<PAGE>

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

                            (Mark One)

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

     For the quarterly period ended         March 31, 1997          
                                    ------------------------------
                                or

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

     For the transition period from _____________ to ________________

               Commission File Number:    0-15025
                                      -------------------

                      PROGRESSIVE BANK, INC.
                      ----------------------
      (Exact name of registrant as specified in its charter)


           New York                                 14-1682661     
-------------------------------                ------------------
(State or other jurisdiction of                (I.R.S. Employer    
incorporation or organization)                 Identification No.) 



             1301 Route 52, Fishkill, New York 12524
       ---------------------------------------------------
       (Address of principal executive offices) (Zip Code)

                          (914) 897-7400       
       ---------------------------------------------------
       (Registrant's telephone number, including area code)

                          Not Applicable       
       ---------------------------------------------------
(Former name, former address and former fiscal year, if changed since last 
report.)

     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 x   No                    
                                                   ---    ---

     Indicate the number of shares outstanding of each of the issuer's 
classes of common stock, as of May 8, 1997: 3,809,884 shares.

<PAGE>

                        TABLE OF CONTENTS


                  PART I - FINANCIAL INFORMATION


                                                              Page
Item 1. Financial Statements (Unaudited)

   Consolidated Balance Sheets as of March 31, 1997
     and December 31, 1996 . . . . . . . . . . . . . . . . . . .1

   Consolidated Statements of Income for the Three
     Months Ended March 31, 1997 and March 31, 1996. . . . . . .2

   Consolidated Statements of Shareholders' Equity for the Three
     Months Ended March 31, 1997 and March 31, 1996. . . . . . .3

   Consolidated Statements of Cash Flows for the Three
     Months Ended March 31, 1997 and March 31, 1996. . . . . . .4

   Notes to Consolidated Interim Financial Statements. . . . . .5

Item 2. Management's Discussion and Analysis of Financial 
            Condition and Results of Operations. . . . . . . 6-16



                   PART II - OTHER INFORMATION


Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . 17

Item 2. Changes in Securities. . . . . . . . . . . . . . . . . 17

Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . 17

Item 4. Submission of Matters to a Vote of Security Holders. . 17

Item 5. Other Information. . . . . . . . . . . . . . . . . . . 17

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 17

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Exhibit I. . . . . . . . . . . . . . . . . . . . . . . . . . . 19

<PAGE>

                           CONSOLIDATED BALANCE SHEETS
                     PROGRESSIVE BANK, INC. AND SUBSIDIARY 
             (IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                                MARCH 31,     DECEMBER 31,
                                                                  1997           1996
                                                               ----------------------------

ASSETS

<S>                                                            <C>            <C>
  Cash and due from banks. . . . . . . . . . . . . . . . . . . . $ 13,432       15,070

  Federal funds sold . . . . . . . . . . . . . . . . . . . . . .   25,700       30,500

  Securities:

    Available for sale, at fair value. . . . . . . . . . . . . .  134,366      137,792

    Held to maturity, at amortized cost (fair value of 
                $84,046 in 1997 and $72,315 in 1996) . . . . . .   85,347       72,614
-----------------------------------------------------------------------------------------
    Total securities . . . . . . . . . . . . . . . . . . . . . .  219,713      210,406
-----------------------------------------------------------------------------------------
  Loans, net:

    Mortgage loans . . . . . . . . . . . . . . . . . . . . . . .  517,496      517,077

    Other loans. . . . . . . . . . . . . . . . . . . . . . . . .   77,393       75,708

    Allowance for loan losses. . . . . . . . . . . . . . . . . .   (9,421)      (9,231)
-----------------------------------------------------------------------------------------
      Total loans, net . . . . . . . . . . . . . . . . . . . . .  585,468      583,554
-----------------------------------------------------------------------------------------
  Accrued interest receivable. . . . . . . . . . . . . . . . . .    5,676        6,068

  Other real estate, net . . . . . . . . . . . . . . . . . . . .    1,318        2,270

  Premises and equipment, net  . . . . . . . . . . . . . . . . .    9,717       10,323

  Deferred income taxes, net . . . . . . . . . . . . . . . . . .    6,667        6,134

  Intangible assets  . . . . . . . . . . . . . . . . . . . . . .    8,406        8,755

  Other assets . . . . . . . . . . . . . . . . . . . . . . . . .    1,570        2,100
-----------------------------------------------------------------------------------------
      TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . $877,667      875,180
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

  Liabilities:

   Savings and time deposits . . . . . . . . . . . . . . . . . . $738,731      736,579

   Demand deposits . . . . . . . . . . . . . . . . . . . . . . .   56,159       57,622

   Accrued expenses and other liabilities. . . . . . . . . . . .    9,452        8,437
-----------------------------------------------------------------------------------------
    TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . .  804,342      802,638
-----------------------------------------------------------------------------------------
  Shareholders' equity:

   Preferred stock ($1.00 par value; 5,000,000 shares
    authorized; none issued) . . . . . . . . . . . . . . . . . .       --           --

   Common stock ($1.00 par value; 15,000,000 shares
    authorized; 4,427,999 shares issued) . . . . . . . . . . . .    4,428        4,428

   Paid-in capital . . . . . . . . . . . . . . . . . . . . . . .   25,879       25,879

   Retained earnings . . . . . . . . . . . . . . . . . . . . . .   53,334       51,882

   Treasury stock, at cost (603,115 shares in 1997
     and 603,315 shares in 1996) . . . . . . . . . . . . . . . .  (10,412)     (10,416)

   Net unrealized gain on securities available for sale, net of 
     taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .       96          769
-----------------------------------------------------------------------------------------
    Total shareholders' equity . . . . . . . . . . . . . . . . .   73,325       72,542
-----------------------------------------------------------------------------------------
    Total liabilities and shareholders' equity . . . . . . . . . $877,667      875,180
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated interim financial statements.


                                       1

<PAGE>

                           CONSOLIDATED STATEMENTS OF INCOME
                         PROGRESSIVE BANK, INC. AND SUBSIDIARY
                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                       (UNAUDITED)


<TABLE>
<CAPTION>

                                                                          FOR THE
                                                                     THREE MONTHS ENDED
                                                                         MARCH 31,
                                                                     1997           1996
                                                                 --------------------------


<S>                                                               <C>               <C>
INTEREST AND DIVIDEND INCOME:
  Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . .   $11,320          10,491

  Other loans. . . . . . . . . . . . . . . . . . . . . . . . . .     1,818           1,510

  Securities . . . . . . . . . . . . . . . . . . . . . . . . . .     3,448           2,495

  Federal funds sold . . . . . . . . . . . . . . . . . . . . . .       393             188
-------------------------------------------------------------------------------------------
   Total interest and dividend income. . . . . . . . . . . . . .    16,979          14,684
-------------------------------------------------------------------------------------------
INTEREST EXPENSE:

  Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .     8,567           7,343

  Other borrowings . . . . . . . . . . . . . . . . . . . . . . .        --              30
-------------------------------------------------------------------------------------------
   Total interest expense. . . . . . . . . . . . . . . . . . . .     8,567           7,373
-------------------------------------------------------------------------------------------
   Net interest income . . . . . . . . . . . . . . . . . . . . .     8,412           7,311

Provision for loan losses. . . . . . . . . . . . . . . . . . . .       600             300
-------------------------------------------------------------------------------------------
   Net interest income after provision for loan losses . . . . .     7,812           7,011
-------------------------------------------------------------------------------------------

OTHER INCOME:

  Deposit service fees . . . . . . . . . . . . . . . . . . . . .       577             595

  Other service fees . . . . . . . . . . . . . . . . . . . . . .       195             150

  Net gain on sales of loans . . . . . . . . . . . . . . . . . .        65              90

  Other non-interest income. . . . . . . . . . . . . . . . . . .        83              71
-------------------------------------------------------------------------------------------
   Total other income. . . . . . . . . . . . . . . . . . . . . .       920             906
-------------------------------------------------------------------------------------------
   Net interest and other income . . . . . . . . . . . . . . . .     8,732           7,917
-------------------------------------------------------------------------------------------
OTHER EXPENSE:

  Salaries and employee benefits . . . . . . . . . . . . . . . .     2,846           2,452

  Occupancy and equipment. . . . . . . . . . . . . . . . . . . .       689             732

  Net cost of other real estate. . . . . . . . . . . . . . . . .       (12)             54

  Amortization of intangible assets. . . . . . . . . . . . . . .       349              --

  Other non-interest expense . . . . . . . . . . . . . . . . . .     1,393           1,400
-------------------------------------------------------------------------------------------
   Total other expense . . . . . . . . . . . . . . . . . . . . .     5,265           4,638
-------------------------------------------------------------------------------------------
   Income before income taxes. . . . . . . . . . . . . . . . . .     3,467           3,279

Income tax expense . . . . . . . . . . . . . . . . . . . . . . .     1,364           1,357
-------------------------------------------------------------------------------------------
   Net income. . . . . . . . . . . . . . . . . . . . . . . . . .    $2,103           1,922
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net income per common share(1) . . . . . . . . . . . . . . . . .    $ 0.55            0.49
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Weighted average common shares outstanding(1). . . . . . . . . .     3,825           3,945
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>

(1) The 1996 amounts were adjusted for the three-for-two stock split 
    completed in December 1996. See note 2.



See accompanying notes to consolidated interim financial statements.


                                       2


<PAGE>

                              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                  PROGRESSIVE BANK, INC. AND SUBSIDIARY
                            (IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
                                                (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                                        Net

                                         Common Stock                                                Unrealized
                                 --------------------------
                                   Shares                     Paid-in      Retained     Treasury      Gain on

                                Outstanding(1)    Amount(1)   Capital(1)   Earnings      Stock       Securities      Total
----------------------------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>            <C>         <C>          <C>           <C>         <C>
Balance at December 31, 1996 .   3,824,684         $4,428      25,879       51,882      (10,416)             769     72,542

Net income . . . . . . . . . .                         --          --        2,103           --               --      2,103
Cash dividends declared               
 ($0.17 per share) . . . . . .                         --          --         (650)          --               --       (650)

Stock options exercised. . . .         200             --          --           (1)           4               --          3

Net change in unrealized gain       
 on securities available for sale,    
 net of taxes. . . . . . . . .                         --          --           --           --             (673)      (673)
----------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997. . .   3,824,884         $4,428      25,879       53,334      (10,412)              96     73,325
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 .   3,942,441         $4,428      25,879       44,880       (7,655)           1,126     68,658

Net income . . . . . . . . . .                         --          --        1,922           --               --      1,922

Cash dividends declared               
 ($0.13 per share)(1). . . . .                         --          --         (526)          --               --       (526)

Stock options exercised. . . .       3,498             --          --          (13)          55               --         42

Net change in unrealized gain       
 on securities available for sale,    
 net of taxes. . . . . . . . .                         --          --           --           --             (497)      (497)
----------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1996. . .   3,945,939         $4,428      25,879       46,263       (7,600)             629     69,599
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The 1996 amounts were adjusted for the three-for-two stock split 
    completed in December 1996. See note 2.




See accompanying notes to consolidated interim financial statements. 


                                          3

<PAGE>


                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    PROGRESSIVE BANK, INC. AND SUBSIDIARY
                                                (IN THOUSANDS)
                                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                               FOR THE THREE MONTHS ENDED
                                                                        MARCH 31,
                                                                  1997              1996
                                                            ---------------------------------

OPERATING ACTIVITIES:

<S>                                                            <C>               <C>
   Net income. . . . . . . . . . . . . . . . . . . . . . .       $ 2,103             1,922
   Adjustments to reconcile net income to net cash provided by                  
    operating activities:
     Provision for loan losses . . . . . . . . . . . . . .           600               300
     Provision for losses on other real estate . . . . . .            --                75
     Depreciation expense. . . . . . . . . . . . . . . . .           209               238
     Net gain on sales of loans. . . . . . . . . . . . . .           (65)              (90)
     Amortization of net premiums (discounts) on securities           16               (22)
     Amortization of net deferred loan origination fees. .           (67)             (203)
     Net decrease (increase) in accrued interest receivable          392               (81)
     Gain on sales of premises and equipment . . . . . . .          (186)               --
     Gain on sales of other real estate. . . . . . . . . .          (351)              (31)
     Amortization of intangible assets . . . . . . . . . .           349                --
     Net increase in accrued expenses and other liabilities        1,015            17,920
     Other, net. . . . . . . . . . . . . . . . . . . . . .           411            (1,682)
--------------------------------------------------------------------------------------------
      Net cash provided by operating activities. . . . . .         4,426            18,346
--------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
   Purchases of securities:
      Securities available for sale. . . . . . . . . . . .       (24,602)          (38,665)
      Securities held to maturity. . . . . . . . . . . . .       (17,517)          (33,164)
   Proceeds from principal payments, maturities and calls of 
      securities:
      Securities available for sale. . . . . . . . . . . .        26,905            13,861
      Securities held to maturity. . . . . . . . . . . . .         4,748             2,126
   Disbursements for loan originations, net of principal 
      collections. . . . . . . . . . . . . . . . . . . . .        (6,084)           (8,258)
   Proceeds from sales of loans. . . . . . . . . . . . . .         3,373             1,377
   Purchases of premises and equipment . . . . . . . . . .           (67)              (88)
   Proceeds from sales of premises and equipment . . . . .           680                --
   Proceeds from sales of other real estate. . . . . . . .         1,658                64
--------------------------------------------------------------------------------------------
   Net cash used in investing activities . . . . . . . . .       (10,906)          (62,747)
--------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
   Net decrease in time deposits . . . . . . . . . . . . .        (7,047)          (14,890)
   Net increase in other deposits. . . . . . . . . . . . .         7,736            20,469
   Cash dividends paid on common stock . . . . . . . . . .          (650)             (526)
   Net proceeds on exercises of stock options. . . . . . .             3                42
   Increase in other borrowings. . . . . . . . . . . . . .            --            17,900
--------------------------------------------------------------------------------------------
        Net cash provided by financing activities. . . . .            42            22,995
--------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents. . . . . . . . .        (6,438)          (21,406)
Cash and cash equivalents at beginning of period . . . . .        45,570            37,893
--------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period . . . . . . . .       $39,132            16,487
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
   Interest paid . . . . . . . . . . . . . . . . . . . . .       $ 8,614             7,252
   Income taxes paid . . . . . . . . . . . . . . . . . . .           134               390
   Loans transferred to other real estate. . . . . . . . .           505               826
   Loans originated to finance sales of other real estate.           170                96
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated interim financial statements.



                                        4

<PAGE>


        NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
              Progressive Bank, Inc. and Subsidiary
                           (Unaudited)

Note 1: Basis of Presentation

The unaudited consolidated financial statements included herein have been 
prepared by Progressive Bank, Inc. ("Progressive," or, together with its 
subsidiary, the "Company") in conformity with generally accepted accounting 
principles for interim financial statements.  Progressive, a New York 
corporation, is a bank holding company whose sole subsidiary is Pawling 
Savings Bank ("Pawling"), a New York state-chartered stock savings bank. In 
the opinion of management, the unaudited consolidated financial statements 
include all adjustments, consisting of normal recurring accruals, necessary 
for a fair presentation of the consolidated interim financial position and 
results of operations for the periods presented.  Certain information and 
footnote disclosures normally included in accordance with generally accepted 
accounting principles have been condensed or omitted pursuant to the rules 
and regulations of the Securities and Exchange Commission. 

The unaudited consolidated interim financial statements presented herein 
should be read in conjunction with the annual consolidated financial 
statements of the Company for the fiscal year ended December 31, 1996.

Note 2: Net Income Per Common Share

Net income per common share is based on net income divided by the weighted 
average common shares outstanding during the period.  Outstanding common 
stock equivalents (stock options) did not have a significant dilutive effect 
upon the net income per share computation.

All 1996 share and per share data have been adjusted to give retroactive 
effect to the three-for-two stock split completed in December 1996. The split 
resulted in the issuance of 1,476,025 additional common shares. The total 
par value for these shares was retroactively transferred to common stock from 
paid-in-capital.

In February 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," 
which requires presentation of both basic EPS and diluted EPS by all entities 
with complex capital structures. Basic EPS, which replaces primary EPS, 
excludes dilution and is computed by dividing income available to common 
shareholders by the weighted average number of common shares outstanding for 
the period. Diluted EPS reflects the potential dilution that could occur if 
securities or other contracts to issue common stock (such as the Company's 
stock options) were exercised or converted into common stock or resulted in 
the issuance of common stock that then shared in the earnings of the entity.  
As required, the Company will adopt SFAS No. 128 in the fourth quarter of 
1997 and will present EPS data for all periods in accordance with the new 
statetment.  


                                       5

<PAGE>

Item 2.

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

                                   GENERAL

  The financial condition and operating results of the Company are primarily 
dependent upon the financial condition and operating results of Pawling. The 
Company is engaged principally in the business of attracting retail deposits 
from the general public and the business community and investing those funds 
in residential and commercial mortgages, consumer loans and securities. 

  The operating results of the Company depend primarily on its net interest 
income after provision for loan losses.  Net interest income is the 
difference between interest and dividend income on earning assets, primarily 
loans and securities, and interest expense on deposits and other borrowings.  
Net income of the Company is also affected by other income, which includes 
service fees and net gain (loss) on securities and  loans; other expense, 
which includes salaries and employee benefits and other operating expenses; 
and federal and state income taxes.

                               FINANCIAL CONDITION

  Total assets of the Company were $877.7 million at March 31, 1997 as 
compared to $875.2 million at December 31, 1996, an increase of $2.5 million 
or 0.3%.  

  Total securities increased by $9.3 million, consisting of a $12.7 million 
increase in securities held to maturity and a $3.4 million decrease in 
securities available for sale. The increase in securities held to maturity 
primarily reflects $17.5 million in purchases of fixed rate five- and 
seven-year balloon mortgage-backed securities, partially offset by principal 
paydowns of $4.7 million. The decrease in securities available for sale 
primarily reflects maturities, calls and principal paydowns of $26.9 million, 
partially offset by $24.6 million in purchases of U.S. government agencies 
and U.S. Treasury notes.

  Net loans totaled $585.5 million at March 31, 1997 compared to $583.6 
million at December 31, 1996, an increase of $1.9 million or 0.3%.   The 
residential mortgage segment of the loan portfolio increased $370,000 (net of 
loan sales to the secondary market of $3.3 million) from $429.2 million at 
December 31, 1996 to $429.5 million at March 31, 1997. The commercial 
mortgage segment of the loan portfolio decreased $320,000 or 0.4%, from $81.1 
million at December 31, 1996 to $80.8 million at March 31, 1997.  The 
construction mortgage segment of the loan portfolio increased $225,000 or 
2.5%, from $8.9 million at December 31, 1996 to $9.1 million at March 31, 
1997. Other loans increased $1.7 million or 2.3% during the first three 
months of 1997 from $72.5 million to $74.2 million, primarily due to 
increases in business installment loans and automobile financing.

  The $689,000 increase in deposits during the first quarter of 1997 was 
primarily attributable to a $16.0 million increase in money market accounts, 
partially offset by a decrease in time deposits of $7.0 million, a decline in 
savings accounts of $6.8 million and a decline of $1.5 million in demand 
deposits.

  Shareholders' equity at March 31, 1997 was $73.3 million, an increase of 
$783,000 or 1.1% from December 31, 1996.  This increase primarily reflects 
net income of $2.1 million, partially offset by cash dividends of $650,000. 
Shareholders' equity, as a percent of total assets, was 8.35% at March 31, 
1997 compared to 8.29% at December 31, 1996.  Book value per share increased 
to $19.17 at March 31, 1997 from $18.97 at December 31, 1996.

                                       6

<PAGE>


  The following table shows the Company's average consolidated balances, 
interest income and expense, and average rates (annualized) for the periods 
indicated:


<TABLE>
<CAPTION>

                                                   Three Months Ended                  Three Months Ended
                                                     March 31, 1997                     March 31, 1996
                                           -------------------------------     --------------------------------
                                             Average              Average        Average              Average
                                             Balance   Interest    Rate          Balance   Interest     Rate
                                           --------------------------------------------------------------------
                                                                  (Dollars in thousands)

Interest-earning assets:
<S>                                          <C>      <C>         <C>            <C>         <C>      <C>
   Mortgage loans (1). . . . . . .          $521,181    11,320     8.69%         $481,895   10,491      8.71%

   Other loans (1) . . . . . . . .            73,130     1,818     9.94            59,754    1,510     10.11

   Mortgage-backed securities (2).           122,783     2,101     6.84            88,391    1,478      6.69

   U.S. Treasury and agencies,
    corporate and other securities (2,3)      86,766     1,347     6.21            63,388    1,017      6.42

   Federal funds sold. . . . . . .            30,687       393     5.12            14,292      188      5.26
----------------------------------------------------------------------------------------------------------------
    Total interest-earning assets            834,547    16,979     8.14%          707,720   14,684      8.30%

Non-interest-earning assets. . . .            46,065                               44,313
----------------------------------------------------------------------------------------------------------------
    Total assets . . . . . . . . .          $880,612                             $752,033
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

Interest-bearing liabilities:

  Time deposits. . . . . . . . . .          $370,489     4,906     5.30%         $339,697    4,708      5.54%

  Other deposits (4) . . . . . . .           366,049     3,661     4.00           268,441    2,635      3.93

  Other borrowings . . . . . . . .                --        --       --             2,226       30      5.39
----------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities        736,538     8,567     4.65%          610,364    7,373      4.83%

Non-interest-bearing liabilities .            71,140                               72,540
----------------------------------------------------------------------------------------------------------------
   Total liabilities . . . . . . .           807,678                              682,904

Shareholders' equity . . . . . . .            72,934                               69,129
----------------------------------------------------------------------------------------------------------------
   Total liabilities and shareholders'        
           equity. . . . . . . . .          $880,612                             $752,033
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Net earning balance. . . . . . . .          $ 98,009                            $  97,356
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Net interest income. . . . . . . .                       8,412                               7,311
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Interest rate spread (5) . . . . .                                 3.49%                                3.47%

Net yield on interest-earning
  assets (margin) (6). . . . . . .                                 4.03%                                4.13%
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Interest income on loans does not include interest on non-accrual loans; 
     however, such loans have been included in the calculation of the average 
     balances outstanding.
(2)  Average balances have been calculated based on amortized cost.
(3)  Yields on tax-exempt obligations have not been computed on a 
     tax-equivalent basis, as the effect thereof is not material.
(4)  Includes NOW accounts, passbook and statement savings accounts, and 
     money market accounts.
(5)  Represents average rate on total interest-earning assets less average 
     rate on total interest-bearing liabilities.
(6)  Represents net interest income divided by total average interest-earning 
     assets.


                                       7

<PAGE>

RESULTS OF OPERATIONS

GENERAL

  The Company's net income was $2.1 million or $0.55 per share for the 
quarter ended March 31, 1997 as compared to $1.9 million or $0.49 per share 
for the same three-month period in 1996.  The $181,000 or 9.4% increase in 
net income was primarily the result of a $1.1 million increase in net 
interest income, partially offset by a $627,000 increase in other expense and 
a $300,000 increase in the provision for loan losses.  

NET INTEREST INCOME

  Net interest income increased $1.1 million, or 15.1%, to $8.4 million for 
the three-month period ended March 31, 1997 compared to $7.3 million for the 
same period in 1996.  The components of net interest income are interest and 
dividend income, which increased $2.3 million or 15.6%, and interest on 
deposits and other borrowings, which increased $1.2 million or 16.2%.  The 
Company's interest rate spread widened by 2 basis points from 3.47% for the 
three months ended March 31, 1996 to 3.49% for the same period in 1997, 
attributable to an 18 basis point decrease in the cost of interest-bearing 
liabilities, substantially offset by a 16 basis point decrease in the average 
yield on interest-earning assets.  The Company's net interest margin narrowed 
by 10 basis points from 4.13% for the three months ended March 31, 1996 to 
4.03% for the same period in 1997.  

  Interest on loans increased by $1.1 million, or 9.5%, primarily reflecting 
increases in the volume of outstanding loans, partially offset by the 
decrease in the average yield. Average mortgage and other loans increased by 
$52.7 million for the quarter as compared to the same quarter in the previous 
year. 

  Interest on mortgage-backed securities increased $623,000, or 42.2%,  due 
to an increase of $34.4 million in the average  balance outstanding and an 
increase of 15 basis points in the average yield earned on the portfolio. The 
higher yield was attributable to recent purchases of securities and upward 
adjustments on adjustable rate mortgage-backed securities.

  Interest and dividends on U.S. Treasury and agencies, corporate and other 
securities increased by $330,000, or 32.4%, primarily reflecting a $23.4 
million increase in the average balance outstanding, primarily due to 
purchases of U.S. Treasury and agency securities,  partially offset by 
maturities and calls.  The average portfolio yield declined by 21 basis 
points, primarily reflecting maturities and calls of higher yielding 
securities.

  Interest on federal funds sold increased $205,000 primarily reflecting a 
$16.4 million increase in the average balance outstanding, partially offset 
by a decrease in the average yield. 

  The $1.2 million increase in interest expense was primarily due to a $128.4 
million increase in average interest-bearing deposits primarily due to the 
acquisition of the Rockland County branches during the second quarter of 
1996, partially offset by the decline in the overall cost of funds.


                                       8

<PAGE>


PROVISION FOR LOAN LOSSES

  The provision for loan losses is a charge against income which increases 
the allowance for loan losses. The adequacy of the allowance for loan losses 
is evaluated periodically and is determined based on management's judgment 
concerning the amount of risk and potential for loss inherent in the 
portfolio. Management's judgment is based upon a number of factors including 
a review of non-performing and other classified loans, the value of 
collateral for such loans, historical loss experience, changes in the nature 
and volume of the loan portfolio, and current economic conditions.

  For the three-month period ended March 31, 1997, the provision for loan 
losses was $600,000, an increase of $300,000 compared to the provision of 
$300,000 for the comparable period in 1996.  The higher provision was made to 
increase the allowance for loan losses in line with the Company's loan growth 
and changes in portfolio mix. The allowance for loan losses represented 1.6% 
of total loans at March 31, 1997 compared to 1.5% a year earlier. 
Non-performing loans were $5.5 million, or 0.92% of total loans, at March 31, 
1997 compared to $6.2 million, or 1.13% of total loans, at March 31, 1996 and 
$4.8 million, or 0.81% of total loans, at December 31, 1996. 

  In determining the allowance for loan losses, management also considers the 
level of slow paying loans, or loans where the borrower is contractually past 
due 30 to 89 days or more, but has not yet been placed on non-accrual status. 
 At March 31, 1997, slow paying loans amounted to $4.4 million as compared to 
$4.0 million at March 31, 1996 and $6.3 million at December 31, 1996.

  Loan loss provisions in future periods will continue to depend on trends in 
the credit quality of the Company's loan portfolio, loan mix and the level of 
loan charge-offs which, in turn, will depend in part on the economic and real 
estate market conditions prevailing within the Company's lending region.  If 
general economic conditions or real estate values deteriorate, the level of 
delinquencies, non-performing loans and charge-offs may increase and higher 
provisions for loan losses may be necessary.


                                       9

<PAGE>

  Activity in the allowance for loan losses for the periods indicated is 
summarized as follows:


<TABLE>
<CAPTION>


                                                                     THREE MONTHS ENDED
                                                                          MARCH 31,
                                                                    1997            1996
                                                                  -------------------------
                                                                    (Dollars in thousands)

<S>                                                               <C>            <C>
Balance at beginning of period . . . . . . . . . . . . . . . . .   $9,231           8,033

Provision charged to operations. . . . . . . . . . . . . . . . .      600             300
-------------------------------------------------------------------------------------------
                                                                    9,831           8,333
-------------------------------------------------------------------------------------------
Loans charged-off:

  Mortgage loans:

   Residential . . . . . . . . . . . . . . . . . . . . . . . . .     (277)           (214)

   Construction and land . . . . . . . . . . . . . . . . . . . .      (41)             --

  Other loans:

   Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . .     (111)            (37)
-------------------------------------------------------------------------------------------
      Total charge-offs. . . . . . . . . . . . . . . . . . . . .     (429)           (251)
-------------------------------------------------------------------------------------------
Recoveries:

  Mortgage loans:

   Residential . . . . . . . . . . . . . . . . . . . . . . . . .       --              48

   Commercial. . . . . . . . . . . . . . . . . . . . . . . . . .       --              31

   Construction and land . . . . . . . . . . . . . . . . . . . .       --             101

  Other loans:

   Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . .       16              12

   Commercial. . . . . . . . . . . . . . . . . . . . . . . . . .        3               1
-------------------------------------------------------------------------------------------
      Total recoveries . . . . . . . . . . . . . . . . . . . . .       19             193
-------------------------------------------------------------------------------------------
Net charge-offs. . . . . . . . . . . . . . . . . . . . . . . . .     (410)            (58)
-------------------------------------------------------------------------------------------
Balance at end of period . . . . . . . . . . . . . . . . . . . .   $9,421           8,275
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------


Ratio of net charge-offs to average total loans
  outstanding (annualized) . . . . . . . . . . . . . . . . . . .     0.28%           0.04%
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>

                                       10

<PAGE>

  The following table sets forth information with respect to non-performing 
assets and certain asset quality ratios at or for the dates indicated:

<TABLE>
<CAPTION>

                                                                       MARCH 31,         DECEMBER 31,
                                                                  1997          1996        1996
                                                            -------------------------------------------
                                                                          (Dollars in thousands)


NON-PERFORMING LOANS:

  Mortgage loans:

<S>                                                            <C>            <C>         <C>
   Residential properties. . . . . . . . . . . . . . . . . . . . $4,608         2,608       3,769

   Commercial properties . . . . . . . . . . . . . . . . . . . .    652         2,357         714

   Construction and land . . . . . . . . . . . . . . . . . . . .    138         1,173         215
------------------------------------------------------------------------------------------------------
                                                                  5,398         6,138       4,698

  Other loans. . . . . . . . . . . . . . . . . . . . . . . . . .     85            29         101
------------------------------------------------------------------------------------------------------
      Total non-performing loans (1) . . . . . . . . . . . . . .  5,483         6,167       4,799

OTHER REAL ESTATE, NET . . . . . . . . . . . . . . . . . . . . .  1,318         1,024       2,270
------------------------------------------------------------------------------------------------------
      Total non-performing assets. . . . . . . . . . . . . . . . $6,801         7,191       7,069
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------

Ratio of non-performing loans to total loans . . . . . . . . . .   0.92%         1.13%       0.81%

Ratio of non-performing assets to total assets . . . . . . . . .   0.77          0.92        0.81

Ratio of allowance for loan losses to total
  non-performing loans . . . . . . . . . . . . . . . . . . . . . 171.82        134.18      192.35
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes loans on non-accrual status of $5.3 million, $6.0 million and 
    $4.6 million at March 31, 1997, March 31, 1996, and December 31, 1996, 
    respectively.  The remaining balance consists of loans greater than 90 
    days past due and still accruing. The Company generally stops accruing 
    interest on loans that are delinquent over 90 days.

  The loan portfolio also includes certain restructured loans that are 
current in accordance with modified payment terms and, accordingly, are not 
included in the preceding table.  These restructured loans are loans for 
which concessions, including reduction of interest rates to below-market 
levels or deferral of payments, have been granted due to the borrowers' 
financial condition.  Restructured loans totaled $568,000 at March 31, 1997, 
compared to $1.3 million at March 31, 1996 and $571,000 at December 31, 1996.

   The Company's recorded investment in impaired loans consisted of 
non-accrual commercial mortgage and construction loans totaling $790,000 at 
March 31, 1997 and $929,000 at December 31, 1996.  Total impaired loans at 
March 31, 1997 consist of (i) loans of $149,000 for which there was an 
allowance for loan impairment of $28,000 determined in accordance with SFAS 
No. 114 and (ii) loans of $641,000 for which such an allowance was not 
required due to the adequacy of related collateral values and prior 
charge-offs. The average recorded investment in impaired loans was $860,000 
for the first quarter of 1997 and $3.4 million for the first quarter of 1996. 
 Interest income on impaired loans is recognized on a cash basis and was not 
significant for the quarters ended March 31, 1997 and 1996.


                                       11

<PAGE>

OTHER INCOME

  Sources of other income include deposit and other service fees, net gain 
(loss) on securities, net gain (loss) on sales of loans, and other 
non-interest income.  For the three-month period ended March 31, 1997, other 
income increased by $14,000 to $920,000 from $906,000 for the same period in 
1996.

  Deposit service fees, the largest component of other income, decreased by 
$18,000, or 3.0%, to $577,000 for the three-month period ended March 31, 1997 
from $595,000 for the same period in 1996. Other service fees increased to 
$195,000 for the quarter ended March 31, 1997 from $150,000 for the previous 
year. 

  Net gain on sales of loans was $65,000 for  the three-month period ended 
March 31, 1997 compared to $90,000 during the same period in 1996. Sales of 
mortgage loans in both periods reflect the Company's current practice of 
selling newly originated fixed rate mortgage loans.
 
OTHER EXPENSE

  Other expense consists of general and administrative expenses incurred in 
managing the core business of the Company and the net costs associated with 
managing and selling other real estate properties.  For the quarter ended 
March 31, 1997, other expense increased by $627,000, or 13.5%, to $5.3 
million from $4.6 million for 1996, primarily reflecting increases in 
salaries and employee benefits expense, as well as amortization of intangible 
assets in 1997.

  Salaries and employee benefits, the largest component of other expense, 
increased by $394,000, or 16.1%, to $2.8 million for the three-month period 
ended March 31, 1997 from $2.5 million for the same period in 1996. The 
increase primarily reflects additional expense due to the April 1996 
acquisition of two branches, as well as the hiring of additional staff and 
normal merit and promotional salary increases. 

  Occupancy and equipment costs decreased $43,000, or 5.9%, to $689,000 for 
the three-month period ended March 31, 1997 from the first quarter of 1996, 
primarily due to decreases in depreciation and equipment rental and repair 
expenses.

  The net cost of other real estate decreased $66,000 to ($12,000) for the 
quarter ended March 31, 1997 from $54,000 for the prior year quarter, 
primarily reflecting a decrease in the provision for losses on other real 
estate and increased gains on sales of properties, partially offset by 
increased holding costs.      
  
  Amortization of intangible assets totaled $349,000 for the first quarter of 
1997, primarily reflecting the amortization of the purchase premium as a 
result of the acquisition of branches in April 1996. 

  Other non-interest expense remained virtually unchanged at $1.4 million for 
both quarters in 1997 and 1996. Increases in advertising expense, data 
processing expense and miscellaneous operating expenses  were offset by a 
$186,000 gain on sale of the Newburgh Operations building in January 1997. 

INCOME TAX EXPENSE

  For both three-month periods ended March 31, 1997 and 1996, income tax 
expense was $1.4 million (effective tax rates of 39.3% and 41.4%, 
respectively). 

  The Company's net deferred tax assets were $6.7 million at March 31, 1997, 
compared to $6.1 million at December 31, 1996.  Based on recent historical 
and anticipated future pre-tax earnings, management believes it is more 
likely than not that the Company will realize its net deferred tax assets.

                                       12

<PAGE>

RATIOS

  Results of operations can be measured by various ratios.  Two widely 
recognized performance indicators are the return on assets and the return on 
equity.  The following table sets forth these performance ratios for the 
Company on an annualized basis:

<TABLE>
<CAPTION>


                                             THREE MONTHS ENDED            YEAR ENDED
                                                  MARCH 31,               DECEMBER 31,
                                             1997           1996              1996
                                         ------------------------------------------------

Return on assets:

<S>                                        <C>              <C>            <C>
 Net income divided by average
  total assets . . . . . . . . . . .         0.96%          1.02%             1.09%


Return on equity:

 Net income divided by average equity (1).  11.53%         11.12%             13.11%
</TABLE>


(1)  Average equity includes the effect of the net unrealized gain (loss) on 
     securities available for sale, net of taxes.

                            LIQUIDITY

 Liquidity is defined as the ability to generate sufficient cash flow to meet 
all present and future funding commitments.  Management monitors the 
Company's liquidity position on a daily basis and evaluates its ability to 
meet depositor withdrawals and to make new loans and investments as 
opportunities arise.  The Asset/Liability Management Committee, consisting of 
members of senior management, is responsible for setting general guidelines 
to ensure maintenance of prudent levels of liquidity.  The mix of liquid 
assets and various deposit products, at any given time, reflects management's 
view of the most efficient use of these sources of funds.

 The Company's cash flows are classified according to their source - 
operating activities, investing activities, and financing activities.  
Further details concerning the Company's cash flows are provided in the 
"Consolidated Statements of Cash Flows."

 Liquid assets are provided by short-term investments, proceeds from 
maturities of securities and principal collections on loans.  One measure 
used by the Company to assess its liquidity position is the primary liquidity 
ratio (defined as the ratio of cash and due from banks, federal funds sold 
and securities maturing within one year to total assets).  At March 31, 1997, 
the Company had a primary liquidity ratio of 6.99% as compared to 7.84% at 
December 31, 1996.  

 An important source of funds is Pawling's core deposit base.  Management 
believes that a substantial portion of Pawling's deposits of $794.9 million 
at March 31, 1997 are core deposits.  Core deposits are generally considered 
to be a highly  stable source of liquidity due to the long-term relationships 
with deposit customers. Pawling recognizes the importance of maintaining and 
enhancing its reputation in the consumer and commercial  markets to enable 
effective gathering and retention of core deposits.  The Company has not 
utilized brokered deposits as a source of funds.

 In addition to the funding sources discussed above, the Company has the 
ability to borrow funds from several sources.  Pawling is a member of the 
Federal Home Loan Bank of New York ("FHLBNY") and, at March 31, 1997, had 
immediate access to additional liquidity in the form of borrowings from the 
FHLBNY of up to $99.3 million.  The Company also has access to the discount 
window of the Federal Reserve Bank. There were no borrowings from these 
sources in 1997 and 1996, other than short term purchases of federal funds 
from the 

                                       13

<PAGE>

FHLBNY during 1996.

 At March 31, 1997, Pawling had outstanding loan commitments and unadvanced 
customer lines of credit totaling $90.8 million.  These commitments do not 
necessarily represent future cash requirements since certain of these 
instruments may expire without being funded and others may not be fully drawn 
upon. The sources of liquidity discussed above are deemed by management to be 
sufficient to fund outstanding loan commitments and to meet the Company's 
other obligations.

                            CAPITAL

 Progressive, as a bank holding company, is subject to regulation and 
supervision by the Federal Reserve Board ("FRB").  Pawling, as a New York 
state-chartered stock savings bank, is subject to regulation and supervision 
by the New York State Banking Department as its chartering agency and by the 
FDIC as its deposit insurer.  Both the FRB and the FDIC have developed and 
follow, in substance, similar requirements to maintain minimum levels of 
leverage and risk-based capital.

 The risk-based capital adequacy guidelines require the Company and Pawling 
to maintain capital according to the risk profile of their asset portfolios 
and certain off-balance sheet items.  The guidelines set forth a system for 
calculating risk-weighted assets by assigning assets (and credit-equivalent 
amounts for certain off-balance sheet items) to one of four broad risk-weight 
categories.  The amount of risk-weighted assets is determined by applying a 
specific percentage (0%, 20%, 50% or 100%, depending on the level of credit 
risk) to the amounts assigned to each category.  As a percentage of 
risk-weighted assets, a minimum ratio of 4.0% must be maintained for Tier 1 
capital and 8.0% for total capital.

 At March 31, 1997, Progressive's consolidated capital ratios exceeded the 
FRB's minimum regulatory capital guidelines as follows:

<TABLE>
<CAPTION>

                                                                      Risk-Based Capital
                                                          -----------------------------------------
                              Leverage Capital                    Tier 1                  Total
                        ------------------------------------------------------------------------------
                           Amount(1)      Ratio           Amount(1)      Ratio    Amount(1)    Ratio
------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>            <C>            <C>       <C>          <C>
Actual . . . . . . . .     $64,851         7.4%           $64,851        13.2%    $71,045      14.4%

Minimum requirement. .      35,112         4.0             19,693         4.0      39,386       8.0
------------------------------------------------------------------------------------------------------
Excess . . . . . . . .     $29,739         3.4%           $45,158         9.2%    $31,659       6.4%
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
</TABLE>


(1)  For all capital amounts, actual capital excludes the Company's after-tax 
     net unrealized gain of $96,000 on securities available for sale (other 
     than a $4,000 unrealized loss on equity securities) and intangible assets 
     of $8.4 million.

 At March 31, 1997, Pawling's capital ratios exceeded the FDIC's minimum 
regulatory capital requirements as follows:


<TABLE>
<CAPTION>
                                                                        Risk-Based Capital
                                                           ------------------------------------------
                              Leverage Capital                    Tier 1                  Total
                           --------------------------------------------------------------------------
                           Amount(1)      Ratio          Amount(1)      Ratio    Amount(1)      Ratio
-----------------------------------------------------------------------------------------------------
<S>                        <C>            <C>            <C>            <C>      <C>            <C>
Actual . . . . . . . .     $58,934        6.8%           $58,934        12.0%    $65,118        13.3%

Minimum requirement. .      34,878        4.0             19,660         4.0      39,320         8.0
-----------------------------------------------------------------------------------------------------
Excess . . . . . . . .     $24,056        2.8%           $39,274         8.0%    $25,798         5.3%
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>

(1)  For all capital amounts, actual capital excludes Pawling's after-tax net 
     unrealized gain of $119,000 on securities available for sale and 
     intangible assets of $8.4 million.

                                       14

<PAGE>

 During 1994, the Company announced two plans to repurchase in each case up 
to 5% of Progressive's outstanding common stock, to be used for general 
corporate purposes.  The first repurchase was completed in November 1994 and 
consisted of 220,500 shares at a total cost of $3.1 million or $14.14 per 
share.  The second repurchase plan was completed in September 1995 and 
consisted of 210,000 shares at a total cost of $3.3 million or $15.89 per 
share.  A third repurchase plan, which was announced in October 1995 and 
completed in July 1996, consisted of 202,500  shares at a total cost of $3.9 
million or $19.19 per share.  On October 21, 1996, the Company announced a 
fourth plan to repurchase 195,000 shares, or approximately 5% of outstanding 
stock, over a six- to nine-month period.  At March 31, 1997, 74,250 shares 
had been purchased under the fourth plan at a cost of $1.7 million or $22.80 
per share.  The number of shares and the per share cost of each repurchase 
program have been restated to reflect the 1996 three-for-two stock split.

 On April 9, 1997, the Company's Board of Directors declared a dividend of 17 
cents ($0.17) per common share, payable on May 30, 1997 to shareholders of 
record as of April 30, 1997.

                    ASSET/LIABILITY MANAGEMENT

 The Company's asset/liability management goal is to maintain an acceptable 
level of interest rate risk to produce relatively stable net interest income 
in changing interest rate environments.  Management continually monitors the 
Company's interest rate risk.  Risk management strategies are developed and 
implemented by the Asset/Liability Management Committee which uses various 
risk measurement tools to evaluate the impact of changes in interest rates on 
the Company's asset/liability structure and net interest income.  

 Earnings are susceptible to interest rate risk to the degree that 
interest-bearing liabilities mature or reprice on a different basis than 
interest-earning assets.  These interest rate repricing "gaps" provide an 
indication of the extent that net interest income may be affected by future 
changes in interest rates.  A one-year period is a common measurement 
interval of interest sensitivity known as the one-year gap.  The Company's 
one-year gap as a percentage of total assets was -4.18% at March 31, 1997.  A 
negative gap exists when the amount of interest-bearing liabilities exceeds 
the amount of interest-earning assets expected to mature or reprice in a 
given period.  A negative gap may enhance earnings in periods of declining 
interest rates in that, during such periods, the interest expense paid on 
liabilities may decrease more rapidly than the interest income earned on 
assets.  Conversely, in a rising interest rate environment, a negative gap 
may decrease earnings as the increase in interest expense paid on liabilities 
may be greater than the increase in interest income earned on assets. While a 
negative gap indicates the amount of interest-bearing liabilities which will 
reprice before interest-earning assets, it does not indicate the extent to 
which they will reprice.  Therefore, at times, a negative gap may not produce 
higher margins in a declining rate environment. 

                                       15

<PAGE>



 Due to limitations inherent in the gap analysis, management augments the 
asset/liability management process by using simulation analysis.  Simulation 
analysis estimates the impact on net interest income of hypothetical changes 
in the balance sheet structure and/or interest rate environment.  This 
analysis serves as an additional tool in meeting the Company's goal of 
maintaining relatively stable net interest income in varying rate 
environments.

 The Company manages its interest rate risk primarily by structuring its 
balance sheet to emphasize holding adjustable rate loans and mortgage-backed 
securities, and maintaining a large base of core deposits.  To date, the 
Company has not used synthetic hedging instruments such as interest rate 
futures, swaps or options in managing its interest rate risk.

 The following table summarizes the Company's interest rate sensitive assets 
and liabilities at March 31, 1997 according to the time periods in which they 
are expected to reprice, and the resulting gap for each time period.

<TABLE>
<CAPTION>



                                                         Within         One to Five       Over Five
                                                        One Year          Years             Years
                                                      -----------------------------------------------
                                                                  (Dollars in thousands)

<S>                                                   <C>            <C>                  <C>
Total interest-earning assets. . . . . . . . .         $479,590         296,740            57,376

Total interest-bearing liabilities . . . . . .          516,303         111,175           111,253
-----------------------------------------------------------------------------------------------------
 (Deficiency) excess of interest-earning assets
  compared to interest-bearing liabilities . .        ($ 36,713)        185,565           (53,877)
-----------------------------------------------------------------------------------------------------
 (Deficiency) excess as a percent of total assets.       (4.18%)         21.14%            (6.14%)

 Cumulative (deficiency) excess as a percent of            
       total assets. . . . . . . . . . . . . .           (4.18%)         16.96%            10.82%
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------

</TABLE>


                                       16

<PAGE>

                                    PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         Not applicable.

Item 2.  Changes in Securities

         Not applicable.

Item 3.  Defaults Upon Senior Securities

         Not applicable.

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

         Not applicable.

Item 5.  Other Information
 
         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

        (a)  Exhibit I,  Computation of Net Income Per Common Share.




                                       17


<PAGE>


                            SIGNATURES


       Pursuant to the requirements 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.


                                                PROGRESSIVE BANK, INC.
                                                ----------------------
                                                   (Registrant)





Date:  May 9, 1997                           /s/ Peter Van Kleeck 
                                             --------------------------
                                             Peter Van Kleeck
                                             President and Chief Executive 
                                              Officer
                                             Principal Executive Officer




Date:  May 9, 1997                           /s/ Robert Gabrielsen 
                                             ---------------------------
                                             Robert Gabrielsen, Treasurer
                                             Principal Financial Officer and
                                             Principal Accounting Officer



                                       18


<PAGE>



                            Exhibit I


            COMPUTATION OF NET INCOME PER COMMON SHARE

<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED
                                                                   MARCH 31,
                                                               1997           1996
                                                    ----------------------------------------
                                                    (In thousands, except per share amounts)

<S>                                                         <C>            <C>
Net income . . . . . . . . . . . . . . . . .                  $2,103          $1,922

Weighted average common shares (1,2,3) . . .                   3,825           3,945

Net income per common share (3). . . . . . .                   $0.55           $0.49
</TABLE>


(1)  Outstanding common stock equivalents (stock options) did not have a 
     significant dilutive effect on the per share data for either of the 
     periods presented.

(2)  Net of treasury stock.

(3)  The 1996 amounts were adjusted for the three-for-two stock split 
     completed in December 1996.  See note 2.


                                       19