed to
protect  the general  public,  borrowers,  depositors,  and other  customers  of
depository  institutions.  These  include  the Bank  Secrecy  Act,  the Truth In
Lending Act, the Truth In Savings Act,  the Home  Mortgage  Disclosure  Act, the
Fair Housing  Act, the Real Estate  Settlement  Procedures  Act, the  Electronic
Funds Transfers Act, the Fair Credit Reporting Act, and the Fair Debt Collection
Practices Act. The OCC and, in some instances,  other regulators,  including the
Justice Department,  may take enforcement action against  institutions that fail
to comply with these laws.

Prohibitions Against Tying Arrangements.  National banks are prohibited, subject
to some exceptions,  from extending credit to or offering any other service,  or
fixing or varying the consideration for such extension of credit or service,  on
the condition that the customer obtain some additional  service from the bank or
its affiliates or not obtain services of a competitor of the bank.

Privacy Regulations.  OCC regulations generally require the Bank to disclose its
privacy  policy.  The  policy  must  identify  with  whom  the Bank  shares  its
customer's  "non-public  personal  information," at the time of establishing the
customer relationship and annually thereafter. In addition the Bank must provide
its customers with the ability to "opt-out" of having their personal information
shared with  unaffiliated  third parties and not to disclose  account numbers or
access codes to non-affiliated third parties for marketing purposes.  We believe
that the Bank's privacy policy complies with the regulations.

The USA PATRIOT Act. The Bank is subject to the USA PATRIOT Act, which gives the
federal  government new powers to address  terrorist  threats  through  enhanced
domestic security measures,  expanded surveillance powers, increased information
sharing, and broadened anti-money laundering  requirements.  The USA PATRIOT Act
imposes affirmative obligations on financial  institutions,  including the Bank,
to establish anti-money laundering programs which require: (i) the


17-K
<PAGE>

establishment  of  internal  policies,   procedures,   and  controls;  (ii)  the
designation  of an  anti-money  laundering  compliance  officer;  (iii)  ongoing
employee training  programs;  and (iv) an independent audit function to test the
anti-money laundering program. The OCC must consider the Bank's effectiveness in
combating money laundering when ruling on merger and other applications.

c. Subsidiaries

The Bank's insurance agency subsidiary,  Mang-Wilber LLC, is subject to New York
State insurance laws and regulations.

J. Competition

We face  competition in all the markets we serve.  Traditional  competitors  are
other local commercial banks, savings banks, savings and loan institutions,  and
credit  unions,  as well as local  offices of major  regional  and money  center
banks.  Also,  non-banking  financial  organizations,  such as consumer  finance
companies, mortgage brokers, insurance companies, securities firms, money market
funds,  mutual funds and credit card companies offer substantive  equivalents of
transaction accounts and various loan and financial products. As a result of the
enactment  of the  GLBA  (discussed  further  in  Item  1. I (b)  above),  other
non-banking  financial  organizations now may offer comparable products to those
offered by the Company and to establish,  acquire,  or affiliate with commercial
banks themselves.

K. Legislative Developments

Preemption  and  Predatory  Lending.  On  January  13,  2004,  the  OCC  adopted
amendments to its regulations,  which assert the exclusive  authority of the OCC
to regulate the activities and operations of national banks and prohibit certain
"predatory"  lending practices.  The new regulations  preempt the application to
national banks of any state laws that obstruct,  impair, or condition a national
bank's  ability to fully  exercise  its  deposit-taking  and lending  powers and
reaffirm, subject to narrow exceptions, the OCC's exclusive authority to examine
national banks.  The new  regulations  also prohibit a national bank from making
any  consumer  loan  based  predominantly  on  the  bank's  realization  of  the
foreclosure or liquidation value of the borrower's collateral, without regard to
the  borrower's  ability  to repay  the loan  according  to its  terms  and from
engaging in unfair or deceptive practices within the meaning of section 5 of the
Federal Trade Commission Act. We believe that the Bank's  underwriting and other
credit-related  policies  and  procedures  comply  with  the  lending  standards
prescribed in the new regulations.

FACT Act. In December 2003, The Fair and Accurate Credit Transaction Act of 2003
("FACT Act") was signed into law. The FACT Act was crafted to provide  consumers
with more disclosure and notification on their credit score, rating, and history
(particularly  negative information  filings),  and how these items impact their
credit-related transactions.  The FACT Act also provides consumers with enhanced
identity  theft,  fraud  alert,  and  fraud  repair   provisions,   as  well  as
restrictions on information sharing among affiliates.

New Legislative  Developments.  Various  federal bills that would  significantly
affect banks are  introduced in Congress from time to time.  The Company  cannot
estimate the  likelihood  of any currently  pending  banking bills being enacted
into  law,  or the  ultimate  effect  that any such  potential  legislation,  if
enacted, would have upon its financial condition or results of operations.

ITEM 1A:  RISK FACTORS

The investment  performance of our common shares is affected by several material
risk  factors.  These  factors  (summarized  below)  can  affect  our  financial
condition or results of  operations.  Accordingly,  you should be aware of these
risk factors and how each may  potentially  affect your investment in our common
stock.

General  Competitive  and Economic  Conditions.  National,  regional,  and local
competitive  conditions can negatively affect our financial condition or results
of  operations.  Our existing  competition  may begin  offering new products and
services,  change the price for existing  products and  services,  or open a new
office  in  direct  competition  with  one  of our  offices.  In  addition,  new
competitors  can establish a physical  presence in our market or begin  offering
products and services  through the Internet or other remote channel that compete
directly  with our products and  services.  All of these factors are dynamic and
may affect the demand for our products and services, and, in turn, our financial
condition and results of operations.


18-K
<PAGE>

Regional and local economic  conditions  including  employment and  unemployment
conditions,  population growth, and price and wage scale changes, may impact the
demand for our products and services,  the level of customer deposits, or credit
status  of  our  borrowers.   National  and  international  economic  conditions
including raw materials costs, oil prices, consumer demand, and consumer trends,
may impact  the demand for our  commercial  borrower's  products  and  services,
which, in turn, can affect our financial condition and results of operation.

Changes in Interest  Rates and Capital  Markets.  Our  financial  condition  and
results of  operations  are  highly  dependent  upon the amount of the  interest
income we receive on our earning  assets and the interest we pay for our funding
and  capital  resources.  Accordingly,  changes in  interest  rates and  capital
markets can affect our financial condition and results of operations. A detailed
analysis regarding our market risk and interest rate sensitivity is contained in
Item 7A of this Annual Report on Form 10-K.

Changes in Government Laws,  Regulations,  and Policies.  Financial institutions
are highly regulated companies and are subject to numerous laws and regulations.
Changes to these laws or  regulations,  particularly  at the  federal  and state
level, may materially  impact the business climate we operate within,  which, in
turn, may impact the economic return on our common shares,  financial condition,
or results of operations.

Changes in  Generally  Accepted  Accounting  Principles.  Changes  to  Generally
Accepted  Accounting   Principles  are  periodically  issued  by  the  Financial
Accounting Standards Board ("FASB"). The purpose of these new Generally Accepted
Accounting Principles is to quantify, identify, or disclose certain aspects of a
company's  financial  condition  or results of  operations.  The adoption of new
accounting  standards may alter certain  aspects of the  Consolidated  Financial
Statements of the Company and, in turn, the investment performance of our common
shares.

Changes in the Financial Condition of Government Agencies,  Government Sponsored
Enterprises,  and Local and State  Governments.  We invest  substantially in the
debt instruments issued by U.S. Government  Agencies,  U.S. Government Sponsored
Enterprises,  and local and state  governments.  A  deterioration  of the credit
standing of any of these  issuers of debt may  materially  impact our  financial
condition or results of operations.

Actions of Regulatory  Authorities.  The Company and the Bank are subject to the
supervision of several federal and state  regulatory  bodies.  These  regulatory
bodies  have  authority  to issue,  change,  and enforce  rules and  regulations
including the authority to assess fines. Changes to these regulations may impact
the financial condition or results of operations of the Company or the Bank. See
Item 1 I.  of this  Annual  Report  on  Form  10-K  for  additional  explanation
regarding the regulations to which the Company and the Bank are subject.

Changes in the Company's  Policies or  Management.  Our financial  condition and
results  of  operations  depend  upon  the  policies  approved  by the  Board of
Directors and the practices of management. Changes in our policies or management
practices,  particularly  credit  policies and practices of the Bank, may affect
our financial condition or results of operations.

Allowance for Loan Losses May not be Sufficient to Cover Actual Loan Losses. The
Bank's Chief Credit  Officer,  under the control and supervision of the Board of
Directors,  continually monitors the credit status of the Bank's loan portfolio.
The adequacy of the Allowance for Loan Losses is reviewed quarterly by the Board
of Directors,  and  periodically  by an  independent  loan review firm under the
direction  of the  Bank's  Audit  Committee,  the  Bank's  regulators,  and  the
Company's external auditors.  However,  because the Allowance for Loan Losses is
an estimate  of  probable  losses and is based on  management's  experience  and
assumptions,  there is no certainty  that the  Allowance for Loan Losses will be
sufficient  to cover  actual  loan  losses.  Actual loan losses in excess of the
Allowance for Loan Losses would  negatively  impact our financial  condition and
results of operations.

The  Financial  Performance  of Large  Borrowers.  Our  financial  condition and
results of  operations  are highly  dependent  upon the  credit  worthiness  and
financial performance of our borrowers. The Bank has several borrowers or groups
of  related  borrowers  whose  total  indebtedness  with the Bank  exceeds  $1.0
million. The financial  performance of these borrowers is a material risk factor
that may affect our financial condition or results of operations.

Incidents Affecting Our Reputation.  The demand for our products and services is
influenced by our reputation and the reputation of our management and employees.
Public  incidents  that  negatively  affect the reputation of the Company or the
Bank,  including,  but not  limited  to,  breaches  in the  security of customer
information or unfair or deceptive practices, may adversely impact our financial
condition,  results of  operations,  or economic  performance  of the  Company's
common stock.

Liquidity of the Company's Common Shares.  The Company's common stock is lightly
traded on the Amex(R).  This  condition may make it difficult  for  shareholders
with large common  stock  ownership  positions to sell or liquidate  shares at a
suitable price.


                                                                            19-K
<PAGE>

Changes to the Markets or Exchanges  On Which the  Company's  Common  Shares Are
Traded.  The  Company's  common  shares  trade on the  Amex(R).  Changes  to the
Amex(R)'s trading practices or systems,  reputation or financial  condition,  or
rules which govern trading on the Amex may impact our  shareholders'  ability to
buy or sell his / her commons shares at a suitable price.

ITEM 1B: UNRESOLVED STAFF COMMENTS

The  Company has not been  subject to any  comments by the SEC during the period
covered by this Annual Report on Form 10-K that remain unresolved.

ITEM 2: PROPERTIES

The Company and the Bank are  headquartered  at 245 Main  Street,  Oneonta,  New
York. The three buildings that comprise our  headquarters  are owned by the Bank
and also  serve as our main  office.  In  addition  to our main  office,  we own
nineteen  (19) branch  offices and lease one (1) branch  office and two (2) loan
production  offices at market  rates.  We also own an insurance  sales office in
Walton, New York, through our insurance agency subsidiary, Mang-Wilber LLC.

In the  opinion of  management,  the  physical  properties  of the  Company  are
suitable and adequate.  All of our  properties  are insured at full  replacement
cost.

ITEM 3: LEGAL PROCEEDINGS

From time to time,  the Company  becomes  subject to various  legal claims which
arise in the normal  course of business.  At December 31, 2005,  the Company was
not the subject of any material pending legal  proceedings,  other than ordinary
routine litigation  occurring in the normal course of its business.  The various
pending legal claims  against the Company will not, in the opinion of management
based upon consultation with legal counsel,  result in any material liability to
the Company and will not materially  affect our financial  position,  results of
operation or cash flow.

Neither the  Company,  the Bank,  nor any of the Bank's  subsidiaries  have been
subject to review by the Internal Revenue Service of any transactions  that have
been identified as abusive or that have a significant tax avoidance purpose.

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

There were no matters submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 2005.


20-K
<PAGE>

                                     PART II
                                     -------

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY,  RELATED STOCKHOLDER MATTERS, AND
        ISSUERS PURCHASES OF EQUITY SECURITIES

A.  Market  Information;   Dividends  on  Common  Stock;  and  Recent  Sales  of
Unregistered Securities

Through February 11, 2004, the common stock of the Company was inactively traded
on Nasdaq's  Over-the-Counter  Bulletin Board market under the symbol "WLBC.OB."
Market makers for the stock were Ryan,  Beck,  and Company;  Monroe  Securities,
Inc.;  Hill Thompson  Magid & Co., Inc.;  Knight Equity  Markets,  L.P.;  Schwab
Capital Markets, L.P.; and Stifel, Nicolaus & Company, Incorporated. On February
12,  2004,  the common  stock of the Company  ($0.01 par value per share)  began
trading on the Amex(R)  under the symbol  "GIW." The  following  table shows the
high and low bid quotations (while on the  Over-the-Counter  Bulletin Board) and
trading price (while on the Amex(R)) for the common stock and quarterly dividend
paid to our security holders for the periods presented:

Common Stock Market Price and Dividend Table:

<TABLE>
<CAPTION>
                                      2005                                            2004
                     --------------------------------------------    -------------------------------------------
                         High          Low          Dividend             High          Low         Dividend
                     --------------------------------------------    -------------------------------------------
<S>                     <C>           <C>            <C>                <C>          <C>            <C>
4th Quarter             $12.00        $10.84         $0.0950            $12.64       $11.94         $0.0950
3rd Quarter             $12.27        $11.80         $0.0950            $12.80       $12.00         $0.0950
2nd Quarter             $12.45        $12.00         $0.0950            $13.65       $12.00         $0.0950
1st Quarter             $12.90        $11.94         $0.0950            $15.50       $12.65         $0.0950
</TABLE>

(1) The high and low bid quotations  and trading  prices  provided in this table
were obtained from  www.finance.yahoo.com.  The high and low prices provided for
the  period  in  which  the  common  stock  of the  Company  was  traded  on the
Over-the-Counter  Bulletin  Board market  reflect  inter-dealer  bid  quotations
without retail mark-up,  mark-down,  or commissions and may not represent actual
transactions.

At March  7,  2006,  there  were 532  holders  of  record  of our  common  stock
(excluding  beneficial  owners who hold their  shares in  nominee  name  through
brokerage accounts). The closing price of the common stock at March 7, 2006, was
$10.42 per share.

We have not sold any unregistered securities in the past five years.

B. Use of Proceeds from Registered Securities

None.

C. Purchases of Equity Securities by Issuer and Affiliated Purchasers

On August 27, 2004,  we announced  that our Board of Directors  approved a stock
repurchase  program,  which  authorizes  the  purchase,  at  the  discretion  of
management,  of up to $1.5 million of the Company's common stock. Between August
27,  2004,  and July 26, 2005,  management  purchased  46,300  shares under this
authority.  These  repurchases  reduced the amount  available to  management  to
purchase additional shares under the program to $929 thousand. On July 26, 2005,
management's  authority to purchase the  Company's  common stock under the stock
repurchase program was reauthorized to $1.5 million.

All shares repurchased under our repurchase program were made in the open market
or through private  transactions,  were limited to one transaction per week, and
were conducted  exclusively  through Merrill Lynch, a registered  broker-dealer.
All such  purchases  were in compliance  with the laws of the State of New York,
Rule  10b(18)  of the  Securities  Exchange  Act  of  1934  and  the  rules  and
regulations  there under,  and the rules and  regulations  of the  Amex(R).  The
following  table  summarizes the shares  repurchased by us under this repurchase
program during the fourth quarter of 2005:


                                                                            21-K
<PAGE>

Share Repurchases:

<TABLE>
<CAPTION>
                                                 Total           Average                            Remaining
                                               Number of          Price                               Share
                                                 Shares          Paid per         Total Cost        Repurchase
           Period                              Purchased          Share               (1)            Authority
---------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>              <C>              <C>
October 1 - October 31, 2005                           0           $0.00                 $0         $1,500,000
November 1, - November 30, 2005                    6,000          $11.30            $67,800         $1,432,200
December 1, - December 31, 2005                   11,155          $11.05           $123,263         $1,308,937

                                                -------------------------------------------
Total                                             17,155          $11.14           $191,063
</TABLE>

(1)   Excludes brokerage commissions paid by the Company.

All shares purchased by the Company during the three month period ended December
31, 2005, were purchased under the publicly announced program.

ITEM 6: SELECTED FINANCIAL DATA

The  comparability  of the information  provided in the following 5-Year Summary
Table of Selected Financial Data and the Table of Selected  Quarterly  Financial
Data have not been materially impacted by any significant business combinations,
dispositions  of business  operations,  or  accounting  changes other than those
provided in the footnotes to our financial  statements provided in PART II, Item
8, of this document.  However, all per share financial  information contained in
this  document,  as well as all  exhibits,  was  restated to reflect a 4:1 stock
split approved on September 5, 2003.

5-Year Summary Table of Selected Financial Data:

                      The Wilber Corporation and Subsidiary
                  (Dollars in Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                              As of and for 12-month Period Ended December 31,
                                                            ---------------------------------------------------
                                                              2005       2004       2003       2002       2001
                                                            ---------------------------------------------------
<S>                                                         <C>        <C>        <C>        <C>        <C>
Consolidated Statements of Income Data:
 Interest Income                                            $40,310    $37,165    $38,628    $41,646    $42,307
 Interest Expense                                            14,930     12,761     14,153     17,170     20,449
                                                            ---------------------------------------------------
 Net Interest Income                                         25,380     24,404     24,475     24,476     21,858
 Provision for Loan Losses                                    1,580      1,200      1,565      1,920      1,540
 Net Interest Income After Provision for Loan Losses         23,800     23,204     22,910     22,556     20,318
 Non-Interest Income (Excluding Net Gains on Securities)      5,041      4,603      4,599      4,982      4,645
 Net Gains on Securities Transactions                           469      1,031      1,064        272        175
 Non-Interest Expense (1)                                    18,851     17,218     16,583     15,890     13,945
                                                            ---------------------------------------------------
 Income Before Provision for Income Taxes                    10,459     11,620     11,990     11,920     11,193
 Provision for Income Taxes                                   2,715      3,002      3,277      3,358      3,147
                                                            ---------------------------------------------------
 Net Income                                                  $7,744     $8,618     $8,713     $8,562     $8,046
                                                            ===================================================
</TABLE>


22-K
<PAGE>

5-Year Summary Table of Selected Financial Data, continued

<TABLE>
<CAPTION>
                                                              As of and for 12-month Period Ended December 31,
                                                          ------------------------------------------------------------
                                                            2005         2004         2003         2002         2001
                                                          ------------------------------------------------------------
<S>                                                       <C>          <C>          <C>          <C>          <C>
Per Common Share: (2)
 Earnings (Basic)                                            $0.69        $0.77        $0.78        $0.76        $0.71
 Cash Dividends                                              0.380        0.380        0.370        0.375        0.350
 Book Value                                                   6.08         6.04         5.74         5.61         4.92
 Tangible Book Value (3)                                      5.61         5.77         5.46         5.32         4.88
5-Year Summary Table of Selected Financial Data, cont.
Consolidated Period-End Balance Sheet Data:
 Total Assets                                             $752,728     $750,861     $729,023     $708,984     $626,787
 Securities Available-for-Sale                             240,350      249,415      275,051      234,542      188,712
 Securities Held-to-Maturity                                54,939       59,463       44,140       42,837       46,017
 Gross Loans                                               403,665      391,043      360,906      358,295      329,544
 Allowance for Loan Losses                                   6,640        6,250        5,757        5,392        4,476
 Deposits                                                  604,958      571,929      580,633      549,081      491,012
 Long-Term Borrowings                                       52,472       65,379       55,849       73,346       62,512
 Short-Term Borrowings                                      19,357       37,559       20,018       13,260       10,530
 Stockholder's Equity                                       67,717       67,605       64,304       63,162       55,827

Selected Key Ratios:
 Return on Average Assets                                    1.02%        1.17%        1.20%        1.25%        1.36%
 Return on Average Equity                                   11.40%       13.08%       13.67%       14.36%       14.91%
 Net Interest Margin (tax-equivalent)                        3.82%        3.76%        3.77%        3.96%        4.17%
 Efficiency Ratio (4)                                       57.52%       55.37%       53.61%       51.16%       48.46%
 Dividend Payout                                            55.07%       49.35%       47.44%       49.34%       49.30%

Asset Quality:
 Non-performing Loans                                        4,918        2,751        3,658        3,138        3,280
 Non-performing Assets                                       4,938        2,829        3,678        3,160        4,137
 Net Loan Charge-Offs to Average Loans                       0.30%        0.19%        0.33%        0.29%        0.33%
 Allowance for Loan Losses to Period-End Loans               1.64%        1.60%        1.60%        1.50%        1.36%
 Allowance for Loan Losses to Non-performing Loans (5)        135%         227%         157%         172%         136%
 Non-performing Loans to Period-End Loans                    1.22%        0.70%        1.01%        0.88%        1.00%
</TABLE>

(1)  Amortization of goodwill was discontinued  with retroactive  effect back to
January 1, 2002 upon adoption of SFAS No. 147 during the third quarter of 2003.

(2) All  per  share  amounts  have  been  adjusted  for the 4 for 1 stock  split
approved on September 5, 2003.

(3)  Tangible  book  value  numbers  exclude  goodwill  and  intangible   assets
associated with prior business combinations.

(4) The efficiency  ratio is calculated by dividing total  non-interest  expense
less amortization of intangibles and other real estate expense by tax-equivalent
net interest income plus  non-interest  income other than  securities  gains and
losses.

(5) Non-performing  loans include non-accrual loans,  troubled debt restructured
loans and accruing loans 90 days or more delinquent.


                                                                            23-K
<PAGE>

Table of Selected Quarterly Financial Data:

<TABLE>
<CAPTION>
                                                 2005                                                2004
                           ---------------------------------------------------------------------------------------------------------
                              Fourth       Third       Second        First       Fourth       Third        Second          First
                           ---------------------------------------------------------------------------------------------------------
                                                                     (Dollars in Thousands)
<S>                        <C>          <C>          <C>          <C>          <C>          <C>          <C>            <C>
Interest income            $    10,400  $    10,150  $     9,940  $     9,820  $     9,933  $     9,243  $      8,893   $     9,096
Interest expense                 4,127        3,735        3,559        3,509        3,383        3,172         3,097         3,109
                           ---------------------------------------------------------------------------------------------------------
Net interest income              6,273        6,415        6,381        6,311        6,550        6,071         5,796         5,987
Provision for loan losses          800          300          240          240          240          300           300           360
                           ---------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses        5,473        6,115        6,141        6,071        6,310        5,771         5,496         5,627
                           ---------------------------------------------------------------------------------------------------------
Investment Security Gains
(Losses), Net                        5           71          148          244          110          223           (21)          719
                           ---------------------------------------------------------------------------------------------------------
Other non-interest income        1,261        1,308        1,303        1,170        1,161        1,259         1,090         1,093
                           ---------------------------------------------------------------------------------------------------------
Non-interest expense             4,641        4,812        4,845        4,553        4,463        4,329         4,113         4,313
                           ---------------------------------------------------------------------------------------------------------
Income before income tax
expense                          2,098        2,682        2,747        2,932        3,118        2,924         2,452         3,126
Income tax expense                 505          700          748          762          799          760           601           842
                           ---------------------------------------------------------------------------------------------------------
Net income                 $     1,593  $     1,982  $     1,999  $     2,170  $     2,319  $     2,164  $      1,851   $     2,284
                           =========================================================================================================

Basic earnings per share   $      0.14  $      0.18  $      0.18  $      0.19  $      0.21  $      0.19  $       0.17   $      0.20
                           =========================================================================================================

Basic weighted average
shares outstanding          11,158,813   11,163,092   11,171,114   11,186,275   11,202,087   11,208,037    11,209,392    11,209,392
                           =========================================================================================================

Net interest margin (tax
equivalent) (1)                   3.78%        3.85%        3.85%        3.81%        3.95%        3.75%         3.58%         3.75%
Return on average assets          0.84%        1.04%        1.06%        1.16%        1.23%        1.17%         1.01%         1.27%
Return on average equity          9.37%       11.54%       11.76%       12.94%       13.57%       13.16%        11.53%        14.00%
Efficiency ratio (2)             57.30%       57.97%       58.57%       56.21%       53.99%       55.16%        55.74%        56.72%
</TABLE>

(1) Net interest margin  (tax-equivalent)  is tax-equivalent net interest income
divided by average earning assets.

(2) The Efficiency  Ratio is calculated by dividing total  non-interest  expense
less amortization of intangibles and other real estate expense by tax-equivalent
net interest income plus  non-interest  income other than  securities  gains and
losses


24-K
<PAGE>

ITEM 7: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

A. General

The primary  objective of this financial review is to provide an overview of the
financial  condition and results of operations of The Wilber Corporation and its
subsidiary  for each of the years in the  three-year  period ended  December 31,
2005.  This discussion and tabular  presentations  should be read in conjunction
with the accompanying  Consolidated  Financial Statements and Notes presented in
PART II, Item 8, of this document.

Our financial  performance is heavily dependent upon net interest income,  which
is the difference  between the interest and dividend  income earned on our loans
and investment securities less the interest paid on our deposits and borrowings.
Results of  operations  are also  affected  by the  provision  for loan  losses,
investment  securities  gains  (losses),  service  charges and  penalty  fees on
deposit accounts,  fees collected for trust and investment  services,  insurance
commission  income,  the increase on the cash surrender value on bank owned life
insurance, other service fees, other income and taxes. Our non-interest expenses
primarily consist of salaries,  employee benefits,  occupancy expense, furniture
and  equipment  expense,  computer  service  fees,  advertising  and  marketing,
professional fees, and other miscellaneous  expenses.  Results of operations are
also influenced by general economic conditions (particularly changes in interest
rates), competitive conditions, government policies, changes in Federal or State
tax law, and the actions of our regulatory authorities.

Critical Accounting Policies. Management of the Company considers the accounting
policy  relating to the  allowance  for loan losses to be a critical  accounting
policy given the  uncertainty in evaluating the level of the allowance  required
to cover credit losses  inherent in the loan  portfolio and the material  effect
that such  judgments can have on the results of operations.  While  management's
current evaluation of the allowance for loan losses indicates that the allowance
is adequate, under adversely different conditions or assumptions,  the allowance
would need to be  increased.  For example,  if historical  loan loss  experience
significantly   worsened  or  if  current  economic   conditions   significantly
deteriorated,  additional  provisions  for  loan  losses  would be  required  to
increase  the  allowance  for loan  losses.  In addition,  the  assumptions  and
estimates used in the internal reviews of the Company's non-performing loans and
potential problem loans have a significant impact on the overall analysis of the
adequacy of the allowance for loan losses.  While  management has concluded that
the evaluation of collateral  values was reasonable under the  circumstances for
each of the  reported  periods,  if  collateral  valuations  were  significantly
lowered the Company's allowance for loan losses would also require an additional
provision for loan losses.

Our  policy  on the  allowance  for loan  losses is  disclosed  in Note 1 of the
Consolidated Financial Statements.  A more detailed description of the allowance
for loan  losses is  included in PART II,  Item 7 C.a.,  of this  document.  All
accounting  policies are  important,  and as such,  we  encourage  the reader to
review each of the  policies  included in Note 1 of the  Consolidated  Financial
Statements  (provided  in PART II, Item 8, of this  document) to obtain a better
understanding of how our financial performance is reported.

Accounting  for Branch  Acquisition.  On February 4, 2005, the Bank acquired two
branch offices from HSBC Bank USA, National Association ("HSBC"), one in Sidney,
New York,  and one in Walton,  New York.  Under the terms of our agreement  with
HSBC, we assumed deposit  liabilities with a fair value of $32.967 million,  and
acquired loans with a fair value of $7.635 million, and property, equipment, and
other tangible assets with a fair value of $484 thousand.  This  acquisition was
accounted for as a business  combination  in accordance  with SFAS No. 141. SFAS
No. 141 states that a business  combination  occurs when an entity  acquires net
assets  that  constitute  a business,  as defined by Emerging  Issues Task Force
("EITF")  Issue  No.  98-3,  "Determining  Whether  a  Non-monetary  Transaction
Involves  Receipt of Productive  Assets or of a Business."  EITF No. 98-3 states
that a business is a  self-sustaining  integrated  set of activities  and assets
conducted  and  managed for the purpose of  providing a return to  investors.  A
business  consists of inputs  (long-lived  assets,  intellectual  property,  the
ability to obtain  access to necessary  materials or rights,  employees,  etc.),
processes  (the  existence  of systems  necessary  for normal,  self  sustaining
operations) and outputs (the ability to obtain access to customers).

The branch  purchase  involved the  acquisition of (i) long-lived and intangible
assets  (building,  core deposit  intangible,  and  equipment),  (ii)  employees
(branch  management  and staff),  (iii)  certain  processes  (administration  of
personnel,  operational processes, and strategic management processes), and (iv)
the ability to obtain access to customers who purchase outputs (deposit and loan
customers and accounts of the acquired  branch were  included in the  purchase).
For these reasons, we recorded the acquisition as a business  combination within
the scope of SFAS No.  141. In  connection  with this  acquisition,  we recorded
goodwill of $1.835 million and a core deposit intangible of $492 thousand.


                                                                            25-K
<PAGE>

Recent Accounting Pronouncements.

The EITF reached consensus in March,  2004,  regarding guidance provided in EITF
issue  No.  03-1,  "The  Meaning  of  Other-Than-Temporary  Impairment  and  its
Application  to Certain  Investments."  The purpose of EITF issue No. 03-1 is to
determine the meaning of other-than-temporary  impairment and its application to
certain  securities,  including debt and equity  securities  that are within the
scope of SFAS No.  115.  Guidance  in EITF  Issue  No.  03-1  should  be used to
determine when an investment is considered impaired,  whether that impairment is
other-than-temporary,  and the  measurement of an impaired  loss.  This guidance
also  includes  accounting  considerations  for  securities  subsequent  to  the
recognition of other-than-temporary impairment, and requires certain disclosures
about unrealized  losses that have not been recognized as  other-than-temporary.
Portions of this guidance were effective for reporting  periods  beginning after
June 15, 2004, and other portions will be deliberated  further.  This delay does
not  suspend  the  current   requirement   to   recognize   other-than-temporary
impairments as required by existing  authoritative  literature.  The Company has
not identified any  other-than-temporary  impairment in its securities portfolio
as of December 31, 2005. Subsequent to the FASB final deliberations, the Company
will   evaluate   the   potential   impact  on  its   process   of   identifying
other-than-temporary  declines  in  value of its  debt  and  equity  securities.
Management does not believe that the provision,  as currently written, will have
a  material   impact  on  the  results  of  operations   for  several   quarters
prospectively.

In 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This statement replaces Accounting Principles Board Opinion No.
20, "Accounting Changes", and FASB Statement No. 3, "Reporting Accounting
Changes in Interim Financial Statements" and changes the requirements for the
accounting for and reporting of a change in accounting principle. SFAS No. 154
shall be effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. Therefore, the Company has
adopted this statement, as applicable, on January 1, 2006.

In December, 2004, the Financial Accounting Standards Board revised Statement of
Financial  Accounting  Standards (SFAS) No. 123R,  "Share-Based Payment (Revised
2004)." SFAS 123R  establishes  standards for the accounting for transactions in
which an entity (i) exchanges its equity  instruments for goods or services,  or
(ii) incurs  liabilities in exchange for goods or services that are based on the
fair  value of the  entity's  equity  instruments  or that may be settled by the
issuance of the equity instruments.  SFAS 123R eliminates the ability to account
for stock-based compensation using APB 25 and requires that such transactions be
recognized  as  compensation  cost in the income  statement  based on their fair
values on the date of grant.  SFAS 123R is effective  for  financial  statements
issued for fiscal  quarters  beginning  July 1, 2005.  Since we do not currently
have  an  employee   stock  option  plan  or  any  other  form  of   stock-based
compensation,  this  pronouncement  did not have any impact on our  Consolidated
Financial Statements.

B. Performance Overview for Period Ended December 31, 2005

During 2005, several of our key performance measures decreased significantly, as
compared to 2004. Net income,  earnings per share,  return on assets, and return
on equity all  decreased  between the  periods  ended  December  31,  2004,  and
December 31, 2005.  Specifically,  net income  decreased  from $8.618 million in
2004 to $7.744 million in 2005, an $874 thousand,  or 10.1%  decrease.  Earnings
per share,  return on assets, and return on equity decreased from $0.77,  1.17%,
and 13.08%, respectively, in 2004, to $0.69, 1.02%, and 11.40%, respectively, in
2005.  Although our net interest income increased $976 thousand between 2004 and
2005, it was offset by a $1.633 million  increase in non-interest  expense and a
$380  thousand  increase  in the  provision  for loan  losses.  The  increase in
non-interest  expense was driven by  increases in  salaries,  employee  benefits
expense,  computer  service fees,  professional  fees,  and other  miscellaneous
expenses.  During 2005, we converted our core computer system, focused resources
on Bank-related  compliance efforts, and incurred increases in professional fees
related to  compliance  with  Section  404 of the  Sarbanes  - Oxley Act.  These
endeavors required us to purchase  substantial  amounts of new computer hardware
and software, engage computer,  accounting and other professional service firms,
pay overtime wages, and create several new full and part-time job positions. The
increase  in the  provision  for loan losses was due to a decline in some of our
key loan quality measures.

Although  several of our key  performance  measures  decreased  during 2005,  we
experienced growth in our primary lines of business,  namely deposits and loans.
Total deposits increased from $571.929 million at December 31, 2004, to $604.958
million at December 31, 2005, a $33.029 million, or 5.8% increase.  The increase
in our total  deposits was  principally  driven by our HSBC branch  acquisition.
During  the first  quarter  of 2005,  we  assumed  $32.967  million  of  deposit
liabilities as a result of the  acquisition.  Similarly,  total loans  increased
from $391.043  million at December 31, 2004, to $403.665 million at December 31,
2005, a $12.622  million,  or 3.2% increase.  This growth was driven by both the
HSBC branch  acquisition and our continuing  efforts to increase the size of our
small business loan portfolio.


26-K
<PAGE>

During 2005, some of our key loan quality measures worsened. In particular,  the
amount of  non-performing  loans and loans  charged-off  net of recoveries  both
increased.   At  December  31,  2005,  total   non-performing  loans  and  total
non-performing  loans as a percent of total loans were $4.918 million and 1.22%,
as compared to $2.751 million and 0.70% at December 31, 2004, a $2.167  million,
or 52 basis point  increase.  During the fourth  quarter of 2005,  the financial
condition  of one of our  large  commercial  borrowers  declined  rapidly.  This
required  us to place our loans to the  borrower,  totaling  $973  thousand,  on
non-accrual  status.  During the third quarter we also  restructured  a troubled
loan for a community-oriented,  not-for-profit business. The balance of the loan
at  December  31,  2005,  was $871  thousand.  The loans to these two  borrowers
comprised 85.1% of the net increase in non-performing loans between December 31,
2004, and December 31, 2005.

During  the  fourth  quarter of 2005,  the  amount of loans  charged-off  net of
recoveries  increased  precipitously.  We  experienced  a  sudden  spike  in net
charge-offs in the consumer loan and commercial loan portfolio.  Through the end
of the third quarter of 2005, loans  charged-off net of recoveries  totaled $433
thousand.   During  the  fourth  quarter,  we  recorded  $758  thousand  in  net
charge-offs.  Of the increase,  $335 thousand was due to the charge-off of loans
made to one  commercial  borrower.  The remaining  portion of the fourth quarter
increase,  totaling $423 thousand,  was recorded in the consumer loan portfolio.
Management  attributes the sudden  increase in consumer loan  charge-offs to the
change in the federal bankruptcy law that took effect during the fourth quarter.

The  allowance for loan losses and the ratio of the allowance for loan losses to
non-performing  loans both increased between December 31, 2004, and December 31,
2005.  The allowance for loan losses was $6.250 million at December 31, 2004, as
compared to $6.640  million at December  31, 2005.  Similarly,  the ratio of the
allowance for loan losses to period-end  loans  increased from 1.60% at December
31, 2004, to 1.64% at December 31, 2005. The Company's  management  believes the
allowance for loan losses was adequate at December 31, 2005, to absorb  inherent
losses in the loan portfolio.

The  information  provided  in ITEM 7,  Parts C through F, that  follow  provide
additional  information  as to the financial  condition,  results of operations,
liquidity, and capital resources of the Company.

C. Financial Condition

a. Comparison of Financial Condition at December 31, 2005, and December 31, 2004

Please refer to the Consolidated Financial Statements presented in PART II, Item
                              8, of this document.

Asset Composition
-----------------
Our assets are  comprised  of earning and  non-earning  assets.  Earning  assets
include our investment  securities,  loans,  interest-bearing  deposits at other
banks,  and federal funds sold.  Non-earning  assets include our real estate and
other  assets  acquired  as the result of  foreclosure,  facilities,  equipment,
goodwill and other  intangibles,  non-interest  bearing deposits at other banks,
and  cash.  We  generally  maintain  92% to 95% of our total  assets in  earning
assets.  The ratio of earning  assets to total assets we maintained  during 2004
and 2005 was  slightly  greater than the ratio  maintained  by  comparable  bank
holding companies.

Total Assets
------------
During 2005,  our total assets  increased  slightly,  from  $750.861  million at
December 31, 2004, to $752.728  million at December 31, 2005, a $1.867  million,
or less than 1%  increase.  This  compares to a 3.0%  increase  in total  assets
between  December 31, 2003,  and  December  31, 2004.  During 2005,  we acquired
$32.967 million of deposit  liabilities from HSBC, but repaid $31.109 million of
short and  long-term  borrowings.  During 2005 our  management  repaid  maturing
borrowings as they came due,  which curbed  growth in total  assets.  Throughout
most of 2005 the yield curve was flat.  This interest rate  environment  reduced
the Bank's ability to earn spread on borrowed funds,  which prompted  management
to repay rather than renew most borrowings during 2005.

Investment Securities
---------------------
Our investment securities portfolio consists of trading, available-for-sale, and
held-to-maturity   securities.  The  following  table  summarizes  our  trading,
available-for-sale, and held-to-maturity investment securities portfolio for the
periods indicated.


                                                                            27-K
<PAGE>

Summary of Investment Securities:

<TABLE>
<CAPTION>
                                                                    At December 31
                                     ----------------------------------------------------------------------------
                                               2005                      2004                      2003
                                     ----------------------------------------------------------------------------

                                      Amortized    Estimated    Amortized    Estimated    Amortized    Estimated
                                        Cost      Fair Value      Cost      Fair Value      Cost      Fair Value
                                     ----------------------------------------------------------------------------
                                                                   (In thousands)
<S>                                  <C>          <C>          <C>          <C>          <C>          <C>
                                     -----------  -----------  -----------  -----------  -----------  -----------
Trading (1):                             $1,334        $1,542       $1,347       $1,504       $1,028       $1,025
                                     -----------  -----------  -----------  -----------  -----------  -----------

Available-for-sale:
U.S. Treasuries                          $10,952      $10,866       $4,960       $5,016       $3,978       $4,023
Obligations of U.S. Government
   Corporations and Agencies              25,444       25,091       11,989       11,954        2,000        2,005
Obligations of States and Political
    Subdivisions (Municipal Bonds)        55,080       54,638       66,656       67,745       56,684       58,016
Mortgage - Backed Securities             146,463      143,248      159,289      158,645      192,745      192,365
Corporate Bonds                                0            0            0            0       13,038       13,949
Equity securities                          6,356        6,507        5,870        6,055        4,520        4,693
                                     -----------  -----------  -----------  -----------  -----------  -----------
   Total available-for-sale             $244,295     $240,350     $248,764     $249,415     $272,965     $275,051
                                     -----------  -----------  -----------  -----------  -----------  -----------

Held-to-maturity:
Obligations of States and Political
Subdivisions (Municipal Bonds)           $10,655      $10,633       $7,811       $7,999       $6,292       $6,515
Mortgage-Backed Securities                44,284       43,204       51,652       51,325       37,848       37,901
                                     -----------  -----------  -----------  -----------  -----------  -----------
   Total held-to-maturity                $54,939      $53,837      $59,463      $59,324      $44,140      $44,416
                                     -----------  -----------  -----------  -----------  -----------  -----------
</TABLE>

(1) These  securities  are held by the Company for its  non-qualified  Executive
Deferred Compensation plan.

Between  December 31, 2004,  and December 31, 2005,  our  investment  securities
portfolio   (including  trading,   available-for-sale,   and   held-to-maturity)
decreased  $13.551 million,  or 4.4%. During 2005, we sold or had mature $80.232
million of available-for-sale and held-to-maturity  investment securities versus
new  purchases  of $71.895  million.  Proceeds  from the sale or maturity of the
investment  securities  portfolio in excess of new purchases were generally used
to fund growth in our loan portfolio.

During  2005,  we  continued  to reduce  our  concentration  in  mortgage-backed
securities.   These   include  both   mortgage   pass-through   securities   and
collateralized  mortgage  obligations.  At the end of 2005, our  mortgage-backed
securities  portfolio  comprised  63.2% of the carrying  value of our investment
securities  portfolio.  This  compares to 67.6% and 71.9% at the end of 2004 and
2003,  respectively.  During 2003 and 2004,  residential mortgage interest rates
were very low. This boosted housing starts and provided  considerable  incentive
for consumers to refinance  their  existing home.  This, in turn,  significantly
accelerated  the  level  of  principal   pre-payments  on  our   mortgage-backed
securities,  requiring  us to record  unprecedented  levels of  amortization  of
premiums on investments in those years. Since the prepayment options embedded in
mortgage-backed securities provides for more volatile investment securities cash
flows  and  yields,   the  Bank's   management   reduced  its  concentration  in
mortgage-backed  securities  during 2004 and 2005 and  increased its holdings of
U.S. Treasury and U.S. government corporation and agency bonds.

The estimated fair value of the investment  portfolio is largely  dependent upon
the interest rate  environment  at the time the market price is  determined.  As
interest rates decline,  the estimated fair value of bonds generally  increases,
and conversely,  as interest rates  increase,  the estimated fair value of bonds
generally  decreases.  At December  31,  2005,  the net  unrealized  loss on the
available-for-sale  investment  securities  portfolio  was  $3.945  million.  By
comparison,   at  December   31,   2004,   the  net   unrealized   gain  on  the
available-for-sale investment securities portfolio was $651 thousand. The change
in net unrealized  investment  securities gains / losses between the periods was
due to several factors, including the general rise in interest rates between the
periods, the change in the composition of our investment  securities  portfolio,
as well as the sale of  available-for-sale  securities.  During  2003 and  2004,
respectively,   we  purchased   $203.619   million  and   $181.119   million  of
available-for-sale and held-to-maturity investment securities due principally to
the high


28-K
<PAGE>

levels of prepayments on our mortgage-backed securities portfolio.  During those
periods the coupon rates and yields on investment  securities were very low. For
this  reason,  management  anticipates  that  the  Company's  available-for-sale
investment  securities  portfolio will remain in a net unrealized  loss position
during 2006.

The  following  table sets  forth  information  regarding  the  carrying  value,
weighted  average  yields,  and anticipated  principal  repayments of the Bank's
investment securities portfolio as of December 31, 2005. All amortizing security
principal payments,  including  collateralized mortgage obligations and mortgage
pass-through  securities,  are included based on their  expected  average lives.
Callable securities,  primarily callable agency securities,  and municipal bonds
are assumed to mature on their maturity date.  Available-for-sale securities are
shown at fair value.  Held-to-maturity  securities are shown at their  amortized
cost. The yields on debt  securities  shown in the table below are calculated by
dividing annual interest,  including  accretion of discounts and amortization of
premiums,  by the amortized cost of the securities at December 31, 2005.  Yields
on obligations of states and  municipalities  exempt from federal  taxation were
not tax-effected.

Investment Securities Maturity Table:

<TABLE>
<CAPTION>
                                                      At December 31, 2005
                       ------------------------------------------------------------------------------------------------------------
                                                After One Year      After Five Years
                       In One Year or Less    through Five Years    through Ten Years      After Ten Years            Total
                       ------------------------------------------------------------------------------------------------------------

                                   Weighted              Weighted              Weighted              Weighted              Weighted
                        Carrying   Average    Carrying   Average    Carrying   Average    Carrying   Average    Carrying   Average
 Dollars in Thousands    Value      Yield      Value      Yield      Value      Yield      Value      Yield      Value      Yield
                       ------------------------------------------------------------------------------------------------------------
<S>                      <C>        <C>       <C>          <C>      <C>         <C>       <C>          <C>      <C>          <C>
U.S. Treasuries
                              --    0.00%       $7,918     4.03%      $2,948    4.10%           --     0.00%     $10,866     3.65%
Obligations of U.S.
Government
Corporations               9,854    3.03%       15,237     3.75%          --    0.00%           --     0.00%      25,091     3.47%
and Agencies

Obligations of States
and Political
Subdivisions               5,084    3.98%       13,154     3.59%      36,932    3.83%       10,123     4.34%      65,293     3.87%
(Municipal Bonds)

Mortgage-backed
securities                 9,131    5.13%      145,236     4.21%      31,097    5.00%        2,068     5.42%     187,532     4.40%
                       ------------------------------------------------------------------------------------------------------------
 Total securities (1)    $24,069    4.03%     $181,545     4.12%     $70,977    4.35%      $12,191     4.52%    $288,782     4.19%
                       ============================================================================================================
</TABLE>

(1) This table excludes  trading  securities  totaling  $1.542 million and other
equity securities totaling $6.507 million at December 31, 2005.

At December 31, 2005, the approximate  weighted  average maturity for all of the
Bank's  available-for-sale  and held-to-maturity  debt securities was 4.4 years.
This estimate was  established  based upon  projected  cash flows  provided by a
third party  investment  securities  analyst and is used to provide  comparisons
with  other  companies  in  the  banking  industry.   Our  estimate   fluctuates
considerably from period to period due to our  concentration in  mortgage-backed
securities.

The credit quality of our debt securities is strong. At December 31, 2005, 99.8%
of the securities held in our available-for-sale and held-to-maturity investment
securities portfolio were rated "A" or better by Moody's credit rating services;
95.1% were rated AAA.  This compares to 99.8% and 94.1%,  respectively,  for the
period ended December 31, 2004.

At  December  31,  2005,  we also  held  $6.507  million  of  equity  securities
including: $3.254 million in FHLBNY stock; a $1.829 million equity interest in a
Small Business  Investment  Company,  Meridian  Venture Partners II, L.P; $1.229
million of common stock holdings of other banking institutions; $135 thousand of
Federal  Reserve  Bank of New York  stock;  $35  thousand  in New York  Business
Development  Corporation  stock; and $25 thousand in a money market mutual fund.
By comparison, at December 31, 2004; equity securities totaled $6.055 million at
estimated  fair  value.  The  increase  in the  estimated  fair  value of equity
securities between the periods totaling $452 thousand was due to a $592 thousand
increase in the common stock of other  banking  institutions  (primarily  due to
additional  security  purchases during 2005) and a $200 thousand increase in the
Bank's  investment  in Meridian  Venture  Partners  II,  L.P.,  offset by a $115
thousand  decrease  in FHLBNY  stock and a $225  thousand  decrease in the money
market mutual fund balance.

Interest Bearing Bank Balances and Federal Funds Sold
-----------------------------------------------------

During 2005, we  substantially  reduced our time  deposits with other banks.  At
December  31,  2004,  time  deposits at other  banks were  $10.099  million,  as
compared to $2.700  million at December  31, 2005,  a $7.399  million  decrease.
These balances are comprised of FDIC-insured certificates of deposit (in amounts
of $100,000 or less) in various FDIC-insured banks throughout the United States.
All of the  certificates  of  deposit  were  acquired  by the  Bank  during  the
execution of


                                                                            29-K
<PAGE>

wholesale  leverage  transactions  in 2000,  2001 and 2004. The  certificates of
deposit  purchased  in December  2000 and January 2001  (original  total - $20.0
million) were funded by equal amounts of FHLBNY advances with identical maturity
terms.  The cost of the advances  were 0.70% - 0.75% below the yield on the like
maturity  certificates  of  deposit  at  the  time  of  purchase.   All  of  the
certificates of deposit currently in our portfolio will mature prior to December
31, 2007.

In the normal course of business, we sell and purchase federal funds to and from
other banks to meet our daily liquidity  needs.  Because the funds are generally
an unsecured  obligation  of the counter  party,  we only sell federal  funds to
well-capitalized  banks  that  carry  strong  credit  ratings.  Given  the daily
fluctuation  in our  federal  funds sold  position  throughout  the year,  it is
appropriate  to compare the annual average  federal funds sold positions  rather
than the positions at the end of the periods.  During 2005, our average  federal
funds sold position was $8.110 million. By comparison,  during 2004, our average
federal funds sold position was $6.346 million.

Loan Portfolio
--------------

General.  The total loan portfolio increased by $12.622 million, or 3.2%, during
2005. Total loans  outstanding at December 31, 2005, were $403.665  million,  as
compared to $391.043  million at December  31, 2004.  During  2005,  we acquired
$7.635  million of loans  during the HSBC branch  acquisition  and  continued to
increase the loans  outstanding in the  commercial  and  commercial  real estate
categories.  This was due to our efforts to expand our market area and focus our
resources  on  this  type  of  lending.   During  2005,  we  established  a  new
representative  loan  production  office  in the  Syracuse,  New York  (Onondaga
County) market,  continued to seek loan  opportunities with select loan brokers,
expanded  our network of banks to grow  participation  loans,  and  maintained a
geographic  footprint for small business loans that extended  beyond our primary
market  area.  The  following  table  summarizes  the  composition  of our  loan
portfolio over the prior five-year period.

Distribution of Loans Table:

<TABLE>
<CAPTION>
                                                                        At December 31,
                             -------------------------------------------------------------------------------------------------------
                                    2005                 2004                 2003                 2002                 2001
                             -------------------------------------------------------------------------------------------------------
                              Amount   Percent     Amount   Percent     Amount   Percent     Amount   Percent     Amount   Percent
                             -------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                          <C>          <C>     <C>          <C>     <C>          <C>     <C>          <C>     <C>          <C>
Residential real estate (1)  $123,748      30.7%  $119,103      30.5%  $118,571      32.9%  $125,464      35.0%  $125,510      38.1%

Commercial real estate        144,171      35.7%   129,516      33.1%   115,733      32.1%   104,967      29.3%    87,268      26.5%

Commercial (2)                 69,651      17.3%    78,003      19.9%    65,031      18.0%    65,595      18.3%    53,157      16.1%

Consumer                       66,095      16.4%    64,421      16.5%    61,571      17.1%    62,269      17.4%    63,609      19.3%
                             -------------------------------------------------------------------------------------------------------
      Total loans             403,665     100.0%   391,043     100.0%   360,906     100.0%   358,295     100.0%   329,544     100.0%
                             ----------=========------------=========------------=========------------=========------------=========

Less:

Allowance for loan losses      (6,640)              (6,250)              (5,757)              (5,392)              (4,476)
                             --------             --------             --------             --------             --------
        Net loans            $397,025             $384,793             $355,149             $352,903             $325,068
                             ========             ========             ========             ========             ========
</TABLE>

(1)  Includes  loans  secured by 1-4  family  residential  dwellings,  5+ family
residential dwellings, home equity loans and residential construction loans.

(2) Includes commercial and industrial loans, agricultural loans and obligations
(other than  securities and leases) of states and political  subdivisions in the
United States

During the prior  five-year  period the  composition  of our loan  portfolio has
generally  shifted from one with a concentration  in residential  real estate to
one with a  concentration  in commercial  real estate and commercial  (primarily
small  business)  loans.  However,  during 2005 our  residential  loan portfolio
increased  modestly,  primarily due to an increase in home equity loans.  During
the first  quarter of 2005 we acquired the loans of two branch  offices of HSBC.
The majority of the loans acquired were loans secured by residential properties.
In  addition,  we  continued  to actively  promote and  competitively  price our
variable rate home equity line of credit  product known as the "Prestige Line of
Credit." The loan balances  outstanding in the residential  real estate category
increased  $4.721 million or 4.0% during 2005, from $119.103 million at December
31, 2004 to $123.824 million at December 31, 2005.

Our commercial real estate portfolio  increased during 2005 due to our continued
emphasis  on small  business  lending  and the low  interest  rate  environment.
Specifically,  our  commercial  real estate  portfolio  increased  from $129.516
million at December 31, 2004 to $144.171 million at December 31, 2005, a $14.655
million or 11.3% increase.


30-K
<PAGE>

Our  commercial  loan portfolio  decreased  $8.352 million or 10.7% during 2005,
from  $78.003  million at December  31, 2004 to $69.651  million at December 31,
2005. During 2005 two large commercial borrowers repaid their loans with us. One
paid-off  approximately  $4.5  million  on a line  of  credit,  which  the  Bank
continues  to  maintain.  The other  borrower  paid-off all loans with the Bank,
totaling  $5.220  million.  In spite of the  decrease in this  category of loans
during 2005, we will continue to focus our efforts on increasing the balances of
our small business loan portfolio prospectively.

During 2005, we increased our total consumer loans outstanding by $1.674 million
or 2.6%.  During 2005, we continued to broaden our automobile  dealer network to
increase the volume of our indirect  automobile loans (secured primarily by used
vehicles).  These  efforts  resulted  in a  $1.791  million  increase  in  loans
outstanding in this category. In management's  opinion,  higher levels of growth
in indirect loans were curbed by a reduced level of used automobile sales in our
primary  market  area.  At December  31,  2004,  our  indirect  automobile  loan
portfolio  was  comprised of 4,123  accounts,  totaling  $41.268  million.  This
compares to 4,217 accounts and $43.059  million at December 31, 2005, a 2.3% net
increase in accounts  and 4.3% net increase in indirect  automobile  loan volume
outstanding.

The following table sets forth the amount of loans maturing and repricing in our
portfolio.  The full principal  amount  outstanding of adjustable rate loans are
included in the period in which the interest  rate is next  scheduled to adjust.
Similarly,  the full principal amount  outstanding of fixed-rate loans are shown
based on their final maturity date.  The full  principal  amount  outstanding of
demand  loans  without a repayment  schedule  and no stated  maturity,  financed
accounts  receivable,  and  overdrafts  are reported as due within one year. The
table has not been  adjusted for  scheduled  principal  payments or  anticipated
principal pre-payments.

Maturity and Repricing of Loans Table:

                                            One        More
                             Within One   Through      Than
                              Year (1)   Five Years  Five Years    Total
                             ----------------------------------------------
Residential real estate (1)    $51,624     $10,249     $61,875     $123,748
Commercial real estate          52,861       9,826      81,484      144,171
Commercial (2)                  39,203      11,202      19,246       69,651
Consumer                         9,265      47,332       9,498       66,095
                             ----------------------------------------------
     Total loans receivable   $152,953     $78,609    $172,103     $403,665
                             ==============================================

(1)  Includes  loans  secured by 1-4  family  residential  dwellings,  5+ family
residential dwellings, home equity loans and residential construction loans.

(2) Includes commercial and industrial loans, agricultural loans and obligations
(other than  securities and leases) of states and political  subdivisions in the
United States

The  following  table sets forth fixed and  adjustable  rate loans with maturity
dates after December 31, 2006:

Table of Fixed and Adjustable Rate Loans:

                                            Due After December 31, 2006
                                         ----------------------------------
                                           Fixed     Adjustable    Total
                                         ----------  ----------  ----------
Residential real estate (1)                $26,395     $90,647    $117,042
Commercial real estate                      93,034      50,084     143,118
Commercial (2)                              28,735      16,130      44,865
Consumer                                    58,800       1,454      60,254
                                          --------   ---------    --------
    Total loans                           $206,964    $158,315    $365,279
                                          ========    ========    ========

(1)  Includes  loans  secured by 1-4  family  residential  dwellings,  5+ family
residential dwellings, home equity loans and residential construction loans.

(2) Includes commercial and industrial loans, agricultural loans and obligations
(other than  securities and leases) of states and political  subdivisions in the
United States


                                                                            31-K
<PAGE>

Commitments  and Lines of Credit.  Standby  letters  of credit  are  conditional
commitments  issued by us to guarantee the  performance of a customer to a third
party.  Those  guarantees  are  primarily  issued to support  public and private
borrowing arrangements,  including bond financing and similar transactions.  The
credit risk involved in issuing  standby  letters of credit is  essentially  the
same as that involved in extending loans to customers. Since most of the standby
letters of credit are  expected to expire  without  being drawn upon,  the total
commitment  amounts do not necessarily  represent future cash  requirements.  At
December 31, 2005 and December 31, 2004 standby letters of credit totaled $8.880
million and $9.948 million,  respectively. At December 31, 2005 and December 31,
2004 the fair value of the Bank's standby letters of credit was not material.

In addition  to standby  letters of credit,  we have issued  lines of credit and
other  commitments  to lend to our  customers.  Commitments to extend credit are
agreements  to  lend to a  customer  as long as  there  is no  violation  of any
condition  established in the loan agreement.  Commitments  generally have fixed
expiration dates or other termination  clauses and may require payment of a fee.
These  include  home equity lines of credit,  commitments  for  residential  and
commercial  construction loans, commercial letters of credit, and other personal
and  commercial  lines of credit.  At December 31, 2005 and December 31, 2004 we
had  outstanding  unfunded  loan  commitments  of $76.783  million  and  $57.055
million,  respectively,  representing a $19.728 million or 34.6% increase period
over period.  The increase in the unfunded loan commitments was primarily due to
growth in the unused portion of commercial and home equity lines of credit.

Asset Quality and Risk Elements
-------------------------------

General.  One of our key objectives is to maintain  strong credit quality of the
Bank's loan portfolio.  The following narrative provides summary information and
our experience regarding the quality and risk elements of our loan portfolio.

Delinquent Loans. At December 31, 2005, we had $2.062 million of loans that were
30 or more days past due (excluding non-performing loans). This equaled 0.51% of
total loans  outstanding.  By  comparison,  at  December  31, 2004 we had $2.077
million  of this  same  category  of loans  that  were 30 or more  days past due
(excluding non-performing loans). This equaled 0.53% of total loans outstanding.
Management  considers  the level of  delinquent  loans as low (relative to prior
years'  levels)  and  attributes  the low  levels  of  delinquency  to  improved
delinquent loan collection procedures implemented in 2001.

Non-accrual,  Past Due and  Restructured  Loans.  The following chart sets forth
information regarding non-performing assets for the periods stated.

Table of Non-performing Assets:

<TABLE>
<CAPTION>
                                                          At December 31,
                                             ------------------------------------------
                 Dollars in Thousands         2005     2004     2003     2002     2001
                                             ------------------------------------------
<S>                                          <C>      <C>      <C>      <C>      <C>
Loans in Non-Accrual Status:
   Residential real estate (1)                 $327     $141     $257     $222     $465
   Commercial real estate                     2,287    2,168    1,199    1,049    1,587
   Commercial (2)                             1,191      243    1,700      760       33
   Consumer                                      61        9        8        3        5
                                             ------------------------------------------
               Total non-accruing loans       3,866    2,561    3,164    2,034    2,090
Loans Contractually Past Due 90 Days or
More and Still Accruing Interest                181      190      123      717      329
Troubled Debt Restructured Loans                871        0      371      387      861
                                             ------------------------------------------
              Total non-performing loans      4,918    2,751    3,658    3,138    3,280
Other real estate owned                          20       78       20       22      857
                                             ------------------------------------------
Total non-performing assets                  $4,938   $2,829   $3,678   $3,160   $4,137
                                             ==========================================
Total non-performing assets as a
percentage of total assets                     0.66%    0.38%    0.50%    0.45%    0.66%
                                             ==========================================
Total non-performing loans as a percentage
of total loans                                 1.22%    0.70%    1.01%    0.88%    1.00%
                                             ==========================================
</TABLE>

(1)  Includes  loans  secured by 1-4  family  residential  dwellings,  5+ family
residential dwellings, home equity loans and residential construction loans.

(2) Includes commercial and industrial loans, agricultural loans and obligations
(other than  securities and leases) of states and political  subdivisions in the
United States


32-K
<PAGE>

Total non-performing  assets increased from $2.829 million at December 31, 2004,
to $4.938 million at December 31, 2005, a $2.109 million or 74.5% increase.  The
substantial  majority of the  increase in  non-performing  assets was due to the
decline in the  financial  condition of two of our large  borrowers.  During the
third  quarter  of 2005 we  restructured  a  credit  facility  for a  struggling
not-for-profit  company. The loan balance at December 31, 2005 was $871 thousand
and was current under the restructured  terms. During the fourth quarter of 2005
the financial  condition of one of our large commercial  borrowers  deteriorated
rapidly.  Due to the  borrowers  financial  condition  and past due  status,  we
determined it was necessary to place the borrower's loans with us on non-accrual
status.  The total loans  outstanding  with the borrower  were $973  thousand at
December 31, 2005.

Other Real Estate Owned and Repossessed Assets. Other Real Estate Owned ("OREO")
consists of properties  formerly pledged as collateral on loans, which have been
acquired by the Bank through foreclosure  proceedings or acceptance of a deed in
lieu of foreclosure.  OREO is carried at the lower of the recorded investment in
the loan or the fair value of the real estate,  less estimated costs to sell. At
both  December 31, 2004 and December 31, 2005 we held  insignificant  amounts of
OREO property totaling less than $100 thousand.

Potential Problem Loans. In addition to non-performing loans, we have identified
through normal credit review procedures  potential problem loans totaling $7.897
million or 2.0% of total loans  outstanding at December 31, 2005. By comparison,
at December 31, 2004,  potential problem loans totaled $8.662 million or 2.2% of
total loans  outstanding.  Potential  problem loans are loans that are currently
performing,  but where known  information  about possible credit problems of the
related  borrowers  causes  management  to have doubts as to the ability of such
borrowers to comply with the present loan  repayment  terms and which may result
in  disclosure  of such  loans as  non-performing  at some  time in the  future.
Potential  problem  loans  are  typically  loans  that are  performing,  but are
classified by our loan rating system as  "substandard."  Potential problem loans
may  fluctuate  significantly  from period to period due to a rating  upgrade of
loans  previously  classified  as  substandard  or a rating  downgrade  of loans
previously  carried  in a  higher  credit  classification.  Management  does not
believe the decrease in potential problem loans,  totaling $765 thousand between
December 31, 2004,  and December 31, 2005 to be  significant or indicative of an
improvement  in the overall  quality of the loan  portfolio.  Management  cannot
predict  the extent to which  economic  conditions  may worsen or other  factors
which may impact borrowers and the potential problem loans.  Accordingly,  there
can be no  assurance  that other loans will not become 90 days or more past due,
be placed on  non-accrual  status,  become  restructured,  or require  increased
allowance coverage and provision for loan losses.

Loan Concentrations.  At December 31, 2005 we had $33.210 million of total loans
outstanding  and  $1.795  million  of  unfunded  loan  commitments   secured  by
commercial rental properties. Total loans outstanding in this category comprised
8.2% of our total loans  outstanding  at  December  31,  2005.  We have nine (9)
borrowers  within  this area of  concentration  that each has  outstanding  loan
balances in excess of $1.0 million. The aggregate amount of loans outstanding to
these nine (9) borrowers at December 31, 2005, was $23.393 million. All of these
loans were in compliance  with  contractual  payment terms at December 31, 2005.
The remaining  portfolio was comprised of approximately  seventy-five (75) loans
and spread amongst a diverse group of properties  and borrowers.  By comparison,
at December 31, 2004, we had $22.707 million of commercial rental property loans
outstanding  with seven (7) of these  loans in excess of $1.0  million  totaling
$12.873 million.

At December  31, 2005 we had  outstanding  $28.538  million or 7.1% of our total
loans  outstanding  to borrowers who operate in the hotel / motel  industry.  By
comparison,  at December 31, 2004 we had outstanding $30.048 million, or 7.7% of
our total loans outstanding in this same category.  The hotel / motel properties
that we finance are geographically  dispersed throughout our market area and the
broader  statewide  region.  The Bank's Board of  Directors  has  established  a
specific exposure guideline for this hotel / motel industry at 50% of the Bank's
total equity capital, which at December 31, 2005 was $32.449 million.

At December 31, 2005 we had $25.350 million of total loan outstanding and $2.054
million of unfunded loan  commitments to  manufacturing  companies.  Total loans
outstanding in this category  comprised  6.2% of our total loans  outstanding at
December 31, 2005.  This compares to $23.076  million in loans  outstanding  and
$8.795 million of unfunded loan commitments to this sector at December 31, 2004.
Although our borrowers  operate in various  industries  within the manufacturing
sector,  we have  experienced a general  decline in the  financial  condition of
several  borrowers  within  this  sector.  We have  eight (8)  borrowers  in the
manufacturing sector with aggregate credit facilities in excess of $1.0 million.
Five (5) of these have either been placed on non-accrual status, identified as a
potential  problem loan, or  identified  as a "special  mention" loan  requiring
special monitoring.

At  December  31,  2005 we had  $22.766 of total  loans  outstanding  and $1.418
million of unfunded loan commitments  secured by residential  rental properties.
Total  loans  outstanding  in this  category  comprised  5.6% of our total loans
outstanding at December 31, 2005. Within this group we had six (6) loans to four
(4)  borrowers  totaling  approximately  $9.6 million  that operate  independent
living,  assisted  living,  or residential  care facilities for senior citizens.
None of these


                                                                            33-K
<PAGE>

loans was classified as substandard at December 31, 2005 and all were performing
pursuant to  contractual  terms.  By  comparison,  at  December  31, 2004 we had
$22.257 million of total loan commitments in this same category.

At  December  31, 2005 we had $16.663  million of total  loans  outstanding  and
$4.065  million of unfunded loan  commitments to automotive  dealerships.  Total
loans outstanding in this category comprised 4.1% of our total loans outstanding
at December 31, 2005. The largest eight (8) borrowers  comprise  $19.380 million
or 93.5% of the loan  commitments  to this  industry.  Management  monitors  the
dealer floor plan loans  provided to six of these seven  borrowers by conducting
inventory reviews on a monthly basis.

At  December  31, 2005 we had $13.943  million of total  loans  outstanding  and
$6.135  million of unfunded  loan  commitments  to borrowers in the  convenience
store / fuel business.  Total loans outstanding in this category  comprised 3.5%
of our total loans outstanding at December 31, 2005. By comparison,  at December
31, 2004, we had $22.036 million of total loan commitments to this industry.  At
December 31, 2005 none of the loans to these borrowers were rated substandard by
our management. These loans were primarily distributed among five (5) borrowers.
We have  loan  commitments  totaling  $8.000  million  to one  borrower  in this
industry.

Other areas of  concentration  at December 31, 2005,  include $12.724 million of
loan commitments to medical facilities and medical practices,  $9.527 million of
loan  commitments  to general  residential  and commercial  contractors,  $8.632
million of loan commitments to various  restaurants,  and $8.049 million of loan
commitments  to  religious  and  human  services   organizations.   Although  we
classified  these  industries as areas of credit  concentration,  we believe the
aggregate  exposure to these industries do not pose unwarranted  amounts of risk
to the Company.

Summary of Loss  Experience  (Charge-Offs)  and Allowance  for Loan Losses.  The
following  table sets forth the  analysis of the activity in the  allowance  for
loan losses, including charge-offs and recoveries, for the periods indicated.

Analysis of the Allowance for Loan Losses Table:

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                             ------------------------------------------
                                              2005     2004     2003     2002     2001
                                             ------------------------------------------
                                                      (Dollars in thousands)
<S>                                          <C>      <C>      <C>      <C>      <C>
Balance at beginning of year                 $6,250   $5,757   $5,392   $4,476   $4,003
  Charge offs:
    Residential real estate (1)                  20      133      174       93      225
    Commercial real estate                        0       51        0        0      148
    Commercial (2)                              364      121      193      402      123
    Consumer                                  1,091      639    1,109      926      905
                                             ------------------------------------------
       Total charge offs                      1,475      944    1,476    1,421    1,401
                                             ------------------------------------------
  Recoveries:
    Residential real estate (1)                  39       20       10        0       24
    Commercial real estate                        0        0        0        0       40
    Commercial (2)                               29       51       78      250       88
    Consumer                                    217      166      188      167      181
                                             ------------------------------------------
        Total recoveries                        285      237      276      417      334
                                             ------------------------------------------
Net charge-offs                               1,190      707    1,200    1,004    1,068
Provision for loan losses                     1,580    1,200    1,565    1,920    1,540
                                             ------------------------------------------
Balance at end of year                       $6,640   $6,250   $5,757   $5,392   $4,476
                                             ==========================================

Ratio of net charge-offs during the year to    0.30%    0.19%    0.33%    0.29%    0.33%
average loans outstanding during the year
                                             ==========================================
Allowance for loan losses to total loans       1.64%    1.60%    1.60%    1.50%    1.36%
                                             ==========================================
Allowance for loan losses to non-
performing loans                                135%     227%     157%     172%     136%
                                             ==========================================
</TABLE>


(1)  Includes  loans  secured by 1-4  family  residential  dwellings,  5+ family
residential dwellings, home equity loans and residential construction loans.

(2) Includes commercial and industrial loans, agricultural loans and obligations
(other than  securities and leases) of states and political  subdivisions in the
United States


34-K
<PAGE>

The  allowance for loan losses and the allowance for loan losses as a percent of
total loans increased from $6.250 million and 1.60%,  respectively,  at December
31, 2004 to $6.640 million and 1.64%,  respectively,  at December 31, 2005. This
represents a $390 thousand and 4 basis point  increase  between the periods.  In
2005 the provision for loan losses  increased to $1.580  million,  versus $1.200
million in 2004. During 2005, two of our key credit quality measures, namely net
charge-offs  and  non-performing  loans,  worsened,  as compared to 2004.  These
trends in our loan portfolio,  as well as the decline in the financial condition
of one of our large  commercial  borrowers  during the  fourth  quarter of 2005,
prompted us to increase the provision for loan losses during the fourth  quarter
to absorb the estimated  losses embedded in our loan  portfolio.  Management and
the Board of  Directors  deemed the  allowance  for loan  losses as  adequate at
December 31, 2005 and December 31, 2004.

Allocation of the Allowance for Loan Losses.  We allocate our allowance for loan
losses among the loan categories  indicated below. This allocation should not be
interpreted as a projection of: (i) likely sources of future  charge-offs,  (ii)
likely proportional distribution of future charge-offs among loan categories, or
(iii)  likely  amounts of future  charge-offs.  Additionally,  since  management
regards  the  allowance  for loan  losses  as a  general  balance,  the  amounts
presented  do not  represent  the  total  balance  available  to  absorb  future
charge-offs that might occur within the designated categories.

Subject to the  qualifications  noted above,  an allocation of the allowance for
loan losses by principal  classification  and the proportion of the related loan
balance  represented  by the  allocation  is  presented  below  for the  periods
indicated.

Loan Loss Summary Allocation Table:

<TABLE>
<CAPTION>
                                                        At December 31,
                       -----------------------------------------------------------------------------------
                                 2005                         2004                        2003
                       -----------------------------------------------------------------------------------
                                     Percent of                   Percent of                   Percent of
                                     Allowance                    Allowance                    Allowance
                       Amount of      for Loan      Amount of      for Loan      Amount of      for Loan
                       Allowance     Losses in      Allowance     Losses in      Allowance     Losses in
                        for Loan        Each         for Loan        Each         for Loan        Each
Dollars in Thousands     Losses       Category        Losses       Category        Losses       Category
                       -----------------------------------------------------------------------------------
<S>                      <C>            <C>           <C>            <C>           <C>            <C>
Residential real
estate (1)                 $595           9.0%          $670          10.7%          $545           9.5%
Commercial real
estate                    3,171          47.8%         2,454          39.3%         2,248          39.0%
Commercial (2)            1,512          22.8%         1,435          23.0%         1,297          22.5%
Consumer                  1,114          16.8%         1,080          17.3%           966          16.8%
Unallocated                 248           3.7%           611           9.8%           701          12.2%
                       -----------------------------------------------------------------------------------
  Total                  $6,640         100.0%        $6,250         100.0%        $5,757         100.0%
                       ===================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                            At December 31,
                       ------------------------------------------------------
                                  2002                       2001
                       ------------------------------------------------------
                                     Percent of                   Percent of
                                     Allowance                    Allowance
                       Amount of      for Loan      Amount of      for Loan
                       Allowance     Losses in      Allowance     Losses in
                        for Loan        Each         for Loan        Each
Dollars in Thousands     Losses       Category        Losses       Category
                       ------------------------------------------------------
<S>                      <C>            <C>           <C>            <C>
Residential real
estate (1)                 $718          13.3%          $598          13.4%
Commercial real
estate                    2,051          38.0%         1,461          32.6%
Commercial (2)            1,282          23.8%           891          19.9%
Consumer                  1,017          18.9%           982          21.9%
Unallocated                 324           6.0%           544          12.2%
                       ------------------------------------------------------
  Total                  $5,392         100.0%        $4,476         100.0%
                       ======================================================
</TABLE>

(1)  Includes  loans  secured by 1-4  family  residential  dwellings,  5+ family
residential dwellings, home equity loans and residential construction loans.

(2) Includes commercial and industrial loans, agricultural loans and obligations
(other than  securities and leases) of states and political  subdivisions in the
United States

Other Non-earning Assets and Bank Owned Life Insurance
------------------------------------------------------

Cash and Due from Banks.  In order to operate the Bank on a daily  basis,  it is
necessary for us to maintain a limited amount of cash at our teller stations and
within our vaults and ATMs to meet customers'  demands.  In addition,  we always
maintain  an  amount  of check and other  presentment  items in the  process  of
collection  (or  float).  We are also  required to maintain a clearing / reserve
balance at the Federal  Reserve Bank of New York and minimum target  balances at
our correspondent banks. At December 31, 2005, we maintained $12.817 million, or
1.7% of total assets in these categories of non-earning assets. This compares to
$10.440 million, or 1.4% of total assets at December 31, 2004.

Premises and Equipment.  The net book value of premises and equipment  increased
$570  thousand or 9.7%,  from $5.860  million at December  31,  2004,  to $6.430
million at December 31, 2005.  During 2005,  we acquired  $440  thousand of real
property and equipment in the HSBC branch acquisition and purchased  significant
amounts of  computer  equipment  for our core  computer  system  conversion  and
expansion activities.

Bank-Owned  Life  Insurance.  The cash surrender  value of the life insurance at
December  31,  2005 was  $15.530  million,  as  compared  to $14.975  million at
December 31, 2004.  The  increase  was  attributable  to an increase in the cash
surrender value of the policies between the periods totaling $555 thousand.  The
policies are issued by four life insurance


                                                                            35-K
<PAGE>

companies  who all carry strong  financial  strength  ratings.  The policies are
issued on the lives of the Bank's senior management.

Goodwill and Other Intangible Assets. As a result of the HSBC branch transaction
in February,  2005, we recorded  $1.836 million in goodwill and $492 thousand in
core deposit intangible. No impairment of the goodwill from the HSBC transaction
or previous  transactions  was deemed  necessary  during 2005. The $492 thousand
increase in core deposit  intangible was offset by $171 thousand of amortization
expense on the HSBC core  deposit  intangible,  as well as  previously  recorded
intangible assets,  resulting in a $321 thousand net increase.  The core deposit
intangible  on the  HSBC  acquisition  is  being  amortized  over 5  years  on a
straight-line basis.

Other Assets.  Other assets increased by $2.026 million,  or 18.0%, from $11.253
million at December 31,  2004,  to $13.279  million at December 31, 2005.  Other
assets are comprised of other real estate owned,  interest  receivable,  prepaid
dealer reserve,  prepaid pension plan asset, computer software, net deferred tax
assets,  deferred taxes on investment  securities,  other assets,  other prepaid
items,  and other accounts  receivable.  Several factors  contributed to the net
increase in other assets between the periods.

The  largest  contributing  factor  to the  increase  in  other  assets  was the
significant  swing in our deferred  taxes on investment  securities  between the
periods.  Our deferred taxes on investment  securities  increased $1.789 million
between the periods due to the  significant  decline in net  unrealized  gains /
losses  in  our  available-for-sale   investment  securities  portfolio  between
December 31, 2004 and December 31, 2005. At December 31, 2004 the net unrealized
gain  on  our  available-for-sale   investment  securities  portfolio  was  $651
thousand.  This compares to a net unrealized  loss of $3.945 million at December
31, 2005.

Composition of Liabilities
--------------------------

Deposits. Deposits are our primary funding source. At December 31, 2005 deposits
represented  88.3% of our total  liabilities,  compared to 83.7% at December 31,
2004.  At December  31, 2004 our total  deposits  were  $571.929  million.  This
compares to $604.958  million at December 31,  2005,  a $33.029  million or 5.8%
increase.  The increase in total deposits was primarily attributable to our HSBC
branch  acquisition  in the first quarter of 2005,  in which we assumed  $32.967
million of deposit liabilities.

At December 31, 2005,  $343.095  million or 56.7% of our total  deposits were in
accounts  without a stated  maturity  date versus  $261.863  million or 43.3% of
total deposits in certificates of deposit.  This compares to $330.389 million or
57.8%  of total  deposits  and  $241.540  million  or  42.2% of total  deposits,
respectively, at December 31, 2004.

The following  table indicates the amount of our time accounts by time remaining
until maturity as of December 31, 2005.

Time Accounts Maturity Table:

<TABLE>
<CAPTION>
                                                           Maturity as of December 31, 2005
                                             -------------------------------------------------------------
                                                                       Over 6 to
                Dollars in Thousands          3 Months     Over 3 to       12        Over 12
                                              or  Less     6 Months      Months       Months         Total
                                             -------------------------------------------------------------
<S>                                            <C>          <C>          <C>         <C>          <C>
Certificates of Deposit of $100,000 or more    $21,557      $12,369       $9,746      $34,475      $78,147
Certificates of Deposit less than $100,000      29,340       21,005       29,493      103,878      183,716
                                             -------------------------------------------------------------

Total of time accounts                         $50,897      $33,374      $39,239     $138,353     $261,863
                                             =============================================================
</TABLE>

Foreign  Deposits in Domestic  Offices.  At December  31,  2005,  we held $3.793
million of deposits from foreign depositors. This compares to $13.824 million at
December 31, 2004. The substantial majority of these deposit  relationships were
acquired  during 1994 when we  purchased  certain  assets and all of the deposit
liabilities from the First National Bank of Downsville in Delaware  County,  New
York. Due to the difficulty  associated  with servicing our foreign  depositors,
during  2005 we asked  each of these  customers  to close  their  accounts  upon
maturity.  At  December  31,  2005,  a few  certificates  of  deposit  and other
interest-bearing accounts remained active.

Borrowings. Total borrowed funds consist of short-term and long-term borrowings.
Short-term borrowings include federal funds purchased,  treasury,  tax, and loan
notes held for the benefit of the U.S. Treasury Department,  and securities sold
under  agreements  to repurchase  with our  customers  and other third  parties.
Long-term borrowings consist of monies we


                                                                            36-K
<PAGE>

borrowed from the FHLBNY for various funding  requirements and wholesale funding
strategies.  At  December  31,  2005,  our ratio of  borrowed  funds  (including
short-term and long-term  borrowings) to total liabilities decreased as compared
to December  31, 2004.  Total  borrowed  funds were $71.829  million or 10.5% of
total liabilities at December 31, 2005, as compared to $102.938 million or 15.1%
of total  liabilities at December 31, 2004, a $31.109 million  decrease.  During
2005, upon acquisition of the HSBC branches, we repaid a $15.0 million borrowing
from a large money center bank. The monies were initially borrowed in the fourth
quarter  of 2004 to  purchase  $15.0  million of  available-for-sale  investment
securities  with the intention of replacing the borrowing  with the core deposit
liabilities assumed in the HSBC branch acquisition. In addition, throughout 2005
we repaid other  short-term and long-term  borrowings as they came due. In prior
years,  management has borrowed funds at the FHLBNY for the purpose of acquiring
investment  securities  or time deposits at other banks to increase net interest
income.  Management did not execute any new such wholesale leverage transactions
during 2005 due to a poor interest rate climate,  most notably the flat Treasury
yield curve. See Note 8 of the Consolidated  Financial  Statements  contained in
PART II, Item 8, of this document for additional detail on our borrowed funds.

D. Results of Operations

a.  Comparison  of Operating  Results for the Years Ended  December 31, 2005 and
December 31, 2004

Please refer to the Consolidated Financial Statements presented in PART II, Item
                              8, of this document.

Summary. Net income for 2005 was $7.744 million. This was $874 thousand or 10.1%
less than 2004 net income of $8.618  million.  This resulted in a $0.08 decrease
in earnings  per share.  Earnings  per share were $0.69 in 2005,  as compared to
$0.77  in  2004.   Although  net  interest  income  and  several  components  of
non-interest income improved year over year, they were negated by an increase in
non-interest  expense,  an  increase in the  provision  for loan  losses,  and a
decrease  in net  investment  securities  gains.  In 2005  net  interest  income
increased $976  thousand.  This was  principally  due to an increase in both the
volume and the yield on the loan  portfolio.  This  improvement  was offset by a
$1.633 million increase in non-interest expense. In 2005 we incurred significant
increases  in  most  components  of   non-interest   expense  due  to  expansion
activities,  the core computer system  conversion,  and  significant  regulatory
compliance efforts, including Sarbanes-Oxley Act compliance and Bank Secrecy Act
/ Anti-Money Laundering compliance.

During the fourth  quarter of 2005,  we recorded  $800 thousand in the provision
for loan  losses to  increase  the  allowance  for loan  losses to a level  that
reflected  the  estimated  embedded  losses in the  portfolio.  The  substantial
increase  in the  provision  for loan  losses  during  the  fourth  quarter  was
principally due to the substantial  decline in the financial condition of one of
our large commercial borrowers and increase in net charge-offs.

In  2004  we  recorded  $1.031  million  of  investment   securities  gains  due
principally  to the sale of  $12.986  million of  available-for-sale  investment
securities.  Low interest rates through the period allowed us to sell investment
securities at  substantial  gains to our book value.  During 2005 interest rates
increased,   which  reduced  the  level  of  investment   securities   gains  on
available-for-sale  securities.  As a result, during 2005 we sold $9.350 million
of  available-for-sale  investment  securities and recorded $469 thousand of net
investment securities gains.

Our  return on  average  assets  declined  from  1.17% in 2004 to 1.02% in 2005.
Similarly,  our return on average stockholders' equity also declined from 13.08%
in 2004 to 11.40% in 2005.  In 2005  average  assets and  average  stockholders'
equity  increased,  while net income  declined,  resulting  in a lower return on
average assets and lower return on average equity.

Net Interest  Income.  Net  interest  income is our most  significant  source of
earnings.  During 2005, net interest income  comprised 82% of our total revenues
(the other 18% was due to  non-interest  income).  This compares to 81% and 19%,
respectively,  for 2004. For this reason,  the following  tables,  including the
Asset and Yield Summary  Table,  the Interest Rate Table and the Rate and Volume
Table and the associated  analytical  narrative are important  components of our
results of operations.

The following  table  summarizes the total dollar amount of interest income from
average  earnings  assets  and the  resultant  yields,  as well as the  interest
expense and rate paid on average interest bearing liabilities. No tax equivalent
adjustments were made for tax-exempt  assets. The average balances presented are
calculated using daily totals and averaging them for the period indicated.


                                                                            37-K
<PAGE>

Asset and Yield Summary Table:

<TABLE>
<CAPTION>
                                                 For the Years Ended December 31,
                         -------------------------------------------------------------------------------
                                          2005                                      2004
                         -------------------------------------------------------------------------------
                           Average      Interest       Yield        Average      Interest       Yield
                         Outstanding     Earned          /        Outstanding     Earned          /
                           Balance        /Paid        Rate         Balance        /Paid        Rate
                         -------------------------------------------------------------------------------
                                                      (Dollars in thousands)
<S>                       <C>             <C>            <C>       <C>            <C>            <C>
Earning Assets:
Federal funds sold          $8,110          $270         3.33%       $6,346           $81         1.28%
Interest- bearing
deposits                     9,006           449         4.99%        8,581           534         6.22%
Securities (1)             297,965        11,908         4.00%      308,101        11,685         3.79%
Loans, Net (2)             392,240        27,683         7.06%      367,328        24,865         6.77%
                          ----------------------                   ----------------------
   Total earning assets    707,321        40,310         5.70%      690,356        37,165         5.38%

Non-earning assets          46,394                                   46,394
                          --------                                 --------
      Total assets        $753,715                                 $736,750
                          ========                                 ========

Liabilities:
Savings accounts           $98,356          $677         0.69%      $95,657          $601         0.63%
Money market
accounts                    42,667         1,145         2.68%       28,773           328         1.14%
NOW accounts               112,042         1,134         1.01%      122,640         1,023         0.83%
Time & other deposit
accounts                   277,649         8,984         3.24%      271,317         7,526         2.77%
Borrowings                  83,225         2,990         3.59%       82,929         3,283         3.96%
                          ----------------------                   ----------------------
Total interest-bearing
liabilities                613,939        14,930         2.43%      601,316        12,761         2.12%

Non-interest bearing
deposits                    67,790                                   61,626
Other non-interest
bearing liabilities          5,986                                    7,913
                          --------                                 --------
      Total liabilities    687,715                                  670,855
Stockholders' equity        67,950                                   65,895
                          --------                                 --------
 Total liabilities and
stockholders' equity      $755,665                                 $736,750
                          ========                                 ========
Net interest income                      $25,380                                  $24,404
                                         =======                                  =======
Net interest rate
spread (3)                                               3.27%                                    3.26%
                                                       ======                                   ======
 Net earning assets        $93,382                                  $89,040
                          ========                                 ========
Net interest margin (4)                                  3.59%                                    3.53%
                                                       ======                                   ======
Ratio of earning assets
to interest-bearing       ========                                 ========
liabilities                 115.21%                                  114.81%
                          ========                                 ========
</TABLE>
<TABLE>
<CAPTION>
                           For the Years Ended December 31,
                          -----------------------------------
                                        2003
                          -----------------------------------
                            Average       Interest    Yield
                          Outstanding      Earned       /
                            Balance         /Paid     Rate
                          -----------------------------------
                                 (Dollars in thousands)
<S>                        <C>             <C>         <C>
Earning Assets:
Federal funds sold           15,175           173      1.14%
Interest- bearing
deposits                     14,149           928      6.56%
Securities (1)              302,387        13,050      4.32%
Loans, Net (2)              352,935        24,477      6.94%
                          -----------------------
   Total earning assets     684,646        38,628      5.64%

Non-earning assets           43,580
                          ---------
      Total assets         $728,226
                          =========


Liabilities:
Savings accounts            $89,087          $791      0.89%
Money market
accounts                     30,938           298      0.96%
NOW accounts                121,288         1,353      1.12%
Time & other deposit
accounts                    280,290         8,258      2.95%

Borrowings                   77,068         3,453      4.48%
                          -----------------------
Total interest-bearing
liabilities                 598,671        14,153      2.36%

Non-interest bearing
deposits                     57,355
Other non-interest

bearing liabilities           8,454
                           --------
      Total liabilities     664,480
Stockholders' equity         63,746
                           --------
  Total liabilities and
stockholders' equity       $728,226
                           ========

Net interest income                       $24,475
                                          =======
Net interest rate
spread (3)                                             3.28%
                                                     ======


 Net earning assets         $85,975
                           ========
Net interest margin (4)                                3.57%
                                                     ======
Ratio of earning assets
to interest-bearing        ========
liabilities                  114.36%
                           ========
</TABLE>

(1) Securities are shown at average  amortized cost with net unrealized gains or
losses on securities  available-for-sale  included as a component of non-earning
assets.

(2) Average net loans equal average  total loans less the average  allowance for
loan losses. However, for purposes of these computations,  non-accrual loans are
included in average loan balances outstanding.

(3) Net interest  rate spread  represents  the  difference  between the weighted
average  yield on  interest-earning  assets  and the  weighted  average  cost of
interest-bearing liabilities.

(4)  The  net  interest  margin,   also  known  as  the  net  yield  on  average
interest-earning  assets,  represents  net interest  income as a  percentage  of
average interest-earning assets.


38-K
<PAGE>

Net  interest  income  increased  $976  thousand  or 4.0% in 2005.  During  2005
national interest rates increased (see comparative interest rate table below for
an 8 quarter history of interest rates). These changes, particularly the changes
to the national prime rate of interest (eight 25 basis point increases  totaling
200 basis points),  helped increase the average yield on net loans from 6.77% in
2004 to 7.06% in 2005. During 2005 we maintained  approximately  $155 million in
variable rate loans. The substantial  majority of these variable rate loans were
indexed to the national prime rate,  which  contributed to the improved yield on
these assets.  The interest income on our loan portfolio  increased from $24.865
million in 2004 to $27.683  million in 2005, a $2.818 million or 11.3% increase.
Also  during  the  year,  we  increased  the  average  dollar  volume  of  loans
outstanding through our loan production efforts and the HSBC branch acquisition.
During  2004 the  average  volume  of our net  loans was  $367.328  million,  as
compared to $392.240 million during 2005, a 6.8% increase.

In addition to increases in interest income on loans, during 2005 we recorded an
increase in the  interest  income on our  investment  securities.  Although  our
average volume of securities  decreased during 2005, as loans grew and we repaid
borrowings,  we  recorded  a  $223  thousand  increase  in  interest  income  on
securities  over  2004.   During  2004,  due  to  the  very  low  interest  rate
environment,  we recorded  $2.180  million in net  amortization  of premiums and
accretion of discounts on investments. This decreased to $1.027 million in 2005.
Within our investment  securities  portfolio,  we maintained a concentration  of
mortgage-backed  securities. Many of these securities were purchased at premiums
to their par value. As homeowners  refinanced and prepaid their mortgages during
2004 due to the low interest rate environment,  we received prepayments on these
securities,  which required us to record substantial  amounts of amortization on
the premiums.  During 2005 the level of homeowner  refinancing  decreased due to
higher  residential  mortgage  interest  rates,  resulting  in a decrease in the
amount of  amortization  recorded  on this  portfolio.  Our yield on  investment
securities was 3.79% in 2004, versus 4.00% in 2005.

Due to the rising interest rate  environment  during 2005 and the acquisition of
the HSBC branches,  we substantially  increased the interest expense on our most
interest rate sensitive deposits,  namely money market and time accounts. During
2005, the interest expense on these two categories of deposits  increased $2.275
million. Throughout 2005 our competitors raised their deposit interest rates due
to the higher  national  interest rate  environment.  To remain  competitive and
retain our customer's  deposit accounts,  we also raised our deposit rates. This
rate increase,  coupled with the HSBC branch acquisition and slight increases in
less interest  sensitive  savings and NOW account interest rates, our total cost
of interest-bearing liabilities increased from 2.12% in 2004 to 2.43% in 2005, a
31 basis point increase.

At December  31, 2005 the Treasury  yield curve was very flat.  The two year and
the ten year Treasury  notes were both yielding  4.34%.  This flat interest rate
environment  inhibits  our  ability to earn net  interest  income,  since  banks
typically  earn  net  interest  income  by  procuring  short-term  deposits  and
borrowings and investing  those  proceeds in longer term loans and  investments.
This  practice,  which  is  sometimes  referred  to as  mismatching  assets  and
liabilities,  typically  allows banks to enhance their "interest  spread," which
generates net interest income. If this flat interest rate environment  persists,
it may negatively impact our ability to increase net interest income for several
quarters prospectively.

Comparative Interest Rate Table:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                      2005                                               2004
                               -------------------------------------------------  ------------------------------------------------

      Interest Rates (1)        December     September      June         March      December     September      June       March
--------------------------------------------------------------------------------  ------------------------------------------------
<S>                                <C>           <C>         <C>          <C>          <C>           <C>        <C>         <C>
Target Federal Funds Rate          4.25%         3.75%       3.25%        2.75%        2.25%         1.75%      1.00%       1.00%
--------------------------------------------------------------------------------  ------------------------------------------------
NYC Prime                          7.25%         6.75%       6.25%        5.75%        5.25%         4.75%      4.00%       4.00%
--------------------------------------------------------------------------------  ------------------------------------------------
90 Day Treasury Bill               3.97%         3.48%       2.98%        2.78%        2.23%         1.71%      1.32%       0.95%
--------------------------------------------------------------------------------  ------------------------------------------------
6 Month Treasury Bill              4.32%         3.87%       3.12%        3.09%        2.56%         1.95%      1.68%       0.99%
--------------------------------------------------------------------------------  ------------------------------------------------
1 Year Treasury Note               4.37%         3.88%       3.40%        3.38%        2.77%         2.14%      2.20%       1.17%
--------------------------------------------------------------------------------  ------------------------------------------------
2 Year Treasury Note               4.34%         4.08%       3.65%        3.83%        3.09%         2.53%      2.84%       1.53%
--------------------------------------------------------------------------------  ------------------------------------------------
3 Year Treasury Note               4.30%         4.08%       3.69%        4.03%        3.27%         2.81%      3.32%       1.93%
--------------------------------------------------------------------------------  ------------------------------------------------
5 Year Treasury Note               4.31%         4.14%       3.77%        4.27%        3.65%         3.29%      3.97%       2.71%
--------------------------------------------------------------------------------  ------------------------------------------------
10 Year Treasury Note              4.34%         4.29%       4.00%        4.59%        4.29%         4.04%      4.75%       3.76%
--------------------------------------------------------------------------------  ------------------------------------------------
Federal Housing Finance Board
National Avg. Mortgage             6.22%         5.83%       5.80%        5.68%        5.65%         5.77%      5.73%       5.69%
Contract Rate (2)
--------------------------------------------------------------------------------  ------------------------------------------------
</TABLE>

(1) The yields and interest rates  presented in this table are provided to us by
a third party vendor on a bi-weekly  basis.  The interest  rates provided in the
table were obtained from the report nearest to the month-end.

(2) The Federal Housing Finance Board national average mortgage contract rate is
presented with a one-month lag.


                                                                            39-K
<PAGE>

Rate and Volume Analysis

The following  table presents  changes in interest  income and interest  expense
attributable to changes in volume (change in average balance multiplied by prior
year rate),  changes in rate (change in rate  multiplied  by prior year volume),
and the net change in net interest  income.  The net change  attributable to the
combined  impact of volume and rate has been  allocated to each in proportion to
the  absolute  dollar  amount of  change.  The table has not been  adjusted  for
tax-exempt interest.

Rate and Volume Table:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                    --------------------------------------------------------------
                                             2005 vs. 2004                   2004 vs. 2003
                                    --------------------------------------------------------------
                                      Rate      Volume     Total       Rate      Volume     Total
                                    --------------------------------------------------------------
                                                           (In thousands)
<S>                                  <C>        <C>        <C>       <C>           <C>     <C>
Earning assets:
   Federal funds sold                 $161        $28       $189        $19      ($111)      ($92)
   Interest-bearing deposits          (110)        25        (85)       (46)      (348)      (394)
   Securities                          621       (398)       223     (1,608)       243     (1,365)
   Loans                             1,088      1,730      2,818       (595)       983        388
                                    -----------------------------  -------------------------------
          Total earning assets       1,760      1,385      3,145     (2,230)       767     (1,463)
                                    -----------------------------  -------------------------------

Interest bearing liabilities:
    Savings accounts                    58         17         75       (245)        55       (190)
    Money market accounts              603        214        817         52        (22)        30
    NOW accounts                       205        (93)       112       (345)        15       (330)
    Time accounts                    1,234        224      1,458       (486)      (246)      (732)
    Borrowings                        (306)        13       (293)      (421)       251       (170)
                                    -----------------------------  -------------------------------
Total interest bearing liabilities   1,794        375      2,169     (1,445)        53     (1,392)
                                    -----------------------------  -------------------------------

Change in net interest income         ($34)    $1,010       $976      ($785)      $714       ($71)
                                    -----------------------------  -------------------------------
</TABLE>

During 2005 we  recorded a $3.145  million  increase  in  interest  income and a
$2.169 million increase in interest expense, netting a $976 thousand improvement
in net  interest  income  over 2004.  Between  the  periods we recorded a $2.818
million  increase in interest  income on loans.  This comprised 89.6% of the net
increase  in interest  income  between  the  periods.  As  mentioned  above,  we
maintained an average variable rate loan portfolio of approximately $155 million
throughout  2005. As interest  rates climbed  during 2005 the interest rates and
resultant  yields on these loans  increased.  In addition,  during 2005 as loans
matured  or were  repaid,  they were  replaced  by new loans at higher  rates of
interest.  Due to these factors, the amount of interest income recorded on loans
due to changes in rate  contributed  an  additional  $1.088  million to interest
income  between  2004 and 2005.  The  increase  in the  average  volume of loans
outstanding  between 2004 and 2005 (due to our HSBC branch  acquisition  and our
loan  production  efforts)  contributed  an  additional  $1.730  million  toward
interest income between the periods.

During  2005 we  recorded  $11.908  million  of  interest  income on  investment
securities,  as  compared  to  $11.685  million  during  2004,  a $223  thousand
increase. During 2005, the yield on the investment securities portfolio improved
primarily because we recorded a decrease in the net amortization of premiums and
accretion  of  discounts on  investments  between the  periods.  The increase in
interest  income on  investment  securities  between the periods due to rate was
$621 thousand. This was offset by a $398 thousand decrease in interest income on
investments  securities  due to a decrease in the average  volume of  investment
securities outstanding between the periods.

During 2005 we recorded $449 thousand of interest  income from  interest-bearing
deposits  held at other banks.  This compares with $534 thousand in 2004, an $85
thousand  decrease.  During  the  course of 2004 and 2005 we had  mature  $7.598
million of FDIC-insured  certificates  of deposit that were originally  acquired
during 2000 and 2001 in  connection  with an interest rate  arbitrage  wholesale
leverage  strategy.  Interest rates were  significantly  higher in 2000 and 2001
than in 2004 and  2005.  In  addition,  during  the  fourth  quarter  of 2004 we
acquired  $4.800 million of  FDIC-insured  certificates  of deposit as part of a
wholesale  leverage  strategy  consummated  in  connection  with the HSBC branch
acquisition.  The certificates of deposit acquired in the fourth quarter of 2004
were  acquired at a much lower rate of interest than the  certificates  that had
matured in connection with the 2000 / 2001 interest arbitrage wholesale leverage
strategy.  These  activities  resulted in a $110  thousand  decrease in interest
income due to rate and a $25  thousand  increase  in  interest  income due to an
increase in the average volume between the periods.


40-K
<PAGE>

During 2005 we maintained  an average  balance in our federal funds sold account
of $8.110  million.  This compares to $6.346  million  during 2004. In addition,
throughout  2004 and 2005 the Federal  Open Market  Committee  raised the target
federal funds rate by 325 basis points (thirteen 25 basis point increases).  Due
to these changes,  interest income on federal funds sold increased $189 thousand
between 2004 and 2005, $161 thousand due to an increase in rate and $28 thousand
due to the increase in volume of federal funds sold.

During  2005 the  interest  expense on all  categories  of our  interest-bearing
deposits increased relative to 2004. The most significant  increases between the
periods were recorded on our most interest-sensitive  deposits,  namely time and
money  market  accounts.  This was due to both  the  rapidly  rising  short-term
interest  rates  throughout  both  periods  and  the  HSBC  branch   acquisition
consummated  during the first  quarter of 2005.  The total  increase in interest
expense  on  interest-bearing  deposits  due to rate was  $2.100  million.  This
compares to a net increase in interest expense on interest-bearing  deposits due
to volume of $362 thousand.  Between the periods, the average volume of savings,
money  market,  and time  accounts  increased,  while the average  volume of NOW
accounts decreased. The decrease in NOW account volumes was principally due to a
decrease in deposit  balances in our  Electronic  Money  Management  Account,  a
consumer-oriented  deposit  account.  The  increase  in the  average  volume  of
savings,  money market and time accounts was  principally due to the HSBC branch
acquisition.

The total interest  expense on our  borrowings  decreased from $3.283 million in
2004 to $2.990 million in 2005, a $293 thousand decrease.  During 2005 we repaid
$37.807 million of long-term borrowings.  Most of these borrowings were borrowed
in periods  when  borrowing  costs were  greater  than the rates that  prevailed
during 2005.  Although we re-borrowed  $24.900  million of long-term  borrowings
during 2005, the rates of interest on these borrowings were lower than the rates
of borrowings that were repaid.

Provision  for Loan Losses.  During 2005 we recorded a provision for loan losses
of $1.580 million, or 0.40% of average total loans outstanding. This compares to
$1.200  million,  or 0.31% of  average  total  loans  outstanding  in 2004.  The
provision  for loan losses  increased  in 2005,  as  compared to 2004,  due to a
decline  in the credit  quality of our loan  portfolio.  During  2005,  net loan
charge-offs  increased  $483  thousand or 68.3%,  from $707 thousand or 0.19% of
average total loans  outstanding  in 2004 to $1.190  million or 0.30% of average
total  loans  outstanding  in 2005.  Similarly,  during 2005 we  experienced  an
increase in the level of our  non-performing  loans. At December 31, 2005 we had
$4.918  million of  non-performing  loans  outstanding  versus $2.751 million at
December  31,  2004.  This was a $2.167  million or 78.8%  increase  between the
periods.

Non-Interest  Income.  Non-interest  income is comprised of trust fees,  service
charges on deposit  accounts,  commission  income,  investment  security gains /
(losses),  income on bank-owned  life  insurance,  other service fees, and other
income.  Non-interest  income decreased  modestly from $5.634 million in 2004 to
$5.510  million in 2005.  This  represents  a $124  thousand  or 2.2%  decrease.
Increases in trust fees,  service  charges on deposit  accounts,  other  service
fees, and other income, were negatively offset by a significant  decrease in net
investment  security gains, a modest decrease in commission  income and a slight
decrease in bank-owned life insurance income.

Total trust fees increased  during 2005.  Specifically,  during 2004 we recorded
total trust fees of $1.325  million,  as compared to $1.472  million in 2005,  a
$147 thousand or 11.1% increase.  The increase in trust fees between the periods
was due to an increase in non-recurring  estate  administration  commissions and
trust account  termination  fees, as well as an increase in general service fees
on trust, custodial, and investment management accounts.  During 2004 we revised
our trust account fee schedule.  Accordingly,  the increased fees imposed by the
revised  fee  schedule  impacted  all of 2005,  as  opposed to only a portion of
fiscal 2004. In 2005 we recorded  $118 thousand in trust / estate  closing fees,
as compared to $81 thousand in 2004.

Service  charges on deposit  accounts  increased  from $1.556 million in 2004 to
$1.615 million in 2005, a $59 thousand or 3.8% increase.  During the second half
of 2004, we increased certain penalty charges on checking  accounts,  the impact
of which was  recognized  for the full-year of 2005 versus only for a portion of
2004. In addition,  due to the HSBC branch  acquisition  in the first quarter of
2005,  the number of demand  deposit  accounts upon which we were able to assess
service charges increased year over year.

Our commission income is generated from the Bank's insurance agency  subsidiary,
Mang - Wilber LLC.  During 2005 we recorded $489 thousand of commission  income,
as compared to $524  thousand in 2004, a $35 thousand or 6.7%  decrease.  During
2005 our agency did not renew coverage on several large commercial  property and
casualty insurance accounts due to competitive factors. In addition the agency's
personal   lines   property  and  casualty  "book  of  business"  did  not  grow
substantially  between periods.  These two factors resulted in a net decrease in
commission income.

During 2005,  we  recognized  net pre-tax  investment  securities  gains of $469
thousand.  This was a $562 thousand or 54.5%  decrease,  as compared to 2004. In
2004 we recorded  $1.031  million in net pre-tax  investment  securities  gains.
During 2005 we sold $9.350 million of  available-for-sale  investment securities
and an additional $70.882 million in


                                                                            41-K
<PAGE>

available-for-sale  and  held-to-maturity  securities matured or were called. By
comparison, during 2004 we sold $12.986 million of available-for-sale investment
securities   and  had  an   additional   $175.702  in   available-for-sale   and
held-to-maturity  securities mature or be called.  The principal cash flows from
matured, called, and sold investment securities and the realized gains generated
from  those  principal  cash  flows  were  greater  in 2004  than in 2005 due to
historically low interest rates experienced during 2004.

The income  related to the increase in the cash  surrender  value of  bank-owned
life insurance  decreased from $570 thousand in 2004 to $555 thousand in 2005, a
$15  thousand  or 2.6%  decrease.  During  2005  the  insurance  companies  that
underwrote our bank-owned life insurance  decreased the crediting rates to their
policyholders  because  the  yields on their  investment  securities  portfolios
generally  declined  during 2004 and 2005 as a result of the low  interest  rate
environment.

Other  service  fees are  comprised of numerous  types of fee income,  including
merchant credit card processing fees, residential mortgage commissions, official
check and check cashing fees, travelers' check sales, wire transfer fees, letter
of credit fees, and other miscellaneous service charges,  commissions, and fees.
Other  service  fees  increased  substantially  year over year.  During  2004 we
recorded $286  thousand in other  service fees,  versus $471 thousand in 2005, a
$185 thousand or 64.7%  increase.  The  substantial  majority of the increase in
other  services  fees in 2005  was due to a  substantial  increase  in  mortgage
commissions year over year.  During 2005 we increased our marketing  efforts and
streamlined our mortgage origination process to increase the volume of mortgages
we originate as agent for a large  regional bank based in the  Southeast.  These
efforts,  coupled with the low  mortgage  rates  prevalent  during most of 2005,
increased our mortgage  origination fees by $159 thousand,  from $69 thousand in
2004 to $228 thousand in 2005.

Other income is comprised of numerous types of fee income,  including investment
services,  lease income, safe deposit box income, title insurance agency income,
rental of foreclosed real estate,  and distributions  from two insurance trusts,
in which the Bank  participates.  Other income  increased  from $342 thousand in
2004 to $439 thousand in 2005, a $97 thousand,  or 28.4% increase.  During 2004,
we recorded  $113 thousand of investment  services  income,  as compared to $211
thousand in 2005, a $98  thousand,  or 86.7%  increase.  During 2003, we hired a
financial  planning and  investment  management  specialist  and licensed  eight
additional  employees to sell investment  services.  The fee income improvements
experienced  in 2005 were the result of  additional  mutual fund,  annuity,  and
investment  securities sales generated by these employees.  In addition,  during
2005 we recorded a $25  thousand  increase in other  income due to the  improved
performance in a title insurance agency in which we hold an ownership  interest.
During 2004 we recorded $18 thousand of other income due to the title agency, as
compared to $43 thousand in 2005. This  improvement was offset by a $25 thousand
decrease in the amount  distributed  from a credit life insurance trust in which
we  participate  through our  membership  in the New York  Bankers  Association.
During  2004 we  received a $52  thousand  distribution  from this  credit  life
insurance trust, versus $27 thousand in 2005.

Non-Interest  Expense.  Non-interest expense is comprised of salaries,  employee
benefits,  occupancy expense,  furniture and equipment expense, computer service
fees,  advertising and marketing expense,  professional fees, and other expense.
Total  non-interest  expense  increased from $17.218  million in 2004 to $18.851
million in 2005, a $1.633 million or 9.5% increase. During 2005, we acquired two
branch offices from HSBC, opened a loan production office in Syracuse, New York,
converted our core computer  operating  system,  and completed a few significant
compliance  related  projects,  including  documenting  and testing our internal
controls over  financial  reporting in compliance  with the  Sarbanes-Oxley  Act
(Section  404).  These  efforts  resulted in  significant  increases  in several
categories of non-interest expense.

Salaries expense increased significantly in 2005. Total salaries expense in 2005
was $9.040  million  versus  $8.425  million in 2004,  a $615  thousand  or 7.3%
increase. The $615 thousand increase between periods was due to several factors.
To service the accounts  acquired from HSBC we increased our teller and customer
service staff by ten (10) full-time employees. During the second quarter of 2005
we opened a loan  production  office in  Syracuse,  New York,  and hired two (2)
additional  staff  members.  In addition,  throughout  2004 and 2005 we provided
salary increases to various members of the Company's staff for merit and cost of
living purposes. And finally, due to our core computer system conversion and our
Sarbanes-Oxley Act (Section 404) compliance efforts, we recorded $78 thousand in
increased  overtime  wages.  These  increases  were  partially  offset by a $227
thousand  reduction in salaries  expense related to the Company's profit sharing
incentive and commission plans.

In 2005 employee  benefits expense increased $296 thousand or 12.8%, from $2.316
million  in 2004 to $2.612  million  in 2005.  Although  various  components  of
benefits expense changed year over year, the increase was primarily attributable
to three factors,  namely group health  insurance costs,  F.I.C.A  expense,  and
retirement  plan  costs.  During  2005,  we  experienced  higher  claims  on our
partially  self-insured  group health  insurance  plan.  This resulted in a $155
thousand  increase in plan costs year over year.  In  addition,  during 2005 the
expense associated with our pension plan increased from $477 thousand in 2004 to
$574 thousand in 2005, a $97 thousand increase.  And finally, due to an increase
in


42-K
<PAGE>

salaries expense,  our F.I.C.A. tax increased from $580 thousand in 2004 to $639
thousand in 2005, a $59 thousand increase.

On February 28, 2006, we "froze" our defined  benefit  pension plan and replaced
it with a defined  contribution  401k retirement plan. Under the frozen plan, no
future  benefits  will  accrue for the plan's  participants.  We expect that the
switch from the defined benefit retirement plan to the defined contribution 401k
plan will reduce retirement benefit related expense by $163 thousand in 2006.

Occupancy  expense and furniture and fixture expense both increased  during 2005
due to  our  expansion  activities,  increased  utilities  cost,  and  increased
property  taxes.  In 2005 we recorded total  occupancy and furniture and fixture
expenses of $2.197  million.  This  compares to $2.327  million in 2004,  a $130
thousand or 5.9% increase. During 2005 our utilities cost increased $64 thousand
due  primarily to higher fuel prices.  Our school and land taxes  increased  $33
thousand or 11.4% year over year due to increased property taxes assessed by the
municipalities in which our main office and branch offices operate. In addition,
we acquired an office  building in the HSBC  branch  acquisition.  And  finally,
building  repair and  maintenance  costs due to increased snow removal costs and
depreciation expense increased $27 thousand and $17 thousand, respectively, year
over year.

Computer  service fees  increased from $598 thousand in 2004 to $745 thousand in
2005, a $147  thousand or 24.6%  increase.  During the third quarter of 2005, we
converted our proprietary core computer operating system to a system more widely
used  throughout  the banking  industry.  To complete the conversion we incurred
significant  computer  consulting fees to: (i) convert  existing data to the new
system,  (ii) build  software  interfaces  between  the core  system and related
ancillary  computer systems,  and (iii) set and test new system  parameters.  In
addition,  to operate  the new  system(s)  on an ongoing  basis we entered  into
various  software  licensing  agreements and maintenance  contracts with several
hardware and software computer system vendors.

Advertising and marketing  expense  decreased $30 thousand or 5.6% in 2005, from
$538  thousand  in 2004 to $508  thousand  in 2005.  During  2004 we  recorded a
significant  increase in advertising and marketing expense to support our market
expansion activities.  In addition,  due to the low interest rate environment in
2004, we increased the  promotion  expense  related to variable rate home equity
line of credit.  We reduced our  expenditures on these marketing and advertising
endeavors  in 2005  due to our  concentration  on our  computer  conversion  and
compliance efforts.

Professional  fees increased $197 thousand or 38.5% in 2005,  from $512 thousand
in 2004 to  $709  thousand  in  2005.  The  increase  was  principally  due to a
substantial  increase in independent  auditor fees and an accounting  consultant
related to our Sarbanes - Oxley Act compliance efforts.

Other miscellaneous  expenses include directors' fees,  fidelity insurance,  the
Bank's OCC  assessment,  FDIC  premiums  and  assessments,  bad debt  collection
expenses,  correspondent  bank services,  service  expense related to the Bank's
accounts  receivable  financing  service,   charitable  donations  and  customer
relations,  other losses,  dues and memberships,  office  supplies,  postage and
shipping,  subscriptions,  telephone expense, employee travel and entertainment,
software   amortization,   intangible  asset  amortization   expense,   goodwill
impairment,  OREO  expenses,  gain / loss on the  disposal  of assets,  minority
interest  expense,   Amex(R)  listing  fees,  and  several  other  miscellaneous
expenses.  During 2005, other miscellaneous expenses increased $278 thousand, or
10.6%,  from $2.632  million in 2004 to $2.910  million in 2005.  The  following
table itemizes the individual  components of other  miscellaneous  expenses that
increased or (decreased) by more than $10 thousand between the periods.


                                                                            43-K
<PAGE>

Table of Other Miscellaneous Expenses:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                        Year
                                                                -----------------
Description of Other Miscellaneous                                                 Increase /
Expense                                                          2005        2004  (Decrease)
----------------------------------------------------------------------------------------------
<S>                                                            <C>         <C>          <C>
dollars in thousands
Directors fees                                                   $200        $150        $50
Accounts receivable financing servicing
expense                                                           165         152         13
Customer relations expense                                         79          67         12
Charitable donations                                               84         107        (23)
Office Supplies                                                   318         261         57
Postage and Shipping                                              270         224         46
Travel and entertainment                                          229         198         31
Software amortization                                             183         165         18
Amortization of Intangible Assets                                 171          84         87
Minority interest for Mang - Wilber
insurance agency subsidiary                                        90         110        (20)
Other losses                                                       36          25         11
American stock exchange listing fees                               20          73        (53)
(Gain) / loss on disposal of assets                                (5)         30        (35)
All other expense items, net                                    1,070         986         84
                                                            ----------------------------------
            Total Other Miscellaneous Expense                  $2,910      $2,632       $278
----------------------------------------------------------------------------------------------
</TABLE>

Income Taxes. Income tax expense decreased from $3.002 million in 2004 to $2.715
million in 2005, a $287 thousand,  or 9.6%  decrease.  The primary reason income
tax  expense  decreased  between  the  periods  was due to a decrease in pre-tax
income.  Our  effective  tax  rates  for 2005 and 2004  were  26.0%  and  25.8%,
respectively.

During 2004 and 2005 we recorded New York State  income tax expense  utilizing a
statutory  alternative  minimum tax rate of 3%.  This rate was used  because New
York State tax law has allowed us to claim a 60%  dividends  paid  deduction for
dividends paid to the Bank by its subsidiary,  Wilber REIT, Inc. This section of
New York State tax law,  namely,  Article  32, may not be renewed in its current
form,  which would  disallow the dividends  paid  deduction  for taxable  income
earned in tax years  beginning  January 1, 2006. If this were to occur,  our New
York State  income tax expense  would  increase  in 2006 and beyond,  negatively
affecting the results of operations. If passed, we expect the legislative change
would increase our New York State income tax rate to 6.75%.

b.  Comparison of Operating  Results for the Years Ended  December 31, 2004, and
December 31, 2003

Please refer to the Consolidated Financial Statements presented in PART II, Item
                              8, of this document.

Summary.  Net income for 2004 was $8.618 million.  This was $95 thousand or 1.1%
less than 2003 net income of $8.713  million.  Earnings per share also decreased
slightly,  from $0.78 in 2003 to $0.77 in 2004.  Minor decreases in net interest
income and other income and an increase in other expenses were partially  offset
by reductions in the provision for loan losses and income taxes. During 2004 net
interest income  decreased by $71 thousand or 0.3%, from $24.475 million in 2003
to $24.404  million in 2004.  A  reduction  in net  interest  income due to rate
totaling $785  thousand was offset by an increase in net interest  income due to
volume of $714 thousand.  Similarly, other income decreased modestly from $5.663
million in 2003 to $5.634 million in 2004.  Decreases in trust fees,  investment
securities  gains,  bank-owned  life insurance  income,  other service fees, and
other income were offset by increases in service charges on deposit accounts and
commission income. Other expenses increased $635 thousand or 3.8% in 2004 due to
increases in employee  benefits  expense,  occupancy  expense,  computer service
fees, advertising and marketing, professional fees, and other fees totaling $810
thousand,  offset by reductions in salaries  expense and furniture and equipment
expense totaling $175 thousand. The provision for loan losses in 2004 was $1.200
million,  as compared to $1.565  million in 2003, a $365  thousand  decrease due
primarily to a decrease in net  charge-offs  and improved asset quality.  Income
taxes  decreased  from $3.277  million in 2003 to $3.002 million in 2004, a $275
thousand or 9.2% decrease due to increased  tax-exempt municipal security income
and a reduction in income before taxes.

Our  return on  average  assets  declined  from  1.20% in 2003 to 1.17% in 2004.
Similarly,  our return on average stockholders' equity also declined from 13.67%
in 2003 to 13.08% in 2004. In 2004 average earning assets and average


44-K
<PAGE>

stockholders' equity increased modestly, while net income declined, resulting in
a lower return on average assets and lower return on average equity.

Net Interest  Income.  Net  interest  income is our most  significant  source of
earnings.  During both 2004 and 2003 net interest income  contributed 81% of our
total revenues,  as compared to 19% for non-interest income. Net interest income
decreased $71 thousand or 0.3% in 2004.  Specifically,  our net interest  income
was $24.404 million in 2004, as compared to $24.475 million in 2003.  Throughout
2004, national interest rates remained low relative to historical interest rates
(see comparative  interest rate table below for an 8 quarter history of interest
rates).  This interest rate environment  allowed us to reduce the interest rates
paid on our deposits  (particularly  time  deposits) and  borrowings,  netting a
reduction   in  interest   expense  and  the  total  cost  of   interest-bearing
liabilities.  In 2004 our  interest-bearing  liabilities  expense  and cost were
$12.761  million and 2.12%  respectively.  This compares to $14.153  million and
2.36%,  respectively,  in 2003. A reduction in interest  expense totaling $1.392
million was offset by a reduction in interest income totaling $1.463 million. In
2004 the  interest  income  and net yield on our  earning  assets  were  $37.165
million and 5.38%,  respectively.  In 2003, the interest income and net yield on
our earning  assets were $38.628  million and 5.64%,  respectively.  The primary
cause for the decrease in interest  income and our total earning asset yield was
the  reduction  in  interest  income  on  our  investment  securities  portfolio
(including trading, available-for-sale and held-to-maturity).

Comparative Interest Rate Table:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                     2004                                              2003
                                --------------------------------------------- --------------------------------------------------
     Interest Rates (1)         December     September      June      March       December    September       June       March
----------------------------------------------------------------------------- --------------------------------------------------
<S>                                 <C>           <C>       <C>        <C>            <C>          <C>        <C>         <C>
Target Federal Funds Rate           2.25%         1.75%     1.00%      1.00%          1.00%        1.00%      1.00%       1.25%
----------------------------------------------------------------------------- --------------------------------------------------
NYC Prime                           5.25%         4.75%     4.00%      4.00%          4.00%        4.00%      4.00%       4.25%
----------------------------------------------------------------------------- --------------------------------------------------
90 Day Treasury Bill                2.23%         1.71%     1.32%      0.95%          0.88%        0.91%      0.81%       1.10%
----------------------------------------------------------------------------- --------------------------------------------------
6 Month Treasury Bill               2.56%         1.95%     1.68%      0.99%          0.99%        1.00%      0.82%       1.10%
----------------------------------------------------------------------------- --------------------------------------------------
1 Year Treasury Note                2.77%         2.14%     2.20%      1.17%          1.21%        1.06%      0.84%       1.16%
----------------------------------------------------------------------------- --------------------------------------------------
2 Year Treasury Note                3.09%         2.53%     2.84%      1.53%          1.84%        1.47%      1.10%       1.49%
----------------------------------------------------------------------------- --------------------------------------------------
3 Year Treasury Note                3.27%         2.81%     3.32%      1.93%          2.31%        1.97%      1.40%       1.86%
----------------------------------------------------------------------------- --------------------------------------------------
5 Year Treasury Note                3.65%         3.29%     3.97%      2.71%          3.24%        2.82%      2.16%       2.73%
----------------------------------------------------------------------------- --------------------------------------------------
10 Year Treasury Note               4.29%         4.04%     4.75%      3.76%          4.27%        3.94%      3.27%       3.82%
----------------------------------------------------------------------------- --------------------------------------------------
Federal Housing Finance Board
National Avg. Mortgage              5.65%         5.77%     5.73%      5.69%          5.79%        5.61%      5.68%       5.88%
Contract Rate (2)
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The yields and interest rates  presented in this table are provided to us by
a third party vendor on a bi-weekly  basis.  The interest  rates provided in the
table were obtained from the report nearest to the month-end.

(2) The Federal Housing Finance Board national average mortgage contract rate is
presented with a one-month lag.

In 2003  our  investment  securities  portfolio  generated  $13.050  million  in
interest  income  resulting  in a  4.32%  yield.  By  comparison,  in  2004  our
investment securities portfolio generated $11.685 million in interest income and
yielded 3.79%, a $1.365 million  reduction in interest income and 53 basis point
reduction in yield.  During 2004, we experienced  very rapid  prepayments on the
mortgage-backed  securities  sector  of  our  investment  securities  portfolio,
requiring us to record a significant  amount of  amortization of premiums on our
investment  securities.  During 2003 we recorded a net  amortization of premiums
and accretion of discounts on  investments of $1.682  million.  This compares to
$2.180 million in 2004, a $498 thousand increase.  Additionally, due to the high
levels of prepayments and the low interest rate environment,  we reinvested much
of the  investment  securities  proceeds in investment  securities at investment
yields below the  investment  yield on the maturing  security,  driving down our
yields.  Specifically,  during 2003 and 2004 we received  investment  securities
proceeds  (primarily due to prepayments)  totaling  $344.788  million,  $156.031
million in 2003 and $188.757 million in 2004.

The yield on the loan portfolio  declined from 6.94% in 2003 to 6.77% in 2004, a
17 basis point  decrease.  As existing  loans matured and  amortized  throughout
2004,  they were  replaced by new loans at lower rates of interest.  In spite of
the decreased  yields,  the interest  income on loans increased by $388 thousand
period over  period due to a  substantial  increase  in our average  total loans
outstanding.  Average total loans  outstanding were $352.935 million in 2003, as
compared to $367.328  million in 2004, a $14.393 million or 4.1% increase period
over period.

During 2004 both the yield and average volume  outstanding  of  interest-bearing
bank balances  decreased.  This resulted in a $394 thousand decrease in interest
income year over year.  In 2003 the  average  balances  outstanding  and average
yield  on  interest-bearing   bank  balances  were  $14.149  million  and  6.56%
respectively. This compares to $8.581 million and 6.22% in 2004. During 2003 and
2004, several FDIC-insured bank certificates of deposit acquired in a wholesale


                                                                            45-K
<PAGE>

leverage transaction during the fourth quarter of 2000 and first quarter of 2001
matured.  The average yield on these  maturing  certificates  ranged from 6.50 -
6.75%.  During  the  fourth  quarter  of 2004,  we  acquired  $4.800  million of
FDIC-insured   certificates   of  deposit  as  part  of  a  wholesale   leverage
transaction.  The interest rate paid on these  certificates of deposit was lower
(2.40 -  3.40%)  than  the  interest  rates  paid on the  matured  certificates,
resulting in a decrease in our average yield on  interest-bearing  bank balances
in 2004.

During  2004 the  interest  income  earned  on  federal  funds  sold  decreased,
primarily due to a reduction in our average outstanding  balances.  During 2003,
we maintained an average  balance in federal funds sold of $15.175  million,  as
compared to $6.346 million in 2004.  Although the average yield on federal funds
sold  increased  during  the last two  quarters  of 2004,  our  interest  income
decreased from $173 thousand in 2003 to $81 thousand in 2004.

During 2004 we offset our  decrease in earning  asset yields by  decreasing  the
cost of interest-bearing  liabilities.  Specifically,  the interest expenses and
total cost of  interest-bearing  liabilities  was  $14.153  million and 2.36% in
2003,  as compared to $12.761  million and 2.12% in 2004,  respectively.  During
2004,  we reduced our interest  expense on our savings  accounts,  NOW accounts,
time accounts, and borrowings,  and only modestly increased the interest expense
on our money market accounts.

The most significant decrease in our interest expense occurred in time accounts.
During 2003, we recorded  $8.258  million of interest  expense on time accounts.
This compares to $7.526 million of interest  expense on time accounts in 2004, a
$732  thousand  decrease.  During 2004 the  weighted  average  interest  rate on
maturing  certificates  of deposit  exceeded the rates of interest being paid on
new  and  renewed  certificates  of  deposit,  primarily  because  the  maturing
certificates  of deposit were  initially  issued at a time when market  interest
rates were higher.  This caused a reduction in the average cost of time deposits
from 2.95% in 2003 to 2.77% in 2004, an 18 basis point decrease.

During 2004 the interest  expense and cost associated with savings  accounts and
NOW accounts also decreased even though the average  balance  maintained in both
categories  increased.  In 2003,  savings  accounts  balances  averaged  $89.087
million.  This compares to $95.657  million in 2004, a $6.570  million,  or 7.4%
increase.  In spite of this increase,  the interest  expense  related to savings
accounts decreased by $190 thousand, from $791 thousand in 2003 to $601 thousand
in 2004. During 2003 and 2004 we decreased the interest rate paid on our savings
accounts as a result of the  decrease in  short-term  interest  rates during the
second quarter of 2003. This decreased our average cost on savings deposits from
0.89% in 2003 to  0.63% in 2004,  a 26  basis  point  decrease.  Similarly,  the
average cost of our NOW accounts  decreased  from 1.12% in 2003 to 0.83% in 2004
for this same reason.  This reduced interest expense on NOW accounts from $1.353
million in 2003 to $1.023 million in 2004, a $330 thousand, or 24.4% decrease.

Our  interest  expense and average  cost of  borrowings  decreased  during 2004.
Specifically,  in 2003 our interest expense on borrowings was $3.453 million, as
compared to $3.283 million in 2004. During 2003 and 2004 respectively, we repaid
$17.497  million  and $5.470  million  of high cost  borrowings.  These  matured
borrowings were replaced by $6.758 million and $32.541 million of new lower-cost
borrowings  in 2003 and 2004,  respectively,  which  reduced the average cost of
borrowed funds from 4.48% in 2003 to 3.96% in 2004.

The cost of our money market  accounts  increased from 0.96% in 2003 to 1.14% in
2004 due to an  increase  in the 90-day  Treasury  bill rate  during  2004.  The
majority of our money  market  account  balances  were  deposited in our highest
interest rate tier in 2004, which was indexed weekly to the 90-day Treasury bill
rate. For this reason,  as the 90-day Treasury bill rate increased  during 2004,
as did our cost of money market deposit accounts.

Rate and Volume Analysis.  During 2004 we were able to maintain our net interest
income  near the 2003  levels  because we  increased  the volume of our  earning
assets and reduced the cost of interest-bearing  liabilities.  Specifically,  in
2004 net interest income decreased by $71 thousand, from $24.475 million in 2003
to $24.404  million in 2004.  The  growth in the  volume of our  earning  assets
contributed an additional  $767 thousand in interest income in 2004 (over 2003),
while the reduction in our  interest-bearing  liability  costs reduced  interest
expense by $1.445 million. These two factors combined nearly offset the decrease
in  interest  income on  earning  assets of  $2.230  million  due to a change in
interest rates.

Interest income on investment  securities  decreased $1.365 million during 2004,
due to  reduction  in volume.  An increase in the average  volume of  securities
contributed  an  additional  $243 thousand of interest  income in 2004,  while a
reduction in the yield on the securities  portfolio decreased interest income by
$1.608  million.  During  2004 we  experienced  very  rapid  prepayments  on our
mortgage-backed  securities portfolio due to the low interest rates available on
home mortgages.  During 2004 many homeowners refinanced or repaid their existing
mortgage  to lower  their  interest  rate or move into a new home.  These  rapid
prepayments required us to amortize a significant portion of premiums paid by us
to obtain these  securities.  Additionally,  due to a high  turnover rate on our
investment  securities  portfolio  in 2003  and  2004,  many  of the  securities
purchased were purchased at yields below the yield on the maturing security. The
reduction in


46-K
<PAGE>

interest  income on the  securities  portfolio due to a change in interest rates
was the largest contributing factor toward our decrease in net interest income.

Interest  income on loans  increased  $388  thousand  during  2004.  Changes  in
interest  rates caused a $595 thousand  reduction in interest  income,  while an
increase in the average volume of loans outstanding increased interest income by
$983  thousand.  Although  interest  rates  declined on loans  during  2004,  we
increased the interest income earned on loans by increasing loans outstanding.

Interest income earned on  interest-bearing  deposits (at other banks) decreased
by  $394   thousand   during  2004.   A  decrease  in  the  average   volume  of
interest-bearing  deposits  reduced  interest  income by $348 thousand,  while a
decrease in the average yield reduced interest income by $46 thousand.

Interest  income on federal funds sold in 2004  decreased by $92 thousand,  from
$173  thousand in 2003 to $81 thousand in 2004.  The interest  income  earned on
federal funds sold  decreased by $111 thousand due to a reduction in the average
volume of federal  funds sold  during the year.  This  reduction  was  partially
offset by a $19 thousand  increase in interest  income on federal funds sold due
to the increase in the federal funds rate during the second half of 2004.

During 2004 we experienced a significant  reduction in interest expense due to a
reduction  in the rate and  volume of time  accounts.  During  2004  higher-rate
certificates  of deposit were replaced by new  certificates  of deposit at lower
rates.  Interest  expense on time accounts  decreased  $732 thousand in 2004, as
compared to 2003.  Interest  expense  decreased  $486  thousand as a result of a
reduction in rates and $246  thousand as a result of a reduction in volume.  The
average cost of time  deposits was 2.95% in 2003,  as compared to 2.77% in 2004,
while the average  volume of time deposits  decreased  from $280.290  million in
2003 to $271.317 million in 2004.

Savings  accounts,  NOW accounts,  and borrowings  experienced  similar rate and
volume  patterns  in 2004.  In 2004 the  average  balances of all three of these
categories of interest bearing liabilities increased, while the average interest
rate paid decreased. The increase in the average balances resulted in additional
interest  expense  due to a change  in  volume,  while  the  change in the rates
decreased interest expense. On the savings accounts,  interest expense decreased
$190  thousand due to a $245  thousand  reduction  in interest  expense due to a
change in rates, offset by a $55 thousand increase in interest expense due to an
increase in the average volume. On the NOW accounts,  interest expense decreased
$330  thousand due to a $345  thousand  reduction  in interest  expense due to a
change in rates, offset by a $15 thousand increase in interest expense due to an
increase in the average volume.  And finally,  on borrowings,  interest  expense
decreased $170 thousand due to a $421 thousand reduction in interest expense due
to a change in rates, offset by a $251 thousand increase in interest expense due
to an increase in the average volume.

Interest  expense on our money market  accounts  increased  $30 thousand in 2004
over 2003.  Interest  expense  increased  $52  thousand  due to an  increase  in
interest rates paid on money market accounts,  while interest expense  decreased
$22  thousand due to a reduction  in the volume of money  market  accounts.  The
majority of our money market  accounts are indexed to the 90-day  Treasury  bill
rate, which increased during 2004.

Provision for Loan Losses.  The provision for loan losses was $1.200  million or
0.33% of average total loans  outstanding in 2004, as compared to $1.565 million
or 0.44% of average total loans outstanding in 2003. This was a $365 thousand or
23.3% decrease.  The provision for loan losses  decreased in 2004 as compared to
2003 due to a general  improvement in the credit quality of our loan  portfolio.
During 2004 net loan  charge-offs  decreased  by $493  thousand  or 41.1%,  from
$1.200 million or 0.33% of average loans outstanding in 2003 to $707 thousand or
0.19%  of  average  loans  outstanding  in  2004.  Similarly,   during  2004  we
experienced a reduction in the level of our  non-performing  loans.  At December
31, 2003,  we had $3.658  million of  non-performing  loans  outstanding  versus
$2.751 million at December 31, 2004.  This was a $907 thousand or 24.8% decrease
between the periods.  Delinquent  loans also decreased  between the periods.  At
December  31,  2004,  we had  $2.267  million  of loans or 0.58% of total  loans
outstanding  that  were 30 or more  days  past due  (excluding  loans  placed on
non-accrual status). By comparison,  at December 31, 2003, we had $2.752 million
or  0.76%  of  total  loans  outstanding  that  were 30 or more  days  past  due
(excluding loans placed on non-accrual  status). The potential problem loans did
not change significantly between the periods.  Potential problem loans increased
slightly  between  the  periods,  from  $7.846  million  or 2.2% of total  loans
outstanding  at  December  31,  2003,  to $8.662  million or 2.2% of total loans
outstanding at December 31, 2004.

Non-Interest  Income.  Non-interest  income is comprised of trust fees,  service
charges on deposit  accounts,  commission  income,  investment  security gains /
(losses),  income on bank-owned  life  insurance,  other service fees, and other
income.  Non-interest  income decreased  slightly from $5.663 million in 2003 to
$5.634  million  in 2004.  This  represents  a $29  thousand  or 0.5%  decrease.
Increases in service  charges on deposit  accounts and  commissions  income were
negatively  offset  by  decreases  in trust  fees,  investment  security  gains,
bank-owned life insurance income, other service fees, and other income.


                                                                            47-K
<PAGE>

Total trust fees decreased  slightly in 2004.  Specifically,  trust fees totaled
$1.383 million in 2003, as compared to $1.325 million in 2004, a $58 thousand or
4.2% decrease.  The decrease in trust fees between the periods was primarily due
to a reduction in non-recurring  closing fees,  including estate  administration
commissions  and  trust  account  termination  fees.  In 2003 we  recorded  $289
thousand in trust / estate closing fees, as compared to $81 thousand in 2004. We
partially  offset this decline in 2004 by recording a $151 thousand  increase in
fees on other trusts,  custodial and investment  management  accounts.  Although
there was a decrease in the period end market  value of trust  accounts  between
December  31, 2003 and  December  31,  2004,  the average  value of trust assets
administered by the Bank increased,  driving the increase in our trust fees. The
decrease in the period end market  value of trust  accounts  between the periods
was primarily  due to the reduction in value of a single trust account  totaling
approximately $26.600 million.

Service  charges on deposit  accounts  increased  from $1.457 million in 2003 to
$1.556 million in 2004, a $99 thousand or 6.8% increase.  During the second half
of 2004, we increased  certain  penalty charges on checking  accounts.  This, in
addition to a higher average  balance of demand deposit  accounts in 2004 versus
2003, increased our service charge income year over year.

Our commission income is generated from the Bank's insurance agency  subsidiary,
Mang - Wilber LLC.  During  2004 we  increased  the number of  policies  through
additional  sales to customers  and  purchased a two-thirds  interest in a small
specialty-lines  insurance  agency  located in  Clifton  Park,  New York.  These
factors  increased  our  commission  income  from $434  thousand in 2003 to $524
thousand in 2004, a $90 thousand or 20.7% increase.

During  2004 we  recorded  net  pre-tax  investment  securities  gains of $1.031
million on the call and sale of investment  securities.  This was a $33 thousand
or 3.1% decrease as compared to 2003. In 2003 we recorded  $1.064 million in net
pre-tax  investment  securities  gains.  During 2004 we sold $12.986  million of
available-for-sale  investment securities and had an additional $175.771 million
in  available-for-sale  and  held-to-maturity  securities mature or be called as
interest  rates  declined.  Our  corporate  securities  were sold during 2004 to
reduce the credit risk in our investment securities portfolio.

The income  related to the increase in the cash  surrender  value of  bank-owned
life insurance  decreased from $639 thousand in 2003 to $569 thousand in 2004, a
$70 thousand or 11.0% decrease.  During 2004 the insurance  companies  decreased
the crediting rates for their  policyholders  because yields  decreased on their
investment   securities  portfolios  as  a  result  of  the  low  interest  rate
environment.

Other  service  fees are  comprised of numerous  types of fee income,  including
merchant credit card processing fees,  residential  mortgage  origination  fees,
official  check and check cashing fees,  travelers'  check sales,  wire transfer
fees,  letter  of  credit  fees,  and  other   miscellaneous   service  charges,
commissions,  and fees.  Other service fees decreased from $325 thousand in 2003
to $286  thousand in 2004, a $39 thousand or 12.0%  decrease.  During the second
quarter of 2003,  we lost our  largest  merchant  credit  card  customer,  which
decreased  fees related to this service from $58 thousand in 2003 to $9 thousand
in 2004, a $49 thousand  decrease.  This  decrease  was  partially  offset by an
increase in our mortgage  loan fees.  During 2004,  we increased  our  marketing
efforts and origination process to increase the volume of mortgages we originate
as agent for another bank.  These efforts,  coupled with the low mortgage rates,
increased our mortgage  loan fees by $30 thousand,  from $39 thousand in 2003 to
$69 thousand in 2004.

Other income is comprised of numerous types of fee income,  including investment
services,  lease income, safe deposit box income, title insurance agency income,
rental of foreclosed real estate,  and distributions  from two insurance trusts,
in which the Bank  participates.  Other income  decreased  from $361 thousand in
2003 to $342 thousand in 2004, a $19 thousand or 5.3%  decrease.  During 2004 we
recorded  $113  thousand  of  investment  services  income,  as  compared to $54
thousand  in 2003,  a $59  thousand  increase.  During 2003 we hired a financial
planning and investment  management  specialist  and licensed  eight  additional
employees to sell investment services.  The fee income improvements  experienced
in 2004 were the result of  additional  mutual  fund,  annuity,  and  investment
securities  sales  generated  by  these  employees.   These   improvements  were
negatively  offset by a $50  thousand  decrease in income  related to the Bank's
investment in New York Bankers Title Agency East and a $28 thousand net decrease
in other miscellaneous income items.

Non-Interest  Expense.  Non-interest  expenses  are  comprised  of salaries  and
employee benefits,  occupancy expense, furniture and equipment expense, computer
service fees,  advertising and marketing  expense,  professional fees, and other
expense.  Total  non-interest  expense increased from $16.583 million in 2003 to
$17.218 million in 2004, a $635 thousand or 3.8% increase.

Salaries  expense  decreased  slightly  in 2004.  Specifically,  total  salaries
expense was $8.425  million in 2004,  as compared to $8.548  million in 2003,  a
$123  thousand or 1.41%  decrease.  Although  the net  decrease in salaries  was
modest  in 2004,  there  were  several  positive  and  negative  factors,  which
contributed to the net change. Base salaries, overtime, and


                                                                            48-K
<PAGE>

employee incentive pay increased by $276 thousand,  or 3.5% in 2004, from $7.889
million  in 2003 to  $8.165  million  in 2004  due to  annual  wage  and  salary
adjustments  for existing  employees  and  expansion  activities,  including the
addition of new employees.  This increase was offset by a $399 thousand decrease
in  salaries   expense   recorded  between  the  periods  due  to  our  deferred
compensation  plan for  executives.  Under  the plan,  participants  may defer a
portion of their salary into the plan. The deferred amounts are then invested in
either  "phantom  stock units" of the Company or other  permissible  investments
allowed under the plan. The deferred amounts  allocated to "phantom stock units"
are indexed to the  economic  performance  of the  Company's  common  stock with
changes recorded to salaries  expense.  During 2004, we recorded $83 thousand of
expense due to the "phantom  stock units"  component of the plan, as compared to
$395 thousand during 2003, a $312 thousand decrease.  Similarly,  during 2004 we
recorded $177 thousand of expense due to the other investments held by the plan,
as compared to $264 thousand in 2003, an $87 thousand decrease.

During  2004,  we recorded  $2.316  million of  employee  benefits  expense,  as
compared to $2.230 million in 2003, an $86 thousand or 3.9% increase between the
periods.  The net  increase in benefits  expense,  although  modest,  was due to
several  positive and negative  factors.  Our group  health  insurance  expenses
increased from $650 thousand in 2003 to $717 thousand in 2004, a $67 thousand or
9.3%  increase  due to  increased  claims  and  plan  administration  costs.  In
addition,  during  2004  we  recorded  increases  in  F.I.C.A.  expense  (due to
increased salaries expense),  group life insurance,  group disability,  employee
education,  supplemental  executive retirement plan benefits, and other benefits
totaling $95 thousand.  These increases were partially  offset by a $67 thousand
decrease in  retirement  plan  expenses  and a $9  thousand  decrease in workers
compensation expense between the periods.

Our net occupancy expense on bank premises  increased $86 thousand or 6.3%, from
$1.360 million in 2003 to $1.446 million in 2004. During 2004, building repairs,
utilities,  insurance,  building  rental  expense,  school and land  taxes,  and
depreciation  expense all increased due to general  inflationary-type  increases
and the  establishment  of a new  full-service  branch  office in  Johnson  City
(Broome  County),  New York,  and a  representative  loan  production  office in
Kingston (Ulster County), New York.

Furniture and  equipment  expense  decreased $52 thousand or 6.5% in 2004,  from
$803  thousand  in  2003  to $751  thousand  in  2004.  During  2004,  equipment
maintenance and repair costs and  depreciation  expense declined by $30 thousand
and $26 thousand respectively.

During 2004, we recorded a significant  increase in computer service fees. Total
computer  service fees were $598  thousand in 2004, as compared to $305 thousand
in 2003, a $293 thousand or 96.1% increase. During the third quarter of 2004, we
terminated a contract to convert our core computer  processing  system.  At that
time we were carrying $135 thousand of prepaid conversion costs in other assets,
which we expensed to computer  service  fees.  The  remaining  $158  thousand in
computer  service fee increases were incurred as the result of implementing  new
computer  systems and data  conversion  costs  related to increased  information
technology  system  demands  and the pending  core  computer  system  conversion
scheduled for the second quarter of 2005.

Marketing and advertising expense increased $102 thousand or 23.4% in 2004, from
$436 thousand in 2003 to $538 thousand in 2003. Our market expansion activities,
increased  product  promotions  and  an  increased  level  of  participation  in
community events drove the increase in our marketing and advertising  expense in
2004.

Professional  fees  increased  by $103  thousand  or 25.2% in  2004,  from  $409
thousand in 2003 to $512  thousand in 2004. In 2004 we expanded the scope of our
loan review process.  We recorded $39 thousand of additional  professional  fees
expense for this purpose.  Other various professional fees increases account for
the remaining of professional fees increases.

Other miscellaneous  expenses include directors' fees,  fidelity insurance,  the
Bank's OCC  assessment,  FDIC  premiums  and  assessments,  bad debt  collection
expenses,  correspondent  bank services,  service  expense related to the Bank's
accounts  receivable  financing  service,   charitable  donations  and  customer
relations,  other miscellaneous  losses, dues and memberships,  office supplies,
postage and shipping,  subscriptions,  telephone  expense,  employee  travel and
entertainment,  software  amortization,  intangible asset amortization  expense,
goodwill  impairment,  OREO  expenses,  gain / loss on the  disposal  of assets,
minority interest expense, Amex(R) listing fees, and several other miscellaneous
expenses.  During 2004,  other expenses  increased  $140 thousand or 5.6%,  from
$2.492 million in 2003 to $2.632  million in 2004. The following  table itemizes
the  individual  components of other  miscellaneous  expenses that  increased or
(decreased) by more than $10 thousand between the periods.


                                                                            49-K
<PAGE>

Table of Other Miscellaneous Expenses:

----------------------------------------------------------------------------
                                                      Year
                                                 ----------------
                                                                 Increase /
Description of Other Expense                      2004     2003  (Decrease)
----------------------------------------------------------------------------
dollars in thousands
Directors fees                                   $   150  $   168  $   (18)
Bad debt collection expense                          137      178      (41)
Accounts receivable financing servicing expense      152      100       52
Customer relations expense                            67       31       36
Charitable donations                                 107       89       18
Telephone                                            178      227      (49)
Travel and entertainment                             198      177       21
Software amortization                                165      130       35
Intangible asset amortization                         84      115      (31)
Deferred reserves for unused loan commitments          4       38      (34)
Minority interest for Mang - Wilber insurance
agency subsidiary                                    110       89       21
Other losses                                          25       38      (13)
American stock exchange listing fees                  73       --       73
All other expense items, net                       1,182    1,112       70
                                                 -------------------------
                  Total Other                    $ 2,632  $ 2,492  $   140
----------------------------------------------------------------------------

Income Taxes. Income tax expense decreased from $3.277 million in 2003 to $3.002
million in 2004, a $275 thousand,  or 8.4% decrease.  The decrease in the income
tax expense was  primarily  due to a net increase in  tax-exempt  income of $397
thousand in 2004 and  decreased  pre-tax  earnings.  Our effective tax rates for
2004 and 2003 were 25.8% and 27.3%, respectively.

Our income tax expense and  effective  tax rate were reduced in 2004 (as well as
in prior years) because  current New York State tax law allows us to claim a 60%
dividends  paid  deduction  for  dividends  paid to the Bank by its  subsidiary,
Wilber REIT,  Inc.  Legislation  has been  proposed at the New York State level,
which would change the tax treatment of dividends paid by real estate investment
trusts,  such as Wilber REIT, Inc. If the law is passed in its current form with
an  effective  date of January 1, 2005,  our  annual  income tax  expense  would
increase by  approximately  $320 thousand,  increasing our effective tax rate to
28.6%.

E. Liquidity

Liquidity  describes  our ability to meet  financial  obligations  in the normal
course of  business.  Liquidity is primarily  needed to meet the  borrowing  and
deposit  withdrawal  requirements of our customers,  to fund loans to customers,
and  to  fund  our  current  and  planned  expenditures.  We  are  committed  to
maintaining a strong liquidity position.  Accordingly,  we monitor our liquidity
position on a daily  basis  through our daily  funds  management  process.  This
includes:

            o     maintaining the appropriate levels of currency  throughout our
                  branch system to meet the daily cash needs of our customers,
            o     balancing our mandated  deposit or "reserve"  requirements  at
                  the Federal Reserve Bank of New York,
            o     maintaining adequate cash balances at our correspondent banks,
                  and
            o     assuring  that adequate  levels of federal funds sold,  liquid
                  assets,   and  borrowing   resources  are  available  to  meet
                  obligations,    including    reasonably    anticipated   daily
                  fluctuations.

In addition to the daily  funds  management  process,  we also  monitor  certain
liquidity  ratios and complete a liquidity  assessment every 90 days to estimate
current and future  sources and uses of  liquidity.  The 90 day sources and uses
assessment is reviewed by our ALCO. The ALCO, based on this assessment and other
data,  determines our future  funding or investment  needs and  strategies.  The
results of the 90 day  sources and uses  assessment  is reported to the Board of
Directors of the Bank quarterly.  We were in compliance with all of its internal
liquidity policy limits at December


                                      50-K
<PAGE>

31, 2005 and December 31, 2004.  The following  list  represents  the sources of
funds available to meet our liquidity requirements. Our primary sources of funds
are denoted by an asterisk (*).

                Source of Funding
                o Currency*
                o Federal Reserve and Correspondent Bank Balances*
                o Federal Funds Sold*
                o Loan and Investment Principal and Interest Payments*
                o Investment Security Maturities and Calls*
                o Demand Deposits & NOW Accounts*
                o Savings & Money Market Deposits*
                o Certificates of Deposit and Other Time Deposits*
                o Repurchase Agreements*
                o FHLBNY Advances / Lines of Credit*
                o Sale of Available-for-Sale Investment Securities
                o Brokered Deposits
                o Correspondent Lines of Credit
                o Fed. Reserve Discount Window Borrowings
                o Sale of Loans
                o Proceeds from Issuance of Equity Securities
                o Branch Acquisition
                o Cash Surrender Value of Bank-Owned Life Insurance


Our liquidity  position did not materially  change between December 31, 2004 and
December 31, 2005. We maintained  adequate  amounts of cash and cash equivalents
at both period ends to meet anticipated  short-term  funding needs. In addition,
our ability to meet unanticipated funding needs was strong. At December 31, 2004
we maintained $64.622 million of  available-for-sale  investment securities that
could be pledged for  borrowings or sold to meet  unanticipated  funding  needs.
This  compares  to  $63.472  million at  December  31,  2004.  In  addition,  we
maintained a $10.000  million credit  facility at a  correspondent  bank, in the
event we needed to borrow federal funds on an overnight basis.  This compares to
$7.600  million at December  31,  2004.  In  addition,  at December 31, 2005 and
December  31,  2004,  our total  loan to total  asset  ratio of 53.6% and 52.1%,
respectively,  were low  relative  to our  comparative  peer group of  financial
institutions.

The following  table  summarizes  several of our key liquidity  measures for the
periods stated:

Table of Liquidity Measures:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                         Liquidity Measure                                December 31,
                                                                      -------------------
Dollars in Thousands                                                    2005      2004
-----------------------------------------------------------------------------------------
<S>                                                                    <C>       <C>
Cash and Cash Equivalents                                              $18,417   $20,539
-----------------------------------------------------------------------------------------
Available for Sale Investment Securities at
Estimated Fair Value less Securities pledged for                       $64,622   $63,472
State and Municipal Deposits and Borrowings
-----------------------------------------------------------------------------------------
Total Loan to Total Asset Ratio                                          53.63%    52.08%
-----------------------------------------------------------------------------------------
FHLBNY Remaining Borrowing Capacity                                    $19,413   $19,180
-----------------------------------------------------------------------------------------
Available Correspondent Bank Lines of Credit                           $10,000   $ 7,600
-----------------------------------------------------------------------------------------
</TABLE>

Our  commitments  to extend credit and stand-by  letters of credit  increased by
$18.660  million or 27.8%  between  December 31, 2004 and December 31, 2005.  At
December 31, 2005  commitments  to extend credit and stand-by  letters of credit
were $85.663 million,  as compared to $67.003 million at December 31, 2004. This
increase  was due to both an increase in home equity line of credit  commitments
assumed  during the HSBC  branch  acquisition  and  additional  commercial  loan
commitments.  Our experience  indicates that draws on the  commitments to extend
credit  and  stand-by  letters  of credit do not  fluctuate  significantly  from
quarter to quarter,  and  therefore,  are not expected to materially  impact our
liquidity prospectively.

We recognize that deposit flows and loan and investment  prepayment activity are
affected by the level of interest rates, the interest rates and products offered
by competitors,  and other factors.  Based on our deposit retention  experience,
anticipated levels of regional economic activity,  particularly  moderate levels
of loan demand within our primary market


51-K
<PAGE>

area, and current pricing strategies, we anticipate that we will have sufficient
levels of liquidity to meet our current funding commitments for several quarters
prospectively.

F. Capital Resources and Dividends

The maintenance of appropriate capital levels is a management priority.  Overall
capital adequacy is monitored on an ongoing basis by our management and reviewed
regularly by the Board of Directors.  Our principal  capital planning goal is to
provide an adequate return to stockholders  while retaining a sufficient capital
base to provide for future expansion and comply with all regulatory standards.

At  December  31, 2005 our  stockholders'  equity was  $67.717  million,  a $112
thousand or 0.2% increase over December 31, 2004 stockholders' equity of $67.605
million.  The slight increase in stockholders'  equity was due to an increase in
retained  earnings of $3.498  million  offset by a $2.805  million  reduction in
other comprehensive income and a $581 thousand increase in Treasury stock.

The  Company and the Bank are both  subject to  regulatory  capital  guidelines.
Under  these  guidelines,  as  established  by federal  bank  regulators,  to be
adequately  capitalized  the Company and the Bank must both maintain the minimum
ratio of tier 1 capital to risk-weighted assets at 4.0% and the minimum ratio of
total capital to risk-weighted assets ratio of 8.0%. tier 1 capital is comprised
of  stockholders'   equity,   less  intangible   assets  and  accumulated  other
comprehensive  income.  Total capital,  for this  risk-based  capital  standard,
includes tier 1 capital plus the Company's allowance for loan losses. Similarly,
for the Bank to be  considered  "well  capitalized,"  it must  maintain a tier 1
capital  to  risk-weighted   assets  ratio  of  6.0%  and  a  total  capital  to
risk-weighted  assets ratio of 10.0%.  The Company exceeded all capital adequacy
guidelines and the Bank exceeded all well capitalized guidelines at December 31,
2005,  and December  31, 2004.  The  Company's  tier 1 capital to  risk-weighted
assets  ratio and total  capital to  risk-weighted  assets ratio at December 31,
2005, were 13.12% and 14.37%, respectively.  This compares to 13.09% and 14.34%,
respectively,  at December 31, 2004.  Additional details regarding the Company's
and the  Bank's  capital  ratios  are  set  forth  in  Note 13 of the  Company's
Consolidated Financial Statements located in PART II, Item 8, of this document.

The principal  source of funds for the payment of  shareholder  dividends by the
Company has been  dividends  declared and paid to the Company by its  subsidiary
bank.  There are various  legal and  regulatory  limitations  applicable  to the
payment of dividends to the Company by its  subsidiaries  as well as the payment
of dividends by the Company to its stockholders.  As of December 31, 2005, under
this statutory  limitation,  the maximum amount that could have been paid by the
Bank  subsidiary  to the  Company,  without  special  regulatory  approval,  was
approximately  $9.787  million.  The  ability of the Company and the Bank to pay
dividends  in the future is and will  continue to be  influenced  by  regulatory
policies, capital guidelines, and applicable laws.

See PART II, Item 5 of this document,  "Market for  Registrant's  Common Equity,
Related Stockholder  Matters, and Issuers Purchases of Equity Securities," for a
recent  history  of the  Company's  cash  dividend  payments  and stock sale and
repurchase activities.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business  activities  generate  market risk.  Market risk is the possibility
that  changes in future  market  conditions,  including  rates and prices,  will
reduce earnings and make the Company less valuable.  We are primarily exposed to
market risk through changes in interest rates. This risk is called interest rate
risk and is an inherent component of risk for all banks. The risk occurs because
we pay interest on deposits and borrowed funds at varying rates and terms, while
receiving  interest  income on loans and  investments  with different  rates and
terms.  As a result,  our earnings and the imputed  economic value of assets and
liabilities  are subject to  potentially  significant  fluctuations  as interest
rates  rise and fall.  Our  objective  is to  minimize  the  fluctuation  in net
interest margin and net interest income caused by anticipated and  unanticipated
changes in interest rates.

Ultimately,  the Company's  Board of Directors is responsible for monitoring and
managing market and interest rate risk. The Board accomplishes this objective by
annually reviewing and approving an Asset and Liability Management Policy, which
establishes  broad risk limits and delegates  responsibility  to carry out asset
and  liability  oversight  and  control to the  Directors'  Loan and  Investment
Committee and management's Asset and Liability Committee ("ALCO").

We manage a few  different  forms of interest  rate risk.  The first is mismatch
risk,  which  involves  the  mismatch  of  maturities  of fixed rate  assets and
liabilities.  The second is basis risk.  Basis risk is the risk  associated with
non-correlated  changes in different interest rates. For example,  we price many
of our  adjustable  rate  commercial  loans (an asset) using the prime rate as a
basis,  while some of our deposit  accounts (a  liability)  are tied to Treasury
security yields. In a given


52-K
<PAGE>

timeframe, the prime rate might decrease 2% while a particular Treasury security
might  only  decrease  1%.  If this  were to  occur,  our  yield on prime  based
commercial  loans would  decrease by 2%,  while the cost of deposits  might only
decrease  by 1%,  negatively  affecting  net  interest  income and net  interest
margin. The third risk is option risk. Option risk generally appears in the form
of prepayment  volatility on  residential  mortgages,  commercial and commercial
real estate loans,  consumer  loans,  mortgage-backed  securities,  and callable
agency or municipal investment  securities.  The Bank's customers generally have
alternative  financing  sources (or options) to refinance  their  existing  debt
obligations  with other  financial  institutions.  When interest rates decrease,
many of these customers exercise this option and refinance at other institutions
and prepay  their  loans with us,  forcing us to reinvest  the prepaid  funds in
lower yielding investments and loans. The same type of refinancing activity also
accelerates  principal payments on mortgage-backed  securities held by the Bank.
Municipal investment  securities and agency securities are issued with specified
call  dates and call  prices and are  typically  exercised  by the  issuer  when
interest  rates on  comparable  maturity  securities  are lower than the current
coupon rate on the security.

Measuring and managing  interest rate risk is a dynamic  process that the Bank's
management must continually  perform to meet the objective of maintaining stable
net interest  income and net interest  margin.  This means that prior to setting
the term or interest rate on loans or deposits,  or before purchasing investment
securities  or  borrowing  funds,  management  must  understand  the impact that
alternative  interest rates will have on the Bank's  interest rate risk profile.
This is accomplished  through simulation  modeling.  Simulation  modeling is the
process of "shocking" the current balance sheet under a variety of interest rate
scenarios  and then  measuring  the  impact of  interest  rate  changes  on both
projected  earnings and the economic value of the Bank's  equity.  The estimates
underlying the sensitivity analysis are based on numerous assumptions including,
but not limited to: the nature and timing of interest rate changes,  prepayments
on loans and securities, deposit retention rates, pricing decisions on loans and
deposits, and reinvestment/replacement  rates on asset and liability cash flows.
While  assumptions  are  developed  based on available  information  and current
economic and local market  conditions,  management cannot make any assurances as
to the ultimate accuracy of these assumptions,  including competitive influences
and  customer  behavior.  Accordingly,  actual  results  will  differ from those
predicted by simulation modeling.

The following  table shows the projected  changes in net interest  income from a
parallel  shift in all market  interest  rates.  The shift in interest  rates is
assumed to occur in monthly  increments  of 0.50% per month until the full shift
is complete.  In other words,  we assume it will take 6 months for a 3.00% shift
to take  place.  This is also  known as a  "ramped"  interest  rate  shock.  The
projected  changes in net  interest  income are totals for the  12-month  period
beginning  January 1, 2006 and ending  December  31,  2006,  under  ramped shock
scenarios.

Interest Rate Sensitivity Table:

--------------------------------------------------------------------------------
Interest Rates                             Dollars in Thousands
--------------------------------------------------------------------------------

                                                                   Projected
                                                                   Change in
                                       Projected      Projected    Net Interest
                        Projected      Dollar         Percentage   Income as a
                        Annualized     Change         Change in    Percent of
Interest                Net            in Net         Net          Total
Rate Shock   Prime      Interest       Interest       Interest     Stockholders'
(1)          Rate       Income         Income         Income       Equity
--------------------------------------------------------------------------------
    3.00%      10.25%     $25,863         220            0.86%        0.32%
-------------------------------------------------------------------------------
    2.00%      9.25%      $25,482        (161)          -0.63%       -0.24%
--------------------------------------------------------------------------------
    1.00%      8.25%      $25,478        (165)          -0.64%       -0.24%
-------------------------------------------------------------------------------
No change      7.25%      $25,643          --              --           --
--------------------------------------------------------------------------------
    -1.00%     6.25%      $25,245        (398)          -1.55%       -0.59%
--------------------------------------------------------------------------------
    -2.00%     5.25%      $24,092      (1,551)          -6.05%       -2.29%
--------------------------------------------------------------------------------
    -3.00%     4.25%      $23,295      (2,348)          -9.16%       -3.47%
--------------------------------------------------------------------------------

(1) Under a ramped interest rate shock,  interest rates are modeled to change at
a rate of 0.50% per month.

Many  assumptions  are  embedded  within our  interest  rate risk  model.  These
assumptions are approved by the Bank's ALCO and are based upon both management's
experience and projections provided by investment securities companies. Assuming
our  prepayment  and  other  assumptions  are  accurate  and  assuming  we  take
reasonable actions to preserve net interest income, we project that net interest
income would decline by $161 thousand or 0.24% of total stockholders' equity


                                                                            53-K
<PAGE>

in a +2.00%  ramped  interest  rate shock and  $1.551  million or 2.29% of total
stockholders'  equity in a -2.00% ramped interest rate shock. This is within our
Asset and  Liability  Policy  guideline,  which  limits  the  maximum  projected
decrease in net interest income in a +2.00% or -2.00% ramped interest rate shock
to -5.0% of the Company's total equity capital.

Our  strategy  for  managing  interest  rate risk is impacted by general  market
conditions and customer  demand.  But generally,  we try to limit the volume and
term of fixed-rate  assets and fixed-rate  liabilities so that we can adjust the
mix and  pricing of assets and  liabilities  to  mitigate  net  interest  income
volatility.  We also  purchase  investments  for the  securities  portfolio  and
structure  borrowings  from the FHLBNY to offset interest rate risk taken in the
loan portfolio.  We also offer  adjustable  rate loan and deposit  products that
change as  interest  rates  change.  Approximately  21% of our  total  assets at
December 31, 2005 were invested in adjustable rate loans and investments.

At December 31, 2005 the Treasury  yield curve was very "flat." The two year and
the ten year  Treasury note were both  yielding  4.34%.  This flat interest rate
environment  inhibits  our  ability to earn net  interest  income,  since  Banks
typically  earn  net  interest  income  by  procuring  short-term  deposits  and
borrowings and investing  those  proceeds in longer term loans and  investments.
This  practice,  which  is  sometimes  referred  to as  mismatching  assets  and
liabilities,  typically allows Bank's to enhance their "interest  spread," which
generates net interest income. If this flat interest rate environment  persists,
it may negatively impact our ability to increase net interest income for several
quarters prospectively.


54-K
<PAGE>

ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

             Report of Independent Registered Public Accounting Firm

The Board of Directors of The Wilber Corporation:

We have audited the  accompanying  consolidated  statements  of condition of The
Wilber  Corporation  and subsidiary  (the "Company") as of December 31, 2005 and
2004,   and  the  related   consolidated   statements  of  income,   changes  in
stockholders'  equity and comprehensive  income,  and cash flows for each of the
years in the  three-year  period ended  December 31,  2005.  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 the standards of the Public  Company
Accounting Oversight Board (United States). 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  The  Wilber
Corporation  and subsidiary as of December 31, 2005 and 2004, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended  December 31, 2005,  in  conformity  with U.S.  generally  accepted
accounting principles.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the effectiveness of the Company's
internal  control over  financial  reporting  as of December 31, 2005,  based on
criteria  established  in Internal  Control-Integrated  Framework  issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated March 10, 2006  expressed an  unqualified  opinion on  management's
assessment of, and the effective  operation of, internal  control over financial
reporting.

                                              /s/ KPMG LLP

Albany, New York
March 10, 2006


                                                                            55-K
<PAGE>

The Wilber Corporation
Consolidated Statements of Condition

<TABLE>
<CAPTION>
                                                                   December 31,    December 31,
dollars in thousands except share and per share data                   2005            2004
------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>
Assets
Cash and Due from Banks                                            $      12,817   $      10,440
Time Deposits with Other Banks                                             2,700          10,099
Federal Funds Sold                                                         2,900              --
                                                                   -------------   -------------
    Total Cash and Cash Equivalents                                       18,417          20,539
Securities
    Trading, at Fair Value                                                 1,542           1,504
    Available-for-Sale, at Fair Value                                    240,350         249,415
    Held-to-Maturity, Fair Value of $53,837 at December 31, 2005
      and $59,324 at December 31, 2004                                    54,939          59,463
Loans                                                                    403,665         391,043
    Allowance for Loan Losses                                             (6,640)         (6,250)
                                                                   -------------   -------------
    Loans, Net                                                           397,025         384,793
                                                                   -------------   -------------
Premises and Equipment, Net                                                6,430           5,860
Bank Owned Life Insurance                                                 15,530          14,975
Goodwill                                                                   4,518           2,682
Intangible Assets, Net                                                       698             377
Other Assets                                                              13,279          11,253
                                                                   -------------   -------------
    Total Assets                                                   $     752,728   $     750,861
                                                                   =============   =============
Liabilities and Stockholders' Equity
Deposits:
    Demand                                                         $      72,986   $      63,746
    Savings, NOW and Money Market Deposit Accounts                       244,484         241,151
    Certificates of Deposit (Over $100M)                                  78,147          76,346
    Certificates of Deposit (Under $100M)                                183,716         165,194
    Other Deposits                                                        25,625          25,492
                                                                   -------------   -------------
    Total Deposits                                                       604,958         571,929
                                                                   -------------   -------------
Short-Term Borrowings                                                     19,357          37,559
Long-Term Borrowings                                                      52,472          65,379
Other Liabilities                                                          8,224           8,389
                                                                   -------------   -------------
    Total Liabilities                                                    685,011         683,256
                                                                   -------------   -------------
Stockholders' Equity:
    Common Stock, $.01 Par Value, 16,000,000 Shares Authorized,
      and 13,961,664 Shares Issued at December 31, 2005,
      and December 31, 2004                                                  140             140
    Additional Paid in Capital                                             4,224           4,224
    Retained Earnings                                                     86,900          83,402
    Accumulated Other Comprehensive (Loss) Income                         (2,409)            396
    Treasury Stock at Cost, 2,815,727 Shares at December 31, 2005
       and 2,767,072 Shares at December 31, 2004                         (21,138)        (20,557)
    Total Stockholders' Equity                                            67,717          67,605
                                                                   -------------   -------------
    Total Liabilities and Stockholders' Equity                     $     752,728   $     750,861
                                                                   =============   =============
</TABLE>

See accompanying notes to Consolidated Financial Statements


56-K
<PAGE>

The Wilber Corporation
Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
dollars in thousands except share and per share data               2005           2004           2003
---------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>
Interest and Dividend Income
Interest and Fees on Loans                                     $     27,683   $     24,865   $     24,477
Interest and Dividends on Securities:
    U.S. Government and Agency Obligations                            9,124          8,605          9,751
    State and Municipal Obligations                                   2,569          2,665          2,198
    Other                                                               215            415          1,101
Interest on Federal Funds Sold and Time Deposits                        719            615          1,101
                                                               ------------   ------------   ------------
    Total Interest and Dividend Income                               40,310         37,165         38,628
                                                               ------------   ------------   ------------
Interest Expense
Interest on Deposits:
    Savings, NOW and Money Market Deposit Accounts                    2,956          1,952          2,442
    Certificates of Deposit (Over $100M)                              2,445          2,197          2,414
    Certificates of Deposit (Under $100M)                             5,944          4,782          5,310
    Other Deposits                                                      595            547            534
Interest on Short-Term Borrowings                                       633            212            116
Interest on Long-Term Borrowings                                      2,357          3,071          3,337
                                                               ------------   ------------   ------------
    Total Interest Expense                                           14,930         12,761         14,153
                                                               ------------   ------------   ------------
Net Interest Income                                                  25,380         24,404         24,475
Provisions for Loan Losses                                            1,580          1,200          1,565
                                                               ------------   ------------   ------------
Net Interest Income After Provision for Loan Losses                  23,800         23,204         22,910
                                                               ------------   ------------   ------------
Non Interest Income
Trust Fees                                                            1,472          1,325          1,383
Service Charges on Deposit Accounts                                   1,615          1,556          1,457
Commissions Income                                                      489            524            434
Investment Security Gains, Net                                          469          1,031          1,064
Increase in Cash Surrender Value of Bank Owned Life Insurance           555            570            639
Other Service Fees                                                      471            286            325
Other Income                                                            439            342            361
                                                               ------------   ------------   ------------
    Total Non Interest Income                                         5,510          5,634          5,663
                                                               ------------   ------------   ------------
Non Interest Expense
Salaries                                                              9,040          8,425          8,548
Employee Benefits                                                     2,612          2,316          2,230
Net Occupancy Expense of Bank Premises                                1,563          1,446          1,360
Furniture and Equipment Expense                                         764            751            803
Computer Service Fees                                                   745            598            305
Advertising and Marketing                                               508            538            436
Professional Fees                                                       709            512            409
Other Miscellaneous Expenses                                          2,910          2,632          2,492
                                                               ------------   ------------   ------------
    Total Non Interest Expense                                       18,851         17,218         16,583
                                                               ------------   ------------   ------------
Income Before Taxes                                                  10,459         11,620         11,990
Income Taxes                                                         (2,715)        (3,002)        (3,277)
                                                               ------------   ------------   ------------
Net Income                                                     $      7,744   $      8,618   $      8,713
                                                               ============   ============   ============

Weighted Average Shares Outstanding                              11,169,730     11,207,215     11,214,288
Basic Earnings Per Share
                                                               $       0.69   $       0.77   $       0.78
</TABLE>

See accompanying notes to Consolidated Financial Statements


                                                                            57-K
<PAGE>

The Wilber Corporation
Consolidated  Statements of Changes in  Stockholders'  Equity and  Comprehensive
Income

<TABLE>
<CAPTION>

                                                                                          Accumulated
                                                                  Additional                  Other
                                                        Common      Paid in     Retained  Comprehensive   Treasury
dollars in thousands except share and per share data     Stock      Capital     Earnings  Income (Loss)     Stock        Total
---------------------------------------------------------------------------------------------------------------------------------
<S>              <C> <C>                                <C>         <C>          <C>          <C>          <C>          <C>
Balance December 31, 2002                               $ 2,182     $  2,182     $ 74,439     $  4,242     $(19,883)    $ 63,162
                                                        -------     --------     --------     --------     --------     --------
Comprehensive Income:
  Net Income                                                 --           --        8,713           --           --        8,713
  Change in Net Unrealized (Loss)
    on Securities, Net of Taxes                              --           --           --       (2,970)          --       (2,970)
                                                                                                                        --------
Total Comprehensive Income                                                                                                 5,743
                                                                                                                        --------
Cash Dividends ($.37 per share)                              --           --       (4,109)          --           --       (4,109)
Purchase of Treasury Stock (11,917 shares)                   --           --           --           --         (492)        (492)
Change in Par Value and Stock Split                      (2,042)       2,042           --           --           --           --
                                                        -------     --------     --------     --------     --------     --------
Balance December 31, 2003                               $   140     $  4,224     $ 79,043     $  1,272     $(20,375)    $ 64,304
                                                        -------     --------     --------     --------     --------     --------
Comprehensive Income:
  Net Income                                                 --           --        8,618           --           --        8,618
  Change in Net Unrealized (Loss)
    on Securities, Net of Taxes                              --           --           --         (876)          --         (876)
                                                                                                                        --------
Total Comprehensive Income                                                                                                 7,742
                                                                                                                        --------
Cash Dividends ($.38 per share)                              --           --       (4,259)          --           --       (4,259)
Purchase of Treasury Stock (14,800 shares)                                                                     (182)        (182)
                                                        -------     --------     --------     --------     --------     --------
Balance December 31, 2004                               $   140     $  4,224     $ 83,402     $    396     $(20,557)    $ 67,605
                                                        -------     --------     --------     --------     --------     --------
Comprehensive Income:
  Net Income                                                 --           --        7,744           --           --        7,744
  Change in Net Unrealized (Loss)
    on Securities, Net of Taxes                              --           --           --       (2,805)          --       (2,805)
                                                                                                                        --------
Total Comprehensive Income                                                                                                 4,939
                                                                                                                        --------
Cash Dividends ($.38 per share)                              --           --       (4,246)          --           --       (4,246)
Purchase of Treasury Stock (48,655 shares)                                                                     (581)        (581)
                                                        -------     --------     --------     --------     --------     --------
Balance December 31, 2005                               $   140     $  4,224     $ 86,900     $ (2,409)    $(21,138)    $ 67,717
                                                        -------     --------     --------     --------     --------     --------
</TABLE>

See accompanying notes to Consolidated Financial Statements.

(1) Per share  information has been restated to give  retroactive  effect to the
4-for-1 stock split that was approved September 5, 2003.


58-K
<PAGE>

The Wilber Corporation
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                   Year Ended December 31,
dollars in thousands                                                                          2005          2004          2003
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>          <C>           <C>
Cash Flows from Operating Activities:
   Net Income                                                                               $  7,744     $   8,618     $   8,713
   Adjustments to Reconcile Net Income to Net Cash
   Used by Operating Activities:
     Provision for Loan Losses                                                                 1,580         1,200         1,565
     Depreciation and Amortization                                                             1,151         1,022         1,026
     Net Amortization of Premiums and Accretion of Discounts on Investments                    1,027         2,180         1,682
     Available-for-Sale Investment Security Gains, net                                          (370)         (871)         (808)
     Deferred Income Tax (Benefit) Expense                                                      (138)          (56)          336
     Other Real Estate Losses                                                                     --            41            66
     Increase in Cash Surrender Value of Bank Owned Life Insurance                              (555)         (570)         (639)
     Net Decrease (Increase) in Trading Securities                                                61          (319)          138
     Net Gains on Trading Securities                                                             (99)         (160)         (256)
     Increase in Other Assets                                                                   (180)         (302)       (2,849)
     (Decrease) Increase in Other Liabilities                                                   (223)          226          (141)
                                                                                            --------     ---------     ---------
     Net Cash Provided by Operating Activities                                                 9,998        11,009         8,833
                                                                                            --------     ---------     ---------
Cash Flows from Investing Activities:
   Net Cash Acquired from Acquisition of a Branch                                             22,521            --            --
   Proceeds from Maturities of Held-to-Maturity Investment Securities                          9,932        24,150        32,230
   Purchases of Held-to-Maturity Investment Securities                                        (5,528)      (39,767)      (33,745)
   Proceeds from Maturities of Available-for-Sale Investment Securities                       60,950       151,552       112,562
   Proceeds from Sales of Available-for-Sale Investment Securities                             9,350        12,986        11,239
   Purchases of Available-for-Sale Investment Securities                                     (66,367)     (141,352)     (169,874)
   Net Increase in Loans                                                                      (6,177)      (31,295)       (3,921)
   Proceeds from Sale of Loans                                                                    --           294            --
   Purchase of Premises and Equipment, Net of Disposals                                         (927)         (912)         (548)
   Proceeds from Sale of Other Real Estate                                                        --            58            47
                                                                                            --------     ---------     ---------
     Net Cash Provided by (Used by) Investing Activities                                      23,754       (24,286)      (52,010)
                                                                                            --------     ---------     ---------
Cash Flows from Financing Activities:
   Net Decrease in Demand Deposits, Savings, NOW,
     Money Market and Other Time Deposits                                                     (8,100)       (8,614)       28,452
   Net Increase (Decrease) in Certificates of Deposit                                          8,162           (90)        3,100
   Net (Decrease) Increase in Short-Term Borrowings                                          (18,202)       17,541         6,758
   Increase in Long-Term Borrowings                                                           24,900        15,000            --
   Repayment of Long-Term Borrowings                                                         (37,807)       (5,470)      (17,497)
   Decrease in Dividends Payable                                                                  --            --          (209)
   Purchase of Treasury Stock                                                                   (581)         (182)         (492)
   Cash Dividends Paid                                                                        (4,246)       (4,259)       (4,109)
                                                                                            --------     ---------     ---------
     Net Cash (Used by) Provided by Financing Activities                                     (35,874)       13,926        16,003
                                                                                            --------     ---------     ---------
       Net (Decrease) Increase in Cash and Cash Equivalents                                   (2,122)          649       (27,174)
Cash and Cash Equivalents at Beginning of Period                                              20,539        19,890        47,064
                                                                                            --------     ---------     ---------
   Cash and Cash Equivalents at End of Period                                               $ 18,417     $  20,539     $  19,890
                                                                                            ========     =========     =========
Supplemental Disclosures of Cash Flow Information:
   Cash Paid during Period for:
     Interest                                                                               $ 14,918     $  12,852     $  14,334
     Income Taxes                                                                           $  3,085     $   2,874     $   3,683
   Non Cash Investing Activities:
     Change in Unrealized Loss on Securities                                                $ (4,596)    $  (1,435)    $  (4,902)
     Transfer of Loans to Other Real Estate                                                 $     --     $     157     $     110
   Fair Value of Tangible Assets Acquired                                                   $  8,119     $      --     $      --
   Fair Value of Liabilities Assumed                                                        $ 32,967     $      --     $      --
</TABLE>

See accompanying notes to Consolidated Financial Statements.


                                                                            59-K
<PAGE>

Note 1. Summary of Significant Accounting Policies

The Wilber Corporation (the Parent Company) operates 20 branches serving Otsego,
Delaware,  Schoharie,  Ulster,  Chenango, and Broome Counties through its wholly
owned subsidiary  Wilber National Bank (the Bank). The Company's  primary source
of revenue is interest  earned on  commercial,  mortgage,  and consumer loans to
customers  who  are  predominately   individuals  and  small  and  middle-market
businesses. Collectively, the Parent Company and the Bank are referred to herein
as "the Company."

The Bank owns a majority  interest  in  Mang-Wilber,  LLC, an  insurance  agency
offering  a full line of life,  health and  property,  and  casualty  insurance.
Accordingly,   the  assets  and   liabilities   and  revenues  and  expenses  of
Mang-Wilber,   LLC  are  included  in  the  Company's   Consolidated   Financial
Statements.

The  Consolidated  Financial  Statements  of the Company  conform to  accounting
principles  generally  accepted  in the  United  States of America  (GAAP).  The
following is a summary of the more significant policies:

Principles of Consolidation -- The Consolidated Financial Statements include the
accounts of the Parent Company and its wholly owned subsidiary after elimination
of  inter-company  accounts  and  transactions.  In  the  "Parent  Company  Only
Financial  Statements," the investment in subsidiary is carried under the equity
method of accounting.

Management's Use of Estimates -- The preparation of the  Consolidated  Financial
Statements in conformity  with GAAP  requires  management to make  estimates and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of contingent  assets and liabilities at the date of the Consolidated
Financial  Statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.

Reclassifications  -- Whenever  necessary,  reclassifications  are made to prior
period amounts to conform to current year presentation.

Cash Equivalents -- The Company considers amounts due from correspondent  banks,
cash  items in  process  of  collection,  federal  funds  sold and time  deposit
balances  with  other  banks  to  be  cash   equivalents  for  purposes  of  the
consolidated statements of cash flows.

Securities  -- The  Company  classifies  its  investment  securities  at date of
purchase   as   either   held-to-maturity,    available-for-sale   or   trading.
Held-to-maturity  securities  are those for which the Company has the intent and
ability  to  hold  to   maturity,   and  are   reported   at   amortized   cost.
Available-for-sale  securities  are reported at fair value,  with net unrealized
gains  and  losses  reflected  in  stockholders'  equity  as  accumulated  other
comprehensive  income (loss),  net of the applicable income tax effect.  Trading
securities  are  reported  at fair  value,  with  unrealized  gains  and  losses
reflected in the income statement.  Transfers of securities  between  categories
are recorded at full value at the date of transfer.

Non-marketable  equity  securities,  including  Federal Reserve and FHLBNY stock
required for membership in those organizations, are carried at cost.

Premiums and  discounts  are  amortized or accreted over the life of the related
security as an adjustment to yield using a method that approximates the interest
method.  Dividend and interest income are recognized when earned. Realized gains
and losses on the sale of securities are included in securities  gains (losses).
The cost of securities sold is based on 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 to be other  than  temporary  is charged to
earnings, resulting in the establishment of a new cost basis for the security.

Loans -- Loans are reported at their  outstanding  principal  balance.  Interest
income on loans is accrued based upon the principal amount outstanding.

Loans are placed on non-accrual  status when timely  collection of principal and
interest in accordance with contractual terms is doubtful. Loans are transferred
to a non-accrual  basis  generally  when principal or interest  payments  become
ninety days  delinquent,  unless the loan is well  secured and in the process of
collection,  or sooner when  management  concludes  circumstances  indicate that
borrowers may be unable to meet contractual principal or interest payments. When
a loan is transferred to a non-accrual  status, all interest  previously accrued
in the current period but not collected is reversed  against  interest income in
that period. Interest accrued in a prior period and not collected is charged-off
against the allowance for loan losses.


60-K
<PAGE>

Note 1. Summary of Significant Accounting Policies, Continued

If ultimate  repayment of a non-accrual loan is expected,  any payments received
are applied in  accordance  with  contractual  terms.  If ultimate  repayment of
principal is not expected, any payment received on a non-accrual loan is applied
to principal until ultimate  repayment becomes  expected.  Non-accrual loans are
returned to accrual status when they become current as to principal and interest
or demonstrate a period of performance  under the contractual  terms and, in the
opinion of management,  are fully collectible as to principal and interest. When
in the opinion of management the collection of principal appears  unlikely,  the
loan balance is charged-off in total or in part.

Commercial  type loans are  considered  impaired  when it is  probable  that the
borrower will not repay the loan according to the original  contractual terms of
the loan  agreement,  and all loan types are considered  impaired if the loan is
restructured in a troubled debt restructuring.

A loan is  considered  to be a troubled  debt  restructured  loan (TDR) when the
Company grants a concession to the borrower because of the borrower's  financial
condition that it would not otherwise  consider.  Such  concessions  include the
reduction  of interest  rates,  forgiveness  of  principal  or interest or other
modifications  of interest  rates that are less than the current market rate for
new  obligations  with similar risk. TDR loans that are in compliance with their
modified  terms and that yield a market rate may be removed  from the TDR status
after a period of performance.

Allowance for Loan Losses -- The allowance for loan losses is the amount,  which
in the opinion of management, is necessary to absorb probable losses inherent in
the  loan   portfolio.   The  allowance  is   determined   based  upon  numerous
considerations,  including local economic conditions, the growth and composition
of the loan portfolio with respect to the mix between the various types of loans
and their  related  risk  characteristics,  a review of the value of  collateral
supporting  the  loans,  comprehensive  reviews  of the  loan  portfolio  by the
external  Loan Review and  management,  as well as  consideration  of volume and
trends of delinquencies, non-performing loans, and loan charge-offs. As a result
of the test of adequacy, required additions to the allowance for loan losses are
made periodically by charges to the provision for loan losses.

The allowance for loan losses  related to impaired  loans is based on discounted
cash flows using the loan's initial effective interest rate or the fair value of
the collateral  for certain loans where  repayment of the loan is expected to be
provided solely by the underlying  collateral  (collateral dependent loans). The
Company's  impaired  loans  are  generally  collateral  dependent.  The  Company
considers the estimated cost to sell, on a discounted  basis,  when  determining
the fair value of collateral in the measurement of impairment if those costs are
expected to reduce the cash flows  available to repay or  otherwise  satisfy the
loans.

Management  believes  that the  allowance  for loan  losses is  adequate.  While
management uses available information to recognize loan losses, future additions
to the allowance  for loan losses may be necessary  based on changes in economic
conditions or changes in the values of properties  securing loans in the process
of foreclosure. 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 for loan losses based on their judgments about  information  available
to them at the time of their examination,  which may not be currently  available
to management.

Other  Real  Estate  Owned  ("OREO")  -- Other real  estate  owned  consists  of
properties  formerly pledged as collateral on loans, which have been acquired by
the Company through  foreclosure  proceedings or acceptance of a deed in lieu of
foreclosure.  Other real  estate  owned is carried at the lower of the  recorded
investment  in the loan or the fair  value of the real  estate,  less  estimated
costs to sell.  Upon transfer of a loan to foreclosure  status,  an appraisal is
obtained and any excess of the loan balance over the fair value,  less estimated
costs to sell, is charged  against the  allowance for loan losses.  Expenses and
subsequent adjustments to the fair value are treated as other operating expense.
Gains on the sale of other real estate  owned are  included in income when title
has passed and the sale has met the minimum down payment requirements prescribed
by GAAP.

Bank Premises and  Equipment -- Land is carried at cost.  Premises and equipment
are stated at cost less  accumulated  depreciation  computed  principally  using
accelerated  methods over the estimated useful lives of the assets,  which range
from 15 to 40 years  for  buildings  and from 3 to 10 years  for  furniture  and
equipment. Maintenance and repairs are charged to expense as incurred.

Bank-Owned Life Insurance ("BOLI") -- The 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 the
life insurance  policy results in an interest  sensitive  asset on the Company's
consolidated  statements of condition that provides  monthly  tax-free income to
the Company. In


                                                                            61-K
<PAGE>

Note 1. Summary of Significant Accounting Policies, Continued

addition to interest risk related to BOLI investments, there is also credit risk
related to insurance carriers. To mitigate this risk, annual financial condition
reviews  are  completed  on all  carriers.  BOLI  is  stated  on  the  Company's
consolidated  statements  of  condition  at its current  cash  surrender  value.
Increases in BOLI's cash surrender value are reported as other operating  income
in the Company's consolidated statements of income.

Income Taxes -- Income  taxes are  accounted  for under the asset and  liability
method.  The Company  files a  consolidated  tax return on the  accrual  method.
Deferred tax assets and liabilities  are recognized for future tax  consequences
attributable to temporary  differences  between the financial statement carrying
amounts of existing assets and  liabilities  and their  respective tax bases and
operating  loss  and  tax  credit  carry  forwards.   Deferred  tax  assets  and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which 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 in the period that includes the enactment date.

Pension  Costs -- The  Company  maintains  a  noncontributory,  defined  benefit
pension plan  covering  substantially  all  employees,  as well as  supplemental
employee  retirement  plans covering certain  executives.  Costs associated with
these plans, based on actuarial  computations of current and future benefits for
employees, are charged to current operating expenses.

Treasury Stock -- Treasury stock  acquisitions are recorded at cost.  Subsequent
sales of treasury stock are recorded on an average cost basis. Gains on the sale
of treasury stock are credited to additional paid-in-capital. Losses on the sale
of treasury  stock are charged to  additional  paid-in-capital  to the extent of
previous gains, otherwise charged to retained earnings.

Earnings  Per Share -- Basic  earnings  per share  (EPS) is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Entities with complex capital structures must
also present diluted EPS, which reflect the potential  dilution that could occur
if  securities  or other  contracts  to issue  common  stock were  exercised  or
converted  into  common  shares.  The  Company  does not have a complex  capital
structure and, accordingly, has presented only basic EPS.

Trust Department -- Assets held in fiduciary or agency  capacities for customers
are not included in the accompanying consolidated statements of condition, since
such items are not assets of the Company.

Financial  Instruments  with  Off-Balance  Sheet  Risk -- The Bank is a party to
other financial  instruments with off-balance sheet risk in the normal course of
business  to  meet  the  financing  needs  of  its  customers.  These  financial
instruments  include  commitments to extend credit and standby letters of credit
which involve, to varying degrees,  elements of credit and interest rate risk in
excess of the amount  recognized  in the  statement of  condition.  The contract
amounts of those  instruments  reflect the extent of involvement the Bank has in
particular classes of financial instruments.

Comprehensive  Income -- For the Company,  comprehensive  income  represents net
income plus other comprehensive  income (loss), which consists of the net change
in unrealized  gains or losses on securities  available for sale,  net of income
taxes, for the period and is presented in the consolidated statements of changes
in   stockholders'   equity  and   comprehensive   income.   Accumulated   other
comprehensive  income (loss)  represents the net  unrealized  gains or losses on
securities  available-for-sale  as of the  balance  sheet  dates,  net of income
taxes.

Segment  Reporting  -- The  Company's  operations  are  solely in the  community
banking  industry and include the provision of  traditional  commercial  banking
services.  The Company operates solely in the geographical region of Central New
York State. The Company has identified  separate  operating  segments;  however,
these segments did not meet the quantitative thresholds for separate disclosure.

Goodwill and Other Intangible  Assets  --Acquired  intangible assets (other than
goodwill) are amortized over their useful economic life,  while goodwill and any
acquired  intangible  assets with an  indefinite  useful  economic  life are not
amortized, but are reviewed for impairment on an annual basis.


62-K
<PAGE>

Note 2. Investment Securities

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

<TABLE>
<CAPTION>
                                                                             December 31, 2005
                                                             ----------------------------------------------------
                                                                             Gross         Gross      Estimated
                                                             Amortized    Unrealized    Unrealized        Fair
dollars in thousands                                            Cost         Gains        Losses         Value
-----------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>           <C>           <C>
Available-for-Sale Portfolio
U.S. Treasuries                                               $ 10,952      $     --      $     86      $ 10,866
Obligations of U.S. Government Corporations and Agencies        25,444            --           353        25,091
Obligations of States and Political Subdivisions                55,080           519           961        54,638
Mortgage-Backed Securities                                     146,463           156         3,371       143,248
Equity Securities                                                6,356           154             3         6,507
                                                              --------      --------      --------      --------
                                                              $244,295      $    829      $  4,774      $240,350
                                                              ========      ========      ========      ========

                                                              --------      --------      --------      --------
Trading Portfolio                                                1,334           208            --         1,542
                                                              ========      ========      ========      ========
Held-to-Maturity Portfolio
Obligations of States and Political Subdivisions              $ 10,655      $     27      $     49       10,633$
Mortgage-Backed Securities                                      44,284             1         1,081      $ 43,204
                                                              --------      --------      --------      --------
                                                              $ 54,939      $     28      $  1,130      $ 53,837
                                                              ========      ========      ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                             December 31, 2004
                                                             ----------------------------------------------------
                                                                             Gross         Gross      Estimated
                                                             Amortized    Unrealized    Unrealized        Fair
dollars in thousands                                            Cost         Gains        Losses         Value
-----------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>           <C>           <C>
Available-for-Sale Portfolio
U.S. Treasuries                                               $  4,960      $     56      $     --      $  5,016
Obligations of U.S. Government Corporations and Agencies        11,989             5            40        11,954
Obligations of States and Political Subdivisions                66,656         1,556           467        67,745
Mortgage-Backed Securities                                     159,289           612         1,256       158,645
Equity Securities                                                5,870           185            --         6,055
                                                              --------      --------      --------      --------
                                                              $248,764      $  2,414      $  1,763      $249,415
                                                              ========      ========      ========      ========

                                                              --------      --------      --------      --------
Trading Portfolio                                                1,347           157            --         1,504
                                                              ========      ========      ========      ========
Held-to-Maturity Portfolio
Obligations of States and Political Subdivisions              $  7,811      $    205      $     17      $  7,999
Mortgage-Backed Securities                                      51,652           127           454      $ 51,325
                                                              --------      --------      --------      --------
                                                              $ 59,463      $    332      $    471      $ 59,324
                                                              ========      ========      ========      ========
</TABLE>

The following tables provide information on temporarily impaired securities:

<TABLE>
<CAPTION>
                                                                              December 31, 2005
                                                  -----------------------------------------------------------------------
                                                    Less Than 12 Months     12 Months or Longer           Total
                                                  ------------------------ ----------------------  ----------------------
                                                   Estimated   Unrealized  Estimated   Unrealized  Estimated   Unrealized
dollars in thousands                               Fair Value    Losses    Fair Value    Losses    Fair Value    Losses
-------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>         <C>         <C>         <C>           <C>
U.S. Treasuries                                       10,866          86          --          --      10,866          87
Obligations of U.S. Government
   Corporations and Agencies                          15,255         193       9,837         160      25,092         354
Obligations of States and Political Subdivisions      17,608         235      18,296         775      35,904       1,010
Mortgage-Backed Securities                            69,924       1,193     104,396       3,259     174,320       4,450
Equity Securities                                        210           3          --          --         210           3
                                                    --------    --------    --------    --------    --------      ------
                                                    $113,863    $  1,710    $132,529    $  4,194    $246,392      $5,904
                                                    ========    ========    ========    ========    ========      ======

</TABLE>


                                                                            63-K
<PAGE>

Note 2. Investment Securities, Continued


<TABLE>
<CAPTION>
                                                                             December 31, 2004
                                                  -----------------------------------------------------------------------
                                                    Less Than 12 Months     12 Months or Longer           Total
                                                  ------------------------ ----------------------  ----------------------
                                                   Estimated   Unrealized  Estimated   Unrealized  Estimated   Unrealized
dollars in thousands                               Fair Value    Losses    Fair Value    Losses    Fair Value    Losses
-------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>         <C>         <C>         <C>           <C>
Obligations of U.S.
  Government Corporations and Agencies                 9,955          40          --          --       9,955        40
Obligations of States and Political Subdivisions      16,193         127       8,744         357      24,937       484
Mortgage-Backed Securities                           119,403       1,386      26,545         324     145,948     1,710
                                                    --------    --------    --------    --------    --------    ------
                                                    $145,551    $  1,553    $ 35,289    $    681    $180,840    $2,234
                                                    ========    ========    ========    ========    ========    ======
</TABLE>

The above unrealized losses are considered temporary, based on the following:

U.S. Treasuries and agencies,  State and political subdivisions:  The unrealized
losses on these  investments were caused by market interest rate increases.  The
contractual  terms of  these  investments  require  the  issuer  to  settle  the
securities at par upon maturity of the  investment.  Because the Company has the
ability and intent to hold these  investments  until a market price  recovery or
possibly    to    maturity,     these    investments    are    not    considered
other-than-temporarily impaired.


Mortgage-backed   securities:   The   unrealized   losses  on   investments   in
mortgage-backed   securities   has  been  caused  by  market   rate   increases.
Substantially  all of the contractual  cash flows of these securities are issued
or backed by various  government  agencies or government  sponsored  enterprises
such as GNMA,  FNMA, and FHLMC.  Because the decline in fair value is attributed
to market interest rates and not credit quality, and because the Company has the
ability and intent to hold these investments until a market price recovery or to
maturity, these investments are not considered other-than-temporarily impaired.

Based on our  analysis  for  other  than  temporary  impairment,  there  were no
securities  in the  investment  portfolio  at or during the twelve  months ended
December  31,  2005  and  2004  that  exceeded  the  Company's   guidelines  for
recognizing an other-than-temporary impairment loss.

The amortized cost and fair value of debt  securities by  contractual  maturity,
are shown below.  Expected  maturities will differ from  contractual  maturities
because issuers may have the right to call or prepay obligations with or without
call or prepayment penalties.  Equity securities have no stated maturity and are
excluded from the following tables.


                                                          December 31, 2005
                                                     --------------------------
                                                      Amortized         Fair
dollars in thousands                                     Cost           Value
--------------------------------------------------------------------------------
Available-for-Sale Securities
Due in One Year or Less                                 11,788          11,669
Due After One Year Through Five Years                   73,005          71,630
Due After Five Years Through Ten Years                  72,257          70,860
Due After Ten Years                                     80,889          79,684
                                                      --------        --------
                                                      $237,939        $233,843
                                                      ========        ========

                                                          December 31, 2005
                                                     --------------------------
                                                      Amortized         Fair
dollars in thousands                                     Cost           Value
--------------------------------------------------------------------------------
Held-to-Maturity Securities
Due in One Year or Less                                  3,391           3,476
Due After One Year Through Five Years                    2,048           2,051
Due After Five Years Through Ten Years                  22,502          21,979
Due After Ten Years                                     26,998          26,331
                                                      --------        --------
                                                      $ 54,939        $ 53,837
                                                      ========        ========


64-K
<PAGE>

Note 2. Investment Securities, Continued

The following table sets forth  information  with regard to securities gains and
losses realized on sales or calls:

<TABLE>
<CAPTION>
                               Year Ended               Year Ended                 Year Ended
                            December 31, 2005        December 31, 2004          December 31, 2003
                          ----------------------   ----------------------    ----------------------
                          Available -              Available -               Available -
dollars in thousands      -for-Sale      Trading   -for-Sale      Trading    -for-Sale      Trading
---------------------------------------------------------------------------------------------------
<S>                       <C>          <C>         <C>          <C>          <C>          <C>
Gross Gains               $     383    $      99   $     932    $     161    $     842    $     280
Gross Losses                    (13)          --         (61)          (1)         (34)         (24)
                          ---------    ---------   ---------    ---------    ---------    ---------
Net Securities Gains      $     370    $      99   $     871    $     160    $     808    $     256
                          =========    =========   =========    =========    =========    =========
</TABLE>

Federal Home Loan Bank and Federal  Reserve Bank stock of $3,424,000 at December
31,  2005,  and  $3,504,000  in 2004 is carried  at cost as fair  values are not
readily determinable.  Both investments are required for membership. At December
31, 2005,  investment  securities with an amortized cost of $181,038,000  and an
estimated  fair value of  $177,864,000  were pledged as  collateral  for certain
public deposits and other purposes as required or permitted by law.

Note 3. Loans

                                                             December 31,
dollars in thousands                                    2005             2004
--------------------------------------------------------------------------------
Residential Real Estate                                123,748          119,103
Commercial Real Estate                                 144,171          129,516
Commercial                                              69,651           78,003
Consumer                                                66,095           64,421
                                                     ---------        ---------
                                                       403,665          391,043
Less: Allowance for Loan Losses                         (6,640)          (6,250)
                                                     ---------        ---------
    Net Loans                                        $ 397,025        $ 384,793
                                                     =========        =========

At December 31, 2005, $57,012,000  residential real estate loans were pledged as
collateral for FHLBNY advances.

At the periods  presented  below, the subsidiary bank had loans to directors and
executive  officers of the Company and its subsidiary,  or company in which they
have  ownership.  Such  loans are made in the  ordinary  course of  business  on
substantially the same terms, including interest rates and collateral,  as those
prevailing at the time for  comparable  transactions  with other persons and did
not involve more than normal risk of collectibility or present other unfavorable
features. Loan transactions with related parties are as follows:


                                                           December 31,
dollars in thousands                                   2005              2004
--------------------------------------------------------------------------------
Balance at Beginning of Year                         $ 14,249          $ 13,254
Loan Payments                                          (8,133)           (2,320)
New Loans and Advances                                    480             3,315
                                                     --------          --------
    Ending Balance                                   $  6,596          $ 14,249
                                                     --------          --------


                                                                            65-K
<PAGE>

Note 4. Allowance for Loan Losses

Changes in the allowance for loan losses are presented in the following summary:

                                                  Year Ended December 31,
dollars in thousands                          2005          2004          2003
--------------------------------------------------------------------------------
Balance at Beginning of Year                $ 6,250       $ 5,757       $ 5,392
Provision for Loan Losses                     1,580         1,200         1,565
Recoveries Credited                             285           237           276
Loans Charged-Off                            (1,475)         (944)       (1,476)
                                            -------       -------       -------
    Ending Balance                          $ 6,640       $ 6,250       $ 5,757
                                            =======       =======       =======

The following provides information on impaired loans for the periods presented:

                                                        As of and For the Year
                                                       Year Ended December 31,
dollars in thousands                                   2005      2004      2003
--------------------------------------------------------------------------------
Impaired Loans                                        $3,478    $2,411    $3,270
Allowance for Impaired Loans                           1,179       651       510
Average Recorded Investment in Impaired Loans          3,170     2,089     3,485

The following table sets forth information with regards to non-performing loans:


                                                          As of December 31,
dollars in thousands                                   2005      2004      2003
--------------------------------------------------------------------------------
Loans in Non-Accrual Status                           $3,866    $2,561    $3,164
Loans Contractually Past Due 90 Days or More
  and Still Accruing Interest                            181       190       123
Troubled Debt Restructured Loans                         871        --       371
                                                      ------    ------    ------
    Total Non-Performing Loans                        $4,918    $2,751    $3,658
                                                      ======    ======    ======

Had the loans in non-accrual  status performed in accordance with their original
terms,  additional  interest  income of $49,000 would have been recorded for the
year ended December 31, 2005. In addition,  in 2004 and 2003 interest  income of
$22,000, and $83,000, respectively, would have been recorded.

Had the troubled debt  restructured  loans  performed in  accordance  with their
original  terms,  the Company would have recorded  interest income of $3,000 for
the year ended  December  31, 2005 and $31,000 for the year ended  December  31,
2003.  Under the restructured  terms,  the Company  recorded  interest income of
$4,000 for the year  ended  December  31,  2005 and  $32,000  for the year ended
December 31, 2003.

Note 5. Premises and Equipment

                                                             December 31,
dollars in thousands                                     2005            2004
--------------------------------------------------------------------------------
Land                                                   $    599        $    539
Buildings                                                 8,614           7,892
Furniture, Fixtures and Equipment                         6,046           5,518
                                                       --------        --------
                                                         15,259          13,949
Less: Accumulated Depreciation                           (8,829)         (8,089)
                                                       --------        --------
                                                       $  6,430        $  5,860
                                                       ========        ========

Depreciation  expense was $797,000,  $773,000,  and $781,000 for the years ended
December 31, 2005, 2004 and 2003, respectively.



66-K
<PAGE>

Note 6. Goodwill and Intangible Assets

Goodwill and intangible assets are presented in the following table:

                                                              December 31,
dollars in thousands                                     2005              2004
--------------------------------------------------------------------------------
Goodwill                                              $ 4,518           $ 2,682
                                                      =======           =======

Core Deposit Intangible                               $   777           $   285
Other Intangible Assets                                   350               350
                                                      -------           -------
  Total Intangible Assets                             $ 1,127           $   635
Accumulated Amortization                                 (429)             (258)
                                                      -------           -------
  Intangible Assets, Net                              $   698           $   377
                                                      =======           =======

Amortization  expense on  intangible  assets was $171,000 for 2005,  $84,000 for
2004,  and $115,000 for 2003. The core deposit  intangible and other  intangible
assets are amortized over a weighted  average period of  approximately  5 and 15
years, respectively.

In February  2005,  the Company  acquired  two  branches  and  recorded  related
goodwill of $1,836,000 and a core deposit intangible asset of $492,000.

Estimated  annual  amortization   expense  of  intangible  assets,   absent  any
impairment or change in estimated useful lives is summarized as follows for each
of the next five years:

dollars in thousands
--------------------------------------------------------------------------------
    2006                                                                   $179
    2007                                                                    129
    2008                                                                    121
    2009                                                                    121
    2010                                                                     31

Note 7. Time Deposits

Contractual maturities of time deposits were as follows:

                                                           December 31, 2005
dollars in thousands                                    Amount              %
--------------------------------------------------------------------------------
2006                                                   $123,509           47.16
2007                                                     75,412           28.80
2008                                                     40,007           15.28
2009                                                     21,157            8.08
2010                                                      1,678            0.64
Thereafter                                                  100            0.04
                                                       --------          ------
                                                       $261,863          100.00%
                                                       --------          ------


                                                                            67-K
<PAGE>

Note 8. Borrowings

The following is a summary of borrowings:

<TABLE>
<CAPTION>
                                                                                      December 31,
dollars in thousands                                                                2005       2004
------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>       <C>
Short-Term Borrowings:
  Federal Funds Purchased                                                            $    --   $  2,400
  Securities Sold Under Agreements to Repurchase                                      17,564     33,106
  Treasury Tax and Loan Notes                                                          1,793      2,053
Long-Term Borrowings:
  Advances from Federal Home Loan Bank of New York
     Bearing Interest at 3.64% to 5.68%, Due January 2005                                 --        617
     Bearing Interest at 6.52%, Due January 2005                                          --     10,000
     Bearing Interest at 1.30% to 6.55%, Due March 2005                                   --     13,000
     Bearing Interest at 2.62%, Due November 2012, Callable November 2005                 --      8,000
     Bearing Interest at 5.90% to 6.11%, Due December 2005                                --      4,000
     Bearing Interest at 5.77%, Due January 2006                                       1,000      1,000
     Bearing Interest at 1.81%, Due March 2006                                         3,000      3,000
     Bearing Interest at 5.22%, Due July 2006                                            223        544
     Bearing Interest at 4.30%, Due November 2010, Callable November 2006              4,000         --
     Bearing Interest at 3.62%, Due February 2008, Callable February 2007              5,000         --
     Bearing Interest at 2.35% to 2.43%, Due March 2007                                5,500      5,500
     Bearing Interest at 3.85%, Due March 2010, Callable March 2007                    5,000         --
     Bearing Interest at 3.05%, Due December 2012, Callable December 2007              8,000      8,000
     Bearing Interest at 5.56%, Due July 2008                                            427        572
     Bearing Interest at 4.31% Due November 2015, Callable November 2008               4,000         --
     Bearing Interest at 5.03%, Due January 2009                                         992      1,274
     Bearing Interest at 3.85%, Due January 2010                                         846         --
     Bearing Interest at 3.12%, Due March 2011                                         2,735      3,199
     Bearing Interest at 5.89% to 5.95%, Due July 2011                                 1,084      1,241
     Bearing Interest at 5.30%, Due December 2011                                      1,340      1,521
     Bearing Interest at 4.11%, Due January 2012                                         896         --
     Bearing Interest at 4.42%, Due January 2015                                         932         --
     Bearing Interest at 6.26%, Due July 2016                                            800        851
     Bearing Interest at 5.77%, Due December 2016                                      1,631      1,733
     Bearing Interest at 6.04%, Due January 2017                                         823        873
     Bearing Interest at 6.46%, Due July 2021                                            439        454
     Bearing Interest at 5.07%, Due January 2025                                       3,804         --
                                                                                     -------   --------
     Total Borrowings                                                                $71,829   $102,938
                                                                                     =======   ========
</TABLE>

Borrowings   from  the  Federal  Home  Loan  Bank  of  New  York   (FHLBNY)  are
collateralized by mortgage loans, mortgage-backed securities or other government
agency securities. At December 31, 2005, $26,500,000 of the long term borrowings
were  collateralized  by securities  with an amortized  cost and estimated  fair
value of  $30,492,000  and  $29,773,000,  respectively.  The remaining long term
borrowings  totaling  $25,972,000 are  collateralized by the Company's  mortgage
loans.  At December 31, 2005, the Bank had a line of credit of $75,432,000  with
the FHLB. However,  based on outstanding  borrowings at FHLB the total potential
borrowing  capacity on these  lines is reduced to  $19,413,000  at December  31,
2005.

Information related to short-term borrowings is as follows:

                                                         As of and For the
                                                      Year Ended December 31,
dollars in thousands                                2005       2004       2003
--------------------------------------------------------------------------------
Outstanding Balance at End of Period              $19,357    $37,559    $20,018
Average Interest Rate at End of Period               3.30%      1.77%      0.92%
Maximum Outstanding at any Month-End               39,447     37,559     20,018
Average Amount Outstanding during Period           22,747     17,288     13,529
Average Interest Rate during Period                  2.78%      1.23%      0.86%


68-K
<PAGE>

Note 8. Borrowings, Continued

Average  amounts  outstanding  and average  interest  rates are  computed  using
weighted daily averages.

Securities sold under agreements to repurchase included in short-term borrowings
represent  the  purchase of  interests in  government  securities  by the Bank's
customers  or other  third  parties,  which are  repurchased  by the Bank on the
following business day or at stated maturity. The underlying securities are held
in a third party  custodian  account and are under the  Company's  control.  The
amortized cost and estimated fair value of securities  pledged as collateral for
repurchase  agreements  was  $43,660,000  and  $42,802,000 at December 31, 2005,
respectively.  These amounts are included in the total of investment  securities
pledged disclosed in Note 2.

Note 9. Income Taxes

Income tax expense  attributable  to income  before  taxes is  comprised  of the
following:

                                                    Year Ended December 31,
dollars in thousands                             2005          2004         2003
--------------------------------------------------------------------------------
Current:
   Federal                                    $ 2,541       $ 2,738       $2,620
   State                                          312           320          321
                                              -------       -------       ------
      Total Current                             2,853         3,058        2,941
Deferred:
   Federal                                        (75)         (109)         275
   State                                          (63)           53           61
                                              -------       -------       ------
      Total Deferred                             (138)          (56)         336
                                              -------       -------       ------
        Total Income Tax Expense              $ 2,715       $ 3,002       $3,277
                                              =======       =======       ======

The components of deferred income taxes,  which are included in the consolidated
statements of condition are:

                                                        Year Ended December 31,
dollars in thousands                                       2005          2004
--------------------------------------------------------------------------------
Assets:
   Allowance for Loan Losses                             $2,586        $2,434
   Deferred Compensation                                  1,341         1,255
   Net Unrealized Loss on Securities
     Available-for-Sale                                   1,537            --
   Other                                                    203           168
                                                         ------        ------
                                                          5,667         3,857
                                                         ------        ------
Liabilities:
   Securities Discount Accretion                            280           221
   Defined Benefit Pension Plan                           1,544         1,768
   Net Unrealized Gain on Securities
     Available-for-Sale                                      --           252
   Equity Investment                                        286           132
   Goodwill Amortization                                    233           140
   Other                                                    406           353
                                                         ------        ------
                                                          2,749         2,866
                                                         ------        ------
     Net Deferred Tax Assets                             $2,918        $  991
                                                         ======        ======


                                                                            69-K
<PAGE>

Note 9. Income Taxes, Continued

Realization  of deferred tax assets is dependent  upon the  generation of future
taxable  income  or the  existence  of  sufficient  taxable  income  within  the
carryback period. A valuation  allowance is provided 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.

A  reconciliation  of the  statutory  federal  income tax rate to the  effective
income tax rate is as follows:

                                                      Year Ended December 31,
dollars in thousands                                2005       2004       2003
--------------------------------------------------------------------------------
Statutory Federal Income Tax Rate                   34.0%      34.0%      34.0%
Variances from Statutory Rate:
   State Income Tax, Net of Federal Tax Benefit      1.6        2.1        2.1
   Tax Exempt Income                               (12.1)     (10.2)      (8.8)
   Other                                             2.5       (0.1)        --
                                                    ----       ----       ----
     Effective Tax Rate                             26.0%      25.8%      27.3%
                                                    ====       ====       ====

Note. 10. Employee Benefit Plans

The Company, through its bank subsidiary, has a non-contributory defined benefit
pension  plan  covering  employees  who  have  attained  the age of 21 and  have
completed one year of service.  The Company's  funding practice is to contribute
at least the minimum  amount  annually  to meet  minimum  funding  requirements.
Contributions  are  intended  to provide  not only for  benefits  attributed  to
service to date, but for those expected to be earned in the future.  Plan assets
consist primarily of marketable fixed income securities and common stocks.  Plan
benefits are based on years of service and the employee's  average  compensation
during the five highest consecutive years of the last ten years of employment.

The following  table sets forth the components of pension  expense  (benefit) as
well as changes in the plan's projected  benefit  obligation and plan assets and
the plan's funded status and amounts  recognized in the consolidated  statements
of condition based on a September 30 measurement date.

dollars in thousands                                        2005        2004
--------------------------------------------------------------------------------
Change in Benefit Obligation:
    Benefit Obligation at Beginning of Year               $ 16,050    $ 14,259
    Service Cost                                               682         646
    Interest Cost                                              924         839
    Actuarial Loss                                           1,305         903
    Benefits Paid                                             (693)       (597)
                                                          --------    --------
    Projected Benefit Obligation at End of Year           $ 18,268    $ 16,050
                                                          ========    ========

Change in Plan Assets:
    Fair Value of Plan Assets at Beginning of Year        $ 15,404    $ 14,538
    Actual Gain on Plan Assets                               1,765       1,462
    Employer Contribution                                      552          --
    Benefits Paid                                             (693)       (597)
                                                          --------    --------
    Fair Value of Plan Assets at End of Year              $ 17,028    $ 15,403
                                                          ========    ========

dollars in thousands                                          2005        2004
--------------------------------------------------------------------------------
Unfunded Status                                           $ (1,240)   $   (647)
Unrecognized Net Actuarial Loss                              4,849       4,244
Unrecognized Net Transition Asset                               --          --
Unrecognized Prior Service Cost                                355         389
                                                          --------    --------
Prepaid Benefit Cost before Fourth Quarter Contribution   $  3,964    $  3,986
Amount Contributed during the Fourth Quarter              $     --    $    552
                                                          --------    --------
Prepaid Benefit Cost at December 31                       $  3,964    $  4,538
                                                          ========    ========


70-K
<PAGE>

Note. 10. Employee Benefit Plans, Continued

The following table presents a comparison of the accumulated  benefit obligation
and plan assets:


dollars in thousands                                        2005           2004
--------------------------------------------------------------------------------
    Projected benefit obligation                          $18,268        $16,050
    Accumulated benefit obligation                         15,354         13,491
    Fair Value of Plan Assets                              17,028         15,403

Components of Net Periodic Benefit Cost are:

dollars in thousands                              2005         2004       2003
--------------------------------------------------------------------------------
    Service Cost                                $   682      $   646      $ 541
    Interest Cost                                   924          839        785
    Expected Return on Plan Assets               (1,247)      (1,142)      (949)
    Net Amortization                                215          200        166
                                                -------      -------      -----
                                                $   574      $   543      $ 543
                                                =======      =======      =====

The following  weighted-average  assumptions  were used to determine the benefit
obligation of the plan as of September 30:

                                                  2005       2004       2003
--------------------------------------------------------------------------------
      Discount Rate                               5.50%      5.88%      6.00%
      Expected Return on Plan Assets              8.00%      8.00%      8.00%
      Rate of Compensation Increase               3.00%      3.00%      3.00%

The  following  weighted-average  assumptions  were  used to  determine  the net
periodic benefit cost of the plan for the years ended December 31:

                                                  2005       2004       2003
--------------------------------------------------------------------------------
      Discount Rate                               5.88%      6.00%      6.75%
      Expected Return on Plan Assets              8.00%      8.00%      8.50%
      Rate of Compensation Increase               3.00%      3.00%      4.00%

The plan's weighted average asset allocations at September 30, 2005 and 2004, by
asset category are as follows:

                                                         Plan Assets at
                                                          September 30,
                                                       2005            2004
--------------------------------------------------------------------------------
      Equity Securities                                58.8%           64.7%
      Debt Securities                                  41.2%           34.9%
      Other                                             0.0%            0.4%
                                                      -----           -----
                                                      100.0%          100.0%
                                                      =====           =====

The following  benefit  payments,  which reflect  expected  future  service,  as
appropriate, are expected to be paid over the next five years

dollars in thousands
-------------------------------------------------------------------------------
    2006                                                            $   685
    2007                                                                774
    2008                                                                820
    2009                                                                819
    2010                                                                849
    2011-2016                                                         5,143


                                                                            71-K
<PAGE>

Note. 10. Employee Benefit Plans, Continued

Investment Strategy

The plan assets are  invested in the New York State  Bankers  Retirement  System
(the  "System"),  which was  established  in 1938 to provide  for the payment of
benefits to employees of participating  banks. The System is overseen by a Board
of Trustees who meet quarterly and set the  investment  policy  guidelines.  The
System utilizes two investment  management firms,  (which will be referred to as
Firm  I and  Firm  II).  Firm I is  investing  approximately  68%  of the  total
portfolio  and Firm II is  investing  approximately  32% of the  portfolio.  The
System's  investment  objective is to exceed the  investment  benchmarks in each
asset category.  Each firm operates under a separate written  investment  policy
approved  by the  Board of  Trustees  and  designed  to  achieve  an  allocation
approximating  60%  invested  in  Equity  Securities  and 40%  invested  in Debt
Securities. Each firm reports at least quarterly to the Investment Committee and
semi-annually to the Board.

The equity  portfolio  consists of  international  securities  and a diversified
range of securities in the US equity markets.  The fixed income porfolio focuses
the  purchase  and sale of futures and options on futures on foreign  currencies
and foreign and domestic bonds, bond indicies and short-term securities.

Discount Rate

Annually,  the Company establishes a discount rate to determine the value of the
plan's benefit obligation.  The Company uses the 20-year AA Corporate bond yield
as a basis for determining the discount rate for the plan.

Expected Long-Term Rate-of-Return

The expected  long-term  rate-of-return  on the plan assets  reflects  long-term
earnings  expectations on existing plan assets and those contributions  expected
to  be  received  during  the  current  plan  year.  In  estimating  that  rate,
appropriate  consideration was given to historical returns earned by plan assets
in the fund and the rates of return  expected to be available for  reinvestment.
Average rates of return over the past 1,3,5 and 10 year periods were  determined
and  subsequently  adjusted to reflect  current  capital market  assumptions and
changes in investment allocations.

Supplemental Retirement Income Agreement

In addition to the Company's  noncontributory  defined  benefit pension plan, in
2002 the Company  adopted two  supplemental  employee  retirement  plans for one
current  executive  and one  former  executive.  The  amount of the  liabilities
recognized in the Company's consolidated statements of condition associated with
these plans was $934,000 at December 31, 2005 and $787,000 at December 31, 2004.
For the years ended December 31, 2005,  2004,  and 2003, the Company  recognized
$194,000,  $178,000  and  $163,000,  respectively,  of expense  related to those
plans. The discount rate used in determining the actuarial present values of the
projected benefit obligations was 5.88% at December 31, 2005.

Note 11. Commitments and Contingencies

Financial  instruments  whose contract amounts  represent credit risk consist of
the following:


                                                                December 31,
dollars in thousands                                       2005            2004
--------------------------------------------------------------------------------
Commitments to Extend Credit                             $76,783         $57,055
Standby Letters of Credit                                  8,880           9,948

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 some of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent future cash requirements.

Standby letters of credit written are conditional commitments issued by the Bank
to guarantee the  performance of a customer to a third party.  Those  guarantees
are  primarily  issued to support  public and  private  borrowing  arrangements,
including bond financing and similar  transactions.  The credit risk involved in
issuing  letters of credit is essentially the same as that involved in extending
loan  facilities to customers.  Since some of the letters of credit are expected
to expire  without  being  drawn  upon,  the  total  commitment  amounts  do not
necessarily represent future cash requirements.


72-K
<PAGE>


Note 11. Commitments and Contingencies, Continued

The  estimated  fair value of the Company's  stand-by  letters of credit was $12
thousand   and  $22  thousand  at  December  31,  2005  and  December  31,  2004
respectively.  The estimated  fair value of stand-by  letters of credit at their
inception  is equal to the fee that is charged to the  customer by the  Company.
Generally,  the Company's stand-by letters of credit have a term of one year. In
determining  the fair  values  disclosed  above,  the  fees  were  reduced  on a
straight-line  basis from the inception of each stand-by letter of credit to the
respective  dates above. Due to immateriality of the fair value of the Company's
standby  letters of credit,  as well as their  short-term  nature,  the  Company
recognized  the fees for the  stand-by  letters of credit in income at inception
during 2003.

The  amount  of  collateral  obtained,  if  deemed  necessary,  by the Bank upon
extension of credit for  commitments to extend credit and letters of credit,  is
based upon management's credit evaluation of the counter party.  Collateral held
varies but includes residential and commercial real estate.

In the ordinary course of business there are various legal  proceedings  pending
against  the  Company.  After  consultation  with  outside  counsel,  management
considers  that the aggregate  exposure,  if any,  arising from such  litigation
would not have a material adverse effect on the Company's consolidated financial
position.

Note 12. Disclosures about Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial  Instruments," requires
disclosure of fair value information about financial instruments, whether or not
recognized  in  the  consolidated  statement  of  condition,  for  which  it  is
practicable to estimate that value.  In cases where quoted market prices are not
available,  fair  values are based on  estimates  using  present  value or other
valuation  techniques.  Those  techniques  are  significantly  affected  by  the
assumptions  used,  including  the  discount  rate and  estimates of future cash
flows. In that regard,  the derived fair value estimates cannot be substantiated
by comparison to independent markets and in many cases, could not be realized in
immediate settlement of the instruments. SFAS No. 107 excludes certain financial
instruments and all nonfinancial  instruments from its disclosure  requirements.
Accordingly,  the aggregate  fair value  amounts  presented do not represent the
underlying value of the Bank.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

Short-Term Financial Instruments

The fair value of certain  financial  instruments  is estimated  to  approximate
their  carrying  value because the  remaining  term to maturity of the financial
instrument is less than 90 days or the financial  instrument reprices in 90 days
or less.  Such financial  instruments  include cash and due from banks,  Federal
Funds sold, accrued interest receivable and accrued interest payable.

The fair value of Time Deposits with Other Banks is estimated  using  discounted
cash flow analysis based on the Company's current  reinvestment rate for similar
deposits.

Securities

Fair values of securities are based on quoted market prices or dealer quotes. If
a quoted  market price is not  available,  fair value is estimated  using quoted
market prices for similar securities.

Loans

For certain homogenous categories of loans, such as some residential  mortgages,
credit card receivables, and other consumer loans, fair value is estimated using
the quoted market prices for securities  backed by similar  loans,  adjusted for
differences in loan  characteristics.  The fair value of other types of loans is
estimated by discounting  the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for the
same remaining maturities.



                                                                            73-K
<PAGE>

Note 12. Disclosures about Fair Value of Financial Instruments, Continued

Deposits

The fair value of demand deposits,  savings accounts,  and certain NOW and money
market  deposits is the amount payable on demand at the reporting date. The fair
value of  fixed-maturity  time deposits is estimated  using the rates  currently
offered for deposits of similar remaining maturities.

Borrowings

The fair value of repurchase agreements,  short-term  borrowings,  and long-term
borrowings  is  estimated  using  discounted  cash  flow  analysis  based on the
Company's current incremental borrowing rate for similar borrowing arrangements.

Off-Balance Sheet Instruments

The fair value of outstanding loan commitments and standby letters of credit are
based on fees currently  charged to enter into similar  agreements,  taking into
account the  remaining  terms of the  agreements,  the counter  parties'  credit
standing and discounted cash flow analysis.  The fair value of these instruments
approximates the value of the related fees and is not material.

The carrying  values and estimated fair values of the  Company's financial
instruments are as follows:


<TABLE>
<CAPTION>
                                          December 31                December 31
                                              2005                      2004
                                     --------------------------------------------------
                                      Carrying         Fair     Carrying         Fair
dollars in thousands                     Value        Value        Value        Value
---------------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>          <C>
Financial Assets:
    Cash and Cash Equivalents        $  18,417    $  18,427    $  20,539    $  21,112
    Securities                         296,831      295,729      310,382      310,243
    Loans                              403,665      398,429      391,043      393,640
    Allowance for Loan Losses           (6,640)      (6,640)      (6,250)      (6,250)
                                     ---------    ---------    ---------    ---------
      Net Loans                        397,025      391,789      384,793      387,390
    Accrued Interest Receivable          3,297        3,297        2,857        2,857
Financial Liabilities:
    Demand, Savings, NOW and Money
      Market Deposit Accounts        $ 342,815    $ 342,815    $ 304,897    $ 304,897
    Time Deposits                      262,143      262,133      267,032      266,577
    Borrowings                          71,829       70,638      102,938      103,675
    Accrued Interest Payable               690          690          678          678
</TABLE>


                                      74-K
<PAGE>

Note 13. Regulatory Matters

The Company and the subsidiary  bank are 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 Company' s consolidated  financial  statements.
Under  capital  adequacy  guidelines  and the  regulatory  framework  for prompt
corrective  action,  the subsidiary bank must meet specific  capital  guidelines
that  involve  quantitative  measures  of  assets,   liabilities,   and  certain
off-balance sheet items as calculated under regulatory accounting practices. The
Company's and subsidiary  bank's capital  amounts and  classifications  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the  maintenance  of minimum  amounts and ratios (set forth in the table
below)  of  total  and  Tier  1  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined).  Management  believes the Company and subsidiary  bank meet
all capital adequacy requirements to which they are subject.

The most recent  notification from the Office of the Comptroller of the Currency
categorized  the  subsidiary  bank  as well  capitalized  under  the  regulatory
framework for prompt  corrective  action.  To be categorized as well capitalized
the Company and subsidiary bank must maintain minimum total  risk-based,  Tier 1
risk-based,  and Tier 1  leverage  ratios as set forth in the  following  table.
There have been no conditions or events since that  notification that management
believes have changed the subsidiary institution's category.

<TABLE>
<CAPTION>
                                                                      For Capital
                                                 Actual:           Adequacy Purposes:     Well Capitalized:
dollars in thousands                        Amount      Ratio      Amount      Ratio      Amount      Ratio
-------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>      <C>            <C>     <C>           <C>
As of December 31, 2005
Total Capital to Risk-Weighted Assets:
    The Company                           $ 71,198      14.37%   $ 39,626       8.00%        N/A        N/A
    Subsidiary Bank                       $ 68,365      13.83%   $ 39,546       8.00%   $ 49,432      10.00%
Tier 1 Capital to Risk-Weighted Assets:
    The Company                           $ 65,000      13.12%   $ 19,813       4.00%        N/A        N/A
    Subsidiary Bank                       $ 62,180      12.58%   $ 19,773       4.00%   $ 29,659       6.00%
Tier 1 Capital to Average Assets:
    The Company                           $ 65,000       8.71%   $ 29,846       4.00%        N/A        N/A
    Subsidiary Bank                       $ 62,180       8.35%   $ 29,798       4.00%   $ 37,247       5.00%

As of December 31, 2004
Total Capital to Risk-Weighted Assets:
    The Company                           $ 70,276      14.34%   $ 39,197       8.00%        N/A        N/A
    Subsidiary Bank                       $ 67,689      13.84%   $ 39,132       8.00%   $ 48,915      10.00%
Tier 1 Capital to Risk-Weighted Assets:
    The Company                           $ 64,150      13.09%   $ 19,599       4.00%        N/A        N/A
    Subsidiary Bank                       $ 61,571      12.59%     19,566       4.00%   $ 29,349       6.00%
Tier 1 Capital to Average Assets:
    The Company                           $ 64,150       8.59%   $ 29,880       4.00%        N/A        N/A
    Subsidiary Bank                       $ 61,571       8.25%   $ 29,854       4.00%   $ 37,318       5.00%
</TABLE>

Banking  regulations  limit  the  amount  of  dividends  that  may  be  paid  to
stockholders.  Generally,  dividends are limited to retained net profits for the
current year and two preceding years. At December 31, 2005,  dividends  totaling
$9,787,000 could have been paid without prior regulatory approval.


                                                                            75-K
<PAGE>

Note 14. Other Comprehensive Income

The  following  is a summary of changes  in other  comprehensive  income for the
periods presented:

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
dollars in thousands                                                  2005       2004       2003
--------------------------------------------------------------------------------------------------
<S>                                                                 <C>        <C>        <C>
Unrealized Holding Losses Arising During the Period Net of Tax
   (Pre-tax Amount of ($4,226,000), ($564,000), and ($4,094,000))   $(2,579)   $  (344)   $(2,485)
Reclassification Adjustment for Gains Realized in Net Income
   During the Period, Net of Tax (Pre-tax Amount of ($370,000),
    ($871,0000), and ($808,000))                                       (226)      (532)      (485)
                                                                    -------    -------    -------
Other Comprehensive Loss, Net of Tax of ($1,791,000), ($559,000)
    and ($1,932,000)                                                $(2,805)   $  (876)   $(2,970)
                                                                    =======    =======    =======
</TABLE>

Note 15. Parent Company Only Financial Statements

Presented below are the condensed statements of condition December 31, 2005, and
2004 and  statements  of  income  and cash  flows  for each of the  years in the
three-year  period  ended  December  31,  2005,  for the Parent  Company.  These
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial statements and notes thereto.

Condensed Statements of Condition

                                                                 December 31,
dollars in thousands                                           2005       2004
--------------------------------------------------------------------------------
Assets
Cash and Cash Equivalents                                     $ 1,593    $ 2,083
Securities Available for Sale, at Estimated Fair Value          1,229        638
Investment in Subsidiary, Equity Basis                         64,897     64,913
Other Assets                                                    1,547      1,525
                                                              -------    -------
    Total Assets                                              $69,266    $69,159
                                                              =======    =======
Liabilities and Stockholders' Equity
Total Liabilities                                             $ 1,549    $ 1,554
Stockholders' Equity                                           67,717     67,605
                                                              -------    -------
    Total Liabilities and Stockholders' Equity                $69,266    $69,159
                                                              =======    =======

Condensed Statements of Income

<TABLE>
<CAPTION>
                                                                 December 31,
dollars in thousands                                      2005       2004       2003
--------------------------------------------------------------------------------------
<S>                                                     <C>        <C>        <C>
Dividends from Subsidiary                               $ 5,305    $ 5,306    $ 5,375
Interest and Other Dividend Income                           89         47         31
Net (Loss) Gain on Sale of Securities                        --         95         --
                                                        -------    -------    -------
                                                          5,394      5,448      5,406

Operating Expense                                           606        301        172
                                                        -------    -------    -------
Income Before Income Tax (Benefit) Expense and Equity
    in Undistributed Income of Subsidiary                 4,788      5,147      5,234
Income Tax (Benefit) Expense                               (190)       (81)       (56)
Equity in Undistributed Income of Subsidiaries            2,766      3,390      3,423
                                                        -------    -------    -------
Net Income                                              $ 7,744    $ 8,618    $ 8,713
                                                        =======    =======    =======
</TABLE>


76-K
<PAGE>

Note 15. Parent Company Only Financial Statements, Continued

Condensed Statements of Cash Flows

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
dollars in thousands                                        2005       2004       2003
----------------------------------------------------------------------------------------
<S>                                                       <C>        <C>        <C>
Cash Flows from Operating Activities:
Net Income                                                $ 7,744    $ 8,618    $ 8,713
Adjustments to Reconcile Net Income to Cash
    Provided by Operating Activities:
    Investment Security Gains                                  --        (95)        --
    Decrease (Increase) in Other Assets                        16        (16)        (4)
    (Decrease) Increase in Other Liabilities                  (32)        91        (44)
    Equity in Undistributed Income of Subsidiaries         (2,766)    (3,390)    (3,423)
                                                          -------    -------    -------
      Net Cash Provided by Operating Activities             4,962      5,208      5,242
                                                          -------    -------    -------
Cash Flows from Investing Activities:
Proceeds from Sales of Available-for-Sale Securities           --        195         --
Purchase of Available-for-Sale Securities                    (625)        --         --
                                                          -------    -------    -------
    Net Cash (Used by) Provided by Investing Activities      (625)       195         --
                                                          -------    -------    -------
Cash Flows from Financing Activities:
Purchase of Treasury Stock                                   (581)      (182)      (492)
Sale of Treasury Stock                                         --         --         --
Cash Dividends                                             (4,246)    (4,259)    (4,319)
                                                          -------    -------    -------
    Net Cash Used in Financing Activities                  (4,827)    (4,441)    (4,811)
                                                          -------    -------    -------
      Net (Decrease) Increase in Cash Equivalents            (490)       962        431
Cash and Cash Equivalents at Beginning of Year              2,083      1,121        690
                                                          -------    -------    -------
    Cash and Cash Equivalents at End of Year              $ 1,593    $ 2,083    $ 1,121
                                                          =======    =======    =======
</TABLE>

Note 16. Stockholders' Equity

On July 21, 2003 the Board of Directors  approved a 4-for-1  stock split payable
on September 18, 2003. On September 5, 2003, the stockholders  approved:  (i) an
increase in authorized shares of common stock to 16,000,000 and (ii) a change in
the par value of the common stock from no par value to $0.01 par value.  All per
share amounts were restated to reflect the 4-for-1 stock split.  The stock split
resulted in an increase in the shares  issued and treasury  shares of 10,471,248
and 2,064,204 shares, respectively, on September 5, 2003.


Note 17. Federal Reserve Bank Requirement

The Company is required to maintain a clearing  balance with the Federal Reserve
Bank. The required  clearing  balance for the 14-day  maintenance  period ending
January 4, 2006 was $1,300,000.


Note 18. Subsequent Events

Effective February 2006, the Company' s defined benefit pension plan was frozen.
The  curtailment  gain due to the freezing of the plan will reduce the projected
benefit obligation by approximately $2,561,000 in the first quarter of 2006.


                                                                            77-K
<PAGE>

ITEM  9:  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.

ITEM 9A: CONTROLS AND PROCEDURES

We have  established  disclosure  control  procedures  to ensure  that  material
information  related  to the  Company,  its  financial  condition  or results of
operation,  is made known to the officers that certify the  Company's  financial
reports and to other  members of senior  management  and the Board of Directors.
These  procedures  have been  formalized  through the  formation of a Management
Disclosure  Committee  and the  adoption of a  Management  Disclosure  Committee
Charter and related disclosure  certification process. The management disclosure
committee is comprised of our senior  management and meets at least quarterly to
review periodic filings for full and proper disclosure of material information.

Our  management,  including  the Chief  Executive  Officer  and Chief  Financial
Officer,  evaluated the design and  operational  effectiveness  of the Company's
disclosure  controls  and  procedures  (as  defined  in  Rules  13(a)-15(e)  and
15(d)-15(e)  under  the  Securities  Exchange  Act of 1934,  as  amended)  as of
December 31, 2005. Based upon that evaluation,  the Chief Executive  Officer and
Chief Financial  Officer  concluded that the Company's  disclosure  controls and
procedures were effective in ensuring that information  required to be disclosed
by the Company in reports that it files or submits under the Securities Exchange
Act of 1934 are recorded,  processed,  summarized  and reported  within the time
periods specified in the SEC's rules and forms.

It should be noted that any system of internal  controls,  regardless  of design
can provide only reasonable, and not absolute,  assurance that the objectives of
the control  system are met. In  addition,  the design of any control  system is
based in part upon certain  assumption  about the  likelihood of future  events.
Because of these and other inherent limitations of control systems, there can be
no assurance  that any design will  succeed in achieving  its stated goals under
all potential future conditions, regardless of how remote.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting,  as such term is defined in Exchange Act Rules
13a-15f.  Under the  supervision and with the  participation  of our management,
including our Chief Executive Officer and Chief Financial Officer,  we conducted
an  evaluation  of the  effectiveness  of our internal  control  over  financial
reporting  based on the  framework in Internal  Control -  Integrated  Framework
issued by the Committee of Sponsoring  Organizations of the Treadway Commission.
Based on our  evaluation  under the  framework in Internal  Control - Integrated
Framework,  our management  concluded  that our internal  control over financial
reporting was effective as of December 31, 2005. Our management's  assessment of
the  effectiveness  of our  internal  control  over  financial  reporting  as of
December 31,  2005,  has been audited by KPMG,  LLP, an  independent  registered
public accounting firm, as stated in their report on the following page.


78-K
<PAGE>

Report of Independent Registered Public Accounting Firm

The Board of Directors of The Wilber Corporation:

We  have  audited   management's   assessment,   included  in  the  accompanying
Management's Report on Internal Control Over Financial Reporting that The Wilber
Corporation (the "Company") maintained effective internal control over financial
reporting  as of December 31, 2005,  based on criteria  established  in Internal
Control-Integrated framework issued by the Committee of Sponsoring Organizations
of the Treadway  Commission (COSO). The Company's  management is responsible for
maintaining  effective  internal  control over  financial  reporting and for its
assessment of the  effectiveness of internal  control over financial  reporting.
Our  responsibility  is to express an opinion on management's  assessment and an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion,  management's  assessment that The Wilber Corporation maintained
effective internal control over financial  reporting as of December 31, 2005, is
fairly  stated,  in all  material  respects,  based on criteria  established  in
Internal  Control-Integrated  Framework  issued by the  Committee of  Sponsoring
Organizations  of the Treadway  Commission  (COSO).  Also,  in our opinion,  the
Company  maintained,  in all material respects,  effective internal control over
financial  reporting as of December 31, 2005,  based on criteria  established in
Internal  Control-Integrated  Framework  issued by the  Committee of  Sponsoring
Organizations of the Treadway Commission (COSO).

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight  Board (United  States),  the  consolidated  statements of
condition of The Wilber  Corporation  and subsidiary as of December 31, 2005 and
2004,   and  the  related   consolidated   statements  of  income,   changes  in
stockholders'  equity and comprehensive  income,  and cash flows for each of the
years in the  three-year  period ended  December 31, 2005,  and our report dated
March 10, 2006 expressed an unqualified opinion on those consolidated  financial
statements.


Albany, New York
March 10, 2006


                                                                            79-K
<PAGE>

ITEM 9B: OTHER INFORMATION

None.

                                    PART III
                                    --------

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A. Directors of the Registrant

Information  contained  under the caption  Proposal  II,  "Election of Directors
(introduction);" "The Nominees and Continuing Directors" and in "Meetings of the
Board of Directors and Certain Committees" in the definitive Proxy Statement for
the Annual  Meeting of  Shareholders  to be held on April 29, 2006,  to be filed
with the Commission  within 120 days after the end of the fiscal year covered by
this Form 10-K, is incorporated herein by this reference.

B. Executive Officers of the Registrant Who Are Not Directors

Information contained in Proposal II under the caption,  "Executive Officers Who
Are Not Directors," in the definitive  Proxy Statement for the Annual Meeting of
Shareholders  to be held on April  29,  2006,  to be filed  with the  Commission
within 120 days after the end of the fiscal year  covered by this Form 10-K,  is
incorporated herein by this reference.

C. Compliance With Section 16(a)

Information  contained under the caption,  "Section 16(a)  Beneficial  Ownership
Reporting  Compliance," in the definitive Proxy Statement for the Annual Meeting
of  Shareholders  to be held on April 29, 2006, to be filed with the  Commission
within 120 days after the end of the fiscal year  covered by this Form 10-K,  is
incorporated herein by this reference.

The Company has adopted a Code of Ethics for  adherence  by its Chief  Executive
Officer,  Chief Financial Officer, and Chief Accounting Officer to ensure honest
and ethical conduct;  full, fair and proper disclosure of financial  information
in the Company's  periodic reports;  and compliance with applicable laws, rules,
and  regulations.  The  text of the  Company's  Code of  Ethics  is  posted  and
available on the Bank's website (http://www.wilberbank.com) under 'About Us.'

ITEM 11: EXECUTIVE COMPENSATION

Information contained under the caption, "Compensation," in the definitive Proxy
Statement for the Annual Meeting of  Shareholders  to be held on April 29, 2006,
to be filed with the Commission within 120 days after the end of the fiscal year
covered by this Form 10-K, is incorporated herein by this reference.

ITEM 12:  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

Information contained under the caption, "Principal Owners of Our Common Stock,"
in the definitive  Proxy  Statement for the Annual Meeting of Shareholders to be
held on April 29, 2006,  to be filed with the  Commission  within 120 days after
the end of the fiscal year covered by this Form 10-K, is incorporated  herein by
this reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  contained  under the caption,  "Compensation  -  Transactions  with
Directors and Executive  Officers," in the  definitive  Proxy  Statement for the
Annual  Meeting of  Shareholders  to be held on April 29, 2006, to be filed with
the Commission  within 120 days after the end of the fiscal year covered by this
Form 10-K, is incorporated herein by this reference.

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES

Information contained under the caption, "Independent Auditors' Fees - Audit and
Non-Audit  Fees," and  "Independent  Auditors' Fees - Pre-Approval  Policies and
Procedures"  in the  definitive  Proxy  Statement  for  the  Annual  Meeting  of
Shareholders  to be held on April  29,  2006,  to be filed  with the  Commission
within 120 days after the end of the fiscal year  covered by this Form 10-K,  is
incorporated herein by this reference.


80-K
<PAGE>

                                     PART IV
                                     -------

ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

(a) (1) The following  Consolidated Financial Statements are included in PART
II, Item 8, hereof:

              -Independent Auditors' Report
              -Consolidated Balance Sheets at December 31, 2005 and 2004
              -Consolidated Statements of Income for the Years Ended December
                31, 2005, 2004 and 2003
              -Consolidated Statements of Changes in Stockholders' Equity
                for the Years Ended December 31, 2005, 2004 and 2003
              -Consolidated Statements of Cash Flows for the Years Ended
                December 31, 2005, 2004 and 2003  -Consolidated  Statements
                of  Comprehensive Income for the Years Ended December 31,
                2005, 2004 and 2003
              -Notes to Consolidated Financial Statements

    (2) None.

    (3) Exhibits: See Exhibit Index to this Form 10-K

(b) See Exhibit Index to this Form 10-K

(c) None.


                                                                            81-K
<PAGE>

                                   SIGNATURES

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

                                           THE WILBER CORPORATION


Date: March 10, 2006                 By:   /s/ Douglas C. Gulotty
     ---------------                       --------------------------------
                                           Douglas C. Gulotty
                                           President and Chief Executive Officer

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

<TABLE>
<CAPTION>
Signatures                                Title                                                Date
----------                                -----                                                ----
<S>                                       <C>                                                  <C>
  /s/  Douglas C. Gulotty                 President and Chief Executive Officer                March 10, 2006
---------------------------------                                                              --------------
Douglas C. Gulotty

  /s/ Joseph E. Sutaris                   Secretary, Treasurer and Chief Financial             March 10, 2006
---------------------------------         Officer                                              --------------
Joseph E. Sutaris

  /s/ Brian R. Wright                     Director, Chairman                                   March 10, 2006
---------------------------------                                                              --------------
Brian R. Wright

  /s/ Alfred S. Whittet                   Director, Vice Chairman                              March 10, 2006
---------------------------------                                                              --------------
Alfred S. Whittet

  /s/ Mary C. Albrecht                    Director                                             March 10, 2006
---------------------------------                                                              --------------
Mary C. Albrecht

  /s/ Olon T. Archer                      Director                                             March 10, 2006
---------------------------------                                                              --------------
Olon T. Archer

  /s/ Philip J. Devine                    Director                                             March 10, 2006
---------------------------------                                                              --------------
Philip J. Devine

  /s/ Richard E. Keene                    Director                                             March 10, 2006
---------------------------------                                                              --------------
Richard E. Keene

  /s/ Joseph P. Mirabito                  Director                                             March 10, 2006
---------------------------------                                                              --------------
Joseph P. Mirabito

  /s/ James L. Seward                     Director                                             March 10, 2006
---------------------------------                                                              --------------
James L. Seward

  /s/ Geoffrey A. Smith                   Director                                             March 10, 2006
---------------------------------                                                              --------------
Geoffrey A. Smith

  /s/ James F. VanDeusen                  Director                                             March 10, 2006
---------------------------------                                                              --------------
James F. VanDeusen

  /s/ David F. Wilber, III                Director                                             March 10, 2006
---------------------------------                                                              --------------
David F. Wilber, III
</TABLE>


82-K
<PAGE>

EXHIBIT INDEX

No.        Document

3.1        Restated  Certificate  of  Incorporation  of The  Wilber  Corporation
           (incorporated  by reference as Exhibit A of the Company's  Definitive
           Proxy  Statement - Schedule 14A (File No.  001-31896)  filed with the
           Securities and Exchange Commission on March 24, 2005)

3.2        Bylaws  of  The   Wilber   Corporation   as  Amended   and   Restated
           (incorporated  by reference to Exhibit 3.2 of the Company's  Form 8-K
           Current  Report (File No.  001-31896)  filed with the  Securities and
           Exchange Commission on January 27, 2005)

10.1       Deferred  Compensation  Agreement as Amended  between Wilber National
           Bank and Alfred S. Whittet (incorporated by reference to Exhibit 10.1
           of the Company's Form 8-K Current Report (File No.  001-31896)  filed
           with the Securities and Exchange Commission on January 6, 2006)

10.2       Summary Plan Description for the Amended and Restated Wilber National
           Bank Split-Dollar  Life Insurance Plan  (incorporated by reference to
           Exhibit 10.2 of the Company's Form 10/A  Registration  Statement (No.
           001-31896)  filed with the  Securities  and  Exchange  Commission  on
           January 30, 2004)

10.3       Amendment to the Wilber  National Bank  Split-Dollar  Life  Insurance
           Plan Agreement and  Split-Dollar  Policy  Endorsement  between Wilber
           National  Bank and Alfred S.  Whittet  (incorporated  by reference to
           Exhibit 10.3 of the Company's Form 10/A  Registration  Statement (No.
           001-31896)  filed with the  Securities  and  Exchange  Commission  on
           January 30, 2004)

10.4       Executive Salary Continuation  Agreement between Wilber National Bank
           and Robert W. Moyer (incorporated by reference to Exhibit 10.4 of the
           Company's Form 10/A Registration Statement (No. 001-31896) filed with
           the Securities and Exchange Commission on January 30, 2004)

10.5       Executive Salary Continuation  Agreement between Wilber National Bank
           and Alfred S. Whittet  (incorporated  by reference to Exhibit 10.5 of
           the Company's Form 10/A Registration  Statement (No. 001-31896) filed
           with the Securities and Exchange Commission on January 30, 2004)

10.6       Employment  Agreement  between  Wilber  National  Bank and  Alfred S.
           Whittet  (incorporated  by reference to Exhibit 10.6 of the Company's
           Form 10/A  Registration  Statement  (No.  001-31896)  filed  with the
           Securities and Exchange Commission on January 30, 2004)

10.7       Severance  Compensation  Agreement between The Wilber Corporation and
           Alfred S. Whittet  (incorporated  by reference to Exhibit 10.7 of the
           Company's Form 10/A Registration Statement (No. 001-31896) filed with
           the Securities and Exchange Commission on January 30, 2004)

10.8       Retention Bonus Agreement as Amended between Wilber National Bank and
           Douglas C. Gulotty  (incorporated by reference to Exhibit 10.8 of the
           Company's Form 8-K Current Report (File No. 001-31896) filed with the
           Securities and Exchange Commission on January 6, 2006)

10.9       Retention Bonus Agreement as Amended between Wilber National Bank and
           Joseph E. Sutaris  (incorporated  by reference to Exhibit 10.8 of the
           Company's Form 8-K Current Report (File No. 001-31896) filed with the
           Securities and Exchange Commission on January 6, 2006)

10.11      Employment  Agreement  between  Wilber  National  Bank and Douglas C.
           Gulotty  (incorporated by reference to Exhibit 10.11 of the Company's
           Form  8-K  Current  Report  (File  No.   001-31896)  filed  with  the
           Securities and Exchange Commission on January 6, 2006)

10.12      Employment  Agreement  between  Wilber  National  Bank and  Joseph E.
           Sutaris  (incorporated by reference to Exhibit 10.12 of the Company's
           Form  8-K  Current  Report  (File  No.   001-31896)  filed  with  the
           Securities and Exchange Commission on January 6, 2006)

13         Annual Report to Shareholders (included in this annual report on Form
           10-K)


                                                                            83-K
<PAGE>

14         Code of Ethics as Amended  incorporated by reference to Exhibit 14 of
           the  Company's  Annual  Report on Form  10-K,  and  available  on the
           Company's website  (http://www.wilberbank.com)  under the link 'About
           Us.'

21         Subsidiaries of the Registrant

31.1       Certification  of Chief Executive  Officer Pursuant to Section 302 of
           the Sarbanes-Oxley Act

31.2       Certification  of Chief Financial  Officer Pursuant to Section 302 of
           the Sarbanes-Oxley Act

32.1       Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350

32.2       Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350


84-K
<PAGE>

                                                                      Exhibit 21

Subsidiaries of the Registrant

The Wilber Corporation has the following subsidiary, which is wholly owned:

Wilber National Bank, a national bank.


                                                                            85-K