UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

            FOR THE QUARTERLY PERIOD ENDED       DECEMBER 31, 2000
                                           ------------------------------

                                       OR

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

            FOR THE TRANSITION PERIOD FROM _______________ TO ________________


                       COMMISSION FILE NUMBER   000-25439
                                              --------------

                           TROY FINANCIAL CORPORATION
             ------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


         DELAWARE                                                  16-1559508
         --------                                               --------------
(STATE OR OTHER JURISDICTION OF                                (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)


                     32 SECOND STREET, TROY, NY           12180
               ---------------------------------------- ----------
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)


                                  (518)270-3313
              ----------------------------------------------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS),  AND  (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS.                               YES |X|  NO |_|


  INDICATE THE NUMBER OF SHARES  OUTSTANDING OF EACH OF THE ISSUER'S  CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:


   COMMON SHARES, $.0001 PAR VALUE                   10,494,597
   -------------------------------                ----------------
          (TITLE OF CLASS)                 (OUTSTANDING AT JANUARY 31, 2001)


<PAGE>

                           TROY FINANCIAL CORPORATION
                                    FORM 10-Q
                                DECEMBER 31, 2000


INDEX

<TABLE>
<CAPTION>
PART I                FINANCIAL INFORMATION                                                                   PAGE
<S>                   ---------------------                                                                      <C>
Item 1.               Consolidated Interim Financial Statements

                      Consolidated Statements of Financial Condition as of
                      December 31, 2000 (Unaudited) and September 30, 2000                                       1

                      Consolidated Statements of Income for the three months ended December 31, 2000
                      and 1999 (Unaudited)                                                                       2

                      Consolidated Statements of Changes in Shareholders' Equity for the three
                      months ended December 31, 2000 and 1999 (Unaudited)                                        3


                      Consolidated Statements of Cash Flows for the three months ended December 31,
                      2000 and 1999 (Unaudited)                                                                  4

                      Notes to Unaudited Consolidated Interim Financial Statements                               5

Item 2.               Management's Discussion and Analysis of Financial Condition and Results of
                      Operations                                                                                 7

Item 3.               Quantitative and Qualitative Disclosures about Market Risk                                16

PART II               OTHER INFORMATION
                      -----------------


Item 1.               Legal Proceedings                                                                         18

Item 2.               Changes in Securities                                                                     18

Item 3.               Default on Senior Securities                                                              18

Item 4.               Submission of Matters to a Vote of Security Holders                                       18

Item 5.               Other Information                                                                         18

Item 6.               Exhibits and Reports on Form 8-K                                                          18


                      Signatures                                                                                20
</TABLE>



<PAGE>

                           TROY FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                      December 31, 2000       September 30, 2000
                                                                                     ------------------       ------------------
                                                                                         (Unaudited)
<S>                                                                            <C>                           <C>
         Assets
         ------
Cash and due from banks                                                                   $    22,382             $    14,300
Federal funds sold                                                                              8,738                   9,455
                                                                                          -----------             -----------
         Total cash and cash equivalents                                                       31,120                  23,755
Loans held for sale                                                                             2,765                   2,016
Securities available for sale, at fair value                                                  275,705                 266,750
Investment securities held to maturity (fair value of $2,320
and $2,289 at December 31, 2000 and  September 30, 2000, respectively)                          2,268                   2,301
Net loans receivable                                                                          746,962                 586,846
Accrued interest receivable                                                                     7,504                   6,064
Other real estate owned                                                                           580                   1,273
Premises & equipment, net                                                                      18,863                  15,037
Goodwill and other intangibles, net                                                            33,280                   1,187
Other assets                                                                                   32,999                  16,799
                                                                                          -----------             -----------
         Total assets                                                                     $ 1,152,046             $   922,028
                                                                                          ===========             ===========
         Liabilities and Shareholders' Equity
         ------------------------------------
Liabilities:
   Deposits:
      Savings accounts                                                                    $   251,055             $   177,589
      Money market accounts                                                                    27,667                  26,103
      N.O.W. and demand accounts                                                              172,755                 134,001
      Time accounts                                                                           330,457                 218,279
                                                                                          -----------             -----------
         Total deposits                                                                       781,934                 555,972
   Mortgagors' escrow accounts                                                                  5,897                   1,717
   Securities sold under agreements to repurchase                                              13,840                 105,781
   Short-term borrowings                                                                      110,000                  20,000
   Long-term debt                                                                              52,906                  53,027
   Accrued interest payable                                                                     1,280                     712
   Official bank checks                                                                         4,707                   7,472
   Contributions payable                                                                        1,413                   1,385
   Other liabilities and accrued expenses                                                      10,828                   8,684
                                                                                          -----------             -----------
         Total liabilities                                                                    982,805                 754,750
                                                                                          -----------             -----------

Shareholders' equity:
   Preferred stock, $.0001 par value; 15,000,000 authorized,
     none issued                                                                                   --                      --
   Common stock, $.0001 par value; 60,000,000 shares authorized, 12,139,021
     issued at December 31, 2000 and September 30, 2000                                             1                       1
   Additional paid-in capital                                                                 117,892                 117,804
   Unallocated common stock held by ESOP                                                       (8,202)                 (9,027)
   Unvested restricted stock awards                                                            (3,605)                 (3,847)
   Treasury stock, at cost (1,644,424 shares at
     December 31, 2000 and 1,521,846 shares at September 30, 2000)                            (17,582)                (16,020)
   Retained earnings, substantially restricted                                                 79,209                  78,543
   Accumulated other comprehensive income (loss)                                                1,528                    (176)
                                                                                          -----------             -----------
         Total shareholders' equity                                                           169,241                 167,278
                                                                                          -----------             -----------
                Total liabilities and shareholders' equity                                $ 1,152,046             $   922,028
                                                                                          ===========             ===========
</TABLE>

 See accompanying notes to unaudited consolidated interim financial statements.



                                       1
<PAGE>

                           TROY FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                  THREE MONTHS ENDED
                                                                                                     DECEMBER 31,
                                                                                             2000                    1999
                                                                                           --------                --------
                                                                                                      (Unaudited)
<S>                                                                                        <C>                     <C>
Interest and dividend income:
     Interest and fees on loans                                                            $ 13,771                $ 11,252
     Securities available for sale:
         Taxable                                                                              2,309                   1,870
         Tax-exempt                                                                             813                     701
                                                                                           --------                --------
                  Total securities available for sale                                         3,122                   2,571
                                                                                           --------                --------
     Investment securities held to maturity                                                      54                      50
     Federal funds sold                                                                         122                     171
                                                                                           --------                --------
         Total interest and dividend income                                                  17,069                  14,044
                                                                                           --------                --------

Interest expense:
     Deposit and escrow accounts                                                              6,124                   4,656
     Short-term borrowings                                                                    1,058                     602
     Long-term debt                                                                             832                     651
                                                                                           --------                --------
         Total interest expense                                                               8,014                   5,909
                                                                                           --------                --------
         Net interest income                                                                  9,055                   8,135
     Provision for loan losses                                                                  366                     800
                                                                                           --------                --------
Net interest income after provision for loan losses                                           8,689                   7,335
                                                                                           --------                --------

Non-interest income:
     Service charges on deposits                                                                354                     261
     Loan servicing fees                                                                        124                     132
     Trust service fees                                                                         196                     202
     Net (losses) gains from securities transactions                                           (199)                      3
     Net losses from mortgage loan sales                                                        (19)                    (23)
     Other income                                                                               676                     576
                                                                                           --------                --------
         Total non-interest income                                                            1,132                   1,151
                                                                                           --------                --------

Non-interest expenses:
     Compensation and employee benefits                                                       3,574                   3,088
     Occupancy                                                                                  504                     465
     Furniture, fixtures and equipment                                                          213                     194
     Computer charges                                                                           435                     434
     Professional, legal and other fees                                                         476                     409
     Printing, postage and telephone                                                            162                     234
     Other real estate expenses                                                                 (45)                    103
     Contributions                                                                               35                      72
     Goodwill and other intangibles amortization                                                273                      56
     Merger related integration costs                                                         1,972                      --
     Other                                                                                      621                     832
                                                                                           --------                --------
         Total non-interest expenses                                                          8,220                   5,887
                                                                                           --------                --------
 Income before income tax expense                                                             1,601                   2,599
 Income tax expense                                                                             367                     719
                                                                                           --------                --------
 Net income                                                                                $  1,234                $  1,880
                                                                                           ========                ========

Earnings per common share:
   Basic                                                                                   $    .13                $    .18
                                                                                           --------                --------
   Diluted                                                                                 $    .13                $    .18
                                                                                           --------                --------
</TABLE>

 See accompanying notes to unaudited consolidated interim financial statements.


                                       2
<PAGE>
                           TROY FINANCIAL CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
           (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
<TABLE>
<CAPTION>
                                                                               December 31,           December 31,
                                                                                  2000                    1999
                                                                                  ----                    ----
<S>                                                                             <C>          <C>       <C>          <C>
COMMON STOCK
     Balance at beginning of period                                             $       1              $       1
                                                                                ---------              ---------

     Balance at end of period                                                   $       1              $       1
                                                                                =========              =========

ADDITIONAL PAID-IN CAPITAL
     Balance at beginning of period                                             $ 117,804              $ 117,759
     Adjustment for ESOP shares released for allocation                                88                     45
                                                                                ---------              ---------

     Balance at end of period                                                   $ 117,892              $ 117,804
                                                                                =========              =========

UNALLOCATED COMMON STOCK HELD BY ESOP
     Balance at beginning of period                                             $  (9,027)             $  (9,620)
     ESOP shares released for allocation (83,311 and
           59,836 shares, respectively)                                               825                    593
                                                                                ---------              ---------

     Balance at end of period                                                   $  (8,202)             $  (9.027)
                                                                                =========              =========

UNVESTED RESTRICTED STOCK AWARDS
     Balance at beginning of period                                             $  (3,847)             $      --
     Grant of restricted stock awards (446,165 shares)                                 --                 (4,824)
     Amortization of restricted stock awards                                          242                    241
                                                                                ---------              ---------

     Balance at end of period                                                   $  (3,605)             $  (4.583)
                                                                                =========              =========

TREASURY STOCK
     Balance at beginning of period                                             $ (16,020)                    --
     Purchase of treasury stock (122,578 and 994,100 shares, respectively)         (1,562)             $ (11,447)
     Grant of restricted stock awards (446,165 shares)                                 --                  4,959
                                                                                ---------              ---------

     Balance at end of period                                                   $ (17,582)             $  (6,488)
                                                                                =========              =========

RETAINED EARNINGS
     Balance at beginning of period                                             $  78,543              $  72,699
     Net income                                                                     1,234    $ 1,234       1,880     $ 1,880
     Cash dividends ($.08 and $.05 per share, respectively)                          (568)                  (607)
     Adjustment for grant of restricted stock awards                                   --                   (135)
                                                                                ---------              ---------

     Balance at end of period                                                   $  79,209              $  73,837
                                                                                =========              =========

ACCUMULATED OTHER COMPREHENSIVE INCOME(LOSS)
     Balance at beginning of period                                             $    (176)             $    (400)
     Unrealized net holding gains (losses) on available for sale securities
        arising during the period (pre-tax $2,642 and ($963))                                  1,585                    (578)
     Reclassification adjustment for net gains (losses) on available for sale
        securities realized in net income (pre-tax ($199) and $3, respectively)                  119                      (2)
                                                                                             -------                --------
     Other comprehensive income (loss)                                              1,704      1,704        (580)       (580)
                                                                                ---------    -------   ---------    --------

     Comprehensive income                                                                    $ 2,938                $  1,300
                                                                                             =======                ========

     Balance at end of period                                                   $   1,528              $    (980)
                                                                                =========              =========

Total shareholders' equity                                                      $ 169,241              $ 170,564
                                                                                =========              =========
</TABLE>

 See accompanying notes to unaudited consolidated interim financial statements.


                                       3
<PAGE>

                           TROY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                   Three Months Ended
                                                                                                       December 31,
                                                                                                2000                 1999
                                                                                             ---------             ---------
                                                                                                        (Unaudited)
<S>                                                                                          <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                                                  $   1,234             $   1,880
 Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
  Depreciation                                                                                     325                   319
  Goodwill and other intangibles amortization                                                      273                    56
  Non-cash contribution expense                                                                     28                    54
  Net accretion on securities                                                                      (19)                 (362)
  Provision for loan losses                                                                        366                   800
  Amortization of restricted stock awards                                                          242                   241
  ESOP compensation expense                                                                        276                   215
  Net accretion of purchase accounting adjustments                                                 (55)                   --
  Net gains on sale of other real estate owned                                                    (167)                  (28)
  Write-down of other real estate                                                                    5                    13
  Net losses (gains) from securities transactions                                                  199                    (3)
  Net losses from mortgage loan sales                                                               19                    23
  Proceeds from sales of loans held for sale                                                     4,477                 5,842
  Net loans made to customers and held for sale                                                 (5,245)               (3,723)
  Net increase in accrued interest receivable and other assets                                  (1,939)               (1,778)
  Net increase (decrease) contributions and other liabilities                                    3,045                  (670)
                                                                                             ---------             ---------
 Net cash provided by operating activities                                                       3,064                 2,879
                                                                                             ---------             ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in acquisition activity                                                          (50,514)                   --
Proceeds from paydowns of investment securities                                                     33                    48
Net loans repaid by (made to) customers                                                          3,992               (28,994)
Capital expenditures, net                                                                         (234)               (1,063)
Purchase of AFS securities                                                                     (71,183)             (126,898)
Proceeds from sale of AFS securities                                                            21,107                18,493
Proceeds from maturity/calls/paydowns of AFS securities                                        120,189               142,242
Proceeds from sales of other real estate owned                                                   1,060                 2,458
                                                                                             ---------             ---------
Net cash provided by investing activities                                                       24,450                 6,286
                                                                                             ---------             ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits                                                              6,467                (6,114)
Net increase in mortgagors' escrow accounts                                                      2,471                 2,355
Net increase (decrease) in securities sold U/A to repurchase                                  (101,836)               90,197
Net increase (decrease) in short-term borrowings                                                75,000               (75,700)
Repayment of long-term debt                                                                       (121)                 (115)
Cash dividends paid on common stock                                                               (568)                 (607)
Purchase of common stock for treasury                                                           (1,562)              (11,447)
                                                                                             ---------             ---------
Net cash used in financing activities                                                          (20,149)               (1,431)
                                                                                             ---------             ---------
Net increase in cash and cash equivalents                                                        7,365                 7,734
Cash and cash equivalents at beginning of period                                                23,755                35,935
                                                                                             ---------             ---------
Cash and cash equivalents at end of period                                                   $  31,120             $  43,669
                                                                                             =========             =========
Supplemental cash flow information disclosure:
   Interest paid                                                                             $   7,446             $   5,750
   Income taxes paid                                                                               982                   105
Transfer of loans to other real estate owned                                                        96                 3,381
Adjustment of securities available for sale to fair value, net of  tax                           1,704                  (580)
Grant of restricted stock awards                                                                    --                 4,959
Acquisition activity:
   Fair value of non-cash assets acquired                                                      261,790                    --
   Fair value of liabilities assumed                                                           243,623                    --
</TABLE>

  See accompanying notes to unaudited consolidated interim financial statements


                                       4
<PAGE>

                           TROY FINANCIAL CORPORATION
                         NOTES TO UNAUDITED CONSOLIDATED
                          INTERIM FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

         The unaudited  consolidated  interim financial  statements  include the
         accounts of Troy Financial  Corporation  (the "Company") and its wholly
         owned subsidiaries, The Troy Savings Bank and The Troy Commercial Bank.
         All  intercompany  accounts and  transactions  have been  eliminated in
         consolidation. Amounts in prior periods' unaudited consolidated interim
         financial statements are reclassified  whenever necessary to conform to
         the  current  period's  presentation.   In  management's  opinion,  the
         unaudited   consolidated   interim  financial  statements  reflect  all
         adjustments of a normal  recurring  nature,  and disclosures  which are
         necessary  for a fair  presentation  of the  results  for  the  interim
         periods   presented  and  should  be  read  in  conjunction   with  the
         consolidated  financial  statements  and related notes  included in the
         Company's 2000 Annual Report to Stockholders. The results of operations
         for the interim periods are not  necessarily  indicative of the results
         of operations  to be expected for the full fiscal year ended  September
         30, 2001, or any other interim periods.


NOTE 2. EARNINGS PER SHARE

         Basic  earnings per share are  calculated by dividing net income by the
         weighted average number of common shares outstanding during the period.
         Diluted  earnings per share is computed in a manner  similar to that of
         basic  earnings per share except that the  weighted  average  number of
         common  shares  outstanding  is  increased  to  include  the  number of
         additional  common  shares  that  would  have been  outstanding  if all
         potentially  dilutive common shares (such as stock options and unvested
         restricted  stock)  were issued during the  reporting  period using the
         treasury stock method.  Unallocated  common shares held by the ESOP are
         not  included  in  the  weighted   average   number  of  common  shares
         outstanding  for  either  the  basic  or  diluted  earnings  per  share
         calculations.

         The following sets forth certain information  regarding the calculation
         of basic and diluted  earnings  per share for the  three-month  periods
         ended December 31:

<TABLE>
<CAPTION>
                                                                                   2000                 1999
                                                                               -----------           -----------
<S>                                                                            <C>                   <C>
                   Net income (in thousands)                                   $     1,234           $     1,880
                                                                               ===========           ===========



                   Weighted average common shares                                9,296,248            10,709,491

                   Dilutive effect of potential common shares
                            related to stock compensation plans                    190,247                 9,745
                                                                               -----------           -----------

                   Weighted average common shares including
                            potential dilution                                   9,486,495            10,719,236
                                                                               ===========           ===========



                   Basic earnings per share                                    $       .13           $       .18

                   Diluted earnings per share                                  $       .13           $       .18
</TABLE>



                                       5
<PAGE>

NOTE 3. ACQUISITIONS

         On November 10, 2000, Troy acquired Catskill Financial  Corporation,  a
         community based financial  services company  headquartered in Catskill,
         New York. On the acquisition date, Catskill had assets of approximately
         $305 million, deposits of $220 million and seven full service branches.
         Catskill  shareholders  received cash of $23 per share  representing  a
         total consideration paid of $89.9 million.  The transaction was treated
         as a  purchase,  and Troy  recorded  goodwill  of  approximately  $32.2
         million,  which is being  amortized,  on a  straight-line  basis over a
         period of 20 years.


NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS

         The Company  adopted the  provisions of SFAS No. 133,  "Accounting  for
         Derivative  Instruments and Hedging Activities," as amended,  effective
         October 1, 2000.  This Statement  establishes  accounting and reporting
         standards for  derivative  instruments,  including  certain  derivative
         instruments embedded in other contracts, and for hedging activities. It
         requires that entities  recognize all  derivatives  as either assets or
         liabilities in the statement of condition and measure those instruments
         at fair value.  Changes in the fair value of the  derivative  financial
         instruments  are reported in either earnings or  comprehensive  income,
         depending on the use of the  derivative and whether or not it qualifies
         for hedge accounting.

         Special  hedge  accounting  treatment  is  permitted  only if  specific
         criteria are met, including a requirement that the hedging relationship
         be  highly  effective  both  at  inception  and  on an  ongoing  basis.
         Accounting for hedges varies based on the type of hedge - fair value or
         cash  flow.  Results of  effective  hedges  are  recognized  in current
         earnings  for fair value hedges and in other  comprehensive  income for
         cash  flow  hedges.  Ineffective  portions  of  hedges  are  recognized
         immediately in earnings and are not deferred.

         The  derivative  instruments  held by the Company as of October 1, 2000
         consisted  solely of  instruments  related  to the  Company's  mortgage
         banking  activities.  Based on market rates and economic  conditions on
         October 1, 2000, the adoption of SFAS No. 133 as of October 1, 2000 did
         not have a  material  effect on the  Company's  consolidated  financial
         statements, and accordingly,  there is no cumulative effect of a change
         in  accounting  principle  presented.  In  addition,  the effect of the
         adjustment to fair value of the Company's  derivatives during the three
         months ended December 31, 2000 was not significant.  However, there may
         be increased  volatility in net income and  stockholders'  equity on an
         ongoing basis as a result of accounting for  derivative  instruments in
         accordance with SFAS No. 133.



                                       6
<PAGE>

                           TROY FINANCIAL CORPORATION
                                    FORM 10-Q
                                DECEMBER 31, 2000

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


                   PART I - FINANCIAL INFORMATION (CONTINUED)


ITEM 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

GENERAL
-------

Troy Financial  Corporation (the "Company") is a community  based,  full-service
financial  services  company  offering a wide variety of business,  retail,  and
municipal banking  products,  as well as a full range of trust,  insurance,  and
investment  services.  The Company  operates  through The Troy Savings Bank (the
"Savings  Bank")  and The Troy  Commercial  Bank (the  "Commercial  Bank").  The
Company's primary sources of funds are deposits and borrowings, which it uses to
originate real estate  mortgages,  both  residential and commercial,  commercial
business  loans,  and consumer  loans  throughout  its primary market area which
consists  of  the  eight  New  York  counties  of  Albany,   Greene,   Saratoga,
Schenectady, Schoharie, Warren, Washington, and Rensselaer. The Company's Common
Stock is traded on the NASDAQ Stock Market National Market Tier under the symbol
"TRYF."  During  fiscal  2000,  the  Company  established  the  commercial  bank
subsidiary.  The  Commercial  Bank provides  banking and  financing  services to
municipalities.  As of December 31, 2000, the Commercial Bank had generated $8.7
million in municipal deposits.

The  Company's  profitability,  like  that of many  financial  institutions,  is
dependent  to a  large  extent  upon  its  net  interest  income,  which  is the
difference between the interest it receives on earning assets, such as loans and
securities,   and  the  interest  it  pays  on   interest-bearing   liabilities,
principally deposits and borrowings.

Results of  operations  are also  affected  by the  provision  for loan  losses,
non-interest  expenses  such as salaries and employee  benefits,  occupancy  and
other operating  expenses,  and to a lesser extent,  non-interest income such as
trust service fees, loan servicing fees and service charges on deposit accounts.
Economic  conditions,  competition  and the monetary and fiscal  policies of the
federal  government  in general,  including  the Company,  significantly  affect
financial institutions.  Lending activities are influenced by the demand for and
supply of housing,  competition  among  lenders,  interest rate  conditions  and
prevailing  market  rates on competing  investments,  customer  preferences  and
levels of personal income and savings in the Company's primary market area.

On  November  10,  2000,  the  Company  completed  the  acquisition  of Catskill
Financial  Corporation  ("Catskill") in a cash transaction for $23.00 per share,
for a total transaction value of approximately  $89.8 million.  The seven former
offices of Catskill  Savings  Bank are now open as  full-service  offices of the
Savings Bank. In accordance  with the purchase method of accounting for business
combinations,  the assets acquired and liabilities  assumed were recorded by the
Company at their  estimated  fair market value.  Related  operating  results are
included in the Company's  consolidated  financial  statements  from the date of
acquisition.


                                       7
<PAGE>

FORWARD-LOOKING STATEMENTS

When used in this Form 10-Q or future filings by the Company with the Securities
and Exchange  Commission,  in the  Company's  press  releases or other public or
shareholder  communications,  or in oral statements made with the approval of an
authorized  executive officer,  the words or phrases "will likely result",  "are
expected  to",  "will  continue",  "is  anticipated",   "estimate",   "project",
"believe",  or similar  expressions  are  intended to identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995. In addition,  certain disclosures and information  customarily provided
by financial institutions, such as analysis of the adequacy of the allowance for
loan losses or an analysis of the interest  rate  sensitivity  of the  Company's
assets and  liabilities,  are inherently based upon predictions of future events
and circumstances. Furthermore, from time to time, the Company may publish other
forward-looking  statements  relating to such matters as  anticipated  financial
performance, business prospects, and similar matters.

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
forward-looking  statements.  In order  to  comply  with  the  terms of the safe
harbor,  the Company  notes that a variety of factors  could cause the Company's
actual results and experience to differ materially from the anticipated  results
or other  expectations  expressed in the Company's  forward-looking  statements.
Some of the risks and uncertainties that may affect the operations, performance,
development and results of the Company's business, the interest rate sensitivity
of its  assets and  liabilities,  and the  adequacy  of its  allowance  for loan
losses, include but are not limited to the following:

o        Deterioration   in  local,   regional,   national  or  global  economic
         conditions  which could result,  among other things,  in an increase in
         loan  delinquencies,  a decrease in property values, or a change in the
         housing turnover rate;

o        changes  in  market  interest  rates or  changes  in the speed at which
         market interest rates change;

o        changes  in  laws  and  regulations  affecting  the  financial  service
         industry;

o        changes in competition;

o        changes in consumer preferences; and

o        the ability of the Company to integrate and achieve the cost savings of
         its recently completed acquisition of Catskill.

The  Company  wishes to  caution  readers  not to place  undue  reliance  on any
forward-looking statements,  which speak only as of the date made, and to advise
readers that various factors,  including those described above, could affect the
Company's financial  performance and could cause the Company's actual results or
circumstances  for future periods to differ materially from those anticipated or
projected.

The Company does not undertake,  and specifically  disclaims any obligation,  to
publicly release any revisions to any forward-looking  statements to reflect the
occurrence of anticipated or  unanticipated  events or  circumstances  after the
date of such statements.

FINANCIAL CONDITION
-------------------

Total  assets were $1.2  billion at  December  31,  2000,  an increase of $230.0
million,  or 24.9% from the $922.0  million at September 30, 2000.  The increase
was principally  due to the acquisition of Catskill on November 10, 2000,  which
had a significant impact on most balance sheet line items. Total assets acquired
were approximately $305.0 million; however, the Company's total assets increased
by a lesser amount, since the



                                       8
<PAGE>

Company  used  Catskill's  federal  funds of $35.2  million  and  proceeds  from
maturities, and to a lesser extent, sales from its existing securities available
for sale portfolio to pay Catskill  shareholders.  Total  consideration paid for
the acquisition was approximately $89.8 million.

Cash and cash  equivalents were $31.1 million,  an increase of $7.3 million,  or
30.7% from the $23.8 million at September 30, 2000. The increase was principally
from the acquisition of Catskill,  as well as to a lesser extent, an increase in
checks in process of collection.

Securities  available for sale ("AFS") were $275.7 million,  an increase of $9.0
million,  or 3.4% from $266.7  million as of September 30, 2000. The increase in
AFS securities  was  principally  from the $76.4 million of securities  acquired
from Catskill,  partially  offset by maturities,  and to a lesser extent,  sales
from  the  Company's  existing  portfolio  in  order  to fund a  portion  of the
acquisition cost.

Loans  receivable  were $761.2  million as of December 31, 2000,  an increase of
$162.5  million or 27.1% over the $598.7  million as of September 30, 2000.  The
following  table  shows  the loan  portfolio  composition  as of the  respective
balance sheet dates:

<TABLE>
<CAPTION>
                                                   December 31,                            September 30,
                                                       2000                                    2000
                                                ------------------                        --------------
                                                  (In thousands)       % of Loans         (In thousands)      % of Loans
                                                                       ----------                             ----------
<S>                                                 <C>                      <C>            <C>                     <C>
     Real estate loans:
         Residential mortgage                       $ 351,263                46.0%          $ 226,961               37.9%
         Commercial                                   238,917                31.4             233,334               38.9
         Construction                                   8,760                 1.2               7,300                1.2
                                                    ---------          ----------           ---------         ----------
             Total real estate loans                  598,940                78.6             467,595               78.0
                                                                       ----------                             ----------
     Commercial business loans                         89,720                11.8              87,167               14.6
                                                                       ----------                             ----------
     Consumer loans:
         Home equity lines of credit                    6,804                  .9               5,019                 .8
         Other consumer                                66,036                 8.7              39,320                6.6
                                                    ---------          ----------           ---------         ----------
             Total consumer loans                      72,840                 9.6              44,339                7.4
                                                    ---------          ----------           ---------         ----------
     Gross loans                                      761,500               100.0%            599,101              100.0%
                                                                       ==========                             ==========
     Net deferred loan fees and costs                    (325)                                   (364)
                                                    ---------                               ---------
             Total loans receivable                 $ 761,175                               $ 598,737
                                                    =========                               =========
</TABLE>

The  Company  acquired  loans  of  $167.4  million  from  Catskill,  which  were
principally  residential  mortgages and to a lesser extent,  consumer loans. The
residential  mortgage portfolio increased $124.3 million, or 54.8%,  whereas the
consumer loan portfolio  increased $28.5 million,  or 64.3%.  The acquisition of
Catskill  increased the  percentage of the portfolio  represented by residential
mortgages,  and decreased the percentage  represented by commercial mortgage and
commercial business loans. Subject to market conditions,  the Company intends to
continue to  emphasize  increasing  its  commercial  real estate and  commercial
business  loan  portfolios  as part of its strategy to continue to diversify its
portfolio and increase commercial banking activities.


                                       9
<PAGE>

Non-performing  assets at December 31, 2000 were $6.8 million,  or .59% of total
assets,  compared to the $6.9 million,  or .75% of total assets at September 30,
2000.  The table below sets forth the amounts and  categories  of the  Company's
non-performing assets.


<TABLE>
<CAPTION>
                                                                                December 31,          September 30,
                                                                           ---------------------------------------------
                                                                                    2000                  2000
                                                                                   -------               -------
                                                                                       (dollars in thousands)
<S>                                                                                <C>                    <C>
Non-accrual loans:
    Real estate loans:
       Residential mortgage                                                        $ 2,896                $ 2,424
       Commercial mortgage                                                           2,783                  2,829
       Construction                                                                     --                     --
                                                                                   -------                -------
         Total real estate loans                                                     5,679                  5,253
    Commercial business loans                                                           91                    103
    Home equity lines of credit                                                        141                     84
    Other consumer loans                                                               292                    160
                                                                                   -------                -------
       Total non-accrual loans                                                       6,203                  5,600
Troubled debt restructurings                                                            52                     53
                                                                                   -------                -------
         Total non-performing loans                                                $ 6,255                $ 5,653
                                                                                   =======                =======
Other real estate owned:
       Residential real estate                                                         410                    240
       Commercial real estate                                                          170                  1,033
                                                                                   -------                -------
          Total other real estate owned                                                580                  1,273
                                                                                   -------                -------
Total non-performing assets                                                        $ 6,835                $ 6,926
                                                                                   =======                =======

Allowance for loan losses                                                          $14,213                $11,891
                                                                                   =======                =======
Allowance for loan losses as a percentage
     of non-performing loans                                                        227.23%                210.35%
Allowance for loan losses as a percentage of total loans                              1.87%                  1.99%
Non-performing loans as a percentage of total loans                                   0.82%                  0.94%
Non-performing assets as a percentage of total assets                                 0.59%                  0.75%
</TABLE>

The slight increase in non-performing  loans at December 31, 2000 as compared to
September 30, 2000 was principally due to the  non-performing  loans,  primarily
residential mortgages, home equity and consumer loans, acquired from Catskill.

The following  table  summarizes the activity in other real estate owned for the
periods presented:

<TABLE>
<CAPTION>
                                                                                    Three Months Ended December 31,
                                                                                    -------------------------------
                                                                                     2000                    1999
                                                                                     ----                    ----
                                                                                           (In thousands)
<S>                                                                                 <C>                    <C>
   Other real estate beginning of period                                            $ 1,273                $ 1,845
   Transfer of loans to other real estate owned                                          96                  3,381
   Other real estate acquired from Catskill                                             109                     --
   Sales of other real estate, net                                                     (893)                (2,430)
   Write-down of other real estate                                                       (5)                   (13)
                                                                                    -------                -------
   Other real estate end of period                                                  $   580                $ 2,783
                                                                                    =======                =======
</TABLE>


                                       10
<PAGE>

Additionally,  at December 31, 2000, the Company  identified  approximately $3.1
million in loans having more than normal credit risk, principally,  all of which
are  secured by real  estate.  The  Company  believes  that if  economic  and/or
business conditions change in its lending area, some of these loans could become
non-performing in the future.

The  allowance for loan losses was $14.2 million or 1.87% of period end loans at
December 31, 2000,  and provided  coverage of  non-performing  loans of 227.23%,
compared to  coverage  of 210.35% and 1.99% of period end loans as of  September
30,  2000.  The  following  summarizes  the activity in the  allowance  for loan
losses:

<TABLE>
<CAPTION>
                                                                Three Months Ended December 31,
                                                           -----------------------------------------
                                                                2000                        1999
                                                              --------                    --------
                                                                         (In thousands)
<S>                                                           <C>                         <C>
Allowance at beginning of the period                          $ 11,891                    $ 10,764
    Charge-offs                                                   (252)                       (527)
    Recoveries                                                      24                          35
                                                              --------                    --------
        Net charge-offs                                           (228)                       (492)
    Provision for loan losses                                      366                         800
    Allowance acquired from Catskill                             2,184                          --
                                                              --------                    --------
Allowance at end of the period                                $ 14,213                    $ 11,072
                                                              ========                    ========
</TABLE>

Total  deposits were $781.9  million at December 31, 2000, up $226.0  million or
40.6% from the $556.0 million at September 30, 2000.  The following  table shows
the deposit composition as of the two dates:

<TABLE>
<CAPTION>
                                                         December 31, 2000                       September 30, 2000
                                                --------------------------------------  ------------------------------------
                                                  (In thousands)       % of Deposits      (In thousands)     % of Deposits
<S>                                                 <C>                     <C>             <C>                   <C>
        Savings                                     $ 251,055               32.1%           $ 177,589             31.9%
        Money market                                   27,667                3.5               26,103              4.7
        NOW                                           115,236               14.7               90,005             16.2
        Non-interest-bearing demand                    57,519                7.4               43,996              7.9
        Time deposits                                 330,457               42.3              218,279             39.3
                                                    ---------              -----            ---------            -----
                                                    $ 781,934              100.0%           $ 555,972            100.0%
                                                    =========              =====            =========            =====
</TABLE>

         The increase in deposits was  principally  due to the $219.9 million of
         deposits acquired from Catskill,  with the remaining increase primarily
         representing  municipal  deposits generated by the Commercial Bank. The
         acquisition  of Catskill  did not  significantly  change the  Company's
         deposit mix, but did reduce the  Company's  reliance on  borrowings  to
         fund loans by reducing the Company's  loan to deposit ratio to 97.3% at
         December 31, 2000, from the 107.7% reported at September 30, 2000.

         The Company decreased its total borrowings which are primarily with the
         Federal  Home Loan Bank of New York  ("FHLB"),  to  $176.7  million  at
         December 31,  2000, a decrease of $2.1 million from the $178.7  million
         at September  30, 2000.  At December  31, 2000,  the Company  still had
         additional  available  credit of $21.0 million under its overnight line
         and $46.1 million under its one-month advance program with the FHLB.

         Shareholders'  equity at  December  31,  2000 was  $169.2  million,  an
         increase of $1.9  million or 1.2% from the $167.3  million at September
         30, 2000. The increase was principally due to the $1.7 million positive
         change in the  Company's  net  unrealized  gain  (loss)  on  securities
         available for sale, net of taxes,  due to a decrease in market interest
         rates, the $.9 million increase due to the release of ESOP shares,  the
         $.7 million of net income  retained  after cash  dividends  and the $.2
         million due to  amortization  of restricted  stock  awards.  Offsetting
         these increases was the $1.6 million cost to repurchase  122,578 shares
         of the Company's common stock.


                                       11
<PAGE>

         Shareholders' equity as a percentage of total assets decreased to 14.7%
         at December 31, 2000 compared to 18.1% at September 30, 2000, primarily
         due to the increase in assets from the Catskill acquisition. Book value
         per common share was $16.13 at December 31, 2000, compared to $15.76 at
         September 31, 2000.

COMPARISON OF OPERATING RESULTS
-------------------------------
FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
-----------------------------------------------------

General
-------

For the three months ended December 31, 2000, the Company recorded net income of
$1.2  million,  a decrease of  $646,000,  or 34.4%,  compared to the three month
period ended December 31, 1999.  Basic and diluted earnings per share were $.13,
a decrease of 27.8% compared to basic and diluted earnings per share of $.18 for
the three months ended  December 31, 1999.  For the three months ended  December
31, 2000, weighted average common shares - basic were 9,296,248, down 1,413,243,
or 13.2%,  from the  comparable  period of the prior  year due to the  Company's
share repurchase programs.

The  Company's  net  income  and basic and  diluted  earnings  per share for the
quarter ended  December 31, 2000,  were  adversely  impacted by the $2.0 million
($1.2 million  after-tax),  of merger related integration costs expensed as part
of the  acquisition  and  integration of Catskill.  Excluding the merger related
integration costs, net income would have been $2.4 million and basic and diluted
earnings per share would have been $.26 per share, respectively

Excluding merger related integration costs,  annualized return on average assets
for the three  months  ended  December  31,  2000 and  1999,  was .98% and .89%,
respectively,  and the annualized  return on average equity was 5.75% and 4.21%,
respectively.

Net Interest Income
-------------------

Net  interest  income  on a tax  equivalent  basis for the  three  months  ended
December 31, 2000,  was $9.5 million,  an increase of $997,000,  or 11.7%,  when
compared  to the  three  months  ended  December  31,  1999.  The  increase  was
principally  volume related with average  earning assets up $121.7  million,  or
15.5%, primarily from the Catskill acquisition.

Interest  income for the three months ended  December 31, 2000 was $17.5 million
on a tax  equivalent  basis,  an increase of $3.1  million,  or 21.5%,  over the
comparable  period last year.  The $121.7  million  increase in average  earning
assets had a direct  positive effect on interest income as the Company sought to
leverage its excess capital  through the  acquisition  of Catskill.  The Company
also benefited  from a 37 basis point  increase in the yield on average  earning
assets  caused  primarily  by  increases  in the  yield  earned  on the loan and
securities portfolios due to higher market interest rates.

Average  earning  assets  increased  principally  in  the  loan  and  securities
available  for  sale   portfolios,   which  on  average  grew  19.2%  and  8.8%,
respectively.  Average loans increased  $110.3 million and management  estimates
that  approximately  85.0%  of this  increase  were  due to the  loan  portfolio
acquired  from  Catskill.  The  balance  of the  increase  was in the  Company's
commercial real estate and commercial loan portfolios,  as the Company continues
to emphasize  its  commercial  banking  strategy.  The average yield on the loan
portfolio increased 21 basis points to 8.03% due to the general rising of market
interest rates in 2000.

Average  securities  available for sale  increased  $16.7  million or 8.8%.  The
Company  estimates  that the securities  acquired from the Catskill  acquisition
increased average securities for the quarter by approximately $42.3



                                       12
<PAGE>

million.  Principally  offsetting that impact,  however,  were maturities in the
Company's existing portfolio, which were not reinvested but instead used to fund
a portion  of the  Catskill  acquisition.  The yield on the  average  securities
portfolio  increased 75 basis points as the Company's  relatively  short average
life portfolio  benefited from its  reinvestment in a rising rate environment in
2000.

Interest expense for the three months ended December 31, 2000, was $8.0 million,
an increase  of $2.1  million or 35.6%.  Average  interest  bearing  liabilities
increased  $137.6  million  or  22.6%,  principally  due to the  acquisition  of
Catskill.  Management  estimates  that  average  interest  bearing  deposits and
borrowings  increased $122.0 million and $13.9 million,  respectively,  from the
Catskill  acquisition.  Furthermore,  the  Company  incurred  a 37  basis  point
increase in its cost of funds due to the general rise in market  interest  rates
since the comparable quarter of the prior year. Despite the increase in its cost
of funds,  the  Company's net interest  spread  remained at 3.49% as its average
earning assets repriced at the same rate as the change in its cost of funds.

The Company's net interest  margin was 4.18% for the three months ended December
31, 2000,  down 18 basis points  compared to the comparable  period of the prior
year.  The  decrease was  principally  caused by the purchase of Catskill as the
Company used cash flow from its existing  securities  portfolio to pay a portion
of the $89.8 million purchase price.  The acquisition of Catskill  increased the
amount of average earning assets funded by interest bearing liabilities. For the
three months ended  December 31, 2000, the Company had $159.1 million of average
earning assets with no funding  costs,  a decrease of $15.9  million,  or 10.0%,
from the $175.0  million for the three  months  ended  December  31,  1999.  The
Company  expects its net interest  margin to drop further in the next quarter as
the  Company  will  have the  acquired  assets  from  Catskill  and the  related
acquisition cost in its operating results for the full three-month period.

For more information on average  balances,  interest,  yields and rates,  please
refer to Table #1, included in this report.

Provision for Loan Losses
-------------------------

The Company  establishes  an  allowance  for loan losses based on an analysis of
risk factors in its loan portfolio.  This analysis  includes  concentrations  of
credit,  past loan loss  experience,  current  economic  conditions,  amount and
composition  of loan  portfolio,  estimated  fair  market  value  of  underlying
collateral, delinquencies and other factors. Accordingly, the calculation of the
adequacy of the  allowance  for loan losses is not based  solely on the level of
non-performing loans.

The provision for loan losses was $366,000,  or .21% annualized of average loans
for the three months ended  December 31, 2000,  down  $434,000 or 54.3% from the
comparable  period of the prior year.  The provision  was decreased  principally
based on lower net charge-offs  and improved asset quality.  The Company had net
charge-offs  of $228,000 or .13% of average loans for the quarter ended December
31, 2000,  compared to net  charge-offs  of $492,000 or .34% of average loans in
the comparable  period last year.  Non-performing  loans were $6.3 million as of
December 31, 2000, or .82% of total loans,  a decrease of $638,000 from December
31,  1999,  when they were 1.16% of total  loans.  At  December  31,  2000,  the
allowance  for loan losses was $14.2  million or 1.87% of period end loans,  and
provided  coverage  of  non-performing  loans of 227.2%,  compared  to 1.87% and
160.6%, respectively, as of December 31, 1999.

Non-Interest Income
-------------------

Non-interest  income was $1.1 million for the three  months  ended  December 31,
2000 a decrease  of $19,000 or 1.7% from the three  months  ended  December  31,
1999,  principally from the change in net securities  transactions.  The Company
had net  securities  losses of $199  thousand in the period  ended  December 31,
2000,



                                       13
<PAGE>

as compared to $3 thousand of net gains in the comparable  quarter in 1999. Also
during the quarter ended December 31, 2000, the Company realized a $174 thousand
gain on the  sale  of a  partnership  interest,  which  was  included  in  other
non-interest income.


Non-Interest Expenses
---------------------

Non-interest  expenses for the three  months  ended  December 31, 2000 were $8.2
million,  an increase of $2.3 million, or 39.6%, over the comparable period last
year.  The increase was  principally  due to the $2.0 million of merger  related
integration costs, such as compensation,  data processing and other professional
fees incurred to merge Catskill  operations into the Company.  In addition,  the
Company recorded goodwill  amortization  related to the Catskill  acquisition of
$225  thousand.  Excluding  the merger  related  integration  costs and goodwill
amortization, non-interest expenses increased only $136,000 or 2.3%.


Income Tax Expense
------------------

Income tax expense for the three months ended December 31, 2000, was $367,000, a
decrease of  $352,000,  or 49.0%,  from the  comparable  period  last year.  The
Company's  effective tax rates for the three months ended  December 31, 2000 and
1999, were 22.9% and 27.7%, respectively.  The decrease in income tax expense is
principally  the  impact  of the  lower  income  before  income  tax;  the lower
effective tax rate  reflects tax exempt income that was a larger  portion of the
Company's  taxable income in this period  compared to the same period last year,
partially offset by non-deductible goodwill amortization.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Liquidity  is the ability to generate  cash flows to meet  present and  expected
future funding needs.  Management monitors the Company's liquidity position on a
daily basis to evaluate its ability to meet  expected and  unexpected  depositor
withdrawals and to make new loans and or investments.

The Company's primary sources of funds for operations are deposits,  borrowings,
principal and interest  payments on loans,  maturities of federal funds sold and
securities available for sale.

The Company  attempts to provide stable and flexible  sources of funding through
the  management of its  liabilities,  including  core deposit  products  offered
through its branch network,  as well as FHLB advances.  Management believes that
the level of the Company's  liquid assets combined with daily monitoring of cash
inflows  and  outflows  provide  adequate  liquidity  to fund  outstanding  loan
commitments, meet daily withdrawal requirements of the Company's depositors, and
meet all other daily obligations of the Company.

Net cash provided by operating  activities was $3.1 million for the three months
ended December 31, 2000, up $185,000 from the comparable three month period. The
increase  was  principally  due to the change in other  liabilities  caused by a
increase in accrued expenses and other liabilities due. Somewhat offsetting this
increase was the change in loans held for sale, as the Company  originated  more
loans held for sale than it sold in the three  months  ended  December 31, 2000,
whereas in the comparable quarter sales exceeded originations.

Investing  activities provided net cash inflow of $24.5 million during the three
months ended December 31, 2000. Net securities activities provided $70.8 million
as the  Company  sold  lower  yielding  securities  and held  cash flow from its
existing maturities to pay a portion of the Catskill acquisition.  Net cash used
in the acquisition was $50.5 million,  in addition part of the acquisition  cost
was funded by the $39.4 million of cash acquired from



                                       14
<PAGE>

Catskill.  Financing  activities  used  cash of $20.1  million,  as the  Company
reduced  borrowings  by $27.0  million,  which  were  offset,  in part by a $6.5
million increase in deposits generated principally by the Commercial Bank.

An important  source of the  Company's  funds is the  Company's  core  deposits.
Management  believes that a substantial  portion of the Company's $781.9 million
of  deposits  are a  dependable  source  of  funds  due  to  long-term  customer
relationships.  The Company does not currently use brokered deposits as a source
of funds,  and as of December  31, 2000,  deposit  accounts  having  balances in
excess of $100,000 totaled $51.0 million, or 6.5%, of total deposits.

The Company  anticipates  that it will have sufficient funds to meet its current
commitments.  At December 31,  2000,  the Company had  commitments  to originate
loans of $41.3  million.  In addition,  the Company had undrawn  commitments  of
$98.7  million on  commercial  business,  home equity and other lines of credit.
Certificates  of deposits  which are  scheduled to mature in one year or less at
December 31, 2000,  totaled  $243.1  million,  and  management  believes  that a
significant portion of such deposits will remain with the Company.

At December 31, 2000, the Savings Bank, the Commercial Bank, and the Company all
met the capital  adequacy  requirements  to which they were subject.  Also as of
that  date all met the  standards  to be a  well-capitalized  institution  under
applicable regulations.

The following is a summary of the actual capital  amounts and ratios at December
31, 2000, compared to minimum capital requirements:

<TABLE>
<CAPTION>
                                                        Actual                                Minimum
                                                        ------                                -------
                                                        Amount          %                     Amount          %
                                                        ------         ---                    ------         --
                                                                    (Dollars in thousands)
<S>                                                    <C>             <C>                     <C>          <C>
         Tier 1 Capital:
            Savings Bank                                $96,313        10.71%                  $35,978      4.00%
            Consolidated                               $135,198        14.25%                  $37,943      4.00%
         Tier 1 Risk Based Capital:
            Savings Bank                                $96,313        12.59%                  $30,610      4.00%
            Consolidated                               $135,198        16.95%                  $31,898      4.00%
         Total Risk Based Capital:
            Savings Bank                               $105,944        13.84%                  $61,219      8.00%
            Consolidated                               $145,247        18.21%                  $63,797      8.00%
</TABLE>

At December 31, 2000,  the Company had $17.9  million of available  resources at
the  holding  company  level  on an  unconsolidated  basis  to  use  for  direct
activities  of the Company.  Furthermore,  the Company has the ability to obtain
dividends from the Savings and the Commercial Bank to provide  additional funds.
However,  New York State  Banking  law  provides  generally  that all  dividends
declared in any calendar year not exceed the total of the Bank's net profits for
the year combined with its retained net profits of the preceding two years, less
any  required  transfer  to  surplus,   without  the  prior  approval  from  the
Superintendent  of Banks.  The term "net  profits"  means the  remainder  of all
earnings from current  operations plus actual  recoveries on loans,  investments
and other assets, after deducting all current operating expenses,  actual losses
and all  federal  and state  taxes.  Net  profits  must be reduced at the time a
provision for loan losses is made rather than when any net losses are charged to
the loan loss  reserve.  The Savings  Bank has  already  paid  dividends  to the
Company over the past two years in excess of that amount, therefore, NYS banking
approval would be required  before  additional  dividends  could be paid at this
time.  However,  once the  Savings  Bank  reports  net  profits  for the current
calendar year or additional  net profits cause  cumulative  dividends  paid on a
rolling  basis to fall  below  that  threshold,  dividends  can  resume  without
regulatory approval.

                                       15
<PAGE>

                   PART I - FINANCIAL INFORMATION (CONTINUED)

ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk

The  Company  believes  there have been no  material  changes  in the  Company's
interest rate risk  position  since  September  30, 2000.  Other types of market
risk,  such as foreign  exchange rate risk and commodity price risk do not arise
in the normal course of the Company's business activities.


                                       16
<PAGE>

         TABLE #1  AVERAGE BALANCES, INTEREST, YIELD AND RATE
                   ------------------------------------------

The following table presents,  for the periods indicated the total dollar amount
of  interest  income  from  average  interest-earning  assets and the  resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed  both in dollars and rates.  All average  balances  are daily  average
balances. Non-accruing loans have been included in the table as loans receivable
with interest earned recognized on a cash basis only.  Securities  available for
sale are shown at amortized cost.


<TABLE>
<CAPTION>
                                                                       For the three months ended December 31,
                                                             -----------------------------------------------------------
                                                                  2000                                          1999
                                                   ------------------------------------        -------------------------------------
                                                   Average                                     Average
                                                   Balance      Interest     Yield/Rate        Balance        Interest    Yield/Rate
                                                   -------      --------     ----------        -------        --------    ----------
                                                                                 (Dollars in thousands)
INTEREST-EARNING ASSETS
<S>                                               <C>           <C>              <C>          <C>             <C>            <C>
  Total loans                                     $ 686,069     $  13,770        8.03%        $ 575,745       $  11,257      7.82%
  Loans held for sale                                 2,380            49        8.24%            2,935              57      7.77%
  Investment securities held to maturity              2,284            54        9.46%            2,511              50      7.96%
  Securities available for sale:
      Taxable                                       133,760         2,314        6.92%          119,867           1,870      6.24%
      Tax-exempt                                     72,716         1,236        6.80%           69,875           1,038      5.94%
                                                  ---------     ---------                     ---------       ---------
        Total securities available for sale         206,476         3,550        6.88%          189,742           2,908      6.13%
                                                  ---------     ---------                     ---------       ---------
  Federal funds sold and other                        7,785           122        6.22%           12,341             171      5.54%
                                                  ---------     ---------                     ---------       ---------
    Total interest-earning assets                   904,994        17,545        7.75%          783,274          14,443      7.38%
  Allowance for loan losses                         (13,248)    ---------                       (10,934)      ---------
  Other assets, net                                  89,338                                      74,123
                                                  ---------                                   ---------
         Total assets                             $ 981,084                                   $ 846,463
                                                  =========                                   =========

INTEREST-BEARING LIABILITIES
  Deposits:
    NOW and Super NOW accounts                      100,979           556        2.18%           85,681             477      2.23%
    Money market accounts                            26,966           205        3.02%           19,268             146      3.03%
    Savings accounts                                216,662         1,567        2.87%          188,228           1,343      2.85%
    Time deposits                                   277,977         3,777        5.39%          223,858           2,677      4.78%
    Escrow accounts                                   3,958            19        1.90%            2,861              13      1.82%
                                                  ---------     ---------                     ---------       ---------
    Total interest-bearing deposits                 626,542         6,124        3.88%          519,896           4,656      3.58%
  Borrowings:                                     ---------     ---------                     ---------       ---------
   Securities sold U/A to repurchase                 12,634           191        6.00%            3,200              25      3.11%
   Short-term borrowings                             51,815           867        6.64%           40,747             577      5.63%
   Long-term debt                                    54,903           832        6.01%           44,412             651      5.83%
                                                  ---------     ---------                     ---------       ---------
        Total borrowings                            119,352         1,890        6.28%           88,359           1,253      5.64%
                                                  ---------     ---------                     ---------       ---------
    Total interest-bearing liabilities              745,894         8,014        4.26%          608,255           5,909      3.89%
                                                  ---------     ---------                     ---------       ---------
  Non-interest-bearing deposits                      47,517                                      46,898
  Other liabilities                                  20,440                                      12,838
  Shareholders' equity                              167,233                                     178,472
                                                  ---------                                   ---------
         Total liabilities & equity               $ 981,084                                   $ 846,463
                                                  =========                                   =========
  Net interest spread                                                            3.49%                                       3.49%

  Net interest income/net interest margin                       $   9,531        4.18%                        $   8,534      4.36%
  Ratio of interest-earning assets to
     interest-bearing liabilities                                              121.33%                                     128.77%
  Less: tax equivalent adjustment                                     476                                           399
                                                                ---------                                     ---------
  Net interest income as per
     consolidated financial statements                          $   9,055                                     $   8,135
                                                                =========                                     =========
</TABLE>


                                       17
<PAGE>

                           TROY FINANCIAL CORPORATION
                                    FORM 10-Q

                                DECEMBER 31, 2000



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------

In the  ordinary  course of  business,  the Company and the Banks are subject to
legal actions,  which involve claims for monetary relief.  Management,  based on
advice of counsel,  does not believe  that any  currently  known legal  actions,
individually  or in the aggregate  will have a material  effect on the Company's
consolidated financial condition or results of operations.

Item 2.  Changes in Securities
         ---------------------

                  None


Item 3.  Defaults on Senior Securities
         -----------------------------

                  Not Applicable


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

                  None


Item 5.  Other Information
         -----------------

                  None


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

         (a)      Exhibits

                  None

         (b)      Reports on Form 8-K

                  (i)      On October 24, 2000, Troy  Financial  Corporation and
                           Catskill  Financial   Corporation  reported  that  on
                           October  18,  2000  they announced   the  receipt  of
                           regulatory and shareholder approvals for their merger
                           transaction.


                                       18
<PAGE>

                  (ii)     On November  27,  2000,  Troy  Financial  Corporation
                           reported  that on November 10, 2000, it completed its
                           acquisition   of   Catskill   Financial   Corporation
                           pursuant  to an  Agreement  and Plan of Merger  dated
                           June  7,  2000.   Incorporated   by  reference   were
                           Financial    Statements    of   Catskill    Financial
                           Corporation  and  a  press  release   announcing  the
                           completion of the acquisition.

                  (iii)    On November  29,  2000,  Troy  Financial  Corporation
                           announced  that its annual  meeting  of  shareholders
                           would be held on  February 8, 2001.  A press  release
                           describing  the  meeting  and  providing   additional
                           information  about the  Company  was  attached  as an
                           exhibit.

                  (iv)     On December  28,  2000,  Troy  Financial  Corporation
                           announced  that David J. DeLuca had been appointed as
                           Senior Vice President and Chief Financial  Officer of
                           the  Company.   A  press   release   describing   the
                           appointment was attached as an exhibit.


                                       19
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                    TROY FINANCIAL CORPORATION
                                    --------------------------


Date: February 14, 2001              /s/ Daniel J. Hogarty, Jr.
                                    ---------------------------
                                             Daniel J. Hogarty, Jr.
                                             Chairman of the Board, President
                                             and Chief Executive Officer
                                             (Principal Executive Officer)



Date: February 14, 2001              /s/ David J. DeLuca
                                    --------------------
                                             David J. DeLuca
                                             Chief Financial Officer
                                             (Principal Financial and
                                             Accounting Officer)




                                       20