SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549
                     ------------------------  

                            FORM 10-KSB

       [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  
             EXCHANGE ACT OF 1934

              For the fiscal year ended December 31, 1998
                                OR

       [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE         
      SECURITIES EXCHANGE ACT OF 1934

                 Commission File Number:  0-22038

                          ALBION BANC CORP.                             
------------------------------------------------------------------------------
          (Exact name of registrant as specified in its charter)

     Delaware                                                 16-1435160     
---------------------------------------              -------------------------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                           Identification No.)

48 North Main Street,
Albion, New York                                              14411-0396
---------------------------------------              -------------------------
Address of principal executive offices)                        (Zip Code)    

Registrant's telephone number, including area code:  (716) 589-5501
                                                     --------------

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

Securities registered pursuant to Section 12(g) of the Act:

                  Common Stock, par value $0.01 per share
                  ---------------------------------------
                             (Title of Class)

       Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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      NO  x  
                                                     ----    ----

       Indicate by check mark whether disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
other information statements incorporated by reference in Part III of this
Form 10-KSB or any amendments to this Form 10- KSB.  [X]   

       The aggregate market value of the voting stock held by nonaffiliates of
the Registrant, based on the closing sales price of the Registrant's Common
Stock as quoted on the Nasdaq Smallcap Market under the symbol "ALBC" on March
1, 1999, was $7,530,580 (753,058 shares at $10.00 per share).  It is assumed
for purposes of this calculation that none of the Registrant's officers,
directors and 5% stockholders are affiliates.

       The Registrant's revenues for the fiscal year ended December 31, 1998
were $5,622,373. 

                DOCUMENTS INCORPORATED BY REFERENCE

1.     Portions of Annual Report to Stockholders for the Fiscal Year Ended     
       December 31, 1998. (Parts I and II)

2.     Portions of Proxy Statement for the 1999 Annual Meeting of
       Stockholders. (Part III)

Transitional Small Business Disclosure Format (check one)  Yes     No  X     
                                                               ---    ---   

<PAGE>

<PAGE>

                                PART I

Item 1.  Description of Business
--------------------------------

     Albion Banc Corp. (the "Company"), a Delaware corporation, was
incorporated on March 23, 1993 for the purpose of becoming the holding company
for Albion Federal Savings and Loan Association ("Albion Federal" or the
"Association") (the Company and Albion Federal shall at times be referred to
as the "Company") upon Albion Federal's conversion from a federal mutual to a
federal stock savings and loan association ("Conversion").  The Conversion was
completed on July 23, 1993.  At December 31, 1998, the Company had total
assets of $76.5 million, total deposits of $59.1 million and shareholders'
equity of $6.4 million.  The Company has not engaged in any significant
activity other than holding the stock of Albion Federal.  Accordingly, the
information set forth in this report, including financial statements and
related data, relates primarily to Albion Federal.

     Albion Federal was organized in 1934 as a federally chartered mutual
savings and loan association and has been a member of the Federal Home Loan
Bank ("FHLB") System since 1935.  Albion Federal is regulated by the Office of
Thrift Supervision ("OTS") and its deposits are insured up to applicable
limits under the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC").    

     The Association provides its customers with a full array of community
banking services.  The Association is primarily engaged in the business of
attracting deposits from the general public and using such deposits, together
with other funding sources, to invest in one-to-four family residential
mortgage loans and, to a lesser extent, multi-family residential, consumer,
and commercial mortgage loans, including home equity loans, for its loan
portfolio, as well as for mortgage-backed and U.S. Government and agency
securities and other assets.  At December 31, 1998, the Association's loans
totaled $59.2 million, or 77.4% of total assets, including $48.4 million, or
81.8%, of gross loans secured by one-to-four family properties, $3.4 million,
or 5.7% of gross loans secured by other real estate properties and $7.9
million of consumer loans, or 13.3% of gross loans.  Of the Association's
residential mortgage loans secured by one-to-four family and other real estate
properties, $39.1 million, or 80.8%, are fixed-rate loans and $9.3 million, or
19.2%, are adjustable rate residential mortgage loans (collectively referred
to as ARMs).

Selected Consolidated Financial Information

     This information is incorporated by reference from page 2 of the 1998
Annual Report to Stockholders ("Annual Report").

Yields Earned and Rates Paid

     This information is incorporated by reference from page 8 of the Annual
Report.

                                      1

<PAGE>

<PAGE>
<TABLE>
Rate/Volume Analysis

     The following table sets forth the effects of changing rates and volumes on net interest income of
the Association.  Information is provided with respect to (i) effects on interest income attributable to
changes in volume (changes in volume multiplied by prior rate); (ii) effects on interest income
attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) changes in
rate/volume (change in rate multiplied by change in volume).


                              1998 Compared to 1997    1997 Compared to 1996   1996 Compared to 1995
                                Increase (Decrease)     Increase (Decrease)     Increase (Decrease)
                                      Due to                 Due to                    Due to       
                             ------------------------  ----------------------  -------------------------
                                          Rate/                    Rate/                    Rate/
                             Rate  Volume Volume  Net  Rate Volume Volume Net  Rate Volume  Volume   Net
                             ----- ------ ------ ----  ---- ------ ------ ---  ---- ------  ------   ---
                                                           (In thousands)
<S>                        <C>     <C>   <C>     <C>   <C>  <C>    <C>   <C>  <C>   <C>     <C>     <C>
Interest-earning assets:
 Real estate loans........ $(183)  $470  $(24)   $263  $46  $ 69   $ 1   $116 $44   $135    $ 2     $181
 Consumer loans...........    12     85     2      99    5   155     1    161 (14)    13     (1)      (2)
                           -----   ----  ----    ----  ---  ----   ---   ---- ---   ----    ---     ----
  Total loans.............  (171)   555   (22)    362   51   224     2    277  30    148      1      179
 Mortgage-backed 
  securities..............   (89)    29    (4)    (64)  19   303    33    355  10     12      1       23
 Investment securities....     1   (133)   (1)   (133)  (3)  (35)    1    (37) (8)   (26)     1      (33)
 Daily interest-earning
  deposits................    --     --    --      --   --    --    --     --  --     --     --       -- 
Other interest-earning 
  assets (1)..............    --    --      (1)  (6)  162   (13)   143 (10)  (116)     5     (121)
                           -----   ----  ----    ----  ---  ----   ---   ---- ---   ----    ---     ----
Total net change in
 income on interest-
 earning assets...........  (260)   451   (27)    164   61  654     23    738  22     18      8       48
                           -----   ----  ----    ----  ---  ----   ---   ---- ---   ----    ---     ----
Interest-bearing liabilities:               
 Interest-bearing 
  deposits................   (25)   146    (2)    119  (27) 197     (2)   168 (73)   161     (6)      82
 FHLB advances and
  other borrowings........    (5)    14    (1)      8   24  284     27    335   9   (192)    (4)    (187)
                           -----   ----  ----    ----  ---  ----   ---   ---- ---   ----    ---     ----
Total net change in
 expense on interest-
 bearing liabilities.....    (30)   160    (3)    127   (3) 481     25    503 (64)   (31)   (10)    (105)
                           -----   ----  ----    ----  ---  ----   ---   ---- ---   ----    ---     ----
Net change in net
 interest income.........  $(230)  $291  $(24)   $ 37  $64 $173    $(2)  $235 $86    $49    $18     $153
                           =====   ====  ====    ====  === ====   ====   ==== ===   ====    ===     ====
</TABLE>

                                                            2

<PAGE>


<PAGE>

Interest Rate Risk Exposure

     The following table sets forth the interest rate risk exposure of the
Association's portfolio based on OTS data at December 31, 1998.

           Interest Rate Sensitivity of Net Portfolio Value ("NPV")

                                                             NPV as % of
                                                     Portfolio Value of Assets
                                                     -------------------------
                      Net Portfolio Value                     
             -----------------------------------
Change                                                NPV
in Rates     $ Amount   $ Change(1)     % Change     Ratio(2)      Change(3) 
--------     --------   -----------     --------     --------      ---------
                              (Dollars in thousands)

 400  bp     $3,878      $(3,558)        (48)%         5.37%       (421)  bp
 300  bp      4,999       (2,437)        (33)          6.78        (280)  bp
 200  bp      6,060       (1,376)        (19)          8.05        (153)  bp
 100  bp      6,932         (504)         (7)          9.05         (53)  bp
   0  bp      7,436                                    9.58              
(100) bp      7,606          170           2           9.71          13   bp
(200) bp      7,701          265           4           9.75          17   bp
(300) bp      7,978          542           7          10.00          42   bp
(400) bp      8,177          741          10          10.15          57   bp

___________
(1)    Represents the increase (decrease) of the estimated NPV at the
       indicated change in interest rates compared to the NPV assuming no      
       change in interest rates.
(2)    Calculated as the estimated NPV divided by the portfolio value of total 
       assets.
(3)    Calculated as the increase (decrease) of the NPV ratio assuming the     
       indicated change in interest rates over the estimated NPV ratio         
       assuming no change in interest rates.

     The above table illustrates, for example, that at December 31, 1998 an
instantaneous 200 basis point increase in market interest rates would reduce
the Association's NPV by approximately $1.4 million, or 19%, and an
instantaneous 200 basis point (bp) decrease in market interest rates would
increase the Association's NPV by approximately $265,000, or 4%.

     Certain assumptions utilized by the OTS in assessing the interest rate
risk of a savings association within its region were utilized in preparing the
preceding table.  These assumptions relate to interest rates, loan prepayment
rates, deposit decay rates, and the market values of certain assets under
differing interest rate scenarios, among others.

     As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table.  For
example, although certain assets and liabilities may have similar maturities
or periods to repricing, they may react in different degrees to changes in
market interest rates.  Also, the interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest rates,
while interest rates on other types may lag behind changes in market rates. 
Additionally, certain assets, such as ARM loans, have features which restrict
changes in interest rates on a short-term basis and over the life of the
asset.  Further, in the event of a change in interest rates, expected rates of
prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.

                                        3

<PAGE>

<PAGE>

Lending Activities

     General.  The principal lending activity of the Association is the
origination of first mortgage loans secured by residential properties, and, to
a lesser extent, commercial real estate loans.  In addition, the Association
currently offers a variety of consumer loans such as home equity loans, home
equity lines of credit and auto loans.  The Association's net loans totaled
approximately $58.8 million at December 31, 1998, representing approximately
76.9% of its total assets.

     Loan Portfolio Analysis.  The following table sets forth the composition
of the Association's loan portfolio by type of loan as of the dates indicated. 

                                             At December 31,       
                        ------------------------------------------------------
                              1998               1997              1996    
                        -----------------  -----------------  ----------------
                        Amount    Percent  Amount    Percent  Amount   Percent
                        ------    -------  ------    -------  ------   -------
                                        (Dollars in thousands)
Real Estate Loans:
 One-to-four family
  residential.......... $48,396   81.0%    $43,024   80.3%    $39,393   81.4%
 Commercial(1).........   1,793    3.0       2,204    4.1       2,234    4.6
 Construction(2).......   1,589    2.7         413    0.8         578    1.2
                        -------  -----     -------  -----     -------  -----
  Total real estate
   loans...............  51,778   86.7      45,641   85.2      42,205   87.2

Other Loans:
 Automobile............      93    0.2         100    0.2         129    0.3
 Home improvement
  and second
  mortgage loans.......   7,415   12.4       7,152   13.3       4,960   10.2
 Other.................     434    0.7         688    1.3       1,106    2.3
                        -------  -----     -------  -----     -------  -----
   Total other loans...   7,942   13.3       7,941   14.8       6,195   12.8
                        -------  -----     -------  -----     -------  -----

   Gross loans.........  59,720  100.0%     53,582  100.0%     48,400  100.0%
                                 =====              =====              =====
Less:
 Undisbursed loans
  in process...........    (721)              (327)              (279)   
 Net deferred loan
  origination  costs 
    (fees).............      74                 39                 23   
 Allowance for
  loan losses..........    (267)              (276)              (306)   
                        -------            -------            -------
 Total loans, net...... $58,806            $53,017            $47,838
                        =======            =======            =======
   
_____________
(1)    Commercial mortgage loans include mortgages on multi-family residential 
       real estate and other commercial properties.
(2)    All construction loans originated by Albion Federal represent permanent 
       financings.

       One-to-Four Family Residential Loans. The primary lending activity of
the Association has been the origination of mortgage loans to enable borrowers
to purchase/refinance existing homes or to construct new single-family homes. 
Management believes that this policy of focusing on single-family residential
mortgage loans has been successful in contributing to interest income while
keeping delinquencies and losses to a minimum.  At December 31, 1998,
approximately $48.4 million, or 81.0% of the Association's gross loan
portfolio consisted of loans secured by one- to-four family residential real
estate.  The Association offers long-term, fixed rate mortgage loans and
adjustable-rate mortgage loans.

       The Association presently originates both fixed rate mortgage loans and
ARMs secured by one-to-four family properties with loan terms of 10 to 30
years.  ARMs originated since 1991 have interest rates that adjust at regular

                                  4

<PAGE>

<PAGE>

intervals of one or three years based upon changes in the Treasury Bill for a
period matching the repricing period of the loan.  These loans provide that
the amount of any increase or decrease in the interest rate is limited to two
percentage points per adjustment period and are limited to six percentage
points by which the rate can increase or decrease over the life of the loan. 
Borrower demand for ARMs versus fixed rate mortgage loans is a function of the
level of interest rates, the expectations of changes in the level of interest
rates and the difference between the interest rates and loan fees offered for
fixed rate mortgage loans and the first year rate and loan fees for ARMs.  The
relative amount of fixed rate and ARMs that can be originated at any time is
largely determined by the demand for each in a competitive environment.

     As in fiscal 1997, during fiscal year 1998, the demand for ARM's
continued at a decreased rate in connection with a flattening of the yield
curve and the decline in long-term interest rates.  Therefore, the Association
experienced a decrease in its origination of residential ARM's and the
portfolio decreased to $9.2 million at December 31, 1998 from $13.6 million at
December 31, 1997.

     During the year ended December 31, 1998 the Association's total
single-family mortgage loan originations were $17.1 million, all of which were
long-term, fixed rate loans.

     The Association underwrites ARMs based on the borrower's ability to repay
the loan assuming the fully indexed accrual rate on the ARM remained constant
during the loan term.  As a result, the potential for a substantial increase
in interest payments on ARMs is lessened, as is the likelihood of
delinquencies and defaults.

     Since October 1990, the Association has originated long-term, fixed-rate
loans under guidelines established by the Federal National Mortgage
Association ("FNMA"), which facilitates the sale of such loans in the
secondary market with servicing retained by the Association.  The
Association's long-term, fixed-rate loans typically are originated with terms
of 15 to 30 years, amortized on a monthly basis with principal and interest
due each month.  A determination is made at the time of origination whether
the loan is held for sale.  At December 31, 1998, the Association had $39.2
million of one-to-four family residential fixed rate loans outstanding.

     The Association's lending policies generally limit the maximum
loan-to-value ratio on fixed-rate and adjustable rate residential mortgage
loans to 80% of the lesser of the appraised value or purchase price of the
underlying residential property unless private mortgage insurance to cover the
excess over 80% is obtained in which case the mortgage is limited to 95% of
the lesser of appraised value or purchase price.  The Association does have
limited funding from FNMA for its Community Homebuyer's program in which case
the loan-to-value ratio increases to 97% of the lesser of the appraised value
or purchase price.  Also, the Association offers Federal Housing
Administration ("FHA") and Veteran Administration ("VA") financing.  These
loans typically have a loan-to-value ratio of 100% and are partially insured
by the government should losses occur as a result of foreclosure.

     At December 31, 1998, the Association had $1.6 million in interim
construction loans in its portfolio.  All of these loans are residential
construction loans for single family dwelling units and all automatically
convert into permanent residential real estate loans.

     Multi-Family Residential Loans.   At December 31, 1998, the Association
had five loans secured by multi-family dwelling units which it originated and
retained the entire interest that totalled $422,334, or 0.7%, of the
Association's gross loan portfolio.    Multi-family real estate loans are
generally originated at 80% of the appraised value of the property or selling
price, whichever is less, and carry adjustable rate mortgages with the
principal amortized over 10 to 30 years.  Loans secured by multi-family real
estate are generally larger and involve a greater degree of risk than
one-to-four family residential loans, and are similar to the risks associated
with commercial real estate lending.  See " -- Commercial Real Estate Loans."

     At December 31, 1998, the Association's largest multi-family residential
loan was a $126,950 loan secured by an eight unit apartment building in the
Association's primary market area.  At December 31, 1998, the Association did

                                 5

<PAGE>

<PAGE>

not have any multi-family residential loans which the Association originated
and retained the entire interest, and which were delinquent 120 days or more. 
See "-- Nonperforming Assets and Delinquencies."

     Commercial Real Estate Loans.  Federal regulations permit federal savings
and loan associations and savings banks to invest in non-residential real
estate loans up to 400% of their capital as computed under generally accepted
accounting principles ("GAAP") plus general loan loss reserves.  At December
31, 1998, this would limit the Association's aggregate non-residential real
estate loans to approximately $24 million.  At such time, the Association had
commercial real estate loans outstanding of $1.4 million.  The commercial real
estate loans originated by the Association are primarily secured by retail
outlets, churches, hospitals, warehouses and office buildings.

     The Association does not actively solicit or originate commercial real
estate loans.  Of primary concern in commercial real estate lending is the
borrower's creditworthiness and the feasibility and cash flow potential of the
project.  Loans secured by income properties are generally larger and involve
greater risks than residential mortgage loans because payments on loans
secured by income properties are often dependent on successful operation or
management of the properties.  As a result, repayment of such loans may be
subject, to a greater extent than residential real estate loans, to supply and
demand in the market in the type of property securing the loan and therefore,
may be subject to adverse conditions in the real estate market or the economy. 
If the cash flow from the project is reduced, the borrowers ability to repay
the loan may be impaired.  Although the thrift industry has generally
experienced material losses in commercial real estate lending, Albion Federal
has sustained no material losses on such loans.

     Consumer Loans.  At December 31, 1998, the Association's consumer loan
portfolio was $7.9 million, or 13.2%, of the gross loan portfolio.  Of this
amount, $7.4 million were home improvement and home equity loans secured by
first or second liens on residential real estate that the Association
originates using similar underwriting standards as utilized with residential
first mortgage loans.

     Albion Federal currently offers a variety of consumer loans, including
loans secured by mortgages on real estate for home improvement, debt
consolidation and other purposes, and savings account loans.  The majority of
such loans are secured by a first or second mortgage on residential property. 
The Association actively solicits these types of loans by contacting their
borrowing customers directly.  The Association offers fixed and adjustable
rate home equity loans which are made for a maximum of $150,000 and are
secured by a first or second lien on one-to-four family properties.  The
maximum term for fixed rate home equity loans is 15 years and 20 years for
variable rate loans.  For adjustable rate loans, during the initial five
years, the borrower may take draws against the line of credit up to their
credit limit.  After the initial five year period, the pay-back period
commences over the remaining 15 years of the loan.  One additional five year
draw period may be made available to the borrower at the Association's
discretion.  Home equity lines of credit programs have interest rates varying
from the prime rate to the prime rate plus a margin of 1.20% or 1.45%,
depending upon the amount of the loan.  The Association's lending policies
generally limit the maximum loan-to-value on home equity loans to 80% of the
appraised value of the underlying residential property.  The Association's
average home equity loan is approximately $22,000.

     Consumer loans have been offered under a variety of terms and conditions.
Secured consumer loans are limited to a maximum of 90% of the retail value of
the consumer collateral offered or real estate, including any other mortgages
or liens offered to secure the loan, except in the case of guaranteed student
loans, the amount which is established by the program.  In recent years,
management has expanded its consumer lending to include automobile loans.

     The Association's underwriting standards for consumer loans include an
assessment of the applicant's payment history on other debts and ability to
meet existing obligations and payments on the proposed loans.  Although the
applicant's creditworthiness is a primary consideration, the underwriting
process also includes a comparison of the value of the collateral securing the
loan, if any, to the proposed loan amount.

     Consumer loans may entail greater risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or
secured by assets that depreciate rapidly, such as automobiles.  In the latter
case, 

                                        6

<PAGE>

<PAGE>

repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment for the outstanding loan and the remaining
deficiency often does not warrant further substantial collection efforts
against the borrower.  In addition, consumer loan collections are dependent on
the borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy. 
Furthermore, the application of various federal and state laws, including
federal and state bankruptcy and insolvency laws, may limit the amount which
can be recovered on such loans.  Such loans may also give rise to claims and
defenses by the borrower against the Association as the holder of the loan,
and a borrower may be able to assert claims and defenses which it has against
the seller of the underlying collateral.  The Association adds a general
provision to its consumer loan loss allowance, based on general economic
conditions and prior loss experience.  The Association historically has had a
low level of delinquencies on its consumer loans.  See "-- Nonperforming
Assets and Delinquencies."

Loan Maturity and Repricing

     The following table sets forth certain information at December 31, 1998
regarding the dollar amount of loans and mortgage-backed securities maturing
in the Association's portfolio based on their contractual terms to maturity,
but does not include scheduled payments or potential prepayments.  Demand
loans, loans having no stated schedule of repayments and no stated maturity,
and overdrafts are reported as due in one year or less.  Mortgage loans which
have adjustable rates are shown as maturing at their next repricing date. 
Loan balances do not include undisbursed loan proceeds, unearned discounts,
unearned income and nonperforming loans.

                                                                               
                                   One      Three   Five    
                            Within  to      to      to        Beyond 
                            One    Three    Five    Ten       Ten
                            Year   Years    Years   Years     Years     Totals
                            ----   -----    -----   -----     -----     ------

Real estate mortgages.....$ 8,871  $ 622    $ 993   $4,783   $33,529   $48,798
Commercial real estate....    215     --      308      218       666     1,407
Construction..............    937     --       --       --        --       937
Consumer..................  4,474    230      360    1,430     1,310     7,804
Mortgage-backed 
  securities..............     --     --       29       13     7,724     7,766
Other.....................    127     --       --       --        --       127
                          -------   ----   ------   ------   -------   -------
     Total................$14,624   $852   $1,690   $6,444   $43,229   $66,839
                          =======   ====   ======   ======   =======   =======

     The following table sets forth all loans and mortgage-backed securities
due beyond December 31, 1999 which have fixed interest rates and have floating
or adjustable interest rates.

                                  Fixed         Floating or
                                  Rates         Adjustable Rates
                                  -----         ----------------
                                      (In thousands)

Real estate mortgages........... $39,567            $   360
Commercial real estate..........     931                261
Construction....................      --                 --
Consumer........................   3,330                 --
Mortgage-backed securities......   3,944              3,822
                                 -------             ------
     Total...................... $47,772             $4,443
                                 =======             ======

     Mortgage Loan Solicitation and Processing.  Loan originations are derived
through the Association's sales representative as well as walk-ins. 
Advertising in local newspapers promotes loan products to the public in
general.  The present customer base and walk-in traffic are solicited through
stuffers, brochures, lobby signs, and, occasionally through direct mail. 
Telephone inquiries are also used.

                                     7

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<PAGE>

     Once a mortgage loan application is received, a credit and property
analysis is completed including obtaining a credit report from local reporting
agencies, verification of income and deposits through mail or direct contact,
asset and liability verification as required and an appraisal of the property
offered as collateral.  Real estate appraisals are completed by board approved
and licensed independent, fee appraisers.  The application is then submitted
to the Association's loan officer for underwriting and approval.  All loans
require the approval of two officers of the Association.  The loans are
reported to the loan committee at the next monthly meeting.  In an effort to
ensure non- discrimination in lending decisions, two officers must also review
loan applications that are declined.  Any application that is declined is also
reported to the loan committee at the next monthly meeting.

     Loan Originations, Purchases and Sales.  Loans are originated to meet or
exceed the applicable underwriting requirements of the FNMA.  The Association
maintains mortgage documentation on single-family loans it originates as
required to sell such loans to FNMA in the secondary market.  Single-family
loan sales over the past five years have been limited to long-term fixed-rate
whole loans to FNMA without recourse and servicing retained.  Loans sold have
had a fixed rate monthly payment.

     In addition to selling one-to-four family loans, Albion Federal has
occasionally purchased loans originated by other financial institutions,
secured by one-to-four family residential properties located outside of its
primary market area.  The Association's purchases in the secondary market are
dependent upon the demand for mortgage credit in the local market area and the
inflow of funds from traditional sources.  The Association has not purchased
any whole loans since 1986.  At December 31, 1998, the Association had
$572,792 in whole loans which were purchased by the Association and which are
serviced by the Association, and $102,034 in mortgage pool securities which
are serviced by others. 

     The following table shows the dollar amount of loans originated,
purchased, sold and repaid during the periods indicated.

                                           Year Ended December 31,        
                                       -------------------------------
                                       1998          1997         1996
                                       ----          ----         ----
                                                (In thousands)

Total loans at
 beginning of period................. $53,255      $48,400      $44,781
                                      -------      -------      -------
Real estate loans originated:
 One-to-four family residential......  14,373        6,300        7,076
 Multi-family residential
  and commercial real estate.........     140          767          185
 Construction loans(1)...............   2,596        1,892        2,242

Other loans originated:
 Consumer............................   2,632        4,548        2,586
 Other loans.........................      --           --           --
                                      -------      -------      -------
   Total loans originated............  19,741       13,507       12,089
                                      -------      -------      -------
Real estate loans purchased..........      --           --           --

                (table continued on following page)



                                  8

<PAGE>

<PAGE>
                                            Year Ended December 31,  
                                        ------------------------------
                                        1998         1997         1996
                                        ----         ----         ----
                                                (In thousands)
Loans sold:
 Total one-to-four
  family residential mortgages.......  (1,375)        (507)        (459)
                                      -------      -------      -------
    Total loans sold.................  (1,375)        (507)        (459)
                                      -------      -------      -------
Loan principal repayments............ (12,506)      (8,145)      (7,718)

Transfers to foreclosed real 
  estate(2)..........................    (116)          --         (293)
                                      -------      -------      -------
Net loan activity....................   5,744        4,855        3,619
                                      -------      -------      -------
Total loans at end of period......... $58,999      $53,255      $48,400
                                      =======      =======      =======
___________________
(1)    All construction loans originated by Albion Federal represent permanent 
       financings.
(2)    Activity represents transfers from loans receivable to real estate
       owned.

     Loan Commitments.  The Association issues commitments for fixed and
adjustable rate one-to-four family residential mortgage loans conditioned upon
the occurrence of certain events.  Such commitments are made in writing on
specified terms and conditions and are honored for up to 60 days from
approval, subject to interest rate change if the loan does not close within
the specified expiration date.  The Association had outstanding net loan
commitments of approximately $1.2 million at December 31, 1998.  See Note 14
of Notes to Consolidated Financial Statements.

     Loan Origination and Other Fees.  The Association, in some instances,
receives loan origination fees and discount "points."  Loan fees and points
are a percentage of the principal amount of the mortgage loan which are
charged to the borrower for funding the loan.  The Association usually charges
discount points of 0% to 2% on one-to-four family residential real estate
loans and on long-term multi-family residential loans and a 1% origination fee
on residential construction loans.  Current accounting standards require fees
received (net of certain loan origination costs) for originating loans to be
deferred and amortized into interest income over the contractual life of the
loan.  Net deferred fees associated with loans that are sold are recognized as
income at the time of sale.  The Association had $74,255 of net deferred loan
costs at December 31, 1998.
  
     The Association also receives loan servicing fees on the loans it sells
and on which it retains the servicing responsibilities.

     Nonperforming Assets and Delinquencies.  When a mortgage loan borrower
fails to make a required payment by the end of the month in which the payment
is due, the Association generally institutes collection procedures.  The
Association's collection procedures provide for a two-to-five percent late
charge if a monthly installment is more than 15 days past due.  The first
notice is generally mailed to the borrower within 15 days of the payment due
date and, if necessary, a second written notice follows at the end of the
month or shortly thereafter, in which that payment was due.  A "demand" letter
is mailed to the borrower after the 60th day of delinquency.  Attempts are
made to contact the borrower again during the 90-120th day of delinquency. 
When contact is made with the borrower, the Association will attempt to obtain
full payment and if that is not possible, work out a repayment schedule with
the borrower to avoid foreclosure.

     In most cases, delinquencies are cured promptly; however, if by the 120th
day of delinquency, or sooner if the borrower is chronically delinquent and
all reasonable means of inducing the borrower to pay on time have been
exhausted, the Association initiates foreclosure, deed-in-lieu of foreclosure,
or, in the case of a second mortgage, liquidation according to the terms of
the security instrument and applicable law.

     The Association institutes the same collection procedures for
non-mortgage loans. 

                                    9

<PAGE>

<PAGE>

     The Board of Directors is informed on a monthly basis as to the status of
all mortgage and non-mortgage loans that are delinquent 60 days or more, as
well as the status on all loans currently in foreclosure or owned by the
Association through foreclosure.

     The table below sets forth the amounts and categories of nonperforming
assets in the Association's loan portfolio at the dates indicated.  Loans are
placed on non-accrual status through the establishment of a reserve for
uncollected interest when the loan becomes more than 90 days delinquent and
collection of interest becomes doubtful.  The Association does not recognize
income on non-accrual loans.  At December 31, 1998, uncollected cumulative
interest totaled $12,300.  The Association would have recorded interest income
of $11,516, $14,470 and $8,926 and on non- accrual loans during the years
ended December 31, 1998, 1997, 1996, respectively, if such loans had been
performing during such periods.  The Association did not recognize interest
income on loans placed on a non-accrual basis during the years ended December
31, 1998, 1997 and 1996, respectively.  Foreclosed assets include assets
acquired in settlement of loans.  During the periods shown, the Association
had no troubled debt restructured loans within the meaning of Statement of
Financial Accounting Standards ("SFAS") No. 15, " Accounting By Debtors and
Creditors for Troubled Debt Restructurings." 

                                                       Year Ended December 31,
                                                       -----------------------
                                                         1998    1997    1996
                                                         ----    ----    ----
                                                            (In thousands)
Loans accounted for on a nonaccrual basis:
  Real estate:
   One-to-four family residential........................ $262   $276   $252
   Commercial............................................   --     --     --
                                                          ----   ----   ----
     Total                                                 262    276    252
                                                          ----   ----   ----
Accruing loans which are contractually 
  past due 90 days or more...............................   --     --     --

Total of nonaccrual and 90 days past due loans...........  262    276    252
Foreclosed real estate...................................   --     --    211
                                                          ----   ----   ----
   Total nonperforming assets............................ $262   $276   $463
                                                          ====   ====   ====

Total loans delinquent 90 days or more to net loans......  0.5%   0.5%   0.5%

Total loans delinquent 90 days or more to total assets...  0.3%   0.4%   0.4%

Total nonperforming assets to total assets(1)............  0.3%   0.4%   0.7%

--------------------
(1)  Total nonperforming assets include total nonaccrual and 90 days past
     due loans and real estate owned.

     The decrease in total nonperforming assets from $276,000 at December 31,
1997 to $262,000 at December 31, 1998 can be attributed to the write off of a
portion of three participation mortgage loan pools.

     Asset Classification.  Federal regulations require that each insured
institution review and classify its assets on a regular basis.  In addition,
in connection with examinations of insured institutions, OTS examiners have
authority to identify problem assets and, if appropriate, require them to be
classified.  There are three classifications for problem assets:  substandard,
doubtful and loss.  Substandard assets must have one or more defined
weaknesses and are characterized by the distinct possibility that the insured
institution will sustain some loss if the deficiencies are not corrected. 
Doubtful assets have the weaknesses of substandard assets with the additional
characteristic that the

                                      10

<PAGE>

<PAGE>

weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss.  An asset classified loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted.  The regulations also provide for a  special mention category,
described as assets which do not currently expose an insured institution to a
sufficient degree of risk to warrant classification but do possess credit
deficiencies or potential weaknesses deserving management's close attention. 
If an asset or portion thereof is classified loss, the insured institution
establishes specific allowances for loan losses for the full amount of the
portion of the asset classified loss.  A portion of general loss allowances
established to cover possible losses related to assets classified substandard
or doubtful may be included in determining an institution's regulatory
capital, while specific valuation allowances for loan losses generally do not
qualify as regulatory capital.

     At December 31, 1998, there were no unclassified assets which should have
been classified because management knew about possible credit problems of
borrowers which caused management to have serious doubts as to the ability of
such borrowers to comply with existing repayment terms.

     At December 31, 1998, 1997 and 1996 the aggregate amounts of the
Association's classified assets, and of the Association's general and specific
allowances and charge-offs for the period then ended were as follows:

                                           At December 31, 
                                 ---------------------------------- 
                                 1998           1997           1996   
                                 ----           ----           ----
                                         (In thousands)
Classified assets:
  Doubtful.....................  $  4           $ 26           $ --
  Substandard assets...........   258            250            372
  Special mention..............   148            541            510

Loan loss allowance:
  General loss allowances......   267            276            306
  Specific loss allowances.....    --             --             --
Net charge-offs................    74             65             78

     The following is a discussion of the Association's major substandard
loans at December 31, 1998:

     The Association's largest nonperforming asset(s) consists of three
participation mortgage loan pool securities that totalled $102,034 at December
31, 1998.  The securities were purchased in 1987 from Thrift Association
Service Corporation (TASCO) and are secured by one-to-four family properties. 
Payments from TASCO ceased during May 1996 and resumed in April 1997.  The
Association charged-off $55,987, representing the payments collected during
that period and retained by the FDIC for expenses incurred in foreclosure
actions and previous payments advanced in error.  The Association's loan loss
allowance includes $13,775 based on the classification of the remaining TASCO
pool balances.
       
     Real Estate Owned.  Real estate acquired by the Association as a result
of foreclosure or by deed in lieu of foreclosure is classified as real estate
owned until it is sold.  When property is acquired, the unpaid principal
balance of the related loan plus foreclosure costs and estimated costs to sell
are compared to the property's appraised value.  The property is then directly
written down to the lower of cost or fair value.  Subsequently, the property
is carried at the lower of cost or net realizable value with any adjustments
made through the establishment of a specific reserve.  At December 31, 1998,
the Association did not have any real estate owned.

     Allowance for Loan Losses.  The Association's management, at least
quarterly, evaluates the need to establish reserves against losses on loans
based on estimated losses on specific loans when a finding is made that a
significant and permanent decline in value has occurred.  Such evaluation
includes a review of all loans for which full collectibility may not be
reasonably assured and considers, among other matters, the estimated market
value of the underlying 

                                   11

<PAGE>

<PAGE>

collateral of problem loans, prior loss experience, economic conditions and
overall portfolio quality. These provisions for losses are charged against
earnings in the year they are established.   The Association established
provisions for loan losses for the years ended December 31, 1996, 1997 and
1998, of approximately $140,239, $35,414 and $65,023, respectively.  The
fluctuation in the annual provision for loan losses is the result of
management's assessment of economic conditions and such provisions are
computed based on management's established loan review process.   In fiscal
1997, the provision for loan losses totalled $35,414, a decrease of $104,825
from fiscal 1996.  This decrease in the provision between the periods was the
result of an improvement in credit quality of three participation mortgage
pool securities and a low delinquency level in the Association's loan
portfolio.  In fiscal 1998, the provision for loan losses totalled $65,023, an
increase of $29,609 from fiscal 1997.  The Association's ratio of
nonperforming assets to total assets remained low at .35%, while the ratio of
allowance for  loan losses to total loans decreased to .45% during the period. 
 Although the Association believes its provision for loan losses is at a level
which it considers to be adequate to provide for losses, there can be no
assurances such losses will not exceed the estimated amounts.
            
     At December 31, 1998 the Association had an allowance for loan losses of
$267,000 which represented .5% of total loans.  Management believes that loan
loss reserves were adequate at December 31, 1998.  However, if the underlying
facts and circumstances of the loan portfolio change in the future, the
adequacy of the allowance for loan losses will be addressed and, if need be,
adjusted accordingly.

Loan Loss Allowance Analysis

     The following table sets forth an analysis of the Association's gross
allowance for loan losses for the periods indicated.  Where specific loan loss
reserves have been established, any difference between the loss reserve and
the amount of loss realized has been charged or credited to current income. 

                                                    Year  Ended December 31,
                                                  --------------------------
                                                  1998       1997       1996
                                                  ----       ----       ----
                                                     (Dollars in thousands)

Allowance at beginning of period ................ $276       $306       $244
Provision for loan losses........................   65         35        140

Net charge offs:
  Residential real estate........................  (64)       (54)       (58)
  Commercial real estate.........................   --         --         (4)
  Consumer loans.................................  (10)       (11)       (16)
           Net charge offs.......................  (74)       (65)       (78)

    Allowance at end of period................... $267       $276       $306

Ratio of allowance to total loans outstanding
 at the end of the period........................  0.5%       0.5%       0.6%

Ratio of net charge offs to average loans
 outstanding during the period...................  0.1%       0.1%       0.2%

                                       12

<PAGE>




Allowance for Loan Losses by Category

     The following table sets forth the breakdown of the allowance for loan
losses by loan category for the dates indicated.
                                                                               
                                            At December 31, 
                         -----------------------------------------------------
                               1998              1997            1996 
                         ----------------- ------------------  ---------------
                                  Loan              Loan               Loan
                                Category           Category          Category
                                as a % of          as a % of         as a % of
                                  Out                Out                Out
                               -standing          -standing          -standing
                         Amount  Loans     Amount   Loans      Amount  Loans
                         ------  -----     ------   -----      ------  -----
                                            (Dollars in thousands)

Real estate loans:
  One-to-four family 
     residential........  $197   81.0%      $196    80.8%       $218   81.4%
  Commercial............     2    3.0         26     4.1          34    4.6
  Construction..........     6    2.7          3     0.2           8    1.2
Consumer................    43   13.3         51    14.9          46   12.8
                          ----  -----       ----   -----        ----  -----
   Total allowance for
     loan losses........  $267  100.0%      $276   100.0%       $306  100.0%
                          ====  =====       ====   =====        ====  =====

Investment Activities

     Savings and loan associations have authority to invest in various types
of liquid assets, including United States Treasury obligations, securities of
various Federal agencies and of state and municipal governments, deposits at
the FHLB-New York, certificates of deposit of federally insured institutions,
certain bankers' acceptances and federal funds.  Subject to various
restrictions, such savings institutions may also invest a portion of their
assets in commercial paper, corporate debt securities and mutual funds, the
assets of which conform to the investments that federally chartered savings
institutions are otherwise authorized to make directly.  Savings institutions
are also required to maintain minimum levels of liquid assets by regulation. 
See "Regulation of Albion Federal  -- Liquidity Requirements."  The
Association may decide to increase its liquidity above the required levels
depending upon the availability of funds and comparative yields on investments
in relation to return on loans.

     The Association is required under federal regulations to maintain a
minimum amount of liquid assets and is also permitted to make certain other
securities investments.  See "Regulation of Albion Federal."  The balance of
the Association's investments in short-term securities in excess of regulatory
requirements reflects management's response to the significantly increasing
percentage of deposits with short maturities.  At December 31, 1998, the
Association's regulatory liquidity was 23.5% which is in excess of the
required 4%.  It is the intention of management to hold securities with short
maturities in the Association's investment portfolio in order to enable the
Association to match more closely the interest-rate sensitivities of its
assets and liabilities. 

     The Association periodically invests in mortgage-backed securities,
insured or guaranteed by either the Government National Mortgage Association
("GNMA"), FNMA or the Federal Home Loan Mortgage Corporation ("FHLMC").  All
of the mortgage-backed securities in the portfolio have coupon rates as of
December 31, 1998, ranging from 6.0% to 10.25% with a weighted average yield
of 7.57% for the year ended December 31, 1998.  At December 31, 1998, the
amortized cost of the Association's mortgage-backed securities portfolio
totaled $7.7 million.  The market value of such mortgage-backed securities
totalled $7.8 million at December 31, 1998.  Mortgage-backed securities

                                   13

<PAGE>

<PAGE>

generally increase the quality of the Association's assets by virtue of the
guarantees that back them, are more liquid than individual mortgage loans and
may be used to collateralize borrowing or other obligations of the
Association.  Of the Association's mortgage-backed securities portfolio, $3.9
million are carried at fixed rates and $3.8 million are carried at adjustable
rates as of December 31, 1998.
            
     Investment decisions are reviewed by the Asset/Liability Committee
("ALCO"), which meets monthly and consists of the Association's Chairman of
the Board, Vice Chairman, Chief Executive Officer and three Vice Presidents. 
The ALCO Committee acts within policies established by the Board of Directors. 
At December 31, 1998, the Association's investment and mortgage-backed
securities portfolio totaled $7.8 million and consisted primarily of U.S.
Treasury securities, corporate bonds, municipal bonds and mortgage-backed
securities.  The Association's variable rate mortgage-backed securities are
held as available for sale, while the fixed rate mortgage-backed securities,
U.S. Treasuries, corporate bonds and municipals, are held until maturity.  For
further information concerning the Association's investment and
mortgage-backed securities portfolio, see Note 2 of the Notes to Consolidated
Financial Statements contained in the Annual Report.

Investment Securities Analysis

     The following table sets forth the Association's investment and
mortgage-backed securities portfolio at carrying value at the dates indicated.

<PAGE>
<TABLE>

                                                               At December 31,        
                                   ----------------------------------------------------------------------
                                         1998                      1997                   1996      
                                   ----------------------   ----------------------   --------------------
                                   Book        Percent of   Book        Percent of   Book      Percent of
                                   Value(1)    Portfolio    Value(1)    Portfolio    Value(1)  Portfolio
                                   --------    ---------    --------    ---------    --------  ---------
                                                             (Dollars in thousands)
<S>                                 <C>          <C>         <C>          <C>         <C>        <C>
Available-for-sale:

U.S. government treasury and
  obligations of U.S.
  government agencies.............. $3,944       50.8%       $4,035       37.1%       $3,946     35.1%
State and political subdivision....     --         --            --         --            --       --
Corporate obligations..............     --         --            --         --            --       --
                                    ------                   ------                   ------
Total available-for-sale........... $3,944                   $4,035                   $3,946    
                                    ======                   ======                   ======
Held-to-Maturity:

U.S. government treasury and
  obligations of U.S.
  government agencies.............. $3,822       49.2%       $6,834       62.9%      $ 7,002     62.2%
State and political subdivision....     --         --            --         --           200      1.8
Corporate obligations..............     --         --            --         --           100      0.9
                                    ------      -----       -------      -----       -------    -----     
    
Total held-to-maturity.............  3,822                    6,834                    7,302         
                                    ------      -----       -------      -----       -------    -----
Total.............................. $7,766      100.0%      $10,869      100.0%      $11,248    100.0%
                                    ======      =====       =======      =====       =======    =====
--------------   
(1)  The market value of the Association's investment securities portfolio, including mortgage-backed     
     securities, amounted to $7.8 million, $10.9 million and $11.2 million, at December 31, 1998, 1997
     and 1996, respectively. 

</TABLE>

                                                        14

<PAGE>

<PAGE>

     The following table sets forth the contractual maturities and weighted
average yields of the debt securities including mortgage-backed securities in
the Association's investment securities portfolio at December 31, 1998.

                         Less Than     One to       Five to       Over Ten
                         One Year    Five Years    Ten Years       Years   
                      ------------  ------------  ------------   ------------
                      Amount Yield  Amount Yield  Amount Yield   Amount Yield
                      ------ -----  ------ -----  ------ -----   ------ -----
                                       (Dollars in thousands)

Available-for-sale:

U.S. government
  treasury and
  obligations of 
  U.S. government
  agencies..........     --    --     $29  8.55%    $13  8.55%  $3,902  7.27%

Held-to-Maturity:

U.S. government
  treasury and
  obligations of
  U.S. government
  agencies..........     --    --      --    --      --    --   $3,822  7.86%

Deposit Activities and Other Sources of Funds

     General.  Deposits, loan repayments and FHLB advances are the major
source of the Association's funds for lending and other investment purposes. 
Loan repayments are a relatively stable source of funds, while deposit inflows
and outflows and loan prepayments are significantly influenced by general
interest rates and money market conditions.  Borrowings may be used on a
short-term basis to compensate for reductions in the availability of funds
from other sources.  They may also be used on a longer term basis for general
business purposes. 

     Deposit Accounts.  Deposits are attracted from within the Association's
primary market area through the offering of a broad selection of deposit
instruments, including negotiable order of withdrawal ("NOW") accounts, money
market accounts, regular savings accounts, checking accounts, certificates of
deposit and retirement savings plans.  Deposit account terms vary according to
the minimum balance required, the time periods the funds must remain on
deposit and the interest rate, among other factors.  The Association has
emphasized checking accounts, passbooks and certificates of deposits.  In
determining the terms of its deposit accounts, the Association considers the
rates offered by its competition, profitability to the Association, matching
deposit and loan products and its customer preferences and concerns.  The
Association generally reviews its deposit mix and pricing weekly, and adjusts
it as necessitated by liquidity needs and competition.  Management believes
deposits remained relatively stable, net of interest credited, between the
periods despite withdrawals as depositors sought increased yields on
alternative investments in the marketplace.

                                     15

<PAGE>

<PAGE>

Deposit Balances

     The following table sets forth information concerning the Association's
time deposits and other interest-bearing deposits at December 31, 1998.

                                                                    Percentage
Weighted                                                             of Total
Average                                                              Interest-
Interest                                             Minimum          Bearing
Yield   Term             Category                    Amount  Balance  Deposits
------  ----             --------                    ------  -------  --------
                                                      (Dollars in thousands)
                         Interest-Bearing Deposits
                         -------------------------

5.36%   18 Month         IRA                       $  1,000  $   761    1.36%
5.63    42 Month         IRA                          1,000      580    1.04
3.05    None             Passbook                        50   14,838   26.56
4.10    32 -  44 days    Fixed term and fixed rate    1,000      639    1.14
4.10    45 - 181 days    Fixed term and fixed rate    1,000       --      --
4.97    182- 365 days    Fixed term and fixed rate    1,000    3,074    5.50
5.36    1 year           Fixed term and fixed rate    1,000   19,122   34.23
5.65    2 years          Fixed term and fixed rate    1,000    4,084    7.31
5.66    3 years          Fixed term and fixed rate    1,000    1,056    1.89
6.56    4 years          Fixed term and fixed rate    1,000      911    1.63
6.27    5 years          Fixed term and fixed rate    1,000    4,067    7.28
1.79    None             NOW Accounts                 1,000    4,680    8.38
3.05    None             MMDA                         2,500    2,055    3.68
                                                             -------  ------
                                                                      
                         Total                               $55,867  100.00%
                                                             =======  ======

                                       16

<PAGE>

<PAGE>
<TABLE>
Deposit Flow

    The following table sets forth the balances of savings deposits in the various types of savings
accounts offered by the Association at the dates indicated.

                                                                   At December 31,         
                               --------------------------------------------------------------------------
                                          1998                          1997                       1996
                               --------------------------   ---------------------------   ---------------
                                         Percent                       Percent                    Percent
                                           of    Increase                of    Increase              of
                               Amount    Total  (Decrease)   Amount    Total  (Decrease)   Amount  Total
                               ------    -----  ----------   ------    -----  ----------   ------  -----
                                                                (Dollars in thousands)
<S>                             <C>      <C>      <C>         <C>       <C>     <C>       <C>      <C>  
Noninterest bearing............ $ 3,253    5.5%   $  858      $ 2,395    4.4%   $  810    $ 1,585    3.3%
NOW checking...................   4,680    7.9     1,182        3,498    6.4       882      2,616    5.4
Regular savings accounts.......  14,838   25.1       864       13,974   25.4     1,085     12,889   26.6
Money market deposit...........   2,055    3.5      (165)       2,220    4.0    (1,324)     3,544    7.3
Fixed-rate certificates which
  mature in the year ending
    Within 1 year..............  26,478   44.7     3,487       22,991   41.9     4,702     18,289   37.7
    Within 1-3 years...........   6,068   10.3    (2,537)       8,605   15.7       791      7,814   16.1
Certificates maturing
   thereafter..................   1,748    3.0       521        1,227    2.2      (528)     1,755    3.6
                                -------  -----    ------      -------  -----    ------    -------  -----

     Total..................... $59,120  100.0%   $4,210      $54,910  100.0%   $6,418    $48,492  100.0%
                                =======  =====    ======      =======  =====    ======    =======  =====

NOTE:  IRA accounts are included in certificate balances:  Amounts are $1.1 million, $1.1 million and
       $1.1 million at December 31, 1998, 1997 and 1996, respectively.

</TABLE>

                                                                          17

<PAGE>

<PAGE>

Time Deposits by Rates and Maturities

     The following table sets forth the time deposits in the Association
classified by rates as of the dates included.

                                           At December 31,               
                           ----------------------------------------
                           1998                1997            1996
                           ----                ----            ----
                                           (In thousands)

Below 4.00%............... $    --             $    11         $   472
4.01% - 6.00%.............  31,512              29,446          22,852
6.01% - 8.00%.............   2,780               3,354           4,518
8.01% - 10.00%............       2                  11              15

     The following table sets forth the amount and maturities of time deposits
at December 31, 1998.

                                         Amount Due         
                  -------------------------------------------
                                                                    Percentage
                                                                     of Total
                                                                      Certi-
                  Less Than 1-2      2-3     3-4     After            ficate
                  One Year  Years    Years   Years   4 Years   Total  Accounts
                  --------  -----    -----   -----   -------   -----  --------
                                         (Dollars in thousands)

Below 4.00%......$    --     $   --  $   --  $ --    $ --      $    --      
4.01% - 6.00%.... 24,506      4,323   1,306   599      778      31,512   91.9%
6.01% - 8.00%....  1,970        430       9   194      177       2,780    8.1
8.01% - 10.00%...      2         --      --    --       --           2   0.01
                 --------    ------  ------  ----     ----     -------
     Total.......$26,478     $4,753  $1,315  $793     $955     $34,294
                 =======     ======  ======  ====     ====     =======

     The following table sets forth the savings activities of the Association
for the periods indicated.

                                             Year Ended December 31,     
                                       ---------------------------------
                                       1998           1997          1996
                                       ----           ----          ----
                                                (In thousands)

Beginning balance................... $54,910        $48,492       $46,559
                                     =======        =======       =======
Net increase (decrease)
  before interest credited.......... $ 1,796        $ 4,121       $  (196)
Interest credited...................   2,414          2,297         2,129
                                     -------        -------       -------  
Net increase in savings deposits....   4,210          6,418         1,933
                                     -------        -------       -------
Ending balance...................... $59,120        $54,910       $48,492
                                     =======        =======       =======

     Borrowings.  Savings deposits are the primary source of funds for the
Association's lending and investment activities and for its general business
purposes.  The Association may rely upon advances from the FHLB-New York to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements.  The FHLB-New York has served as one of the Association's
primary borrowing sources.  Advances from the FHLB-New York are typically

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secured by the Association's first mortgage loans.  At December 31, 1998, the
Association had $9.0 million of fixed rate borrowings from the FHLB-New York
at a weighted average rate of 5.38%.  Required principal repayments are as
follows:  $1.0 million in 1999, $1.0 million in 2000, $2.0 million in 2001,
$2.0 million in 2002 and $3.0 million  in 2003.  The Association did not have
any overnight borrowings from the FHLB-New York at December 31, 1998. 

     The FHLB-New York functions as a central reserve bank providing credit
for savings and loan associations and certain other member financial
institutions.  As a member, the Association is required to own capital stock
in the FHLB-New York and is authorized to apply for advances on the security
of such stock and certain of its mortgage loans and other assets (principally
securities which are obligations of,  or guaranteed by, the United States)
provided certain standards related to creditworthiness have been met. 
Advances are made pursuant to several different programs.  Each credit program
has its own interest rate and range of maturities.  Depending on the program,
limitations on the amount of advances are based either on a fixed percentage
of an institution's retained earnings or on the FHLB's assessment of the
institution's creditworthiness.  The FHLB-New York determines specific lines
of credit for each member institution.

     At December 31, 1998, 1997 and 1996, the Association had no short-term
borrowings or securities sold under agreements to repurchase.

Subsidiary Activities

     In January 1994, the Company formed a subsidiary, New Frontier of Albion
("New Frontier"), to sell fixed rate annuities.  In October 1994, New Frontier
was sold to Albion Federal to help facilitate the sale of fixed rate and
variable rate products.  At December 31, 1998, Albion Federal had an equity
investment of $100 in New Frontier. The operations of New Frontier, which are
not material, are included in the Company's consolidated financial statements
appearing in the Annual Report.

                      REGULATION OF ALBION BANC CORP.

General

     The Company is a savings and loan holding company within the meaning of
the Home Owners' Loan Act of 1933 ("HOLA").  As such, the Company is
registered with the OTS and is subject to OTS regulations, examinations,
supervision and reporting requirements.  The Company is also subject to the
information, proxy solicitation, insider trading restrictions, and other
requirements of the Securities Exchange Act of 1934, as amended.

Company Acquisitions

     The HOLA and OTS regulations issued thereunder generally prohibit a
savings and loan holding company, without prior OTS approval, from acquiring
more than 5% of the voting stock of any other savings association or savings
and loan holding company or controlling the assets thereof.  They also
prohibit, among other things, any director or officer of a savings and loan
holding company, or any individual who owns or controls more than 25 percent
of the voting shares of such holding company, from acquiring control of any
savings association not a subsidiary of such savings and loan holding company,
unless the acquisition is approved by the OTS.

Company Activities

     As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions.  If the Company acquires control of
another savings association as a separate subsidiary, it would become a
multiple savings and loan holding company.  There generally are more
restrictions on the activities of a multiple savings and loan holding company
than a unitary savings and loan holding company.  Specifically, if either
federally insured subsidiary savings association fails to meet the QTL test,
the activities of the Company and any of its subsidiaries (other than the
Company or other federally insured subsidiary savings associations) would
thereafter be subject to further restrictions. 

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The HOLA provides that, among other things, no multiple savings and loan
holding company or subsidiary thereof which is not an insured association
shall commence or continue for more than two years after becoming a multiple
savings and loan association holding company or subsidiary thereof, any
business activity other than:  (i) furnishing or performing management
services for a subsidiary insured institution, (ii) conducting an insurance
agency or escrow business, (iii) holding, managing, or liquidating assets
owned by or acquired from a subsidiary insured institution, (iv) holding or
managing properties used or occupied by a subsidiary insured institution, (v)
acting as trustee under deeds of trust, (vi) those activities previously
directly authorized by regulation as of March 5, 1987 to be engaged in by
multiple holding companies or (vii) those activities authorized by the Federal
Reserve Board as permissible for bank holding companies, unless the OTS by
regulation, prohibits or limits such activities for savings and loan holding
companies.  Those activities described in (vii) above also must be approved by
the OTS prior to being engaged in by a multiple holding company.   

Affiliate Restrictions

     The affiliate restrictions contained in Sections 23A and 23B of the
Federal Reserve Act apply to all federally insured savings associations and
any such "affiliate."  A savings and loan holding company, its subsidiaries
and any other company under common control are considered affiliates of the
subsidiary savings association under the HOLA.  Generally, Sections 23A and
23B:  (i) limit the extent to which the insured association or its
subsidiaries may engage in certain covered transactions with an affiliate to
an amount equal to 10% of such institution's capital and surplus, and contain
an aggregate limit on all such transactions with all affiliates to an amount
equal to 20% of such capital and surplus, and (ii) require that all such
transactions be on terms substantially the same, or at least as favorable to
the institution or subsidiary, as those provided to a non-affiliate.  The term
"Covered transaction" includes the making of loans, purchase of assets,
issuance of a guarantee and similar other types of transactions.  Also, a
savings association may not make any loan to an affiliate unless the affiliate
is engaged only in activities permissible for bank holding companies.  Only
the Federal Reserve Board may grant exemptions from the restrictions of
Sections 23A and 23B.  The OTS, however, may impose more stringent
restrictions on savings associations for reasons of safety and soundness.  

Qualified Thrift Lender Test

     The HOLA requires that any  savings and loan holding company that
controls a savings association that fails the qualified thrift lender test, as
explained under "Regulation of Albion Federal -- Qualified Thrift Lender
Test," must, within one year after the date on which the association ceases to
be a qualified thrift lender, register as and be deemed a bank holding company
subject to all applicable laws and regulations.

                        REGULATION OF ALBION FEDERAL

General

     The Association is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer
of its deposits.  The activities of federal savings institutions are governed
by the HOLA and, in certain respects, the Federal Deposit Insurance Act
("FDIA"), and the regulations issued by the OTS and the FDIC to implement
these statutes.  These laws and regulations delineate the nature and extent of
the activities in which federal savings associations may engage.  Lending
activities and other investments must comply with various statutory and
regulatory capital requirements.  In addition, the Association's relationship
with its depositors and borrowers is also regulated to a great extent,
especially in such matters as the ownership of deposit accounts and the form
and content of the Association's mortgage documents.  The Association must
file reports with the OTS and the FDIC concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other financial
institutions.  There are periodic examinations by the OTS and the FDIC to
review the Association's compliance with various regulatory requirements.  The
regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment 

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of adequate loan loss reserves for regulatory purposes.  Any change in such
policies, whether by the OTS, the FDIC or Congress, could have a material
adverse impact on the Company, the Association and their operations.  

Federal Regulation of Savings Associations

     Office of Thrift Supervision.  The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the
Treasury.  The OTS generally possesses the supervisory and regulatory duties
and responsibilities formerly vested in the Federal Home Loan Bank Board. 
Among other functions, the OTS issues and enforces regulations affecting
federally insured savings associations and regularly examines these
institutions. 

     Federal Home Loan Bank System.  The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB").  The
designated duties of the FHFB are to  supervise the FHLBs, to ensure that the
FHLBs carry out their housing finance mission, to ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets, and to
ensure that the FHLBs operate in a safe and sound manner. 

     The Association, as a member of the FHLB-New York, is required to acquire
and hold shares of capital stock in the FHLB-New York in an amount equal to
the greater of (i) 1.0% of the aggregate outstanding principal amount of
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or (ii) 1/20 of its advances (i.e., borrowings)
from the FHLB-New York.  The Association is in compliance with this
requirement with an investment in FHLB-New York stock of $528,800 at December
31, 1998.

     Among other benefits, the FHLB provides a central credit facility
primarily for member institutions.  It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System.  It
makes advances to members in accordance with policies and procedures
established by the FHFB and the Board of Directors of the FHLB-New York.

     Federal Deposit Insurance Corporation.  The FDIC is an independent
federal agency established originally to insure the deposits, up to prescribed
statutory limits, of federally insured banks and to preserve the safety and
soundness of the banking industry.  The FDIC maintains two separate insurance
funds: the Bank Insurance Fund ("BIF") and the SAIF.  The Association's
deposit accounts are insured by the FDIC under the SAIF to the maximum extent
permitted by law.  As insurer of the Association's deposits, the FDIC has
examination, supervisory and enforcement authority over all savings
associations.

     Under applicable regulations, the FDIC assigns an institution to one of
three capital categories based on the institution's financial information, as
of the reporting period ending seven months before the assessment period.  The
capital categories are: (i) well-capitalized, (ii) adequately capitalized, or
(iii) undercapitalized.  An institution is also placed in one of three
supervisory subcategories within each capital group.  The supervisory subgroup
to which an institution is assigned is based on a supervisory evaluation
provided to the FDIC by the institution's primary federal regulator and
information that the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds.  An
institution's assessment rate depends on the capital category and supervisory
category to which it is assigned with the most well-capitalized, healthy
institutions receiving the lowest rates.  

     On September 30, 1996, the Deposit Insurance Funds Act ("DIF Act") was
enacted, which, among other things, imposed a special one-time assessment on
SAIF member institutions, including the Association, to recapitalize the SAIF. 
As a result of the DIF Act and the special one-time assessment, the FDIC
reduced the assessment schedule for SAIF members, effective January 1, 1997,
to a range of 0% to 0.27%, with most institutions, including the Association,
paying 0%. This assessment schedule is the same as that for the BIF, which
reached its designated reserve ratio in 1995.  In addition, since January 1,
1997, SAIF members are charged an assessment of 0.065% of SAIF-assessable
deposits for the purpose of paying interest on the obligations issued by the
Financing Corporation ("FICO") in the 1980s to help fund the thrift industry
cleanup.  BIF-assessable deposits are charged an assessment to help pay
interest on the FICO bonds 

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at a rate of approximately .013%.  Full pro rata sharing of the FICO payments
between BIF and SAIF members will not occur until the earlier of December 31,
1999, or the date the BIF and SAIF are merged.

     The FDIC is authorized to raise the assessment rates in certain
circumstances.  The FDIC has exercised this authority several times in the
past and may raise insurance premiums in the future.  If such action is taken
by the FDIC, it could have an adverse effect on the earnings of the
Association.

     Under the FDIA, insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is
in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or
the OTS.  Management of the Association does not know of any practice,
condition or violation that might lead to termination of deposit insurance.

     Liquidity Requirements.  Under OTS regulations, each savings institution
is required to maintain an average daily balance of liquid assets (cash,
certain time deposits and savings accounts, bankers' acceptances, and
specified U.S. Government, state or federal agency obligations,
mortgage-backed securities and certain other investments) equal to a monthly
average of not less than a specified percentage (currently 4.0%) of its net
withdrawable accounts plus short-term borrowings.  Monetary penalties may be
imposed for failure to meet liquidity requirements. 

     Prompt Corrective Action.  The FDIA requires each federal banking agency
is required to implement a system of prompt corrective action for institutions
that it regulates.  The federal banking agencies have promulgated
substantially similar regulations to implement this system of prompt
corrective action.  Under the regulations, an institution shall be deemed to
be (i) "well capitalized" if it has a total risk-based capital ratio of 10.0%
or more, has a Tier I risk-based capital ratio of 6.0% or more, has a leverage
ratio of 5.0% or more and is not subject to specified requirements to meet and
maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total risk-based capital ratio of 8.0% or more, a
Tier I risk-based capital ratio of 4.0% or more and a leverage ratio of 4.0%
or more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized;" (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that
is less than 4.0% or a leverage ratio that is less than 4.0% (3.0% under
certain circumstances); (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a leverage ratio that is less than
3.0%; and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%.

     The FDIA also provides that a federal banking agency may, after notice
and an opportunity for a hearing, reclassify a well capitalized institution as
adequately capitalized and may require an adequately capitalized institution
or an undercapitalized institution to comply with supervisory actions as if it
were in the next lower category if the institution is in an unsafe or unsound
condition or is engaging in an unsafe or unsound practice.  The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.

     An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized.  Immediately upon becoming
undercapitalized, an institution shall become subject to various mandatory and
discretionary restrictions on its operations.

     At December 31, 1998, the Association was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.

     Standards for Safety and Soundness.  The federal banking regulatory
agencies have prescribed, by regulation, standards for all insured depository
institutions relating to: (i) internal controls, information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii)
earnings; and (viii) compensation, fees and benefits ("Guidelines").  The
Guidelines set forth the safety

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and soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired.  If the OTS determines that the Association fails to meet any
standard prescribed by the Guidelines, the agency may require the Association
to submit to the agency an acceptable plan to achieve compliance with the
standard.  Management is aware of no conditions relating to these safety and
soundness standards which would require submission of a plan of compliance.

     Qualified Thrift Lender Test.  All savings associations, including Albion
Federal, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations.  This test requires a savings
association to have at least 65% of its portfolio asset (as defined by
regulation) in qualified thrift investments on a monthly average for nine out
of every 12 months on a rolling basis.  As an alternative, the savings
association may maintain 60% of its assets in those assets specified in
Section 7701(a)(19) of the Internal Revenue Code ("Code").  Under either test,
such assets primarily consist of residential housing related loans and
investments.  At December 31, 1998, Albion Federal met the test and its QTL
percentage was 97.2%.

     Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL.  If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF.   If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state.  In addition, the
association is immediately ineligible to receive any new FHLB borrowings and
is subject to national bank limits for payment of dividends.  If such
association has not requalified or converted to a national bank within three
years after the failure, it must divest of all investments and cease all
activities not permissible for a national bank.  In addition, it must repay
promptly any outstanding FHLB borrowings, which may result in prepayment
penalties.  If any association that fails the QTL test is controlled by a
holding company, then within one year after the failure, the holding company
must register as a bank holding company and become subject to all restrictions
on bank holding companies. 

     Capital Requirements.  Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital.  Savings associations must meet all of the standards in
order to comply with the capital requirements.  The Company is not subject to
any minimum capital requirements.

     OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets).  Core capital
is defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities.  In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion
of certain assets from capital and to account appropriately for the
investments in and assets of both includable and nonincludable subsidiaries. 
Institutions that fail to meet the core capital requirement would be required
to file with the OTS a capital plan that details the steps they will take to
reach compliance.  In addition, the OTS' prompt corrective action regulation
provides that a savings institution that has a leverage ratio of less than 4%
(3% for institutions receiving the highest CAMEL examination rating) will be
deemed to be "undercapitalized" and may be subject to certain restrictions. 
See "-- Federal Regulation of Savings Associations -- Prompt Corrective
Action."

     As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks.  The OTS has proposed that only those savings associations
rated a composite one (the highest rating) under the CAMEL rating system for
savings associations will be permitted to operate at or near the regulatory
minimum leverage ratio of 3%.  All other savings associations will be required
to maintain a minimum leverage ratio of 4% to 5%.  The OTS will assess each
individual savings association through the 

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supervisory process on a case-by-case basis to determine the applicable
requirement.  No assurance can be given as to the final form of any such
regulation, the date of its effectiveness or the requirement applicable to the
Association.

     Savings associations also must maintain "tangible capital" not less than
1.5% of the Association's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights.
 
     Each savings institution must maintain total risk-based capital equal to
at least 8% of risk-weighted assets.  Total risk-based capital consists of the
sum of core and supplementary capital, provided that supplementary capital
cannot exceed core capital, as previously defined.  Supplementary capital
includes (i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt and mandatory convertible
subordinated debt, (ii) maturing capital instruments such as subordinated
debt, intermediate-term preferred stock and mandatory convertible subordinated
debt, subject to an amortization schedule, and (iii) general valuation loan
and lease loss allowances up to 1.25% of risk-weighted assets.

     The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets.  Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets.  The categories range from 0% for cash and securities
that are backed by the full faith and credit of the U.S. Government to 100%
for repossessed assets or assets more than 90 days past due.  Qualifying
residential mortgage loans (including multi-family mortgage loans) are
assigned a 50% risk weight.  Consumer, commercial, home equity and residential
construction loans are assigned a 100% risk weight, as are nonqualifying
residential mortgage loans and that portion of land loans and nonresidential
construction loans that do not exceed an 80% loan-to-value ratio.  The book
value of assets in each category is multiplied by the weighing factor (from 0%
to 100%) assigned to that category.  These products are then totalled to
arrive at total risk-weighted assets.  Off-balance sheet items are included in
risk-weighted assets by converting them to an approximate balance sheet
"credit equivalent amount" based on a conversion schedule.  These credit
equivalent amounts are then assigned to risk categories in the same manner as
balance sheet assets and included as risk-weighted assets.

     The OTS has incorporated an interest rate risk component into its
regulatory capital rule.  Under the rule, avings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements.  A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of
the association's assets, as calculated in accordance with guidelines set
forth by the OTS.  A savings association whose measured interest rate risk
exposure exceeds 2% must deduct an interest rate risk component in calculating
its total capital under the risk-based capital rule.  The interest rate risk
component is an amount equal to one-half of the difference between the
institution's measured interest rate risk and 2%, multiplied by the estimated
economic value of the association's assets.  That dollar amount is deducted
from an association's total capital in calculating compliance with its
risk-based capital requirement.  Under the rule, there is a two quarter lag
between the reporting date of an institution's financial data and the
effective date for the new capital requirement based on that data.  A savings
association with assets of less than $300 million and risk-based capital
ratios in excess of 12% is not subject to the interest rate risk component,
unless the OTS determines otherwise.  The rule also provides that the Director
of the OTS may waive or defer an association's interest rate risk component on
a case-by-case basis.  Under certain circumstances, a savings association may
request an adjustment to its interest rate risk component if it believes that
the OTS-calculated interest rate risk component overstates its interest rate
risk exposure.  In addition, certain "well-capitalized" institutions may
obtain authorization to use their own interest rate risk model to calculate
their interest rate risk component in lieu of the OTS-calculated amount.  The
OTS has postponed the date that the component will first be deducted from an
institution's total capital.

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     At December 31, 1998, Albion Federal's core capital of approximately $5.8
million, or 7.6% of adjusted total assets, was $2.7 million in excess of the
OTS requirement of $3.0 million, or 3% of adjusted total assets.  As of such
date, the Association's tangible capital of approximately $5.7 million, or
7.6% of adjusted total assets, was $4.6 million in excess of the OTS
requirement of $1.1 million, or 1.5% of adjusted total assets.  Finally, at
December 31, 1998, the Association had risk-based capital of approximately
$6.0 million or15.7% of total risk-weighted assets, which was $3.0 million in
excess of the OTS risk-based capital requirement of $3.0 million or 8% of
risk-weighted assets.
    
     Limitations on Capital Distributions.  OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers.  In addition, OTS regulations require the Association to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends.  The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.

     A Tier 1 savings association has capital in excess of its fully phased-in
capital requirement (both before and after the proposed capital distribution). 
A Tier 1 savings association may make (without application but upon prior
notice to, and no objection made by, the OTS) capital distributions during a
calendar year up to 100% of its net income to date during the calendar year
plus one-half its surplus capital ratio (i.e., the amount of capital in excess
of its fully phased-in requirement) at the beginning of the calendar year or
the amount authorized for a Tier 2 association.  Capital distributions in
excess of such amount require advance notice to the OTS.  A Tier 2 savings
association has capital equal to or in excess of its minimum capital
requirement but below its fully phased-in capital requirement (both before and
after the proposed capital distribution).  Such an association may make
(without application) capital distributions up to an amount equal to 75% of
its net income during the previous four quarters depending on how close the
association is to meeting its fully phased-in capital requirement.  Capital
distributions exceeding this amount require prior OTS approval.  A Tier 3
savings association has capital below the minimum capital requirement (either
before or after the proposed capital distribution).  A Tier 3 savings
association may not make any capital distributions without prior approval from
the OTS.

     The Association currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of
the calendar year less any distributions previously paid during the year.

     Loans to One Borrower.  Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower. 
Generally, this limit is 15% of the Association's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such
loan is secured by readily-marketable collateral, which is defined to include
certain financial instruments and bullion.  The OTS by regulation has amended
the loans to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower
in additional amounts under circumstances limited essentially to loans to
develop or complete residential housing units.  At December 31, 1998, the
Association's limit on loans to one borrower was $870,000.  At December 31,
1998, the Association's largest single loan to one borrower was $438,171,
which was performing according to its original terms. 

     Activities of Associations and Their Subsidiaries.  When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide
the information each agency may, by regulation, require.  Savings associations
also must conduct the activities of subsidiaries in accordance with existing
regulations and orders.

     The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is

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inconsistent with sound banking practices or with the purposes of the FDIA. 
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary.  The
FDIC also may determine by regulation or order that any specific activity
poses a serious threat to the SAIF.  If so, it may require that no SAIF member
engage in that activity directly.

     Transactions with Affiliates.  Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank.  A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA.  Generally, Sections 23A and 23B:  (i) limit the extent to
which the insured association or its subsidiaries may engage in certain
covered transactions with an affiliate to an amount equal to 10% of such
institution's capital and surplus and place an aggregate limit on all such
transactions with affiliates to an amount equal to 20% of such capital and
surplus, and (ii) require that all such transactions be on terms substantially
the same, or at least as favorable to the institution or subsidiary, as those
provided to a non-affiliate.  The term "covered transaction" includes the
making of loans, the purchase of assets, the issuance of a guaranty and
similar types of transactions.  Any loan or extension of credit by the
Association to an affiliate must be secured by collateral in accordance with
Section 23A.

     Three additional rules apply to savings associations:  (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank
holding companies; (ii) a savings association may not purchase or invest in
securities issued by an affiliate (other than securities of a subsidiary); and
(iii) the OTS may, for reasons of safety and soundness, impose more stringent
restrictions on savings associations but may not exempt transactions from or
otherwise abridge Section 23A or 23B.  Exemptions from Section 23A or 23B may
be granted only by the Federal Reserve Board, as is currently the case with
respect to all FDIC-insured banks.  The Association has not been significantly
affected by the rules regarding transactions with affiliates.

     The Association's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such
persons, is governed by Sections 22(g) and 22(h) of the Federal Reserve Act,
and Regulation O thereunder.  Among other things, these regulations require
that such loans be made on terms and conditions substantially the same as
those offered to unaffiliated individuals and not involve more than the normal
risk of repayment.  Regulation O also places individual and aggregate limits
on the amount of loans the Association may make to such persons based, in
part, on the Association's capital position, and requires certain board
approval procedures to be followed.  The OTS regulations, with certain minor
variances, apply Regulation O to savings institutions. 

     Community Reinvestment Act.  Under the federal Community Reinvestment Act
("CRA"), all federally-insured financial institutions have a continuing and
affirmative obligation consistent with safe and sound operations to help meet
all the credit needs of its delineated community.  The CRA does not establish
specific lending requirements or programs nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to meet all the credit needs of its delineated community.  The CRA
requires the federal banking agencies, in connection with regulatory
examinations, to assess an institution's record of meeting the credit needs of
its delineated community and to take such record into account in evaluating
regulatory applications to establish a new branch office that will accept
deposits, relocate an existing office, or merge or consolidate with, or
acquire the assets or assume the liabilities of, a federally regulated
financial institution, among others.  The CRA requires public disclosure of an
institution's CRA rating.  The Association received a "satisfactory" rating as
a result of its latest evaluation.

     Regulatory and Criminal Enforcement Provisions.  The OTS has primary
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on
an insured institution.  Formal enforcement action may range from the issuance
of a capital directive or cease and desist order to removal of officers or
directors, receivership, conservatorship or termination of deposit insurance. 
Civil penalties cover a wide range of violations and can amount to $27,500 per
day, or $1.1 million per day in especially egregious cases.  Under the FDIA,
the FDIC has the authority to recommend to the Director of the OTS 

                                    26

<PAGE>

<PAGE>

that enforcement action be taken with respect to a particular savings
institution.  If action is not taken by the Director, the FDIC has authority
to take such action under certain circumstances.  Federal law also establishes
criminal penalties for certain violations.

                                 TAXATION

Federal Taxation

     General.  The Company and the Association report their income on a fiscal
year basis using the accrual method of accounting and are subject to federal
income taxation in the same manner as other corporations with some exceptions,
including particularly the Association's reserve for bad debts discussed
below.  The following discussion of tax matters is intended only as a summary
and does not purport to be a comprehensive description of the tax rules
applicable to the Association or the Company.

     Bad Debt Reserve.  Historically, savings institutions such as the
Association which met certain definitional tests primarily related to their
assets and the nature of their business ("qualifying thrift") were permitted
to establish a reserve for bad debts and to make annual additions thereto,
which may have been deducted in arriving at their taxable income.  The
Association's deductions with respect to "qualifying real property loans,"
which are generally loans secured by certain interest in real property, were
computed using an amount based on the Association's actual loss experience, or
a percentage equal to 8% of the Association's taxable income, computed with
certain modifications and reduced by the amount of any permitted additions to
the non-qualifying reserve.  Due to the Association's loss experience, the
Association generally recognized a bad debt deduction equal to 8% of taxable
income.

     The thrift bad debt rules were revised by Congress in 1996.  The new
rules eliminated the 8% of taxable income method for deducting additions to
the tax bad debt reserves for all thrifts for tax years beginning after
December 31, 1995.  These rules also required that all institutions recapture
all or a portion of their bad debt reserves added since the base year (last
taxable year beginning before January 1, 1988).  The Association has no
post-1987 reserves subject to recapture.  For taxable years beginning after
December 31, 1995, the Association's bad debt deduction will be determined
under the experience method using a formula based on actual bad debt
experience over a period of years.  The unrecaptured base year reserves will
not be subject to recapture as long as the institution continues to carry on
the business of banking.  In addition, the balance of the pre-1988 bad debt
reserves continue to be subject to provisions of present law referred to below
that require recapture in the case of certain excess distributions to
shareholders.

     Distributions.  To the extent that the Association makes "nondividend
distributions" to the Company, such distributions will be considered to result
in distributions from the balance of its bad debt reserve as of December 31,
1987 (or a lesser amount if the Association's loan portfolio decreased since
December 31, 1987) and then from the supplemental reserve for losses on loans
("Excess Distributions"), and an amount based on the Excess Distributions will
be included in the Association's taxable income.  Nondividend distributions
include distributions in excess of the Association's current and accumulated
earnings and profits, distributions in redemption of stock and distributions
in partial or complete liquidation.  However, dividends paid out of the
Association's current or accumulated earnings and profits, as calculated for
federal income tax purposes, will not be considered to result in a
distribution from the Association's bad debt reserve.  The amount of
additional taxable income created from an Excess Distribution is an amount
that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution.  Thus, if, after the Conversion, the Association
makes a "nondividend distribution," then approximately one and one-half times
the Excess Distribution would be includable in gross income for federal income
tax purposes, assuming a 34% corporate income tax rate (exclusive of state and
local taxes).  See "Regulation of Albion Federal" for limits on the payment of
dividends by the Association.  The Association does not intend to pay
dividends that would result in a recapture of any portion of its tax bad debt
reserve.

     Corporate Alternative Minimum Tax.  The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%.  The excess of the tax bad
debt reserve deduction using the percentage of taxable income

                                 27

<PAGE>

<PAGE>

method over the deduction that would have been allowable under the experience
method is treated as a preference item for purposes of computing the AMTI.  In
addition, only 90% of AMTI can be offset by net operating loss carryovers. 
AMTI is increased by an amount equal to 75% of the amount by which the
Association's adjusted current earnings exceeds its AMTI (determined without
regard to this preference and prior to reduction for net operating losses). 
For taxable years beginning after December 31, 1986, and before January 1,
1996, an environmental tax of 0.12% of the excess of AMTI (with certain
modification) over $2.0 million is imposed on corporations, including the
Association, whether or not an Alternative Minimum Tax is paid.

     Dividends-Received Deduction.  The Company may exclude from its income
100% of dividends received from the Association as a member of the same
affiliated group of corporations.  The corporate dividends-received deduction
is generally 70% in the case of dividends received from unaffiliated
corporations with which the Company and the Association will not file a
consolidated tax return, except that if the Company or the Association owns
more than 20% of the stock of a corporation distributing a dividend, then 80%
of any dividends received may be deducted.

State Taxation  

     New York has adopted the Code, with certain modifications, as it relates
to savings and loan associations, effective for taxable years beginning after
December 31, 1984.  The Association is subject to New York income tax at the
rate of 9%.  This rate of tax is imposed on savings and loan associations in
lieu of the general state business corporation income tax.

Audits

     The Company's income tax returns have not been audited by federal or
state authorities within the last five years. For additional information
regarding income taxes, see Note 12 of the Notes to Consolidated Financial
Statements.

Competition

     The Association has been, and continues to be, a community-oriented
savings institution offering a variety of financial resources to meet the
needs in the communities it serves.  The Association's deposit gathering area
is concentrated in Orleans County and Western Monroe counties, New York.  The
Association's lending base primarily covers the same area; however, the
Association periodically originates or purchases multi-family residential
loans in other parts of New York.  The Association's offices are located in
Albion and Brockport.

     The Association was the largest of the eight bank and thrift offices
located in Orleans County, New York, based on its total assets of $75.6
million at December 31, 1998.  Based on data at June 30, 1998, the Marine
Midland branch and the Fleet Bank branch had approximately $50.3 million and
$18.1 million in deposits, respectively.  The Association faces strong
competition in the attraction of savings deposits and in the origination of
loans.  Its most direct competition for savings deposits and loans has
historically come from other thrift institutions and from commercial banks
located in its primary market area, some with a state-wide or regional
presence.  Additionally, the Association faces significant competition from
mortgage bankers, mortgage brokers, finance companies, insurance companies and
other financial entities in lending.  The Association also competes with
securities firms, credit unions, money market funds and mutual funds in
raising deposits.

     Management considers the Association's reputation for financial strength
and customer service as its major competitive advantage in attracting and
retaining customers in its market area.  The Association also believes it
benefits from its community bank orientation as well as its relatively high
core deposit base.  

                                       28

<PAGE>

<PAGE>

Personnel

     As of December 31, 1998, the Association had 26 full-time employees and
six part-time employees.  The employees are not represented by a collective
bargaining unit.  The Association believes its relationship with its employees
to be satisfactory.

Executive Officers

     The following table sets forth certain information with respect to the
executive officers of the Company, each of whom holds the same positions with
the Company and each of whom holds the same positions with the Association.

Name                         Age(1)    Position
----                         ------    --------

Jeffrey S. Rheinwald         50        President and Chief Executive Officer
John S. Kettle               52        Senior Vice President and Treasurer
Mark F. Reed                 40        Vice President and Chief Financial
                                       Officer
-----------------
(1)  As of December 31, 1998.

     The principal occupation of each executive officer of the Association is
set forth below.  Unless otherwise noted, all officers have held the position
described below for at least the past five years and reside in Albion, New
York.

     JEFFREY S. RHEINWALD has been employed in various capacities at Albion
Federal for over 25 years and currently holds the position of President and
Chief Executive Officer of the Association and the Company.  

     JOHN S. KETTLE is Senior Vice President and Treasurer of the Company and
the Association.  He has been employed by Albion Federal since 1995.  Prior to
joining the Association, Mr. Kettle was employed as an examiner with the
FHLB-New York from 1972-1975, from 1975-1993 he was employed by Anchor Savings
Bank and from 1993-1994 he was employed by First Federal Savings and Loan
Association of Rochester.

     MARK F. REED is Vice President and Chief Financial Officer of the
Association and the Company, a position he has held with the Association since
1990.  Prior to joining Albion Federal, Mr. Reed was employed as an examiner
for the OTS from 1989 through 1990; from 1988 through 1989 he was employed by
the FHLB-New York and from 1987 through 1988 was an examiner for the Office of
the Comptroller of the Currency.  

Item 2.  Description of Property
--------------------------------

     The following table sets forth information concerning the Association's
offices at December 31, 1998.

                                                               Net Book Value
                        Year    Square  Owned/   Total         at December 31,
Name of Office          Opened  Footage Leased   Cost                1998
--------------          ------  ------- ------   ----          ---------------

Main Office             1976    8,522   Owned    $1,653,537    $  627,917
48 North Main Street
Albion, NY  14411

Loan Department         1993    3,314   Owned       281,457       218,472
34 North Main Street
Albion, NY 14411

               (table continued on following page)

                                  29

<PAGE>

<PAGE>
                                                               Net Book Value
                   Year    Square    Owned/      Total         at December 31,
Name of Office     Opened  Footage   Leased      Cost               1998 
--------------     ------  -------   ------      -----         ---------------

Branch Office      1994    3,276     Owned      $1,568,661     $1,326,579
Brockport, NY 

     The net book value of the Association's investment in all office
properties and equipment less accumulated depreciation totaled $2.2 million at
December 31, 1998.  See Note 6 of the Notes to the Consolidated Financial
Statements for further information on office properties and equipment.

Item 3.  Legal Proceedings
--------------------------

     From time to time, the Association is a party to legal proceedings in the
ordinary course of business wherein it enforces its security interest in
mortgage loans it has made.  Other than such proceedings, the Association is
not involved in any legal proceedings of a material nature at this time.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1998.

                             PART II

Item 5.  Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------

     The information contained in the section captioned "Market for Albion
Banc Corp.'s Common Stock and Related Stockholder Matters" in the Annual
Report is incorporated herein by reference.

Item 6.  Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------
                                                      
     The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Annual Report is incorporated herein by reference.

Item 7.  Financial Statements
-----------------------------

     Independent Auditors Report*
     Consolidated Statements of Financial Condition, December 31, 1998, 1997
        and 1996*
     Consolidated Statement of Operations For the Years Ended December 31,
        1998, 1997 and 1996*
     Consolidated Statement of Changes in Shareholders' Equity For the Years
        Ended December 31, 1998, 1997 and 1996*
     Consolidated Statements of Cash Flows For the Years Ended December 31,
        1998, 1997 and 1996*
     Notes to Consolidated Financial Statements*

     * Contained in the Annual Report to Stockholders filed as an exhibit
     hereto and incorporated herein  by reference.  All schedules have been
     omitted as the required information is either inapplicable or contained
     in the Consolidated Financial Statements or related Notes contained in
     the Annual Report to Stockholders.



                                     30

<PAGE>

<PAGE>

Item 8.  Changes in and Disagreements With Accountants on
         Accounting and Financial Disclosure                           
---------------------------------------------------------

     No disagreement with the Company's independent accountants on accounting
and financial disclosure has occurred during the past 24 months.

                             PART III

Item 9.  Directors, Executive Officers, Promoters and Control
         Persons; Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------------------------

     The information contained under the section captioned "Proposal I --
Election of Directors" in the Proxy Statement is incorporated herein by
reference.  For information concerning the executive officers of the
Association, see "Item I -- Business -- Executive Officers."  The information
contained under the section captioned "Compliance With Section 16(a) of the
Exchange Act" in the Proxy Statement is incorporated herein by reference.

Item 10.  Executive Compensation
--------------------------------

     The information contained under the section captioned "Proposal I --
Election of Directors" in the Proxy Statement is incorporated herein by
reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

     (a)    Security Ownership of Certain Beneficial Owners

            Information required by this item is incorporated herein by
            reference to the section captioned "Voting Securities and
            Security Ownership of Certain Beneficial Owners and Management"
            of the Proxy Statement.

     (b)    Security Ownership of Management

            Information required by this item is incorporated herein by
            reference to the sections captioned "Voting Securities and
            Security Ownership of Certain Beneficial Owners and Management"
            and "Proposal I - Election of Directors" of the Proxy Statement.

     (c)    Changes in Control

            The Company is not aware of any arrangements, including any
            pledge by any person of securities of the Company, the operation
            of which may at a subsequent date result in a change in control
            of the Company.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

     The information required by this item is incorporated herein by        
reference to the section captioned "Proposal -- Election of Directors        
-- Certain Transactions."

                                      31

<PAGE>
<PAGE>

Item 13.  Exhibits List and Reports on Form 8-K
-----------------------------------------------

     (a)    Exhibits

     3.1    Certificate of Incorporation of Albion Banc Corp.(1)
     3.2    Bylaws of Albion Banc Corp.(1)
     10.1   Employment Agreement with Jeffrey S. Rheinwald(2)
     10.2   Severance Agreement for Mark F. Reed(2)
     10.3   Severance Agreement for Marie A. Rice(2)
     10.4   Employee Stock Ownership Plan(1)
     10.5   The Albion Banc Corp. 1993 Stock Option and Incentive Plan(3)
     10.6   The Albion Federal Savings and Loan Association Management
            Recognition Plans(3)
     13     Annual Report to Stockholders
     21     Subsidiaries of the Registrant
     23     Consent of PricewaterhouseCoopers LLP
     27     Financial Data Schedule  

     (b)    Report on Form 8-K

            No Forms 8-K were filed during the quarter ended December 31,
            1998.
-----------------
(1)    Incorporated by reference to the Company's Registration Statement on
       Form S-1 File No. 33-60230.
(2)    Incorporated by reference to the Company's Annual Report on Form 10-KSB
       for the year ended December 31, 1995.
(3)    Incorporated by reference to the Company's 1994 Annual Meeting Proxy
       Statement dated March 25, 1994.

                                         32

<PAGE>

<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 report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                        ALBION BANC CORP.

Date:  March 17, 1999                   By: /s/ Jeffrey S. Rheinwald           
                                            ________________________
                                            Jeffrey S. Rheinwald
                                            President and Chief Executive
                                            Officer
                                            (Duly Authorized Representative)

     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.

By: /s/ Jeffrey S. Rheinwald                             March 17, 1999
    ---------------------------------
    Jeffrey S. Rheinwald
    President and Chief Executive Officer
    (Principal Executive Officer) 

By: /s/ Mark F. Reed                                     March 17, 1999
    ---------------------------------
    Mark F. Reed
    (Principal Financial and Accounting Officer)

By: /s/ James H. Keeler                                  March 17, 1999
    ---------------------------------
    James H. Keeler
    Chairman of the Board

By: /s/ Richard A. Pilon                                 March 17, 1999
    ---------------------------------
    Richard A. Pilon
    Director

By: /s/ Dolores L. Giarrizzo                             March 17, 1999
    ---------------------------------
    Dolores L. Giarrizzo
    Director

By: /s/ Robert R. Brown II                               March 17, 1999
    ---------------------------------
    Robert R. Brown II
    Director

By:                                                      March    , 1999
    ---------------------------------                          ---
    Harold P. Kludt
    Director

By:                                                      March    , 1999
    ---------------------------------                          --- 
    Chriss M. Andrews
    Director

By: /s/ Gregory L. Speer                                 March 17, 1999


    ---------------------------------
    Gregory L. Speer
    Director

<PAGE>

<PAGE>

                           Exhibit 13
                                
                  Annual Report to Stockholders

<PAGE>

<PAGE>

                                   ALBION 
                                 [LOGO] BANC
                                        CORPORATION

                                    1998
                                    ---- 
                                   ANNUAL
                                   REPORT

<PAGE>


<PAGE>
 
Business of the Corporation

     Albion Banc Corp. ("Corporation"), a Delaware corporation, was
incorporated on March 23, 1993 for the purpose of becoming the holding company
for Albion Federal Savings and Loan Association ("Albion Federal" or the
"Association") upon Albion Federal's conversion from a federal mutual to a
federal stock savings and loan association ("Conversion").  The Corporation
and Albion Federal shall be referred to collectively as the "Company".  The
Conversion was completed on July 23, 1993.  At December 31, 1998, the
Corporation had total assets of $76.5 million, total deposits of $59.1 million
and stockholders' equity of $6.4 million.  The Corporation has not engaged in
any significant activity other than holding the stock of Albion Federal. 
Accordingly, the information set forth in this report, including financial
statements and related data, relates primarily to Albion Federal.

     Albion Federal was organized in 1934 as a federally chartered mutual
savings and loan association and has been a member of the Federal Home Loan
Bank ("FHLB") System since 1935.  The Association is regulated by the Office
of Thrift Supervision ("OTS") and its deposits are insured up to applicable
limits under the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC").

                            TABLE OF CONTENTS

                                                                   Page
                                                                   ----

        Letter to Shareholders...................................    1
        Selected Consolidated Financial Data.....................    2
        Management's Discussion and Analysis.....................    4
        Independent Accountant's Report..........................   17
        Consolidated Financial Statements........................   18
        Notes to Consolidated Financial Statements...............   22
        Common Stock Information.................................   39
        Directors and Officers...................................   40
        Corporate Information/Offices............................   41


<PAGE>


<PAGE>

Dear Shareholders:

It is my pleasure as President and CEO of Albion Banc Corp. to present the
Annual Report of your Company's affairs for the year 1998.  1998 was a year
when the Holding Company and its subsidiaries, Albion Federal Savings and Loan
Association and New Frontier of Albion Corp., were able to leverage into
profitability their investment in delivery systems, services and people.
 
I think it would be fitting, therefore, to begin by stating that the Company
reported a $362,471 after tax profit for the year 1998, compared to a net
profit of $351,201 for the year 1997.  This translates into earnings per share
of $.47 on a diluted basis.  A contributing factor in our earnings improvement
was the continued growth in our Brockport branch.  During 1998, deposits at
the branch grew by $3.8 million to a total of $22.7 million.  This represents
a 20% increase at the branch from the end of 1997.  This provided the
liquidity to support operations and fund our lending activities.  The added
significance to this growth is that it was achieved through the acquisition of
lower cost transaction accounts.  Transaction accounts now comprise 45% of the
branch's total deposits.  As an institution, deposits grew $4.2 million, or
7.7%, to a total of $59.1 million.

Assets grew as a result of lending activity funded by our deposit growth. 
During the year 1998, Albion Federal Savings and Loan Association originated
$17.1 million in first mortgage loans and $2.6 million in consumer loans.  The
result was an increase in loans of $5.9 million, or an 11.2% increase from
December 31, 1997.  The effect of the lending activity was an increase of 6.7%
in our total assets from year-end 1997 to $76.5 million at December 31, 1998.

I want to mention that we were also successful in controlling nonperforming
assets in 1998.  At the end of 1997, we had $276,300 or .47% in nonperforming
assets.  I am pleased to report that at the end of 1998, we had reduced that
amount to $262,000 or .44% of total loans.

There were also some very notable events relating to our stock.  1998 marked
the first year that we paid a cash dividend on a quarterly basis.  In December
1997, the Company announced a three for one split of its common stock in order
to maintain the Company's listing on the Nasdaq Small Cap Market.  The split
was effective February 5, 1998.

Although we are pleased with our 1998 results, as stewards of your investment,
we are continually striving to maximize your confidence in the Company through
enhancement of profits and franchise value.  On behalf of the Directors,
Officers and employees of Albion Banc Corp., I would like to express our
gratitude for your continuing support of our endeavors.

Yours Very Truly,


/s/Jeffrey S. Rheinwald
Jeffrey S. Rheinwald
President
                                       
                                    1

<PAGE>


<PAGE>

     SELECTED CONSOLIDATED FINANCIAL CONDITION, OPERATING AND OTHER DATA

     Albion Banc Corp. (the "Company"), a  Delaware corporation, is the
holding company for Albion Federal Savings and Loan Association (the
"Association") which is headquartered in Albion,  New York.  The Company is
engaged primarily in the business of directing, planning and coordinating the
business activities of the Association. This information is qualified in its
entirety by reference to the detailed information and Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Report.
     
                                               At December 31,
                                   ---------------------------------------- 
                                   1998     1997     1996      1995    1994
                                   ----     ----     ----      ----    ----
FINANCIAL CONDITION DATA:                          (In thousands)

Total assets...................  $76,470  $71,719   $64,585  $56,992  $55,334
Loans, net ....................   58,929   53,017    47,839   44,049   47,010
Mortgage-backed securities ....    7,765    9,867     8,075    4,138    3,085 
Cash and due from banks, 
 interest-bearing deposits and
 investment securities ........    6,551    5,391     5,299    5,677    3,240  
Deposits ......................   59,120   54,910    48,492   46,559   37,782
Federal Home Loan Bank 
 advances .....................    9,000    9,000     9,000    3,000   10,295
Shareholders' equity ..........    6,423    6,155     5,864    6,089    5,898

                                             Year Ended December 31,
                                   ---------------------------------------- 
                                   1998     1997     1996      1995    1994
                                   ----     ----     ----      ----    ----
                                    
OPERATING DATA:                                   (In thousands)

Interest income ................  $5,347   $5,184   $4,446    $4,398  $3,852
Interest expense ...............   3,007    2,880    2,377     2,482   1,799
                                 -------  ------- --------   -------  ------
Net interest income ............   2,340    2,304    2,069     1,916   2,053
Provision for loan losses ......      65       35      140        36     132
                                 -------  ------- --------   -------  ------
Net interest income after
  provision for loan losses ....   2,275    2,269    1,929     1,880   1,921

Noninterest income .............     368      390      260       197     146
Noninterest expense ............   2,073    2,081    2,231     1,817   1,550
                                 -------  ------- --------   -------  ------
Income ( loss) before income
  taxes.........................     570      578      (42)      260     517
Provision (benefit) for income
  taxes.........................     208      227      (38)       79     165
                                 -------  ------- --------   -------  ------
Net income (loss)............... $   362  $   351 $     (4)  $   181  $  352
                                 =======  ======  ========   =======  ======

                                         2

<PAGE>

<PAGE>

                                               At December 31,
                                   ---------------------------------------- 
                                   1998     1997     1996      1995    1994
                                   ----     ----     ----      ----    ----

OTHER DATA:

Number of:
  Real estate loans serviced....  1,090     1,019      998       931   1,015
  Deposit accounts ............. 10,155     9,315    7,320     6,509   4,938
  Offices ......................      2         2        2         2       2

Per share:
  Book value....................  $8.53     $8.20    $7.82     $7.79   $7.54
  Dividends paid ...............    .14       .16      .10       .10     .10
  Basic earnings (loss).........    .49       .48     (.01)      .24     .47
  Diluted earnings (loss).......    .47       .46     (.01)      .24     .47


                                            Year Ended December 31, 
                                   ---------------------------------------- 
                                   1998     1997     1996      1995    1994
                                   ----     ----     ----      ----    ----    
KEY OPERATING RATIOS:

Return on average assets (net 
  income divided by average
  assets).......................     .5%      .5%      .0%       .3%     .7%

Return on average equity (net
  income divided by average
  equity )......................    5.8%     5.8%     (.1)%     3.0%    6.1%

Average equity to average
  assets .......................    8.5%     8.7%    10.1%     10.2%   10.8%

Interest rate spread (difference
  between average yield on 
  interest-earning assets and 
  average cost of interest-
  bearing liabilities) .........    2.9%     3.2%     3.2%      2.9%    3.6%

Net interest margin (net interest
  income as a percentage of average
  interest-earning assets) .....    3.4%     3.6%     3.7%      3.4%    4.0%

Noninterest expense to average
  assets .......................    2.8%     3.0%     3.7%      3.3%    2.9%

Average interest-earning assets
  to average interest-bearing
  liabilities ..................  110.2%   108.7%   110.6%    111.1%  112.5%

Allowance for loan losses to total
  loans at end of period .......     .5%      .5%      .6%       .6%     .5%

Ratio of nonperforming assets to
  total assets .................     .3%      .4%      .6%       .6%     .4%

                                           3


<PAGE>

<PAGE>

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

General

     Management's discussion and analysis of financial condition and results
of operations is intended to assist in understanding the financial condition
of the Company.  The information contained in this section should be read in
conjunction with the Consolidated Financial Statements, the accompanying Notes
to Consolidated Financial Statements and the other sections contained in this
Report.

Operating Strategy

     The primary goal of management is to increase the Company's profitability
and enhance its capital, while minimizing risk. The operating results of the
Company depend primarily on its net interest income, which is the difference
between interest income on interest-earning assets, primarily loans,
investments, and mortgage-backed securities, and interest expense on
interest-bearing liabilities, primarily deposits and borrowings.  The
Company's net income also is affected by the establishment of provisions for
loan losses and the level of its other income, including fees on loans sold,
deposit service charges, the results of foreclosed real estate activities,
gains or losses from the sale of loans, as well as its other expenses and
income tax provisions.  The Company's results of operations are also
significantly affected by local economic and competitive conditions, primarily
in the Company's market area of Orleans, western Monroe and Genesee counties
of New York state.  Changes in market interest rates, government legislation
and policies concerning monetary and fiscal affairs, housing and financial
institutions and the attendant actions of the regulatory authorities all have
an impact on the Company's operations.  It is management's strategy to
strengthen the Company's presence within its primary market area.

Financial Condition

     General.  Total assets increased by $4.8 million, or 6.6%, from $71.7
million at December 31, 1997 to $76.5 million at December 31, 1998.  This
increase was due primarily to increases of $5.9 million in net loans and $1.8
million in Federal funds sold.  The increase in loans and Federal funds sold
was funded primarily by a $4.2 million increase in deposits.

     Cash and Cash Equivalents.  Cash and due from banks increased by
$341,455, or 22.2%, from $1,539,966 at December 31, 1997 to $1,881,421 at
December 31, 1998.  Federal funds sold increased from $2,850,000 at December
31, 1997 to $4,670,000 at December 31, 1998.

     Investment Securities Available For Sale.  The Company's investment
securities available for sale decreased $91,084, or 2.3%, from $4.0 million at
December 31, 1997 to $3.9 million at December 31, 1998. This decrease was the
result of normal amortization  and paydowns of securities in the portfolio
offset by the purchase of  a $1.5 million government agency security.

     Investment Securities Held to Maturity.  Investment securities held to
maturity decreased by $3.0 million or 44.1%, from $6.8 million at December 31,
1997 to $3.8 million at December 31, 1998.  This decrease was the result of
normal maturities and calls of securities in the held to maturity portfolio
which totaled $3.0 million.

                                     4

<PAGE>

<PAGE>

     Net Loans.  The balance of net loans increased $5.9 million, or 11.2%,
from $53.0 million at December 31, 1997 to $58.9 million at December 31, 1998. 
The increase in net loans was the result of increased one-to-four family
mortgage loan originations and consumer loan originations, primarily home
equity loans.  This resulted from an increase in demand for this type of
lending, due to favorable interest rates, the active refinance market and a
strong emphasis on promoting  home equity products. 

     Premises and Equipment.  Premises and equipment decreased $177,997, or
7.6%, from $2.35 million at December 31, 1997 to $2.17 million at December 31,
1998.  This decrease is attributable to the normal depreciation and
amortization of premises and equipment.

     Deposits and Borrowings.  Deposits increased $4.2 million, or 7.7%, from
$54.9 million at December 31, 1997 to $59.1 million at December 31, 1998. 
This was attributable primarily to growth at the Association's branch in
Brockport, NY.   This increase in deposits was used primarily to fund loan
demand. Advances from the Federal Home Loan Bank of New York (FHLB-NY) and
other borrowings declined from $9.2 million at December 31, 1997 to $9.1
million at December 31, 1998. 

     Shareholders' Equity.  Shareholders' equity increased $268,644, or 4.4%,
from $6.15 million at December 31, 1997 to $6.42 million at December 31, 1998. 
This increase is due primarily to earnings for the year and the resulting
increase in equity, offset by cash dividends on common stock of $100,490.  The
Company's equity as a percentage of total assets at December 31, 1998 was 8.4%
and exceeds all regulatory requirements.

Results of Operations

Fiscal Year Ended December 31, 1998 Compared to December 31, 1997

     Net Income.  The Company reported net income of $362,471 for the year
ended December 31, 1998 as compared to net income of $351,201 for the year
ended December 31, 1997.  This increase was primarily the result of increased
net interest income and decreased noninterest expenses.

     Net Interest Income.  Net interest income increased by $36,337, or 1.6%,
from $2.30 million for the year ended December 31, 1997 to $2.34 million for
the year ended December 31, 1998.  Total interest income increased $162,900,
or 3.1%, during the period.  Interest and fees on loans increased $360,385, or
8.6%, during this period due to a higher average outstanding balance in the
portfolio.  Interest and dividends on investments decreased $197,485, or
19.6%, from $1,006,631 during the year ended December 31, 1997 to $809,146
during the year ended December 31, 1998.  This decrease can be attributed to a
decrease in the average outstanding balance in the portfolio and lower yields. 

     Total interest expense increased $126,563, or 4.4%, primarily due to an
increase in the average balance outstanding of deposits.  The average
outstanding balance of deposits increased $3.2 million, or 6.4%, from $50.2
million for the year ended December 31, 1997 to $53.4 million for the year
ended December 31, 1998.  This increase in the average outstanding balance was
offset by a decrease in the weighted average rate paid on deposits.  The
weighted average rate paid on deposits decreased from 4.57% for the year ended
December 31, 1997 to 4.52% for the year ended December 31, 1998, as a result
of lower interest rates being offered on certificates of deposit.  Interest on
advances from the FHLB-NY increased $17,039 or 3.1%, primarily due to an
increase in the average balance outstanding from $9.2 million in 1997 to $9.4
million in 1998.

                                      5

<PAGE>

<PAGE>

     Provision for Loan Losses.  The Company's provision for loan losses for
the year ended December 31, 1998 was $65,023, a $29,609 increase compared to
the same period in 1997.  Management charges earnings for an amount necessary
to maintain the allowance for possible loan losses at a level considered
adequate to absorb estimated losses in the loan portfolio.  The level of the
allowance is based on management's evaluation of individual loans, past loan
loss experience, the assessment of prevailing and anticipated economic
conditions and other relevant factors.  The allowance for loan losses of the
Company at December 31, 1998 was $267,000, or .45% of total loans, compared to
$276,300, or .52% of total loans at December 31, 1997.  The increase in the
provision between the periods was due primarily to the deterioration in credit
quality of three one-to-four family properties that totaled $96,903. 
 
     Noninterest Income.  Noninterest income for the year ended December 31,
1998 was $368,035 compared with $389,589 for the year ended December 31, 1997. 
However, included in December 31, 1997 was $59,203 of income related to
profits on the sale of real estate owned.  Other noninterest income increased
from $330,386 at December 31, 1997 to $351,237 at December 31, 1998.  This
increase was due primarily to increased fee income from transaction accounts
and fee income from New Frontier of Albion Corp.

     Noninterest Expense.  Noninterest expense decreased $7,831, or 0.4%, from
$2.08 million for the year ended December 31, 1997, to $2.07 million for the
year ended December 31, 1998.  This decrease in noninterest expense resulted
primarily from decreased other operating expenses of $52,185 or 14.2%.  In
1997, other operating expenses included a nonrecurring charge of $41,642 for
expenses related to the conversion to our in-house data processing system. 
Also decreased were FDIC premiums of $12,680, or 27.2%, due to reduced
premiums being charged.  These decreases were partially offset by an increase
in compensation and employee benefits of $15,804, or 1.6%, from $985,588 for
the year ended 1997 to $1.0 million for the year ended 1998, primarily due to
inflationary increases in salaries and benefits.  Occupancy expenses increased
$32,297, or 8.3%, from $390,136 for the year ended December 31, 1997 to
$422,433 for the year ended December 31, 1998 primarily due to the operation
of the Association's in-house data processing system and related supplies. 
Data processing fees increased $12,873, or 6.8% from $188,350 for the year
ended December 31, 1997 to $201,223 for the year ended December 31, 1998,
primarily due to increases in telecommunication costs and supplies. 

     Income Taxes.  The provision for income taxes decreased to $208,000 for
the year ended December 31, 1998 from $226,265 for the year ended December 31,
1997 primarily as a result of increased mortgage tax credits due to the
increased mortgage loan originations.  The effective tax rate for 1998 was
36.5%.

Fiscal Year Ended December 31, 1997 Compared to December 31, 1996

     Net Income.  The Company reported net income of $351,201 for the year
ended December 31, 1997 as compared to a net loss of $4,352 for the year ended
December 31, 1996.  This increase was primarily the result of increased net
interest income and noninterest income, and decreased noninterest expenses.

     Net Interest Income.  Net interest income increased by $235,543, or
11.4%, from $2.1 million for the year ended December 31, 1996 to $2.3 million
for the year ended December 31, 1997.  Total interest income increased
$738,258, or 16.6%, during the period.  Interest and dividends on investments
increased $461,768, or 84.7%, from $544,863 during the year ended December 31,
1996 to $1.0 million during the year ended December 31, 1997.  This increase
can be attributed to an increase in the average outstanding balance in the
portfolio and higher yields.  Interest and fees on loans increased $276,490,
or 7.1%, during this period due to a higher average outstanding balance and
higher yields.

                                     6

<PAGE>


<PAGE>

     Total interest expense increased $502,715, or 21.1%, primarily due to an
increase in the average balance outstanding of deposits and FHLB-NY advances. 
The average outstanding balance of deposits increased $4.2 million, or 9.2%,
from $46.0 million for the year ended December 31, 1996 to $50.2 million for
the year ended December 31, 1997.  This increase in the average outstanding
balance was offset by a decrease in the weighted average rate paid on
deposits.  The weighted average rate paid on deposits decreased from 4.63% for
the year ended December 31, 1996 to 4.57% for the year ended December 31,
1997, as a result of lower interest rates being offered on certificates of
deposit.  Interest on advances from the FHLB-NY increased $334,664 or 134.7%,
primarily due to an increase in the average balance outstanding from $4.4
million in 1996 to $9.2 million in 1997 and an increase in the weighted
average rate paid from 5.69% in 1996 to 6.23% in 1997.

     Provision for Loan Losses.  The Association's provision for loan losses
for the year ended December 31, 1997 was $35,414, a $104,825 decrease compared
to the same period in 1996.  Management charges earnings for an amount
necessary to maintain the allowance for possible loan losses at a level
considered adequate to absorb potential losses in the loan portfolio.  The
level of the allowance is based on management's evaluation of individual
loans, past loan loss experience, the assessment of prevailing conditions and
anticipated economic conditions and other relevant factors.  The allowance for
possible loan losses of the Association at December 31, 1997 was $276,300, or
 .52% of total loans, compared to $305,900, or .64% of total loans at December
31, 1996.  The decrease in the provision between the periods was due primarily
to improvement in the overall credit quality of Association's loan portfolio
and the resumed payments on three participation mortgage loan pools that had
been delinquent.

     Noninterest Income.  Noninterest income for the year ended December 31,
1997 was $389,589 compared with $260,131 for the year ended December 31, 1996. 
This increase was attributable primarily to increased fee income from
depository transaction accounts, fee income from New Frontier of Albion Corp.
and the sale of real estate owned, which resulted in a net gain of $59,203.

     Noninterest Expense.  Noninterest expense decreased $150,041, or 6.7%,
from $2.2 million for the year ended December 31, 1996, to $2.1 million for
the year ended December 31, 1997.  This decrease in noninterest expense
resulted primarily from a reduction in FDIC premiums of $69,988, or 60.0%, due
to reduced premiums being charged as a result of the prior year
recapitalization of the SAIF and the one-time charge of $274,921 associated
with that recapitalization in the prior year.   Data processing fees decreased
$12,803, or 6.4%, as a result of the conversion from a service bureau to our
in-house data processing system.  These decreases were partially offset by an
increase in compensation and employee benefits of $86,843, or 9.7%, from
$898,745 for the year ended 1996 to $985,588 for the year ended 1997,
primarily due to inflationary increases in salaries and benefits.  Occupancy
expenses increased $82,250, or 26.7%, from $307,886 for the year ended
December 31, 1996 to $390,136 for the year ended December 31, 1997 primarily
due to the operation of the Association's in-house data processing system and
related supplies.  Other operating expenses increased $37,222, or 11.3%, from
$330,165 to $367,387 during the year ended December 31, 1997.  This increase
was primarily the result of a one-time charge of $41,642 related to the
Company's data processing conversion. 

     Income Taxes.  The provision (benefit) for income taxes increased to
$226,265 for the year ended December 31, 1997 from $(38,049) for the year
ended December 31, 1996 primarily as a result of the increase in income for
the year as compared to the loss for 1996.  The effective tax rate for 1997
was 39.2%.

                                7

<PAGE>

<PAGE>

Yields Earned and Rates Paid

     The earnings of the Company depend largely on the spread between the
yield on interest-earning assets (primarily loans, mortgage-backed securities
and investments) and the cost of interest-bearing liabilities (primarily
deposit accounts and borrowings), as well as the relative size of the
Association's interest-earning assets and interest-bearing liability
portfolios.

     The following tables set forth, for the periods indicated, information
relating to average balances of consolidated assets and liabilities.  These
tables reflect the average yields on assets and the average costs of
liabilities for the periods indicated (derived by dividing income or expense
by the average balance of assets or liabilities, respectively), as well as the
"net interest margin" (which reflects the effect of the net earning balance)
for the periods shown.

                         (Tables begin on next page)

                                     8

<PAGE>

<PAGE>
<TABLE>
                                                         Year Ended December 31,
                                         -----------------------------------------------------------
                                                    1998                             1997
                                         ---------------------------     ---------------------------
                                                   Interest                        Interest
                                         Average      and     Yield/     Average      and     Yield/
                                         Balance   Dividends   Cost      Balance   Dividends   Cost
                                         -------   ---------   ----      -------   ---------   ----
                                                         (Dollars in thousands)
<S>                                      <C>        <C>       <C>        <C>         <C>       <C> 

Interest-earning assets:
 Real estate loans ..................... $48,396    $3,794     7.84%     $42,717     $3,532    8.27%
 Consumer loans.........................   7,866       744     9.46        6,956        646    9.29
                                         -------    ------     ----      -------     ------    ----
   Total loans..........................  56,262     4,538     8.07       49,673      4,178    8.41

 Mortgage-backed securities.............   9,007       574     6.37        8,614        637    7.39
 Investment securities..................     222        13     5.86        2,502        146    5.84
 Other interest-earning assets..........   4,013       222     5.53        4,009        223    5.56
                                         -------    ------     ----      -------     ------    ----
   Total interest-earning assets........  69,504     5,347     7.69       64,798      5,184    8.00
                                         -------    ------     ----      -------     ------    ----
Noninterest-earning assets:
 Office properties and equipment, net...   2,262                           2,223
 Foreclosed real estate, net............      --                              -- 
 Other noninterest-earning assets.......   2,268                           1,990
                                         -------                         -------
   Total assets ........................ $74,034                         $69,011
                                         =======                         =======                         

Interest-bearing liabilities:
 Passbook accounts...................... $14,839    $  450     3.03%     $13,724     $  421    3.07%
 NOW accounts...........................   4,045        70     1.73        3,258         57    1.75
 Money market accounts..................   2,241        68     3.03        2,622         80    3.05
 Certificates of deposit................  32,336     1,826     5.65       30,632      1,739    5.68
                                         -------    ------     ----      -------     ------    ----
   Total deposits.......................  53,461     2,414     4.52       50,236      2,297    4.57

 Other interest-bearing liabilities.....   9,588       593     6.18        9,358        583    6.23
                                         -------    ------     ----      -------     ------    ----
   Total interest-bearing liabilities...  63,049     3,007     4.77       59,594      2,880    4.83
                                         -------    ------     ----      -------     ------    ----
Noninterest-bearing liabilities:
 Noninterest-bearing deposits...........   3,557                             767             
 Other liabilities......................   1,139                           2,641                    
                                         -------                         -------
   Total liabilities....................  67,745                          62,659
           
 Shareholders' equity...................   6,289                           6,009
                                         -------                         -------
   Total liabilities and
     shareholders' equity............... $74,034                         $69,011
                                         =======                         =======

Net interest income.....................            $2,341                            $2,304
                                                    ======                            ======
Interest rate spread....................                       2.92%                           3.17%

Contribution of interest-free funds.....                        .45%                            .39%
                                                               ----                            ----
Net interest margin on interest-
  earning assets........................                       3.37%                           3.56%

Ratio of average interest-earning
 assets to average interest-bearing
 liabilities............................                     110.24%                         108.73%
</TABLE>

                                                                             9

<PAGE>

<PAGE>
                                                                               
  
                                             Year Ended December 31,  
                                           ---------------------------     
                                                       1996                    
                                           --------------------------- 
                                                     Interest            
                                           Average     and       Yield/
                                           Balance   Dividends     Cost
                                           -------   ---------    ----- 
                                             (Dollars in thousands)
Interest-earning assets:
 Real estate loans ......................  $41,867    $3,416       8.16%
 Consumer loans..........................    5,276       485       9.20
                                           -------    ------      -----
   Total loans...........................   47,143     3,901       8.27

 Mortgage-backed securities..............    4,137       282       6.82
 Investment securities ..................    3,089       183       5.92
 Other interest-earning deposits ........    1,339        80       5.97
                                           -------    ------      -----
   Total interest-earning assets.........   55,708     4,446       7.98
                                           -------    ------      -----
Noninterest-earning assets:
 Office properties and equipment, net....    2,170
 Foreclosed real estate, net.............      129
 Other noninterest-earning assets .......    1,328
                                           -------
   Total assets .........................  $59,335
                                           =======
Interest-bearing liabilities:
 Passbook accounts.......................  $12,512    $  383       3.06%
 NOW accounts ...........................    2,667        47       1.76
 Money market accounts...................    2,349        72       3.07
 Certificates of deposit.................   28,484     1,627       5.71
                                           -------    ------      -----
   Total deposits........................   46,012     2,129       4.72

 Other interest-bearing liabilities......    4,362       248       5.69
                                           -------    ------      -----
   Total interest-bearing liabilities....   50,374     2,377       4.72
                                           -------    ------      -----
Noninterest-bearing liabilities:
 Noninterest-bearing deposits............      796
 Other liabilities.......................    2,189
                                           -------
   Total liabilities.....................   53,359

 Shareholders' equity....................    5,976
                                           -------
   Total liabilities and
     shareholders' equity................  $59,335
                                           =======
Net interest income......................             $2,069        
                                                      ======
Interest rate spread.....................                          3.26%       
     
Contribution of interest-free funds......                           .45%
                                                                   ----
Net interest margin on interest-
 earning assets..........................                          3.71%

Ratio of average interest-earning 
 assets to average interest-bearing
 liabilities.............................                        110.59%  
                        
                                       10

<PAGE>

<PAGE>

Yields Earned and Rates Paid

     The following table sets forth for the periods and at the dates
indicated, the average yields earned on the Company's assets, the average
interest rates paid on the Company's liabilities, together with the net yield
on interest-earning assets.

                                           Years Ended December 31,
                                          --------------------------
                                          1998      1997        1996
                                          ----      ----        ----

Average yield on loan
  portfolio ..........................     8.1%      8.4%        8.3%

Average yield on mortgage-backed
  securities .........................     6.4%      7.4%        6.8%

Average yield on investment
  portfolio ..........................     5.9%      5.8%        5.9%

Average yield on all
  interest-earning assets ............     7.7%      8.0%        8.0%

Average cost of deposits .............     4.5%      4.6%        4.6%

Average cost of Federal Home
  Loan Bank advances and
  other borrowings ...................     6.2%      6.2%        5.7%

Average cost of all
  interest-bearing liabilities .......     4.8%      4.8%        4.7%

Interest rate spread (spread between
  average yield on all interest-
  earning assets and average cost of
  all interest-bearing liabilities) ..     2.9%      3.2%        3.3%

Net interest margin (net interest
  income as a percentage of
  average interest-earning assets) ...     3.4%      3.6%        3.7%

                                      11

<PAGE>

<PAGE>

Liquidity and Capital Resources

     The Company's primary sources of funds are deposits and proceeds from
principal and interest payments on loans, mortgage-backed securities and
investment securities, sale of fixed rate mortgage loans and FHLB-NY advances. 
While maturities and scheduled amortization of loans and mortgage-backed
securities are a predictable source of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.

     The primary investing activity of the Company is the origination of
mortgage loans.  During the three years ended December 31, 1998, 1997 and
1996, the Company's origination of mortgage loans were $17.1 million, $9.0
million and $9.5 million, respectively.   The volume in mortgage loan
originations during 1998, 1997 and 1996 was primarily the result of an
increase in the demand for this type of lending, due to favorable interest
rates and the active refinance market.  Purchases of mortgage-backed
securities totaled $1.5 million, $3.0 million and $5.0 million for the years
ending December 31, 1998, 1997 and 1996, respectively. Other investing
activities included the purchase of investment securities, which totaled $0
during the year ended December 31, 1998, $2.6 million during the year ended
December 31, 1997 and $2.1 million for the year ended December 31, 1996. 
These activities were funded primarily by deposits, principal repayments on
loans and mortgage-backed securities and maturities of investment securities.

     The net cash provided by financing activities for the year ended December
31, 1998 totaled $4.1  million.  This resulted primarily from a net increase
in deposits of $4.2 million.

     The Company must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit
withdrawals, satisfy financial commitments and take advantage of investment
opportunities.  The Company's sources of funds include deposits, principal and
interest payments from loans and mortgage-backed securities, sale of fixed
rate loans, earnings on investments and FHLB-NY borrowings. During 1998, 1997
and 1996, the Company used its sources of funds primarily to fund loan
commitments, purchase mortgage-backed securities, pay maturing savings
certificates and deposit withdrawals. At December 31, 1998, the Company had
approved loan commitments totaling $1.2 million, including $.7 million of
undisbursed loans in process.

     At December 31, 1998, certificates of deposit amounted to $34.3 million,
or 58.0%, of the Company's total deposits, including $26.5 million that are
scheduled to mature by December 31, 1999. Historically, the Company has been
able to retain a significant share of its deposits as they mature.  Also, the
opening of Albion Federal's Brockport branch has enhanced the Company's
ability to attract deposits. Deposits at that location totaled $22.7 million
at December 31, 1998.   Management of the Company believes it has adequate
resources to meet all liquidity needs, fund all loan commitments by savings
deposits, FHLB-NY advances and sale of mortgage loans and that it can adjust
the offering rates of savings certificates to retain deposits in changing
interest rate environments. 

     The OTS requires a savings institution to maintain an average daily
balance of liquid assets (cash and eligible investments) equal to at least
4.0% of the average daily balance of its net withdrawable deposits and
short-term borrowings.  The Association's average liquidity ratios were 23%,
12% and 9% during the years ended December 31, 1998, 1997 and 1996,
respectively.  The Association's actual liquidity ratio at December 31, 1998
was 24%.  The Association consistently maintains liquidity levels in excess of
regulatory requirements, and believes this is an appropriate strategy for
proper asset and liability management.  The Company does not utilize any
off-balance sheet derivative instruments.

     The Association is required to maintain specific amounts of capital
pursuant to the OTS regulations.  As of December 31, 1997, the Association was
in compliance with all the regulatory capital requirements that were effective
as of such date, with tangible, core and risk-based capital ratios of 7.6%,
7.6% and 15.7%,

                                    12

<PAGE>

<PAGE>

respectively. These ratios exceed the minimum capital ratios as required by
federal regulations.

Market Risk

     One of the Company's principal financial objectives is to achieve
long-term profitability while managing its exposure to fluctuation in interest
rates.  The principal element in achieving this objective has been to increase
the interest rate sensitivity of the Company's assets by originating loans
with interest rates subject to periodic repricing to market conditions and
purchasing adjustable rate mortgage-backed securities. Management has also
offered higher yields on deposits with extended maturities and has lengthened
the average life of its FHLB advances to assist in matching the rate
sensitivity of its liabilities.

     An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period.  If the Company's
assets mature or reprice more quickly or to a greater extent than its
liabilities, the institution's net portfolio value and net interest income
would tend to increase during periods of rising interest rates but decrease
during periods of declining interest rates.  If the Company's assets mature or
reprice more slowly or to a lesser extent than its liabilities, the Company's
net portfolio value and net interest income would tend to decrease during
periods of rising interest rates but increase during periods of falling
interest rates.

     The Company's Board of Directors has formulated an Interest Rate Risk
Management policy designed to promote long-term profitability while managing
interest rate risk.  The Board of Directors has established and
Asset/Liability Committee that consists primarily of the management team of
the institution.  This Committee meets periodically and reports to the Board
of Directors on a monthly basis concerning asset/liability policies,
strategies and the Company's current interest rate risk position.  The
Committee's first priority is to structure and price the institution's assets
and liabilities to maintain an acceptable interest rate spread while reducing
the net effects of change in interest rates.

     Management's principal strategy in managing the Company's interest rate
risk has been to manage the Company's portfolio of investment securities and
mortgage-backed securities so that they mature on a basis that approximates as
closely as possible the estimated maturities of the Company's liabilities.  In
addition, the Company maintains short and intermediate term assets in the
portfolio while selling longer-term assets in excess of the level needed to
meet growth targets.  The Company does not engage in off-balance sheet hedging
activities and has had no trading activity.

     In addition to shortening the average repricing of its assets, the
Company has sought to lengthen the average maturity of its liabilities by
adopting a tiered pricing program for its certificates of deposit, which
provides higher rates of interest on its longer term certificates in order to
encourage depositors to invest in certificates with longer maturities and by
taking down longer maturity FHLB advances.

                                    13

<PAGE>


<PAGE>

     The Company measures its interest rate risk (IRR) in terms of the
Company's Net Portfolio Value (NPV) sensitivity to changes in interest rates.
NPV is the difference between incoming and outgoing discounted cash flows from
assets, liabilities and off balance sheet contracts. The Company measures the
change to the NPV as a result of a hypothetical 200 basis point (bp) change in
market interest rates.
 
     Management reviews the IRR measurements on a quarterly basis. In addition
to monitoring selected measures on NPV, management also monitors effects on
net interest income resulting from increases or decreases in rates. This
measure is used in conjunction with NPV measures to identify excessive
interest rate risk. The following table presents the Company's NPV at December
31, 1998, as calculated by the OTS. 
 
                        At December 31, 1998
-------------------------------------------------------------------------
   Change in           Net Portfolio Value     
Interest Rates        (Dollars in thousands)     NPV as % of PV of Assets
-------------- --------------------------------  ------------------------
(Basis Points) $ Amount   $ Change     % Change   NPV Ratio    BP Change
-------------- --------   --------     --------   ---------    ---------
   +400 bp       3,878      -3,558       - 48       5.37%        - 421
   +300 bp       4,999      -2,437       - 33       6.78%        - 280
   +200 bp       6,060      -1,376       - 19       8.05%        - 153
   +100 bp       6,932      -  504       -  7       9.05%        -  53
      0          7,436                              9.58%
   -100 bp       7,606         170       +  2       9.71%        +  13
   -200 bp       7,701         265       +  4       9.75%        +  17
   -300 bp       7,978         542       +  7      10.00%        +  42
   -400 bp       8,177         741       + 10      11.15%        +  57

     In the above table, the first column on the left presents the basis point
(BP) increments of yield curve shifts. The second column presents the overall
dollar amount of NPV at each basis point increment. The third and fourth
columns present the Company's actual position in dollar change and percentage
change in NPV at each basis point increment. The remaining columns present the
Company's percentage change and basis point change in its NPV as a percentage
of portfolio value (PV) of assets. The model is a static simulation assessing
cash flows from the Company's current balance sheet position. No management
reaction to rate changes is projected. The model measures the economic value
of assets and liabilities taking into consideration effective duration,
imbedded options of mortgage assets, and annual and lifetime caps on rate
adjustments. 

     Certain shortcomings are inherent in the method of analysis presented in
the computation of NPV. Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates.

     The Company's Board of Directors is responsible for reviewing the
Company's assets and liability policies. The Board meets monthly to review
interest rate risk and trends, as well as liquidity and capital ratios and
requirements. The Company's management is responsible for administering the
policies and determinations of the Board of Directors with respect to the
Company's asset and liability goals and strategies. 

                                     14

<PAGE>

<PAGE>
           

Year 2000

     The year 2000 problem (Y2K), which is common to most companies, concerns
the inability of information systems, primarily computer software programs, to
properly recognize and process date sensitive information as the year 2000
approaches. The Y2K issue affects the entire banking industry because of it's
reliance on computers and other equipment that use computer chips and may have
significant effects on banking customers, bank regulators and the general
economy.

     In 1997, management of the Company established a Y2K Plan to prevent or
mitigate adverse effects of the Y2K issue on the Company and its customers. 
Goals of the Y2K Plan include: identifying risks, testing data processing and
other systems and equipment used by the Company, informing customers of Y2K
issues and risks, establishing a contingency plan for operating if Y2K issues
cause important systems or equipment to fail, implementing changes necessary
to achieve Y2K compliance and verifying that these changes are effective. The
Board of Directors reviews progress under the plan each quarter.
 
     Management designed the Y2K Plan to comply with the requirements for Y2K
efforts established by the OTS, the primary federal regulator of the Company. 
The OTS has performed Y2K examinations of the Company's Y2K Plan and the
Company's progress in implementing the plan. Federal regulations prevent the
Company from disclosing the results of Y2K examinations by banking regulators.
The examinations do not represent approval or certification of a Company's Y2K
plans or efforts.

     The Company continues to implement the Y2K Plan.  The Company has met its
Y2K goals to date and believes that it will continue to meet the goals of the
Y2K Plan.  As of December 31, 1998, the Company had completed an assessment of
its systems to identify the systems that could be affected by the Y2K issue,
had implemented its customer awareness program, had begun development of the
Y2K contingency plan and was in the process of testing and implementing
necessary changes in hardware and software.  The Y2K contingency plan calls
for the Company to manually process bank transactions and to use other data
processing methods in the event that Y2K effort of the Company and its data
service providers are not successful.  Delays in processing banking
transactions would result if the Company were required to use manual
processing or other methods instead of its normal computer processes.  These
delays could disrupt the normal business activities of the Company and its
customers.  The Company must assure that the computer systems it uses to
process transactions are Y2K ready in order to avoid these disruptions.

     All of the Company's applications used in operations are purchased from
outside vendors.  These vendors are responsible for maintenance of their
systems and modifications to become year 2000 compliant.  In June 1997, the
Company converted its data processing to an in-house client-server system,
which is reported to be year 2000 compliant.  The supplier of the software has
performed extensive testing and has assured the Company that it is year 2000
compliant.  At the time of the data processing conversion, the majority of the
Company's computer hardware was upgraded to meet the new system requirements
and meet year 2000 compliance.  The Company and the supplier are in the
process of testing hardware and software and will continue to do so into the
year 2000.  The Company's plan includes obtaining certification from third
parties and testing all of the impacted applications.

     At this time, the Company believes that the cost of resolving Y2K issues
will not be material to the Company's business, operations, liquidity, capital
resources or financial condition, based on information developed to date and
communications from data processing suppliers.  The Company estimates that its
total cash outlays in connection with Y2K compliance will be approximately
$20,000, excluding costs of Company employees involved in Y2K compliance
activities.  As of December 31, 1998, the Company had expensed approximately
$8,000 towards Y2K compliance.  To the extent that costs are incurred related
to the year 2000 problem, they will be expensed.

                                    15

<PAGE>

<PAGE>

     Although the Company has completed an assessment of Y2K effects on its
current commercial lending and other customers, the actual effects on
individual, corporate and governmental customers of the Company and on
governmental authorities that regulate the Company and its subsidiaries and
any resulting consequences to the Company, cannot be determined with any
assurance.  The Company's belief that it and its primary suppliers of data
processing services will achieve Y2K compliance, are based on a number of
assumptions and on statements made by third parties and are subject to
uncertainty.  The Company also is not able to predict the effects, if any, on
the Company, financial markets or society in general of the public's reaction
to Y2K.  Because of this uncertainty and reliance upon assumptions and
statements of third parties, the Company cannot be assured that the results of
its Y2K Plan will be achieved.  Management believes, however, that the Company
will be able to accomplish its Y2K goals and that the Company will be able to
continue providing financial services to its customers into the year 2000 and
beyond.

Impact of New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities."  SFAS  No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative
instruments embedded in other contracts and for hedging activities.  The
Company does not currently hold derivative financial instruments covered by
this Statement and therefore, does not believe  it will have a material impact
on the Company upon odoption.

Effect of Inflation and Changing Prices

     The Consolidated Financial Statements and related financial data
presented herein have been prepared in accordance with GAAP, which require the
measurement of financial position and operating results in terms of historical
dollars, without considering the changes in relative purchasing power of money
over time due to inflation.  The primary impact of inflation on operations of
the Company is reflected in increased operating costs.  Unlike most industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates generally have
a more significant impact on a financial institution's performance than do
general levels of inflation.  Interest rates do not necessarily move in the
same direction or to the same extent as the prices of goods and services. 
During the current interest rate environment, management believes that the
liquidity and the maturity structure of the Company's assets and liabilities
are critical to the maintenance of acceptable profitability. 

                                   16

<PAGE>

<PAGE>
                     [Letterhead of PricewaterhouseCoopers LLP]


                          REPORT OF INDEPENDENT ACCOUNTANTS


February 11, 1999

To the Board of Directors and Shareholders of
Albion Banc Corp.


In our opinion, the accompanying consolidated statement of financial condition
and the related consolidated statements of operations, changes in
shareholders' equity and cash flows present fairly, in all material respects,
the financial position of Albion Banc Corp. and its subsidiaries at 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. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.


/s/PricewaterhouseCoopers LLP


                                    17

<PAGE>


<PAGE>
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
------------------------------------------------------------------------------

                                                             December 31,
                                                          1998         1997

                            Assets

Cash and due from banks, including interest-bearing
  accounts of $60,455 and $18,600, respectively        $1,881,421  $1,539,966
Federal funds sold                                      4,670,000   2,850,000
Investment securities available for sale                3,943,816   4,034,900
Investment securities held to maturity (fair value of
  $3,869,466 and $6,883,000, respectively)              3,821,624   6,833,577
Loans held for sale                                       122,912     550,340
Loans receivable, net of allowance for loan losses of
  $267,000 and $276,300, respectively                  58,806,027  52,467,012 
Federal Home Loan Bank stock, at cost                     528,800     500,000 
Premises and equipment, net                             2,172,967   2,350,964 
Other assets                                              522,686     592,490
                                                      ----------- ----------- 
Total assets                                          $76,470,253 $71,719,249
                                                      =========== ===========

           Liabilities and Shareholders' Equity

Deposits                                              $59,120,090 $54,910,181
Advances from Federal Home Loan Bank and other 
  borrowings                                            9,118,734   9,200,526
Advances from borrowers for taxes and insurance           933,248     891,392 
Other liabilities                                         874,705     562,318 
                                                      ----------- -----------
Total liabilities                                      70,046,777  65,564,417
                                                      ----------- -----------
Commitments and contingencies (Note 15)
Shareholders' equity:
Preferred stock, $.01 par value - 500,000
  shares authorized, none outstanding
Common stock, $.0033 par value - 3,000,000 shares
  authorized, 792,163 and 789,258 issued                    2,649       2,631
Capital surplus                                         2,410,463   2,383,434
Retained earnings, substantially restricted             4,248,716   3,986,735
Unearned employee stock ownership plan (ESOP) shares      (35,290)    (44,638)
Accumulated other comprehensive income                     18,533      48,265 
Treasury stock, 39,105 shares, at cost                   (221,595)   (221,595) 
                                                      ----------- -----------
Total shareholders' equity                              6,423,476   6,154,832
                                                      ----------- ----------- 
Total liabilities and shareholders' equity            $76,470,253 $71,719,249
                                                      =========== ===========

The accompanying notes are an integral part of these consolidated financial
statements.

                                    18

<PAGE>

<PAGE>

ALBION BANC CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------------------------------------------------

                                               Years Ended December  31,
                                              1998        1997       1996
Interest  income:
 Interest and fees on loans               $4,538,145  $4,177,760  $3,901,270
 Interest and dividends on investment
   securities and federal funds sold         809,146   1,006,631     544,863
                                          ----------  ----------  ----------
     Total interest income                 5,347,291   5,184,391   4,446,133
                                          ----------  ----------  ----------
Interest expense:
 Interest on deposits                      2,413,807   2,297,157   2,129,106
 Interest on borrowed funds                  592,979     583,066     248,402
                                          ----------  ----------  ----------
     Total interest expense                3,006,786   2,880,223   2,377,508
                                          ----------  ----------  ----------
Net interest income                        2,340,505   2,304,168   2,068,625
Provision for loan losses                     65,023      35,414     140,239
                                          ----------  ----------  ----------
Net interest income after 
   provision for loan losses               2,275,482   2,268,754   1,928,386
                                          ----------  ----------  ----------
Noninterest income:
 Gain on sale of mortgage loans, 
   investment securities available for
   sale and foreclosed real estate            16,798      59,203      38,031
 Other noninterest income                    351,237     330,386     222,100
                                          ----------  ----------  ----------
     Total noninterest income                368,035     389,589     260,131
                                          ----------  ----------  ----------
Noninterest expense:
 Salaries and employee benefits            1,001,392     985,588     898,745
 Occupancy expenses                          422,433     390,136     307,886
 Deposit insurance premiums                   33,952      46,632     391,541
 Professional fees                            98,844     102,784     101,428
 Data processing fees                        201,223     188,350     201,153
 Other operating expenses                    315,202     367,387     330,165
                                          ----------  ----------  ----------
     Total noninterest expense             2,073,046   2,080,877   2,230,918
                                          ----------  ----------  ----------
Income (loss) before income taxes            570,471     577,466     (42,401)
Provision (benefit) for income taxes         208,000     226,265     (38,049)
                                          ----------  ----------  ----------
      Net income (loss)                   $  362,471  $  351,201  $   (4,352)
                                          ==========  ==========  ==========
Basic earnings (loss) per common share    $      .49  $      .48  $     (.01)
                                          ==========  ==========  ==========
Diluted earnings (loss) per common share  $      .47  $      .46  $     (.01)
                                          ==========  ==========  ==========

                                   19

<PAGE>


<PAGE>
<TABLE>

ALBION BANC CORP.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------- 
                                                                        Accumulated
                                                               Unearned other com-
                              Common   Capital     Retained      ESOP   prehensive  Treasury
                              stock    surplus     earnings     shares    income     stock    Total

<S>                           <C>     <C>         <C>         <C>        <C>      <C>       <C>  
Balance at December 31, 1995  $2,607  $2,305,975  $3,833,811  $(97,617)  $44,344  $     --  $6,089,120

Comprehensive income:                         
 Net loss                                             (4,352)                                   (4,352)
  Other comprehensive income,
   net of tax:
    Unrealized gains on 
     investment securities                                                11,271                11,271
                                                                                            ----------
                                                                                                 6,919
Exercise of stock options        24       23,696                                                23,720
Cash dividends paid ($.10 
  per share)                                         (80,000)                                  (80,000)
ESOP shares committed to be
  released                                18,514                26,909                          45,423
Purchase of treasury stock                                                        (221,595)   (221,595)
                            ------    ---------- ----------  --------   -------  ---------  ----------

Balance at December 31, 
  1996                       2,631     2,348,185  3,749,459   (70,708)   55,615   (221,595)  5,863,587
Comprehensive income:
 Net income                                          351,201                                   351,201
 Other comprehensive income,
  net of tax:
   Unrealized losses on 
    investment securities                                                 (7,350)               (7,350)
                                                                                            ----------    
 
                                                                                               343,851
Cash dividends paid ($.16 
  per share)                                        (113,925)                                 (113,925)
ESOP shares committed to be
  released                                35,249                26,070                          61,319
                            ------    ---------- ----------  --------   -------  ---------  ----------
Balance at December 31, 
  1997                       2,631     2,383,434   3,986,735   (44,638)   48,265  (221,595)  6,154,832
Comprehensive  income:
 Net income                                          362,471                                   362,471
  Other comprehensive income,
   net of tax:
    Unrealized losses on 
     investment securities                                               (29,732)              (29,732)

                                                                                            ----------    
 
Exercise of stock options       18         9,663                                                 9,681
Cash dividends paid ($.14 
  per share)                                       (100,490)                                  (100,490)
ESOP shares committed to 
  be released                             17,366                9,348                           26,714
                            ------    ---------- ----------  --------   -------  ---------  ----------
Balance at December 31, 
 1998                       $2,649    $2,410,463 $4,248,716  $(35,290)  $18,533  $(221,595) $6,423,476
                            ======    ========== ==========  ========   =======  =========  ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial 
statements.

                                                                      20

<PAGE>

<PAGE>

ALBION BANC CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------------------------------------------------

                                                Years Ended December 31,
                                               1998        1997       1996
Cash flows from operating activities:
 Net income (loss)                          $362,471    $351,201    $(4,352)
 Depreciation, amortization and accretion    321,435     183,938    142,208
 Provision for loan losses                    65,023      35,414    140,239
 Provision for losses on foreclosed real 
   estate                                                             41,000
 Provision (benefit) for deferred 
  income taxes                                49,600     133,700     (12,800)
 Gain on sale of mortgage loans,
  investment securities and foreclosed
  real estate                                (16,798)    (59,203)    (38,031)
 ESOP expense                                 26,714      61,319      45,423
 Originations of loans held for sale        (945,721)   (392,566) (1,116,740)
 Proceeds from sale of loans held 
   for sale                                1,390,516     506,641     464,990
 Changes in operating assets and 
   liabilities    -
     Decrease (increase) in other assets     (17,239)     32,142    (168,005)
     Increase in other liabilities           281,962     305,894      54,749
                                          ----------  ----------  ----------
        Net cash provided by (used in)
         operating activities              1,517,963   1,158,480    (451,319)
                                          ----------  ----------  ----------
Cash flows from investing activities:
 Proceeds from sale of foreclosed 
   real estate                                87,043     254,586     159,537
 Proceeds from maturities and calls of
   investment securities available
   for sale                                1,512,183     881,521   1,203,432
 Proceeds from maturities and calls
   of investment securities held to
   maturity                                2,950,231   5,116,163   2,206,792
 Purchases of investment securities 
   available for sale                     (1,493,899) (1,001,757) (1,011,009)
 Purchases of investment securities 
   held to maturity                                   (4,621,649) (6,193,497) 
 Net increase in loans receivable         (6,404,038) (5,321,291) (3,632,264)
 (Purchase) redemption of Federal 
   Home Loan Bank stock                      (28,800)    (50,000)     25,000
 Expenditures for capital assets             (58,391)   (448,876)    (64,278)
                                          ----------  ----------  ----------
 Net cash used in investing activities    (3,435,671) (5,191,303) (7,306,287)
                                          ----------  ----------  ----------
Cash flows from financing activities:
 Net increase in savings, NOW, money
   market and noninterest-bearing
   deposits                                2,738,619   1,453,774   4,067,121
 Net increase (decrease) in time deposits  1,471,289   4,964,388  (2,134,531)
 Proceeds from Federal Home Loan Bank and
   other borrowings                        5,000,000   5,000,000   9,500,000
 Payments on advances from Federal 
   Home Loan Bank and other borrowings    (5,081,792) (5,075,149) (3,523,107)
 Proceeds from exercise of stock options       9,681                  23,720 
 Dividends paid                             (100,490)   (113,925)    (80,000)
 Net increase (decrease) in advances 
   from borrowers for taxes and insurance     41,856      67,772    (145,091)
 Purchase of treasury stock                                         (221,595)
                                          ----------  ----------  ----------
 Net cash provided by financing activities 4,079,163   6,296,860   7,486,517
                                          ----------  ----------  ----------
 Net increase (decrease) in cash and cash 
   equivalents                             2,161,455   2,264,037    (271,089)
 Cash and cash equivalents at beginning 
   of year                                 4,389,966   2,125,929   2,397,018
                                          ----------  ----------  ----------
 Cash and cash equivalents at end of 
   year                                   $6,551,421  $4,389,966  $2,125,929
                                          ==========  ==========  ==========
Cash paid during the year for:
 Interest                                 $3,031,309  $2,902,589  $2,307,861
 Income taxes                                 $5,000    $150,273     $46,000

                                       21

<PAGE>

<PAGE>

ALBION BANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    DESCRIPTION OF OPERATIONS
    Albion Banc Corp. (the "Holding Company" or the "Company") is the holding
    company for Albion Federal Savings and Loan Association (the
    "Association"), which is headquartered in Albion, New York. Through the
    Association, the Company is engaged primarily in the business of retail
    banking in Western New York. Additionally, the Association offers
    nontraditional deposit products, such as annuities and mutual funds,
    through a subsidiary, New Frontier of Albion Corp. ("New Frontier").

    BASIS OF PRESENTATION
    The consolidated financial statements include the accounts of the Company,
    the Association and New Frontier. All significant intercompany accounts
    and transactions have been eliminated. The accounting principles of the
    Company conform with generally accepted accounting principles and
    prevailing practices within the banking industry. The preparation of
    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 at the date of the
    financial statements and the reported amounts of revenue and expenses
    during the reporting period. Actual results could differ from those
    estimates.

    STATEMENT OF CASH FLOWS
    For purposes of the statement of cash flows, the Company defines cash and
    cash equivalents as cash and due from banks and federal funds sold.

    INVESTMENT SECURITIES
    Investments in debt securities are classified as held to maturity and
    stated at amortized cost when management has the positive intent and
    ability to hold such securities to maturity. Investments in other debt
    securities having readily determinable fair values are classified as
    available for sale and are stated at estimated fair value. The fair values
    of investment securities are estimated utilizing independent pricing
    services and are based on available market data. Unrealized gains or
    losses related to securities available for sale are reflected in a
    separate component of other comprehensive income, net of applicable income
    taxes.

    Interest income includes interest earned on securities and the respective
    amortization of premium or accretion of discount. Amortization or
    accretion is computed using the straight-line method which approximates
    the interest method. Sales of securities and related gains are determined
    using the specific identification method.

    LOANS HELD FOR SALE
    Mortgage loans originated and intended for sale in the secondary market
    are carried at the lower of cost or estimated market value in the
    aggregate. Net unrealized losses are recognized through a valuation
    allowance by charges to income.

    LOANS RECEIVABLE
    Loans receivable are stated at their principal amount outstanding, net of
    deferred loan origination and commitment fees and certain direct costs,
    which are recognized over the contractual life of the loan as an
    adjustment of the loan's yield. Interest income on loans is recognized on
    an accrual basis, calculated using the level yield interest method.

                                       22

<PAGE>
<PAGE>

    The allowance for loan losses is maintained at a level which, in the
    opinion of management, is considered adequate to absorb potential losses
    inherent in the existing loan portfolio. The level of the allowance is
    based on management's evaluation of individual loans, past loan loss
    experience, the assessment of prevailing and anticipated economic
    conditions, the estimated value of collateral and other relevant factors.
    The allowance for loan losses is established through charges to earnings
    in the form of a provision for loan loss. When a loan or portion of a loan
    is determined to be uncollectible, the portion deemed uncollectible is
    charged against the allowance and subsequent recoveries, if any, are
    credited to the allowance.

    A loan is considered impaired, based on current information and events,
    when it is probable that the Company will not be able to collect the
    scheduled payments of principal or interest when due according to the
    contractual terms of the loan agreement (generally within 90 days).
    Accordingly, the Company measures all nonaccrual and restructured
    commercial real estate and commercial loans individually, based on the
    present value of expected future cash flows discounted at the historical
    effective interest rate, except that all collateral dependent loans are
    measured for impairment based on the fair value of the collateral. This
    accounting policy does not apply to large groups of small balance,
    homogeneous loans such as consumer installment and residential real estate
    loans, that are collectively evaluated for impairment based upon
    historical statistics. Loans continue to be classified as impaired unless
    they are brought fully current and the collection of scheduled interest
    and principal is considered probable.

    Loans, including impaired loans, are placed on a nonaccrual status in
    accordance with policies established by management. Loans, other than
    consumer loans, are generally transferred to nonaccrual status when
    principal or interest payments become 90 days past due. Any accrued but
    uncollected interest previously recorded on such loans is reversed in the
    current period. Past due consumer loans are generally fully reserved or
    charged-off when they reach a 120 day delinquency status. Loans are
    returned to accrual status when management determines that the
    circumstances have improved to the extent that both principal and interest
    are collectible and there has been a sustained period of repayment
    performance in accordance with the contractual terms of interest and
    principal.

    While a loan is classified as nonaccrual and the future collectibility of
    the recorded loan balance is doubtful, collections of interest and
    principal are generally applied as a reduction to principal outstanding.
    When the future collectibility of the recorded loan balance is expected,
    interest income may be recognized on a cash basis. In the case where a
    nonaccrual loan had been partially charged off, recognition of interest on
    a cash basis is limited to that which would have been recognized on the
    recorded loan balance at the contractual interest rate. Cash interest
    receipts in excess of that amount are recorded as recoveries to the
    allowance for loan losses until prior charge-offs have been fully
    recovered.

    PREMISES AND EQUIPMENT
    Land is carried at cost. Company premises and equipment are stated at cost
    less accumulated depreciation. Depreciation is computed on the straight-
    line basis over the estimated useful lives of the related assets,
    generally ranging from three to forty years.

    INCOME TAXES
    The Company accounts for income taxes using the asset and liability
    approach which requires recognition of deferred tax liabilities and assets
    for the expected future tax consequences of temporary differences between
    the carrying amounts and the tax basis of such assets and liabilities.
    This method utilizes enacted statutory tax rates in effect for the year in
    which the temporary differences are expected to reverse and gives
    immediate effect to changes in income tax rates upon enactment. Deferred
    tax assets are recognized, net of any valuation allowances, for deductible
    temporary differences and net operating loss and tax credit carryforwards.

                                     23

<PAGE>

<PAGE>

    EARNINGS (LOSS) PER SHARE
    Basic earnings (loss) per share is determined by dividing income (loss)
    available to common shareholders by the weighted average number of common
    shares outstanding during the period. Shares issued during the period and
    shares reacquired during the period are weighted for the portion of the
    period that they were outstanding. Employee Stock Ownership Plan ("ESOP")
    shares not committed to be released are not considered outstanding for
    purposes of the calculation. Diluted earnings (loss) per share is
    determined by dividing income (loss) available to common shareholders by
    the weighted average number of common shares outstanding, adjusted for the
    number of additional common shares that would have been outstanding if the
    dilutive potential common shares outstanding during the period had been
    issued.

    STOCK SPLIT
    On December 17, 1997, the Company's Board of Directors voted a
    three-for-one stock split of its common stock, effected in the form of a
    stock dividend to holders of record on January 16, 1998. The stock split
    was completed on February 5, 1998. Common stock issued, treasury stock
    held and per share data have been restated to reflect the split.

2.  INVESTMENT SECURITIES

    The amortized cost and estimated fair value of investment securities
    available for sale are as follows:

                                           December 31,  1998
                              --------------------------------------------
                                            Gross      Gross
                              Amortized  unrealized  unrealized  Estimated
                                 cost       gains      losses    fair value

Mortgage-backed securities   $3,912,927    $47,184   $(16,295)  $3,943,816
                             ==========    =======   ========   ==========

                                           December 31,  1997
                              --------------------------------------------
                                            Gross      Gross
                              Amortized  unrealized  unrealized  Estimated
                                 cost       gains      losses    fair value

Mortgage-backed securities   $3,954,539    $84,422    $(4,061)  $4,034,900
                             ==========    =======   ========   ==========

    The amortized cost and estimated fair value of investment securities held
    to maturity are as follows:

                                            December 31,  1998
                              --------------------------------------------
                                            Gross      Gross
                              Amortized  unrealized  unrealized  Estimated
                                 cost       gains      losses    fair value

Mortgage-backed securities   $3,821,624    $47,842   $          $3,869,466
                             ==========    =======   ========   ==========

                                           December 31, 1997
                              ---------------------------------------------
                                            Gross      Gross
                              Amortized  unrealized  unrealized  Estimated
                                 cost       gains      losses    fair value
Mortgage-backed securities   $5,832,311    $50,389              $5,882,700
U.S. government agency 
  securities                  1,001,266                 $(966)   1,000,300
                             ----------    -------   --------   ----------
    Total                    $6,833,577    $50,389      $(966)  $6,883,000
                             ==========    =======   ========   ==========

                                    24

<PAGE>

<PAGE>

3.  LOANS RECEIVABLE

    Loans receivable consist of the following:

                                                         December 31,
                                                     1998         1997
Real estate loans:
 Secured by one to four family residences       $48,396,513   $42,473,738
 Secured by other properties                      1,792,947     2,203,839
 Construction loans                               1,588,951       413,200
                                                -----------   -----------
                                                 51,778,411    45,090,777
                                                -----------   -----------
Other  loans:
 Automobile loans                                    93,438       100,607
 Home improvement loans                           7,413,971     7,152,228
 Other                                              434,444       688,245
                                                -----------   -----------
                                                  7,941,853     7,941,080
                                                -----------   -----------
Undisbursed portion of loans                       (721,492)     (327,480)
Net deferred loan origination costs                  74,255        38,935
Allowance for loan losses                          (267,000)     (276,300)
                                                -----------   -----------
                                                   (914,237)     (564,845)
                                                -----------   -----------
                                                $58,806,027   $52,467,012
                                                ===========   ===========

    The balance of nonaccrual loans at December 31, 1998 and 1997 was $262,243
    and $276,300, respectively. The recorded investment in impaired loans for
    which there was a related valuation allowance for possible impairment
    included in the allowance for credit losses, and the amount of such
    impairment allowance were $164,177 and $45,894, respectively, at December
    31, 1998 and $162,855 and $32,829, respectively, at December 31, 1997. The
    average balance of impaired loans in 1998, 1997 and 1996 was $232,900,
    $211,700 and $52,100, respectively. There was no interest income
    recognized on the impaired loans in 1998, 1997 or 1996 as they were on a
    non-accrual basis.

    At December 31, 1998, there was approximately $11,000,000 of one to four
    family residential real estate loans pledged as collateral for advances
    from the Federal Home Loan Bank of New York.

    The Company does not have reportable operating segments as defined by
    Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
    about Segments of an Enterprise and Related Information." A summary of
    revenues by loan products consists of the following:

                                  Year ended December 31,
                              1998          1997          1996

Real estate loans        $3,794,547     $3,531,567     $3,415,988
Other loans                 743,598        646,193        485,282
                         ----------     ----------     ----------
                         $4,538,145     $4,177,760     $3,901,270
                         ==========     ==========     ==========

    As discussed in Note 14, the Company's customers are located primarily in
    Western Monroe County and Orleans County in New York State. There are no
    transactions with a single customer that in the aggregate result in
    revenues that exceed ten percent of consolidated total revenues.

                                    25

<PAGE>

<PAGE>

4.  ALLOWANCE FOR LOAN LOSSES

    An analysis of changes in the allowance for loan losses is as follows:

                                                  December  31,
                                        1998          1997      1996

Balance at beginning of period        $276,300     $305,900   $244,100
Provision expense                       65,023       35,414    140,239
Net charge-offs                        (74,323)     (65,014)   (78,439)
                                      --------     --------   --------
Balance at end of period              $267,000     $276,300   $305,900
                                      ========     ========   ========

5.  LOAN SERVICING

    Loans serviced for others, amounting to approximately $9,836,000 and
    $10,463,700 at December 31, 1998 and 1997, respectively, are not included
    in the statement of financial condition. Custodial escrow balances
    maintained in connection with loans serviced for others were approximately
    $181,100 and $189,600 at December 31, 1998 and 1997, respectively.

6.  PREMISES AND EQUIPMENT

    Premises and equipment, net of accumulated depreciation and amortization,
    consist of the following:

                                                December 31,
                                              1998        1997

Land                                      $  350,642   $  350,642
Premises                                   1,740,135    1,740,135
Furniture, fixtures and equipment          1,412,878    1,354,487
                                          ----------   ----------
                                           3,503,655    3,445,264

    Accumulated depreciation              (1,330,688)  (1,094,300)
                                          ----------   ----------
                                          $2,172,967   $2,350,964
                                          ==========   ==========

    Depreciation expense on premises and equipment was:  $236,388, $193,400,
    and $158,900 for the years ended December 31, 1998, 1997 and 1996,
    respectively.

                                     26

<PAGE>

<PAGE>

7.  DEPOSITS

    Deposits were comprised of the following:

                                                    December 31,
                                     ----------------------------------------
                                             1998                  1997
                                     ----------------------------------------
                                                    Per                  Per
                                         Amount     cent       Amount    cent

Noninterest bearing deposits         $ 3,254,052    5.5 %  $ 2,395,245   4.4%
Savings deposits                      14,838,088   25.1     13,974,443  25.5
Negotiable order of withdrawal
 deposits                              4,679,530    7.9      3,498,122   6.4
Money market deposits                  2,054,672    3.5      2,219,913   4.0
                                     -----------  -----    ----------- -----
                                      24,826,342   42.0     22,087,723  40.3
                                     -----------  -----    ----------- -----
Certificates of deposit:
 4.00% and less                                                 10,915
 4.01% - 6.00%                        31,511,709   53.3     29,446,514  53.6
 6.01% - 8.00%                         2,780,039    4.7      3,353,533   6.1
 8.01% and greater                         2,000                11,496
                                     -----------  -----    ----------- -----
                                      34,293,748   58.0     32,822,458  59.7
                                     -----------  -----    ----------- -----
                                     $59,120,090  100.0%   $54,910,181 100.0%
                                     ===========  =====    =========== =====

    The weighted average interest rates paid on total deposits were 4.5%, 4.6%
    and 4.4% at December 31, 1998, 1997, and 1996, respectively.

    At December 31, 1998, certificates of deposit have scheduled maturity
    dates as follows:

<PAGE>
<TABLE>

                         1999         2000         2001        2002      2003    Thereafter    Total

<S>                 <C>           <C>          <C>          <C>        <C>        <C>       <C>  
4.00% or less       $         -   $        -   $        -   $      -   $      -   $     -   $         -
4.01% - 6.00%        24,505,917    4,322,633    1,306,336    599,327    772,566     4,930    31,511,709
6.01% - 8.00%         1,970,097      429,950        8,275    194,327    144,403    32,987     2,780,039
8.01% and greater         2,000                                                                   2,000
                    -----------   ----------   ----------   --------   --------   -------   -----------
 Total              $26,478,014   $4,752,583   $1,314,611   $793,654   $916,969   $37,917   $34,293,748
                    ===========   ==========   ==========   ========   ========   =======   ===========

</TABLE>
<PAGE>

    At December 31, 1998, certificates of deposit in amounts of $100,000 or
    more have the following scheduled time remaining until maturity:

          Three months or less                   $  403,813
          Over three through six months             805,062
          Over six through twelve months            863,172
          Over twelve months                        675,032
                                                 ----------    
                                                 $2,747,079
                                                 ==========

                                          27

<PAGE>

<PAGE>

    Interest expense on deposits is as follows:

                                             Years Ended December 31,
                                           1998        1997         1996

        Savings deposits               $  449,792   $  421,071   $  382,701
        Negotiable order of 
          withdrawal deposits              69,684       56,650       47,091
        Money market deposits              67,905       80,148       72,388
        Certificates of deposit         1,826,426    1,739,288    1,626,926
                                       ----------   ----------   ----------
                                       $2,413,807   $2,297,157   $2,129,106
                                       ==========   ==========   ==========

8.  ADVANCES FROM FEDERAL HOME LOAN BANK AND OTHER BORROWINGS

    At December 31, 1998 and 1997, the Company had advances, secured by
    residential real estate loans, from the Federal Home Loan Bank of New York
    of $9,000,000. The borrowings outstanding at December 31, 1998 had fixed
    and variable rates of interest ranging from 5.15% to 6.60%, with a
    weighted average interest rate of 5.96%, and mature at various dates
    through 2003. The borrowings outstanding at December 31, 1997 had fixed
    and variable rates of interest ranging from 5.88% to 6.60%, with a
    weighted average interest rate of 6.19%. Required remaining principal
    repayments at December 31, 1998 are as follows: $1,000,000 in 1999 and
    2000, $2,000,000 in 2001 and 2002 and $3,000,000 in 2003.

    At December 31, 1998 and 1997, the Company had $118,734 and $200,526,
    respectively, outstanding on a loan used for construction of a branch
    office. The loan has a fixed rate of interest of 8.50% and requires
    monthly payments of principal and interest through 2001. At December 31,
    1998, remaining principal payments of $88,400, $42,200 and $40,900 are
    required in 1999, 2000 and 2001, respectively.

9.  EARNINGS (LOSS) PER SHARE

    The full year calculations of earnings (loss) per share for 1998, 1997 and
    1996 reflect an average of the quarterly calculations during those years.
    During 1996, only one of four quarters experienced a loss even though
    there was a net loss for the year. Therefore, the dilutive effect of the
    incremental shares included in the quarterly EPS calculations for the
    quarters with income are excluded from the year-to-date calculation.

                                       28

<PAGE>

<PAGE>

                                            Year Ended December 31, 1998
                                           -------------------------------
                                                                 Per-share
                                             Income    Shares     amount

          Basic EPS                        $362,471   739,867     $  .49
                                           ========   =======     ======
          Effect of Dilutive Securities:
            Options                                    28,749
                                           --------   -------
          Diluted EPS                      $362,471   768,616     $  .47
                                           ========   =======     ======

                                             Year Ended December 31, 1997
                                           -------------------------------
                                                                 Per-share
                                             Income    Shares     amount

          Basic EPS                        $351,201   733,047     $  .48
                                           ========   =======     ======
          Effect of Dilutive Securities:
            Options                                    23,498
                                           --------   -------
          Diluted EPS                      $351,201   756,545     $  .46
                                           ========   =======     ======

                                            Year Ended December 31, 1996
                                           -------------------------------
                                                                 Per-share
                                             Income    Shares     amount

          Basic and Diluted EPS            $(4,352)   738,284     $ (.01)
                                           ========   =======     ======

10. COMPREHENSIVE INCOME

    The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in the
    first quarter of 1998.  SFAS No. 130 establishes standards for reporting
    and displaying comprehensive income and its components.  Adoption of SFAS
    No. 130 had no impact on the Company's results of operations nor its
    financial position.  Financial Statements presented for periods prior to
    1998 were required to be reclassified to reflect application of the
    provisions of SFAS No. 130.

    The following tables display the components of other comprehensive income:

                                           Year ended December 31,
                                          1998         1997       1996
     Unrealized (losses) gains
       on investment securities:
        Before tax amount              $(49,472)    $(14,834)   $18,765
        Income taxes                     19,740        7,484     (7,494)
                                       --------     --------    -------
     Net                               $(29,732)    $ (7,350)   $11,271
                                       ========     ========    =======

11. EMPLOYEE BENEFIT PLANS

    The Company has a defined contribution plan covering substantially all
    employees which provides for a salary deferral arrangement, pursuant to
    Section 401(k) of the Internal Revenue Code, as contributions to a savings
    plan. The plan provides for an annual contribution by the Company of 5% of
    an

                                        29

<PAGE>

<PAGE>
    employee's base salary. In addition, the Company contributes to the
    plan one-half of every dollar contributed by an employee up to an
    additional 4% of an employee's base salary. The amounts charged to expense
    related to this plan were approximately $43,600, $46,000, and $33,500 for
    the years ended December 31, 1998, 1997 and 1996, respectively.

    The Company has an internally leveraged employee stock ownership plan that
    covers all employees who have completed at least 1,000 hours of service in
    a twelve-month period and have attained the age of 21. The Company makes
    annual contributions to the ESOP equal to the ESOP's debt service less
    dividends received by the ESOP. The ESOP shares are pledged as collateral
    for its debt. As the debt is repaid, shares are released from collateral
    and allocated to active participants in proportion to their compensation
    relative to total compensation of all active participants.

    The Company accounts for its ESOP in accordance with Statement of Position
    93-6, "Employer's Accounting for Employee Stock Ownership Plans."
    Accordingly, the debt of the ESOP is eliminated in consolidation and the
    shares pledged as collateral are reported as unearned ESOP shares in the
    consolidated statement of financial position. As shares are released from
    collateral, the Company reports compensation expense equal to the current
    market price of the shares, and the shares become outstanding for earnings
    per share computations. Dividends on allocated ESOP shares are recorded as
    a reduction of retained earnings; dividends on unallocated ESOP shares are
    recorded as a reduction of debt and accrued interest. ESOP compensation
    expense was approximately $26,700, $52,000, and $45,400 during 1998, 1997
    and 1996, respectively.

    A summary of ESOP shares is as follows:
                                                             December 31,
                                                           1998      1997

       Shares released for allocation and allocated       $43,900  $ 41,118
       Unreleased shares                                   10,534    13,629
                                                          -------  --------
       Total ESOP shares                                  $54,434  $ 54,747
                                                          =======  ========
       Fair value of unreleased shares                    $97,440  $181,720
                                                          =======  ========

    Under the 1993 Stock Option and Incentive Plan (Stock Option Plan), 78,210
    shares of common stock were reserved for the benefit of certain officers,
    employees and directors. The Stock Option Plan is administered by a
    committee of the Board of Directors. Management intends that options
    granted under the Stock Option Plan constitute both incentive and
    non-incentive stock options.  Options granted to non-employee directors
    will constitute non-incentive stock options.

    With respect to incentive stock options, the option exercise price may be
    no less than the fair market value of the Company's common stock on the
    date of grant. All options are immediately exercisable and expire no later
    than ten years from the date of grant. The Company applies Accounting
    Principles Board Opinion No. 25, "Accounting for Stock Issued to
    Employees," and related interpretations in accounting for the Stock Option
    Plan.  Accordingly, no compensation expense was recognized in 1996 for
    stock option awards since the exercise price of stock options granted was
    not less than the fair market value of the common stock at date of grant.
    Had the Company recognized compensation expense in accordance with SFAS
    No.123, "Accounting for Stock Based Compensation," net loss and loss per
    basic and diluted common share would have been $26,729 and $0.04,
    respectively,for the year ended December 31, 1996. To calculate those pro
    forma amounts, the Company utilized the Black-Scholes option pricing model
    and the following assumptions: a risk-free interest rate of 6.38%; an


                                     30

<PAGE>

<PAGE>

    expected option life of six years; expected volatility of 31.33%; and an
    expected dividend yield of 1.77%. No options were granted in 1998 and
    1997.

    A summary of the status of the Company's stock option plan as of December
    31, 1998, 1997 and 1996 and changes during the years ended on those dates
    is as follows:


                              1998               1997              1996
                      ------------------   ----------------  ----------------
                                Weighted           Weighted          Weighted
                                Average            Average           Average
                                Exercise           Exercise          Exercise 
                      Shares     price     Shares   price    Shares   price

Outstanding at 
 beginning of year    50,022     $4.00     50,022   $4.00    46,533   $3.33
   Granted                                                   10,605   $5.79
   Exercised          (2,905)    $3.33                       (7,116)  $3.33
   Forfeited               -                    -                 -
                      ------               ------            ------
Outstanding and 
 exercisable at
 end of year          47,117     $3.89     50,022   $4.00    50,022   $4.00
                      ======               ======            ======
Fair value of
 options granted 
 during the year                                             $ 2.11
                                                             ======

    At December 31, 1998, there are 36,512 options outstanding with an
    exercise price of $3.33 and a remaining contractual life of five years,
    and 10,605 options outstanding with an exercise price of $5.79 and a
    remaining contractual life of eight years.  Additionally, at December 31,
    1998 there are 21,072 shares available for future grant.

12. INCOME TAXES

    The Company, the Association, and New Frontier file a consolidated federal
    return. The Company and the Association file a combined state return,
    while New Frontier files a separate state return. All returns are filed on
    a calendar year basis.

    For tax years beginning after January 1, 1996, the Company is only
    permitted to take deductions for bad debts for federal tax purposes on the
    basis of actual loan charge-off activity (specific charge-offs). This
    legislation also requires that the Company recapture into taxable income
    that portion of existing tax bad debt reserves created in years beginning
    after December 31, 1987.

    Under prior federal law, tax bad debt reserves created prior to January 1,
    1988 were subject to recapture into taxable income should the Company fail
    to meet certain qualifying asset and definitional tests. New federal
    legislation eliminated these thrift related recapture rules. However,
    under current law pre-1988 reserves remain subject to recapture should the
    Company make certain non-dividend distributions or cease to maintain a
    Company charter. Management has no intention of taking any such actions.
 
    At December 31, 1998, the Company's total pre-1988 tax bad debt reserve
    was approximately $828,000. This reserve reflects the cumulative effect of
    federal tax deductions by the Company for which no federal income tax
    provision has been made.

    Provided the Company continues to satisfy certain definitional tests and
    other conditions for New York State income tax purposes, the Company is
    permitted to continue to take special reserve method bad debt deductions.
    The deductible annual addition to the state reserve may be computed using
    a specific

                                      31

<PAGE>


<PAGE>

    formula based on the Company's loss history ("Experience Method") or a
    statutory percentage equal to 32% of the Company's New York State taxable
    income. The Company used specific charge-off method in 1996 and the
    percentage method in 1997 and 1998.

    The components of the provision (benefit) for income taxes are as follows:

                                                 December  31,
                                          1998       1997       1996
            Current:
              Federal                  $154,900    $ 88,740   $(25,499)
              State                       3,500       3,825        250
                                       --------    --------   --------
                                        158,400      92,565    (25,249)
            Deferred                     49,600     133,700    (12,800)
                                       --------    --------   --------
                                       $208,000    $226,265   $(38,049)
                                       ========    ========   ========

    A summary of deferred income taxes is as follows:

                                                   December  31,
                                               1998         1997
           Deferred income tax assets:
             Allowance for loan losses        $  90,800  $  97,400
             Other                               24,000     23,300
                                              ---------  --------- 
                                              $ 114,800  $ 120,700
                                              =========  ========= 
           Deferred income tax liabilities:
             Depreciation                     $(162,000) $(135,300)
             Unrealized gain on investment
               securities                       (12,300)   (32,100)
             Deferred loan origination fees 
               and costs                        (29,700)   (15,600)
             Other                              (24,800)   (19,000)
                                              ---------  ---------
                                               (228,800)  (202,000)
                                              ---------  ---------
           Net deferred income tax liability  $(114,000) $ (81,300)
                                              =========  =========

                                      32
<PAGE>

<PAGE>

    The provision for income taxes is different from that which would be
    obtained by applying the statutory federal income tax rate to income
    before taxes. The items causing this difference are as follows:
<PAGE>
<TABLE>


                                                          Years Ended December 31,
                                            ---------------------------------------------------------
                                                  1998                1997                  1996
                                            ---------------     ---------------      ----------------
                                                      % of                % of                  % of
                                                     pretax              pretax                pretax
                                            Amount   income     Amount   income      Amount    income

<S>                                       <C>         <C>      <C>        <C>      <C>        <C> 
Expected tax at federal statutory rate    $193,960    34.0 %   $196,338   34.0 %   $(14,416)  (34.0)%
Increases(decreases) resulting from:
  State franchise taxes, less
   applicable federal income tax benefit    13,860     2.4       23,034    4.0      (18,975)  (44.7)
 Tax exempt interest on investments in
  state and political subdivision
  securities                                                     (1,349)   (.2)      (4,866)  (11.5)
 Other, net                                    180      .1        8,242    1.4          208      .5
                                          --------    ------   --------   ------   ---------  -------
Provision (benefit) for income taxes      $208,000    36.5 %   $226,265   39.2 %   $(38,049)  (89.7)%
                                          ========    ======   ========   ======   =========  =======
/TABLE
<PAGE>

13. RELATED PARTY TRANSACTIONS

    Certain executive officers, directors, principal shareholders and
    companies in which such individuals have 10% or more ownership (related
    parties) are engaged in transactions with the Company in the ordinary
    course of business.  It is the Company's policy that all related party
    transactions are conducted at "arm's length" and all loans and commitments
    included in such transactions are made on substantially the same terms,
    including interest rates and collateral, as those prevailing at the time
    for comparable transactions with other customers. A summary of the changes
    in outstanding loans to such related parties is as follows:

                                                        Years Ended
                                                        December 31,
                                                        1998   1997

        Balance of loans outstanding at 
          beginning of year                          $477,239  $371,650
        New originations and increases 
          in existing loans                           240,446   209,575
        Principal repayments                         (170,753) (103,986)
                                                     --------  --------
        Balance of loans outstanding at 
          end of year                                $546,932  $477,239
                                                     ========  ======== 

    At December 31, 1998 and 1997, there were approximately $239,000 and
    $985,900, respectively, in deposits from such related parties.

                                    33

<PAGE>

<PAGE>

14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
    CREDIT RISK

    The Company is party to financial instruments with off-balance sheet risk
    in the normal course of business in order to meet the financing needs of
    its customers. These financial instruments include commitments to extend
    credit which involve, to varying degrees, elements of credit, interest
    rate or liquidity risk in excess of the amount recognized in the statement
    of financial condition. The Company's exposure to credit loss in the event
    of nonperformance by the other party to the financial instrument for
    commitments to extend credit is represented by the contractual amounts of
    those instruments. The Company has experienced minimal credit losses to
    date on its financial instruments with off-balance sheet risk and
    management does not anticipate any significant losses on its commitments
    to extend credit outstanding at December 31, 1998. The Company does not
    utilize off-balance sheet derivative instruments.

    The Company uses the same credit policies in making commitments and
    conditional obligations as it does for on-balance sheet instruments. The
    Company controls the credit risk of off-balance sheet instruments through
    credit approvals, limits and monitoring procedures, and management
    evaluates each customer's credit worthiness on a case-by-case basis. The
    amount of collateral obtained is based on management's credit evaluation
    of the customer.

    Commitments to extend credit, which generally have a sixty-day expiration
    date or other termination clauses, are legally binding agreements to lend
    to a customer (as long as there is no violation of any condition
    established in the contract). At December 31, 1998, the Company's total
    commitments to extend credit, all of which were fixed rate, were
    $1,186,100. All outstanding loan commitments are scheduled to be disbursed
    within sixty days. Since a portion of the commitments are expected to
    expire without being drawn upon, the total commitment amounts do not
    necessarily represent future liquidity requirements.

    The Company has identified certain credit risk concentrations in relation
    to its on- and off-balance sheet financial instruments. Credit risk is
    defined as the possibility that a loss may occur from the failure of
    another party to perform according to the terms of the contract. A credit
    risk concentration results when the Company has a significant credit
    exposure to an individual or a group engaged in similar activities or
    affected similarly by economic conditions.

    The Company's customers are located primarily in Western Monroe County and
    Orleans County in New York State. As Note 3 to these financial statements
    indicates, the majority of the Company's loan portfolio relates to loans
    secured by first mortgages on real estate.

15. COMMITMENTS AND CONTINGENCIES

    The Company is involved in litigation and investigations of a routine
    nature which are being defended and handled in the ordinary course of
    business.  These matters are not considered significant to the Company's
    financial condition or results of operations.

16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

    CASH AND CASH EQUIVALENTS
    For these short-term instruments, the carrying amount represents an
    estimate of fair value.


                                         34

<PAGE>
<PAGE>

    LOAN RECEIVABLES
    The fair value 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. The
    estimated fair value of financial commitments was not significant.

    DEPOSIT LIABILITIES
    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.

    BORROWINGS
    Rates currently available to the bank for debt with similar terms and
    remaining maturities are used to estimate fair value of existing debt.

    The estimated fair values of the Company's financial instruments are as
    follows:
                                                 December 31,
                               ---------------------------------------------
                                         1998                    1997
                               ----------------------   --------------------
                                 Carrying      Fair     Carrying      Fair
                                  amount      value      amount      value

Financial assets:

 Cash and cash equivalents     $6,551,421  $6,551,421  $4,389,966  $4,389,966
 Investment securities          7,765,440   7,813,282  10,868,477  10,917,900
 Loans held for sale and
  loans receivable, net of
  allowance for possible 
  loan losses                  58,928,939  59,502,000  53,017,352  53,798,000
 Federal Home Loan Bank stock     528,800     528,800     500,000     500,000

Financial liabilities:

 Deposits                      59,120,090  59,336,000  54,910,181  54,987,000
 Advances from the Federal
  Home Loan Bank and other
  borrowings                    9,118,734   9,116,000   9,200,526   9,142,000


17. REGULATORY MATTERS

    The Association is subject to various regulatory capital requirements
    administered by its primary federal regulator, the Office of Thrift
    Supervision (OTS). 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 financial statements. Under capital adequacy guidelines and
    the regulatory framework for prompt corrective action, the Association
    must meet specific guidelines that involve quantitative measures of the
    Association's assets, liabilities and certain off-balance sheet items as
    calculated under regulatory accounting practices. The Association's
    capital amounts and classification are also subject to qualitative
    judgments by the regulators about components, risk weighting, and other
    factors.

    Quantitative measures established by regulation to ensure capital adequacy
    require the Association to maintain minimum amounts and ratios (set forth
    in the table below) of total and Tier I capital (as defined in the
    regulations) to risk-weighted assets (as defined), and of Tier I and
    tangible capital (as defined) to adjusted total assets (as defined).
    Management believes, as of December 31, 1998, that the Association meets
    all capital adequacy requirements to which it is subject.

                                     35

<PAGE>

<PAGE>

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

    The Association's actual capital amounts (in thousands) and ratios are
    also presented in the table.
<PAGE>
<TABLE>


                                                                            To be well
                                                                        capitalized under
                                                        For capital     prompt corrective
                                  Actual             adequacy purposes  action provisions
                                  amount    Ratio    > Amount > Ratio   > Amount   > Ratio
                                                     -        -         -          -

 <S>                             <C>        <C>      <C>        <C>     <C>        <C>
As of December 31, 1998:
  Total capital (to risk-
    weighted assets)             $6,010     15.7%    $3,059     8.0%    $3,823     10.0 %
  Tier I capital (to risk- 
    weighted assets)              5,757     15.1      1,529     4.0      2,300      6.0
  Tier I capital (to adjusted 
    total assets)                 5,757      7.6      3,018     4.0      3,772      5.0
  Tangible capital (to 
    adjusted total assets)        5,757      7.6      1,132     1.5       N/A       N/A

As of December 31, 1997:
  Total capital (to risk-
    weighted assets)             $5,591     15.7%    $2,857     8.0%    $3,571     10.0%
  Tier I capital (to risk-
    weighted assets)              5,352     15.0      1,428     4.0      2,143      6.0
  Tier I capital (to 
    adjusted total assets)        5,352      7.5      2,139     3.0      3,566      5.0
  Tangible capital (to 
    adjusted total assets)        5,352      7.5      1,070     1.5       N/A       N/A

</TABLE>

<PAGE>

    The Association's capital exceeds all of the fully phased-in capital
    requirements imposed by the Financial Institution Reform, Recovery and
    Enforcement Act of 1989. OTS regulations provide that an association that
    exceeds all fully phased-in capital requirements before and after a
    proposed capital distribution can, after prior notice but without the
    approval by the OTS, make capital distributions during the calendar year
    of up to the higher of (i) 100% of its net income to date during the
    calendar year plus the amount that would reduce by one-half its "surplus
    capital ratio" (the excess capital over its fully phased-in capital
    requirements) at the beginning of the calendar year, or (ii) 75% of its
    net income during the most recent four-quarter period. Any additional
    capital distributions require prior regulatory approval.

    At the time of conversion from a mutual savings and loan association to a
    federally chartered stock savings and loan association during 1993, the
    Association established a liquidation account in an amount of $3,077,944
    for the benefit of eligible account holders who continue to maintain their
    accounts at the Association subsequent to the conversion. The liquidation
    account is reduced annually to the extent the eligible account holders
    have reduced their qualifying deposits. Subsequent increases will not
    restore an eligible account holder's interest in the liquidation account.
    Subsequent to the conversion, the Association may not declare or pay cash
    dividends on or repurchase any of its shares of common stock if the effect
    thereof would cause shareholders' equity to be reduced below the balance
    of the liquidation account or if such declaration and payments would
    otherwise violate regulatory requirements.

    The Holding Company is subject to the restrictions of Delaware law, which
    generally limits dividends to the amount of a corporation's surplus or, in
    the case where no such surplus exists, the amount of a corporation's net
    profits for the fiscal year in which the dividend is declared and/or the
    preceding fiscal year. Additionally, the Association is subject to OTS
    regulations which limit its ability to upstream

                                        36

<PAGE>

 <PAGE>

    dividends to the Holding Company. As a Tier I savings association, the
    Association may make capital distributions during a calendar year up to
    100% of its net income to date during the calendar year plus one half of
    its surplus capital ratio at the beginning of the calendar year.

    On July 19, 1995, the Association entered into a Supervisory Agreement
    with the OTS, which required the Company to develop policies and
    procedures primarily relating to its internal operations. On August 25,
    1997, the OTS terminated the Agreement having determined that the Company
    had complied with its terms and conditions.

18. PARENT COMPANY FINANCIAL INFORMATION

    The following condensed statement of financial condition and condensed
    statements of operations and of cash flows for the Holding Company should
    be read in conjunction with the consolidated financial statements and
    notes thereto.

                       Condensed Statement of Condition


                                                   December 31,
                                                 1998        1997
                              Assets

          Cash                               $   26,685  $  100,208
          Federal funds sold                    570,000     600,000
          Investment in subsidiary            5,620,995   5,242,219
          Loan to ESOP                           41,712      52,140
          Other assets                           13,448       3,115
                                             ----------  ----------
                 Total assets                $6,272,840  $5,997,682
                                             ==========  ==========

               Liabilities and Shareholders' Equity

          Accrued liabilities                $    4,330  $      833
          Shareholders' equity:
            Common stock                          2,649       2,631
            Capital surplus                   2,238,740   2,229,078
            Retained earnings                 4,248,716   3,986,735
            Treasury stock                     (221,595)   (221,595)
                                             ----------  ----------
              Total liabilities and 
                shareholders' equity         $6,272,840  $5,997,682
                                             ==========  ==========

                                       37

<PAGE>

<PAGE>

                       Condensed Statement of Condition

                                              Years Ended December 31,
                                           1998          1997         1996

        Equity in undistributed 
         earnings (loss) of subsidiary   $373,263     $343,342     $(24,363)
        Interest and fees on loans          4,432        6,648        8,286
        Interest and dividends on 
         federal funds sold                31,409       31,231       38,501
        Other operating expenses          (46,633)     (30,020)     (26,776)
                                         --------     --------      -------
                Net income (loss)        $362,471     $351,201      $(4,352)
                                         ========     ========      =======

                       Condensed Statement of Cash Flows

                                              Years Ended December 31,
                                           1998          1997         1996

      Cash flows from operating 
      activities:
        Net income (loss)                $362,471     $351,201      $(4,352)
        Adjustments to reconcile net
         income (loss) to net cash 
         provided by operating 
         activities -
           Accretion of bond discount                  (31,058)     (38,483)
           Equity in (income) loss of
             subsidiary                  (373,263)    (343,342)      24,363
           Other                          (12,350)         684       (2,649)
                                         --------     --------     --------
             Net cash used in 
               operating activities       (23,142)     (22,515)     (21,121)
                                         --------     --------     --------
      Cash flows from investing
      activities:
       Proceeds from repayment of 
         ESOP loan                         10,428       26,070       34,673
       Proceeds from maturities of 
         investment securities held
         to maturity                                 1,215,000    1,500,000
       Purchases of investment 
         securities held to maturity                  (599,275)  (1,274,969)
       Net decrease in loans receivable                             120,182
                                         --------     --------     --------
             Net cash provided by 
              investing activities         10,428      641,795      379,886
                                         --------     --------     --------
      Cash flows from financing 
      activities:
        Proceeds from exercise of 
          stock options                     9,681                    23,720
        Dividends paid                   (100,490)    (113,925)     (80,000)
        Purchase of treasury stock                                 (221,595)
                                         --------     --------     --------
             Net cash used in 
              financing activities        (90,809)    (113,925)    (277,875)
                                         --------     --------     --------
      Net (decrease) increase in cash
       and cash equivalents              (103,523)     505,355       80,890

      Cash and cash equivalents at 
       beginning of year                  700,208      194,853      113,963
                                         --------     --------     --------
      Cash and cash equivalents at 
       end of year                       $596,685     $700,208     $194,853
                                         ========     ========     ========


                                    38

<PAGE>


<PAGE>

                        COMMON STOCK INFORMATION

     The common stock of Albion Banc Corp. is traded on the Nasdaq Small Cap
Market under the symbol "ALBC". The Company's common stock closed at $10.00 on
March 1, 1999, on which date, there were approximately 565 stockholders of
record.  Under Federal regulations, the dollar amount of dividends a federal
savings association may pay is dependent upon the association's capital
surplus position and recent net income.  Generally, if an association
satisfies its regulatory capital requirements, it may make dividend payments
up to the limits prescribed in the OTS regulations.  However, institutions
that have converted to the stock form of ownership may not declare or pay a
dividend on, or repurchase any of, its common stock if the effect thereof
would cause the regulatory capital of the institution to be reduced below the
amount required for the liquidation account which was established in
accordance with OTS regulations and the Association's Plan of Conversion. 
Albion Federal is subject to these requirements and regulations.  There are
also certain dividend limitations applicable to the Corporation under Delaware
law.

     The following table sets forth market price and dividend information for
the Corporation's Common Stock for the years 1998 and 1997.

          Fiscal 1998            High     Low      Close    Dividends Paid
          -----------            ----     ---      -----    --------------

          First Quarter         $14.58   $ 9.75   $10.25         $.05

          Second Quarter        $11.00   $ 8.00   $ 8.47          .03

          Third Quarter         $ 9.75   $ 7.75   $ 8.00          .03 

          Fourth Quarter        $11.00   $ 7.63   $ 9.13          .03


          Fiscal 1997            High     Low      Close    Dividends Paid
          -----------            ----     ---      -----    --------------

          First Quarter         $ 6.33   $ 5.50   $ 6.17         $.11

          Second Quarter        $ 7.67   $ 6.00   $ 7.67           --

          Third Quarter         $ 8.58   $ 7.33   $ 8.58          .05

          Fourth Quarter        $13.58   $ 8.83   $13.33           --


                                  39

<PAGE>

<PAGE>

                         DIRECTORS AND OFFICERS


ALBION BANC CORP.                          ALBION FEDERAL SAVINGS
                                           AND LOAN ASSOCIATION

DIRECTORS:                                 DIRECTORS:

James H. Keeler                            James H. Keeler
 Chairman of the Board of the Corporation   Chairman of the Board of the
 and President, Chief Executive Officer     Association and President, Chief
 and majority shareholder of Keeler         Executive Officer and majority 
 Construction Co., Inc.                     shareholder of Keeler Construction
                                            Co., Inc.

Richard A. Pilon                           Richard A. Pilon
 Vice Chairman of the Board of the          Vice Chairman of the Board of the
 Corporation President, Treasurer and       Association, President, Treasurer 
 a majority stockholder of Dale's           and a majority stockholder of 
 Plaza, Inc. and Secretary and Treasurer    Dale's Plaza,Inc. and Secretary
 of Dale & Son Supermarket, Inc. (DBA       and Treasurer of Dale & Son Super- 
 Jubilee Foods).                            market, Inc. (DBA Jubilee Foods).

Dolores L. Giarrizzo                       Dolores L. Giarrizzo
 Retired, prior to that, associated with    Retired, prior to that, associated
 Agway, Inc.                                with Agway, Inc.            

Robert R. Brown II                         Robert R. Brown II
 Self-employed and Vice President of        Self-employed and Vice President 
 Orchard Dale Fruit Farms, Inc.             of Orchard Dale Fruit Farms, Inc.

Harold M. Kludt                            Harold M. Kludt
 Partner and part owner Kludt Bros., Inc.   Partner and part owner Kludt
                                            Bros., Inc.

Chriss M. Andrews                          Chriss M. Andrews
 Owner and President of Barclay & Fowler    Owner and President of Barclay
 Oil Corp.                                  & Fowler Oil Corp.

Greg Speer                                 Greg Speer
 Owner and Chief Executive Officer of       Owner and Chief Executive
 Speer Equipment.                           Officer of Speer Equipment.

OFFICERS:                                  OFFICERS:

Jeffrey S. Rheinwald                       Jeffrey S. Rheinwald
President and Chief Executive Officer      President and Chief Executive
                                            Officer

John S. Kettle                             John S. Kettle
Senior Vice President and Treasurer        Senior Vice President and
                                            Treasurer

Mark F. Reed                               Mark F. Reed
Vice President and Chief Financial Officer Vice President and Chief
                                            Financial Officer
                                   40

<PAGE>

<PAGE>

                             CORPORATE INFORMATION

CORPORATE HEADQUARTERS                   TRANSFER AGENT

48 North Main Street                     American Stock Transfer & Trust Co.
Albion, New York 14411                   6201 15th Avenue
                                         Brooklyn, New York 11219

INDEPENDENT ACCOUNTANTS                  COMMON STOCK

PricewaterhouseCoopers LLP               Traded Over the Counter
Buffalo, New York                        Small Cap Market
                                         Nasdaq Symbol: ALBC

GENERAL COUNSEL

Saperston and Day
Rochester, New York


SPECIAL COUNSEL

Breyer and Associates PC
Washington, D.C.


                              -----------------------


ANNUAL MEETING

     The Annual Meeting of Shareholders will be held Wednesday, April 21, 1999
at 10:00 a.m., Eastern Time, at Tillman's Village Inn, Corner of Routes 98 and
104, Albion, New York.

                                        41

<PAGE>



<PAGE>

                            Exhibit 21

                  Subsidiaries of the Registrant

Parent
------

Albion Banc Corp.

                              Percentage       Jurisdiction or
Subsidiaries (a)             of Ownership   State of Incorporation
----------------             ------------   ----------------------

Albion Federal Savings 
  and Loan Association          100%              United States

New Frontier of Albion (b)      100%              New York

---------------- 
(a)    The operation of the Company's wholly owned subsidiaries are
       included in the Company's Financial Statements contained in the
       Annual Report attached hereto as Exhibit 13.
(b)    New Frontier of Albion is the wholly owned subsidiary of Albion
       Federal Savings and Loan Association.

<PAGE>

<PAGE>

                            Exhibit 23

              Consent of PricewaterhouseCoopers LLP

<PAGE>

<PAGE>

                                                                 Exhibit 23
                                                                 ----------

                       CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 77152) of Albion Banc Corp. of our report dated
February 11, 1999 appearing on page 17 of the 1998 Annual Report to
Shareholders of Albion Banc Corp., which is incorporated in this Annual Report
on Form 10-KSB.


/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Buffalo, New York
March 29, 1999

<PAGE>

<PAGE>

                            Exhibit 27

                     Financial Data Schedule

This schedule contains financial information extracted from the consolidated
financial statements of Albion Banc Corp., Inc. for the year ended December
31, 1998 and is qualified in its entirety by reference to such financial
statements. 

                   Financial Data
                as of or for the year
Item Number    ended December 31, 1998    Item Description
-----------    -----------------------    ----------------

9-03(1)            1,881,421              Cash and due from the Banks
9-03(2)                    0              Interest-bearing deposits
9-03(3)            4,670,000              Federal funds sold - purchased       
                                           securities for resale
9-03(4)                    0              Trading account assets
9-03(6)            3,943,816              Investment and mortgage backed
                                            securities held for sale
9-03(6)            3,821,624              Investment and mortgage backed
                                            securities held to maturity - 
                                            carrying value
9-03(6)            3,869,466              Investment and mortgage backed 
                                            securities held to maturity - 
                                            market value
9-03(7)           58,928,939              Loans
9-03(7)(2)          (267,000)             Allowance for losses
9-03(11)          76,470,253              Total assets
9-03(12)          59,120,090              Deposits
9-03(13)           1,000,000              Short-term borrowings
9-03(15)           1,807,953              Other liabilities
9-03(16)           8,118,734              Long-term debt
9-03(19)                   0              Preferred stock - mandatory 
                                            redemption
9-03(20)                   0              Preferred stock - no mandatory 
                                            redemption
9-03(21)               2,649              Common stocks
9-03(22)           6,420,827              Other stockholders' equity
9-03(23)          76,470,253              Total liabilities and stockholders'
                                             equity
9-04(1)            4,538,145              Interest and fees on loans
9-04(2)              809,146              Interest and dividends on
                                             investments
9-04(4)                    0              Other interest income
9-04(5)            5,347,291              Total interest income
9-04(6)            2,413,807              Interest on deposits
9-04(9)            3,006,786              Total interest expense
9-04(10)           2,340,505              Net interest income
9-04(11)              65,023              Provision for loan losses
9-04(13)(h)                0              Investment securities gains/(losses)
9-04(14)           2,073,046              Other expenses
9-04(15)             570,471              Income/loss before income tax
9-04(17)             570,471              Income/loss before extraordinary
                                             items
9-04(18)                   0              Extraordinary items, less tax
9-04(19)                   0              Cumulative change in accounting
                                             principles
9-04(20)             362,471              Net income or loss
9-04(21)                 .49              Earnings per share - basic
9-04(21)                 .47              Earnings per share - diluted
I.B.5                   3.37              Net yield - interest earning assets
                                             - actual
III.C.1.(a)          262,000              Loans on non-accrual
III.C.1.(b)                0              Accruing loans past due 90 days or
                                             more
III.C.2.(c)                0              Troubled debt restructuring

<PAGE>

<PAGE>

III.C.2                    0              Potential problem loans
IV.A.1               276,300              Allowance for loan loss - beginning
                                             of period
IV.A.2                74,323              Total chargeoffs
IV.A.3                     0              Total recoveries
IV.A.4               267,000              Allowance for loan loss - end of
                                             period
IV.B.1               267,000              Loan loss allowance to allocated to
                                             domestic loans
IV.B.2                     0              Loan loss allowance to foreign loans
IV.B.3                     0              Loan loss allowance - unallocated

<PAGE>