BATH NATIONAL CORPORATION
                        AND SUBSIDIARIES
                                
                  CONSOLIDATED FINANCIAL REPORT
                                
                        December 31, 1998


                       Bath National Corporation and Subsidiaries
                                                                 
                                                         Contents




Independent Auditor's Report                                    1


Financial Statements

 Consolidated statements of financial condition                2
 Consolidated statements of income                             3
 Consolidated statements of stockholders' equity               4
 Consolidated statements of cash flows                         5
 Notes to consolidated financial statements                 6-23
<PAGE>
Independent Auditor's Report


To the Board of Directors and Stockholders
Bath National Corporation

We  have  audited  the  accompanying consolidated  statements  of
financial condition of Bath National Corporation and subsidiaries
as  of  December 31, 1998 and 1997, and the related  consolidated
statements  of income, stockholders' equity, and cash  flows  for
each  of  the three years in the period ended December 31,  1998.
These   financial  statements  are  the  responsibility  of   the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We  conducted  our  audits in accordance with generally  accepted
auditing  standards. 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  Bath  National Corporation and subsidiaries  as  of
December  31, 1998 and 1997, and the results of their  operations
and  their  cash flows for each of the three years in the  period
ended  December  31, 1998, in conformity with generally  accepted
accounting principles.









Albany, New York
February 20, 1999
<PAGE>

                                        Bath National Corporation
                                                                 
                   Consolidated Statements of Financial Condition
                                       December 31, 1998 and 1997

                                                      
                                             1998        1997
                                                      
Assets                                                
Cash and due from banks                    $12,009,241 $    7,453,597
intterest bearing deposits in other banks      396,377      1,477,829
Securities                                  84,799,120     89,030,914
Loans, net                                 186,117,798    163,009,225
Premises and equipment, net                  5,462,078      5,625,903
Accrued interest receivable                  2,351,959      2,310,129
Other                                        4,340,714      2,826,444
                                                      
                                                      
                                          $295,477,287   $271,734,041
                                                      
Liabilities and Stockholders' Equity                  
Liabilities                                           
 Deposits:                                            
   Demand                                  35,30,118  $ 31,218,815
   Savings                                43,039,599    41,781,937
   NOW accounts                           36,145,813    33,030,029
   Money market accounts                  11,384,049    10,572,735
   Time deposits ($100,000 or more)       18,894,039    19,620,007
   Other time accounts                    80,110,976    75,818,040
                                                      
                                         224,604,584   212,041,563
 Federal funds purchased                   2,150,000          -
 Securities  sold  under  agreements  to  28,090,773    23,840,977
repurchase
 Borrowed funds                           5,000,000         -
 Other                                    5,108,937      4,714,097
                                                      
                                          264,954,294  240,596,637
                                    
Commitments and Contingencies                         
                                                      
Stockholders' Equity                                  
 Preferred   stock,   $10   par   value,              
300,000 shares                               -            -
   authorized; none issued
 Common  stock, $5 par value,  1,500,000              
shares authorized,1,365,801authorized, 
 1,365,801   issued   and
outstanding                                6,829,005     6,829,005
 Additional paid in capital                1,494,678     1,494,678
 Undivided profits                        22,839,159    22,816,135
 Accumulated other comprehensive income      851,210       736,902
 Treasury stock (18,750 shares in  1998,              
19,203                                    (1,491,059)  (739,316)
,   shares in 1997)
                                                      
                                          30,522,993   31,137,404
                                                      
                                          

                                        $295,477,287 $271,734,041


                  See Notes to Consolidated Financial Statements.
<PAGE>
                                                  Bath National Corporation
                                                                           
                                          Consolidated Statements of Income
                               Years Ended December 31, 1998, 1997 and 1996

                                                                  
                                            1998        1997        1996
                                                                  
Interest income:                       
 Loans                                  $14,968,012   $14,518,778 $13,878,041
                                       
 Securities                                                       
   Held-to-maturity                                               
     U.S. Government and agency           1,538,000     1,538,000     730,550
obligations
   Available-for-sale                                             
     U.S. Government and agency           1,754,087     2,355,672   2,725,582
obligations
     State and municipal obligations      1,876,492     1,784,057   1,343,952
 Federal funds sold                         346,195       156,219      81,539
 Deposits in other banks                    126,658       195,583     254,709
                                                                  
        Total interest income            20,609,444    20,548,309  19,014,373
                                                                  
Interest expense:                                                 
 Deposits                                 7,485,833     7,447,411   6,891,164
 Borrowings                               1,681,381     1,436,903     952,038
                                                                  
        Total interest expense            9,167,214     8,884,314   7,843,202
                                                                  
        Net interest income               11,442,230   11,663,995  11,171,171
Provision for loan losses                    333,689      295,468     268,793
                                                                  
 Net interest income after                          
provision for loan losses                 11,108,54 1  11,368,527  10,902,378
          
                                                                  
Noninterest income:                                               
 Service charges                          831,068         784,299     762,002
 Net realized gains (losses) on sale  of                          
available-for-sale securities              58,095          33,218     (21,653)
   
 Other                                    613,393         292,161     252,930
                                                                  
        Total other income              1,502,556       1,109,678     993,279
                                                                  
Noninterest expenses:                                             
 Salaries and employee benefits         4,499,521       4,400,690   3,806,366
 Occupancy                              1,306,538       1,092,288   1,058,539
 Other                                  2,240,966       2,067,879   2,086,289
                                                                  
        Total other expenses            8,047,025       7,560,857   6,951,194
                                                                  
Income before income taxes              4,564,072       4,917,348   4,944,463
Income taxes                            1,152,696       1,383,784   1,496,384
                                                                  
        Net Income                    $ 3,411,376       3,533,564   3,448,079
                                       
                                                                  
Net Income per Common Share                 $2.56           $2.61       $2.52

                            See Notes to Consolidated Financial Statements.
<PAGE>
                                                       Bath National Corporation
                                                                                
                                 Consolidated Statements of Stockholders' Equity
<TABLE>
                                    Years Ended December 31, 1998, 1997 and 1996

                                                                                             
                           [---------                                                        
                            - COMMON
                           STOCK ----
<CAPTION>
                             ------]
                                                                    Accumulate               
                                                                        d                 Total
                            Number of           AdditionalUndivided   Other    Treasury Stockholde
                             Shares     Amount   Paid in   Profits  Comprehens  Stock   rs' Equity
                                                 Capital            ive Income
<S>                         <C>      <C>        <C>       <C>         <C>         <C>     <C>  
Balance, January 1, 1996    683,117  $3,415,585 $4,923,490$19,966,387 $248,300            $28,553,762
2-for-1 stock split         683,117   3,415,585 (3,415,585)     -          -          -        -
                                    
fractional shares repurc.      (433)     (2,165)   (13,227)     -          -          -       (15,392)
Comprehensive income                                                                        , 
 Net income                    -          -          -      3,448,079      -          -     3,448,079      
  
 Other comprehensive                                                                          
income:
   Net change in                                                                              
unrealized gains (losses)                                                                     
on securities available
for-sale net of taxes
     of $181,310              -           -         -          -      (211,393)       -      (211,393)       
   Less: reclass. adjust.     -           -         -          -        21,653     -           21,653

                                                                                              
     Total other                                                                              
comprehensive income                                                                         (189,740)
                                                                                              
         Total                                                                                
comprehensive income                                                                        3,258,339
                                                                                              
Cash dividends declared             
($1.05 per common share)    -          -          -      (1,434,116)      -        -       (1,434,116)
                                  
                                                                                              
Balance, December 31, 1996  1,365,801  6,829,005  1,494,678 21,980,350 58,560      -       30,362,593  
                    
Purchase of treasury stock                     
(19,203 shares)             -          -          -           -          -     (739,316)     (739,316)
Comprehensive income                                                                          
 Net income                 -          -          -          3,533,564   -          -    .    3,533,564          
Other comprehensive                                                                          
income:
   Net change in                             
unrealized gains (losses)                                                                     
on 
     securities available-
for-sale net of taxes
     of $437,286           -           -          -          -        711,560      -          711,560                    
   Less: reclassification 
adjustment                 -           -          -          -        (33,218)     -          (33,218)    
                                                                                              
     Total other                                                                               
comprehensive income                                                                           678,342    
                                                                                              
         Total                                                                                
comprehensive income                                                                         4,211,906
                                                                                              
Cash dividends declared             
($2.00 per common share)  -           -          -    (2,697,779)         -        -        (2,697,779)
                          
                                                                                              
Balance, December 31, 1997 1,365,801  6,829,005  1,494,678 22,816,135 736,902 (739,316)  31,137,404 
                        
Purchase of treasury stock                     
(18,750 shares)             -          -          -           -          -    (751,743)    (751,743)
Comprehensive income                                                                          
 Net income                 -          -          -         3,411,376    -         -      3,411,376
 Other comprehensive                                                                          
income:
   Net change in                                                                              
unrealized gains (losses)                                                                     
on                        
     securities available-
for-sale net of taxes
     of $76,205             -          -           -          -          172,403    -        172,403       
   Less: reclass. adjust.   -          -           -          -          (58,095)   -        (58,095)

                                                                                              
     Total other                                                                               
comprehensive income                                                                           114,308    
                                                                                              
         Total                                                                                
comprehensive income                                                                         3,525,684
                                                                                              
Cash dividends declared           
($2.55 per common share)   -           -          -     (3,388,352)          -       -      (3,388,352)     
                                    
                                                                                              
Balance, December 31, 1998  1,365,801 6,829,005  1,494,678  22,839,159  851,210  (1,491,059)30,522,993     
</TABLE>
           
                       
        


            See Notes to Consolidated Financial Statements.
<PAGE>
                                                  Bath National Corporation
<TABLE>
                                                                           
                                      Consolidated Statements of Cash Flows
                               Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
                                                                  
                                            1998        1997        1996
<S>                                     <C>         <C>          <C>           
Cash Flows From Operating Activities                              
Net income                              3,411,376   3,533,564    3,448,079
Adjustments to reconcile net income to                            
net cash provided by
 operating activities:
   Depreciation and amortization          520,691     437,578      409,581
   Provision for loan losses              333,689     295,468      268,793
   Deferred taxes                         -           (50,538)     17,472
   Loan origination costs deferred       (189,348)   (69,465)     (72,635)
   Bond premium amortized and discount    160,355     140,080      175,703
accreted
   Losses (gains) on sale of              (58,095)    (33,218)      21,653
investments
   Loss on disposed assets                 11,629        -            -
   Changes in:                                                    
     Interest receivable                  (41,830)     78,964     (613,958)
     Other assets                       (1,538,450     19,050     (459,293)
                    
     Other liabilities                    (253,161)   408,984      232,718
                                                                  
        Net cash provided by operating   
activities                                2,356,856   4,760,467    3,428,113 
                                                                  
Cash Flows From Investing Activities                              
 Proceeds from sales and maturities of   
available-for-sale securities             16,562,804  9,949,448    13,926,729  
 Purchases of held-to-maturity                        
securities                                    -          -        (20,000,000)
                                                   
 Purchases of available-for-sale                                  
securities                               (12,242,757)(7,911,437)  (20,424,362)
                                    
 Federal funds purchased/sold              2,150,000 (4,225,000)    1,675,000
                                                 
 Net decrease in interest bearing        
deposits in other banks                    1,081,452  1,478,712       578,797
 Increase in loans, net                  (23,252,914)(6,794,600)   (8,283,737)
                                        
 Capital expenditures                       (374,743)  (976,873)     (329,947)
 Proceeds from sales of equipment             30,428      -            -
                                                                  
        Net cash used in investing                                
activities                               (16,045,730)(8,479,750)   (32,857,520)
                                   
                                                                  
Cash Flows From Financing Activities                              
 Proceeds from Federal Home Loan Bank     
borrowings                                 5,000,000     -              -
 Repayments of Federal Home Loan Bank    
borrowings                                     -     (2,000,000)  (1,000,000)
 Net increase in securities sold under   
repurchase agreements                     4,249,796   1,912,040    20,858,081
 Purchase of treasury stock                (751,743)   (739,316)       -
 Increase in deposits                    12,563,021   3,568,593    10,711,651
 Dividends paid                          (2,816,556) (1,427,667)   (1,499,743)                         
                                   
                                                                  
        Net cash provided by financing   
activities                               18,244,518   1,313,650    29,069,989
                                                                  
Net increase (decrease) in cash and due  
from banks                                4,555,644  (2,405,633)     (359,418) 
Cash and due from banks:                                          
 Beginning of year                        7,453,597   9,859,230    10,218,648
                                                                  
                                                       
 End of Year                            $12,009,241 $   7,453,59 $   9,859,23
                                          
                                                                  
Supplemental Disclosures of Cash Flow                             
Information
                                                                  
 Interest paid                            9,206,412   9,023,686    7,415,700
                                                                  
 Income taxes paid                          902,984   1,531,283    1,698,800
                                                                  
 Dividends payable (included in other 
liabilities)                              2,456,519   1,884,723      614,611
</TABLE>

                            See Notes to Consolidated Financial Statements.
<PAGE>
Note 1. Summary of Significant Accounting Policies

      General

        Bath    National    Corporation    (the    "Company"),    a    bank
        holding    company,    its    wholly   owned    subsidiary,    Bath
        National     Bank     (the     "Bank"),     a     federal-chartered
        financial    institution,   and   BNC   Financial    Services,    a
        wholly     owned     subsidiary    providing     securities     and
        insurance   products   and   services,   are   incorporated   under
        the   laws   of  New  York  State.  The  accounting  and  financial
        reporting    policies   of   the   entities   are   in   accordance
        with     generally     accepted    accounting    principles     and
        general practices within the industry.

      Consolidation

        The     consolidated    financial    statements     include     the
        accounts     of    the    Company    and    its    wholly     owned
        subsidiaries.    All    material    intercompany    accounts    and
        transactions have been eliminated in consolidation.

      Securities

        The   Bank   has   investments  in  debt  and   other   securities.
        Debt   securities   consist  primarily  of   obligations   of   the
        U.S.    government,    its   agencies   and    corporations,    and
        state    and    municipal   governments.   Management    determines
        the   appropriate  classification  of  securities   at   the   time
        of purchase.

        Trading

          Trading    account    assets   are    held    for    resale    in
          anticipation    of    short-term   market   movements.    Trading
          account   assets,   consisting   of   debt   and   money   market
          instruments,    are   stated   at   fair   value.    Gains    and
          losses,   both   realized  and  unrealized,   are   included   in
          other    income.   The   Bank   did   not   hold   any    trading
          account assets at December 31, 1998 and 1997.

        Held-to-Maturity

          Securities   for   which  the  Bank  has  the   positive   intent
          and   ability  to  hold  to  maturity  are  reported   at   cost,
          adjusted     for    premiums    and    discounts     that     are
          recognized    in   interest   income   over   the    period    to
          maturity.

        Available-for-Sale

          Available-for-sale   securities   consist   of   bonds,    notes,
          debentures,     and     certain     equity     securities     not
          classified      as     trading     or     as     held-to-maturity
          securities.

          Unrealized   gains  and  losses,  net  of  tax,   on   available-
          for-sale      securities     are      reported      in      other
          comprehensive income.

<PAGE>
Note 1. Summary of Significant Accounting Policies, Continued

      Securities, Continued

        Available-for-Sale, Continued

          Gains    and   losses   on   the   sale   of   available-for-sale
          securities     are     determined     using     the      specific
          identification method.

          Premiums    and    discounts   are   recognized    in    interest
          income over the period to maturity.

      Loans and Allowance for Loan Losses

        Loans   are   stated   at   the   amount   of   unpaid   principal,
        adjusted    for    net    deferred    loan    origination    costs,
        unearned   fees   and   discounts,  and  an  allowance   for   loan
        losses.    Certain    direct    loan    origination    costs    are
        deferred    and   recognized   as   an   adjustment   to   interest
        income   over  the  estimated  life  of  the  loans.  Interest   on
        loans   is   recognized  over  the  term  of  the   loan   and   is
        calculated   using   the  simple  interest  method   on   principal
        amounts outstanding.

        The   allowance  for  loan  losses  is  maintained   at   a   level
        which,   in   management's  judgment,   is   adequate   to   absorb
        potential   losses   inherent   in   the   loan   portfolio.    The
        amount    of    the    allowance   is   based    on    management's
        evaluation   of   the   collectibility  of  the   loan   portfolio,
        including     the     nature    of    the     portfolio,     credit
        concentrations,    trends    in   historical    loss    experience,
        specific     impaired     loans,    and    economic     conditions.
        Allowances    for   impaired   loans   are   generally   determined
        based   on   collateral   values   or   the   present   value    of
        estimated   cash   flows.  The  allowance   is   increased   by   a
        provision   for   loan   losses,  which  is  charged   to   expense
        and   reduced   by   charge-offs,  net   of   recoveries.   Changes
        in   the   allowance  relating  to  impaired  loans   are   charged
        or   credited  to  the  provision  for  loan  losses.  Because   of
        uncertainties     inherent    in    the     estimation     process,
        management's   estimate   of  credit   losses   inherent   in   the
        loan   portfolio   and  the  related  allowance   may   change   in
        the  near  term.  However,  the  amount  of  the  change  that   is
        reasonably    possible   cannot   be   estimated.   In    addition,
        various    regulatory   agencies,   as   an   integral   part    of
        their     examination    process,    periodically    review     the
        Company's   allowance   for   losses  on   loans.   Such   agencies
        may   require   the   Company  to  recognize   additions   to   the
        allowances    based    on    their   judgments    of    information
        available to them at the time of their examination.

        Accounting   for   loan  impairments  is  governed   by   Statement
        of    Financial   Accounting   Standards   No.   114,   "Accounting
        by   Creditors   for  Impairment  of  a  Loan"   (SFAS   114)   and
        SFAS   118,   "Accounting  by  Creditors  for   Impairment   of   a
        Loan   -   Income   Recognition  and  Disclosure,"  which   amended
        SFAS     114.      These    Statements    prescribe     recognition
        criteria    for    loan    impairment,   generally    related    to
        commercial    type    loans,    and   measurement    methods    for
        certain   impaired   loans   and  all   loans   whose   terms   are
        modified   in   troubled   debt   restructurings   subsequent    to
        the   adoption   of   these  statements.  A  loan   is   considered
        impaired   when  it  is  probable  that  the  borrower   will   not
        repay    the   loan   according   to   the   original   contractual
        terms of the loan agreement.
<PAGE>

Note 1. Summary of Significant Accounting Policies, Continued

      Loans and Allowance for Loan Losses, Continued

        As    a    matter   of   policy,   the   Bank   generally    places
        impaired    loans    on    nonaccrual   status    and    recognizes
        interest   income  on  such  loans  only  on  a  cash  basis   upon
        receipt   of   interest   payments  from  the   borrower.   Accrual
        of   interest   is   discontinued  on  a   loan   when   management
        believes,      after      considering      economics,      business
        conditions    and   collection   efforts,   that   the   borrower's
        financial   condition   is   such  that  collection   of   interest
        is    doubtful,    or   after   three   months    of    nonpayment,
        whichever    is   earlier.   Uncollectible   interest    previously
        accrued     is     charged    off.    Income    is     subsequently
        recognized   only  to  the  extent  cash  payments   are   received
        until,   in   management's   judgment,   the   borrower's   ability
        to   make   periodic  interest  and  principal  payments  is   back
        to   normal,  in  which  case  the  loan  is  returned  to  accrual
        status.

      Premises and Equipment, Net

        Premises    and    equipment    are    stated    at    cost    less
        accumulated    depreciation.   Depreciation   is   provided    over
        the    estimated   useful   lives   using   straight    line    and
        accelerated methods.

      Other Real Estate Owned

        Real   estate   properties  acquired  through,  or  in   lieu   of,
        loan    foreclosure   are   to   be   sold   and   are    initially
        recorded    at    fair   value   at   the   date   of   foreclosure
        establishing    a    new    cost    basis.    After    foreclosure,
        valuations   are   periodically   performed   by   management   and
        the   real   estate   is   carried  at  the   lower   of   carrying
        amount   or   fair   value   less  cost  to   sell.   Revenue   and
        expenses   from   operations   and   changes   in   the   valuation
        allowances are included in noninterest expense.

        Real    estate   properties   formally   acquired   in   settlement
        of loans were not material in 1998 and 1997.

      Income Taxes

        Income   taxes   are   provided  for  the  tax   effects   of   the
        transactions    reported   in   the   financial   statements    and
        consist   of   taxes  currently  due  and  deferred  taxes,   which
        relate   primarily   to   differences   between   the   basis    of
        available-for-sale     securities;     allowance      for      loan
        losses;    accumulated   depreciation;   and   employee    benefits
        for    financial   and   income   tax   reporting.   Deferred   tax
        assets   and   liabilities  represent   the   future   tax   return
        consequences   of   those  differences,  which   will   either   be
        taxable   or   deductible   when   the   assets   and   liabilities
        are    recovered    or   settled.   Deferred   tax    assets    and
        liabilities   are   reflected  at  income  tax   rates   applicable
        to   the   period   in   which   the   deferred   tax   assets   or
        liabilities   are   expected  to  be  realized   or   settled.   As
        changes   in   tax  laws  or  rates  are  enacted,   deferred   tax
        assets    and    liabilities    are    adjusted    through      the
        provision for income taxes.
<PAGE>

Note 1. Summary of Significant Accounting Policies, Continued

      Employee Benefit Plans

        Retirement     Benefits:     The     Bank     has     a     defined
        contribution   pension   plan   and   a   profit   sharing    plan,
        with   a   salary   deferral  feature,  for  those  employees   who
        meet    the   eligibility   requirements   set   forth    in    the
        plans.    Contributions   to   the   defined   contribution    plan
        are   based  on  a  formula  while  contributions  to  the   profit
        sharing   plan   are   at   the  discretion   of   the   board   of
        directors.

        Postretirement    Benefits:     The    Bank    provides     certain
        health   care  benefits  for  all  retired  employees   that   meet
        certain    eligibility   requirements.   The   Bank's   share    of
        the   estimated   costs   that  will  be  paid   after   retirement
        is   generally   being   accrued  by  charges   to   expense   over
        the   employees'   active  service  periods  to  the   dates   they
        are   fully   eligible  for  benefits,  except  that   the   Bank's
        unfunded   cost  that  existed  prior  to  the  adoption   of   the
        plan    is   being   accrued   primarily   in   a   straight   line
        manner.

      Stock Split and Net Income Per Common Share

        On  March  21,  1996,  the  Board  of  Directors  approved  a  two-
        for-one   common   stock   split,  distributable   on   April   24,
        1996   to   stockholders  of  record  at  the  close  of   business
        on   that   date.   All   per   share  amounts   and   numbers   of
        shares    in    the   consolidated   financial   statements    have
        been   restated   to   reflect  this   split.   In   addition,   an
        amount  equal  to  the  $5  par  value  of  the  split  shares  has
        been    transferred   from   additional   paid   in   capital    to
        common stock.

        Net   income   per  common  share  is  computed  on  the   weighted
        average   number   of   shares  outstanding   during   each   year.
        The   weighted   average   number  of   shares   outstanding   were
        1,331,567,   1,354,869   and   1,365,832   in   1998,   1997    and
        1996, respectively.

      Use of Estimates

        The   preparation   of  the  Company's  financial   statements   in
        conformity    with   generally   accepted   accounting   principles
        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  financial   statements   and
        reported   amounts   of   revenues   and   expenses   during    the
        reporting   period.   Actual  results  could  differ   from   those
        estimates.

      Reclassifications

        Certain   items   have   been  reclassified   in   the   1997   and
        1996    financial   statements   to   conform   with    the    1998
        presentation.


Note 2. Cash and Due From Banks

      The   Bank   is   required   to  maintain   reserve   cash   balances
      with   the   Federal  Reserve  Bank.  The  total  of  those   reserve
      cash   balances   was   approximately   $5,645,000   and   $2,938,000
      at December 31, 1998 and 1997, respectively.
<PAGE>

Note 3. Securities

      The   amortized   cost   and   fair  values   of   available-for-sale
      securities   as   of   December   31,   1998   are   summarized    as
      follows:

                                                
                                       [-----Gross Unrealized -----]
                          Amortized                         
                             Cost     Gains     Losses    Fair
                                                          Value
                                                           
      U.S. Government and                                  
      agency               
        securities        9,587,648     63,977     30,938     9,620,687
      State and municipal                                  
      securities         37,295,393  1,470,182      3,917    38,761,658
      Mortgage-backed and                                  
      related                                              
        securities       15,957,808     45,417    152,329    15,850,896
      Other                 545,184     22,829      2,134       565,879
                                                           
                                                           
                        $63,386,033 $1,602,405   $189,318   $64,799,120
      
      The  amortized  cost  and fair value of  available-for-sale
      securities as of December 31, 1998 by contractual  maturity
      are  shown  below.  For  purposes of  the  maturity  table,
      mortgage-backed securities, which are not due at  a  single
      maturity  date, have been allocated over maturity groupings
      based  on  the  weighted-average contractual maturities  of
      underlying  collateral. The mortgage-backed securities  may
      mature  earlier  than  their  weighted-average  contractual
      maturities because of principal prepayments.

                                                  
                                    Amortized          Fair
                                      Cost            Value
                                                  
      Due in one year or less       $ 6,224,171   $     6,260,246
      Due after one year             
      through five years             25,337,213        25,971,923 
      Due after five years           
      through ten years              17,182,269        17,930,619  
      Due after ten years            14,642,380        14,636,332
                                                  
                                     $63,386,033      $64,799,120

      The  amortized  cost  and fair values  of  held-to-maturity
      securities  as  of  December 31,  1998  are  summarized  as
      follows:

                                                
                                       [-----Gross Unrealized -----]
                          Amortized                         
                             Cost     Gains     Losses    Fair
                                                          Value
                                                           
      U.S. Government and                                  
      agency                                      
        securities        $20,000,000  $268,750   -     $20,268,750
      
      The amortized cost and fair value of securities being held-
      to-maturity   as  of  December  31,  1998  by   contractual
      maturity are shown below.

                                                  
                                    Amortized          Fair
                                      Cost            Value
                                                  
      Due in one year or less      $20,000,000     $20,268,750
<PAGE>

Note 3. Securities, Continued

      The  amortized  cost  and fair values of available-for-sale
      securities  as  of  December 31,  1997  are  summarized  as
      follows:

                                                
                                       [-----Gross Unrealized -----]
                          Amortized                         
                             Cost     Gains     Losses    Fair
                                                          Value
                                                           
      U.S. Government and                                  
      agency                    
        securities        $11,327,853    66,558     80,270     $11,314,141
      State and municipal                                  
      securities          36,036,771  1,115,839      1,290      37,151,320
      Mortgage-backed and                                  
      related                                              
        securities        19,059,605    139,891    123,490      19,076,006
      Other                1,384,109    105,338       -          1,489,447
                                                           
                                                           
                         $67,808,338 $1,427,626   $205,050     $69,030,914

      The  amortized  cost  and fair values  of  held-to-maturity
      securities  as  of  December 31,  1997  are  summarized  as
      follows:

                                                
                                       [-----Gross Unrealized -----]
                          Amortized                         
                             Cost     Gains     Losses    Fair
                                                          Value
                                                           
      U.S. Government and                                  
      agency                                      
        securities        $20,000,000  $539,200   -       $20,539,200

      Proceeds  from sales and calls of securities  during  1998,
      1997  and  1996,  which  were principally  attributable  to
      those  available-for-sale, were $8,557,804, $5,599,231  and
      $6,867,918,  respectively, with  gross  gains  of  $92,692,
      $58,983  and  $23,080 and gross losses of $34,597,  $25,765
      and $44,733 realized on those sales.

      Securities  with  a  carrying  value  of  $71,743,226   and
      $68,621,401   and   market  values   of   $72,772,816   and
      $69,556,886  at  December 31, 1998 and 1997,  respectively,
      were  pledged  to  secure public deposits, securities  sold
      under  agreements to repurchase, and for other purposes  as
      required or permitted by law.
<PAGE>

Note 4. Loans, Net

      The  components of loans at December 31, 1998 and 1997 were
      as follows:

                                                   
                                        1998           1997
                                                   
      Commercial                 91,073,309       71,582,995
      Installment                18,872,768       19,002,523
      Real estate mortgage       42,872,595       41,788,215
      Home equity loans          23,351,490       21,697,621
      Student                     8,938,556        7,932,328
      Credit card loans           1,700,208        1,886,019
      Net deferred loan                            
      origination costs and           
         unearned discounts         958,872          769,524 
                                                   
                                                   
                                 187,767,798      164,659,225
      Less allowance for loan          
      losses                       1,650,000        1,650,000
                                                   
      Loans, net                $186,117,798     $163,009,225

      Real estate mortgage and home equity loans consist of:

                                                   
      Mortgages with fixed rates $23,685,162
      Mortgages with variable                      
      rates                       19,187,433
      Home equity loans with                       
      fixed rates                 18,873,518
      Home equity loans with           
      variable rates               4,477,972
                                                   
        Total real estate loans  $66,224,085
      
      Changes  in  the allowance for loan losses  for  the  years
      ended December 31, 1998, 1997 and 1996 were as follows:

                                                         
                                    1998       1997       1996
                                                         
      Balance, beginning of                              
      year                       $1,650,000  $1,650,000  $1,650,000
      Provision for loan losses     333,689     295,469     268,793
      Recoveries credited to                             
      the allowance                  69,167      86,306      80,752
      Losses charged to the                              
      allowance                    (402,856)   (381,775)   (349,545)
                                                         
      Balance, end of year       $1,650,000  $1,650,000  $1,650,000

      The  Bank  has, and may be expected to have in the  future,
      banking  transactions with directors,  principal  officers,
      their  immediate families and affiliated companies in which
      they  are principal stockholders (commonly referred  to  as
      related  parties). The aggregate amount of loans to related
      parties was $550,000 and $675,000 at December 31, 1998  and
      1997, respectively.

<PAGE>
Note 4. Loans, Net, Continued

      The  activity with respect to loans to related parties  for
      the year ended December 31, 1998 follows:

                                                  
      Aggregate amount beginning of period             $675,000
      New loans                                         135,000
      Repayments                                       (260,000)
                                                  
      Aggregate amount end of period                   $550,000


Note 5. Premises and Equipment

      At  December  31,  1998  and 1997, premises  and  equipment
      consist of:

                                                   
                                        1998           1997
                                                   
      Land                                502,389         502,389
      Buildings and improvements        6,229,904       6,161,265
      Furniture                         3,545,907       3,315,991
        Total                          10,278,200       9,979,645
      Less accumulated    
      depreciation                      4,816,122       4,353,742
      
                                                   
      Premises and equipment, net                  
                                     $  5,462,078     $5,625,903

      Depreciation  expense was $496,511, $411,672  and  $379,401
      for  the  years  ended December 31, 1998,  1997  and  1996,
      respectively.


Note 6. Deposits

      A  summary of deposit accounts at December 31, by maturity,
      is as follows:

                                                   
                                        1998           1997
                                                   
      No contractual maturity   $125,599,569    $116,625,042
      Maturity within one year    81,109,227      80,899,368
      Maturity after one year                      
      through five years          17,895,788      14,517,153
                                                   
                                                   
                                $224,604,584    $212,041,563


Note 7. Securities Sold Under Agreements to Repurchase

      Substantially   all   securities  sold   under   repurchase
      agreements   were  delivered  to  the  broker-dealers   who
      arranged  the transactions. These broker-dealers  may  have
      sold,  loaned, or otherwise disposed of such securities  to
      other  parties  in  the normal course of their  operations,
      and  have  agreed  to  resell  to  the  Bank  substantially
      identical  securities at the maturities of the  agreements.
      The agreements mature in less than one year.

<PAGE>
Note 7. Securities Sold Under Agreements to Repurchase, Continued

      Information concerning securities sold under agreements  to
      repurchase is summarized as follows:

                                                   
                                        1998           1997
                                                   
      Average balance during the                   
      year                        $24,577,300      $21,533,500
                                                   
      Average interest rate             6.2%            6.2%
      during the year
                                                   
      Maximum month-end balance                    
      during                                       
        the year                  $28,887,900      $23,841,000

      Securities underlying the agreements at year-end:

                                                   
      Carrying value             $32,539,000      $28,086,000
                                                   
      Estimated fair value       $32,884,000      $28,136,500


Note 8. Borrowed Funds

      Borrowed  funds  represent advances from the  Federal  Home
      Loan  Bank.  There were no advances at December  31,  1997.
      Advances at December 31, 1998 are summarized as follows:

      
              1998
                                               
            Advance             Interest            Maturity
             Amount               Rate                Date
                                               
          $5,000,000                6.08%           June 2008


Note 9. Income Taxes

      A summary of the components of income taxes is as follows:

                              
                              [----------Years Ended December 31, -------]
                              
                                  1998        1997       1996
                                                        
      Current Tax                                       
        Federal             $828,322      $1,091,641   $1,099,494
        State                324,374         342,681      379,418
                                                        
          Total current tax                             
      expense              1,152,696       1,434,322    1,478,912
      Deferred tax                                      
        Federal and State          -         (50,538)      17,472
                                                        
          Total provision                               
      for income                                        
            taxes         $1,152,696      $1,383,784   $1,496,384
<PAGE>
Note 9. Income Taxes, Continued

      A  reconciliation  of  the  expected  income  tax  expense,
      computed  at  the federal statutory rate  of  34%,  to  the
      income  tax expense included in the consolidated statements
      of income is as follows:

                              
                              [----------Years Ended December 31, -------]
                               
                                  1998        1997       1996
                                                        
      Statutory provision  $1,551,784   $1,671,898   $1,681,117
      Tax exempt interest    (672,113)    (608,027)    (508,980)
      State income tax, net                             
      of federal                                        
        benefit               225,967      226,169      250,416
      Non deductible               
      interest                 90,004       80,956       57,800
      Other                   (42,946)      12,788       16,031
                          
                                                        
          Total            $1,152,696   $1,383,784   $1,496,384

      Net   deferred   tax  liabilities  (classified   as   other
      liabilities) consist of the following at December 31,  1998
      and 1997:

                                                     
                                           1998         1997
                                                     
      Deferred tax assets:                           
        Provision for loan losses       $502,464      $502,464
        Employee benefits                361,500       322,724
                                                     
                                         863,964       825,188
        Less valuation allowance            -              -
                                                     
                                         863,964       825,188
                                                     
      Deferred tax liabilities:                      
        Depreciation                     486,295       467,495
        Deferred loan fees               383,549       307,810
                                                     
                                         869,844       775,305
                                                     
      Net deferred tax asset    
     (liability)                         (5,880)       49,883

      This  analysis does not include the recorded  deferred  tax
      liabilities  of  $565,235  and  $489,030  related  to   the
      unrealized   gains  in  the  available-for-sale  securities
      portfolio  as  of December 31, 1998 and 1997, respectively.
      These  amounts  are included in other liabilities  and  the
      changes in the deferred taxes related to the available-for-
      sale   securities   portfolio   are   reported   in   other
      comprehensive  income  in  the statement  of  stockholders'
      equity.

<PAGE>
Note 10.  Employee Benefit Plans and Postretirement Benefits

      Employee Benefit Plans:

        The  Bank  has  a defined contribution pension  plan  for
        those  employees  who  meet the eligibility  requirements
        set  forth  in the plan. Substantially all of the  Bank's
        full   time   employees   are  covered   by   the   plan.
        Contributions  to  the plan are based  on  a   percentage
        computation.  The  Bank's  defined  contribution  pension
        plan  expense  was  $265,600, $268,000 and  $214,300  for
        1998, 1997 and 1996, respectively.

        The  Bank  also has a profit sharing plan, with a  salary
        deferral  feature,  for  those  employees  who  meet  the
        eligibility   requirements  set  forth   in   the   plan.
        Contributions  to the plan are at the discretion  of  the
        Board of Directors. Substantially all of the Bank's  full
        time  employees  are  covered by  the  plan.  The  Bank's
        profit  sharing plan expense was $177,300,  $208,700  and
        $198,800 for 1998, 1997 and 1996, respectively.

        The  Bank has severance compensation agreements with  two
        of  its  officers  which do not become  effective  unless
        there  has  been  a  change in control  of  the  Bank  as
        defined   and   the   Bank   terminates   the   officers'
        employment. Under those conditions the Bank will pay,  as
        severance,  a lump sum payment equal to three  times  the
        aggregate  annual  compensation  paid  to  the  executive
        officers  during the calendar year immediately  preceding
        the change in control.

      Postretirement Benefits:

        The  Bank  provides health and dental  care  benefits  to
        retired  employees  who meet specified  age  and  service
        requirements through a postretirement health  and  dental
        care  plan  in which both the Bank and retiree share  the
        cost.  The  plan  provides  for  substantially  the  same
        medical insurance coverage as for active employees  until
        their  death  and is integrated with Medicare  for  those
        retirees aged 65 or older.

        A summary of the plan's funded status is as follows:

                                                       
                                              1998       1997
                                                       
        Change in benefit obligation                   
              Benefit obligation at   
        beginning of year                  924,328     874,469
              Service cost                  37,489      26,798
              Interest cost                 83,253      68,154
              Plan participants'                       
        contributions                       13,70        9,402
              Actuarial loss               399,387         -
                                        
              Benefits paid                (79,405)    (54,495)
                Benefit obligation at end              
        of year                          1,378,752     924,328
                                                       
        Change in plan assets                          
              Fair value of plan assets         
        at beginning of year                    -            - 

        Actual return on plan          
        assets                                  -            -
              Employer contribution         65,705      45,093
              Plan participants'                       
        contributions                       13,700       9,402
              Benefits paid                (79,405)    (54,495)
                Fair value of plan assets    
        at end of year                          -            -
                                                       
        Funded status                   (1,378,752)   (924,328)
        Unrecognized transition                        
        obligation                         371,211     397,725
        Unrecognized net actuarial loss    511,957     125,437
                                                       
        Accrued benefit cost (classified    
        as other liabilities)             (495,584)   (401,166)
<PAGE>

Note 10.   Employee  Benefit  Plans and Postretirement  Benefits,
      Continued

      Postretirement Benefits, Continued:

                                                        
                                               1998       1997
                                                        
        Weighted-average assumptions as of              
        December 31
                                                        
              Discount rate                    6.75%     8.00%
                                                        
              Expected return on plan          
         assets                                 n/a       n/a
                                                        
              Rate of compensation            
        increase                                n/a       n/a

          For measurement purposes, a 7.5 percent annual rate  of
        increase  in  the per capita cost of covered health  care
        benefits  was assumed for 1999. The rate was  assumed  to
        decrease gradually to 4.5 percent for 2004 and remain  at
        that level thereafter. The dental trend rate assumed  was
        3 percent.

                                                          
                                        1998     1997     1996
                                                          
        Components of net periodic                        
        benefit cost
              Service cost          37,489     26,798    26,690
              Interest cost         83,253     68,154    70,005
              Amortization of                             
        transition obligation       26,514     26,514    26,514
              Amortization of net                         
        loss                        12,867      2,714     8,078
                                                          
                Net periodic benefit                      
        cost                      $160,123   $124,180  $131,287

        Assumed  health and dental care cost trend rates  have  a
        significant effect on the amounts reported for the  plan.
        A  one-percentage-point  change  in  assumed  health  and
        dental  care  cost trend rates would have  the  following
        effects at December 31, 1998:

                                                     
                                       1-Percentage-1-Percentage-
                                           Point        Point
                                         Increase     Decrease
                                                     
        Effect on total service and                  
        interest cost                 
              components               16,978        (13,958)
                                                     
        Effect on postretirement             
        benefit obligation            121,915       (102,342)


Note 11.  Regulatory Matters

      The   Bank   is  subject  to  various  regulatory   capital
      requirements administered by the federal banking  agencies.
      Failure  to  meet  minimum regulatory capital  requirements
      can  initiate  certain  mandatory-and  possibly  additional
      discretionary-actions by regulators  that,  if  undertaken,
      could   have  a  direct  material  effect  on  the   Bank's
      financial   statements.   Under  the   regulatory   capital
      adequacy  guidelines  and  the  regulatory  framework   for
      prompt  corrective  action, the  Bank  must  meet  specific
      capital guidelines that involve quantitative

<PAGE>
Note 11.  Regulatory Matters, Continued

      measures  of  the Bank's assets, liabilities,  and  certain
      off-balance-sheet  items  as  calculated  under  regulatory
      accounting  practices.  The  Bank's  capital  amounts   and
      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 Bank  to  maintain  minimum
      amounts and ratios (set forth in the table below) of  total
      risk-based  capital and Tier I capital (as defined  in  the
      regulations) to risk-weighted assets (as defined),  and  of
      Tier  I  capital  to  adjusted total assets  (as  defined).
      Management  believes, as of December  31,  1998,  that  the
      Bank  meets all capital adequacy requirements to  which  it
      is subject.

      As  of December 31, 1998, the most recent notification from
      the  Office  of Controller of the Currency categorized  the
      Bank  as  well  capitalized under the regulatory  framework
      for  prompt  corrective action. To be categorized  as  well
      capitalized  the  Bank must maintain  minimum  total  risk-
      based,  Tier  I risk-based, and Tier I leverage  ratios  as
      set  forth in the table. There are no conditions or  events
      since  that  notification  that  management  believes  have
      changed the Bank's category.

      The  Bank's actual and required capital amounts and  ratios
      are as follows (dollars in thousands):

                                               
                                For Capital         
                                   Adequacy    To Be Well
                        Actual   Purposes:    Capitalized:
                        Amount  Ratio Amount  Ratio Amount Ratio
                                                                
      As of December                                            
      31, 1998
      Total Risk- Based                                         
      Capital
        (to Risk-                                               
      Weighted Assets)  $31,053  18.1%   $13,734  >=8.0%   $17,167  >=10.0%
                       
      Tier I Capital                                            
        (to Risk-                                               
      Weighted Assets)   29,403  17.1%     6,867  >=4.0%    10,300  >=6.0%
      Tier I Capital                                            
        (to Adjusted                                            
      Total Assets)      29,403  10.3%    11,374  >=4.0%    14,217  >=5.0%
                                                                
      As of December                                            
      31, 1997
      Total Risk-Based                                          
      Capital
        (to Risk-                                               
      Weighted Assets)  31,757  21.3%    11,923  >=8.0%    14,904  >=10.0%
      Tier I Capital                                            
        (to Risk-                                               
      Weighted Assets)  30,107  20.2%     5,962  >=4.0%     8,943  >=6.0%
      Tier I Capital                                            
        (to Adjusted                                            
      Total Assets)     30,107  11.1%    10,832  >=4.0%    13,540  >=5.0%
                                                                
      
      The  Bank is restricted as to the amount of dividends which
      can  be  paid.  Dividends declared by national  banks  that
      exceed  net income (as defined) for the current  year  plus
      retained  net  income for the preceding two years  must  be
      approved  by  the  Comptroller of the Currency.  Under  the
      formula, dividends of approximately $2,800,000 may be  paid
      without  prior  regulatory approval. Regardless  of  formal
      regulatory  restrictions, the Bank may  not  pay  dividends
      that  would  result in capital levels being  reduced  below
      the minimum requirements shown above.

<PAGE>
Note 12.  Commitments and Contingencies

      Financial instruments with off balance sheet risk:

        The  Bank  is  party  to financial instruments  with  off
        balance  sheet risk in the normal course of  business  to
        meet   the  financing  needs  of  its  customers.   These
        financial  instruments  include  commitments  to   extend
        credit  and  standby letters of credit. These instruments
        involve, to varying degrees, elements of credit  risk  in
        excess  of  the  amount recognized in the  statements  of
        financial condition.

        The  Bank's exposure to credit loss in the event  of  non
        performance   by  the  other  party  to   the   financial
        instrument  for commitments to extend credit and  standby
        letters  of  credit  is represented  by  the  contractual
        amount  of  those  instruments. The Bank  uses  the  same
        credit  policies  in making commitments  and  conditional
        obligations  as they do for on balance sheet instruments.
        A  summary of the Bank's commitments at December 31, 1998
        is as follows (dollars in thousands):

                                                    
        Revolving open-end lines secured by 1-4                 
        family residential                             
          properties                                    $  3,807   
                                                    
        Credit card lines                                  5,277
                                                    
        Commercial real estate, construction and           
        land development                                   3,432
                                                    
        Commercial and similar letters of credit,            
        net                                                  363 
                                                    
        Other unused commitments                          20,418
                                                    
                                                         $33,297

        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. Since many of  the
        commitments  are expected to expire without  being  drawn
        upon,  the  total  commitment amounts do not  necessarily
        represent  future cash requirements. The  Bank  evaluates
        each  customer's  creditworthiness  on  a  case  by  case
        basis.  The  amount  of  collateral  obtained  if  deemed
        necessary by the Bank upon extension of credit  is  based
        on  management's  credit evaluation of the  counterparty.
        Collateral   held   varies  but  may   include   accounts
        receivable,  inventory, property,  equipment  and  income
        producing commercial properties.

        Letters  of credit 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  private borrowing arrangements. The credit  risk
        involved in issuing letters of credit is essentially  the
        same  as  that  involved in extending loan facilities  to
        customers. Collateral held varies as specified above  and
        is required in instances where the Bank deems necessary.

<PAGE>
Note 12.  Commitments and Contingencies, Continued

      Concentrations of credit risk:

        The  Company  and  the Bank are located in  the  Southern
        Tier  of  the Finger Lakes region of New York State.  The
        Bank  grants  commercial, consumer and residential  loans
        primarily   to   customers   in  Allegheny,   Livingston,
        Ontario,  Schuyler,  Steuben  and  Yates  counties.   The
        Bank's  loan  portfolio consists primarily of commercial,
        installment  and real estate secured loans. A substantial
        portion  of its debtors' ability to honor their contracts
        is dependent upon the economic conditions of the region.

        All  of  the  Bank's loans, commitments to extend  credit
        and  letters of credit have been granted to customers  in
        the  Bank's market area. Investments in securities issued
        by   state   and  political  subdivisions  also   involve
        governmental entities within the Bank's market area.  The
        concentrations of credit by type of loan  are  set  forth
        in  Note  4.  The distribution of commitments  to  extend
        credit    approximates   the   distribution   of    loans
        outstanding.  Standby  letters  of  credit  were  granted
        primarily to commercial borrowers.

      Line of credit:

        The  Bank has credit available from the Federal Home Loan
        Bank and Manufacturers and Traders Bank in the amount  of
        $12,812,000   and   $4,000,000,  respectively,   at   the
        overnight federal funds rate.


Note 13.  Disclosures About Fair Value of Financial Instruments

      The  fair  values  shown  below  (in  thousands)  represent
      management's  estimates  of values  at  which  the  various
      types   of  the  Bank's  financial  instruments  could   be
      exchanged   in  transactions  between  willing,   unrelated
      parties.  They  do not necessarily represent  amounts  that
      would  be  received  or paid in actual trades  of  specific
      financial instruments.


                              ...1998...         ...1997...
                              Carrying   Fair   Carrying   Fair
                               Amount    Value   Amount   Value
                                                            
      Financial assets:                                     
        Cash and short term      
      investments             12,406    12,406    8,931     8,931
        Securities            84,799    85,068   89,031    89,570
                            
        Loans, net           186,118   188,401  163,009   170,048
                           
                                                            
                                                           
                            $283,323  $285,875 $260,971  $268,549
                                                            
      Financial liabilities:                                
        Deposits              224,605 $225,007 $212,042   $212,171        
                           
        Federal funds         
      purchased               2,150     2,150     -            - 
        Securities sold under           
      agreements to                                         
          repurchase         28,091    28,091   23,841     23,841
        Borrowed funds        5,000     5,000      -         -
                             
                                                            
                                                            
                           $259,846  $260,248  $235,883  $236,012
                                                            
      Unrecognized financial                                
      instruments
        Commitments to extend   
      credit               $ 33,297    33,297    24,225    24,225
<PAGE>
Note  13.  Disclosures About Fair Value of Financial Instruments,
Continued

      The  specific estimation methods and assumptions  used  can
      have  a substantial impact on the resulting fair values  of
      financial instruments. Following is a brief summary of  the
      significant  methods  and assumptions  used  in  the  above
      table:

      Cash and short term investments:

        For those short term instruments, the carrying amount  is
        a reasonable estimate of fair value.

      Securities:

        For  securities  held as investments, fair  value  equals
        quoted  market  price, if available. If a  quoted  market
        price  is  not  available, fair value is estimated  using
        quoted market prices for similar securities.

      Loans, net:

        For  certain  homogeneous categories of  loans,  such  as
        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  money market deposits is the amount  payable  on
        demand  at  the reporting date. The fair value  of  fixed
        maturity  certificates of deposit is estimated using  the
        rates   currently   offered  for  deposits   of   similar
        remaining maturities.

      Securities   sold  under  agreements  to   repurchase   and
      borrowed funds:

        The  carrying amounts of securities sold under agreements
        to  repurchase and borrowed funds approximate their  fair
        values.

      Commitments  to  extend  credit  and  standby  letters   of
      credit:

        The  fair  value  of commitments is estimated  using  the
        fees  currently charged to enter into similar agreements,
        taking   into   account  the  remaining  terms   of   the
        agreements  and  the  present  creditworthiness  of   the
        counterparties.  For  fixed rate loan  commitments,  fair
        value  also  considers  the  difference  between  current
        levels  of  interest rates and the committed  rates.  The
        fair  value  of  letters  of  credit  is  based  on  fees
        currently  charged  for  similar  agreements  or  on  the
        estimated cost to terminate them or otherwise settle  the
        obligations  with  the counterparties  at  the  reporting
        date.

<PAGE>
Note 14.  Parent Company Only Financial Information

      Parent  company (Bath National Corporation) only  condensed
      financial information is as follows:

      Condensed Statements of Financial Condition
      December 31, 1998 and 1997

                                                       
                                              1998       1997
                                                       
      Assets                                           
                                                       
      Cash                                    2,144       1,297
                                                       
      Dividend receivable                 2,460,000   1,886,000
                                                       
      Investment in subsidiaries         30,545,229  31,163,993
                                                       
            Total assets                $33,007,373 $33,051,290
                                      
                                                       
      Liabilities and Stockholders'                    
      Equity
                                                       
      Liabilities                                      
                                                       
        Dividend payable                 2,456,519   1,884,723
                                                       
        Other liabilities                   27,861      29,163
                                                       
                                                       
                                         2,484,380   1,913,886
                                                       
      Stockholders' Equity                             
                                                       
        Common stock                     6,829,005   6,829,005
                                                       
        Additional paid in capital       1,494,678   1,494,678
                                                       
        Undivided profits               22,839,159  22,816,135
                                                       
        Accumulated other comprehensive                
      income                               851,210     736,902
                                                       
        Treasury stock                  (1,491,059)   (739,316)
                                         
                                                       
                                                       
                                        30,522,993  31,137,404
                                                       
            Total liabilities and                      
      stockholders' equity             $33,007,373 $33,051,290
                                        
      
      
      Condensed Statements of Operations
      Years Ended December 31, 1998, 1997 and 1996
      
                                                        
                                   1998       1997       1996
                                                        
      Revenue                    $    -  $     -    $      -
                                                        
      Expenses                                          
                                                        
              Other operating                    
             expenses                1,295       2,165       1,835
                                                        
      Loss before equity in                             
      earnings of                                       
              subsidiaries          (1,295)     (2,165)     (1,835)
                                                        
      Equity in earnings of                             
      subsidiaries               3,412,671   3,535,729   3,449,914
                                                        
      Net income                $3,411,376  $3,533,564  $3,448,079

<PAGE>
Note 14.  Parent Company Only Financial Information, Continued

      Condensed Statements of Cash Flows
      Years Ended December 31, 1998, 1997 and 1996

                                                         
                                       1998     1997      1996
                                                         
      Cash Flows from Operating                          
      Activities
                                                         
            Net income            $3,411,376  $3,533,564  $3,448,079
                                  
                                                         
            Adjustments to                               
      reconcile net income to net
              cash used in
      operating activities:
                                                         
                Net earnings of                          
      subsidiaries               (3,412,671) (3,535,729)  (3,449,914)
                                
                                                         
                Change in other                          
      liabilities                   (1,302)   (2,788)   (1,392)
                                                         
                  Net cash used in                       
      operating activities          (2,597)   (4,953)   (3,227)
                                                         
      Cash Flows from Investing                          
      Activities
                                                         
         Cash dividend received  3,571,743 2,170,313 1,505,608
                                                         
      Cash Flows from Financing                          
      Activities
                                                         
            Payments for purchase                         
      of treasury stock         (751,743 ) (739,316)     -
                                                         
        Cash dividends paid    (2,816,556) (1,427,667) (1,499,743)
                                  
                                                         
            Net cash used in                       
      financing activities     (3,568,299) (2,166,983) (1,499,743)
                                 
                                                         
      Net increase (decrease) in                         
      cash                           847       (1,623)      2,638
                                                         
      Cash, January 1              1,297        2,920         282
                                                         
      Cash, December 31            2,144        1,297       2,920