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                           ANNUAL REPORT ON FORM 10-K

                                     to the

                       SECURITIES AND EXCHANGE COMMISSION

                                       of

                             THE WILBER CORPORATION
                      for the Year-Ended December 31, 2004

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                                  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, 2004

                        Commission file number: 001-31896

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

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

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

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

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

Title of each class to be registered   Name of each exchange on which registered
            Common Stock                        American Stock Exchange

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

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 an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes |_| No |X|

Based upon the closing  price of the  registrant's  common  stock as of June 30,
2004, the aggregate value of the voting stock, common stock, $0.01 par value per
share held by  non-affiliates  of the  registrant  was $84.3  million.  Although
Directors,  and Executive  Officers of the registrant  and Wilber  National Bank
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, 2004.

The  number  of  shares  of  common  stock  outstanding  on March  11,  2005 was
11,178,092.

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 23, 2005 are  incorporated by
reference.


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2-K
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                             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 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 ISSUER PURCHASES OF EQUITY SECURITIES

            A.    Market Price and Dividends on Common Stock
            B.    Unregistered Sale of Securities (not applicable)
            C.    Repurchases of Equity Securities

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.    Recent Developments
                        b.    Comparison of Financial  Condition at December 31,
                              2004 and December 31, 2003
            D.    Results of Operations
                        a.    Comparison  of  Operating  Results  for the  Years
                                Ended December 31, 2004 and December 31, 2003
                        b.    Comparison  of  Operating  Results  for the  Years
                                Ended December 31, 2003 and December 31, 2002
            E.    Liquidity
            F.    Capital Resources and Dividends


                                                                             3-K
<PAGE>

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 ACCOUNTANT FEES AND SERVICES
-------

                                     PART IV
                                     -------

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


4-K
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                           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  annual   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, 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.


                                                                             5-K
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                                     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 nationally  chartered 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  nineteen (19) 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 a representative  loan production banking
office in Kingston,  New York (Ulster County). The Bank's main office is located
at 245 Main Street,  Oneonta,  New York 13820 (Otsego  County).  We employed 228
full-time  equivalent  employees at December 31,  2004.  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, 2004, the Bank owned a 63.1% 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 high-quality 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  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 192,000.  Between the 1990
and 2000 U.S. Government census, the area population  increased by less than 1%.
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 per capita  income for the four
county region was approximately $17,002. This is


6-K
<PAGE>

approximately  79% of the United States national average for 1999 of $21,587 and
73% of the New York  State  average  of  $23,389  for the same  period.  Private
non-farm employment  increased by less than 1% between 1990 and 1999 from 47,604
jobs in 1990 to 47,979 jobs in 1999. Management believes the demographic profile
of the  primary  market  area in which we  operate  has not  materially  changed
through 2004.

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 office located in Kingston,  New
York (Ulster 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  on-site  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.  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 nationally
recognized  bank.  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 tenants  include "Main Street"
type small  businesses,  retailers and motels.  We also finance  properties  for
commercial


                                                                             7-K
<PAGE>

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  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.  The issuance of a stand-by letter of credit
creates a contingent liability for the Bank.  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


8-K
<PAGE>

automobile  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 $10.2 million at December 31, 2004.  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.  When
conditions  merit,  the Board of Directors is also authorized to make 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  is limited to 50% of the
Bank's legal lending limit, which is approximately  $5.1 million.  The Committee
may also make 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 $7,500,  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 five (5) voting members,
the Bank's Chief Executive  Officer,  President & Chief Operating  Officer,  the
Chief  Credit  Officer,  the  Senior  Lender,  and  the  manager  of the  Credit
Department. The Officers' Loan Committee may approve secured and unsecured loans
up to 15% of the Bank's legal  lending  limit  (approximately  $1.5 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 $7,500 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,
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  finance  the  education  of a
dependent.  However,  any  loans to  Executive  Officers  which  are not for the
construction,  improvement, or purchase of a residence, or not used to finance a
child'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  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


                                                                             9-K
<PAGE>

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.

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 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


10-K
<PAGE>

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.  Charge-offs  are
recorded  as a  reduction  in the  allowance  for loan  losses.  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 will 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 after a period of performance.

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 $7,500).

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,
      (v)   meet the  pledging  requirements  of  State,  County  and  Municipal
            depositors,


                                                                            11-K
<PAGE>

      (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.


12-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, 2004 and December 31, 2003 we had $322.248  million and $332.442
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>
            -------------------------------------------------------------------------------------------------
                                                                               December 31,
                                                              -----------------------------------------------
                                                                      2004                      2003
                                                              -----------------------------------------------
                                                                          Estimated                 Estimated
                                                              Number of     Market      Number of      Market
            dollars in thousands                              Accounts       Value      Accounts       Value
            -------------------------------------------------------------------------------------------------
<S>                                                              <C>       <C>             <C>       <C>
            Trusts                                               337       $176,371        320       $198,166
            -------------------------------------------------------------------------------------------------
            Estates                                                8          1,851          6          2,954
            -------------------------------------------------------------------------------------------------
            Custodian, Investment Management and Others          221        144,026        212        131,322
            -------------------------------------------------------------------------------------------------
            Total                                                566       $322,248        538       $332,442
            -------------------------------------------------------------------------------------------------
</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),
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


                                                                            13-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, 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 a 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. On July 30, 2002, President Bush signed into law the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The Company is subject to
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 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:  new  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

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


14-K
<PAGE>

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.

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.

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.

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 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  shareholders'  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,  2004.  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 shareholders. 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 shareholders 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.

Community Reinvestment Act, Fair Lending and Consumer Protection Laws. 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.

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 borrowers,  depositors and other customers of depository
institutions.  These include 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,


                                                                            15-K
<PAGE>

other regulators,  including the Justice Department, may take enforcement action
against institutions that fail to comply with these laws.

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 2004,  2003 or 2002.  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,
2004,  the  assessment  rate was 1.44 cents per $100 of insured  deposits.  This
compares  to 1.54 cents and 1.44 cents per $100 of insured  deposit at  December
31, 2003 and December 31, 2002, 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.

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, 2004, the Bank
was in compliance with applicable reserve requirements.

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, and mutual funds and credit card companies offer substantive  equivalents
of transaction accounts and various loan and financial products.  As a result of
the GLBA (discussed further in Item 1. I (b) above), other non-banking financial
organizations  now may be in a position  to 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.

Patriot  Act. In October  2001,  Congress  passed the USA PATRIOT Act  ("Patriot
Act").  Title III of the Patriot Act captioned  "International  Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001" added several new provisions
to the Bank  Secrecy  Act,  which are  intended to  facilitate  the  prevention,
detection,  and prosecution of international  money laundering and the financing
of  terrorism.   Specific  provisions  of  the  Patriot  Act  require  financial
institutions,  including


16-K
<PAGE>

banks, to implement  effective customer  identification  procedures to deter (or
perhaps  identify)  terrorist-type  activities.  Banks  that  fail to  implement
effective customer identification  procedures under the Bank Secrecy Act or fail
to comply with the  requisite  provisions of the Patriot Act may face both civil
and criminal monetary fines and penalties.

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 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 twenty
(20)  branch  offices  and lease two  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

The  Company  is not  presently  the  subject  of  any  material  pending  legal
proceedings,  other than  ordinary  routine  litigation  occurring in the normal
course of its business.

On an ongoing basis,  the Bank also becomes subject to various legal claims from
time to time, which arise in the normal course of business.  The various pending
legal claims against the Bank will not, in the opinion of management  based upon
consultation with counsel,  result in any material  liability to the Company and
will not materially affect our financial position,  results of operation or cash
flow.

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, 2004.

                                     PART II
                                     -------

ITEM 5: MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
        RELATED STOCKHOLDER MATTERS

A. Market Price and Dividends on Common Stock

During 2003 and 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 American  Stock  Exchange(R)  ("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:


                                                                            17-K
<PAGE>

Common Stock Market Price and Dividend Table:

<TABLE>
<CAPTION>
                                        2004                             2003
                           -----------------------------    -----------------------------
                             High       Low     Dividend     High        Low     Dividend
                           -----------------------------    -----------------------------
<S>                        <C>        <C>        <C>        <C>        <C>        <C>
            4th Quarter    $ 12.64    $ 11.94    $0.0950    $ 15.00    $ 12.10    $0.0925
            3rd Quarter    $ 12.80    $ 12.00    $0.0950    $ 13.75    $ 10.20    $0.0925
            2nd Quarter    $ 13.65    $ 12.00    $0.0950    $ 10.81    $  9.81    $0.0925
            1st Quarter    $ 15.50    $ 12.65    $0.0950    $ 10.25    $  9.78    $0.0925
</TABLE>

            (1) All  prices  and  dividends  provided  in this  table  have been
            adjusted for the 4:1 stock split approved on September 5, 2003.

            (2) 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  periods 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  11,  2005,  there  were 651  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 11, 2005 was
$12.47 per share.

The  Company  has not sold any  unregistered  securities  within  the past three
years.

During  2004  the  rights  of  holders  of our  registered  securities  were not
modified;  nor were any other  class of security  issued  that could  materially
limit or qualify our registered securities.

B. Unregistered Sale of Securities (not applicable)

C. Repurchases of Equity Securities

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  $1,500,000  of the  Company's  common  stock.  All shares
repurchased under the 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
thereunder,  and the rules and  regulations  of the Amex.  The  following  table
summarizes the shares repurchased by us under this repurchase program during the
fourth quarter of 2004:

Share Repurchases:

<TABLE>
<CAPTION>
                                                                                                  Remaining
                                             Total Number      Average                              Share
                                              of Shares       Price Paid                          Repurchase
      Period                                 Repurchased      per Share       Total Cost (1)       Authority
      ------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>               <C>               <C>
      October 1 - October 31, 2004                   0        $       --        $       --        $1,447,970
      November 1 - November 30, 2004                 0                --                --        $1,447,970
      December 1 - December 31, 2004            10,500             12.28           128,975        $1,318,995

                                                ------------------------------------------------------------
      Total                                     10,500        $    12.28        $  128,975
</TABLE>

      (1) Excludes brokerage commissions paid by the Company.

All  shares  purchased  by the  Company  during  2004 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,


18-K
<PAGE>

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,
                                                       -----------------------------------------------------------------
                                                          2004          2003          2002          2001          2000
                                                       -----------------------------------------------------------------
<S>                                                    <C>           <C>           <C>           <C>           <C>
      Consolidated Statements of Income Data:
       Interest Income                                 $  37,165     $  38,628     $  41,646     $  42,307     $  42,374
       Interest Expense                                   12,761        14,153        17,170        20,449        21,438
                                                       -----------------------------------------------------------------
       Net Interest Income                                24,404        24,475        24,476        21,858        20,936
       Provision for Loan Losses                           1,200         1,565         1,920         1,540         1,680
       Net Interest Income After Provision for Loan
      Losses                                              23,204        22,910        22,556        20,318        19,256
       Other Income                                        4,603         4,599         4,982         4,645         4,331
       Net Gains (Losses) on Securities
      Transactions                                         1,031         1,064           272           175           (11)
       Other Expense (1)                                  17,218        16,583        15,890        13,945        12,701
                                                       -----------------------------------------------------------------
       Income Before Provision for Income Taxes           11,620        11,990        11,920        11,193        10,875
       Provision for Income Taxes                          3,002         3,277         3,358         3,147         3,017
                                                       -----------------------------------------------------------------
       Net Income                                      $   8,618     $   8,713     $   8,562     $   8,046     $   7,858
                                                       =================================================================

      Earnings Per Common Share: (2)
       Basic                                           $    0.77     $    0.78     $    0.76     $    0.71     $    0.68

      Per Common Share: (2)
       Cash Dividends                                      0.380         0.370         0.375         0.350         0.350
       Book Value                                           6.04          5.74          5.61          4.92          4.51
       Tangible Book Value (3)                              5.77          5.46          5.32          4.88          4.39

      Consolidated Period-End Balance Sheet Data:
       Total Assets                                    $ 750,861     $ 729,023     $ 708,984     $ 626,787     $ 560,089
       Securities Available-for-Sale                     249,415       275,051       234,542       188,712       111,329
       Securities Held-to-Maturity                        59,463        44,140        42,837        46,017        74,888
       Gross Loans                                       391,043       360,906       358,295       329,544       324,758
       Nonperforming Assets                                2,751         3,678         3,160         4,137         4,243
       Deposits                                          571,929       580,633       549,081       491,012       439,408
       Long-Term Borrowings                               65,379        55,849        73,346        62,512        50,500
       Short-Term Borrowings                              37,559        20,018        13,260        10,530        13,765
       Shareholder's Equity                               67,605        64,304        63,162        55,827        51,526

      Selected Key Ratios:
      Return on Average Assets                              1.17%         1.20%         1.25%         1.36%         1.42%
      Return on Average Equity                             13.08%        13.67%        14.36%        14.91%        16.20%
      Dividend Payout                                      49.35%        47.44%        49.34%        49.30%        51.47%
</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.


                                                                            19-K
<PAGE>

Table of Selected Quarterly Financial Data:

<TABLE>
<CAPTION>
                                                                        2004
                                            -------------------------------------------------------------
                                              Fourth           Third          Second            First
                                            -------------------------------------------------------------
                                                               (Dollars in Thousands)
<S>                                         <C>             <C>             <C>              <C>
Interest income                             $     9,933     $     9,248     $     8,890      $     9,094
Interest expense                                  3,383           3,172           3,097            3,109
                                            -------------------------------------------------------------
Net interest income                               6,550           6,076           5,793            5,985
Provision for loan losses                           240             300             300              360
                                            -------------------------------------------------------------
Net interest income after provision
for loan losses                                   6,310           5,776           5,493            5,625
                                            -------------------------------------------------------------
Investment Security Gains (Losses), Net             156             224             (27)             678
                                            -------------------------------------------------------------
Other non-interest income                         1,115           1,253           1,099            1,136
                                            -------------------------------------------------------------
Non-interest expense                              4,463           4,329           4,113            4,313
                                            -------------------------------------------------------------
Income before income tax expense            $     3,118     $     2,924     $     2,452      $     3,126
                                            -------------------------------------------------------------
Income tax expense                                  799             760             601              842
                                            -------------------------------------------------------------
Net income                                  $     2,319     $     2,164     $     1,851      $     2,284
                                            =============================================================

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

Basic weighted average shares
outstanding                                  11,202,087      11,208,037      11,209,392       11,209,392
                                            =============================================================

Net interest margin
(tax equivalent) (1)                               3.95%           3.75%           3.58%            3.75%
Return on average assets                           1.23%           1.17%           1.01%            1.27%
Return on average equity                          13.57%          13.16%          11.53%           14.00%
Efficiency ratio (2)                              53.99%          55.19%          55.72%           56.71%

<CAPTION>
                                                                        2003
                                            -----------------------------------------------------------
                                              Fourth           Third          Second          First
                                            -----------------------------------------------------------
                                                             (Dollars in Thousands)
<S>                                         <C>             <C>             <C>             <C>
Interest income                             $     9,445     $     9,373     $     9,785     $    10,025
Interest expense                                  3,314           3,433           3,609           3,797
                                            -----------------------------------------------------------
Net interest income                               6,131           5,940           6,176           6,228
Provision for loan losses                           360             350             435             420
                                            -----------------------------------------------------------
Net interest income after provision
for loan losses                                   5,771           5,590           5,741           5,808
                                            -----------------------------------------------------------
Investment Security Gains (Losses), Net             171              75             420             398
                                            -----------------------------------------------------------
Other non-interest income                         1,241           1,069           1,101           1,188
                                            -----------------------------------------------------------
Non-interest expense                              4,241           4,252           4,080           4,010
                                            -----------------------------------------------------------
Income before income tax expense            $     2,942     $     2,482     $     3,182     $     3,384
                                            -----------------------------------------------------------
Income tax expense                                  741             658             889             989
                                            -----------------------------------------------------------
Net income                                  $     2,201     $     1,824     $     2,293     $     2,395
                                            ===========================================================

Basic earnings per share                    $      0.20     $      0.16     $      0.21     $      0.21
                                            ===========================================================

Basic weighted average shares
outstanding                                  11,209,392      11,209,392      11,209,392      11,229,248
                                            ===========================================================

Net interest margin
(tax equivalent) (1)                               3.76%           3.67%           3.81%           3.86%
Return on average assets                           1.19%           0.99%           1.27%           1.35%
Return on average equity                          13.68%          11.49%          14.27%          15.25%
Efficiency ratio (2)                              54.77%          56.73%          53.02%          51.15%
</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

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
subsidiaries  for each of the years in the three-year  period ended December 31,
2004.  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 employee  salaries and  benefits,  occupancy and equipment
expense, computer service fees, advertising and marketing expense,  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.


20-K
<PAGE>

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 additional
provisions 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.

Recent  Accounting  Pronouncements.  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 is not expected to
have any impact on our Consolidated Financial Statements.

The Emerging  Issues Task Force ("EITF") of the Financial  Accounting  Standards
Board ("FASB") has provided  guidance for the  determination  and recognition of
other-than-temporary  impairment  on investment  securities  in EITF 03-1,  "The
Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain
Investments."  EITF 03-1 provides guidance for determining when an investment is
considered impaired, whether impairment is other-than-temporary, and measurement
of an impairment loss. An investment is considered impaired if the fair value of
the  investment  is less than its cost.  Generally,  an impairment is considered
other-than-temporary unless: (i) the investor has the ability and intent to hold
an investment  for a reasonable  period of time  sufficient  for an  anticipated
recovery of fair value up to (or beyond)  the cost of the  investment;  and (ii)
evidence  indicating  that the cost of the  investment is  recoverable  within a
reasonable period of time outweighs  evidence to the contrary.  If impairment is
determined  to be  other-than-temporary,  then  an  impairment  loss  should  be
recognized equal to the difference  between the  investment's  cost and its fair
value.  Since certain  disclosure  requirements of EITF were adopted in 2003, we
have presented the new  disclosure  requirements  in Note 2 of our  Consolidated
Financial  Statements  for the years  ended  December  31,  2004 and  2003.  The
recognition   and   measurement   provisions   were   initially   effective  for
other-than-temporary impairment evaluations in reporting periods beginning after
June  15,  2004.  However,  in  September  2004,  the  effective  date of  these
provisions  was  delayed  until the  finalization  of a FASB staff  position  to
provide addition  implementation  guidance.  Upon finalization of the FASB Staff
Position, we will evaluate the impact on our Consolidated Financial Statements.

Accounting for Branch  Acquisition.  In February  2002,  the Company  acquired a
branch.  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 a entity acquires net assets that constitute a business,  as defined
by Emerging  Issues Task Force Issue  (EITF) No.  98-3,  "Determining  Whether a
Nonmonetary 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).

Our branch acquisition 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).


                                                                            21-K
<PAGE>

Due to the factors  involved in the  acquisition of the branch in February 2002,
the Company's  management has concluded that the branch  acquired was a business
under EITF No. 98-3 and, therefore, the acquisition of that branch constituted a
business  combination  within the scope of SFAS No. 141. In connection  with the
branch  acquisition in February 2002, the Company,  in accordance  with SFAS No.
72,  "Accounting for Certain  Acquisitions  of Banking or Thrift  Institutions,"
recorded an  unidentified  intangible  asset of $1.877 million and in accordance
with SFAS No. 141, a core deposit intangible of $285 thousand. Upon the adoption
of SFAS No. 147 in October 2002,  the  unidentified  intangible  asset of $1.877
million  was  reclassified  as goodwill on the  Company's  consolidated  balance
sheet.

B. Performance Overview for Period Ended December 31, 2004

During 2004 we experienced  growth in our total assets, but a modest decrease in
our key performance  measures.  In particular,  net income,  earnings per share,
return on assets and return on equity all  declined in 2004 as compared to 2003.
A decrease in net interest income and net interest margin, primarily driven by a
significant  decrease  in our yield on  investment  securities,  in  addition to
increases  in  non-interest  expense,  were the  primary  reasons for the slight
decline in performance in 2004.

Throughout  2004  residential  mortgage  interest rates remained near historical
lows  throughout  the United States.  This  condition  resulted in a very active
housing market,  which meant that many consumers  refinanced their mortgage debt
or  purchased  new  homes.  The active  housing  market  resulted  in very large
principal repayments (also called prepayments) on the mortgage-backed securities
sector of our  available-for-sale  and held-to-maturity  securities  portfolios.
This  caused a  significant  decrease  in the  interest  income  recorded on our
investment securities for two reasons. First, the large prepayments forced us to
reinvest the proceeds in new  investments  at lower  yields.  Second,  the large
prepayments  required  us to  amortize  (as an  offset  to  interest  income)  a
significant   amount  of  the  purchase  premiums  paid  for  these  investments
securities  in the period in which we received the  prepayment.  During 2004 the
interest income on our investment securities portfolios totaled $11.684 million,
as  compared to $13.049  million in 2003,  a $1.365  million or 10.5%  decrease.
Similarly, the yield on our investment securities was 3.79% in 2004, as compared
to 4.32% in 2003, a 53 basis point decrease between the periods.

Non-interest  expenses  increased  $635  thousand or 3.8% in 2004,  from $16.583
million  in 2003 to  $17.218  million  in 2004.  During  2004 we  continued  our
expansion  efforts into new markets by  establishing  a  full-service  branch in
Johnson City,  New York (Broome  County) and a  representative  loan  production
office in Kingston,  New York (Ulster County).  These efforts contributed to the
increase  in salaries  and  employee  benefits  expense,  occupancy  expense and
advertising and marketing expense.  We also experienced a $293 thousand or 96.1%
increase in computer  service fees.  In 2004,  we procured  several new computer
operating  systems and upgrades,  as well as incurred data  conversion  expenses
related  to a core  computer  operating  system  conversion,  which we expect to
execute during the second quarter of 2005. In addition, during the third quarter
of 2004 we recorded a $135 thousand  expense due to the  termination  of a prior
contract to convert our core computer  system.  And finally,  professional  fees
increased  $103  thousand  or  25.2%  in 2004  due  primarily  to the  Company's
registration with the SEC and listing on the Amex.

During 2004 our total assets increased by $21.838 million or 3.0%, from $729.023
million at December  31, 2003 to $750.861  million at  December  31,  2004.  The
modest growth in total assets was not impacted by any  significant  acquisitions
or dispositions  and was largely driven by an increase in borrowed funds,  which
were  secured to fund our loan growth and to  adequately  maintain  our targeted
total  stockholders'  equity to total  asset  ratio.  Specifically,  total loans
increased  $30.137  million or 8.35% between  December 31, 2003 and December 31,
2004 due to our effort to expand the Bank's  loan  markets and  commercial  loan
origination channels, including loans provided through brokers and participation
loans  from other  banks.  Conversely,  our total  deposits  decreased  slightly
primarily due to a decrease in non-maturity  interest-bearing  savings,  NOW and
money market  deposit  accounts.  Specifically,  total  deposits  decreased from
$580.633  million at December 31, 2003 to $571.929 million at December 31, 2004,
a  $8.704  million  or  1.5%  decrease.  Our  total  borrowed  funds  (including
short-term and long-term  borrowings) increased from $75.867 million at December
31, 2003 to $102.938  million at December 31,  2004, a $27.071  million or 35.7%
increase.

Our asset quality  improved  during 2004.  Loans  charged-off  net of recoveries
decreased  by $493  thousand in 2004.  Specifically,  loans  charged-off  net of
recoveries totaled $707 thousand in 2004, as compared to $1.200 million in 2003.
Total  non-performing loans and total non-performing loans as a percent of total
loans improved between periods. At December 31, 2004 total  non-performing loans
and total  non-performing  loans as a percent of total loans were $2.751 million
and 0.70%,  as compared to $3.658 million and 1.01% at December 31, 2003, a $907
thousand  improvement.  The  improvement  in our  asset  quality  resulted  in a
reduction in our  provision  for loan losses year over year.  The  provision for
loan losses  totaled  $1.565  million in 2003, as compared to $1.200  million in
2004, a $365 thousand  reduction.  The allowance for loan losses  increased $493
thousand between December 31, 2003 and December 31, 2004, from $5.757


22-K
<PAGE>

million at  December  31,  2003 to $6.250  million at  December  31,  2004.  The
allowance for loan losses as a percent of period-end  loans  remained  unchanged
between the periods at 1.60%.

C. Financial Condition

a. Recent Developments - Branch Acquisition

Branch Acquisition
------------------

On February 4, 2005,  the Bank  acquired two branch  offices from HSBC Bank USA,
National  Association.  Under the terms of our  agreement  with HSBC, we assumed
approximately $33.054 million of deposit liabilities for HSBC's Sidney, New York
and Walton,  New York  offices.  Approximately,  $19.522  million of the deposit
liabilities  were housed in the Walton branch office and $13.532  million in the
Sidney, New York office (both Delaware County).  We also acquired  approximately
$7.668 million of consumer and residential  real estate loans in the transaction
and purchased the Walton  office  building and fixtures.  HSBC closed its Sidney
office upon  transferring  the branch offices to us. The customers in the Sidney
market will be served by our existing branch located within 1 mile of the office
closed by HSBC. Our total assets immediately following the transaction increased
to approximately $773 million.

b. Comparison of Financial Condition at December 31, 2004 and December 31, 2003

     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,
intangibles,  non-interest  bearing  deposits  at  other  banks,  and  cash.  We
generally  maintain between 92 - 95% of our total assets in earning assets.  The
ratio of earning assets to total assets we maintain is slightly greater than the
ratio maintained by comparable bank holding companies.

Total Assets
------------

During 2004 our total assets  increased  $21.838  million or 3.0%, from $729.023
million at December  31, 2003 to $750.861  million at December  31,  2004.  This
compares to a 2.8% increase in total assets in 2003.  The modest growth in total
assets was driven  primarily by an increase in total loans and two $15.0 million
wholesale  leverage  transactions  executed to leverage  our equity  capital and
improve return on equity.

During  the  first  quarter,  we  purchased  $15.0  million   available-for-sale
investment  securities  and  funded  the  purchases  with a series  of  advances
(borrowings) from the FHLBNY. Similarly,  during the fourth quarter we purchased
an additional  $15.0 million of  available-for-sale  investment  securities  and
funded it with a short-term  repurchase agreement (borrowing) from a large money
center bank. The fourth quarter wholesale leverage transaction was executed with
the intent of  replacing  the  short-term  repurchase  agreement  with  customer
deposits pursuant to the Bank's agreement to assume  approximately $33.0 million
of deposit liabilities from HSBC Bank USA, National  Association.  The borrowing
was  repaid  in  February  2005  upon  assuming  the  HSBC  Bank  USA,  National
Association  deposit  liabilities.  Net of  other  repayments  throughout  2004,
borrowed  funds  (including  short-term  borrowings  and  long-term  borrowings)
increased  from  $75.867  million at December  31,  2003 to $102.938  million at
December 31, 2004.

Even though we purchased  $30.000 million in investment  securities in wholesale
leverage  transactions  during  2004,  total  investment  securities  (including
trading,  available-for-sale  and held-to-maturity)  decreased $9.834 million or
3.1%  between  December 31, 2003 and December  31,  2004.  Throughout  2004,  we
experienced  high  levels  of  principal   repayments  on  the   mortgage-backed
securities  sector  of the  investment  portfolio.  We used  portions  of  these
proceeds  to fund  $30.137  million  of net loan  growth as our  total  deposits
decreased. Total deposit balances were $571.929 million at December 31, 2004, as
compared to $580.633  million at December  31, 2003,  an $8.704  million or 1.5%
decrease.

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.


                                                                            23-K
<PAGE>

Summary of Investment Securities:

<TABLE>
<CAPTION>
                                                                           At December 31
                                          --------------------------------------------------------------------------------
                                                    2004                       2003                         2002
                                          --------------------------------------------------------------------------------
                                          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):                               $  1,347      $  1,504      $  1,028      $  1,025      $  1,263      $    907
                                           --------      --------      --------------------------------------------------

Available-for-sale:

U.S. Treasury and obligations of U.S.
Government corporations and agencies       $ 16,949      $ 16,970      $  5,978      $  6,028      $ 18,265      $ 18,469

Obligations of States and Political
Subdivisions (Municipal Bonds)               66,656        67,745        56,684        58,016        38,172        39,629

Mortgage - Backed Securities                159,289       158,645       192,745       192,365       142,983       146,574

Corporate Bonds                                  --            --        13,038        13,949        23,171        24,816

Equity securities                             5,870         6,055         4,520         4,693         4,963         5,054
                                           --------      --------      --------      --------      --------      --------

   Total available-for-sale                $248,764      $249,415      $272,965      $275,051      $227,554      $234,542
                                           --------      --------      --------      --------      --------      --------

Held-to-maturity:

Obligations of States and Political
Subdivisions (Municipal Bonds)             $  7,811      $  7,999      $  6,292      $  6,515      $  3,230      $  3,231

Mortgage-Backed Securities                   51,652        51,325        37,848        37,901        39,607        40,721
                                           --------      --------      --------      --------      --------      --------

   Total held-to-maturity                  $ 59,463      $ 59,324      $ 44,140      $ 44,416      $ 42,837      $ 43,952
                                           --------      --------      --------      --------      --------      --------
</TABLE>

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

Between  December  31,  2003 and  December  31, 2004 our  investment  securities
portfolio (including trading, available-for-sale and held-to-maturity) decreased
$9.834 million or 3.1%. During 2004 we experienced a significant turnover in our
investment securities  portfolio.  The principal proceeds received from the sale
and maturity of  available-for-sale  and held-to-maturity  investment securities
totaled  $188.757 million in 2004,  approximately  58.9% of our total investment
securities  holdings at the start of the year.  Although  we  replaced  $181.028
million  of  these  proceeds  with  new  purchases,  the  composition  and  risk
characteristics of our investment  securities  portfolio has changed between the
periods.  First,  we eliminated our corporate bond holdings  during the year. At
December 31, 2003 we held $13.949 million of corporate  bonds.  The reduction in
corporate bonds and subsequent  reinvestment in U.S. government  corporation and
agency bonds and insured municipal bonds reduced our credit risk. Second, during
2004 we reduced our concentration of mortgage-backed  securities (including both
mortgage pass-through  securities and collateralized  mortgage obligations).  At
December  31, 2003  mortgage-backed  securities  represented  71.9% of our total
investment securities portfolio. At December 31, 2004 mortgage-backed securities
represented   67.6%  of  our  total   investment   securities   portfolio.   Our
concentration in  mortgage-backed  securities and prepayment options embedded in
these types of securities provides for more volatile investment  securities cash
flows and yields.  Third, in order to diversify  investment security holdings by
type and reduce  prepayment  risk, we increased our holdings of municipal  bonds
and U.S.  government  agency  securities by a total of $22.190 million or 31.5%,
from  $70.336  million at December  31, 2003 to $92.526  million at December 31,
2004.

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,  2003,  the net  unrealized  gain on the
available-for-sale  investment  securities  portfolio  was  $2.086  million.  By
comparison,   at  December   31,   2004,   the  net   unrealized   gain  on  the
available-for-sale  investment  securities  portfolio  was  $651  thousand.  The
decrease in net unrealized  investment  securities gains between the periods was
due to several  factors  including  the  changes in interest  rates  between the
periods, the significant change in the composition of our investment  securities
portfolio, as well as, the sale of available-for-sale  securities.  During 2004,
we realized  investment  securities gains on the sale and maturity of investment
securities totaling $1.031 million.

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, 2004. All amortizing security
principal


24-K
<PAGE>

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 at the date in which management  believes the bond will be
called.  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,  2004.  Yields on  obligations  of states and
municipalities exempt from federal taxation were not tax-effected.

Investment Securities Maturity Table:

<TABLE>
<CAPTION>
                                                At December 31, 2004
                            ---------------------------------------------------------------
                                                       After One
                                                      Year through       After Five Years
                            In One Year or Less        Five Years        through Ten Years
                            ---------------------------------------------------------------

                                       Weighted              Weighted              Weighted
                            Carrying    Average   Carrying    Average   Carrying    Average
   Dollars in Thousands       Value      Yield      Value      Yield      Value      Yield
                            ---------------------------------------------------------------
<S>                         <C>           <C>     <C>           <C>     <C>           <C>
U.S Treasury and federal
agency securities           $     --      0.00%   $ 11,990      3.41%   $  4,980      4.26%

Municipal obligations          3,726      5.10%     33,726      4.28%     30,247      3.54%

Mortgage-backed securities    13,760      4.28%    144,762      4.15%     49,669      4.60%

Corporate securities              --      0.00%         --      0.00%         --      0.00%
                            ---------------------------------------------------------------

     Total securities (1)   $ 17,486      4.45%   $190,478      4.13%   $ 84,896      4.20%
                            ===============================================================

<CAPTION>
                                     At December 31, 2004
                            ----------------------------------------

                              After Ten Years           Total
                            ----------------------------------------

                                       Weighted             Weighted
                            Carrying    Average   Carrying   Average
   Dollars in Thousands       Value      Yield      Value     Yield
                            ----------------------------------------
<S>                         <C>           <C>     <C>          <C>
U.S Treasury and federal
agency securities           $     --      0.00%   $ 16,970     3.66%

Municipal obligations          7,856      3.58%     75,555     3.95%

Mortgage-backed securities     2,107      5.11%    210,298     4.27%

Corporate securities              --      0.00%         --     0.00%
                            ----------------------------------------

     Total securities (1)   $  9,963      3.90%   $302,823     4.16%
                            ========================================
</TABLE>

(1) This table excludes  trading  securities  totaling  $1.504 million and other
equity securities totaling $6.055 million at December 31, 2004.

At December 31, 2004 the approximate  weighted  average  maturity for all of the
Bank's  available-for-sale  and held-to-maturity  debt securities was 4.8 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. This estimated weighted average maturity was greater at December 31,
2004 than our actual experience  throughout 2004 due to the diminishing economic
advantage for homeowners to refinance their existing mortgage debt. During 2002,
2003 and 2004  millions  of  homeowners  refinanced  their  mortgage  debt given
historically  low  mortgage  rates.  Although low  mortgage  rates  persisted at
December 31, 2004, the likelihood that a homeowner would refinance their current
mortgage debt decreased  because their existing  mortgage debt already carried a
low rate of interest.

The credit quality of our debt securities is strong. At December 31, 2004, 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;
94.1% were rated AAA.  This  compares to 98.5% and 89.8%,  respectively  for the
period ended December 31, 2003.

At December 31, 2004 we also held $6.055 million of equity securities including:
$135  thousand  of Federal  Reserve  Bank of New York stock,  $3.369  million in
FHLBNY stock,  $1.629  million equity  interest in a Small  Business  Investment
Company,  Meridian  Venture  Partners II, L.P,  $250  thousand in a money market
mutual fund, $35 thousand in New York Business  Development Corp. stock and $637
thousand of common  stock of other  banking  institutions.  At December 31, 2003
equity  securities  totaled $4.693 million at estimated fair value. The increase
in the estimated fair value of equity  securities  between the periods  totaling
$1.362  million  was  primarily  due to a $896  thousand  increase in the Bank's
investment in Meridian  Venture  Partners II, L.P., a $316 thousand  increase in
FHLBNY  stock and a $239  thousand  increase  in the money  market  mutual  fund
balance.  We slightly  reduced our  position  in common  stock of other  banking
institutions during 2004.

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

During 2004 we increased  our interest  bearing bank  balances.  At December 31,
2003 our interest-bearing  bank balance totaled $7.998 million. By comparison at
December 31, 2004 our interest-bearing  bank balances totaled $10.099 million, a
$2.101 million or 26.3%  increase.  These balances are invested in  FDIC-insured
certificates of deposit (in amounts of $100,000 or less) in various FDIC-insured
banks throughout the United States.  We purchased these  certificates of deposit
during our execution of 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


                                                                            25-K
<PAGE>

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 2004, our average  federal
funds sold position was $6.346 million.  By comparison,  during 2003 our average
federal funds sold was $15.175 million.

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

General.  The Bank's total loan portfolio  increased by $30.137 million or 8.35%
during 2004. Total loans outstanding at December 31, 2004 were $391.043 million,
as compared to $360.906 million at December 31, 2003.  During 2004, we continued
to increase the loans  outstanding in the commercial and commercial  real estate
categories  due to our efforts to expand our market area and focus our resources
on this type of lending.  During 2004 we established a new  representative  loan
production office in the Kingston, New York (Ulster 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,
                             -------------------------------------------------------------------------------------------------------
                                     2004                2003                 2002                  2001                  2000
                             -------------------------------------------------------------------------------------------------------
                              Amount   Percent     Amount   Percent    Amount    Percent     Amount    Percent     Amount    Percent
                             -------------------------------------------------------------------------------------------------------
<S>                          <C>        <C>      <C>         <C>      <C>         <C>      <C>          <C>      <C>          <C>
(Dollars in thousands)
Residential real estate (1)  $119,103    30.5%   $118,571     32.9%   $125,464     35.0%   $ 125,510     38.1%   $ 130,003     40.0%
Commercial real estate        129,516    33.1%    115,733     32.1%    104,967     29.3%      87,268     26.5%      76,860     23.7%
Commercial (2)                 78,003    19.9%     65,031     18.0%     65,595     18.3%      53,157     16.1%      50,946     15.7%
Consumer                       64,421    16.5%     61,571     17.1%     62,269     17.4%      63,609     19.3%      66,949     20.6%
                             -------------------------------------------------------------------------------------------------------
      Total loans             391,043   100.0%    360,906    100.0%    358,295    100.0%     329,544    100.0%     324,758    100.0%
                             -----------======---------------======---------------======----------------======----------------======

Less:
Allowance for loan losses      (6,250)             (5,757)              (5,392)               (4,476)               (4,003)
                             --------            --------             --------             ---------             ---------
        Net loans            $384,793            $355,149             $352,903             $ 325,068             $ 320,755
                             ========            ========             ========             =========             =========
</TABLE>

(1) Includes home equity loans

(2) Includes  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
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.  During  2004 we ceded the  fixed-rate  closed  end 1-4 family
residential  mortgage  loan market to  competition  in a very low interest  rate
environment.  Residential mortgage providers who had the capability to originate
and sell  conforming  mortgages to the secondary  market  lowered their mortgage
interest  rates to very low  levels.  During  the same  period,  we  established
minimum interest rates for fixed rate  residential  mortgages that we would hold
in our loan portfolio.  Our strategy was intended to maintain  acceptable levels
of  interest  rate  risk  in  our  loan  portfolio.  However,  during  2004  our
residential real estate balances increased modestly on a net basis primarily due
to an increase in the outstanding balances of variable rate home equity lines of
credit. During 2004 we continued to actively promote and competitively price our
home equity line of credit  product known as the "Prestige  Line of Credit." The
loan balances  outstanding  in this category  increased  $7.760 million or 40.6%
during  2004,  from $19.091  million at December 31, 2003 to $26.851  million at
December 31, 2004.

During 2004 we increased our total consumer loans  outstanding by $2.850 million
or 4.6%.  The growth in this category of loans is due to our continued  emphasis
in indirect  automobile  lending  (primarily used vehicles).  Throughout 2004 we
continued  to broaden  our  automobile  dealer  network and cater to our highest
volume dealers. At December 31, 2003, our indirect automobile loan portfolio was
comprised of 3,878 accounts  totaling  $36.545  million.  This compares to 4,123
accounts  and  $41.268  million at December  31,  2004,  a 6.3% net  increase in
accounts and 12.9% net increase in loan volume outstanding.


26-K
<PAGE>

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:

<TABLE>
<CAPTION>
                                                               One            More
                                             Within One      Through          Than
                                              Year (1)      Five Years     Five Years        Total
                                             ------------------------------------------------------
<S>                                           <C>            <C>            <C>            <C>
            Residential real estate (1)         55,188          4,604         59,311        119,103
            Commercial real estate              57,363         23,335         48,818        129,516
            Commercial (2)                      53,229         11,271         13,503         78,003
            Consumer                             8,948         44,878         10,595         64,421
                                              -----------------------------------------------------
                 Total loans receivable       $174,728       $ 84,088       $132,227       $391,043
                                              =====================================================
</TABLE>

            (1) Includes home equity loans

            (2)  Includes   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, 2005:

Table of Fixed and Adjustable Rate Loans:

                                                Due After December 31, 2005
                                          --------------------------------------
                                            Fixed       Adjustable        Total
                                          --------------------------------------
            Residential real estate (1)     60,817         47,478        108,295
            Commercial real estate          72,791         50,246        123,037
            Commercial (2)                  22,507         19,913         42,420
            Consumer                        54,497            977         55,474
                                          --------------------------------------
                Total loans               $210,612       $118,614       $329,226
                                          ======================================

            (1) Includes home equity loans

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

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, 2004 and  December 31,  2003,  standby  letters of credit  totaled
$9.948  million  and $9.954  million,  respectively.  At  December  31, 2004 and
December 31, 2003,  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,  and other  personal  and  commercial  lines of
credit. At December 31, 2004 and December 31, 2003, we had outstanding  unfunded
loan commitments of $57.055 million and $49.124 million,  respectively, a $7.931
million or 16.1%  increase.  The increase in the unfunded loan  commitments  was
primarily  due to growth in the unused  portion of  commercial  and home  equity
lines of credit.  Our experience  shows that these  unfunded  commitments do not
fluctuate significantly from month to month.


                                                                            27-K
<PAGE>

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, 2004 we had $2.267 million of loans that were
30 or more days past due (excluding  loans placed on non-accrual  status).  This
equaled 0.58% of total loans outstanding. By comparison, at December 31, 2003 we
had $2.752 million of this same category of loans that were 30 or more days past
due (excluding loans placed on non-accrual status).  This equaled 0.76% of total
loans  outstanding.  The decrease in delinquent loans (still accruing  interest)
between the periods  totaling  $485  thousand was primarily due to a decrease in
residential real estate delinquency.  At December 31, 2003 we had $1.486 million
of  delinquent  residential  real estate loans  outstanding.  This  decreased to
$1.035 million at December 31, 2004. We attribute these improvements to stricter
consumer and mortgage underwriting  guidelines  implemented in 2001 and improved
delinquent loan collection procedures.

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                2004       2003       2002       2001       2000
                                                                --------------------------------------------------
<S>                                                             <C>        <C>        <C>        <C>        <C>
            Loans in Non-Accrual Status:
               Residential real estate (1)                      $  141     $  257     $  222     $  465     $  437
               Commercial real estate                            2,168      1,199      1,049      1,587      1,249
               Commercial (2)                                      243      1,700        760         33        227
               Consumer                                              9          8          3          5         --
                                                                --------------------------------------------------
                      Total non-accruing loans                   2,561      3,164      2,034      2,090      1,913
            Loans Contractually Past Due 90 Days or More and
            Still Accruing Interest                                190        123        717        329        345
            Troubled Debt Restructured Loans                        --        371        387        861        888
                                                                --------------------------------------------------
                      Total non-performing loans                 2,751      3,658      3,138      3,280      3,146
            Other real estate owned                                 78         20         22        857      1,097
                                                                --------------------------------------------------
            Total non-performing assets                         $2,829     $3,678     $3,160     $4,137     $4,243
                                                                ==================================================
            Total non-performing assets as a percentage
            of total assets                                       0.38%      0.50%      0.45%      0.66%      0.76%
                                                                ==================================================
            Total non-performing loans as a percentage of
            total loans                                           0.70%      1.01%      0.88%      1.00%      0.97%
                                                                ==================================================
</TABLE>

            (1) Includes home equity loans

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

Total  non-performing  assets decreased from $3.678 million at December 31, 2003
to $2.829  million at December  31,  2004,  a $849  thousand or 23.1%  decrease.
Non-performing assets as a percent of total assets totaled 0.50% at December 31,
2003,  as compared to 0.38% at December 31, 2004, a 12 basis point  improvement.
The net decrease in non-performing  assets can be primarily  attributed to three
large loan  relationships.  First,  during the second quarter,  we transferred a
$1.357 million  agricultural  loan from non-accrual  status to performing status
due to an  increase  in the  value  of the  collateral  held by the Bank and the
borrower's  resumption  of  payment  in  accordance  with the  loan's  terms and
including all accrued and unpaid interest.  Second, during the fourth quarter we
removed two commercial real estate loans from  non-accrual  status totaling $704
thousand because we received full payment on the loans. Third, during the fourth
quarter we  transferred a commercial  real estate loan totaling  $2.003  million
from accrual  status to  non-accrual  status upon paying a portion of delinquent
taxes on behalf of the borrower to avoid a tax sale of the property.

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


28-K
<PAGE>

real  estate,  less  estimated  costs to sell.  At both  December  31,  2004 and
December 31, 2003 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 $8.662
million or 2.2% of total loans  outstanding at December 31, 2004. By comparison,
at December 31, 2003  potential  problem loans totaled $7.846 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 increase in potential  problem loans totaling $816 thousand  between
December 31, 2003 and December 31, 2004 to be  significant  or  indicative  of a
decrease in the overall  quality of the loan  portfolio.  In fact,  the level of
potential  problem loans as a percent of total loans remained  unchanged at 2.2%
between  the  periods  due to an  increase  in the  volume of loans  outstanding
between the  periods.  However,  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, 2004 we had outstanding $22.595 million or
5.8% of our total  loans  outstanding  to  borrowers  who operate in the hotel /
motel industry.  By comparison,  at December 31, 2003 we had outstanding $29.221
million or 8.1% 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 have
established a specific exposure guideline for this hotel / motel industry at 50%
of the Bank's  total  equity  capital,  which at  December  31, 2004 was $33.803
million.

At December  31, 2004 we also held  $22.707  million or 5.81% of our total loans
outstanding  in commercial  rental  properties.  The portfolio is comprised of a
diverse group of  properties  and  borrowers.  The average loan size for each of
these borrowings at December 31, 2004 was approximately $344 thousand. Seven (7)
of these loans were each in excess of $1.0 million, totaling $12.873 million. By
comparison,  at December 31, 2003 we had $18.173  million of  commercial  rental
property  loans  outstanding  with  five (5) of these  loans in  excess  of $1.0
million totaling $7.728 million.

At December 31, 2004 we had $22.036  million or 5.6% of total loans  outstanding
to  borrowers  in the  convenience  store / fuel  business.  By  comparison,  at
December  31,  2003 we had  $11.313  million of loans  outstanding  and  $16.771
million of total loan commitments to this industry. At December 31, 2004 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.

At  December  31,  2004  we had  $18.301  million  or 4.7%  of our  total  loans
outstanding to automotive dealerships.  The largest seven (7) borrowers comprise
approximately $15.000 million of the loans outstanding.  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,  2004  we had  $15.778  million  or 4.0%  of our  total  loans
outstanding  to 5+ unit  residential  rental  properties.  There  were  five (5)
borrowers  who  comprised  approximately  $8.200  million  of  the  total  loans
outstanding.  One loan in this category totaling $842 thousand was classified as
substandard at December 31, 2004.

Other areas of  concentration  at  December  31, 2004  include  $31.871  million
outstanding to borrowers in the manufacturing sector, $12.352 million to general
residential and commercial contractors,  and $8.046 million of loans outstanding
to various restaurants.  Although these are deemed to be areas of concentration,
management believes the underlying  borrowers provide adequate size and industry
diversification to mitigate significant industry-sector risk.

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.


                                                                            29-K
<PAGE>

Analysis of the Allowance for Loan Losses Table:

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                 --------------------------------------------------
                                                                  2004       2003       2002       2001       2000
                                                                 --------------------------------------------------
                                                                               (Dollars in thousands)
<S>                                                              <C>        <C>        <C>        <C>        <C>

            Balance at beginning of year                         $5,757     $5,392     $4,476     $4,003     $3,998

            Charge offs:
            Residential real estate (1)                             133        174         93        225        559
            Commercial real estate                                   51         --         --        148         --
            Commercial (2)                                          121        193        402        123        753
            Consumer                                                639      1,109        926        905        722
                                                                 --------------------------------------------------
                   Total charge offs                                944      1,476      1,421      1,401      2,033
                                                                 --------------------------------------------------

            Recoveries:
            Residential real estate (1)                              20         10         --         24          7
            Commercial real estate                                   --         --         --         40         --
            Commercial (2)                                           51         78        250         88        135
            Consumer                                                166        188        167        181        216
                                                                 --------------------------------------------------
                    Total recoveries                                237        276        417        334        358
                                                                 --------------------------------------------------

            Net charge-offs                                         707      1,200      1,004      1,068      1,675
            Provision for loan losses                             1,200      1,565      1,920      1,540      1,680
                                                                 --------------------------------------------------
            Balance at end of year                               $6,250     $5,757     $5,392     $4,476     $4,003
                                                                 ==================================================

            Ratio of net charge-offs during the year to
            average loans outstanding during the year              0.19%      0.33%      0.29%      0.33%      0.51%
                                                                 ==================================================

            Allowance for loan losses to total loans               1.60%      1.60%      1.50%      1.36%      1.23%
                                                                 ==================================================

            Allowance for loan losses to non-performing loans       227%       157%       172%       136%       127%
                                                                 ==================================================
</TABLE>

            (1) Includes home equity loans

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

The allowance for loan losses increased from $5.757 million at December 31, 2003
to $6.250  million at December 31, 2004, a $493 thousand or 8.6%  increase.  The
allowance for loan losses as a percent of total loans was unchanged  between the
periods. Specifically, the allowance for loan losses as a percent of total loans
was 1.60% at December 31, 2004 and December 31, 2003.  Management  and the Board
of Directors  deemed the  allowance  for loan losses as adequate at December 31,
2004 and December 31, 2003.

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.


30-K
<PAGE>

Loan Loss Summary Allocation Table:

<TABLE>
<CAPTION>
                                                           At December 31,
                               ------------------------------------------------------------------------
                                        2004                     2003                     2002
                               ------------------------------------------------------------------------
                                           Percent of               Percent of               Percent of
                                            Loans in                 Loans in                 Loans in
                               Amount of      Each      Amount of      Each      Amount of      Each
                               Allowance    Category    Allowance    Category    Allowance    Category
                                for Loan    to Total     for Loan    to Total     for Loan    to Total
Dollars in Thousands             Losses       Loans       Losses       Loans       Losses       Loans
                               ------------------------------------------------------------------------
<S>                              <C>         <C>          <C>         <C>          <C>         <C>
Residential real estate (1)         670       10.72%      $  545        9.47%      $  718       13.32%

Commercial real estate            2,454       39.26%       2,248       39.05%       2,051       38.04%

Commercial (2)                    1,435       22.96%       1,297       22.53%       1,282       23.78%

Consumer                          1,080       17.28%         966       16.78%       1,017       18.86%

Unallocated                         611        9.78%         701       12.18%         324        6.01%
                               ------------------------------------------------------------------------
     Total                       $6,250      100.00%      $5,757      100.00%      $5,392      100.00%
                               ========================================================================

<CAPTION>
                                               At December 31,
                               -----------------------------------------------
                                        2001                     2000
                               -----------------------------------------------
                                           Percent of               Percent of
                                            Loans in                 Loans in
                               Amount of      Each      Amount of      Each
                               Allowance    Category    Allowance    Category
                                for Loan    to Total     for Loan    to Total
Dollars in Thousands             Losses       Loans       Losses       Loans
                               -----------------------------------------------
<S>                              <C>         <C>          <C>         <C>
Residential real estate (1)      $  598       13.36%      $  639       15.96%

Commercial real estate            1,461       32.64%       1,447       36.15%

Commercial (2)                      891       19.91%         959       23.96%

Consumer                            982       21.94%         689       17.21%

Unallocated                         544       12.15%         269        6.72%
                               -----------------------------------------------
     Total                       $4,476      100.00%      $4,003      100.00%
                               ===============================================
</TABLE>

(1) Includes home equity loans

(2)  Includes   agricultural  loans  and  obligations  (other  than  leases  and
securities) 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, 2004 we maintained  $10.440 million or
1.4% of total assets in these categories of non-earning assets. This compares to
$11.892 million or 1.6% of total assets at December 31, 2003.

Premises and Equipment. At December 31, 2004 the net book value of Bank premises
and  equipment  totaled  $5.860  million.  This  compares  to $5.721  million at
December  31,  2003.  During  2004  we  expanded  and  improved  several  branch
properties and purchased  additional  equipment  (primarily computer equipment),
which resulted in a $139 thousand net increase in premises and equipment between
the periods.

Bank-Owned  Life  Insurance.  The cash surrender  value of the life insurance at
December 31, 2004 was $14.975  million,  compared to $14.405 million at December
31, 2003.  The increase was  attributable  to an increase in the cash  surrender
value of the policies between the periods  totaling $570 thousand.  The policies
are  issued by four life  insurance  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.  In February 2002 we acquired a branch in
the City of Norwich,  New York from a regional  competitor.  We  acquired  $34.3
million in deposit  liabilities  and $3.2  million in loan  assets.  We recorded
$1.877  million in goodwill  and $285  thousand in core  deposit  intangible  in
conjunction  with the branch  acquisition.  No  impairment  of the  goodwill was
deemed  necessary  during 2004. The core deposit  intangible is being  amortized
over 5 years.

Other  Assets.  Other  assets  increased  by $754  thousand or 7.2% from $10.499
million at December  31, 2003 to $11.253  million at December  31,  2004.  Other
assets are  comprised  of other real  estate  owned,  interest  receivable,  our
prepaid dealer reserve,  prepaid  pension plan assets,  computer  software,  net
deferred tax assets and other assets,  other  prepaid  items and other  accounts
receivable.  Several  factors  contributed  to the net  increase in other assets
between the periods.  Specifically,  our net deferred tax assets  increased $569
thousand  between the periods due to the decline in the unrealized  gains in our
available-for-sale  investment  securities  portfolio  during  the year.  In the
second quarter,  our insurance  agency  subsidiary Mang - Wilber LLC purchased a
two-thirds  interest in a small  insurance  agency  located in Clifton Park, New
York.  The  investment  in the agency at December 31, 2004 was being  carried at
$468 thousand.  Due to the increase in our indirect automobile loan volumes, our
prepaid  dealer  reserve  increased  $207  thousand  between the periods.  These
increases were offset by a $179 thousand decrease in interest receivable, a $185
thousand  decrease  in other  prepaid  items  and a $133  thousand  decrease  in
computer software.


                                                                            31-K
<PAGE>

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

Deposits. Deposits are our primary funding source. At December 31, 2004 deposits
represented  83.7% of our total  liabilities,  compared to 87.4% at December 31,
2003.  At December  31, 2003 our total  deposits  were  $580.633  million.  This
compares to $571.929  million at December  31, 2004,  an $8.704  million or 1.5%
decrease.  The decrease in total deposits was primarily due to a decrease in our
interest-bearing non-maturity deposit accounts, including savings, NOW and money
market accounts. Throughout 2004, we maintained low rates of interest on many of
the balance tiers in our interest-bearing non-maturity deposit accounts in order
to contain our interest  expense.  Some of our interest rate  sensitive  deposit
customers  transferred these funds to time deposits or non-deposit  investments,
thereby  reducing their balances in the  interest-bearing  non-maturity  deposit
accounts.

The following  table indicates the amount of our time accounts by time remaining
until maturity as of December 31, 2004.

Time Accounts Maturity Table:

<TABLE>
<CAPTION>
                                                                        Maturity as of December 31, 2004
                                                      ------------------------------------------------------------------
                                                      3 Months or   Over 3 to 6   Over 6 to 12    Over 12
            Dollars in Thousands                          Less         Months        Months        Months         Total
                                                      ------------------------------------------------------------------
<S>                                                     <C>           <C>           <C>           <C>           <C>
            Certificates of Deposit and Other Time
            Deposits of $100,000 or more                $ 18,464      $ 14,296      $ 11,817      $ 34,797      $ 79,374

            Certificates of Deposit and Other Time
            Deposits less than $100,000                   22,311        21,330        41,588       102,429       187,658
                                                      ------------------------------------------------------------------

            Total of time accounts                      $ 40,775      $ 35,626      $ 53,405      $137,226      $267,032
                                                      ==================================================================
</TABLE>

Foreign  Deposits in Domestic  Offices.  At  December  31, 2004 we held  $13.824
million of deposits from foreign depositors. This compares to $14.353 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.

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 borrowed from the FHLBNY for various
funding requirements and wholesale funding strategies.  At December 31, 2004 our
ratio of borrowed funds (including short-term and long-term borrowings) to total
liabilities  increased as compared to December 31, 2003.  Total  borrowed  funds
were  $102.938  million or 15.1% of total  liabilities  at December 31, 2004, as
compared  to $75.867 or 11.4% of total  liabilities  at  December  31,  2003;  a
$27.071 million increase. The increase in total borrowed funds was primarily due
to the  implementation  of two $15.0  million  wholesale  leverage  transactions
executed  by  management,  one in the first  quarter  and  another in the fourth
quarter.  During the first quarter, we borrowed $15.0 million from the FHLBNY in
a series of advances (borrowings) with varying terms of repayment.  The borrowed
funds were used to purchase  an equal  amount of  available-for-sale  investment
securities.  During the fourth  quarter,  we borrowed $15.0 million from a large
money  center  bank  through a security  resale  agreement  to purchase an equal
amount of available-for-sale investment securities. These funds were borrowed on
a short-term  basis, with the intention of replacing the borrowing with the core
deposit  liabilities,  scheduled  to be  assumed  by the Bank  from  HSBC  Bank,
National  Association  during the first quarter of 2005. This transaction closed
on  February  4, 2005 and the  borrowed  funds  were  repaid.  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, 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


32-K
<PAGE>

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 occupancy expense, computer service
fees, advertising and marketing,  professional fees and other fees totaling $724
thousand,  offset by  reductions in salaries and employee  benefits  expense and
furniture and equipment  expense  totaling $89 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
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. 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.


                                                                            33-K
<PAGE>

Asset and Yield Summary Table:

<TABLE>
<CAPTION>
                                                         For the Years Ended December 31,
                                ----------------------------------------------------------------------------------
                                                   2004                                       2003
                                ----------------------------------------------------------------------------------
                                  Average       Interest                     Average       Interest
                                Outstanding      Earned         Yield /    Outstanding      Earned         Yield /
                                  Balance        /Paid           Rate        Balance        /Paid            Rate
                                ----------------------------------------------------------------------------------
                                                             (Dollars in thousands)
<S>                               <C>           <C>               <C>        <C>           <C>               <C>
Earning Assets:
Federal funds sold                $  6,346      $     81          1.28%      $ 15,175      $    173          1.14%
Interest bearing
deposits                             8,581           534          6.22%        14,149           928          6.56%
Securities (1)                     308,101        11,685          3.79%       302,387        13,050          4.32%
Loans, Net (2)                     367,328        24,865          6.77%       352,935        24,477          6.94%
                                  ----------------------                     ----------------------
     Total earning assets          690,356        37,165          5.38%       684,646        38,628          5.64%

Non-earning assets                  46,394                                     43,580
                                  --------                                   --------
         Total assets             $736,750                                   $728,226
                                  ========                                   ========

Liabilities:
Savings accounts                  $ 95,657      $    601          0.63%      $ 89,087      $    791          0.89%
Money market
accounts                            28,773           328          1.14%        30,938           298          0.96%
NOW accounts                       122,640         1,023          0.83%       121,288         1,353          1.12%
Time accounts                      271,317         7,526          2.77%       280,290         8,258          2.95%
Borrowings                          82,929         3,283          3.96%        77,068         3,453          4.48%
                                  ----------------------                     ----------------------
Total interest bearing
liabilities                        601,316        12,761          2.12%       598,671        14,153          2.36%

Non-interest bearing
deposits                            61,626                                     57,355
Other non-interest
bearing liabilities                  7,913                                      8,454
                                  --------                                   --------
      Total liabilities            670,855                                    664,480
Shareholder equity                  65,895                                     63,746
                                  --------                                   --------
 Total liabilities and
shareholder equity                $736,750                                   $728,226
                                  ========                                   ========

 Net interest income                            $ 24,404                                   $ 24,475
                                                ========                                   ========

Net interest rate spread (3)                                      3.26%                                      3.28%
                                                                ======                                     ======

 Net earning assets               $ 89,040                                   $ 85,975
                                  ========                                   ========

Net interest margin (4)                                           3.53%                                      3.57%
                                                                ======                                     ======

Ratio of earning
assets to interest-               ========                                   ========
bearing liabilities                 114.81%                                    114.36%
                                  ========                                   ========

<CAPTION>
                                 For the Years Ended December 31,
                              ---------------------------------------
                                                2002
                              ---------------------------------------
                                Average      Interest
                              Outstanding     Earned          Yield /
                                Balance        /Paid           Rate
                              ---------------------------------------
                                       (Dollars in thousands)
<S>                            <C>           <C>               <C>
Earning Assets:
Federal funds sold             $ 14,291      $    238          1.67%
Interest bearing
deposits                         19,769         1,257          6.36%
Securities (1)                  276,550        13,648          4.94%
Loans, Net (2)                  336,283        26,503          7.88%
                               ----------------------
     Total earning assets       646,893        41,646          6.44%

Non-earning assets               41,520
                               --------
         Total assets          $688,413
                               ========

Liabilities:
Savings accounts               $ 79,382      $  1,101          1.39%
Money market
accounts                         36,548           537          1.47%
NOW accounts                     95,861         1,678          1.75%
Time accounts                   274,985         9,719          3.53%
Borrowings                       80,129         4,135          5.16%
                               ----------------------
Total interest bearing          566,905        17,170          3.03%
liabilities

Non-interest bearing
deposits                         52,652
Other non-interest
bearing liabilities               9,230
                               --------
      Total liabilities         628,787
Shareholder equity               59,626
                               --------
 Total liabilities and
shareholder equity             $688,413
                               ========

 Net interest income                         $ 24,476
                                             ========

Net interest rate spread (3)                                   3.41%
                                                             ======

 Net earning assets            $ 79,988
                               ========

Net interest margin (4)                                        3.78%
                                                             ======

Ratio of earning
assets to interest-            ========
bearing liabilities              114.11%
                               ========
</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.


34-K
<PAGE>

Net interest income decreased by $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%
      ----------------------------------------------------------------------    ----------------------------------------
      7 Year Treasury Note            3.68%      3.68%      3.68%      3.68%      3.68%      3.36%      2.67%      3.33%
      ----------------------------------------------------------------------    ----------------------------------------
      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              5.65%      5.77%      5.73%      5.69%      5.79%      5.61%      5.68%      5.88%
      Mortgage 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
leverage transaction during the fourth quarter of 2000 and first quarter of 2001
matured.  The average yield on these


                                                                            35-K
<PAGE>

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 rate bill increased  during 2004,
so did our cost of money market deposit accounts.

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.


36-K
<PAGE>

Rate and Volume Table:

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                              -----------------------------------------------------------------------------
                                                          2004 vs. 2003                             2003 vs. 2002
                                              -----------------------------------------------------------------------------
                                                Rate         Volume        Total          Rate         Volume        Total
                                              -----------------------------------------------------------------------------
                                                                              (In thousands)
<S>                                           <C>           <C>           <C>           <C>           <C>           <C>
      Earning assets:
            Federal funds sold                $    19       $  (111)      $   (92)      $   (79)      $    14       $   (65)
            Interest-bearing deposits             (46)         (348)         (394)           38          (367)         (329)
         Securities                            (1,608)          243        (1,365)       (1,803)        1,205          (598)
         Loans                                   (595)          983           388        (3,292)        1,266        (2,026)
                                              -----------------------------------       -----------------------------------
                   Total earning assets        (2,230)          767        (1,463)       (5,136)        2,118        (3,018)
                                              -----------------------------------       -----------------------------------

      Interest bearing liabilities:
          Savings accounts                       (245)           55          (190)         (433)          123          (310)
          Money market accounts                    52           (22)           30          (165)          (74)         (239)
          NOW accounts                           (345)           15          (330)         (700)          375          (325)
          Time accounts                          (486)         (246)         (732)       (1,646)          185        (1,461)
          Borrowings                             (421)          251          (170)         (529)         (153)         (682)
                                              -----------------------------------       -----------------------------------
      Total interest bearing liabilities       (1,445)           53        (1,392)       (3,473)          456        (3,017)
                                              -----------------------------------       -----------------------------------

      Change in net interest income           $  (785)      $   714       $   (71)      $(1,663)      $ 1,662       $    (1)
                                              -----------------------------------       -----------------------------------
</TABLE>

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 by $1.365  million  during
2004. 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 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 by $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  decrease by $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


                                                                            37-K
<PAGE>

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 203
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 place 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.

Total trust fees decreased  slightly in 2004.  Specifically,  trust fees totaled
$1.383 million in 2003, as compared to $1.326 million in 2004, a $57 thousand or
4.3% 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.


38-K
<PAGE>

During 2004 we netted 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  and  employee  benefits  expense  decreased  slightly  in 2004.  Total
salaries  and  benefits  expense  was  $10.741  million in 2004,  as compared to
$10.778  million in 2003,  a $37  thousand or 0.3%  decrease.  Although  the net
decrease  in  salaries  and  employee  benefits  was modest in 2004,  there were
several positive and negative factors, which contributed to the net change. Base
salaries, overtime and employee incentive pay increased by $429 thousand or 5.4%
in 2004,  from  $7.885  million in 2003 to $8.314  million in 2004 due to annual
wage and salary adjustments for existing employees and expansionary  activities,
including the addition of new  employees.  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 group life  insurance,  group
disability, employee education, supplemental executive retirement plan benefits,
and other benefits totaling $96 thousand.

These  increases  were offset by a $66  thousand  decrease  in our pension  plan
expense,  a $10 thousand  decrease in workers'  compensation  expense,  and most
significantly,  a $553  thousand  decrease  in  expense  related  to the  Bank's
executive  deferred  compensation  plan. During 2003 we recorded a $663 thousand
expense  for our  executive  deferred  compensation  plan,  as  compared to $110
thousand in 2004.  The decrease was  primarily  due to a decrease in the returns
generated by the investments held in the plan,  including the Company's  phantom
stock units.

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.


                                                                            39-K
<PAGE>

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,  American Stock  Exchange  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.

Table of Other Miscellaneous Expenses:

<TABLE>
<CAPTION>
            ---------------------------------------------------------------------------
                                                             Year
                                                      ------------------
                                                                              Increase/
            Description of Other Expense               2004        2003      (Decrease)
            ---------------------------------------------------------------------------
            dollars in thousands
<S>                                                   <C>         <C>         <C>
            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
            ---------------------------------------------------------------------------
</TABLE>


40-K
<PAGE>

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 rate for 2004
and 2003, was 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
and  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%.

b.  Comparison  of Operating  Results for the Years Ended  December 31, 2003 and
December 31, 2002

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

Summary. Net income for 2003 was $8.713 million. This represents a $151 thousand
or 1.8%  increase  over 2002 net income of $8.562  million.  Earnings  per share
increased  by $0.02 per share from $0.76 per share in 2002 to $0.78 per share in
2003. Net interest income was very flat between periods. Therefore, the increase
in our earnings was primarily due to an increase in other income, a reduction in
the provision for loan losses,  and a lower provision for income taxes offset by
an increase  in other  expenses.  More  specifically,  during 2003 other  income
increased by $409  thousand,  the  provision  for loan losses  decreased by $355
thousand  and the income tax  provision  was $81  thousand  less in 2003 than in
2002. The combined  improvement of these items totaling $845 thousand was offset
by a $693 thousand increase in other expenses.

Return on average  assets  declined  from  1.25% in 2002 to 1.20% in 2003.  This
occurred   primarily   because  net  interest   margin   declined  during  2003.
Historically  low  and  declining  interest  rates  prompted   significant  loan
refinancing   activity,   reducing  interest  rate  spreads  on  new  loans  and
investments. Return on average stockholders' equity also declined from 14.36% in
2002 to 13.67% in 2003.

Net Interest  Income.  Net  interest  income is our most  significant  source of
revenue. During 2003 and 2002 respectively net interest income comprised 81% and
82% of our total revenues.  Therefore,  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.

Net interest income was flat period over period,  decreasing by only $1 thousand
from 2002 to 2003. More specifically, net interest income was $24.475 million in
2003 as  compared  to $24.476  million in 2002.  Although  net  interest  margin
declined by 21 basis  points  between the periods from 3.78% in 2002 to 3.57% in
2003, its negative impact on net interest income was offset by growth in earning
assets.  The decrease in our net interest margin was primarily driven by rapidly
declining  earning asset yields.  Our earning asset yields  declined by 80 basis
points,  from 6.44% in 2002 to 5.64% in 2003. This occurred because the interest
rates at which we originated new loans,  acquired new investment  securities and
sold  overnight  federal  funds  during  2003  were  significantly   lower  than
comparable interest rates in 2002 (see comparative interest rate table below).


                                                                            41-K
<PAGE>

Comparative Interest Rate Table:

<TABLE>
<CAPTION>
      =================================================================================================================
                                                    2003                                          2002
                                   ----------------------------------------    ----------------------------------------
          Interest Rates (1)       December   September    June       March    December   September    June       March
      ---------------------------------------------------------------------    ----------------------------------------
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
      Target Federal Funds Rate      1.00%      1.00%      1.00%      1.25%      1.25%      1.75%      1.75%      1.75%
      ---------------------------------------------------------------------    ----------------------------------------
      NYC Prime                      4.00%      4.00%      4.00%      4.25%      4.25%      4.75%      4.75%      4.75%
      ---------------------------------------------------------------------    ----------------------------------------
      90 Day Treasury Bill           0.88%      0.91%      0.81%      1.10%      1.18%      1.44%      1.66%      1.75%
      ---------------------------------------------------------------------    ----------------------------------------
      6 Month Treasury Bill          0.99%      1.00%      0.82%      1.10%      1.21%      1.43%      1.68%      2.02%
      ---------------------------------------------------------------------    ----------------------------------------
      1 Year Treasury Note           1.21%      1.06%      0.84%      1.16%      1.20%      1.47%      1.92%      2.57%
      ---------------------------------------------------------------------    ----------------------------------------
      2 Year Treasury Note           1.84%      1.47%      1.10%      1.49%      1.59%      1.73%      2.75%      3.58%
      ---------------------------------------------------------------------    ----------------------------------------
      3 Year Treasury Note           2.31%      1.97%      1.40%      1.86%      1.94%      2.13%      3.30%      4.18%
      ---------------------------------------------------------------------    ----------------------------------------
      4 Year Treasury Note           2.77%      2.34%      1.79%      2.36%      2.37%      2.46%      3.70%      4.56%
      ---------------------------------------------------------------------    ----------------------------------------
      5 Year Treasury Note           3.24%      2.82%      2.16%      2.73%      2.71%      2.72%      3.99%      4.81%
      ---------------------------------------------------------------------    ----------------------------------------
      7 Year Treasury Note           3.68%      3.36%      2.67%      3.33%      3.21%      3.28%      4.41%      5.12%
      ---------------------------------------------------------------------    ----------------------------------------
      10 Year Treasury Note          4.27%      3.94%      3.27%      3.82%      3.79%      3.68%      4.73%      5.28%
      ---------------------------------------------------------------------    ----------------------------------------
      15 Year Treasury Note          4.81%      4.52%      3.89%      4.45%      4.48%      4.47%      5.34%      5.81%
      ---------------------------------------------------------------------    ----------------------------------------
      30 Year Treasury Note          5.08%      4.88%      4.35%      4.84%      4.76%      4.78%      5.13%      5.42%
      ---------------------------------------------------------------------    ----------------------------------------
      Federal Housing Finance
      Board National Avg             5.79%      5.61%      5.68%      5.88%      6.03%      6.32%      6.62%      6.77%
      Mortgage Contract Rate
      =================================================================================================================
</TABLE>

      (1) The above interest rates are provided to us by a third party vendor on
      a bi-weekly  basis.  The interest rates provided in the table are obtained
      from the report  nearest to the  month-end.  The Federal  Housing  Finance
      Board  national  average  mortgage  contract  rate  is  presented  with  a
      one-month lag.

The yield on the loan portfolio declined from 7.88% in 2002 to 6.94% in 2003. As
existing loans matured and amortized  throughout 2003, they were replaced by new
loans at lower rates of  interest.  In addition,  the  interest  rates earned on
variable  rate  loans  were  lower in 2003 than in 2002.  The prime rate and the
1-year constant  maturity Treasury rate are index rates upon which a significant
amount of our variable rate loans are based. On average,  these index rates were
lower in 2003 than in 2002.  And finally,  many large  commercial and commercial
real estate borrowers with fixed rate loans renegotiated their existing loans to
lower rates of interest throughout 2002 and 2003.

The average yield on the investment  securities  portfolio also decreased during
2003.  Specifically,  the  investment  securities  portfolio  decreased 62 basis
points,  from  4.94%  in 2002 to 4.32% in 2003.  Increased  levels  of  mortgage
refinancing activity  accelerated  prepayments on our mortgage backed securities
requiring  that we  reinvest  the  maturing  principal  dollars at lower  market
yields.  Additionally,  the  increased  prepayment  levels  also  required us to
increase   amortization  expense  on  investment   securities  being  held  with
"premiums,"  i.e.,  securities  with amortized book values  exceeding par value,
thereby decreasing interest income and average yield.

The yield on the federal  funds sold  declined  significantly  between  2002 and
2003.  During 2002 and the first half of 2003, the Federal Open Market Committee
lowered the federal funds target rate to stimulate the national  economy.  These
actions lowered our average yield on average federal funds sold.

The average yield on our interest-bearing deposits at other banks increased from
6.36% in 2002 to 6.56% in 2003 due to a shortened duration of the portfolio. The
certificates  of deposit in this  portfolio  were  acquired in December 2000 and
January 2001 at varying terms and rates.  As the  shorter-term  certificates  of
deposit  matured (which were  initially  issued at lower interest rates than the
longer-term  certificates  of  deposit)  it  caused  the  average  yield  of the
portfolio to increase. In total $8.0 million of our FDIC-insured certificates of
deposit  matured  during  2003  and were not  replaced  by new  interest-bearing
deposits with comparable yields.

While earning asset yields  decreased,  management was only able to decrease the
cost of  interest-bearing  liabilities  by 0.67%  from 3.03% in 2002 to 2.36% in
2003.  We,  along  with  other  banks and  competitors,  dropped  deposit  rates
significantly  throughout  the  last two  quarters  of 2002  and the  first  two
quarters  of 2003 to offset a general  decline in interest  rates,  and in turn,
asset yields.  Management,  however,  found it increasingly difficult throughout
2003 to lower  interest  rates  paid on  deposits  further as many of the Bank's
non-maturity  deposit accounts,  such as savings and  interest-bearing  checking
accounts,  were  already  near  an  interest  rate  floor  of  0%.  Accordingly,
management's  options to reduce  interest  expense  declined as  interest  rates
decreased.


42-K
<PAGE>

Rate and Volume  Analysis.  Net interest  income  decreased by $1 thousand  from
$24.476 million in 2002 to $24.475 million in 2003.  Changes in volume increased
net interest income by $1.662 million between the two periods,  while changes in
rate decreased net interest income by $1.663 million.

The interest  income earned on loans decreased by $2.026 million between the two
periods,  from $26.503  million in 2002 to $24.477 million in 2003. The increase
in average loan volume from $336.283 million in 2002 to $352.935 million in 2003
contributed $1.266 million of additional interest income,  whereas the reduction
in the average loan yield decreased  interest income by $3.292 million.  Average
loan yields  decreased  by 0.94%  between the two periods  from 7.88% in 2002 to
6.94% in 2003.

The interest income on investment  securities  decreased by $598 thousand,  from
$13.648  million in 2002 to $13.050  million in 2003.  The average volume of the
investment  portfolio  increased  significantly  between  periods from  $276.550
million during 2002 to $302.387 million during 2003,  generating  $1.205 million
in additional  interest income. This improvement,  however,  was offset by lower
investment yields, which reduced interest income by $1.803 million.

The  interest  income on  federal  funds  sold  decreased  period  over  period.
Specifically,  interest  income on federal funds sold decreased by $65 thousand,
from $238  thousand in 2002 to $173  thousand  in 2003.  During  2003,  interest
income on federal  funds sold  decreased  $79 thousand due to a reduction in the
interest  rate,  while a lower average  volume  outstanding  decreased  interest
income by $14 thousand.

The interest  income on  interest-bearing  deposits  (at other banks)  decreased
period  over  period  by $329  thousand,  from  $1.257  million  in 2002 to $928
thousand in 2003. Specifically, interest income increased by $38 thousand due to
an increase in the average  interest rate,  but was negatively  offset by a $367
thousand reduction in interest income due to a reduction in volume. During 2003,
$8.000 million of FDIC-insured certificate of deposit portfolio matured and were
not replaced by new certificates.

The average volume of savings accounts and NOW accounts increased  significantly
between the two periods in spite of declining interest rates. Specifically,  the
average volume of savings  accounts  increased  from $79.382  million in 2002 to
$89.087 million in 2003. Similarly, the average volume of NOW accounts increased
from $95.861 million in 2002 to $121.288  million in 2003.  Interest expense for
savings and NOW  accounts  decreased  between the two periods by $635  thousand.
Increased volume in these two deposit  categories  created  additional  interest
expense of $498  thousand,  while a significant  decline in short-term  interest
rates  allowed  management to reduce the interest  expense on these  accounts by
$1.133 million.

Interest  expense on money market accounts  decreased from $537 thousand in 2002
to $298 thousand in 2003. Both a reduction in the average volume of money market
balances,  as well as a  reduction  in the  interest  rate paid on money  market
accounts, contributed to this reduction in interest expense.

Time account  balances  increased  slightly  between the two years.  The average
outstanding  balance of time  accounts  during  2003 was  $280.290  million,  as
compared to $274.985 million during 2002.  Accordingly,  interest expense due to
volume for time accounts only  increased  $185 thousand  period over period.  By
comparison, a substantial decrease in interest rates allowed management to lower
certificate of deposit rates,  saving $1.646 million of interest  expense period
over period.  The net  interest  expense  decrease due to time account  balances
equaled $1.461 million.

Interest expense for borrowings  decreased from $4.135 million in 2002 to $3.453
million in 2003. The $682 thousand  decrease in interest  expense for borrowings
is attributable to both a reduction in borrowings  outstanding and a decrease in
average borrowing costs.

Provision  for Loan Losses.  The  provision  for loan losses for 2003 was $1.565
million,  as  compared  to $1.920  million  in 2002,  a $355  thousand  or 18.5%
decrease.  The provision for loan losses  decreased in 2003, as compared to 2002
due to a significant  decrease in delinquent loans, a relatively stable level of
net charge-offs,  and a stable level of specifically  identified inherent losses
in the loan  portfolio.  Delinquent  loans (those 30 or more days past due) as a
percent of total loans  outstanding  averaged  1.49% during 2003, as compared to
2.13% during 2002.  Management  attributes the improvement in delinquency levels
to implementation of an improved consumer credit  identification  and management
system established in 2001. Net charge-offs  remained  relatively stable between
2003 and 2002.  Net  charge-offs in 2003 were $1.200 million in 2003 or 0.33% of
average loans  outstanding.  By comparison,  net charge-offs in 2002 were $1.004
million or 0.29% of average loans outstanding. While the level of non-performing
loans increased  slightly period to period,  the loans that were  transferred to
non-accrual status during 2003 were adequately reserved for in the allowance for
loan losses prior to transfer to  non-accrual  status.  The  provision  for loan
losses as a percentage of average total loans outstanding was 0.44% for 2003, as
compared to 0.57% for 2002.


                                                                            43-K
<PAGE>

Non-Interest  Income.  Non-interest  income is comprised of trust fees,  service
charges on deposit  accounts,  commission  income,  investment  security gains /
(losses),  other service fees and other income.  Non-interest  income  increased
from $5.254  million in 2002 to $5.663 million in 2003.  This  represents a $409
thousand or 7.8%  increase.  The most  significant  reason  non-interest  income
increased period over period is due to the increase in the realized gains on the
sale of available for sale investment securities.

Total trust fees decreased  slightly in 2003.  Specifically,  trust fees totaled
$1.416 million in 2002, as compared to $1.383 million in 2003, a $33 thousand or
2.3% decrease.  The decrease in trust fees was due to a slight  reduction in the
average market value and account  income in 2003,  versus 2002, at the time fees
were  charged.  The sharp  increase  in the  period  end  market  value of trust
accounts  between  December  31, 2002 and  December 31, 2003 was due to a single
Trust that was funded during December 2003. No fees were charged on this account
in 2003.

Service  charges on deposit  accounts  declined  from $1.583  million in 2002 to
$1.457 million in 2003, a $126 thousand or 8.0% decrease. During the second half
of 2002, the Bank removed certain  service fee charges on its business  checking
accounts in an effort to remain competitive and retain customers.  This led to a
reduction in service fee income generated on these accounts.

Commission  income from the Bank's insurance  policy sales  activities  remained
fairly flat at $434 thousand for 2003, as compared to $428 thousand for 2002.

During 2003 we netted  pre-tax  realized gains of $1.064 million on the call and
sale of investment  securities.  This  represents a $792 thousand  increase over
2002 when net pre-tax  realized  gains were $272  thousand.  During 2003 we sold
$11.239 million  available-for-sale  investment  securities (primarily corporate
bonds)  and  had  an  additional  $144.792  million  in  available-for-sale  and
held-to-maturity  securities mature or be called as interest rates declined. The
corporate  securities  were sold because  management  believed it was prudent to
reduce  the  credit  risk,  lock  in  gains  and  shorten  the  duration  of the
available-for-sale  investment securities portfolio while interest rates were at
or near 40-year  lows.  The  long-term  corporate  bonds were sold in particular
because of their  sensitivity to market value decline in an increasing  interest
rate environment.

The  income  related  to the  increase  in the  cash  value of  bank-owned  life
insurance  increased from $552 thousand in 2002 to $639 thousand in 2003, an $87
thousand or 15.8%  increase.  The increase was  primarily due to the purchase of
three additional  policies,  totaling $2.500 million in premium,  which occurred
during the fourth  quarter of 2002.  The policies were  purchased to finance the
benefit expense associated with the Company's implementation of two supplemental
executive retirement plans ("SERP").

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 $404  thousand  in 2002 to $325
thousand in 2003,  a $79  thousand or 19.6%  decrease.  The  reduction  in other
service fees was primarily due to the loss of one  significant  merchant  credit
card processing account offset by a slight increase in letter of credit fees.

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 $599 thousand in
2002 to $361  thousand  in 2003,  a $238  thousand  or 39.8%  decrease.  The net
decrease  in other  income was due to one  significant  positive  variation  and
several negative  variations  between 2002 and 2003. During 2003, income related
to the Bank's  investment in New York Bankers Title Agency East increased by $34
thousand,  from $34 thousand in 2002 to $68 thousand in 2003. These improvements
were offset by a $64 thousand  reduction in other real estate owned  (foreclosed
property) rental income due to sale of a foreclosed  rental property in November
2002; a reduction in investment service fee income of $47 thousand;  a reduction
in the New York Bankers Insurance Trust dividend payments of $62 thousand; a $24
thousand  decrease in lease income; a $25 thousand  insurance claim paid in 2002
only; and other miscellaneous items totaling $49 thousand.

Non-Interest Expense. Non-interest expenses are comprised of salary and employee
benefit expense,  occupancy expense,  furniture and equipment expense,  computer
service fees,  advertising and marketing  expense,  professional fees, and other
miscellaneous  expenses.  Total  non-interest  expenses  increased  from $15.890
million in 2002 to $16.583 million in 2003, a $693 thousand or 4.4% increase.

Salaries and benefits  expense  increased by $638 thousand or 6.3%, from $10.140
million  in 2002 to  $10.778  million  in 2003.  Although  the net  increase  in
salaries and employee  benefits was $638 thousand,  there were several  positive
and negative  factors,  which  contributed  to the net change.  Two factors that
increased expense most  significantly were an increase in the executive deferred
compensation expense and an increase in pension plan expense.  Specifically,  in
2003


44-K
<PAGE>

the  underlying  investments  held for the  benefit  of the  executive  deferred
compensation  plan performed  well,  which required us to record a $538 thousand
increase in salaries expense to fully fund the executive  deferred  compensation
liability.  In 2002 we recorded $125 thousand expense for the executive deferred
compensation plan, as compared to $663 thousand in 2003. The Bank's pension plan
expense also  increased  from $226  thousand in 2002 to $543 thousand in 2003, a
$317  thousand  increase,  due  primarily to increase in the benefit  obligation
under  the  plan.  Base  salaries,  overtime  and  employee  incentive  pay also
increased by $89 thousand or 1.1%, from $7.796 million in 2002 to $7.885 million
in 2003 due to annual wage and salary  adjustments  for existing  employees  and
expansionary   activities.   And  finally,   group  health,  group  life,  group
disability, unemployment insurance, worker's compensation and employee education
expense increased by a total of $73 thousand between the periods.

These  increases  were offset by a $378  thousand  decrease in our  supplemental
executive  retirement plan expense in 2003.  During 2002, the Company's Board of
Directors approved two supplemental  executive  retirement plans for Mr. Whittet
and Mr. Moyer. To fund the benefits  provided under the plans, we recorded other
benefits expense totaling $541 thousand. By comparison, in 2003 we recorded $163
thousand in expense for the supplemental executive retirement plan.

Net  occupancy  expense  totaled  $1.360  million in 2003 as  compared to $1.158
million in 2002, a $202  thousand or 17.4%  increase.  Increases in snow removal
and utility expenses related to a cold winter in the first-half of 2003, as well
as general  increases in insurance cost and property taxes, were responsible for
the increased occupancy expense.

Furniture and equipment expense remained  relatively  unchanged between 2002 and
2003.  Furniture and equipment expense was $803 thousand in 2003, as compared to
$810 thousand in 2002.

Computer service fees,  advertising and marketing  expense and professional fees
all increased  during 2003. On a combined  basis these  expenses  totaled $1.150
million in 2003 as compared to $904  thousand  in 2002,  a $246  thousand or 27%
increase.  Professional  fees  increased  by $134  thousand  from  2002 to 2003,
primarily  due to fees  paid to legal  advisors  and KPMG  LLP for  listing  the
Company's common stock on the Amex and the associated registration with the SEC.

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  and several  other  miscellaneous  expenses.  Other
miscellaneous  expenses  decreased from $2.878 million in 2002 to $2.492 million
in 2003,  a $386  thousand  or 13.4%  decrease.  During  2003 we recorded a $141
thousand reduction in expenses associated with managing foreclosed  property;  a
$114 thousand decrease on the loss associated with the disposal of assets; a $78
thousand  reduction  in  expenses  related  to  servicing  the  Bank's  accounts
receivable  financing program; and a $73 thousand decrease in telephone expense.
Other miscellaneous expenses increased (net) $20 thousand from 2002 to 2003.

Income Taxes. Income tax expense decreased from $3.358 million in 2002 to $3.277
million  in 2003,  an $81  thousand  decrease.  The  decrease  in the income tax
expense is  primarily  due to an increase in  tax-exempt  income,  for state and
municipal  investment  securities  and an  increase  in the  income  related  to
bank-owned life insurance.

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 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


                                                                            45-K
<PAGE>

assessment is reviewed by our Asset and Liability Committee ("ALCO").  The ALCO,
based on this  assessment  and other  data,  determines  our  future  funding or
investment  needs and  strategies.  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

Between  December 31, 2003 and December 31, 2004,  we  experienced a significant
decrease in our liquidity position.  During 2003 and 2004, we received principal
payments on our  available-for-sale  and held-to-maturity  investment securities
portfolio  totaling  $144.792 million and $175.771 million,  respectively.  This
occurred primarily because we maintained  significant volumes of mortgage-backed
securities  during  those  periods  and  received  unusually  large  amounts  of
prepayments on those  securities due to low interest rates and the high level of
mortgage refinancing occurring during those periods. By comparison,  during 2005
we expect to receive  approximately $45.280 million of principal payments on the
available-for-sale  and held-to-maturity  investment securities held at December
31, 2004. In spite of the projected decrease in investment  securities cash flow
during 2005, we believe that the  anticipated  principal  repayments on existing
loans and investment  securities,  as well as the anticipated  deposit retention
levels,  will provide us with an adequate amount of liquidity  throughout  2005.
Furthermore,  at December  31, 2004 the Bank had  $19.180  million of  available
borrowing  capacity at the FHLBNY,  $7.600 million of borrowing  capacity at its
primary   correspondent   bank,   $63.472   million  of   unencumbered,   liquid
available-for-sale securities which could be sold to generate cash or pledged as
collateral  to obtain  additional  borrowings  (see table of liquidity  measures
below).

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                                  2004         2003
            -------------------------------------------------------------------------
<S>                                                             <C>          <C>
            Cash and Cash Equivalents                           $ 20,539     $ 19,890
            -------------------------------------------------------------------------
            Available for Sale Investment Securities at
            Estimated Fair Value less Securities pledged for    $ 63,472     $106,933
            -------------------------------------------------------------------------
            State and Municipal Deposits and Borrowings
            Total Loan to Total Asset Ratio                        52.08%       49.50%
            -------------------------------------------------------------------------
            FHLBNY Remaining Borrowing Capacity                 $ 19,180     $ 18,314
            -------------------------------------------------------------------------
            Available Correspondent Bank Lines of Credit        $  7,600     $ 10,000
            -------------------------------------------------------------------------
</TABLE>

In addition to the above liquidity  measures,  at December 31, 2004 and December
31, 2003 we had  $14.975  million and  $14.405  million,  respectively,  of cash
surrender value in our bank-owned life insurance portfolio. These policies could
be terminated and surrendered for cash upon our demand.

Our  commitments  to extend  credit and standby  letters of credit  increased by
$7.925  million or 13.4%  between  December 31, 2003 to December  31,  2004.  At
December 31, 2004  commitments  to extend  credit and standby  letters of credit
were $67.003  million,  as compared to $59.078 million at December 31, 2003. Our
experience  indicates that draws


46-K
<PAGE>

on the  commitments  to  extend  credit  and  standby  letters  of credit do not
fluctuate  significantly and therefore are not expected to materially impact our
liquidity.

We recognize that deposit flows and loan and investment  prepayment activity are
impacted 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 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 shareholders  while retaining a sufficient capital
base to provide for future expansion and comply with all regulatory standards.

At December  31, 2004 our  stockholders'  equity was $67.605  million,  a $3.301
million or 5.1% increase over December 31, 2003 stockholders'  equity of $64.304
million. The increase in stockholders' equity was due to an increase in retained
earnings  of  $4.359  million  offset  by a $876  thousand  reduction  in  other
comprehensive income and a $182 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 of 8.0%.  Tier 1 capital is comprised of
shareholders' 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 of 6.0% and a total capital to risk-weighted  assets ratio
of 10.0%.  The  Company and the Bank  exceeded  all  capital  adequacy  and well
capitalized guidelines at December 31, 2004 and December 31, 2003. The Company's
Tier 1 capital to risk-weighted  assets ratio and total capital to risk-weighted
assets  ratio at December  31, 2004 were 13.09% and 14.34%,  respectively.  This
compares to 13.01% and 14.26%,  respectively,  at December 31, 2003.  Additional
details  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 shareholders.  As of December 31, 2004, 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  $10.542  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  Price of and  Dividends  on the
Registrant's  Common  Equity  and  Related  Stockholder  Matters,"  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").


                                                                            47-K
<PAGE>

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 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 decay 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, the model assumes 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, 2005 and ending  December  31,  2005  under  ramped  shock
scenarios.

Interest Rate Sensitivity Table:

<TABLE>
<CAPTION>
            ----------------------------------------------------------------------------------------
                    Interest Rates                          Dollars in Thousands
            ----------------------------------------------------------------------------------------
                                                                                       Projected
                                                                                       Change in Net
                                                                                       Interest
                                                          Projected      Projected     Income as a
                                           Projected      Dollar         Percentage    Percent of
                                           Annualized     Change in      Change in     Total
            Interest Rate                  Net Interest   Net Interest   Net Interest  Stockholders'
            Shock (1)        Prime Rate    Income         Income         Income        Equity
            ----------------------------------------------------------------------------------------
<S>                <C>         <C>            <C>           <C>             <C>           <C>
                   3.00%       8.25%          $26,032          $215          0.83%         0.32%
            ----------------------------------------------------------------------------------------
                   2.00%       6.25%          $25,296         ($521)        -2.02%        -0.77%
            ----------------------------------------------------------------------------------------
                   1.00%       6.25%          $25,111         ($706)        -2.73%        -1.04%
            ----------------------------------------------------------------------------------------
            No change          5.25%          $25,817            --            --            --
            ----------------------------------------------------------------------------------------
                  -1.00%       4.25%          $25,349         ($468)        -1.81%        -0.69%
            ----------------------------------------------------------------------------------------
                  -2.00%       3.25%          $24,005       ($1,812)        -7.02%        -2.68%
            ----------------------------------------------------------------------------------------
                  -3.00%       2.25%          $23,775       ($2,042)        -7.91%        -3.02%
            ----------------------------------------------------------------------------------------
</TABLE>

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


48-K
<PAGE>

Many  assumptions  are  embedded  within our  interest  rate risk  model.  These
assumptions  are approved by the Bank's Asset and  Liability  Committee  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 $521  thousand or 0.77% of
total  stockholders'  equity in a +2.00%  ramped  interest rate shock and $1.812
million or 1.81% 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  22% of our  total  assets at
December 31, 2004 were invested in adjustable rate loans and investments.


                                                                            49-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  as of December 31, 2004 and 2003,  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, 2004. 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, 2004 and 2003, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended  December 31,  2004,  in  conformity  with U.S  generally  accepted
accounting principles.


                                        /s/ KPMG LLP

Albany, New York
March 11, 2005


50-K
<PAGE>

The Wilber Corporation
Consolidated Statements of Condition

<TABLE>
<CAPTION>
                                                                         December 31,
dollars in thousands except share and per share data                  2004           2003
-------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>
Assets
Cash and Due from Banks                                            $  10,440      $  11,892
Time Deposits with Other Banks                                        10,099          7,998
                                                                   ---------      ---------
 Total Cash and Cash Equivalents                                      20,539         19,890
                                                                   ---------      ---------
Securities
 Trading, at Fair Value (Note 2)                                       1,504          1,025
 Available-for-Sale, at Fair Value (Note 2)                          249,415        275,051
 Held-to-Maturity, Fair Value of $59,324 at December 31, 2004
    and $44,416 at December 31, 2003 (Note 2)                         59,463         44,140
Loans (Note 3)                                                       391,043        360,906
 Allowance for Loan Losses (Note 4)                                   (6,250)        (5,757)
                                                                   ---------      ---------
 Loans, Net                                                          384,793        355,149
                                                                   ---------      ---------
Premises and Equipment, Net (Note 5)                                   5,860          5,721
Bank Owned Life Insurance                                             14,975         14,405
Goodwill (Note 6)                                                      2,682          2,682
Intangible Assets, Net (Note 6)                                          377            461
Other Assets                                                          11,253         10,499
                                                                   ---------      ---------
 Total Assets                                                      $ 750,861      $ 729,023
                                                                   =========      =========

Liabilities and Stockholders' Equity
Deposits:
 Demand                                                            $  63,746      $  61,267
 Savings, NOW and Money Market Deposit Accounts                      241,151        251,180
 Certificates of Deposit (Over $100M)                                 76,346         82,847
 Certificates of Deposit (Under $100M)                               165,194        158,783
 Other Time Deposits                                                  25,492         26,556
                                                                   ---------      ---------
 Total Deposits                                                      571,929        580,633
                                                                   ---------      ---------
Short-Term Borrowings (Note 8)                                        37,559         20,018
Long-Term Borrowings (Note 8)                                         65,379         55,849
Other Liabilities                                                      8,389          8,219
                                                                   ---------      ---------
 Total Liabilities                                                   683,256        664,719
                                                                   ---------      ---------

Stockholders' Equity:
 Common Stock, $.01 Par Value, 16,000,000 Shares Authorized,
     and 13,961,664 Shares Issued at December 31, 2004,
     and December 31, 2003                                               140            140
 Additional Paid in Capital                                            4,224          4,224
 Retained Earnings                                                    83,402         79,043
 Accumulated Other Comprehensive Income                                  396          1,272
 Treasury Stock at Cost, 2,767,072 Shares at December 31, 2004
      and 2,752,272 Shares at December 31, 2003                      (20,557)       (20,375)
                                                                   ---------      ---------
 Total Stockholders' Equity                                           67,605         64,304
                                                                   ---------      ---------
 Total Liabilities and Stockholders' Equity                        $ 750,861      $ 729,023
                                                                   =========      =========
</TABLE>

See accompanying notes to Consolidated Financial Statements.


                                                                            51-K
<PAGE>

The Wilber Corporation
Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
dollars in thousands except share and per share data                  2004              2003              2002
------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>               <C>
Interest and Dividend Income
Interest and Fees on Loans                                        $     24,865      $     24,477      $     26,503
Interest and Dividends on Securities:
  U.S. Government and Agency Obligations                                 8,605             9,751             9,839
  State and Municipal Obligations                                        2,665             2,198             1,992
  Other                                                                    415             1,101             1,817
Interest on Federal Funds Sold and Time Deposits                           615             1,101             1,495
                                                                  ------------      ------------      ------------
  Total Interest and Dividend Income                                    37,165            38,628            41,646
                                                                  ------------      ------------      ------------

Interest Expense
Interest on Deposits:
  Savings, NOW and Money Market Deposit Accounts                         1,952             2,442             3,316
  Certificates of Deposit (Over $100M)                                   2,197             2,414             2,891
  Other Time                                                             5,329             5,844             6,828
Interest on Short-Term Borrowings                                          212               116               189
Interest on Long-Term Borrowings                                         3,071             3,337             3,946
                                                                  ------------      ------------      ------------
  Total Interest Expense                                                12,761            14,153            17,170
                                                                  ------------      ------------      ------------
Net Interest Income                                                     24,404            24,475            24,476
Provisions for Loan Losses (Note 4)                                      1,200             1,565             1,920
                                                                  ------------      ------------      ------------
Net Interest Income After Provision for Loan Losses                     23,204            22,910            22,556
                                                                  ------------      ------------      ------------

Other Income
Trust Fees                                                               1,325             1,383             1,416
Service Charges on Deposit Accounts                                      1,556             1,457             1,583
Commissions Income                                                         524               434               428
Investment Security Gains, Net                                           1,031             1,064               272
Increase in Cash Surrender Value of Bank Owned Life Insurance              570               639               552
Other Service Fees                                                         286               325               404
Other Income                                                               342               361               599
                                                                  ------------      ------------      ------------
  Total Other Income                                                     5,634             5,663             5,254
                                                                  ------------      ------------      ------------

Other Expense
Salaries and Employee Benefits                                          10,741            10,778            10,140
Net Occupancy Expense of Bank Premises                                   1,446             1,360             1,158
Furniture and Equipment Expense                                            751               803               810
Computer Service Fees                                                      598               305               277
Advertising and Marketing                                                  538               436               352
Professional Fees                                                          512               409               275
Other Miscellaneous Expenses                                             2,632             2,492             2,878
                                                                  ------------      ------------      ------------
  Total Other Expense                                                   17,218            16,583            15,890
                                                                  ------------      ------------      ------------
Income Before Taxes                                                     11,620            11,990            11,920
Income Taxes                                                            (3,002)           (3,277)           (3,358)
                                                                  ------------      ------------      ------------
Net Income                                                        $      8,618      $      8,713      $      8,562
                                                                  ============      ============      ============

Weighted Average Shares Outstanding (1)                             11,207,215        11,214,288        11,285,340
Basic Earnings Per Share (1)                                      $       0.77      $       0.78      $       0.76
</TABLE>

See accompanying notes to Consolidated Financial Statements.

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


52-K
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                          Accumulated
                                                               Additional                    Other
dollars in thousands except                      Common         Paid in      Retained    Comprehensive   Treasury
share and per share data                          Stock         Capital      Earnings    Income (Loss)     Stock         Total
-------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>           <C>           <C>           <C>
Balance December 31, 2001                        $  2,182      $  2,182      $ 70,149      $    520      $(19,206)     $ 55,827
                                                 --------      --------      --------      --------      --------      --------
  Comprehensive Income:
     Net Income                                        --            --         8,562            --            --         8,562
     Change in Net Unrealized Gain (Loss)
        on Securities, Net of Taxes                    --            --            --         3,722            --         3,722
                                                                                                                       --------
  Total Comprehensive Income                                                                                             12,284
                                                                                                                       --------
  Cash Dividends ($.375 per share)                     --            --        (4,272)           --            --        (4,272)
  Purchase of Treasury Stock (20,316 shares)           --            --            --            --          (677)         (677)
                                                 --------      --------      --------      --------      --------      --------
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 Gain (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 Gain (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
                                                 --------      --------      --------      --------      --------      --------
</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.


                                                                            53-K
<PAGE>

The Wilber Corporation
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
dollars in thousands                                                               2004           2003           2002
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>            <C>            <C>
Cash Flows from Operating Activities:
 Net Income                                                                     $   8,618      $   8,713      $   8,562
 Adjustments to Reconcile Net Income to Net Cash
 Provided by Operating Activities:
     Provision for Loan Losses                                                      1,200          1,565          1,920
     Depreciation and Amortization                                                  1,022          1,026            931
     Net Amortization of Premiums and Accretion of Discounts on Investments         2,180          1,682          1,042
     Available-for-Sale Investment Security Gains, net                               (871)          (808)          (488)
     Deferred Income Tax, (Benefit) Expense                                           (56)           336           (373)
     Other Real Estate Losses                                                          41             66            188
     Increase in Cash Surrender Value of Bank Owned Life Insurance                   (570)          (639)          (552)
     Net (Increase) Decrease in Trading Securities                                   (319)           138           (135)
     Net (Gains) Losses on Trading Securities                                        (160)          (256)           216
     Increase in Other Assets                                                        (302)        (2,849)          (667)
     Increase (Decrease) in Other Liabilities                                         226           (141)         1,455
                                                                                ---------      ---------      ---------
     Net Cash Provided by Operating Activities                                     11,009          8,833         12,099
                                                                                ---------      ---------      ---------

Cash Flows from Investing Activities:
 Net Cash Provided by Branch Acquisition                                               --             --         29,168
 Proceeds from Maturities of Held-to-Maturity Investment Securities                24,150         32,230         13,757
 Purchases of Held-to-Maturity Investment Securities                              (39,767)       (33,745)       (10,635)
 Proceeds from Maturities of Available-for-Sale Investment Securities             151,552        112,562         42,721
 Proceeds from Sales of Available-for-Sale Investment Securities                   12,986         11,239         21,181
 Purchases of Available-for-Sale Investment Securities                           (141,352)      (169,874)      (104,107)
 Purchase of Bank Owned Life Insurance                                                 --             --         (3,050)
 Net Increase in Loans                                                            (31,295)        (3,921)       (26,797)
 Proceeds from Sale of Loans                                                          294             --             --
 Purchase of Premises and Equipment, Net of Disposals                                (912)          (548)          (853)
 Proceeds from Sale of Other Real Estate                                               58             47            966
                                                                                ---------      ---------      ---------
     Net Cash Used in Investing Activities                                        (24,286)       (52,010)       (37,649)
                                                                                ---------      ---------      ---------

Cash Flows from Financing Activities:
 Net (Decrease) Increase in Demand Deposits, Savings, NOW,
     Money Market and Other Time Deposits                                          (8,614)        28,452         41,364
 Net (Decrease) Increase in Certificates of Deposit                                   (90)         3,100        (17,951)
 Net Increase in Short-Term Borrowings                                             17,541          6,758          2,730
 Increase in Long-Term Borrowings                                                  15,000             --         21,000
 Repayment of Long-Term Borrowings                                                 (5,470)       (17,497)       (10,167)
 (Decrease) Increase in Dividends Payable                                              --           (209)           209
 Purchase of Treasury Stock                                                          (182)          (492)          (677)
 Cash Dividends Paid                                                               (4,259)        (4,109)        (4,272)
                                                                                ---------      ---------      ---------
     Net Cash Provided by Financing Activities                                     13,926         16,003         32,236
                                                                                ---------      ---------      ---------
        Net Increase (Decrease) in Cash and Cash Equivalents                          649        (27,174)         6,686
Cash and Cash Equivalents at Beginning of Year                                     19,890         47,064         40,378
                                                                                ---------      ---------      ---------
 Cash and Cash Equivalents at End of Period                                     $  20,539      $  19,890      $  47,064
                                                                                =========      =========      =========
</TABLE>

See accompanying notes to Consolidated Financial Statements.


54-K
<PAGE>

The Wilber Corporation
Consolidated Statements of Cash Flows, continued

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
dollars in thousands                                     2004          2003          2002
-------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>           <C>
Supplemental Disclosures of Cash Flow Information:
  Cash Paid during Period for:
      Interest                                         $ 12,852      $ 14,334      $ 17,374
      Income Taxes                                     $  2,874      $  3,683      $  2,321
  Non Cash Investing Activities:
      Change in Unrealized Gain on Securities          $ (1,435)     $ (4,902)     $  6,120
      Transfer of Loans to Other Real Estate           $    157      $    110      $    202
      Fair Value of Assets Acquired                    $     --      $     --      $  3,325
      Fair Value of Liabilities Assumed                $     --      $     --      $ 34,656
</TABLE>

See accompanying notes to Consolidated Financial Statements.


                                                                            55-K
<PAGE>

Note 1. Summary of Significant Accounting Policies

The Wilber Corporation (the Parent Company) operates 19 branches serving Otsego,
Delaware, Schoharie, Ulster and 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 intercompany 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 Federal Home
Loan Bank 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  nonaccrual  status when timely  collection of principal and
interest in accordance with contractual terms is doubtful. Loans are transferred
to a nonaccrual  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 nonaccrual 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.

If ultimate  repayment of a nonaccrual 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 nonaccrual loan is applied
to principal until ultimate  repayment  becomes  expected.  Nonaccrual 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


56-K
<PAGE>

Note 1. Summary of Significant Accounting Policies, Continued

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 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


                                                                            57-K
<PAGE>

Note 1. Summary of Significant Accounting Policies, Continued

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 -- The Company  accounts for goodwill and
intangible  assets  in  accordance  with  SFAS  No.  142,  "Goodwill  and  Other
Intangible Assets." SFAS No. 142 requires that acquired intangible assets (other
than goodwill) be amortized over their useful economic life,  while goodwill and
any acquired intangible assets with an indefinite useful economic life would not
be amortized, but would be reviewed for impairment on an annual basis based upon
guidelines  specified in the  Statement.  SFAS No. 142 requires that goodwill be
evaluated for impairment annually.


58-K
<PAGE>

Note 2. Investment Securities

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

<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
                                                              ========      ========      ========      ========

<CAPTION>
                                                                              December 31, 2003
                                                             ----------------------------------------------------
                                                                              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                                               $  3,978      $     45      $     --      $  4,023
Obligations of U.S. Government Corporations and Agencies         2,000             5            --         2,005
Obligations of States and Political Subdivisions                56,684         1,736           404        58,016
Mortgage-Backed Securities                                     192,745         1,191         1,571       192,365
Corporate Bonds                                                 13,038           911            --        13,949
Equity Securities                                                4,520           173            --         4,693
                                                              --------      --------      --------      --------
                                                              $272,965      $  4,061      $  1,975      $275,051
                                                              ========      ========      ========      ========

                                                              --------      --------      --------      --------
Trading Portfolio                                                1,028             1             5         1,024
                                                              ========      ========      ========      ========

Held-to-Maturity Portfolio
Obligations of States and Political Subdivisions              $  6,292      $    238      $     15      $  6,515
Mortgage-Backed Securities                                      37,848           341           288      $ 37,901
                                                              --------      --------      --------      --------
                                                              $ 44,140      $    579      $    303      $ 44,416
                                                              ========      ========      ========      ========
</TABLE>


                                                                            59-K
<PAGE>

Note 2. Investment Securities, Continued

The following table provides  information on temporarily  impaired securities at
December 31, 2004:

<TABLE>
<CAPTION>
                                                   --------------------------------------------------------------------------------
                                                      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. Treasury and 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 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.

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, 2004
                                                       -------------------------
                                                       Amortized          Fair
dollars in thousands                                      Cost            Value
--------------------------------------------------------------------------------
Available-for-Sale Securities
Due in One Year or Less                                      957             969
Due After One Year Through Five Years                     38,675          39,058
Due After Five Years Through Ten Years                    97,733          97,797
Due After Ten Years                                      105,530         105,536
                                                        --------        --------
                                                        $242,895        $243,360
                                                        ========        ========

                                                           December 31, 2004
                                                       -------------------------
                                                       Amortized          Fair
dollars in thousands                                      Cost            Value
--------------------------------------------------------------------------------
Held-to-Maturity Securities
Due in One Year or Less                                      580             686
Due After One Year Through Five Years                      1,541           1,658
Due After Five Years Through Ten Years                     6,806           6,752
Due After Ten Years                                       50,536          50,228
                                                        --------        --------
                                                        $ 59,463        $ 59,324
                                                        ========        ========


60-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, 2004         December 31, 2003         December 31, 2002
                          ----------------------    ----------------------    ----------------------
                          Available -               Available -               Available -
dollars in thousands       -for-Sale     Trading     -for-Sale     Trading     -for-Sale     Trading
----------------------------------------------------------------------------------------------------
<S>                          <C>          <C>          <C>          <C>          <C>          <C>
Gross Gains                  $ 932        $ 161        $ 842        $ 280        $ 760        $   3
Gross Losses                   (61)          (1)         (34)         (24)        (272)        (219)
                             -----        -----        -----        -----        -----        -----
  Net Securities Gains       $ 871        $ 160        $ 808        $ 256        $ 488        $(216)
                             =====        =====        =====        =====        =====        =====
</TABLE>

Federal Home Loan Bank and Federal  Reserve Bank stock of $3,504,000 at December
31,  2004,  and  $3,188,000  in 2003 is carried  at cost as fair  values are not
readily determinable.  Both investments are required for membership. At December
31, 2004, investment  securities with an amortized cost of $191,631,000,  and an
estimated  fair value of  $192,238,000  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                                     2004            2003
-------------------------------------------------------------------------------
Residential Real Estate                                 119,103         118,571
Commercial Real Estate                                  129,516         115,733
Commercial                                               78,003          65,031
Consumer                                                 64,421          61,571
                                                      ---------       ---------
                                                        391,043         360,906
Less: Allowance for Loan Losses                          (6,250)         (5,757)
                                                      ---------       ---------
    Net Loans                                         $ 384,793       $ 355,149
                                                      =========       =========

At December 31, 2004, $69,163,000  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                                     2004            2003
-------------------------------------------------------------------------------
Balance at Beginning of Year                           $ 13,254        $ 17,701
Loan Payments                                            (2,320)         (7,108)
New Loans and Advances                                    3,315           2,661
                                                       --------        --------
    Ending Balance                                     $ 14,249        $ 13,254
                                                       ========        ========


                                                                            61-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                            2004         2003         2002
-----------------------------------------------------      -------      -------
Balance at Beginning of Year                  $ 5,757      $ 5,392      $ 4,476
Provision for Loan Losses                       1,200        1,565        1,920
Recoveries Credited                               237          276          417
Loans Charged-Off                                (944)      (1,476)      (1,421)
                                              -------      -------      -------
   Ending Balance                             $ 6,250      $ 5,757      $ 5,392
                                              =======      =======      =======

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

                                                      As of and For the Year
                                                      Year Ended December 31,
dollars in thousands                                 2004       2003       2002
--------------------------------------------------------------------------------
Impaired Loans                                      $2,411     $3,270     $2,196
Allowance for Impaired Loans                           651        510        442
Average Recorded Investment in Impaired Loans        2,089      3,485      2,339

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

                                                         As of December 31,
dollars in thousands                                 2004       2003       2002
--------------------------------------------------------------------------------
Loans in Non-Accrual Status                         $2,561     $3,164     $2,034
Loans Contractually Past Due 90 Days or More
   and Still Accruing Interest                         190        123        717
Troubled Debt Restructured Loans                        --        371        387
                                                    ------     ------     ------
     Total Non-Performing Loans                     $2,751     $3,658     $3,138
                                                    ======     ======     ======

Had the loans in non-accrual  status performed in accordance with their original
terms,  additional  interest  income of $22,000 would have been recorded for the
year ended December 31, 2004. In addition,  in 2003, and 2002 interest income of
$83,000, and $116,000, 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 $31,000 and
$34,000 for the years ended December 31, 2003, and 2002, respectively. Under the
restructured  terms, the Company recorded interest income of $32,000 and $35,000
for the years ended December 31, 2003, and 2002, respectively.

Note 5. Premises and Equipment

                                                            December 31,
dollars in thousands                                   2004              2003
-------------------------------------------------------------------------------
Land                                                 $    539          $    539
Buildings                                               7,892             7,418
Furniture, Fixtures and Equipment                       5,518             5,386
                                                     --------          --------
                                                       13,949            13,343
Less: Accumulated Depreciation                         (8,089)           (7,622)
                                                     --------          --------
                                                     $  5,860          $  5,721
                                                     ========          ========

Depreciation  expense was $773,000,  $781,000,  and $825,000 for the years ended
December 31, 2004, 2003 and 2002, respectively.


62-K
<PAGE>

Note 6. Goodwill and Intangible Assets

Goodwill and intangible assets are presented in the following table:

                                                              December 31,
dollars in thousands                                      2004           2003
--------------------------------------------------------------------------------
Goodwill                                                 $ 2,682        $ 2,682
                                                         =======        =======

Core Deposit Intangible                                  $   285        $   285
Other Intangible Assets                                      350            450
                                                         -------        -------
    Total Intangible Assets                              $   635        $   735
Accumulated Amortization                                    (258)          (274)
                                                         -------        -------
    Intangible Assets, Net                               $   377        $   461
                                                         =======        =======

Amortization  expense on  intangible  assets was $84,000 for 2004,  $115,000 for
2003,  and $106,000 for 2002. The core deposit  intangible and other  intangible
assets are amortized over a weighted  average period of  approximately  5 and 15
years, respectively.

In February 2002, the Company acquired a branch and recorded related goodwill of
$1,877,000 and a core deposit intangible asset of $285,000.

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
--------------------------------------------------------------------------------
     2005                                                                    $81
     2006                                                                     80
     2007                                                                     30
     2008                                                                     23
     2009                                                                     23

Note 7. Time Deposits

Contractual maturities of time deposits were as follows:

                                                            December 31, 2004
dollars in thousands                                    Amount              %
-------------------------------------------------------------------------------
2005                                                   $129,728           48.58
2006                                                     46,819           17.53
2007                                                     45,951           17.21
2008                                                     34,717           13.00
2009                                                      9,717            3.64
Thereafter                                                  100            0.04
                                                       --------          ------
                                                       $267,032          100.00%
                                                       ========          ======


                                                                            63-K
<PAGE>

Note 8. Borrowings

The following is a summary of borrowings:

<TABLE>
<CAPTION>
                                                                                   December 31,
dollars in thousands                                                            2004         2003
---------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>
Short-Term Borrowings:
 Federal Funds Purchased                                                      $  2,400     $  8,100
 Securities Sold Under Agreements to Repurchase                                 33,106       11,178
 Treasury Tax and Loan Notes                                                     2,053          740
Long-Term Borrowings:
 Advances from Federal Home Loan Bank of New York
     Bearing Interest at 5.47%, Due January 2004                                    --          500
     Bearing Interest at 3.64% to 5.68%, Due January 2005                          617        1,304
     Bearing Interest at 6.52%, Due January 2005                                10,000       10,000
     Bearing Interest at 1.30% to 6.55%, Due March 2005                         13,000       10,000
     Bearing Interest at 3.43% to 6.13%, Due December 2004                          --        2,746
     Bearing Interest at 2.62%, Due November 2012, Callable November 2005        8,000        8,000
     Bearing Interest at 5.90% to 6.11%, Due December 2005                       4,000        4,000
     Bearing Interest at 5.77%, Due January 2006                                 1,000        1,000
     Bearing Interest at 1.81%, Due March 2006                                   3,000           --
     Bearing Interest at 5.22%, Due July 2006                                      544          848
     Bearing Interest at 2.35% to 2.43%, Due March 2007                          5,500           --
     Bearing Interest at 3.05%, Due December 2012, Callable December 2007        8,000        8,000
     Bearing Interest at 5.56%, Due July 2008                                      572          709
     Bearing Interest at 5.03%, Due January 2009                                 1,274        1,542
     Bearing Interest at 3.12%, Due March 2011                                   3,199           --
     Bearing Interest at 5.89% to 5.95%, Due July 2011                           1,241        1,388
     Bearing Interest at 5.30%, Due December 2011                                1,521        1,694
     Bearing Interest at 6.26%, Due July 2016                                      851          899
     Bearing Interest at 5.77%, Due December 2016                                1,733        1,830
     Bearing Interest at 6.04%, Due January 2017                                   873          920
     Bearing Interest at 6.46%, Due July 2021                                      454          469
                                                                              --------     --------
        Total Borrowings                                                      $102,938     $ 75,867
                                                                              ========     ========
</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, 2004, $29,500,000 of the long term borrowings
were  collateralized  by securities  with an amortized  cost and estimated  fair
value of  $31,788,000  and  $31,641,000,  respectively.  The remaining long term
borrowings  totaling  $35,879,000 are  collateralized by the Company's  mortgage
loans.  At December 31, 2004, the Bank had a line of credit of $74,026,000  with
the FHLB. However,  based on outstanding  borrowings at FHLB the total potential
borrowing  capacity on these  lines is reduced to  $19,180,000  at December  31,
2004.

Information related to short-term borrowings is as follows:

                                                        As of and For the
                                                     Year Ended December 31,
dollars in thousands                              2004        2003        2002
-------------------------------------------------------------------------------
Outstanding Balance at End of Period            $37,559     $20,018     $13,260
Average Interest Rate at End of Period             1.77%       0.92%       1.13%
Maximum Outstanding at any Month-End             37,559      20,018      16,416
Average Amount Outstanding during Period         17,288      13,529      12,889
Average Interest Rate during Period                1.23%       0.86%        1.4%


64-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  and 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  $25,934,000  and  $25,979,000 at December 31, 2004,
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                              2004        2003       2002
-------------------------------------------------------------------------------
Current:
      Federal                                    $ 2,738     $ 2,620    $ 3,328
      State                                          320         321        403
                                                 -------     -------    -------
          Total Current                            3,058       2,941      3,731
Deferred:
      Federal                                       (109)        275       (299)
      State                                           53          61        (74)
                                                 -------     -------    -------
          Total Deferred                             (56)        336       (373)
                                                 -------     -------    -------
             Total Income Tax Expense            $ 3,002     $ 3,277    $ 3,358
                                                 =======     =======    =======

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

                                                         Year Ended December 31,
dollars in thousands                                         2004       2003
--------------------------------------------------------------------------------
Assets:
      Allowance for Loan Losses                             $2,434     $2,242
      Deferred Compensation                                  1,255      1,255
      Reserves                                                  97         97
      Other                                                     71         45
                                                            ------     ------
                                                             3,857      3,639
                                                            ------     ------
Liabilities:
      Securities Discount Accretion                            221        211
      Defined Benefit Pension Plan                           1,768      1,738
      Net Unrealized Gain on Securities
        Available-for-Sale                                     252        812
      Other                                                    625        503
                                                            ------     ------
                                                             2,866      3,264
                                                            ------     ------
          Net Deferred Tax Assets                           $  991     $  375
                                                            ======     ======


                                                                            65-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                              2004        2003        2002
-------------------------------------------------------------------------------
Statutory Federal Income Tax Rate                  34.0%       34.0%       34.0%
Variances from Statutory Rate:
 State Income Tax, Net of Federal Tax Benefit       2.1         2.1         1.8
 Tax Exempt Income                                (10.2)       (8.8)       (8.0)
 Other                                             (0.1)         --         0.4
                                                 ------      ------      ------
     Effective Tax Rate                            25.8%       27.3%       28.2%
                                                 ======      ======      ======

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                                       2004          2003
-------------------------------------------------------------------------------
Change in Benefit Obligation:
  Benefit Obligation at Beginning of Year                $ 14,259      $ 11,868
  Service Cost                                                646           541
  Interest Cost                                               839           785
  Actuarial Loss                                              903         1,413
  Additional Prior Service Cost                                --           161
  Benefits Paid                                              (597)         (509)
                                                         --------      --------
  Projected Benefit Obligation at End of Year            $ 16,050      $ 14,259
                                                         ========      ========

Change in Plan Assets:
  Fair Value of Plan Assets at Beginning of Year         $ 14,538      $ 10,929
  Actual Gain on Plan Assets                                1,462         1,908
  Employer Contribution                                        --         2,210
  Benefits Paid                                              (597)         (509)
                                                         --------      --------
  Fair Value of Plan Assets at End of Year               $ 15,403      $ 14,538
                                                         ========      ========


66-K
<PAGE>

Note. 10. Employee Benefit Plans, continued

dollars in thousands                                          2004        2003
-------------------------------------------------------------------------------
Funded (Unfunded) Status                                    $  (647)    $   279
Unrecognized Net Actuarial Loss                               4,244       3,827
Unrecognized Net Transition Asset                                --         (21)
Unrecognized Prior Service Cost                                 389         444
                                                            -------     -------
Prepaid Benefit Cost before Fourth Quarter Contribution     $ 3,986     $ 4,529
Amount Contributed during the Fourth Quarter                $   552     $    --
                                                            -------     -------
Prepaid Benefit Cost at December 31                         $ 4,538     $ 4,529
                                                            =======     =======

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

dollars in thousands                                        2004           2003
--------------------------------------------------------------------------------
     Projected benefit obligation                         $16,050        $14,259
     Accumulated benefit obligation                        13,491         11,926
     Fair Value of Plan Assets                             15,403         14,538

Components of Net Periodic Benefit Cost are:

dollars in thousands                            2004         2003         2002
-------------------------------------------------------------------------------
     Service Cost                             $   646      $   541      $   484
     Interest Cost                                839          785          758
     Expected Return on Plan Assets            (1,142)        (949)      (1,034)
     Net Amortization                             200          166           18
                                              -------      -------      -------
                                              $   543      $   543      $   226
                                              =======      =======      =======

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

                                                    2004        2003        2002
--------------------------------------------------------------------------------
     Discount Rate                                  5.8%        6.0%        6.7%
     Expected Return on Plan Assets                 8.0%        8.0%        8.5%
     Rate of Compensation Increase                  3.0%        3.0%        4.0%

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

                                                    2004        2003        2002
--------------------------------------------------------------------------------
     Discount Rate                                  6.0%        6.7%       7.25%
     Expected Return on Plan Assets                 8.0%        8.5%       8.50%
     Rate of Compensation Increase                  3.0%        4.0%       4.00%

The plan's weighted average asset allocations at September 20, 2004 and 2003, by
asset category are as follows:

                                                              Plan Assets at
                                                              September 30,
                                                            2004          2003
-------------------------------------------------------------------------------
     Equity Securities                                       64.7%         59.7%
     Debt Securities                                         34.9%         34.5%
     Other                                                    0.4%          5.8%
                                                           ------        ------
                                                            100.0%        100.0%
                                                           ======        ======


                                                                            67-K
<PAGE>

Note. 10. Employee Benefit Plans, continued

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

dollars in thousands
--------------------------------------------------------------------------------
     2005                                                                 $  658
     2006                                                                    655
     2007                                                                    750
     2008                                                                    808
     2009                                                                    808
     2010-2014                                                             5,016

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,  each investing  approximately
50% of the total 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 a diversified  portfolio of common or capital
stocks, or bonds, debentures, notes, or preferred stocks convertible into common
or capital stocks,  or in other types of equity  investments  whether foreign or
domestic.  The fixed income porfolio  focuses on high quality  securities  drawn
from various market sectors,  including U.S. treasuries and government sponsored
agencies,  sovereigns,  supranationals,  residential  Mortgage Backed Securities
(MBS),  corporates,  Commercial Mortgage Backed Securities (CMBS),  Asset Backed
Securities (ABS), and municipals.

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.

The Company  expects to make a tax deductible  contribution of $2,000,000 to the
pension plan in 2005.

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 $787,000 at December 31, 2004 and $656,000 at December 31, 2003.
For the years ended December 31, 2004,  2003,  and 2002, the Company  recognized
$178,000,  $163,000  and  $541,000,  respectively,  of expense  related to those
plans. The discount rate used in determining the actuarial present values of the
projected benefit obligations was 6.00% at December 31, 2004.


68-K
<PAGE>

Note 11. Commitments and Contingencies

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

                                                                December 31,
dollars in thousands                                          2004         2003
--------------------------------------------------------------------------------
Commitments to Extend Credit                                $57,055      $49,124
Standby Letters of Credit                                     9,948        9,954

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.

The  estimated  fair value of the Company's  stand-by  letters of credit was $22
thousand   and  $11  thousand  at  December  31,  2004  and  December  31,  2003
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
stand-by  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 and 2004.

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.


                                                                            69-K
<PAGE>

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

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.

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
                                                           2004                            2003
                                                ---------------------------------------------------------
                                                 Carrying         Fair          Carrying           Fair
dollars in thousands                              Value           Value           Value           Value
---------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>             <C>             <C>
Financial Assets:
            Cash and Cash Equivalents           $  20,539       $  21,112       $  19,890       $  19,891
            Securities                            310,382         310,243         319,191         319,467
            Loans                                 391,043         393,640         360,906         361,434
            Allowance for Loan Losses              (6,250)         (6,250)         (5,757)         (5,757)
                                                ---------       ---------       ---------       ---------
                Net Loans                         384,793         387,390         355,149         355,677
            Accrued Interest Receivable             2,857           2,857           3,045           3,045
Financial Liabilities:
            Demand, Savings, NOW and Money
                Market Deposit Accounts         $ 304,897       $ 304,897       $ 312,447       $ 312,447
            Time Deposits                         267,032         266,577         268,186         271,217
            Borrowings                            102,938         103,675          75,867          78,290
            Accrued Interest Payable                  678             678             769             769
</TABLE>


70-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, 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%

As of December 31, 2003
Total Capital to Risk-Weighted Assets:
  The Company                                $65,642        14.26%      $36,817         8.00%          N/A          N/A
  Subsidiary Bank                            $63,849        13.88%      $36,794         8.00%      $45,993        10.00%
Tier 1 Capital to Risk-Weighted Assets:
  The Company                                $59,889        13.01%      $18,409         4.00%          N/A          N/A
  Subsidiary Bank                            $58,099        12.63%      $18,397         4.00%      $27,596         6.00%
Tier 1 Capital to Average Assets:
  The Company                                $59,889         8.18%      $29,278         4.00%          N/A          N/A
  Subsidiary Bank                            $58,099         7.94%      $29,255         4.00%      $36,569         5.00%

As of December 31, 2002
Total Capital to Risk-Weighted Assets:
  The Company                                $60,912        14.49%      $36,641         8.00%          N/A          N/A
  Subsidiary Bank                            $59,601        14.19%      $33,590         8.00%      $41,987        10.00%
Tier 1 Capital to Risk-Weighted Assets:
  The Company                                $55,662        13.24%      $16,820         4.00%          N/A          N/A
  Subsidiary Bank                            $54,351        12.94%      $16,795         4.00%      $25,192         6.00%
Tier 1 Capital to Average Assets:
  The Company                                $55,662         7.92%      $28,116         4.00%          N/A          N/A
  Subsidiary Bank                            $54,351         7.74%      $28,081         4.00%      $35,101         5.00%
</TABLE>


                                                                            71-K
<PAGE>

Note 13. Regulatory Matters, Continued

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, 2004,  dividends  totaling
$10,481,000 could have been paid without prior regulatory approval.

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                                                        2004        2003        2002
---------------------------------------------------------------------------------------------------------
<S>                                                                       <C>         <C>         <C>
Unrealized Holding (Losses) Gains Arising During the Period Net of Tax
 (Pre-tax Amount of ($564,000), ($4,094,000), and $6,608,000)             $  (344)    $(2,485)    $ 4,015
Reclassification Adjustment for (Gains) Losses Realized in Net Income
 During the Period, Net of Tax (Pre-tax Amount of ($871,000),
 ($808,000), and ($488,000))                                                 (532)       (485)       (293)
                                                                          -------     -------     -------
Other Comprehensive (Loss) Income, Net of Tax of ($559,000),
 ($1,932,000) and $2,398,000                                              $  (876)    $(2,970)    $ 3,722
                                                                          =======     =======     =======
</TABLE>

Note 15. Parent Company Only Financial Statements

Presented below are the condensed statements of condition December 31, 2004, and
2003 and  statements  of  income  and cash  flows  for each of the  years in the
three-year  period  ended  December  31,  2004,  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                                           2004       2003
--------------------------------------------------------------------------------
Assets
Cash and Cash Equivalents                                     $ 2,083    $ 1,121
Securities Available for Sale, at Estimated Fair Value            638        726
Investment in Subsidiary, Equity Basis                         64,913     62,408
Other Assets                                                    1,525      1,029
                                                              -------    -------
  Total Assets                                                $69,159    $65,284
                                                              =======    =======

Liabilities and Stockholders' Equity
Total Liabilities                                             $ 1,554    $   980
Stockholders' Equity                                           67,605     64,304
                                                              -------    -------
  Total Liabilities and Stockholders' Equity                  $69,159    $65,284
                                                              =======    =======


72-K
<PAGE>

Note 15. Parent Company Only Financial Statements, Continued

Condensed Statements of Income

<TABLE>
<CAPTION>
                                                                  December 31,
dollars in thousands                                       2004        2003        2002
----------------------------------------------------------------------------------------
<S>                                                      <C>         <C>         <C>
Dividends from Subsidiary                                $ 5,306     $ 5,375     $ 5,026
Interest and Other Dividend Income                            47          31          28
Net (Loss) Gain on Sale of Securities                         95          --        (165)
                                                         -------     -------     -------
                                                           5,448       5,406       4,889

Operating Expense                                            301         172          83
                                                         -------     -------     -------

Income Before Income Tax (Benefit) Expense and Equity
  in Undistributed Income of Subsidiary                    5,147       5,234       4,806

Income Tax (Benefit) Expense                                 (81)        (56)        (91)
Equity in Undistributed Income of Subsidiaries             3,390       3,423       3,665
                                                         -------     -------     -------
Net Income                                               $ 8,618     $ 8,713     $ 8,562
                                                         =======     =======     =======
</TABLE>

Condensed Statements of Cash Flows

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
dollars in thousands                                       2004        2003        2002
----------------------------------------------------------------------------------------
<S>                                                      <C>         <C>         <C>
Cash Flows from Operating Activities:
Net Income                                               $ 8,618     $ 8,713     $ 8,562
Adjustments to Reconcile Net Income to Cash
  Provided by Operating Activities:
  Investment Security Losses (Gains)                         (95)         --         165
  (Increase) Decrease in Other Assets                        (16)         (4)
  (Decrease) Increase in Other Liabilities                    91         (44)        (91)
  Equity in Undistributed Income of Subsidiaries          (3,390)     (3,423)     (3,665)
                                                         -------     -------     -------
      Net Cash Provided by Operating Activities            5,208       5,242       4,971
                                                         -------     -------     -------
Cash Flows from Investing Activities:
Proceeds from Sales of Available-for-Sale Securities         195          --         258
Purchase of Available-for-Sale Securities                     --          --        (246)
                                                         -------     -------     -------
  Net Cash Provided by Investing Activities                  195          --          12
                                                         -------     -------     -------
Cash Flows from Financing Activities:
Purchase of Treasury Stock                                  (182)       (492)       (677)
Sale of Treasury Stock                                        --          --          --
Cash Dividends                                            (4,259)     (4,319)     (4,062)
                                                         -------     -------     -------
  Net Cash Used in Financing Activities                   (4,441)     (4,811)     (4,739)
                                                         -------     -------     -------
      Net Increase (Decrease) in Cash Equivalents            962         431         244
Cash and Cash Equivalents at Beginning of Year             1,121         690         446
                                                         -------     -------     -------
  Cash and Cash Equivalents at End of Year               $ 2,083     $ 1,121     $   690
                                                         =======     =======     =======
</TABLE>


                                                                            73-K
<PAGE>

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 have been  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
December 24, 2004 was $1,300,000.


74-K
<PAGE>

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

None.

ITEM 9A: CONTROLS AND PROCEDURES

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, 2004. 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.

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, "Election of Directors (introduction);"
"Election  of  Directors - The  Nominees;"  and in Proposal II  "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 23, 2005,  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,  "Election of Directors
-The  Nominees - Douglas C.  Gulotty"  and  "Election  of  Directors - Executive
Officers Who Are Not  Directors,"  in the  definitive  Proxy  Statement  for the
Annual  Meeting of  Shareholders  to be held on April 23, 2005, 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 23, 2005, 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 23, 2005,
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.


                                                                            75-K
<PAGE>

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 Stockholders to be
held on April 23, 2005,  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  Officers,"  in the  definitive  Proxy  Statement  for the Annual
Meeting  of  Stockholders  to be held on April 23,  2005,  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 ACCOUNTANT 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
Stockholders  to be held on April  23,  2005,  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.

                                     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, 2004 and 2003
            -Consolidated  Statements of Income for the Years Ended December 31,
              2004, 2003 and 2002
            -Consolidated  Statements of Changes in Shareholders' Equity for the
              Years Ended December 31, 2004, 2003 and 2002
            -Consolidated  Statements of Cash Flows for the Years Ended December
              31, 2004, 2003 and 2002
            -Consolidated Statements of Comprehensive Income for the Years Ended
              December 31, 2004, 2003 and 2002
            -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.


76-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 18, 2005                   By: /s/ Alfred S. Whittet
      --------------                       ---------------------
                                           Alfred S. Whittet
                                           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/ Alfred S. Whittet       President and Chief Executive Officer       March 18, 2005
-------------------------                                               --------------
Alfred S. Whittet


/s/ Joseph E. Sutaris       Treasurer and Chief Financial Officer       March 18, 2005
-------------------------                                               --------------
Joseph E. Sutaris


/s/ Brian R. Wright         Director, Chairman                          March 18, 2005
-------------------------                                               --------------
Brian R. Wright


/s/ Robert W. Moyer         Director, Vice Chairman                     March 18, 2005
-------------------------                                               --------------
Robert W. Moyer


/s/ David F. Wilber, III    Director                                    March 18, 2005
-------------------------                                               --------------
David F. Wilber, III


/s/ James F. VanDeusen      Director                                    March 18, 2005
-------------------------                                               --------------
James F. VanDeusen


/s/ Philip J. Devine        Director                                    March 18, 2005
-------------------------                                               --------------
Philip J. Devine
</TABLE>


                                                                            77-K
<PAGE>

EXHIBIT INDEX

No.   Document

3.1   Articles  of  Incorporation  of The Wilber  Corporation  (incorporated  by
      reference to Exhibit 3.1 of the Company's Form 10/A Registration Statement
      (No.  001-31896)  filed with the  Securities  and Exchange  Commission  on
      January 30, 2004)

3.2   Bylaws of The Wilber Corporation (incorporated by reference to Exhibit 3.2
      of the Company's Form 10/A  Registration  Statement (No.  001-31896) filed
      with the Securities and Exchange Commission on January 30, 2004)

10.1  Deferred Compensation Agreement between Wilber National Bank and Alfred S.
      Whittet  (incorporated  by reference to Exhibit 10.1 of the Company's Form
      10/A Registration  Statement (No. 001-31896) filed with the Securities and
      Exchange Commission on January 30, 2004)

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  between  Wilber  National Bank and Douglas C.
      Gulotty  (incorporated  by reference to Exhibit 10.8 of the Company's Form
      10/A Registration  Statement (No. 001-31896) filed with the Securities and
      Exchange Commission on January 30, 2004)

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

14    Code of Ethics  incorporated  by reference to Exhibit 14 of the  Company's
      Annual  Report  on Form  10-K  filed  with  the  Securities  and  Exchange
      Commission  on March 25, 2005,  as amended 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 of 2002

31.2  Certification  of Chief Financial  Officer  Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002

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


78-K