SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A


[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     AOF 1934 For the Fiscal Year Ended December 31, 1999
                                       OR
[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 For the transaction period from ___________________ to
     ______________________



                        Commission File Number: 000-24809

                          FINGER LAKES FINANCIAL CORP.
                         ------------------------------
             (Exact Name of Registrant as Specified in its Charter)

          United States                                  16-1551047
-------------------------------             ------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

        470 Exchange Street                                      14456
---------------------------------------                       -------------
(Address of Principal Executive Offices)                       (Zip Code)

                                 (315) 789-3838
              ------------------------------------------------------
               (Registrant's Telephone Number including area code)

           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 $.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  twelve months (or for such shorter period that
the  Registrant  was required to file such  reports) and (2) has been subject to
such requirements for the past 90 days.
YES      X           NO
     -----------         ----------

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

     As of February 29, 2000, there were issued and outstanding 3,570,000 shares
of the  Registrant's  Common Stock. The aggregate value of the voting stock held
by  non-affiliates  of the Registrant,  computed by reference to the average bid
and asked  prices of the  Common  Stock as of  February  29,  2000  ($7.06)  was
$6,513,973.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.



<PAGE>



                                     PART I

ITEM 1.     BUSINESS

General

     Finger  Lakes  Financial  Corp.  Finger Lakes  Financial  is currently  the
mid-tier  stock  hcompany  of Savings  Bank of the Finger  Lakes.  Finger  Lakes
Financial owns all of the outstanding common stock of Savings Bank of the Finger
Lakes.  Finger Lakes Financial  Corp., MHC owns 2,389,948 shares of Finger Lakes
Financial's  outstanding common stock. The remaining  1,180,052 shares of common
stock are held by the public.  At December 31, 1999 Finger Lakes  Financial  had
consolidated  assets  totaling  $301.2  million,  deposits of $208.1 million and
consolidated stockholders' equity of $19.4 million.

     Savings  Bank of the Finger  Lakes.  Savings  Bank of the Finger  Lakes was
formed  as the  result  of the  merger in 1984 of  Geneva  Savings  Bank,  a New
York-chartered  savings  bank,  and Geneva  Federal  Sand Loan  Association.  On
November 10, 1994, Savings Bank of the Finger Lakes completed its reorganization
from a federally chartered,  mutual savings bank to a federally chartered mutual
holding  company  known as FLakes  Financial  Corporation,  MHC.  As part of the
reorganization, Savings Bank of the Finger Lakes organized a federally chartered
stock  savings  bank  and  transferred  substantially  all  of  its  assets  and
liabilities,  including  all of its  deposit-taking,  lending and other  banking
functions and its corporate  name to the newly created stock savings bank called
Savings  Bank of the Finger  Lakes in exchange  for  2,389,948  shares of common
stock. Concurrent with the reorganization, Savings Bank of the Finger Lakes sold
1,180,052 shares of common stock, in a public offering.  The Savings Bank of the
Finger Lakes  reorganized into the two-tier mutual holding company  structure on
August 17, 1998. The reorganization into the two-tier structure had no impact on
the operations of the Savings Bank of the Finger Lakes.

     Savings Bank of the Finger Lakes has traditionally  operated as a community
oriented  savings  institution  providing  mortgage loans and other  traditional
financial  services to those in its local community.  Savings Bank of the Finger
Lakes is  primarily  engaged in  attracting  deposits  from the  general  public
through its oand using those funds to  originate  loans  secured by real estate.
Savings  Bank of the Finger Lakes also  originates  commercial  business  loans,
consumer  loans,  mobile home loans and home  equity  loans and lines of credit.
Savings  Bank of the Finger  Lakes  also has a  securities  portfolio  primarily
consisting of  mortgage-backed  securities  issued by federal  agencies,  United
States common stocks and corporate and municipal bonds.

Market Area

     The Savings Bank of the Finger Lakes currently  conducts  business  through
its main office and branch  offices  located in the Finger  Lakes  region of New
York  State.  Geneva,  New  York,  where  Savings  Bank of the  Finger  Lakes is
headquartered,  is  located  in the  eastern  end of  Ontario  county  and has a
population  of  approximately  14,000 as of  December  1999.  We have  sought to
increase our presence in the Finger Lakes region by expanding our branch network
and emphasizing a variety of loan and investment  products.  Our growth has been
targeted  to include  those  areas of the Finger  Lakes  region  that have shown
relative  economic  strength.  Our market area is mainly  rural with  employment
based  primarily  in  education,  service  industries,  and small  manufacturing
concerns, which have experienced little growth in recent years, and agricultural
operations.  Approximately  50% of the market  area's labor force is employed in
traditional  white collar jobs.  The two largest  employers in Geneva are Hobart
and William Smith Colleges and Geneva General Hospital.  The largest employer in
Seneca county is ITT Fluid  Technology.  The largest employer in Tompkins county
is Cornell University.

Lending Activities

     General. Our loan portfolio is predominantly comprised of conventional real
estate mortgages,  primarily on residences and one-to four-family dwellings, but
also on commercial real estate. Our primary emphasis in the past has been on the
origination of residential mortgages. In recent years we have sought to increase
our  multi-family  and commercial  real estate  lending as well as  non-mortgage
lending,  in particular home equity loans and commercial  business  lending.  At
December  31,  1999,  loans  totaled  $160.0  million,  of which $90.6  million,
o56.60%,  were secured by one-to  four-family  real estate,  $28.5  million,  or
17.82% were secured by multi-family and commercial real estate,

                                        1

<PAGE>



$2.7 million,  or 1.69%,  were  construction  loans, and $38.2 million or 23.89%
were nloans. At December 31, 1999,  commercial business loans were $9.5 million,
or 5.96% of total loans,  consumer  loans were $6.0  million,  or 3.73% of total
loans,  mobile  home loans were $4.5  million,  or 2.81% of total loans and home
equity and property  improvement  loans were $18.2  million,  or 11.39% of total
loans.
































                                        2

<PAGE>



     Loan Portfolio Composition.  The following table sets forth the composition
of our loan portfolio by type of loan at the dates indicated.

<TABLE>
<CAPTION>
                                                                          At December 31,
                          ----------------------------------------------------------------------------------------------------------
                                   1999                  1998                1997                 1996                  1995
                          --------------------   ------------------  -------------------  --------------------   -------------------
                            Amount    Percent      Amount  Percent     Amount   Percent      Amount  Percent      Amount    Percent
                          ---------- ---------   -------- ---------  ---------- --------  --------- ----------   --------  ---------
                                                                                  (Dollars In Thousands)
Mortgage Loans:
One-to-four-family
<S>                       <C>           <C>    <C>          <C>     <C>           <C>    <C>           <C>    <C>            <C>
real estate.............. $  90,587     56.60% $  89,456    61.19%  $  75,679     63.42% $  57,932     64.60% $  54,483      62.76%
Multi-family and
commercial real estate...    28,520      17.82     20,534    14.05     19,243     16.13     11,176     12.46     11,843       13.64
Construction.............     2,695       1.69      6,912     4.73      2,103      1.75      1,296      1.44        373        0.43
                          ---------  ---------  --------- --------  --------- ---------  --------- ---------  ---------  ----------
Total mortgage loans.....   121,802      76.11    116,902    79.97     97,025     81.30     70,404     78.50     66,699       76.83
                          ---------  ---------  --------- --------  --------- ---------  --------- ---------  ---------  ----------

Non-Mortgage Loans:
Commercial business......     9,536       5.96%     5,413     3.70%     3,392      2.84%     3,290      3.67%     3,074        3.54%
Home equity and
property improvement.....    18,235      11.39     12,874     8.81      9,184      7.70      6,137      6.84      5,779        6.66
Mobile home..............     4,501       2.81      4,074     2.79      4,916      4.12      5,703      6.36      6,654        7.66
Consumer.................     5,966       3.73      6,920     4.73      4,819      4.04      4,155      4.63      4,613        5.31
                          ---------  ---------  --------- --------  --------- ---------  --------- ---------  ---------  ----------
Total non-mortgage
 loans...................    38,238      23.89     29,281    20.03     22,311     18.70     19,285     21.50     20,120       23.17
                          ---------  ---------  --------- --------  --------- ---------  --------- ---------  ---------  ----------
Total loans..............   160,040     100.00%   146,183   100.00%   119,336    100.00%    89,689    100.00%    86,819      100.00%
                                      ========             =======               ======              =======                =======

Premiums, net of
deferred fees............       163                   129                 252                   81                   40
Allowance for loan
 losses..................    (1,349)               (1,176)             (1,149)              (1,088)                (809)
                          ---------             ---------           ---------            ---------            ---------
Net loans................ $ 158,854             $ 145,136           $ 118,439            $  88,682            $  86,050
                          =========             =========           =========            =========            =========
</TABLE>




                                                                  3

<PAGE>



     Contractual  Principal  Repayments.  The following table sets forth certain
information  at December 31, 1999  regarding the dollar amount of loans maturing
in our  portfolio,  based on the  contractual  terms to maturity.  Demand loans,
loans  having no stated  schedule  of  repayments  and no  stated  maturity  and
overdrafts are reported as due under one year.


<TABLE>
<CAPTION>
                                             Due Under   Due 1-3        Due 3-5     Due 5-10     Due 10-20     Due 20+
                                              1 Year        Years        Years        Years        Years        Years       Total
                                            ----------   ----------   ----------   ----------   ----------  -----------  -----------
                                                                                   (In Thousands)

<S>                                         <C>          <C>          <C>          <C>          <C>         <C>          <C>
One-to four-family real estate............  $   3,089    $   6,908    $   8,009    $  25,593    $  26,659   $  20,329    $  90,587
Multi-family and commercial real estate...      2,095        4,765        5,651       13,525        2,484          --       28,520
Construction..............................      2,695           --           --           --           --          --        2,695
Commercial business.......................      2,371        5,453        1,712           --           --          --        9,536
Home equity and property improvement......      1,725        3,943          298           --           --          --        5,966
Mobile home...............................        234          548          674        2,439          606          --        4,501
Consumer..................................        604        1,370        1,618        5,449        6,789       2,405       18,235
                                            ---------    ---------    ---------    ---------    ---------   ---------    ---------
Total.....................................  $  12,813    $  22,987    $  17,962    $  47,006    $  36,538   $  22,734    $ 160,040
                                            =========    =========    =========    =========    =========   =========    =========
</TABLE>


     The following table sets forth the dollar amount of all loans due after one
year from  December  31,  1999,  which have fixed  interest  rates or which have
floating or adjustable interest rates.

<TABLE>
<CAPTION>
                                                                                                  Floating or
                                                                               Fixed Rates     Adjustable Rates        Total
                                                                               -----------     ----------------        -----
                                                                                            (Dollars In Thousands)

<S>                                                                             <C>               <C>               <C>
One-to four-family real estate.............................................     $  53,496         $  34,002         $  87,498
Multi-family and commercial real estate....................................         5,705            20,720            26,425
Commercial business........................................................         2,029             5,136             7,165
Home equity and property improvement.......................................         4,241                --             4,241
Mobile home................................................................         4,267                --             4,267
Consumer...................................................................        10,278             7,353            17,631
                                                                                ---------         ---------         ---------
Total......................................................................     $  80,016         $  67,211           147,227
                                                                                =========         =========         =========
Percent of total...........................................................         54.35%            45.65%           100.00%
                                                                                =========         =========         =========
</TABLE>

     Scheduled  contractual  amortization  of loans does not  reflect the actual
term of the loan portfolio. The average life of loans is substantially less than
their  contractual  terms because of  prepayments  and due- clauses,  which give
Savings  Bank of the  Finger  Lakes the right to  declare  a  conventional  loan
immediately due and payable in the event, among other things,  that the borrower
sells the real property subject to the mortgage.



                                        4

<PAGE>

Originations, Purchases and Sales of Loans.

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

<TABLE>
<CAPTION>
                                                                                                 Year Ended December 31,
                                                                                        ----------------------------------------
                                                                                           1999           1998            1997
                                                                                        ---------      ---------       ---------
                                                                                                    (In Thousands)
Loan originations:
<S>                                                                                     <C>            <C>             <C>
One-to four-family real estate......................................................    $  21,869      $  42,138       $  22,587
Multi-family and commercial real estate.............................................        7,924          4,582           5,469
Construction........................................................................        5,257          8,844           1,894
Commercial business loans...........................................................       10,936          4,087             916
Home equity and property improvement loans..........................................       10,234          7,806           4,782
Mobile home loans...................................................................        1,388            132             127
Consumer loans......................................................................        3,030          6,040           3,659
                                                                                        ---------      ---------       ---------
Total loans originated..............................................................       60,638         73,629          39,434
Purchases...........................................................................           51            770          11,026
                                                                                        ---------      ---------       ---------
Total loans originated and purchased................................................       60,689         74,399          50,460
                                                                                        ---------      ---------       ---------

Sales and principal reductions:
Loans sold..........................................................................       14,000         21,135           4,533
Loan principal payments and other reductions........................................       32,832         26,417          16,280
                                                                                        ---------      ---------       ---------
Total sold and principal reductions.................................................       46,832         47,552          20,813
Increase (decrease) due to other items, net.........................................         (139)          (150)            110
                                                                                        ---------      ---------       ---------
Net increase in net loan portfolio..................................................    $  13,718      $  26,697       $  29,757
                                                                                        =========      =========       =========
</TABLE>


     One-to  Four-Family  Real Estate Loans. Our primary lending activity is the
origination  of  loans  secured  by  first   mortgage  liens  on   single-family
residences.  At December 31, 1999,  $90.6 million,  or 56.6%,  of our total loan
portfolio consisted of one-to four-family real estate loans.

     We offer both fixed-rate and adjustable-rate one-to four-family real estate
loans with various terms up to 30 years. In recent periods a substantial  number
of our  originations  of  fixed-rate  loans had  terms of 15  years.  Currently,
substantially  all fixed-rate loans originated by us are sold to Fannie Mae on a
servicing  retained  basis.  As of  December  31,  1999,  58.0%  of  our  one-to
four-family real estate loan portfolio had terms of between 16 and 30 years.

     We offer  adjustable-rate  mortgages in order to decrease the vulnerability
of our oto changes in interest rates. At December 31, 1999,  38.0% of the one-to
four-family real estate loans in our loan portfolio consisted of adjustable-rate
loans.  Adjustable-rate mortgages are offered with initial rates which are fixed
for  one,  three  and  five  years  and  adjust  annually  thereafter.  One year
adjustable  rate  loans  have a 2% cap on the  arate  adjustment  with a 6% rate
adjustment cap over the life of the loan.  Three and five year  adjustable  rate
mortgages have a 3% cap on the annual rate  adjustment with a 6% rate adjustment
cap over the life of the loan.  Adjustable  rate loans are priced in  accordance
with  the  corresponding  treasury  security.   Adjustable-rate  mortgage  loans
decrease the risks  associated  with changes in interest rates but involve other
risks,  primarily  because as interest  rates rise,  the payment by the borrower
rises to the extent permitted by the terms of the loan,  thereby  increasing the
potential  for  default.  At the same time,  the  marketability  of the property
securing the loan may be adversely affected by higher interest rates.

     Originations of one-to four- family real estate loans in 1999 totaled $21.9
million.  The decrease in one-to four- family real estate loan originations from
the $42.1  million  originated  in 1998  reflects  the  significant  refinancing
activity that occurred in 1998. Generally, one-to four-family mortgage loans are
originated with loan- ratios up to 95% of the appraised value of the property or
the purchase price of the property with private mortgage  insurance.  Loans have
"due on sale"  clauses,  which are  provisions  giving us the right to declare a
loan  immediately  due and payable in the event the borrower  sells or otherwise
disposes of the property  serving as  collateral  for the  mortgage.  We receive
appraisals on all one-to  four-family loans. We also review and verify each loan
applicant's income and credit history.


     Multi-Family  and Commercial Real Estate Loans. At December 31, 1999, $28.5
million,  or 17.82%,  of our total loan portfolio  consisted of loans secured by
existing multi-family and commercial real e Our multi-family and commercial real
estate  loans  include  loans   secured  by  small  office   buildings,   retail
establishments,  light  manufacturing and distribution  facilities and apartment
buildings.

                                        5

<PAGE>



     We originate both fixed- and  adjustable-rate  multi-family  and commercial
real estate loans.  We generally offer  multi-family  and commercial real estate
loans with  amortization  schedules of up to twenty years with no more than five
years at a fixed rate of interest. Multi-family and commercial real estate loans
are originated with loan-to-value ratios generally up to 80% of the lower of the
purchase  price or an independent  appraisal.  In deciding to originate a multi-
family or commercial  real estate loan, we will review the credit  worthiness of
the borrower,  the expected cash flow from the property  securing the loan,  the
cash flow from the property to debt service  requirements  of the borrower,  the
value of the  property  and the  quality  of the  management  involved  with the
property.  Generally,  we will obtain the personal  guarantee of the  principals
when originating multi-family and commercial real estate loans. Multi-family and
commercial  real  estate  lending is  generally  considered  to involve a higher
degree of credit risk than one-to four-family  residential lending. Such lending
may involve large loan balances  concentrated  on a single  borrower or group of
related  borrowers.  In addition,  the payment  experience  on loans  secured by
income producing  properties is typically dependent on the successful  operation
of the related real estate project.  Consequently  the repayment of the loan may
be  subject to  adverse  conditions  in the real  estate  market or the  economy
generally.

     Construction   Loans.  We  make  construction  loans  for  residential  and
commercial  purposes.  Construction  loans  are  disbursed  as  construction  is
completed. We generally will not make construction loans on a speculative basis.
At December 31, 1999,  construction loans totaled $2.7 million, or 1.69%, of the
total loan portfolio. Of this amount, residential construction loans amounted to
$1.1  million or 0.71% of our total  loan  portfolio.  Residential  construction
lending  is  generally   limited  to  our  primary  lending  area.   Residential
construction  loans  are  generally  to end  owners  and  are  structured  to be
converted  to  permanent  loans  at the  end of the  construction  phase,  which
typically is no more than nine months. Residential construction loans have terms
which  generally  match the  non-construc  loans then offered by us, except that
during the  construction  phase the borrower only pays interest on the loan. The
interest  rates  charged on such loans are  generally  0.25%  higher  than those
charged on other single-family residential loans. Residential construction loans
are  underwritten  pursuant to the same general  guidelines used for originating
permanent  loans.  In addition,  residential  construction  loans may be sold to
Fannie Mae on a servicing retained basis following its conversion to a permanent
loan following the construction period.

     At  December  31,  1999,  commercial  construction  loans  amounted to $1.6
million or 0.98% of our total loan portfolio. Commercial construction lending is
generally  limited to our  primary  lending  areas.  These  loans are  generally
structured  to convert to  permanent  financing  at the end of the  construction
phase,  which typically is no more than twenty- four months,  including a "lease
up period" of up to twelve  months.  Commercial  construction  loans may also be
structured  for  permanent  financing  by  other  financial   institutions  upon
completion  of  the  construction  period.  Commercial  construction  loans  are
underwritten pursuant to established policy guidelines.  Construction  financing
is generally considered to involve a higher degree of credit risk than long-term
financing on owner-oc real estate because of the  uncertainties of construction,
including the possibility of costs exceeding the initial estimates.

     Commercial Business Loans. At December 31, 1999, $9.5 million, or 5.96%, of
our total loan  portfolio  consisted of commercial  business  loans.  Commercial
business  loans  are  generally  provided  to  various  types  of  closely  held
businesses  located  principally  in our primary  market  area.  Our  commercial
business loans may be structured as short-term  self-liquidating lines of credit
and term loans.  Commercial  business  term loans  generally  have terms of five
years  or  less  (up  to  seven  years  if  guaranteed  by  the  Small  Business
Administration)  and  interest  rates which float in  accordance  with the prime
rate,  although we also originate  commercial business loans with fixed rates of
interest. Our commercial lines of credit and commercial term loans generally are
secured by equipment,  machinery or other corporate assets including real estate
and receivables.  In addition,  we generally obtain personal guarantees from the
principals of the borrower with respect to commercial business loans.


                                        6

<PAGE>




     We have actively  sought to increase our commercial  business  lending.  We
established a commercial lending  department in 1996. This department  currently
has three dedicated  lenders and three back osupport staff.  Our originations of
commercial  business  loans  have  increased  substantially.   During  1999,  we
originated  $10.9 million in commercial  business loans compared to $4.1 million
and $916,000 during 1998 and 1997, respectively.

     Commercial  business  loans  generally  are deemed to entail  significantly
greater  credit risk than that which is involved  with  residential  real estate
lending.  The repayment of commercial  business loans  typically is dependent on
the  successful  operations  and  income  of the  borrower.  Such  risks  can be
significantly affected by economic conditions. In addition,  commercial business
lending generally requires  substantially  greater oversight efforts compared to
residential real estate lending.

     Home Equity and Property  Improvement Loans. We offer home equity loans and
lines of credit and property  improvement  loans, the total of which amounted to
$18.2 million,  or 11.39%,  of the total loan portfolio as of December 31, 1999.
Home equity loans and lines of credit are generally made only for owner occupied
homes.  Home equity loans and lines of credit are secured by second mortgages on
residences  with the maximum loan to appraised  value ratio permitted by Savings
Bank of the Finger  Lakes  (after  inclusion of any senior liens on the property
thereto) being 100%. We intend to continue  emphasizing  the origination of home
equity and property improvement loans within our market area.

     Mobile Home Loans.  We purchase  mobile home loans from a third-party  loan
originator who specializes in such lending. As of December 31, 1999, we had $4.5
million,  or  2.81%,  of our  total  loan  psecured  by  mobile  homes  owned by
individuals.  While we generally lend  throughout the states of New York and New
Jersey,  the mobile  home units are  primarily  located in what we believe to be
well-managed  mobile home  parks.  Mobile home loans are made at fixed rates for
terms of up to 20 years, although most mobile home loans have terms of 15 years.

     Consumer Loans.  Subject to the restrictions  contained in federal laws and
regulations,  walso are  authorized to make loans for a wide variety of personal
or consumer  purposes.  As of December 31, 1999, $6.0 million,  or 3.73%, of our
total loan  portfolio  consisted  of  consumer  loans.  We also offer  unsecured
personal loans in amounts up to $5,000.

     Loan Originations and Underwriting.  Our lending  activities are subject to
written,   non-discriminat  underwriting  standards  and  the  loan  origination
procedures  adopted by management  and the Board of Directors.  Designated  loan
officers  have the  authority  to approve  residential  loans up to $240,000 and
consumer loans up to $100,000. Residential and consumer loans up to $350,000 may
be  approved  by a  senior  lending  officer.  Residential  and  consumer  loans
exceeding  these  amounts and up to $500,000 may be approved by our President or
senior loan officer.  Commercial business loans and commercial real estate loans
may be approved by designated loan officers up to $200,000.  Commercial business
loans and commercial  real estate loans in excess of $200,000 and up to $500,000
may be  approved  by a senior  loan  officer or  President  and Chief  Executive
Officer.  All loans in excess of the individual loan limits described above must
be approved by the loan committee which consists of officers of the Savings Bank
of the Finger  Lakes.  This  committee  has the authority to approve loans up to
$750,000.  If any loan or group of loans to one borrower  exceeds  $750,000,  it
must be approved by the loan committee and subsequently  approved by a committee
of the Board of  Directors.  At December  31,  1999,  our  lending  limit to one
borrower was $2.0  million.  On that date,  there were no borrowers in excess of
our lending limits.

                                        7

<PAGE>



Asset Quality

     Delinquent  Loans.  The following table sets forth  information  concerning
delinquent  loans at December 31, 1999,  in dollar amount and as a percentage of
our total loan portfolio.  The amounts presented represent principal balances of
the related loans, rather than the actual payment amounts which are past due.


<TABLE>
<CAPTION>

                                         Multi-family                                          Home Equity
                             One- to         and                                                   and
                           Four-family    Commercial                   Commercial               Property
                           Real Estate    Real Estate    Construction   Business   Mobile Home Improvement   Consumer      Total
                         --------------- -------------- -------------- ----------- ----------- ------------ ----------- -----------
                         Amount       %  Amount      %   Amount    %  Amount   %   Amount   %  Amount    %  Amount   %  Amount   %
                         ------      --- ------     ---  ------   --- ------  ---  ------  --- ------   --- ------  --- ------  ---

                                                                      (Dollars in Thousands)

Loans delinquent for:

<S>                    <C>         <C>   <C>      <C>   <C>     <C>  <C>    <C>   <C>   <C>   <C>    <C>   <C>   <C>   <C>     <C>
30 - 59 days.......... $   724     0.45% $ ---      --% $   --   --% $   9  0.01% $ 58  0.04% $ 116  0.07% $ 52  0.03% $  959  0.60%
60 - 89 days..........     206     0.13    152    0.09      --   --     --    --    18  0.01     --    --    14  0.01     390  0.24
90 days and over           393     0.25    ---     ---      --   --    181  0.11    13  0.01     --    --    --    --     587  0.37
                       -------  -------   ----  ------    ----  ---   ---- -----   ---- -----   ----------   --- -----  ------ -----
Total delinquent
loans................. $ 1,323     0.83% $ 152    0.09% $   --   --% $ 190  0.12% $ 89  0.06% $ 116  0.07% $ 66  0.04% $1,936  1.21%
                       =======  =======  =====   =====  ======  ==== ===== =====  ====  ====  =====  ====  ====  ====  ======  ====
</TABLE>



                                                                               8

<PAGE>



     Loan  Delinquencies and Collection  Procedures.  Our collection  procedures
provide that if a loan is past due five days after  expiration of the applicable
grace  period,  a telephone  call is made to the borrower  stressing the need to
make the loan current and obtaining the reasons for delinquency. This process is
implemented ba special asset manager and a collector. If payment is not promptly
received,  we will exercise our rights to debit the borrower's  deposit  account
(if a deposit  relationship  exists) or otherwise exercise our rights of offset.
If the loan becomes  past due 60 days we will send the borrower a demand  letter
and a notice of intent to  foreclose  or repossess  the  underlying  collateral.
Loans that are written off at the conclusion of the process are turned over to a
collection agency for additional recovery efforts.

     Non-Performing  Loans.  All loans are  reviewed on a regular  basis and are
placed  on a  non-acc  status  when,  in the  opinion  of  management,  there is
reasonable  probability  of loss of principal or the  collection  of  additional
interest is deemed insufficient to warrant further accrual.  Generally, we place
all loans 90 days or more past due on non-accrual status. In addition,  we place
any loan on  non-accrual  if any part of it is classified as doubtful or loss or
if any part has been charged-off.  When a loan is placed on non-accruing status,
total  interest  accrued  and unpaid to date is  reversed.  Application  of cash
payments  received  while a loan is on  non-accrual  is  determined by the chief
financial  officer and the senior loan officer.  Subsequent  payments are either
applied to the  outstanding  principal  balance or recorded as interest  income,
depending  on  the  assessment  of the  ultimate  collectibility  of  the  loan.
Generally,   consumer  loans  are  charged-off   before  they  become  120  days
delinquent.

     As of December 31, 1999, our total  nonaccrual  loans amounted to $587,000,
or 0.37% of total loans,  compared to  $1,016,000,  or 0.69% of total loans,  at
December  31,  1998.  The  largest  non-performing  loan at December  31,  1999,
consisted of a one-to four-family mortgage on which $224,000 was outstanding.

     Troubled Debt Restructurings. A troubled debt restructuring occurs when we,
for economic or legal reasons  related to a borrower's  financial  difficulties,
grant a  concession  to the  borrower,  either as a deferment  or  reduction  of
interest or principal,  that we would not otherwise consider. As of December 31,
1999, we had $282,000 of troubled debt  restructurings,  compared to $121,000 as
of December 31, 1998.  All troubled debt rwere  performing  in  accordance  with
modified or restructured terms at December 31, 1999.

     Real Estate Owned.  Real estate owned consists of property acquired through
formal  foreclosures  or by deed in lieu of  foreclosure  and is recorded at the
lower of recorded  investment or fair value.  Write from recorded  investment to
fair value which are required at the time of foreclosure are charged to the afor
loan losses.  After  transfer,  the property is carried at the lower of recorded
investment or fair value, less estimated  selling  expenses.  Adjustments to the
carrying value of such properties  that result from subsequent  declines in vare
charged to operations in the period in which the declines  occur. As of December
31, 1999, we held three parcels of real estate owned with an aggregate  carrying
value of $93,000.








                                        9

<PAGE>

     The  following   table  sets  forth  the  amounts  and  categories  of  our
non-performing assets and troubled debt restructurings at the dates indicated.

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                            ------------------------------------------------------------------------
                                                               1999           1998            1997           1996           1995
                                                            ----------     ----------     -----------     ----------     -----------
                                                                                          (Dollars in Thousands)
Non-accruing loans:
<S>                                                         <C>            <C>            <C>             <C>            <C>
  One-to-four-family real estate.........................   $     393      $     673      $     403       $     194      $     549
  Multi-family and commercial real estate................          --             --              3             407             73
  Construction...........................................          --             --             --              --             --
  Commercial business....................................         181            268              6             133             90
  Home equity and property improvement...................          --             17             38              83             95
  Mobile home............................................          13             20             58              60             36
  Consumer...............................................          --             38             56              41            189
                                                            ---------      ---------      ---------       ---------      ---------

   Total non-performing loans............................         587          1,016            564             918          1,032

Real estate owned........................................          93             90            150             275            453
                                                            ---------      ---------      ---------       ---------      ---------
   Total non-performing assets...........................   $     680      $   1,106      $     714       $   1,193      $   1,485
                                                            =========      =========      =========       =========      =========

Troubled debt restructurings.............................   $     282      $     121      $     520       $     669      $   1,506

Total non-performing loans and troubled debt
  restructurings as a percentage of total loans..........       0.54%          0.78%          0.91%           1.77%          2.92%

Total non-performing assets and troubled debt
  restructurings as a percentage of total assets.........       0.32%          0.43%          0.50%           0.93%          1.78%
</TABLE>

     We had no accruing  loans  greater than 90 days  delinquent at December 31,
1999,  1998 and 1997.  The  additional  interest  income  that  would  have been
recorded  during the years  ended  December  31,  1999,  December  31,  1998 and
December  31, 1997 if our  non-performing  loans at the end of such  periods had
been  current in  accordance  with their terms  during such periods was $65,000,
$78,000, and $59,000, respectively.

     Classified Assets.  Federal  regulations  require that each insured savings
association   classify  its  assets  on  a  regular   basis.   There  are  three
classifications  for  problem  assets:   "substandard,"  "doubtful"  and  "loss"
Substandard  assets 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 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.  Another  category
designated  "special mention" also must be established and maintained for assets
which do not currently expose an insured  institution to a sufficient  degree of
risk  to  warrant  classification  as  substandard,  doubtful  or  loss.  Assets
classified  as  substandard  or doubtful  require the  institution  to establish
general allowances for loan losses. If an asset or portion thereof is classified
loss, a specific  valuation  allowance  will be established to cover 100% of the
portion  of the asset  classified  loss,  or such  amount  will be  charged-off.
General loss allowances related to assets classified substandard or doubtful may
be included in determining an institution's  regulatory capital,  while specific
valuation allowances do not qualify as regulatory capital. Federal examiners may
disagree with an insured institution's  classifications and amounts reserved and
have the  authority  to require a savings  association  to  classify  additional
assets, or to change the classification of existing  classified assets,  and, if
appropriate, to establish reserves.

     At December 31,  1999,  we had  $885,000 of assets  categorized  as special
mention, $1.6 million of assets classified as substandard and $152,000 of assets
classified  as  doubtful or loss.  As of December  31,  1999,  total  classified
assets,  including  real estate owned and special  mention  assets,  amounted to
0.87% of total assets.

     Allowance  for Loan  Losses.  It is  management's  policy  to  maintain  an
allowance  for estimated  loan losses based upon (1) in the case of  residential
loans,  management's  review of delinquent loans,  loans iforeclosure and market
conditions;  (2) in the case of commercial  business loans and  commercial  real
estate loans,  identification of a significant  decline in value; and (3) in the
case of consumer  loans,  an assessment of risks inherent in the loan portfolio.
Although  management  uses available  information  to make such  determinations,
future adjustments to allowances may be necessary

                                       10

<PAGE>



based on economic and market  conditions and as a result of future  examinations
by regulatory authorities,  and net earnings could be significantly affected, if
circumstances  differ  substantially  from  the  aused  in  making  the  initial
determinations.

     At December 31, 1999, our allowance for loan losses  amounted to $1,349,000
compared to $1,176,000 at December 31, 1998.

     The following table sets forth an analysis of our allowance for loan losses
during the  periods  indicated.  See Notes 1 and 3 to the Notes to  Consolidated
Financial Statements included herein.

<TABLE>
<CAPTION>

                                                                                                                        At or for
                                                                                                                    the Eight Months
                                                                                    At or for                             Ended
                                                                           the Year Ended December 31,                 December 31,
                                                         ---------------------------------------------------------
                                                            1999            1998           1997           1996            1995
                                                         ----------     -----------     ----------     -----------     ----------
                                                                                         (Dollars In Thousands)

<S>                                                      <C>            <C>             <C>            <C>             <C>
Total loans outstanding...............................   $ 160,040      $ 146,183       $ 119,336      $  89,689       $  86,819
                                                         =========      =========       =========      =========       =========
Average loans outstanding.............................   $ 153,783      $ 132,324       $  99,939      $  87,058       $  85,547
                                                         =========      =========       =========      =========       =========

Balance at beginning of period........................   $   1,176      $   1,149       $   1,088      $     809       $     771
                                                         ---------      ---------       ---------      ---------       ---------
Charge-offs:
   One- to four-family real estate....................         (93)           (38)             (9)           (35)            (66)
   Multi-family and commercial real estate............          --             --              --             --              --
   Construction.......................................          --             --              --             --              --
   Consumer...........................................        (113)          (141)           (137)          (183)            (75)
   Commercial business................................          (6)          (114)             (1)           (48)           (182)
   Home equity and property improvement...............          --             --              --             --              --
                                                         ---------      ---------       ---------      ---------       ---------
Total charge-offs:....................................        (212)          (293)           (147)          (266)           (323)
Recoveries............................................         185             80              88             62              71
                                                         ---------      ---------       ---------      ---------       ---------
Net charge-offs.......................................         (27)          (213)            (59)          (204)           (252)
Provision for loan losses.............................         200            240             120            483             290
                                                         ---------      ---------       ---------      ---------       ---------
Balance at end of period..............................   $   1,349      $   1,176       $   1,149      $   1,088       $     809
                                                         =========      =========       =========      =========       =========
Allowance for loan losses as a percentage of
   total loans outstanding............................       0.84%          0.80%           0.96%          1.21%           0.93%
                                                         ========       ========        ========       ========        ========
Net charge-offs as a percentage of average
   loans outstanding..................................       0.02%          0.16%           0.06%          0.24%           0.29%
                                                         ========       ========        ========       ========        ========
Allowance for loan losses to non-performing loans          229.81%        115.75%         203.72%        118.52%          78.49%
                                                         ========       ========        ========       ========        ========
-----------------
</TABLE>


     Although we believe that we have  established our allowance for loan losses
in accordance with generally  accepted  accounting  principles,  there can be no
assurance that regulators,  in reviewing our loan portfolio, will not request us
to  significantly  increase the allowance for loan losses,  thereby reducing our
retained earnings and income.



                                       11

<PAGE>



     Allocation of Allowance for Loan Losses. The following table sets forth the
allocation  of the  allowance  for loan  losses  by loan  category  at the dates
indicated.  The  allocation  of the  allowance  by category  is not  necessarily
indicative  of future  losses and does not restrict the use of the  allowance to
absorb losses in any category.

<TABLE>
<CAPTION>
                                                                               At December 31,
                           ---------------------------------------------------------------------------------------------------------
                                   1999                  1998                1997               1996                   1995
                           --------------------- --------------------- -------------------- ------------------- --------------------
                                     % of Loans            % of Loans          % of Loans          % of Loans            % of Loans
                                       in Each               in Each             in Each             in Each               in Each
                                     Category to           Category to         Category to         Category to           Category to
                             Amount  Total Loans   Amount  Total Loans  Amount Total Loans  Amount Total Loans  Amount   Total Loans
                           --------------------- ---------------------  ------------------- ------------------- --------------------

                                                     (Dollars In Thousands)
Balance at end of
period applicable to:

One-to-four-family
<S>                         <C>        <C>        <C>        <C>       <C>      <C>        <C>      <C>          <C>      <C>
 real estate............... $    314   56.60%     $   315    61.19%    $  320   63.42%     $  257   64.60%       $   275  62.76%
Multi-family and
 commercial real estate....      360   17.82          325    14.05        314   16.13         254   12.46            122  13.64
Construction...............        6    1.69            3     4.73          1    1.75           3    1.44              1   0.43
Commercial business........      194    5.96          160     3.70         85    2.84         114    3.67            125   3.54
Consumer...................      119    3.73           91     4.73         94    4.04         115    4.63             58   5.31
Mobile home................       10    2.81            7     2.79         29    4.12          38    6.36             44   7.66
Home equity and property
   improvement.............       76   11.39           40     8.81         76    7.70          45    6.84             43   6.66
                                     -------               -------             ------              ------                ------
Unallocated................      270      --          235       --        230      --         262      --            141     --
                            -------- -------      -------  -------     ------  ------     -------  ------      --------- ------
Total allowance for
  loan losses..............  $ 1,349  100.00%     $ 1,176     100.00%  $1,149   100.00%     1,088  100.00%       $   809 100.00%
                             =======  ======      =======     ======   ======  =======     ======  ======        ======= ======
</TABLE>


                                                                  12

<PAGE>



Investment Activities

     General.  Our investment  securities policy is contained within our overall
asset/liability  policy.  The policy,  which is established by senior management
and approved by the Board of  Directors,  is based upon our asset and  liability
management  goals and is  designed  to  provide  a  portfolio  of high  quality,
diversified  investments  while  seeking to optimize net interest  income within
acceptable  limits  of  safety  and  liquidity.  Investment  activities  consist
primarily  of  investments  in  fixed  and   adjustable   rate   mortgage-backed
securities,  including  collateralized  mortgage  obligations  ("CMOs") and U.S.
Government and Agency securities.

     We have  invested in a portfolio of  mortgage-backed  securities  which are
insured or  guaranteed  by the Freddie  Mac,  Ginnie Mae, or Fannie Mae,  all of
which  are  agencies  of  the  federal   government  or   government   sponsored
corporations.  The portfolio also includes  collateralized  mortgage obligations
("CMOs"),  of which $31.8 million or 63.4% are backed by Freddie Mac, Ginnie Mae
and Fannie Mae securities, and $18.3 million or 36.6% are obligations of private
issuers.  Mortgage-backed  securities,  including CMOs backed by U.S. Government
agencies,  increase the liquidity and the quality of our assets by virtue of the
guarantees  that back either the  securities  themselves  or, in the case of the
CMOs, the underlying securities. In addition, at December 31, 1999, 35.8% of our
mortgage-backed  securities  portfolio  consisted  of pools  of  adjustable-rate
mortgages. Mortgage-backed securities of this tserve to reduce the interest rate
risk associated with changes in interest rates.

     Of our total investment in mortgage-backed securities at December 31, 1999,
$50.2  million  consisted  of  CMOs,  $4.5  million  consisted  of  Freddie  Mac
certificates,  $11.8  million  consisted  of Fannie  Mae  certificates  and $3.8
million consisted of Ginnie Mae certificates.

     The  following  table  sets  forth  the  activity  in  our  mortgage-backed
securities   portfolio  during  the  periods  indicated.   Our   mortgage-backed
securities are classified as available for sale, and consequently are carried on
our financial statements at fair value.

<TABLE>
<CAPTION>
                                                                       At or for the Year Ended
                                                                             December 31,
                                                              -----------------------------------------
                                                                  1999           1998           1997
                                                              ----------      ---------      ----------
                                                                        (Dollars In Thousands)
<S>                                                           <C>             <C>            <C>
Mortgage-backed securities at beginning of period...........  $  86,612       $  71,824      $  67,589
Purchases...................................................     14,636          62,821         44,818
Sales.......................................................     (5,738)        (25,856)       (32,009)
Repayments..................................................    (22,396)        (21,669)        (9,468)
Unrealized gain (loss)......................................     (2,812)           (415)           998
Net accretion/amortization..................................        (37)            (93)          (104)
                                                              ----------      ----------     ----------

Mortgage-backed securities at end of period.................  $  70,265       $  86,612      $  71,824
                                                              =========       =========      =========

Weighted average yield at end of period.....................       6.57%           6.49%          6.55%
                                                              =========       =========      =========
</TABLE>

     At December  31,  1999,  all of the $70.3  million was  scheduled to mature
after  five  years.  Due to  prepayments  of the  underlying  loans,  the actual
maturities of mortgage-backed  securities  generally are substantially less than
the scheduled maturities.

     At December 31, 1999,  fixed rate  mortgage-backed  securities  amounted to
$45.1 million and adjustable rate  mortgage-backed  securities amounted to $25.2
million. All mortgage-backed securities qualify for regulatory liquidity.

     Federally  chartered  savings  institutions  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,
certificates  of  deposit  at  federally  insured  banks  and  savings  and loan
associations, certain bankers' acceptances and federal funds. Subject to various
restrictions, federally chartered 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.  In addition,  we have
certain  additional  investment  authority  under OTS regulations as a result of
certain  grandfathered  powers  permitted under the terms of the approval of our
conversion from state to federal charter.


                                       13

<PAGE>



     Our investment securities portfolio is managed in accordance with a written
investment  policy  adopted by the Board of Directors  and  administered  by the
Executive  Committee  which consists of five Board members,  including the chief
executive  officer.  An  investment  officer is  authorized to purchase and sell
investments up to certain limits set forth in the investment  policy.  All other
investment  transactions must receive prior approval of the Executive Committee.
At the time of purchase of an investment or mortgage-backed security, management
designates  the security as either held to maturity or available  for sale based
on our  investment  objectives,  operational  needs and  intent.  We maintain no
trading account securities.  Investment  activities are monitored to ensure that
they are consistent  with the  investment  policy's  established  guidelines and
objectives.

     As of  December  31,  1999,  our  held to  maturity  investment  securities
portfolio had an amortized cost of $1.6 million, consisting of securities issued
by municipal  agencies.  As of the same date, our securities  available for sale
portfolio  had a fair  value of  $118.7  million,  of which  $42.5  million  was
securities  issued by the UGovernment  and Federal  Government  agencies,  $70.3
million  was  mortgage-backed   securities,  $4.6  million  was  corporate  debt
securities and $1.4 million was mutual funds and common stock.

     The following table sets forth certain information relating to Savings Bank
of the Finger Lakes' investment securities portfolio at the dates indicated.


<TABLE>
<CAPTION>

                                                   December 31, 1999              December 31, 1998             December 31, 1997
                                               -----------------------     -----------------------------   ------------------------
                                                  Amortized     Fair            Amortized        Fair         Amortized    Fair
                                                    Cost        Value             Cost           Value         Cost        Value
                                                                                 (In Thousands)

Securities available for sale:
  Debt securities:
<S>                                            <C>           <C>              <C>            <C>            <C>           <C>
   U.S. Government and agency bonds..........  $   45,401    $    42,546      $      25,962  $    26,064    $   26,344    $   26,462

   Mortgage-backed securities:
     Collateralized mortgage obligations.....      51,996         50,142             59,063       59,044        21,580        21,730
     Fannie Mae..............................      12,307         11,818             16,436       16,597        19,750        20,015
     Freddie Mac.............................       4,585          4,495              6,115        6,188        15,272        15,484
     Ginnie Mae..............................       3,949          3,810              4,760        4,784        14,567        14,594
                                               ----------    -----------      -------------  -----------    ----------    ----------
   Total mortgage-backed securities..........      72,837         70,265             86,374       86,613        71,169        71,823

   Corporate and municipal bonds.............       4,729          4,559                 --           --            --            --
                                               ----------    -----------      -------------  -----------    ----------    ----------

  Total debt securities......................     122,967        117,370            112,336      112,677        97,513        98,285

  Equity securities..........................       1,657          1,380              2,738        2,656         1,645         1,595
                                               ----------    -----------      -------------  -----------    ----------    ----------

  Total securities available for sale........  $  124,624    $   118,750      $     115,074  $   115,333    $   99,158    $   99,880
                                               ==========    ===========      =============  ===========    ==========    ==========

Securities held to maturity:
  Debt securities:
   U.S. Government and agency bonds..........  $       --    $        --      $       4,000  $     4,022    $   14,096    $   14,136
   Corporate and municipal bonds.............       1,593          1,567                640          640            --            --
                                               ----------    -----------      -------------  -----------    ----------    ----------

   Total debt securities.....................       1,593          1,567              4,640        4,662        14,096        14,136
                                               ----------    -----------      -------------  -----------    ----------    ----------

   Total securities held to maturity.........  $    1,593    $     1,567              4,640        4,662        14,096        14,136
                                               ----------    -----------      -------------  -----------    ----------    ----------

   Total securities..........................  $  126,217    $   120,317      $     119,714  $   119,995    $  113,254    $  114,016
                                               ==========    ===========      =============  ===========    ==========    ==========
</TABLE>



                                                                        14

<PAGE>


     At December 31, 1999, the  contractual  maturities of debt securities is as
follows:

<TABLE>
<CAPTION>
                                                                Available for Sale             Held to Maturity
                                                            -------------------------   ----------------------------
                                                               Fair                       Amortized
                                                               Cost           Yield         Cost             Yield
                                                            ----------     ----------   -------------     ----------
                                                                             (Dollars in Thousands)

<S>                                                      <C>               <C>           <C>            <C>
   One year or less.......................               $          --            --%   $        30             5.50%
   After one year through five years......                       5,063          6.31            142             5.50
   After five years through ten years.....                      45,550          6.52            929             4.91
   After ten years........................                      66,757          6.57            492             4.99
                                                         -------------     ---------    -----------    -------------

   Total..................................               $     117,370          6.54%   $     1,593             5.00%
                                                          ============     =========    ===========    =============
</TABLE>

Sources of Funds

     General. Deposits are the primary source of our funds for lending and other
investment  purposes.  In  addition  to  deposits,  we  derive  funds  from loan
principal  repayments.  Loan repayments are a relatively stable source of funds,
while  deposit  inflows and outflows  are  significantly  influenced  by general
interest rates and money market conditions.  Borrowings are used on a short-term
basis to  compensate  for  reductions  in the  availability  of funds from other
sources and are also used on a longer term basis for general business purposes.

     Deposits.  Our deposits are attracted  principally  from within our primary
market area tthe offering of a broad selection of deposit instruments, including
NOW  accounts,  money  market  accounts,  regular  savings  accounts,  and  term
certificate accounts. Deposit account terms vary, with the principal differences
being the minimum  balance  required,  the time periods the funds must remain on
deposit and the interest rate.

     Interest rates paid, maturity terms,  service fees and withdrawal penalties
are established by us on a periodic basis.  Determination of rates and terms are
predicated  on funds  acquisition  and  liquidity  requirements,  rates  paid by
competitors, growth goals and federal regulations.

     We do not advertise for deposits outside our primary market area or utilize
the services of deposit brokers.

     The following table sets forth the dollar amount of deposits in the various
types of deposit programs offered by us at the dates indicated.

<TABLE>
<CAPTION>
                                              December 31, 1999              December 31, 1998              December 31, 1997
                                          -------------------------     --------------------------     --------------------------
                                            Amount         Percent         Amount         Percent        Amount          Percent
                                          ----------     ----------     -----------     ----------     -----------     ----------
                                                                                   (Dollars In Thousands)

<S>                                       <C>                <C>        <C>                 <C>        <C>                  <C>
Certificates of deposit................   $   132,544        63.68%     $   127,852         63.16%     $    112,702         60.42%
                                          -----------    ---------      -----------     ---------      ------------    ----------
Transaction Accounts:
Savings accounts.......................        46,093        22.15           47,259         23.34            48,285         25.88
Money market accounts .................         5,020         2.41            3,196          1.58             2,198          1.18
Demand deposits and NOW accounts               24,475        11.76           24,127         11.92            23,349          12.52
                                           ----------    ---------      -----------     ---------      ------------     ----------

   Total transaction accounts..........        75,588        36.32           74,582         36.84            73,832         39.58
                                          -----------    ---------      -----------     ---------      ------------    ----------
   Total deposits......................   $   208,132       100.00%     $   202,434        100.00%     $    186,534        100.00%
                                          ===========    =========      ===========     =========      ============    ==========
</TABLE>



                                                                    15

<PAGE>



     The  following  table sets forth the deposit  activities of Savings Bank of
the Finger Lakes during the periods indicated.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                             ------------------------------------------
                                                                1999           1998            1997
                                                             -----------    -------------   -----------
                                                                            (In Thousands)

<S>                                                          <C>            <C>             <C>
Deposits................................................     $   619,483    $    500,594    $   360,637
Withdrawals.............................................        (622,445)       (493,372)      (335,673)
                                                             -----------    ------------    -----------
Net increase (decrease) before interest credited........          (2,962)          7,222         24,964
Interest credited.......................................           8,660           8,678          7,738
                                                             -----------    ------------    -----------
Net increase in deposits................................     $     5,698    $     15,900    $    32,702
                                                             ===========    ============    ===========
</TABLE>

     The  following  table  sets forth the  maturities  of our  certificates  of
deposit having principal amounts of $100,000 or more as of December 31, 1999.

    Maturity Period                                   Amount         Percent
-----------------------                            ------------     ----------
                                                  (In Thousands)

Three months or less.........................      $   4,335           17.6%
Over three through six months................          6,408           26.0
Over six through twelve months...............          8,334           33.9
Over twelve months...........................          5,523           22.5
                                                   ---------           ----
   Total certificates of deposit with
      balances of $100,000 or more...........      $  24,600           100%
                                                   =========           ===

     The following  table shows the interest rate and maturity  information  for
our certificates of deposit as of December 31, 1999.

<TABLE>
<CAPTION>
                                                           Maturity Date
                     -------------------------------------------------------------------------------------
  Interest Rate       1 Year or Less   Over 1 to 2 Years Over 2 to 3 Years    Over 3 Years         Total
 ---------------     ---------------   ----------------- ------------------------------------   ----------
                                                         (In Thousands)

<S>                     <C>               <C>               <C>               <C>               <C>
 2.00% - 4.00%          $   1,704         $      --         $      --         $      --         $   1,704
 4.01% - 6.00%             86,817            23,586             1,869             4,522           116,794
 6.01% - 8.00%              9,788             1,192             1,873             1,193            14,046
                        ---------         ---------         ---------         ---------         ---------
   Total                $  98,309         $  24,778         $   3,742         $   5,715         $ 132,544
                        =========         =========         =========         =========         =========
</TABLE>

     Borrowings. We may obtain advances from the FHLB of New York secured by our
investment in FHLB of New York stock, our portfolio of investment securities and
certain of our residential mortgage loans, provided certain standards related to
creditworthiness  have been met.  Such  advances  are made  pursuant  to several
credit  programs,  each  of  which  has its  own  interest  rate  and  range  of
maturities.

     The following  table sets forth the maximum  month-end  balance and average
balance of our FHLB advances during the periods indicated.

<TABLE>
<CAPTION>
                                                            For Year Ended December 31,
                                                     ----------------------------------------
                                                        1999           1998            1997
                                                     ----------     ----------      ---------
                                                                    (Dollars In Thousands)

<S>                                                  <C>            <C>             <C>
Maximum balance...................................   $  69,960      $  54,892       $  36,721
Average balance...................................      61,923         45,532          24,656
Weighted average interest rate on FHLB advances...        5.43%          5.51%           5.70%
</TABLE>



                                       16

<PAGE>



     The following table sets forth certain  information as to our FHLB advances
at the dates indicated.

<TABLE>
<CAPTION>
                                                                    At December 31,
                                                     ----------------------------------------
                                                        1999           1998            1997
                                                     ----------     ----------      ---------
                                                                      (In Thousands)

<S>                                                   <C>           <C>             <C>
FHLB advances.......................................  $  69,960     $  54,815       $  36,721
Weighted average interest rate on FHLB advances.....       5.64%         5.51%           5.76%
</TABLE>


     Subsidiary.  SBFL Agency,  Inc. is a wholly owned  subsidiary  of the Bank.
SBFL Agency,  Inc. was established in November 1995 to sell a line of fixed rate
annuity products.  At December 31, 1999 SBFL Agency,  Inc. offered mutual funds,
financial planning services and insurance annuity products.

     Employees.  We have 85 full-time  employees  and 23 part-time  employees at
December  31,  1999.  None of these  employees  is  represented  by a collective
bargaining  agreement,  and we  believe  that we enjoy good  relations  with our
personnel.

Regulation

     Savings Bank of the Finger Lakes is examined and supervised  extensively by
the  Office of  TSupervision  and the  Federal  Deposit  Insurance  Corporation.
Savings  Bank of the Finger  Lakes is a member of and owns stock in the  Federal
Home Loan Bank of New York,  which is one of the  twelve  regional  banks in the
Federal Home Loan Bank System.  This  regulation and  supervision  establishes a
comprehensive  framework of  activities  in which an ican engage and is intended
primarily for the protection of the insurance fund and depositors.  Savings Bank
of the Finger  Lakes also is  regulated by the Board of Governors of the Federal
Reserve System,  governing  reserves to be maintained against deposits and other
matters.  The Office of Thrift  Supervision  examines Savings Bank of the Finger
Lakes and prepares  reports for the  consideration of Savings Bank of the Finger
Lakes' Board of Directors on any deficiencies that they may find in Savings Bank
of the Finger Lakes' operations.  Savings Bank of the Finger Lakes' relationship
with its  depositors  and borrowers  also is regulated to a great extent by both
federal  and state laws,  especially  in matters  concerning  the  ownership  of
savings  accounts and the form and content of Savings Bank of the Finger  Lakes'
mortgage  documents.  Any  change in this  regulation,  whether  by the  Federal
Deposit Insurance Corporation,  Office of Thrift Supervision, or Congress, chave
a material  adverse  impact on Finger  Lakes  Financial  and Savings Bank of the
Finger Lakes and their operations.

Federal Regulation of Savings Institutions

     Business  Activities.  The activities of federal savings  associations  are
subject to extensive  regulation  including  restrictions or  requirements  with
respect  to loans to one  borrower,  the  percentage  of  non-mortgage  loans or
investments to total assets, capital distributions,  permissible investments and
lending  activities,  liquidity,  transactions  with  affiliates  and  community
reinvestment. The description of statutory provisions and regulations applicable
to  savings  associations  set forth  herein  does not  purport to be a complete
description of these statutes and  regulations and their eon Savings Bank of the
Finger Lakes.

     Loans to One Borrower.  Federal savings associations generally may not make
a loan or extend  credit to a single or related  group of borrowers in excess of
15% of  unimpaired  capital and surplus on an  unsecured  basis.  An  additional
amount may be lent, equal to 10% of unimpaired capital and surplus,  if the loan
is  secured by  rmarketable  collateral,  which is  defined  to include  certain
securities  and bullion,  but  generally  does not include  real  estate.  As of
December 31, 1999,  Savings Bank of the Finger Lakes was in compliance  with its
loans-to-one-borrower limitations.

     Qualified  Thrift Lender Test. As a federal  savings  association,  Savings
Bank of the Finger Lakes is required to satisfy a qualified  thrift  lender test
whereby it must  maintain at least 65% of its  "portfolio  assets" in "qualified
thrift investments"  consisting  primarily of residential  mortgages and related
investments,   including  mortgage-backed  and  related  securities.  "Portfolio
assets"  generally means total assets less specified  liquid assets up to 20% of
total assets,  goodwill and other intangible  assets,  and the value of property
used to conduct business.  A savings association that fails the qualified thrift
lender test must either  convert to a bank  charter or operate  under  specified
restrictions.  As of  December  31,  1999,  Savings  Bank  of the  Finger  Lakes
maintained  87.72% of its  portfolio  assets  in  qualified  thrift  investments
atherefore, met the qualified thrift lender test.

                                       17

<PAGE>




     Capital  Distributions.  OTS regulations  govern capital  distributions  by
savings institutions,  which include cash dividends, stock repurchases and other
transactions  charged to the capital  account of a savings  institution  to make
capital distributions.  Under new regulations effective April 1, 1999, a savings
institution   must  file  an  application   for  OTS  approval  of  the  capital
distribution  if either (1) the total capital  distributions  for the applicable
calendar  year exceed the sum of the  institution's  net income for that year to
date plus the institution's retained net income for the preceding two years, (2)
the  institution  would not be at least  adequately  capitalized  following  the
distribution,  (3)  the  distribution  would  violate  any  applicable  statute,
regulation,  agreement or OTS-imposed  condition,  or (4) the institution is not
eligible  for  expedited  treatment  of its filings.  If an  application  is not
required to be filed,  savings  institutions which are a subsidiary of a holding
company,  as well as certain other  institutions,  must still file a notice with
the OTS at least 30 days  before the board of  directors  declares a dividend or
approves a capital distribution.

     Any  additional  capital   distributions  would  require  prior  regulatory
approval.  In the event Savings Bank of the Finger Lakes' capital fell below its
fully-phased in requirement or the Office of Thrift Supervision notified it that
it was in need of more  than  normal  supervision,  Savings  Bank of the  Finger
Lakes' ability to make capital  distributions could be restricted.  In addition,
the Office of Thrift Supervision could prohibit a proposed capital  distribution
by any institution, which would otherwise be permitted by the regulation, if the
Office of Thrift  Supervision  determines that the distribution would constitute
an unsafe or unsound practice.

     Liquidity.  Savings  Bank of the Finger  Lakes is  required  to maintain an
average daily balance of specified liquid assets equal to a quarterly average of
not less than a specified  percentage of its net  withdrawable  deposit accounts
plus  borrowings  payable in one year or less.  The current  requirement  is 4%.
Savings Bank of the Finger Lakes' average  liquidity ratio for the quarter ended
December 31, 1999 was 41.98%, which exceeded the applicable requirements.

     Community Reinvestment Act and Fair Lending Laws. Savings associations have
a responsibility under the Community Reinvestment Act and related regulations of
the  Office  of  Thrift  Supervision  to help  meet  the  credit  needs of their
communities,  including low- and moderate-income neighborhoods. In addition, the
Equal Credit  Opportunity  Act and the Fair  Housing Act  prohibit  lenders from
discriminating  in their  lending  practices  on the  basis  of  characteristics
specified  in those  statutes.  An  institution's  failure  to  comply  with the
provisions  of the Community  Reinvestment  Act could,  at a minimum,  result in
regulatory restrictions on its activities,  and failure to comply with the Equal
COpportunity Act and the Fair Housing Act could result in enforcement actions by
the Office of Thrift  Supervision,  as well as other federal regulatory agencies
and the  Department  of Justice.  Savings  Bank of the Finger  Lakes  received a
satisfactory  Community  Reinvestment  Act rating  under the  current  Community
Reinvestment  Act  regulations  in its most recent  federal  examination  by the
Office of Thrift Supervision.

     Transactions  with  Related  Parties.  Savings  Bank of the  Finger  Lakes'
authority to engage in  transactions  with related parties or "affiliates" or to
make loans to specified insiders, is limited by Sections 23A and 2of the Federal
Reserve  Act.  The term  "affiliates"  for these  purposes  generally  means any
company that controls or is under common  control with an  institution.  Section
23A  limits the  aggregate  amount of certain  "covered"  transactions  with any
individual  affiliate  to  10%  of  the  capital  and  surplus  of  the  savings
institution and also limits the aggregate  amount of covered  transactions  with
all affiliates to 20% of the savings institution's capital and surplus.  Covered
transactions  with  affiliates  are required to be secured by  collateral  in an
amount and of a type  described  in Section 23A and the  purchase of low quality
assets from  affiliates  is  generally  prohibited.  Section 23B  provides  that
covered transactions with affiliates,  including loans and asset purchases, must
be on terms  and  under  circumstances,  including  credit  standards,  that are
substantially  the same or at least as  favorable  to the  institution  as those
prevailing  at  the  time  for  comparable   transactions  with   non-affiliated
companies. In addition,  savings institutions are prohibited from lending to any
affiliate  that is  engaged  in  activities  that are not  permissible  for bank
holding companies and no savings  institution may purchase the securities of any
affiliate other than a subsidiary.

                                       18

<PAGE>



     Savings Bank of the Finger  Lakes'  authority to extend credit to executive
officers,  directors  and 10%  stockholders,  as well as entities  controlled by
these persons,  is currently governed by Sections 22(g) and 22(h) of the Federal
Reserve Act, and also by  Regulation O. Among other  things,  these  regulations
generally  require  these  loans to be made on terms  substantially  the same as
those  offered to  unaffiliated  individuals  and do not  involve  more than the
normal risk of  repayment.  However,  recent  regulations  now permit  executive
officers and directors to receive the same terms through benefit or compensation
plans, that are widely available to other employees,  as long as the director or
eofficer is not given  preferential  treatment  compared to other  participating
employees. Regulation O also places iand aggregate limits on the amount of loans
Savings Bank of the Finger Lakes may make to these  persons  based,  in part, on
Savings  Bank of the Finger  Lakes'  capital  position,  and  requires  approval
procedures  to be followed.  At December  31,  1999,  Savings Bank of the Finger
Lakes was in compliance with these regulations.

     Enforcement.  The  Office of Thrift  Supervision  has  primary  enforcement
responsibility  over  savings  institutions  and  has  the  authority  to  bring
enforcement  action  against  all   "institution-related   parties,"   including
stockholders,  and  attorneys,  appraisers  and  accountants  who  knowingly  or
recklessly  participate  in  wrongful  action lto 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  and/or
directors of the institutions, receivership,  conservatorship or the termination
of deposit  insurance.  Civil  penalties  cover a wide range of  violations  and
actions, and range up to $25,000 per day, unless a finding of reckless disregard
is made,  in which  case  penalties  may be as high as $1 million  per day.  The
Federal Deposit Insurance Corporation also has the authority to recommend to the
Director of the Office of Thrift  Supervision that  enforcement  action be taken
with respect to a particular savings institution.  If action is not taken by the
Director,  the Federal Deposit Insurance  Corporation has authority to take such
action under specified circumstances.

     Standards  for Safety and  Soundness.  Federal law  requires  each  federal
banking agency to prescribe for all insured  depository  institutions  standards
relating to, among other  things,  internal  controls,  information  systems and
audit  systems,  loan  documentation,  credit  underwriting,  interest rate risk
exposure,  asset growth,  compensation,  asuch other  operational and managerial
standards as the agency deems appropriate.  The federal banking agencies adopted
Interagency  Guidelines  Prescribing  Standards  for  Safety  and  Soundness  to
implement the safety and soundness standards required under the Federal law. The
guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions
before capital becomes  impaired.  The guidelines  address internal controls and
information  systems;   internal  audit  systems;   credit  underwriting;   loan
documentation; interest rate risk exposure; asset growth; and compensation, fees
and benefits.  If the  appropriate  federal  banking agency  determines  that an
institution fails to meet any standard prescribed by the guidelines,  the agency
may  require  the  institution  to submit to the  agency an  acceptable  plan to
achieve  compliance  with the standard.  If an  institution  fails to meet these
standards, the appropriate federal banking agency may require the institution to
submit a compliance plan.

     Capital  Requirements.  Office of Thrift  Supervision  capital  regulations
require savings  institutions to meet three capital  standards:  a 1.5% tangible
capital  standard,  a 4.0% leverage or core capital ratio and an 8.0% risk-based
capital  standard.  Core  capital  is defined  as common  stockholders'  equity,
including retained earnings,  certain  non-cumulative  perpetual preferred stock
and related  surplus,  minority  interests  in equity  accounts of  consolidated
subsidiaries less intangibles other than certain qualifying supervisory goodwill
and  certain  mortgage  servicing  rights.  Tangible  capital is defined as core
capital less all  intangible  assets,  including  supervisory  goodwill,  plus a
specified  amount of mortgage  servicing  rights.  Office of Thrift  Supervision
regulations also require that, in meeting the tangible,  leverage and risk-based
capital  standards,  institutions  must  deduct  investments  in  and  loans  to
subsidiaries  engaged in activities  not  permissible  for a national  bank, and
unrealized gains or losses on certain available for sale securities.

     The  risk-based  capital  standard  for savings  institutions  requires the
maintenance of Tier 2 core and total  capital,  which is defined as core capital
and supplementary capital, to risk weighted assets of 4.0% and 8respectively. In
determining the amount of risk-weighted  assets,  all assets,  including certain
off-balance  sheet  assets,  are  multiplied by a risk- weight of 0% to 100%, as
assigned by the Office of Thrift  Supervision  capital  regulation  based on the
risks the Office of Thrift  Supervision  believes  are  inherent  in the type of
asset.  The components of Tier 1 core capital are equivalent to those  discussed
earlier under the 4.0% leverage ratio standard.  The components of supplementary
capital  currently  include  cumulative  preferred  stock,  long-term  perpetual
preferred  stock,  mandatory  convertible  securities,   subordinated  debt  and
intermediate preferred stock and allowance for loan and lease losses.  Allowance
for loan and lease losses  includable in



                                       19



<PAGE>


supplementary  capital is limited to a maximum of 1.25% of risk-weighted assets.
Overall, the aof supplementary  capital included as part of total capital cannot
exceed 100% of core capital.

     Office of Thrift  Supervision  regulatory capital rules also incorporate an
interest rate risk component.  Savings associations with "above normal" interest
rate risk exposure are 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.  In
calculating its total capital under the risk-based  rule, a savings  association
with a measured  interest rate risk exposure  exceeding 2%,  mdeduct an interest
rate  component  equal to  one-half of the excess  change.  The Office of Thrift
Supervision  has deferred,  for the present time, the date on which the interest
rate component is to be deducted from total capital. The rule also provides that
the  Director  of the  Office  of  Thrift  Supervision  may  waive  or  defer an
institution's  interest rate risk component on a ca-case basis.  At December 31,
1999,  Savings  Bank of the Finger  Lakes  exceeded  each of the three Office of
Thrift Supervision capital requirements.

Prompt Corrective Regulatory Action

     Under  the  Office  of  Thrift   Supervision   Prompt   Corrective   Action
regulations,  the Office of TSupervision is required to take supervisory actions
against  undercapitalized  institutions,  the severity of which depends upon the
institution's level of capital.  Generally, a savings institution that has total
risk-based capital of less than 8.0% or aleverage ratio or a Tier 1 core capital
ratio that is less than 4.0% is  considered  to be  undercapitalized.  A savings
institution that has the total risk-based  capital less than 6.0%, a Tier 1 core
risk-based capital ratio of less than 3.0% or a leverage ratio that is less than
3.0%  is  considered  to  be  "significantly  undercapitalized"  and  a  savings
institution  that has a tangible  capital to assets  ratio equal to or less than
2.0% is deemed  to be  "critically  undercapitalized."  Generally,  the  banking
regulator is required to appoint a receiver or  conservator  for an  institution
that is  "critically  undercapitalized."  The  regulation  also  provides that a
capital  restoration  plan must be filed with the  Office of Thrift  Supervision
within  45  days  of  the  date  an  institution  receives  notice  that  it  is
"undercapitalized,"     "significantly    undercapitalized"    or    "critically
undercapitalized."  In addition,  numerous mandatory  supervisory actions become
immediately  applicable  to the  institution,  including,  but not  limited  to,
restrictions  on  growth,  investment  activities,  capital  distributions,  and
affiliate transactions. The Office of Thrift Supervision could also take any one
of a  number  of  discretionary  supervisory  actions  against  undercapitalized
institutions,  including the issuance of a capital directive and the replacement
of senior executive officers and directors.

Insurance of Deposit Accounts

     The Federal Deposit Insurance  Corporation has adopted a risk-based deposit
insurance  assessment system. The Federal Deposit Insurance  Corporation 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,  and one of  three  supervisory  subcategories  within  each
capital group. The three capital categories are well cadequately capitalized and
undercapitalized.  The supervisory  subgroup to which an institution is assigned
is based on a supervisory  evaluation  provided to the Federal Deposit Insurance
Corporation by the institution's primary federal regulator and information which
the  Federal  Deposit  Insurance  Corporation  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.  The Federal  Deposit  Insurance
Corporation is authorized to raise the  assessment  rates.  The Federal  Deposit
Insurance Corporation has exercised this authority several times in the past and
may raise insurance  premiums in the future.  If this type of action is taken by
the Federal Deposit  Insurance  Corporation,  it could have an adverse effect on
the earnings of Savings Bank of the Finger Lakes.

Federal Home Loan Bank System

     Savings Bank of the Finger Lakes, as a federal association,  is required to
be a member of the Federal Home Loan Bank System,  which consists of 12 regional
Federal Home Loan Banks.  The Federal  Home Loan Bank System  provides a central
credit facility  primarily for member  institutions.  Savings Bank of the Finger
Lakes,  as a member of the  Federal


                                       20

<PAGE>



Home Loan Bank of New York,  is  required  to acquire and hold shares of capital
stock in that  Federal  Home Loan Bank in an amount at least  equal to 1% of the
aggregate principal amount of its unpaid residential  mortgage loans and similar
obligations  at the  beginning of each year,  or 5% of its  borrowings  from the
Federal Home Loan Bank,  whichever is greater.  As of December 31, 1999, Savings
Bank of the Finger Lakes was in compliance  with this  requirement.  The Federal
Home Loan Banks are required to provide  funds for the  resolution  of insolvent
thrifts  and  to  contribute  funds  for  affordable  housing  programs.   These
requirements  could  reduce the amount of  dividends  that the Federal Home Loan
Banks pay to their  members and could also result in the Federal Home Loan Banks
imposing a higher rate of interest on advances to their members.

Federal Reserve System

     The Federal  Reserve Board  regulations  require  savings  institutions  to
maintain noninte reserves against their transaction accounts, such as negotiable
order of withdrawal and regular checking accounts. At December 31, 1999, Savings
Bank of the Finger Lakes was in compliance with these reserve requirements.  The
balances  maintained  to meet the  reserve  requirements  imposed by the Federal
Reserve  Board may be used to  satisfy  liquidity  requirements  imposed  by the
Office of Thrift Supervision.

Thrift Charter

     Congress  has been  considering  legislation  in  various  forms that would
require  federal  thrifts,  such as Savings Bank of the Finger Lakes, to convert
their  charters to national or state bank  charters.  Savings Bank of the Finger
Lakes cannot determine whether,  or in what form,  legislation may eventually be
enacted and there can be no assurance that any legislation that is enacted would
not  adversely  affect  Finger  Lakes  Financial  and Savings Bank of the Finger
Lakes.

                                    TAXATION

Federal Taxation

     For federal income tax purposes,  Finger Lakes Financial and its subsidiary
file a consolidated federal income tax return on a calendar year basis using the
accrual method of accounting.

     As a result of the enactment of the Small  Business Job  Protection  Act of
1996,  all savings  banks and savings  associations  may convert to a commercial
bank  charter,  diversify  their  lending,  or be merged into a commercial  bank
without  having  to  recapture  any of  their  pre-1988  tax  bad  debt  reserve
accumulations. Any post-1987 reserves must be recaptured,  regardless of whether
or not a  particular  thrift  intends to convert its charter,  be  acquired,  or
diversify its activities. The recapture tax on post-1987 reserves is assessed in
equal installments over the six taxable years beginning in 1996.  However,  if a
thrift met the residential loan requirement included in the federal legislation,
then the thrift could  suspend its tax bad debt  recapture for the 1996 and 1997
tax years.  At  December  31,  1999,  Finger  Lakes  Financial  had a balance of
approximately  $3.0 million of bad debt reserves that would be recaptured  under
this legislation.

     Deferred  income  taxes arise from the  recognition  of items of income and
expense  for tax  purposes  in years  different  from  those  in which  they are
recognized in the  consolidated  financial  statements.  Finger Lakes  Financial
accounts for deferred income taxes by the asset and liability  method,  applying
the enacted  statutory  rates in effect at the balance sheet date to differences
between  the  book  basis  and the tax  basis of  assets  and  liabilities.  The
resulting deferred tax liabilities and assets are adjusted to reflect changes in
the tax laws.

     Finger Lakes Financial is subject to the corporate  alternative minimum tax
to the extent it exceeds  Finger Lakes  Financial's  regular  income tax for the
year.  The  alternative  minimum  tax  will be  imposed  at the  rate  o20% of a
specially  computed tax base.  Included in this base are a number of  preference
items,  including  interest on certain  tax-exempt  bonds issued after August 7,
1986, and an "adjusted current  earnings"  computation which is similar to a tax
earnings and profits computation.  In addition,  for purposes of the alternative
minimum tax, the amount of alternative minimum taxable income that may be offset
by net operating losses is limited to 90% of alternative minimum taxable income.


                                       21

<PAGE>




     In 1998,  Finger  Lakes  Financial  Corp.,  MHC and its  subsidiaries  were
audited by the  Internal  Revenue  Service for tax years 1992 and 1995.  Amended
returns were filed, and approximately  $22,000 in additional taxes were assessed
and paid. For additional  information regarding taxation, see Note 7 of Notes to
Consolidated Financial Statements.

State Taxation

     New York State  Taxation.  Finger Lakes  Financial  and Savings Bank of the
Finger Lakes report income on a combined  calendar year basis to New York state.
New York State  Franchise Tax on  corporations  is imposed in an amount equal to
the greater of (a) 9% of "entire net income"  allocable to New York State (b) 3%
of "alternativ  entire net income"  allocable to New York State (c) 0.01% of the
average value of assets  allocable to New York State or (d) nominal minimum tax.
Entire  net  income is based on  federal  taxable  income,  subject  to  certain
modifications.  Alternative  entire  net  income is equal to entire  net  income
without certain modifications.

Executive Officers of the Company

     Listed below is  information,  as of December 31, 1999,  concerning  Finger
Lakes   Financial's   executive   officers.   There  are  no   arrangements   or
understandings  between  Finger Lakes  Financial  and any of persons named below
with respect to which he or she was or is to be selected as an officer.

           Name       Age                              Position and Term
           ----       ---  -----------------------------------------------------

G. Thomas Bowers      56   Chairman of the Board, President and Chief Executive
                           Officer.

Terry L. Hammond      50   Executive Vice President and Chief Financial Officer.

Thomas A. Mayfield    53   Senior Vice President and Senior Loan Officer.

Leslie J. Zornow      35   Senior Vice President, retail banking.




                                       22

<PAGE>



ITEM 2.        PROPERTIES

Properties

     At December 31, 1999, we conducted our business from our main office at 470
Exchange Street, Geneva, New York.

     The  following  table sets forth  certain  information  with respect to the
office and other  properties of the Savings Bank of the Finger Lakes at December
31, 1999.


                                                                   Net Book
                                                                 Value/Lease
                Description/Address     Leased/Owned           Expiration Date
                -------------------     ------------           ---------------


                                                          (Dollars in Thousands)


Main Office                                 Owned                   $ 631
470 Exchange Street
Geneva, New York

Branch Offices

Pyramid Mall                               Leased                  May 2014
Routes 5 and 20
Geneva, New York

Seaway Plaza                               Leased                 March 2011
Routes 5 and 20
Waterloo, New York

Commons                                    Leased                 March 2001
301 E. State Street
Ithaca, New York

South Meadow                           Owned on Leased              $ 776
702 South Meadow Street                     Land                   May 2017
Ithaca, New York

Canandaigua                            Owned on Leased              $ 747
659 South Main Street                       Land                September 2018
Canandaigua, New York


ITEM 3.     LEGAL PROCEEDINGS

     Although Finger Lakes Financial is involved,  from time to time, in various
legal proceedings in the normal course of business,  there are no material legal
proceedings to which Finger Lakes Financial presently is a party or to which any
of its property is subject.

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

           None




                                       23

<PAGE>


                                     PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
             STOCKHOLDER MATTERS

     The following table sets forth the high and low bid quotes for Finger Lakes
Financial  common stock and the adjusted cash  dividends per share  declared for
the periods indicated.  These quotations represent prices between dealers and do
not include retail markups,  markdowns, or commissions and do not reflect actual
transactions.  This  information  has been  obtained  from  monthly  statistical
summaries  provided by the Nasdaq  Stock  Market.  As of December 31, 1999 there
were  1,180,052  publicly-held  shares of Finger  Lakes  Financial  common stock
outstanding.

<TABLE>
<CAPTION>
                                                                                                                 Cash Dividend
                                                              High Bid(1)               Low Bid(1)                 Declared
                                                           ---------------          ---------------           ------------------
Fiscal 1999
<S>                                                         <C>                      <C>                       <C>
Quarter Ended December 31, 1999.....................        $    9.750               $     7.000               $     0.06
Quarter Ended September 30, 1999....................        $   11.000               $     8.125               $     0.06
Quarter Ended June 30, 1999.........................        $   11.750               $    10.500               $     0.06
Quarter Ended March 31, 1999........................        $   15.750               $    11.375               $     0.06

Fiscal 1998
Quarter Ended December 31, 1998.....................        $   13.250               $      9.00               $     0.06
Quarter Ended September 30, 1998....................        $   19.375               $    11.000               $     0.06
Quarter Ended June 30, 1998.........................        $   21.500               $    18.625               $     0.06
Quarter Ended March 31, 1998........................        $   24.750               $    14.750               $     0.05
--------------------
</TABLE>
(1)Common  stock prices and dividends  have been adjusted to reflect two for one
stock split effective March 2, 1998.

ITEM 6.     SELECTED FINANCIAL DATA

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
                    OF FINGER LAKES FINANCIAL AND SUBSIDIARY

     The following tables set forth selected  consolidated  historical financial
and other data of Finger  Lakes  Financial  and the  Savings  Bank of the Finger
Lakes for the periods and at the dates indicated.  The information is derived in
part  from,  and  should  be read  together  with,  the  Consolidated  Financial
Statements and Notes thereto of Finger Lakes  Financial  contained  elsewhere in
this Form 10-K.

<TABLE>
<CAPTION>
                                                                                At December 31,
                                            -------------------------------------------------------------------------------------
                                                 1999              1998              1997              1996              1995
                                            -------------     -------------     -------------     -------------     -------------
                                                                                       (In Thousands)

Selected Financial Condition Data:
<S>                                         <C>               <C>               <C>               <C>               <C>
  Total assets............................  $ 301,241         $ 282,376         $ 247,708         $ 200,429         $ 167,773
  Cash and cash equivalents...............      6,095             4,375             4,394             6,366             6,823
  Securities available for sale...........    118,750           115,333            99,880            83,830            61,719
  Securities held to maturity.............      1,593             4,640            14,096            13,347             4,705
  Loans, net..............................    158,854           145,136           118,439            88,682            86,050
  Deposits................................    208,132           202,434           186,534           153,832           144,846
  Advances from Federal Home Loan Bank         69,960            54,815            36,721            23,800                --
  Stockholders' equity....................     19,379            21,964            21,679            20,350            20,734
</TABLE>




                                                                    24

<PAGE>

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                            -------------------------------------------------------------------------------------
                                                 1999              1998              1997              1996            1995 (1)
                                            -------------     -------------     -------------     -------------     -------------
                                                                  (In Thousands, except per share amounts)

Selected Operating Data:
<S>                                         <C>               <C>               <C>               <C>               <C>
  Total interest income...................  $  20,317         $  18,645         $  15,840         $  13,560         $   8,187
  Total interest expense..................     12,021            11,201             9,197             7,370             4,426
                                            ---------         ---------         ---------         ---------         ---------
   Net interest income....................      8,296             7,444             6,643             6,190             3,761
  Provision for loan losses...............        200               240               120               483               290
                                            ---------         ---------         ---------         ---------         ---------
  Net interest income after provision for
   loan losses............................      8,096             7,204             6,523             5,707             3,471
  Noninterest income......................      1,328             1,202               721             1,093               123
  Noninterest expense.....................      7,259             7,213             5,835             6,741             5,068
                                            ---------         ---------         ---------         ---------         ---------
  Income (loss) before income tax
   expense (benefit)......................      2,165             1,193             1,409                59            (1,474)
  Income tax expense (benefit)............        860               469               562                23              (571)
                                            ---------         ---------         ---------         ---------         ---------
  Net income (loss).......................  $   1,305         $     724         $     847         $      36         $    (903)
                                            =========         =========         =========         =========         =========
  Net income (loss) per share- basic......  $     .37         $     .21         $     .24         $     .01         $    (.25)
                                            =========         =========         =========         =========         =========
  Net income (loss) per share - diluted     $     .37         $     .20         $     .24         $     .01        $     (.25)
                                            =========         =========         =========         =========        ==========
                                                                                                           (
  Dividends per share.....................  $     .24         $     .23         $     .20         $     .20         $     .15
                                            =========         =========         =========         =========         =========
---------------------------
<FN>
(1)    Reflects eight months of operations insofar as the Savings Bank of Finger Lakes converted its fiscal year end from April
       3to December 31 in  1995.
</FN>
</TABLE>

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

     This discussion and analysis reflects Finger Lakes Financial's consolidated
financial  statements  and other  relevant  statistical  data and is intended to
enhance your understanding of our financial condition and results of operations.
You should read the information in this section in conjunction with Finger Lakes
Financial's  consolidated  financial  statements and their notes,  and the other
statistical  data  provided in this  prospectus.  This report  contains  certain
"forwar-looking  statements" which may be identified by the use of such words as
"believe,"   "expect,"   "anticipate,"   "should,"  "planned"   "estimated"  and
"potential." Examples of forward-looking statements include, but are not limited
to, estimates with respect to our financial condition, results of operations and
business that are subject to various factors which could cause actual results to
differ  materially from these  estimates and most other  statements that are not
historical in nature. These factors include, but are not limited to, general and
local economic conditions,  changes in interest rates, deposit flows, demand for
mortgage  and other  loans,  real estate  values,  and  competition;  changes in
accounting  principles,  policies,  or  guidelines;  changes in  legislation  or
regulation;  and other  economic,  competitive,  governmental,  regulatory,  and
technological factors affecting our operations, pricing, products and services.

General

     Our results of operations  depend  primarily upon the results of operations
of our wholly-owned  subsidiary,  Savings Bank of the Finger Lakes, which depend
primarily on net interest income.  Net interest income is the difference between
the interest income we earn on our interest-earning assets, consisting primarily
of loans and investment and mortgage-backed  securities, and the interest we pay
on our interest-bearing  liabilities,  primarily savings accounts, time deposits
and other  borrowings.  Our  results  of  operations  are also  affected  by our
provision  for loan  losses,  other  income  and other  expense.  Other  expense
consists of non-interest  expenses,  including  salaries and employee  benefits,
occupancy,  data processing fees,  deposit insurance  premiums,  advertising and
other expenses.  Other income consists of non-interest income, including service
charges and fees,  gain (loss) on sale of loans and securities and other income.
Our  results of  operations  may also be affected  significantly  by general and
local economic and competitive  conditions,  particularly those with rto changes
in  market  interest  rates,  government  policies  and  actions  of  regulatory
authorities.

                                       25

<PAGE>



Financial Condition

     Our total  assets  as of  December  31,  1999 were  $301.2  million,  a net
increase of $18.8 million,  or 6.7% from December 31, 1998. The increase was due
primarily to a $13.8  million or 9.5% increase in our loan  portfolio.  Our loan
growth is a result of competitive expansion into other markets within the Finger
Lakes  region  in New  York  attracting  new  commercial  and  personal  lending
customers.  With management's  continued emphasis on lending  activities,  loans
increased by $4.9  million,  home equity loans  increased by $5.3  million,  and
commercial  business loans increased by $4.1 million.  Securities  classified as
available for sale at December 31, 1999 were $118.8 million, an increase of $3.5
million from December 31, 1998, while securities  classified as held to maturity
at December 31, 1999 were $1.6 million, a decrease of $3.0 million from December
31, 1998. Other assets totaled $6.1 million at December 31, 1999, an increase of
$2.6 million from 1998.  This  increase is primarily  the result of deferred tax
assets attributed to the unrealized losses on securities available for sale.

     The  growth in assets  during  1999 was funded by a  combination  of a $5.7
million  increase in total  deposits  and a $15.1  million  increase in borrowed
funds.  Certificates of deposit increased by $4.7 million and all other deposits
increased  by $1.0  million in 1999.  Total  deposit  growth of $5.7  million is
reflective  of our  expansion  into  the  Ithaca  and  Canandaigua  markets  and
aggressively  pricing  deposits,   particularly  certificates  of  deposit.  The
increase in borrowed  funds  reflects a  continuation  of our  strategy of using
funding sources other than retail deposits to support asset growth.

     Stockholders'  equity  totaled  $19.4  million as of December  31,  1999, a
decrease of $2.6  million from  December  31, 1998.  Although net income of $1.3
million  in 1999  represents  an 80.2%  increase  over  1998,  the  decrease  in
stockholders'  equity  results  primarily  from  recognition  of a $3.7  million
unrealized  loss in the fair  value  of  savailable  for  sale,  net of  related
deferred income taxes.















                                       26

<PAGE>



Average Balances, Net Interest Income and Yields Earned and Rates Paid

     The  following  table  presents for the periods  indicated the total dollar
amount of interest from average interes assets and the resultant yields, as well
as the interest expense on average interest-bearing liabilities,  expressed both
in dollar and rates, and the net interest m No  tax-equivalent  adjustments have
been made and all average  balances  are daily  average  balances.  Non-accruing
loans have been included in the yield  calculations  in this table and dividends
received are included as interest income.

<TABLE>
<CAPTION>
                                           At December 31,         Year Ended             Year Ended               Year Ended
                                                1999           December 31, 1999       December 31, 1998        December 31, 1997
                                          ----------------- ------------------------ ----------------------- -----------------------
                                                     Yield/  Average          Yield/ Average          Yield/ Average          Yield/
                                            Balance   Rate   Balance Interest  Rate  Balance Interest  Rate  Balance Interest  Rate
                                          ---------- ------ -------- -------- ------ ------- -------- ------ ------- -------- ------
 (Dollars In Thousands)
Interest-earning assets:
<S>                                       <C>          <C>   <C>       <C>     <C>   <C>      <C>       <C>  <C>      <C>      <C>
Loans(1)...............................   $ 160,204    8.00% $ 153,783 $12,137 7.89% $132,324 $ 10,821  .18% $ 99,939 $ 8,588  8.59%
Securities (2).........................     129,741     6.42   128,761   8,173  6.35  119,256    7,810  6.55  110,762   7,204  6.50
Money market investments...............         200     4.75       114       6  5.26      293       14  4.78      788      47  5.96
                                          --------- -------- --------- ------- ----- -------- -------- -----  ------- -------  ----
Total interest-earning assets..........     290,145     7.31   282,658  20,316  7.19  251,873   18,645  7.40  211,489  15,839  7.49
                                                    --------           ------- -----          -------- -----          -------  ----
Non-interest-earning assets............      11,906             11,101                 11,519                   7,820
                                          ---------          ---------               --------                 -------
Total assets...........................   $ 301,241          $ 293,759               $263,392
                                          ---------          =========               ========
                                                                                                             $219,309

Interest-bearing liabilities:
Deposits(3)............................   $ 208,132     4.15   208,166 $ 8,660  4.16 $193,227 $  8,678  4.49 $ 171,993 $ 7,738  4.50
Borrowed funds.........................      69,960     5.64    61,923   3,360  5.43   45,771    2,523  5.51    25,127   1,458  5.80
                                          --------- -------- --------- ------- ----- -------- -------- -----  ---------------- -----
Total interest-bearing liabilities.....     278,092     4.53   270,089  12,020  4.45  238,998   11,201  4.69   197,120   9,196  4.67
                                                    --------           ------- -----          -------- -----          -------- -----
Non-interest-bearing liabilities.......       3,770              2,601                  2,369                    1,260
                                          ---------          ---------              ---------                 --------
Total liabilities......................     281,862            272,690                241,367                  198,380
Stockholders' equity...................      19,379             21,069                 22,025                   20,929
                                          ---------          ---------              ---------                 --------
Total liabilities and
  stockholders' equity.................   $ 301,241          $ 293,759               $263,392                 $219,309
                                            =======          =========               ========                 ========

Net interest income....................                                $ 8,296                  $ 7,444                 $ 6,643
                                                                       =======                  =======

Interest rate spread(4)................                2.78%                     2.74%                    2.71%                2.82%
                                                    =======                    ======                   ======               ======
Net interest margin(5).................                                          2.93%                    2.96%                3.14%
                                                                               ======                   ======               ======
Average interest-earning assets to
   average interest-bearing liabilities                                        104.65%                  105.39%              107.29%
                                                                               ======                   ======               =======
</TABLE>
--------------------
(1)Includes premiums, net of deferred fees.
(2)Includes securities available for sale and held to maturity at amortized cost
and Federal Home Loan Bank stock.
(3)Includes noninterest-bearing deposits.
(4)Represents   the   difference   between  the   weighted   average   yield  on
interest-earning   assets   and  the   weighted   average   costs   of   average
interest-bearing liabilities. (5)Net interest income divided by interest-earning
assets.





                                                                    27

<PAGE>



Rate/Volume Analysis

     The following table describes the extent to which changes in interest rates
and changes in volume of  interest-related  assets and liabilities have affected
interest income and expense during the periods  indicated.  For each category of
interest-  earning  assets  and  interest-bearing  liabilities,  information  is
provided  on changes  attributable  to (i)  changes in volume  (change in volume
multiplied by prior year rate),  (ii) changes in rate (change in rate multiplied
by prior year volume),  and (iii) total change in rate and volume.  The combined
effect of changes in both rate and volume has been allocated  proportionately to
the change due to rate and the change due to volume.

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                1999 vs. 1998                               1998 vs. 1997
                                                 -----------------------------------------   ---------------------------------------
                                                     Increase/(Decrease)                           Increase/(Decrease)
                                                           Due to          Total Increase/               Due to      Total Increase/
                                                 ------------------------                     -------------------------
                                                    Rate         Volume       (Decrease)         Rate          Volume     (Decrease)
                                                 -----------   ----------     ----------      ----------     ----------  -----------
                                                                                      (In Thousands)
Interest-earning assets:

<S>                                              <C>           <C>            <C>             <C>            <C>          <C>
Loans..........................................  $   (439)     $ 1,755        $  1,316        $  (550)       $  2,783     $  2,233
Securities.....................................      (259)         622             363             54             552          606
Money market investments.......................         1           (9)             (8)            (3)            (30)         (33)
                                                 --------      -------        --------        -------        --------     --------
   Total interest-earning assets...............      (697)       2,368           1,671           (499)          3,305        2,806
                                                 --------      -------        --------        -------        --------     --------

Interest-bearing liabilities:

Deposits.......................................      (689)         671             (18)           (15)            955          940
Borrowed funds.................................       (53)         890             837           (133)          1,198        1,065
                                                 --------      -------        --------        -------        --------     --------
    Total interest-bearing liabilities.........      (742)       1,561             819           (148)          2,153        2,005
                                                 --------      -------        --------        -------        --------     --------

Increase (decrease) in net interest income.....  $     45      $    807        $    852       $  (351)      $   1,152     $    801
                                                 ========      ========        ========       =======       =========     ========
</TABLE>

Results of Operations

     Comparison of the years ended December 31, 1999 and 1998

     Net Interest Income.  Our net interest income is determined by its interest
rate spread (i.e.,  the  difference  between  yields earned on  interest-earning
assets and rates paid on interest-bearing  liabilities) and the relative amounts
of  interest-  earning  assets and  interest-bearing  liabilities.  Net interest
income  amounted to $8.3 million in 1999, an increase of $852,000 from 1998. The
increase   resulted  from  a  $30.8  million   increase  in  the  total  average
interest-earning  assets,  primarily from loan growth, offset by a $31.1 million
increase in average interest-bearing  liabilities,  the net of which contributed
to a $807,000 increase in net interest income.  The average interest rate spread
in 1999 was 2.74% versus 2.71% in 1998.  The average  yield on  interest-earning
assets  decreased 21 basis points,  while the average cost of funds decreased 24
basis points from 1998 to 1999,  the benefits of which  contributed to a $45,000
increase in net  interest  income in 1999.  The decline in the average  yield on
interest earning assets was attributable to a declining rate environment through
the second  quarter of 1999 and  increased  competitive  pressures.  The cost of
funds, correspondingly, declined as a result of the rate environment, as well as
deposit pricing strategies designed to lower the overall cost of deposits.

     Interest  Income.  Total interest income in 1999 amounted to $20.3 million,
an increase of $1.7  million from 1998.  Although  the average  yield on earning
assets  declined to 7.19% in 1999 compared to 7.40% in 1998,  interest income on
loans increased to $12.1 million in 1999, an increase of $1.3 million from 1998.
This   improvement  was  attributable  to  loan  growth  as  the  average  total
outstanding loan balance  increased by $21.5 million to $153.8 million for 1999.
Interest income on securities  amounted to $8.2 million, an increase of $363,000
from the prior year.  This increase was attributed to growth in the portfolio as
the average  outstanding  securities balance increased by $9.5 million to $128.8
million for 1999.

     Interest  Expense.  Total interest  expense in 1999 was $12.0  million,  an
increase of $819,000 from 1998. In 1999,  interest expense on deposits  amounted
to $8.7  million  while  interest  expense on  borrowed  funds  amounted to $3.4
million.


                                       28

<PAGE>



     Interest expense on deposits  remained  essentially flat year over year, as
an  increase  of $671,000  attributed  to the growth in the average  outstanding
deposit base was offset by a decrease of $689,000  attributed  to the decline of
0.33% in the average  cost of deposits to 4.16%.  However,  interest  expense on
borrowings increased $837,000, from $2.5 million in 1998, due to a $16.1 million
increase in average outstanding  borrowings.  The average cost of borrowed funds
decreased 0.08% to 5.43% for the year ended December 31, 1999.

     Provision  for Loan  Losses.  Our  provision  for loan  losses  amounted to
$200,000 in 1999, a decrease of $40,000 from the prior year.  Our  allowance for
loan losses  amounted to $1.3 million as of December 31, 1999, or 0.84% of total
loans  outstanding,  as compared to $1.2  million or 0.80% at December 31, 1998.
The reduction in the provision  reflects an improvement in the credit quality of
the portfolio in 1999 as non-performing  loans decreased $429,000 to $587,000 at
December 31, 1999 from $1.0 million at December 31,  1998.  Net  charge-offs  in
1999 were  $27,000  versus  $213,000  in 1998,  representing  0.02%  and  0.16%,
respectively,  of total average loans outstanding.  The decrease in ncharge-offs
was  primarily  a  result  of a  significant  1999  recovery  for  $90,000  of a
previously  charged-off  commercial  business loan bringing total  recoveries to
$185,000 in 1999 as compared  to $80,000 in 1998.  Also,  gross loan charge offs
declined  by $81,000 to  $212,000  in 1999 from  $293,000  in 1998 as we devoted
greater  resources to monitoring of problem loans and  collection  efforts.  The
slight 4 basis point  increase in the  allowance for loan losses as a percentage
of total loans outstanding is a result of qualitative factors including, but not
limited to, the substantial growth in multi-family and commercial business loans
and entry into new markets. Management reviews the adequacy of the allowance for
loan losses quarterly through an asset  classification and review process and an
analysis  of  the  level  of  loan   delinquencies  and  general  mand  economic
conditions.

     Noninterest  Income.  Noninterest income,  consisting  primarily of service
charges  on deposit  accounts,  loan  servicing  fees,  income  from the sale of
annuities and mutual funds, and gains and losses on loans  asecurities sold, was
$1.3 million in 1999, an increase of $126,000 or 10.5% compared to 1998. Service
charges were $1.0 million in 1999, an increase of $224,000 over 1998.  Net gains
on sales of securities  in 1999 were  $77,000,  as compared to $106,000 in 1998.
Net gains on sales of loans were  $224,000  in 1999,  as compared to $277,000 in
1998.

     Noninterest Expense.  Noninterest expense amounted to $7.3 million in 1999,
comparable to 1998. However, excluding provisions for environmental remediation,
expenses  increased  $576,000 or 8.7%. This increase  reflects our investment in
the future with increased staff, branch expansion,  and upgrading  technological
capabilities for data processing. Increases of $269,000 in salaries and employee
benefits  expense and $177,000 in office  occupancy and  equipment  expense were
primarily the result of a full year of expenses including  depreciation  expense
relating  to a new  branch  office in  Canandaigua,  New York.  Data  processing
expense amounted to $159,000,  an increase of $40,000 or 33.6%. This increase is
primarily  the result of additional  processing  costs  associated  with the new
branch office, and data  communications  upgraded at two branches in Ithaca, New
York. We recorded provisions for environmental  remediation of real estate owned
of $90,000  during  1999,  as compared to  $620,000  in 1998.  This  decrease is
primarily the result of  management's  determination  of the provision  required
each year to ensure that the accrual  established for environmental  remediation
as of December 31 is  appropriate.  See note 13 of the  "Consolidated  Financial
Statements."  Professional  fees of  $347,000  in 1999,  which  includes  legal,
consulting and accounting  services,  remained consistent in 1999 as compared to
1998 as did  deposit  insurance  premiums,  which  totaled  $120,000  for  1999.
Marketing  and  advertising  expense  decreased  $16,000  to  $248,000  in 1999,
reflecting  larger media  expenditures in 1998 relating to the new branch office
in Canandaigua.  Real estate owned expenses increased $63,000 to $72,000 in 1999
as compared to $9,000 in 1998,  reflecting higher levels of foreclosure in 1999,
as well as fewer gains on sale of real estate owned.  Other noninterest  expense
of $1.2 million in 1is comprised of expenses such as postage,  office  supplies,
telephone  charges,  loan servicing  expenses,  directors  fees, and third party
check processing charges and remains consistent with the prior year.

     Income  Taxes.  Our  recorded  income tax expense was $860,000 for the year
ended D31, 1999 on income before taxes for the year of $2.2 million,  reflecting
an effective tax rate of 39.7%. In 1998, the effective rate was 39.3%.




                                       29

<PAGE>



     Comparison of the years ended December 31, 1998 and 1997

     Net Interest Income.  Net interest income amounted to $7.4 million in 1998,
an increase of $801,000 from the prior year. The average interest rate spread in
1998 was 2.71%,  versus  2.82% in 1997.  The average  yield on  interest-earning
assets  decreased 9 basis  points,  while the average cost of funds  increased 2
basis points from 1997 to 1998.

     Interest  Income.  Total interest income in 1998 amounted to $18.6 million,
an increase of $2.8  million from 1997.  Although  the average  yield on earning
assets  declined to 7.40% in 1998 compared to 7.49% in 1997,  interest income on
loans  increased to $10.8 million in 1998, an increase of $2.2 million from $8.6
million in 1997.  This  improvement  was  attributable to loan growth as average
total  outstanding  loans increased by $32.4 million to $132.3 million for 1998.
Interest income on securities  amounted to $7.8 million, an increase of $606,000
from  $7.2  million  in 1997.  This  increase  was  attributed  to growth in the
portfolio  as the  average  outstanding  securities  balance  increased  by $8.5
million to $119.3 million for 1998.

     Interest Expense. Total interest expense for 1998 increased $2.0 million to
$11.2 million from $9.2 million in 1997.  Interest expense on deposits increased
to $8.7 million in 1998 from $7.7 million in 1997 winterest  expense on borrowed
funds  increased  $1.0 million to $2.5 million in 1998. The increase in interest
expense on deposits  was  attributed  to the growth in the  average  outstanding
deposit base of $21.2 million to $193.2 million.  The acost of deposits remained
essentially  flat at  4.49%,  as  compared  to 4.50% in 1997.  The  increase  in
interest expense on borrowed funds is attributable to an increase in the average
outstanding  borrowings of $20.7 million partially offset by the average cost of
borrowings  decreasing in 1998 to 5.51%, from 5.80% in 1997. The overall average
cost of funds  for the year  ended  December  31,  1998  was  4.69%,  increasing
slightly from 4.67% in 1997.

     Provision  for Loan  Losses.  Our  provision  for loan losses  increased to
$240,000 in 1998 from $120,000 in 1997.  Our allowance for loan losses  amounted
to $1.2 million as of December 31, 1998 or 0.80% of total loans outstanding,  as
compared  to $1.1  million  as of  December  31,  1997 or 0.96%  of total  loans
outstanding. Net char in 1998 were $213,000 versus $59,000 in 1997, representing
0.16%  and  0.06%,  respectively,  of  total  average  loans  outstanding.  Non-
performing  loans  increased from $564,000 as of December 31, 1997 to $1,016,000
as of December 31, 1998.

     Noninterest  Income.  Noninterest  income  was $1.2  million  in  1998,  an
increase  of  $480,000 or 66.7% from 1997.  Service  charge  income for 1998 was
$803,000,  as compared to $508,000  for 1997,  an increase of $295,000 or 58.1%.
This  increase  reflects  increased  service  charges  on  deposit  accounts  of
$128,000.  Also,  income from the sale of  annuities  and mutual  funds from our
investment  subsidiary  increased  from $62,500 in 1997 to $146,000 in 1998. Net
gains on sales of  securities  in 1998 were  $106,000 as compared to $142,000 in
1997.  Net gains on sales of loans were  $276,000 in 1998 as compared to $27,000
in 1997.

     Noninterest Expense. Noninterest expenses amounted to $7.2 million in 1998,
an  increase  o$1.3  million  from  $5.8  million  in 1997.  However,  excluding
provisions for environmental remediation,  expenses increased $908,000 or 16.7%.
Salaries and employee benefits  increased  $454,000 to $3.3 million in 1998 from
$2.9 million in 1997,  and office  occupancy  and equipment  expenses  increased
$350,000 to $1.2 million in 1998 from  $860,000 in 1997.  These  increases  were
primarily  the result of two new branch  offices  opened  during  1997 and 1998.
Professional  fees,  which pinclude legal and audit fees,  increased  $27,000 to
$342,000 in 1998 from $315,000 in 1997.  Data processing  expenses  decreased by
$57,000 to $119,000 in 1998 as a result of a system  conversion  in October 1997
from a service bureau to an in-ho system,  thereby  reducing third party support
fees. We also reduced real estate owned expense by $47,000,  primarily  from the
disposal or sale of various properties in 1997 and fewer properties held in 1998
as compared to 1997. Noninterest expense for 1998 also includes a loss provision
of $620,000  established for  environmental  remediation costs associated with a
former laundry site acquired through  foreclosure in 1989, as compared to a loss
provision  of  $150,000  in  1997.  See note 13 of the  "Consolidated  Financial
Statements."

     Income Taxes. We recorded income tax expense of $469,000 for 1998 on income
before taxes of $1,193,000,  reflecting an effective tax rate of 39.3%, which is
consistent with the effective tax rate in 1997 of 39.9%.




                                       30

<PAGE>



Quantitative and Qualitative Disclosures About Market Risk

     The following  table presents the difference  between our  interest-earning
assets and interes liabilities within specified maturities at December 31, 1999.
This table does not necessarily  indicate the impact that general  interest rate
movements would have on our net interest income because the repricing of certain
assets  and   liabilities  is  subject  to  competitive   pressure  and  certain
limitations.  As a result,  certain assets and liabilities indicated as maturing
or otherwise  repricing  within a stated period may in fact mature or reprice at
different times and at different volumes.

<TABLE>
<CAPTION>
                                                                          More than 1    More Than 3
                                            Within 3        4 to 12         Year to       Years to          Over
                                             Months         Months          3 Years        5 Years       Five Years        Total
                                          ------------   -------------  -------------   -------------  -------------   -------------
                                                                                     (Dollars In Thousands)
Interest-earning assets:(1)
<S>                                       <C>            <C>            <C>             <C>            <C>             <C>
Mortgage loans(2)......................   $   5,733      $  26,463      $  37,259       $  32,330      $  19,625       $ 121,410
Other loans(2).........................      14,758          3,103          8,213           7,490          4,480          38,044
Securities available for sale(3).......      18,767         14,353         23,074          13,309         49,247         118,750
Securities held to maturity(3).........          --             30             67              75          1,421           1,593
Federal Home Loan Bank Stock...........          --             --             --              --          3,523           3,523
                                          ---------      ---------      ---------       ---------      ---------       ---------
   Total interest-earning assets.......      39,258         43,949         68,613          53,204         78,296         283,320
                                          ---------      ---------      ---------       ---------      ---------       ---------

Interest-bearing liabilities:
Deposits:(4)
   NOW accounts........................         734          2,203          4,112           1,645          1,096           9,790
   Savings accounts....................       3,457         10,371         19,359           7,744          5,162          46,093
   Money market accounts...............         377          1,129          2,109             843            562           5,020
   Certificates of deposit.............      26,492         71,816         28,521           5,642             73         132,544
   Borrowings..........................      17,100         27,000          8,860          15,000          2,000          69,960
                                          ---------      ---------      ---------       ---------      ---------       ---------
      Total interest-bearing liabilities     48,160        112,519         62,961          30,874          8,893         263,407
                                          ---------      ----------     ---------       ---------       --------      ----------

Excess (deficiency) of interest- earning
 assets over interest-bearing liabilities $  (8,902)     $ (68,570)      $   5,652      $  22,330   $   69,403         $   19,913
                                          =========      =========       =========      =========   ==========         ==========

Cumulative excess (deficiency) of
   interest-earning assets over
   interest-bearing liabilities........   $  (8,902)     $ (77,472)     $ (71,820)      $ (49,490)     $  19,913
                                          =========      =========      ==========      =========      =========
Cumulative excess (deficiency)
   of interest-earning liabilities as a
   percentage of total assets..........       (2.96)%       (25.72)%       (23.84)%        (16.43)%        6.61%
                                          =========      =========      =========       ==========     ========
</TABLE>
--------------------
(1)  Adjustable-  and  floating-rate  assets are included in the period in which
     interest  rates are next  scheduled to adjust  rather than in the period in
     which they are due,  and  fixed-rate  assets are included in the periods in
     which they are scheduled to be repaid based on scheduled  amortization,  in
     each  case  adjusted  to  take  into  account  estimated  prepayments.  For
     fixed-rate  mortgages and  mortgage-backed  securities,  annual  prepayment
     rates  ranging  from 5% to  10.5%,  based on the  type of loan or  mortgage
     security and the coupon rate, were used.
(2)  Balances  have been reduced for  non-performing  loans,  which  amounted to
     $587,000 at December 31, 1999.
(3)  Amounts shown are at fair market value.
(4)  Our  negotiable  order of withdrawal  ("NOW")  accounts,  passbook  savings
     accounts  and money  market  deposit  accounts  are  generally  subject  to
     immediate  withdrawal.  However,  management considers a certain portion of
     these accounts to be core deposits having  significantly  longer  effective
     maturities  based on our  retention of such  deposits in changing  interest
     rate environments. NOW accounts, passbook savings accounts and money market
     deposit  accounts are assumed to be withdrawn at annual rates of 30% of the
     declining  balance of such  accounts  during the period  shown.  Management
     believes  these  rates are  indicative  of expected  withdrawal  rates in a
     rising  interest rate  environment.  If all of our NOW  accounts,  passbook
     savings account and money market accounts had been assumed to be subject to
     repricing  within one year, the cumulative  one-year  deficiency of interes
     assets to  interest-bearing  liabilities  would have been $120.1 million or
     39.9% of total assets.

     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 adjustable-rate  mortgage
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,  prepayment  and early  withdrawal  levels would likely deviate
significantly from those assumed in calculating the table.  Finally, the ability
of many borrowers to service their debt may decrease in the event of an interest
rate increase.

           The OTS  requires  the  Savings  Bank of the Finger  Lakes to measure
interest rate risk by computing  estimated  changes in the net  portfolio  value
("NPV") of cash flows from assets,  liabilities and  off-balance  sheet items in
the  event of a range  of  assumed  changes  in  market  interest  rates.  These
computations  estimate  the  effect  on NPV of  sudden  and  sustained  1% to 3%
increases and decreases in market interest rates. The Savings Bank of the Finger
Lakes' board of directors has



                                       31

<PAGE>



adopted an interest  rate risk policy  which  establishes  maximum  decreases in
estimated  NPV in the event of 1%, 2% and 3% increases  and  decreases in market
interest rates,  respectively.  The following  tables set forth those limits and
certain  calculations,  based on information provided to the Savings Bank of the
Finger Lakes by the OTS,  with respect to the  sensitivity  of NPV to changes in
market interest rates at December 31, 1999.


<TABLE>
<CAPTION>
    Basis Point
       Change
      in Rates                       Estimated Net Portfolio Value                              NPV as % of PV of Assets
      --------                                                                                  ------------------------
                     -------------------------------------------------------------
                         $ Amount            $ Change             % Change                 NPV Ratio               BP Change
                         --------            --------             --------                 ---------               ---------
                                       (Dollars in Thousands)
<S>      <C>             <C>             <C>                          <C>                      <C>                   <C>
        +300             $    5,753      $     (16,765)               (74)%                    2.05%                 (538) bp
        +200                 11,628            (10,890)                (48)                     4.04                 (339) bp
        +100                 17,410             (5,108)                (23)                     5.89                 (155) bp
         NC                  22,518                                                             7.43
        -100                 27,732               5,214                  23                     8.94                  150  bp
        -200                 28,594               6,076                  27                     9.12                  169  bp
        -300                 28,801               6,283                  28                     9.11                  168  bp
</TABLE>


     As shown by the table,  increases  in  interest  rates  will  significantly
decrease our NPV,  while  decreases in interest rates will result in smaller net
increases in our NPV. The table  suggests that in the event of a 200 basis point
change in interest  rates we would  experience a decrease in NPV as a percentage
of assets to 4.04% from 7in a rising interest rate environment and a increase in
NPV as a percentage of assets to 9.12% from 7.43% in a decreasing  interest rate
environment.

     In order to offset some of our interest  rate risk we are seeking to extend
the maturities of our FHLB advances and other liabilities,  while adding shorter
duration assets, including shorter term commercial business loans.

     The  Board of  Directors  is  responsible  for  reviewing  asset  liability
management  policies.  On at least a quarterly basis, the Board reviews interest
rate risk and trends,  as well as liquidity and capital ratios and requirements.
Management is responsible for administering  the policies and  determinations of
the Board of Directors with rto our asset and liability goals and strategies.

Liquidity and Capital Resources

     Our  liquidity  management  objective  is to  ensure  the  availability  of
sufficient  cash  flows  to mall  financial  commitments  and to  capitalize  on
opportunities for expansion.  Liquidity management addresses the ability to meet
deposit withdrawals on demand or at contractual maturity, to repay borrowings as
they mature,  and to fund new loans and investments as opportunities  arise. Our
primary  sources  of  internally  generated  funds are  principal  and  interest
payments on loans  receivable,  cash flows generated from  operations,  and cash
flows generated by investments.  External sources of funds include  increases in
deposits and advances from the FHLB.

           Savings Bank of the Finger Lakes is required under applicable federal
regulations to maintain  specified levels of "liquid"  investments in qualifying
types of United States  Government,  federal agency and other investments having
maturities of five years of less. Current OTS regulations require that a savings
association maintain liquid aof not less than 4% of its average daily balance of
net withdrawable  deposit  accounts and borrowings  payable in one year or less.
Monetary  penalties  may be imposed  for  failure to meet  applicable  liquidity
requirements. At December 31, 1999, Savings Bank of the Finger Lakes' liquidity,
as  measured  for  regulatory  purposes,  was  in  excess  of  the  minimum  OTS
requirement.



                                       32

<PAGE>



     At December 31, 1999,  we had loan  commitments  of $3.1 million and unused
lines of credit of $14.7 million extended to borrowers.  We believe that we have
adequate  resources to fund loan  commitments as they arise. If we require funds
beyond our internal funding capabilities,  additional advances from the FHLB are
available including a line of credit agreement with a maximum available limit of
$29.2  million . At  December  31,  1999,  approximately  $98.3  million of time
deposits were scheduled to mature within a year, and we expect that a portion of
these time deposits will not be renewed upon maturity.

Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments and Hedging Activities".  This statement,  as amended by
SFAS No. 137, establishes  comprehensive  accounting and reporting  requirements
for  derivative  instruments  and hedging  activities.  The  statement  requires
companies to recognize all derivatives as either assets or lwith the instruments
measured at fair  value.  The  accounting  for gains and losses  resulting  from
changes in fair value of the derivative  instrument  depends on the intended use
of the derivative and the type of risk being hedged. This statement is effective
for all quarters of fiscal years beginning after June 15, 2000, although earlier
adoption is  permitted.  We do not currently  invest in derivative  instruments,
therefore the  provisions of SFAS No. 133 are not expected to have a significant
effect on our  consolidated  financial  statements.  SFAS No.  133 also  permits
certain   reclassifications   of  securities   from  the   he-maturity   to  the
available-for-sale  classification.  We have no current  intention to reclassify
any securities pursuant to SFAS No. 133.

Year 2000

     We developed  and  implemented  a plan to resolve  issues  associated  with
computer systems and related embedded technology with respect to the rollover of
the two digit year value to 00 ("Year  2000").  The issue was  whether  computer
systems would properly  recognize the date sensitive  information  when the year
changed to 2000.

     We have not  experienced any  significant  issues  associated with the Year
2000  problem  as a result  of the date  change to  January  1, 2000 or any date
subsequent  thereto.  The incremental  costs related to the Year 2000 compliance
were  approximately  $137,800  in 1999 and  $51,500 in 1998,  respectively.  Any
additional  incremental  costs associated with Year 2000 issues are not expected
to be material.  Management will continue to monitor operations through the year
2000 and although no assurances can be given, it is not expected that any future
adverse developments will arise with respect to Year 2000.

Impact of Inflation and Changing Prices

     The  consolidated  financial  statements  and related notes of Finger Lakes
Financial have been prepared in accordance  with generally  accepted  accounting
principles ("GAAP"). GAAP generally requires the measurement ofinancial position
and operating results in terms of historical  dollars without  consideration for
changes in the relative  purchasing  power of money over time due to  inflation.
The impact of inflation is reflected in the  increased  cost of our  operations.
Unlike industrial  companies,  our assets and liabilities are primarily monetary
in nature.  As a result,  changes in market interest rates have a greater impact
on performance than the effects of inflation.






                                       33

<PAGE>



ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations" section includes the information required by this item.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  financial   statements   identified   in  Item  14(a)(1)   hereof  are
incorporated by reference hereunder.

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

     None.

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


                      MANAGEMENT OF FINGER LAKES FINANCIAL
Directors

     The Board of  Directors  of Finger  Lakes  Financial  is  composed  of nine
members.  Directors of Finger Lakes Financial are generally elected to serve for
a three year term or until their  respective  successors shall have been elected
and shall qualify. The following table sets forth certain information  regarding
the  composition  of the Board of Directors  as of December  31, 1999  including
their terms of office.

<TABLE>
<CAPTION>
                                              Position Held at                                              Current Term
         Name                 Age          Finger Lakes Financial         Director Since (1)                  to Expire
---------------------     ----------      -------------------------     ---------------------          ---------------------

<S>                           <C>                                                <C>                            <C>
G. Thomas Bowers              56          Chairman of the Board, President       1995                           2001
                                          and Chief Executive Officer
Michael J. Hanna              54          Director                               1994                           2000
Chris M. Hansen               64          Director                               1983                           2002
Richard J. Harrison           54          Director                               1997                           2001
James E. Hunter               64          Director                               1990                           2000
Ronald C. Long                63          Director                               1994                           2000
Bernard G. Lynch              69          Director                               1962                           2001
Arthur W. Pearce              57          Director                               1998                           2001
Joan C. Rogers                66          Director                               1993                           2002
</TABLE>
----------
(1) Reflects initial appointment to Finger Lakes Financial's predecessors.

     The principal  occupations of each director and executive officer of Finger
Lakes Financial during at least the past five years is set forth below.

     G. Thomas Bowers has served as the Company's  President and Chief Executive
Officer since July 1995. In 1998 Mr. Bowers was elected Chairman of the Board of
Directors.  He was President  and Chief  Executive  Officer of Citizens  Savings
Bank, FSB, Ithaca,  New York, from July 1992 until December 1994. Mr. Bowers was
employed by Columbia  Banking Federal Savings and Loan  Association,  Rochester,
New York,  from 1987 until June 1992,  serving as President and Chief  Executive
Officer from April 1991 until June 1992.

     Michael J. Hanna has served as Director of  Athletics at Hobart and William
Smith Colleges, Geneva, New York, since 1981.

     Chris M. Hansen is retired from the  position as  President of C.M.  Hansen
Farms, Inc., located in Hall, New York.





                                       34

<PAGE>



     Richard J.  Harrison  served as Executive  Vice  President  and Director of
Dominion Capital  Corporation,  Fairport,  New York, since 1994. Mr. Harrison is
President of Newwwdeal.com, an internet service company founded in 1999, as well
as principal in Atlantic  Associates,  a  consulting  organization.  He was also
President  of United  Auto  Finance,  Inc.,  Fairport,  New  York,  from 1994 to
December 1998.  Prior to 1994, Mr. Harrison was employed by Rochester  Community
Savings  Bank,  Rochester,  New York,  serving as President  of its  subsidiary,
American Credit Services, Inc.

     James E. Hunter is a professor  at Cornell  University  and the Director of
the New York State Agricultural Experiment Station, Geneva, New York.

     Ronald C. Long is President of Long Milk Haulers, Inc., Penn Yan, New York,
which owns and operates a milk hauling and trucking operation.

     Bernard G. Lynch is retired  from his  position as  President  of the Lynch
Furniture Co., Inc., a retail furniture outlet with stores in Geneva and Auburn,
New York, where he served full-time in the position until 1992.

     Arthur W.  Pearce  retired  in July 1997  after  over 20 years in  mortgage
banking.  From  December  1994  until July 1997 he was  Senior  Vice  President,
Community  Banking,  of M&T Bank, Ithaca, New York, and from December 1992 until
December 1994 he was Executive  President of Citizens Savings Bank, FSB, Ithaca,
New York.

     Joan C.  Rogers is  retired  from her  position  as Vice  President  of BJR
Broadcasting, Seneca Falls, New York.

     Terry L.  Hammond has served as the  Company's  Executive  Vice  President,
Chief Financial  Officer and Secretary since January 1, 1999.  Prior to that, he
served as Senior Vice  President,  Chief  Financial  Officer and Secretary since
joining the Company in 1990.  Prior to that,  Mr. Hammond was employed by Monroe
Savings Bank, Rochester, New York, in the same capacity.

     Thomas A. Mayfield serves as the Company's Senior Vice President and Senior
Loan  Officer.  He joined the Company in that  capacity  in April 1996.  For two
years prior to that, Mr. Mayfield served in a similar capacity at Savannah Bank,
N.A., Savannah, New York.

     Leslie J. Zornow has served as the Company's Senior Vice President,  Retail
Banking,  since January 1, 1999.  Prior to that,  she served as Vice  President,
Branch  Administration  and Marketing  from 1996 to 1998 and as Vice  President,
Human Resources and Marketing since joining the Company in 1995.  Prior to that,
Ms. Zornow was employed by Monroe County, New York, Department of Communications
as Deputy Director.












                                       35

<PAGE>
ITEM 11.      EXECUTIVE COMPENSATION

     Shown on the  table  below  is  information  on the  annual  and  long-term
compensation for services  rendered to Finger Lakes Financial in all capacities,
for the years ended  December  31,  1999,  1998 and 1997,  paid by Finger  Lakes
Financial to its Chief Executive Officer and Executive Vice President.  No other
executive officer of the Company received salary and bonus in excess of $100,000
in 1999.

<TABLE>
<CAPTION>
                                                          Annual Compensation                   Long-Term Compensation
                                          ------------------------------------------ -----------------------------------------------
                                                                           Other
                                                                           Annual      Restricted                      All Other
               Name and                                                 Compensation     Stock          Option       Compensation
          Principal Position       Year    Salary($)(1)     Bonus($)        ($)(2)    Awards ($)(3)   Grants(#)(4)         (5)
-------------------------------- -------- --------------- -----------  ------------- --------------- --------------  ---------------
<S>                                <C>       <C>            <C>              <C>           <C>              <C>          <C>
G. Thomas Bowers, President        1999      $ 182,606      $ 20,947         $ 0           $ 0              0            $ 7,606
and Chief Executive Officer        1998       174,585         20,227           0          54,250            0             10,610
                                   1997       168,562           0              0          128,469           0             24,160
-------------------------------- -------- --------------- -----------  ------------- --------------- --------------  ---------------
Terry L. Hammond, Executive Vice   1999      $ 96,100        $ 8,610         $ 0           $ 0              0            $ 3,512
President and Chief Financial      1998        86,100         8,320            0             0              0             6,693
Officer                            1997        83,203           0              0          35,750          8,600           7,776
</TABLE>

(1)  The amounts shown include cash compensation earned and paid during the year
     indicated as well as cash compensation deferred at the executives' election
     into the 401(k)  Plan.  The Company  makes no  contributions  to the 401(k)
     Plan.
(2)  Does not  reflect  the value of  perquisites  and other  personal  benefits
     because  the  aggregate  amount of such  compensation  for any year did not
     exceed 10% of the executives' annual salary and bonus for that year.
(3)  The  amounts  shown  reflect  restricted  awards of common  stock under the
     Company's    1996    Management    Recognition    Plan.    See   "Executive
     Compensation--1996  Management  Recognition  Plan" below. The amounts shown
     represent the aggregate  market value of the shares awarded on the dates of
     the awards (for Mr.  Bowers  2,800  shares  awarded in 1998;  9,500  shares
     awarded in 1997 and for Mr.  Hammond  3,000  shares  awarded in 1997).  The
     awards vest and the shares are paid out over periods  ranging from three to
     five years, each commencing oyear from the respective award date. The total
     number and dollar value of shares  credited to Mr. Bowers' award account at
     1999  year-end,  based on the market  value of the common stock on December
     31,  1999 ($8.00 per share) was 13,946  shares  ($111,568).  Mr.  Hammond's
     total  number of shares and dollar  value at 1999 year end was 5,720 shares
     and  $45,760.  Dividends  are  payable  on such  shares at the same rate as
     dividends are paid on other shares of common stock.
(4)  See "Executive Compensation--1996 Stock Option Plan" below.
(5)  The amounts shown reflect:  (i) the aggregate  market value, on the date of
     allocation,  of shares of common stock allocated during the referenced year
     to Mr. Bowers' account under the ESOP ($4,376 at December 31, 1999;  $7,481
     at  December  31,  1998;  $23,066  at  December  31,  1997 (see  "Executive
     Compensation--Employee   Stock  Ownership   Plan"  below);   and  (ii)  the
     compensatory value ($3,230 in 1999; $3,129 in 1998; $1,094 in 1997) of life
     insurance  premiums paid by Finger Lakes  Financial on Mr. Bowers'  behalf.
     The amounts shown for Mr. Hammond  reflect the aggregate  market value,  on
     the date of  allocation  of shares of common  stock  allocated  during  the
     referenced year to Mr. Hammond's aunder the ESOP.

1996 Management Recognition Plan

     The  objective  of the  Company's  1996  Management  Recognition  Plan (the
"Recognition  P is to enable the Company to provide  certain of its officers and
other employees with a proprietary  interest in the Company,  through restricted
stock  awards  which  vest  at  subsequent  dates,  as  compensation  for  their
contributions to the Company as well as an incentive to make such  contributions
in the future by continuing their  employment with the Company.  The Recognition
Plan has been funded with 47,200  shares of common stock  (purchased on the open
market  in 1996  with  funds  provided  by the  Company),  which  are  held by a
third-party   trustee  until  they  are  awarded,   and  thereafter  vested  and
distributed,  to  recipient  employees  in  accordance  with  the  terms  of the
Recognition Plan.

           The  Recognition  Plan is  administered  by the Salary and  Personnel
Committee of the Board of Directors (the "Committee"),  which consists solely of
disinterested  directors.  The Committee  determines,  among other  things,  the
employees who are to receive restricted stock awards under the Recognition Plan,
the number of shares  covered by each award,  and the vesting  schedule by which
awarded shares vest and are paid out by the trustee to each recipient. Under the
terms of the  Recognition  Plan,  the  trustee  is  authorized  to vote,  in its
discretion, all Recognition Plan shares which have not yet vested. Dividends are
payable on awarded shares, for the benefit of the respective recipients,  at the
same rate as dividends are paid on other shares of common stock. The Recognition
Plan also contains customary anti-dilution provisions. The Board of Directors of
Finger Lakes Financial can terminate the Recognition Plan at any time.

                                       36

<PAGE>



     If  an  award  recipient's   employment  with  Finger  Lakes  Financial  is
terminated by reason of his or her death,  disability or  retirement,  or in the
event of a change in control of Finger Lakes  Financial,  all shares  subject to
the award become immediately vested and payable to the recipient.  However, upon
any other termination of an award recipient's  employment,  all rights to shares
not yet vested are forfeited.

     At December  31, 1999,  an  aggregate of 47,200  shares of common stock has
been  awarded  under the  Recognition  Plan to an  aggregate  of ten  employees,
including the Chief Executive  Officer and Finger Lakes  Financial's three other
current executive officers.  Shares awarded under the Recognition Plan vest over
periods  ranging  from three to five years,  each  commencing  one year from the
respective award date.

1996 Stock Option Plan

     The Company's  1996 Stock Option Plan (the "Option  Plan") is designated to
improve the growth and  profitability  of the Company by providing its employees
with a proprietary  interest in the Company as an incentive to contribute to the
success of the Company and to reward employees for outstanding performance.  The
Option Plan is  intended  to be  qualified  under  Section  422 of the  Internal
Revenue Code of 1986, as amended,  and provides for the grant of incentive stock
options, non-statutory stock options and stock appreciation rights. An aggregate
of 118,000  shares of common  stock are  available  for option  grants under the
Option Plan. The Option Plan terminates in 2006.

     The Option  Plan is  administered  by the Salary and  Personnel  Committee,
which determines,  among other things,  the employees who are to receive options
under the Option  Plan,  the types of  options  to be granted  and the number of
shares  covered by each  option.  The  exercise  price of each option must be at
least equal to the market value of the common stock on the option grant date (or
110% of such market value in the case of an incentive  stock option granted to a
holder of 10% or more of the outstanding common stock).

     Options vest and become exercisable at the rate of 20% per year, commencing
one year from the option grant date.  Options are only  exercisable upon vesting
and until the  earlier of ten years  after the option  grant date (or five years
after the option grant date in the case of an incentive  stock option granted to
a holder of 10% or more of the  outstanding  common stock) or three months after
termination  of the  optionee's  employment  with the  Company.  However,  if an
optionee's employment is terminated due to death,  disability or retirement,  or
in the event of a change in control of Finger Lakes  Financial,  the optionee or
his or her estate has one year  following  termination  in which to  exercise an
otherwise exercisable option. Options are non-transferable except by will or the
laws of descent  and  distribution.  The  Option  Plan also  contains  customary
anti-dilution provision.

     Under the Option  Plan,  the  Committee is also  authorized  to grant stock
appreciation rights, under which an optionee may surrender an exercisable option
in return for payment by Finger  Lakes  Financial  of cash or common stock in an
amount equal to the excess of the then-current  market value of the common stock
over the exercise price of the surrendered option.

     At December 31, 1999, options to purchase an aggregate of 109,000 shares of
common stock, at prices ranging from $6.75 to $14.50 per share, were outstanding
and held by an aggregate of 10 employees,  including the Chief Executive Officer
and the three other current executive officers.





                                       37

<PAGE>



     Shown below is information with respect to the total unexercised options to
purchase  common stock held by the  executives  at December 31, 1999. No options
were granted to or exercised by the executives during 1999.

<TABLE>
<CAPTION>
                                     Aggregated Option Exercises in 1999 and Year-End Option Values

                                                                                                         Value of All Unexercised
                                                                         Unexercised Option Held          In-the-Money Options at
                                                                             at Year End(#)                   Year End($)(1)
                              Shares Acquired Value                   ------------------------------     ---------------------------
              Name                  on Exercise(#)     Realized($)    Exercisable      Unexercisable     Exercisable   Unexercisable
-------------------------     ----------------------   -----------    -----------      -------------     -----------   -------------
<S>                                        <C>              <C>          <C>             <C>                <C>            <C>
G. Thomas Bowers                           0                0            17,700          11,800             None           None
Terry L. Hammond                           0                0            12,320           9,880             2,700          1,800
----------
</TABLE>
(1) Expressed as the excess of the per share market value of the common stock at
December 31, 1999 ($8.00) over the per share exercise price of the options.

Employee Stock Ownership Plan ("ESOP")

     The purpose of the ESOP is to recognize and reward the  contributions  made
to Finger Lakes Financial by its employees. Employees who have at least one year
of  credited  service  with  Finger  Lakes  Financial  (including  Finger  Lakes
Financial  and  Savings  Bank of the  Finger  Lakes  in its  forms  prior to the
Reorganization)  and who have attained age 21 are eligible to participate in the
ESOP.

     The ESOP borrowed funds in 1994 from a third-party  lender in order to fund
the  purchase   o94,396   shares  of  common  stock.   Subsequent  to  the  1998
Reorganization, the third-party loan was repaid with the proceeds of a loan from
Finger Lakes  Financial.  The loan to the ESOP,  which bears interest at a fixed
rate  of  7.75%  per  annum,  will  be  repaid  principally  from  Finger  Lakes
Financial's  contributions  to the ESOP over ten years.  Finger Lakes  Financial
may, in any years, make additional  discretionary  contributions for the benefit
of plan  participants  in either  cash or shares of common  stock  (which may be
newly issued or acquired by the purchase of outstanding shares). Such purchases,
if made,  may be funded through  additional  borrowing by the ESOP or additional
contributions  from Finger  Lakes  Financial.  The timing,  amount and manner of
future contributions to the ESOP will be affected by various factors,  including
prevailing  regulatory  policies,   the  requirements  of  applicable  laws  and
regulations and market conditions.

     The shares  purchased by the ESOP with the proceeds of the loan are held in
a suspense account and released on a pro rata basis as debt service payments are
made.  Discretionary  contributions  to the ESOP, and the release of shares from
the  suspense  account,  are  allocated  among  participants  on  the  basis  of
compensation.  Forfeitures are reallocated among remaining  participants and may
reduce any amount Finger Lakes Financial might otherwise have contributed to the
ESOP.  Allocations may be paid out to a participant,  either in shares of common
stock or in cash, upon retirement,  early retirement or separation from service.
Finger Lake  Financial's  contributions  to the ESOP are not fixed,  so benefits
payable under the ESOP cannot be estimated.  Recipients of shares paid out under
the ESOP must give Finger Lakes  Financial a right of first refusal when selling
the shares so acquired.

     The trustees under the ESOP must vote all allocated shares held in the ESOP
in  accordance  with  the  instructions  of  the  participating  employees,  and
unallocated  shares, as well as allocated shares for which employees do not give
instructions,  must  be  voted  in the  same  ratio  as  the  shares  for  which
instructions  are given. The ESOP is subject to the Employee  Retirement  Income
Security Act of 1974,  as amended,  as well as the  regulations  of the Internal
Revenue Service and the Department of Labor.

Employment Agreements

     During 1999,  Mr.  Bowers was  compensated  for his services as  President,
Chief Executive Officer and a director of Finger Lakes Financial  pursuant to an
employment  agreement  with Finger Lakes  Financial  dated January 26, 1995 (the
"Employment  Agreement").  The Employment  Agreement provides for an annual base
salary,  subject to increases in the sole discretion of Finger Lakes  Financial,
and customary fringe benefits.  As an annual incentive,  tEmployment  agreements
also provides for the payment, in the sole discretion of the Board of Directors,
of an annual bonus. In 1999, Mr. Bowers received a bonus of $20,947.




                                       38

<PAGE>




     The  Employment  Agreement may be terminated by either Mr. Bowers or Finger
Lakes  Financial  at any time upon ten days'  notice.  However,  if Finger Lakes
Financial terminated the Employment Agreement wcause or fails to comply with any
material provision thereof, or if Mr. Bowers terminates the Employment Afor good
reason, Mr. Bowers will be entitled to severance pay amounting to 2.99 times the
average  annual cpaid him during the last five years of his employment by Finger
Lakes Financial. In addition, Mr. Bowers may continue to participate in employee
benefit  plans of  Finger  Lakes  Financial  (other  than  retirement  and stock
compensation plans) for three years following his termination.

     Pursuant to the Employment Agreement, Mr. Bowers is also the beneficiary of
a  non-qualif  unfunded  Supplemental  Retirement  Agreement  with Finger  Lakes
Financial  dated  February 28, 1995 and amended  June 22, 1998 (the  "Retirement
Agreement"),  which  provides  that,  upon his  reaching  age 62,  Finger  Lakes
Financial  will pay Mr. Bowers or his surviving  spouse  $30,000 per year for 20
years (or,  upon their  earlier  deaths,  a lump sum payment to their  estates),
subject  to a  downward  adjustment  equal to 6% of the total  cash value in all
policies  subject to any split dollar agreement in effect as of Mr. Bower's 62nd
birthday.  Such  payments  will be provided  in part by  premiums  paid under an
insurance  policy on Mr. Bower's life  maintained  for Finger Lakes  Financial's
benefit.  The Retirement  Agreement vests at the rate of 20% per year on June 30
of each year. The Retirement  Agreements is currently 80% vested,  and would pay
Mr. Bowers,  were his employment to terminate  currently,  $24,000 per year upon
his reaching age 62.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
            AND MANAGEMENT

     Persons and groups who beneficially own in excess of five percent of Finger
Lakes  Financial  Common  Stock are  required to file  certain  reports with the
Securities and Exchange Commission ("SEC") regarding  sownership pursuant to the
Securities  Exchange Act of 1934 (the "Exchange  Act"). The following table sets
forth,  as of tRecord  Date,  the shares of common stock  beneficially  owned by
named executive officers individually,  by executive officers and directors as a
group and by each person who was the beneficial  owner of more than five percent
of Finger  Lakes  Financial  Corp.'s  outstanding  shares of common stock on the
Record Date.

<TABLE>
<CAPTION>
                                                                   Amount of Shares                         Percent of Shares
                 Name and Address of                               Owned and Nature                          of Common Stock
                  Beneficial Owner                            of Beneficial Ownership(1)                   Outstanding (1) (2)
   ----------------------------------------------           ------------------------------           -------------------------

<S>                                                                         <C>                                     <C>
Finger Lakes Financial Corporation, M.H.C.                                  2,389,948                               66.9%
470 Exchange Street
Geneva, New York 14456

      G. Thomas Bowers(3)                                                      85,865                                2.4%
      Michael J. Hanna(4)                                                         200                                0.0%
      Chris M. Hansen(5)                                                        9,083                                0.3%
      Richard J. Harrison                                                       7,158                                0.2%
      James E. Hunter                                                           3,008                                0.1%
      Ronald C. Long(6)                                                         8,640                                0.2%
      Bernard G. Lynch                                                          7,250                                0.2%
      Arthur W. Pearce                                                          5,000                                0.1%
      Joan C. Rogers                                                            5,100                                0.1%
      Terry L. Hammond(7)                                                      27,145                                0.8%
      Thomas A. Mayfield(8)                                                    21,702                                0.6%
      Leslie J. Zornow(9)                                                       9,067                                0.3%
      All directors and executive officers
      as a group (12 persons)                                                 189,218                               16.0%
------------------------------
</TABLE>
(1)  Based on 3,570,000 shares outstanding.
(2)  Based on 1,180,052 shares held by persons other than Finger Lakes Financial
     Corp., MHC.
(3)  Includes (i) 4,000 shares owned by Mr. Bowers' wife; (ii) 3,790 shares held
     in the 401(k) plan for Mr. Bowers'  account;  (iii)  presently  exercisable
     options to purchase  17,700 shares;  and (iv) 4,094 shares held in the ESOP
     for Mr. Bowers'  account,  as to which shares he only indirect voting power
     only. See "Executive Compensation" below.



                                       39

<PAGE>




(4)  Shares held jointly by Mr. Hanna and his daughter.
(5)  Includes 3,980 shares held in a benefit plan of C.M. Hansen Farms, Inc., of
     which Mr. Hansen is a trustee and beneficiary.
(6)  Included 1,289 shares owned by Mr. Long's wife.
(7)  Includes  (i)  8,421  shares  held in the  401(k)  Plan  for Mr.  Hammond's
     account,  as to which shares he has investment  power only; (ii) 333 shares
     which will vest within 60 days under the 1996 Management  Recognition Plan;
     (iii) presently  exercisable  options to purchase  12,320 shares;  and (iv)
     4,650 shares held in the ESOP for Mr. Hammond's account, as to which shares
     he had indirect voting power only. See "Executive Cbelow.
(8)  Includes  (i)  2,085  shares  held in the  401(k)  Plan for Mr.  Mayfield's
     account,  as to which shares he has investment  power only; (ii) 333 shares
     which will vest within 60 days under the 1996 Management  Recognition Plan;
     (iii) presently  exercisable  options to purchase  11,160 shares;  and (iv)
     1,389  shares  held in the ESOP  for Mr.  Mayfield's  account,  as to which
     shares he has indirect voting power only. See "Executive Cbelow.
(9)  Includes (i) 185 shares held in the 401(k) Plan for Ms.  Zornow's  account,
     as to which  shares she has  investment  power only;  (ii) 200 shares which
     will vest within 60 days under the 1996 Management  Recognition Plan; (iii)
     presently  exercisable  options to purchase  5,340  shares;  and (iv) 1,442
     shares held in the ESOP for Ms.  Zornow's  account,  as to which shares she
     has indirect voting power only. See "Executive C below.

ITEM 13.             CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Financial  Institutions  Reform,  Recovery and  Enforcement Act of 1989
("FIRREA") requires that all loans or extensions of credit to executive officers
and directors must be made on substantially the sterms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
the general  public and must not involve  more than the normal risk of repayment
or present other unfavorable features. In addition,  loans made to a director or
executive  officer in excess of the greater of $25,000 or 5% of Savings  Bank of
the Finger  Lakes'  capital and surplus  (up to a maximum of  $500,000)  must be
approved in advance by a majority of the  disinterested  members of the Board of
Directors.

                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
             REPORTS ON FORM 8-K

     (a)  The exhibits and financial statement schedules filed as a part of this
          Form 10-K aas follows:

          (1)  Financial Statements

               The Consolidated  Financial  Statements and Supplemental  Data of
               Finger Lakes Financial Corp. and Independent  Auditors' Report on
               such financial statements are filed under Part II, Item 8.
               Independent Auditors' Report
               Consolidated Statements of Financial Condition as of December 31,
               1999 and December 31, 1998.
               Consolidated  Statements  of Financial  Operations  for the Years
               Ended December 31, 1999, December 31, 1998 and December 31, 1997.



                                       40

<PAGE>


               Consolidated  Statements of Changes in  Stockholders'  Equity and
               Comprehensive  Income  for the Years  Ended  December  31,  1999,
               December 31, 1998 and December 31, 1997.
               Consolidated  Statements  of  Cash  Flows  for  the  Years  Ended
               December 31, 1999, December 31, 1998 and December 31, 1997. Notes
               to Consolidated Financial Statements.

          (2)  Financial Statement Schedules


          (3)  Exhibits


Number                                    Description
------     ---------------------------------------------------------------------

3.1        Federal Stock Charter of Finger Lakes Financial Corp. (1)

3.2        Bylaws of Finger Lakes Financial Corp. (a)

4          Stock Certificate of the Savings Bank of the Finger Lakes, FSB (2)

10.1       Employee Stock Ownership Plan and Trust of the Company (2)*

10.2       Employment Agreement between the Company and G. Thomas Bowers (2)*

10.3       1996 Stock Option Plan of the Company and Amendment No. 1 Thereto*
           (3)

10.4       1996 Management Recognition Plan* (3)

10.5       Modified Supplemental Pension Agreement, as amended, between the
           Company and Ralph E. Springstead* (3)

10.6       Modified Supplemental Pension Agreement between the Company and G.
           Thomas Bowers* (3)

10.7       Agreement between the Company and Terry L. Hammond* (3)

10.8       Agreement between the Company and Thomas A. Mayfield* (3)

10.9       Restated Deferred Compensation Plan for Directors*

10.10      Amendment dated June 22, 1998 to Supplemental Retirement Agreement
           between the Company and G. Thomas Bowers*

10.11      Split Dollar Agreement between the Company and G. Thomas Bowers*

10.12      Amendment dated June 22, 1998 to Supplemental Retirement Agreement
           between the Company and Ralph E. Springstead*

10.13      Split Dollar Agreement between the Company and Ralph E. Springstead*

10.14      Agreement between the Company and Leslie Zornow

21         Subsidiaries of the Registrant - Reference is made to Item 1.
           "Business" for the required information



                                       41

<PAGE>

                                AGREEMENT BETWEEN

                          FINGER LAKES FINANCIAL CORP.

                              AND LESLIE J. ZORNOW



     AGREEMENT,  dated this 1st day of July 1999, between Finger Lakes Financial
Corp. (the "Employer"),  a federally  chartered stock holding company and Leslie
J. Zornow (the "Executive").

                                   WITNESSETH:

     WHEREAS,  the Executive  presently  serves as senior vice  president of the
Employer  and in such  capacity is  responsible  for  administrating  the branch
network, marketing program and human resources function;

     WHEREAS,  the Employer  desires to be ensured of the Executive's  continued
active participation in the business of the Employer; and

     WHEREAS,  in order to induce the  Executive  to remain in the employ of the
Employer  and in  consideration  of the  Executive's  agreeing  to remain in the
employ of the Employer,  the parties  desire to specify the  severance  benefits
which  shall be due the  Executive  in the event  that his  employment  with the
Employer is terminated under specified circumstances;

     NOW THEREFORE,  in consideration of the premises and the mutual  agreements
herein contained, the parties hereby agree as follows:

     1.  Definitions.  The following words and terms shall have the meanings set
forth below for the purposes of this Agreement:

     (a) Annual Compensation. The Executive's "Annual Compensation" for purposes
of this Agreement shall be deemed to mean the annual rate of base salary paid to
the Executive by the Employer immediately preceding the Date of Termination.

     (b) Cause.  Termination by the Employer of the  Executive's  employment for
"Cause" shall mean  termination  because of personal  dishonesty,  incompetence,
willful  misconduct,   breach  of  fiduciary  duty  involving  personal  profit,
intentional failure to perform stated duties, willful violation of any law, rule
or  regulation  (other than  traffic  violations  or similar  offenses) or final
cease-and-desist order.

     (c) Change in Control of the  Employer.  Change in Control of the  Employer
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities  Exchange Act of


<PAGE>


1934, as amended ("Exchange Act"), or any successor thereto,  whether or not any
security of the  Employer is  registered  under  Exchange  Act;  provided  that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any  "person"  (as  such  term is used in  Section  13(d)  and  14(d) of the
Exchange  Act) is or becomes  the  "beneficial  owner" (as defined in Rule 13d-3
under the Exchange Act),  directly or indirectly,  of securities of the Employer
representing  25% or more of the combined  voting power of the  Employer's  then
outstanding  securities;  or (ii)  during any period of two  consecutive  years,
individuals  who at the  beginning  of  such  period  constitute  the  Board  of
Directors of the Employer cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by stockholders,  of
each new director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.

     (d) Code. Code shall mean the Internal Revenue Code of 1986, as amended.

     (e)  Date of  Termination.  "Date  of  Termination"  shall  mean (i) if the
Executive's  employment  is  terminated  for Cause or for  Disability,  the date
specified in the Notice of Termination,  and (ii) if the Executive's  employment
is terminated for any other reason, the date on which a Notice of Termination is
given or as specified in such Notice.

     (f) Disability.  Termination by the Employer of the Executive's  employment
based on "Disability"  shall mean termination  because of any physical or mental
impairment  which  qualifies  the Executive for  disability  benefits  under the
applicable   long-term  disability  plan  maintained  by  the  Employer  or  any
subsidiary  or, if no such plan  applies,  which would qualify the Executive for
disability benefits under the Federal Social Security System.

     (g) Good Reason. Termination by the Executive of the Executive's employment
for "Good Reason" shall mean termination by the Executive based on:

               ( i )  Without  the  Executive's  express  written  consent,  the
          assignment  by the  Employer to the  Executive of any duties which are
          materially  inconsistent  with  the  Executive's  positions,   duties,
          responsibilities  and status with the Employer  immediately prior to a
          Change  in  Control  of the  Employer,  or a  material  change  in the
          Executive's  reporting  responsibilities,  titles  or  offices  as  an
          employee  and as in  effect  immediately  prior  to such a  Change  in
          Control,  or any  removal  of the  Executive  from or any  failure  to
          re-elect  the  Executive  to any of such  responsibilities,  titles or
          offices,  except in connection with the termination of the Executive's
          employment  for Cause,  Disability or Retirement or as a result of the
          Executive's death or by the Executive other than for Good Reason;

               (ii) Without the Executive's express written consent, a reduction
          by the  Employer  in the  Executive's  base salary as in effect on the
          date of the Change in Control  of the  Employer  or as the same may be
          increased  from time to time  thereafter or a reduction in the package
          of fringe benefits provided to the Executive;

<PAGE>



               (iii) Any purported termination of the Executive's employment for
          Cause,  Disability or Retirement  which is not effected  pursuant to a
          Notice of  Termination  satisfying the  requirements  of paragraph (i)
          below; or

               (iv) The failure by the Employer to obtain the  assumption of and
          agreement to perform this  Agreement by any successor as  contemplated
          in Section 6 hereof.

     (h) IRS. IRS shall mean the Internal Revenue Service.

     (i) Notice of  Termination.  Any purported  termination by the Employer for
any reason,  including  for Cause,  Disability or Retirement or by the Executive
for Good Reason shall be  communicated by written "Notice of Termination" to the
other party hereto.  For purposes of this  Agreement,  a "Notice of Termination"
shall mean a notice which (i)  indicates the specific  termination  provision in
this Agreement  relied upon, (ii) sets forth in reasonable  detail the facts and
circumstances  claimed  to  provide  a  basis  for  termination  of  Executive's
employment  under  the  provision  so  indicated,  (iii)  specifies  a  Date  of
Termination,  which shall be not less than thirty (30) nor more than ninety (90)
days  after  such a Notice of  Termination  is given,  except in the case of the
Employer's termination of Executive's employment for Cause, and (iv) is given in
the manner specified in Section 7 hereof.

     (j) Retirement.  Termination by the Employer of the Executive's  employment
based on  "Retirement"  shall mean  voluntary  termination  by the  Executive in
accordance with the Employers' retirement policies,  including early retirement,
generally applicable to their salaried employees.

2. Benefits  Upon  Termination.  Subject to provisions of Section 3 hereof,  the
Executive shall receive the benefits described in paragraphs (a) and (b) of this
section 2 in the event of a Change in  Control  of the  Employer  if within  two
years  following  such  Change  in  Control  (i)  the  Employer  terminates  the
employment of the  Executive for any reason other than for Cause or  Retirement,
as a result  of  Disability  or the  Executive's  death  or (ii)  the  Executive
terminates  his  employment  with the Employer  for Good Reason.  In such event,
Employer or its successor as contemplated in Section 6 hereof shall:

     (a) pay to the Executive,  in the discretion of the Executive,  either in a
single  payment on the first  business  day of the month  following  the Date of
Termination or in equal monthly  installments  for a two-year  period  beginning
with the first business day of the month  following the Date of  Termination,  a
cash amount equal to 2.0 times the Executive's Annual Compensation; and

     (b) maintain and provide for a period  ending at the earlier of (i) two (2)
years  after  the  Date of  Termination  or  (ii)  the  date of the  Executive's
full-time  employment  by  another  employer  (provided  that the  Executive  is
entitled under the terms of such employment to benefits substantially similar to
those  described in this  subparagraph  (b)), at no cost to the  Executive,  the
Executive's  continued  participation  in all group  insurance,  life insurance,
health and accident,  disability and other employee benefit plans,  programs and
arrangements  in which the  Executive


<PAGE>

was entitled to participate  immediately prior to the Date of Termination (other
than retirement  plans or stock  compensation  plans of the Employer),  provided
that in the event that the  Executive's  participation  in any plan,  program or
arrangement  as  provided  in this  subparagraph  (b) is barred,  or during such
period any such plan,  program or  arrangement is  discontinued  or the benefits
thereunder  are  materially  reduced,  the Employer shall arrange to provide the
Executive with benefits  substantially  similar to those which the Executive was
entitled to receive  under such plans,  programs  and  arrangements  immediately
prior to the Date of Termination.

3.  Limitation  of Benefits  under  Certain  Circumstances.  If the payments and
benefits  pursuant  to Section 2 hereof,  either  alone or  together  with other
payments and benefits which Executive has the right to receive from the Employer
would  constitute  a "parachute  payment"  under  Section 280G of the Code,  the
payments  and  benefits  pursuant to Section 2 hereof  shall be reduced,  in the
manner determined by the Executive,  by the amount, if any, which is the minimum
necessary to result in no portion of the payments and benefits  under  Section 2
being  non-deductible  to the Employer  pursuant to Section 280G of the Code and
subject  to  the  excise  tax   imposed   under   Section   4999  of  the  Code.
Notwithstanding  the  foregoing,  if the total  amount of payments  and benefits
pursuant to Section 2 hereof  exceeds the  equivalent  of twice the  Executive's
"annual  compensation" during the year immediately  preceding the termination of
his service,  the  payments  and benefits  pursuant to Section 2 hereof shall be
reduced, in the manner determined by the Executive, by the amount, if any, which
is the  minimum  necessary  to ensure  that the total  amount  of  payments  and
benefits  under Section 2 hereof does not exceed twice the  Executive's  "annual
compensation;"  notwithstanding  the  provisions  of Section  1(a)  hereof,  for
purposes of this sentence only, "annual compensation" shall have the meaning set
forth  in  Section   2510.3-2(b)(2)   of  the  Pension   and  Welfare   Benefits
Administration  Regulations.  The determination of any reduction in the payments
and benefits to be made pursuant to Section 2 shall be based upon the opinion of
independent  tax  counsel   selected  by  the  Employer's   independent   public
accountants  and paid for by the  Employer.  Such  counsel  shall be  reasonably
acceptable  to the  Employer  and the  Executive;  shall  promptly  prepare  the
foregoing opinion,  but in no event later than thirty (30) days from the Date of
Termination;  and may use such  actuaries  as such  counsel  deems  necessary or
advisable for the purpose.  In the event that the Employer  and/or the Executive
do not agree with the opinion of such counsel, (i) the Employer shall pay to the
Executive the maximum amount of payments and benefits  pursuant to Section 2, as
selected by the  Executive,  which such opinion  indicates  that there is a high
probability   do  not  result  in  any  of  such  payments  and  benefits  being
non-deductible  to the Employer and subject to the  imposition of the excise tax
imposed  under  Section 4999 of the Code and (ii) the Employer may request,  and
Executive  shall have the right to demand that the  Employer  request,  a ruling
from the IRS as to whether  the  disputed  payments  and  benefits  pursuant  to
Section 2 hereof have such consequences.  Any such request for a ruling from the
IRS shall be promptly prepared and filed by the Employer,  but in no event later
than thirty (30) days from the date of the opinion of counsel referred to above,
and shall be subject to Executive's approval prior to filing, which shall not be
unreasonably  withheld.  The  Employer  and  Executive  agree to be bound by any
ruling received from the IRS and to make  appropriate  payments to each other to
reflect any such  rulings,  together  with  interest at the  applicable  federal
short-term rate provided for in Section 1274(d) of the Code.  Nothing  contained
herein  shall  result in a  reduction  of any  payments or benefits to which the
Executive may be entitled upon  termination of employment other than



<PAGE>

pursuant  to Section 2 hereof,  or a  reduction  in the  payments  and  benefits
specified in Section 2 below zero.

     4. Mitigation; Exclusivity of Benefits.

     (a) The  Executive  shall not be  required  to  mitigate  the amount of any
benefits  hereunder by seeking  other  employment  or  otherwise,  nor shall the
amount  of any such  benefits  be  reduced  by any  compensation  earned  by the
Executive  as a result  of  employment  by  another  employer  after the Date of
Termination or otherwise.

     (b) The  specific  arrangements  referred  to herein  are not  intended  to
exclude  any other  benefits  which may be  available  to the  Executive  upon a
termination of employment with the Employer  pursuant to employee  benefit plans
of the Employer or otherwise.

     5. Withholding.  All payments required to be made by the Employer hereunder
to the Executive  shall be subject to the  withholding of such amounts,  if any,
relating to tax and other  payroll  deductions  as the Employer  may  reasonably
determine should be withheld pursuant to any applicable law or regulation.

     6.  Assignability.  The Employer may assign this  Agreement  and its rights
hereunder in whole,  but not in part, to any  corporation,  bank or other entity
with or into which either of the Employer may hereafter  merge or consolidate or
to which either of the Employer  may  transfer all or  substantially  all of its
assets,  if in any such case said  corporation,  bank or other  entity  shall by
operation of law or expressly in writing assume all  obligations of the Employer
hereunder as fully as if it had been originally made a party hereto, but may not
otherwise assign this Agreement or its rights  hereunder.  The Executive may not
assign or transfer this Agreement or any rights or obligations hereunder.

     7.  Notice.  For the  purposes  of this  Agreement,  notices  and all other
communications  provided for in this Agreement  shall be in writing and shall be
deemed  to have been duly  given  when  delivered  or  mailed  by  certified  or
registered mail,  return receipt  requested,  postage prepaid,  addressed to the
respective addresses set forth below:

         To the Employer:  G. Thomas Bowers
                           Chairman, President and Chief Executive Officer
                           Finger Lakes Financial Corp.
                           470 Exchange Street
                           Geneva, New York  14456

         To the Executive: Leslie J. Zornow
                           3416 Middle Cheshire Road
                           Canandaigua, New York  14424

<PAGE>


     8.  Amendment;  Waiver.  No provisions  of this  Agreement may be modified,
waived or discharged unless such waiver,  modification or discharge is agreed to
in  writing  signed by the  Executive  and such  officer or  officers  as may be
specifically designated by the Board of Directors of the Employer to sign on its
behalf.  No waiver by any  party  hereto at any time of any  breach by any other
party  hereto  of, or  compliance  with,  any  condition  or  provision  of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time.

     9.  Governing   Law.  The  validity,   interpretation,   construction   and
performance of this Agreement shall be governed by the laws of the United States
where  applicable  and otherwise the  substantive  laws of the State of New York
(without regard to its principles of conflict of laws)..

     10. Nature of Employment and Obligations.

     (a)  Nothing  contained  herein  shall be  deemed to  create  other  than a
terminable  at  will  employment  relationship  between  the  Employer  and  the
Executive, and the Employer may terminate the Executive's employment at any time
and for any reason:  provided that a termination occurring following a Change in
Control  shall be subject to the provision of any payments  specified  herein in
accordance with the terms hereof.

     (b) Nothing contained herein shall create or require the Employer to create
a trust of any kind to fund any benefits which may be payable hereunder,  and to
the extent  that the  Executive  acquires a right to receive  benefits  from the
Employer  hereunder,  such  right  shall be no  greater  than  the  right of any
unsecured general creditor of the Employer.

     11. Term of Agreement. This Agreement shall have a rolling three-year term,
commencing  on the date first above  written and shall be deemed  automatically,
without further  action,  to extend each day for an additional day such that the
remaining  term of this  Agreement  shall  continue to be three years.  However,
within 30 days prior to the first  anniversary  of the date first above  written
and within 30 days prior to each anniversary thereafter,  the Board of Directors
of  the  Employer  shall  consider  (with  appropriate  corporate  documentation
thereof,  and  after  taking  into  account  all  relevant  factors,   including
Executive's performance as an employee) extension of the term of this Agreement,
and the term of this  Agreement  shall  continue  to extend  unless the Board of
Directors of the Employer do not approve such renewal and provide written notice
to the  Executive of such event,  with such written  notice to be given not less
than thirty (30) days following the date of any such  anniversary,  and provided
further that,  notwithstanding  the foregoing to the  contrary,  this  Agreement
shall  automatically  terminate on the second anniversary of a Change in Control
of the Employer.

     12.  Headings.  The section  headings  contained in this  Agreement are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

     13. Validity.  The invalidity or  unenforceability of any provision of this
Agreement  shall  not  affect  the  validity  or  enforeceability  of any  other
provisions of this Agreement, which shall remain in full force and effect.

<PAGE>


     14.   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed to be an original  but all of which
together will constitute one and the same instrument.

     15.  Regulatory  Prohibition.  Notwithstanding  any other provision of this
Agreement to the contrary,  any payments made to the Executive  pursuant to this
Agreement,  or otherwise,  are subject to and conditioned  upon their compliance
with 12 U.S.C.ss.1828(k) and any regulations promulgated thereunder.

     16. Regulatory Actions. The following provisions shall be applicable to the
parties  to the extent  that they are  required  to be  included  in  agreements
between a savings association and its employees pursuant to Section 563.39(b) of
the Regulations Applicable to All Savings Associations,  12 C.F.R. ss.563.39(b),
or any successor  thereto,  and shall be  controlling in the event of a conflict
with any other provision of this Agreement.

     (a) If Executive is suspended  from office  and/or  temporarily  prohibited
from  participating in the conduct of the Employer's  affairs pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance
Act  ("FDIA")(12  U.S.C.   ss.ss.1818(e)(3)   and  1818(g)(1)),   the  Employer'
obligations  under this Agreement  shall be suspended as of the date of service,
unless  stayed by  appropriate  proceedings.  If the  charges  in the notice are
dismissed, the Employer may, in its discretion: (i) pay Executive all or part of
the  compensation  withheld  while its  obligations  under this  Agreement  were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.

     (b) If Executive is removed from office and/or permanently  prohibited from
participating in the conduct of the Employer's  affairs by an order issued under
Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C.  ss.ss.1818(e)(4)  and
1818(g)(1)),  all  obligations  of  the  Employer  under  this  Agreement  shall
terminate  as of the  effective  date of the  order,  but  vested  rights of the
Executive and the Employer as of the date of termination shall not be affected.

     (c) If the  Employer  is in default,  as defined in Section  3(x)(1) of the
FDIA (12 U.S.C.  ss.1813(x)(1)),  all  obligations  under this  Agreement  shall
terminate as of the date of default,  but vested rights of the Executive and the
Employer as of the date of termination shall not be affected.

     (d) All obligations under this Agreement shall be terminated pursuant to 12
C.F.R.  ss.563.39(b)(5)  (except  to  the  extent  that  it is  determined  that
continuation  of the Agreement  for the  continued  operation of the Employer is
necessary):  (i) by the Director of the Office of Thrift Supervision ("OTS"), or
his/her designee, at the time the Federal Deposit Insurance Corporation ("FDIC")
or Resolution Trust Corporation  enters into an agreement to provide  assistance
to or on behalf of the Employer  under the authority  contained in Section 13(c)
of the FDIA (12  U.S.C.  ss.1823(c));  or (ii) by the  Director  of the OTS,  or
his/her  designee,  at the time the  Director  or  his/her  designee  approves a
supervisory  merger to resolve  problems related to operation of the Employer or
when the Employer is determined by the Director of the OTS to be in an unsafe or

<PAGE>

unsound  condition,  but vested  rights of the  Executive and Employer as of the
date of termination shall not be affected.

     17. Entire Agreement. This Agreement sets forth the entire agreement of the
parties with respect to the subject  matter  hereof,  and  supersedes  all prior
agreements,  arrangements  and  understandings,  written or oral, of the parties
with respect to the subject matter hereof.

     IN WITNESS  WHEREOF,  this Agreement has been executed as of the date first
above written.

                                         FINGER LAKES FINANCIAL CORP.



                                             By:  /s/ G. Thomas Bowers
                                                  --------------------------
                                                  G. Thomas Bowers
                                                  Chairman, President & CEO





                                                  /s/ Leslie J. Zornow
                                                  ---------------------------
                                                  Leslie J. Zornow


<PAGE>


(1)        Incorporated  by  reference  to  Exhibits  B and C of  the  Company's
           previously  filed proxy  statement  relating to its Annual Meeting of
           Shareholders' held on April 23, 1998

(2)        Incorporated  by  reference  to the  application  for  Approval  of a
           Minority  Stock  Issuance by  aSavings  Association  Subsidiary  of a
           Mutual  Holding  Company  on Form  MIIC-2  filed by the Bank with the
           Office of Thrift Supervision on December 17, 1993, as amended.

(3)        Incorporated  by reference to the Bank's  Annual  Report on Form 10-K
           for the year ended December 31, 1996.

*          Management contract or compensatory plan or arrangement.

           (b)       Reports filed on Form 8-K.

                    No reports on Form 8-K were filed  during the quarter  ended
                    December 31, 1999


<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.

                                          FINGER LAKES FINANCIAL CORP.


Date: June 5, 2000                  By:   /s/ G. Thomas Bowers
                                          --------------------------------------
                                          G. Thomas Bowers
                                          President and Chief Executive Officer

           Pursuant to the requirements of the Securities Exchange 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/ G. Thomas Bowers                       By:/s/ Michael J. Hanna
   ----------------------------------------      -------------------------------
      G. Thomas Bowers, President, Chief           Michael J. Hanna, Director
        Executive Officer and Director
      (Principal Executive Officer)

Date: June 5, 2000                            Date: June 5, 2000


By:/s/ Chris M. Hansen                        By:/s/ Richard J. Harrison
   ----------------------------------------      -------------------------------
      Chris M. Hansen, Director                    Richard J. Harrison, Director

Date: June 5, 2000                            Date: June 5, 2000


By:/s/ Bernard G. Lynch                       By:/s/ James E. Hunter
   ----------------------------------------      -------------------------------
      Bernard G. Lynch, Director                   James E. Hunter, Director

Date: June 5, 2000                            Date: June 5, 2000


By:/s/ Arthur W. Pearce                       By:/s/ Ronald C. Long
   ----------------------------------------      -------------------------------
      Arthur W. Pearce, Director                   Ronald C. Long, Director

Date: June 5, 2000                            Date: June 5, 2000


By:/s/ Terry L. Hammond                       By:/s/ Joan C. Rogers
   ----------------------------------------      -------------------------------
      Terry L. Hammond, Chief Financial            Joan C. Rogers, Director
          Officer

Date: June 5, 2000                            Date: June 5, 2000


By:/s/ Ralph Springstead
   ----------------------------------------
      Ralph Springstead, Director


Date: June 5, 2000