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

                                 Form 10-Q

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


For the Quarter ended June 30, 1997            Commission File No. 0-19843

                        ALBANK Financial Corporation
            (Exact name of registrant as specified in its charter)


            DELAWARE	                     				   14-1746910
	(State or other jurisdiction of 			(I.R.S. Employer Identification No.)
	incorporation or organization)	            

             10 NORTH PEARL STREET, ALBANY, NY  12207-2774
               (Address of principal executive offices)

Registrant's telephone number, including area code:  (518) 445-2100
	

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:


							                              	Number of shares outstanding
Class of Common Stock					            as of July 31, 1997      	

Common Stock, Par $.01		         				 12,834,006



ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX

Part I		FINANCIAL INFORMATION

Item 1.		Financial Statements 							       

		Consolidated Statements of Earnings for the Three
		Months Ended June 30, 1997 and 1996 (Unaudited)

		Consolidated Statements of Earnings for the Six
		Months Ended June 30, 1997 and 1996 (Unaudited)

		Consolidated Statements of Financial Condition as
		of June 30, 1997 (Unaudited) and December 31, 1996

		Consolidated Statements of Changes in Stockholders' Equity for
		the Six Months Ended June 30, 1997 and 1996 (Unaudited)

		Consolidated Statements of Cash Flows for the Six
		Months Ended June 30, 1997 and 1996 (Unaudited)

		Notes to Unaudited Consolidated Interim Financial Statements

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

Part II		OTHER INFORMATION		

Item 1.		Legal Proceedings

Item 2.		Changes in Securities

Item 3.		Defaults Upon Senior Securities

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

Item 5.		Other Information

Item 6.		Exhibits and  Reports on Form 8-K

Signatures

Exhibit Index

<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
<CAPTION>

                                                                      Three Months Ended   
                                                                          June 30,
                                                                     1997           1996
<S>                                                                   <C>            <C>
                                                                       (Unaudited)
Interest income:
    Mortgage loans                                            $    42,072         37,501
    Other loans                                                    11,427          9,391
    Securities available for sale                                  10,045         10,603
    Investment securities                                           1,728          2,282
    Federal funds sold                                                 13            321
    Securities purchased under agreement to resell                      6            719
    Stock in Federal Home Loan Bank                                   327            272
Total interest income                                              65,618         61,089
                                                                               
Interest expense:
    Deposits and escrow accounts                                   30,799         29,401
    Short-term borrowed funds and repurchase agreements             1,095             40
    Long-term debt                                                    274            406
Total interest expense                                             32,168         29,847

Net interest income                                                33,450         31,242
Provision for loan losses                                           1,800          1,425
Net interest income after provision for loan losses                31,650         29,817

Noninterest income:
    Service charges on deposit accounts                             1,579          1,342
    Net security transactions                                         255              3
    Brokerage and insurance commissions                               510            547
    Other                                                           1,165          1,200
Total noninterest income                                            3,509          3,092

Noninterest expense:
    Compensation and employee benefits                              9,891          9,509
    Occupancy, net                                                  2,439          2,263
    Furniture, fixtures and equipment                               1,648          1,262
    Federal deposit insurance premiums                                358          1,147
    Professional, legal and other fees                                862            686
    Telephone, postage and printing                                 1,032          1,075
    Goodwill amortization                                             873            736
    Capital securities expense                                        322             --
    Other                                                           2,781          3,051
Total noninterest expense                                          20,206         19,729

Income before income taxes                                         14,953         13,180
Income tax expense                                                  5,512          5,345
Net income                                                    $     9,441          7,835

Primary and fully diluted earnings per share                  $      0.68           0.54

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.



</TABLE>
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
<CAPTION>

                                                                      Six Months Ended   
                                                                          June 30,
                                                                     1997           1996
<S>                                                                   <C>            <C> 
                                                                        (Unaudited)
Interest income:
    Mortgage loans                                            $    84,113         75,207
    Other loans                                                    22,283         18,523
    Securities available for sale                                  19,513         21,957
    Investment securities                                           3,490          4,542
    Federal funds sold                                                 14            480
    Securities purchased under agreement to resell                      6          1,457
    Stock in Federal Home Loan Bank                                   629            511
Total interest income                                             130,048        122,677
                                                                               
Interest expense:
    Deposits and escrow accounts                                   61,027         59,493
    Short-term borrowed funds and repurchase agreements             1,959            336
    Long-term debt                                                    576            714
Total interest expense                                             63,562         60,543

Net interest income                                                66,486         62,134
Provision for loan losses                                           3,600          2,850
Net interest income after provision for loan losses                62,886         59,284

Noninterest income:
    Service charges on deposit accounts                             3,117          2,698
    Net security transactions                                         255              5
    Brokerage and insurance commissions                             1,065            945
    Other                                                           2,329          2,454
Total noninterest income                                            6,766          6,102

Noninterest expense:
    Compensation and employee benefits                             19,858         18,969
    Occupancy, net                                                  4,991          4,672
    Furniture, fixtures and equipment                               3,174          2,509
    Federal deposit insurance premiums                                711          2,296
    Professional, legal and other fees                              1,719          1,340
    Telephone, postage and printing                                 2,225          2,304
    Goodwill amortization                                           1,747          1,472
    Capital securities expense                                        322             --
    Other                                                           5,265          5,815
Total noninterest expense                                          40,012         39,377

Income before income taxes                                         29,640         26,009
Income tax expense                                                 10,882         10,463
Net income                                                    $    18,758         15,546

Primary and fully diluted earnings per share                  $      1.35           1.07

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.



</TABLE>
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands, except per share data)
<CAPTION>


                                                                  June 30,   December 31,
                                                                     1997           1996
<S>                                                                   <C>            <C>
                                                                 (Unaudited)
              Assets                                                       
Cash and due from banks                                       $    77,815         68,883
Securities available for sale, at approximate market value        660,836        617,943
Investment securities (approximate market value of $93,846 at 
  June 30, 1997 and $111,091 at  December 31, 1996)                92,870        109,607
                                                             
Loans receivable                                                2,612,869      2,566,364
Less: allowance for loan losses                                    25,960         24,114
Loans receivable, net                                           2,586,909      2,542,250
                                                             
Accrued interest receivable                                        28,966         27,092
Office premises and equipment, net                                 50,029         48,554
Stock in Federal Home Loan Bank, at cost                           21,408         16,913
Real estate owned                                                   3,302          4,012
Goodwill                                                           41,774         43,482
Other assets                                                       38,318         27,400
                                                              $ 3,602,227      3,506,136
                                                             
                                                             
               Liabilities                                   
Deposits                                                      $ 2,986,514      3,013,129
Escrow accounts                                                    24,749         26,603
Accrued income taxes payable                                        8,988          3,938
Short-term borrowed funds and repurchase agreements               112,927         42,346
Long-term debt                                                     20,061         30,061
Obligation under capital lease                                      4,595          4,646
Other liabilities                                                  62,887         66,288
Total liabilities                                               3,220,721      3,187,011
                                                             
Corporation-obligated mandatorily redeemable
  capital securities of subsidiary trust                           50,000             --
                                                             
               Stockholders' Equity                          
Preferred stock, $.01 par value. Authorized 25,000,000 shares; 
  none outstanding                                                     --             --   
Common stock, $.01 par value. Authorized 50,000,000 shares;  
  15,697,500 shares issued; 12,824,856 shares outstanding at
  June 30, 1997 and 12,910,763 shares outstanding at
  December 31, 1996                                                   157            157
Additional paid-in capital                                        181,196        180,670
Retained earnings, substantially restricted                       228,716        214,283
Treasury stock, at cost (2,872,644 shares at June 30, 1997   
  and 2,786,737 shares at December 31, 1996)                      (74,800)       (71,235)
Unrealized gain on securities available for sale, net of tax        2,287          1,781
Common stock acquired by:                                    
    Employee stock ownership plan ("ESOP")                         (6,036)        (6,279)
    Bank recognition plan ("BRP")                                     (14)          (252)
Total stockholders' equity                                        331,506        319,125
                                                              $ 3,602,227      3,506,136
                                                             
See accompanying Notes to Unaudited Consolidated Interim Financial Statements.
</TABLE>

<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands) (Unaudited)
<CAPTION>                                                                  



                                                                                   Net Unrealized
                                                                                      Gain (Loss)    Common    Common
                                                    Additional                      on Securities     Stock     Stock
                                             Common    Paid-in  Retained  Treasury      Available  Acquired  Acquired
                                              Stock    Capital  Earnings     Stock       for Sale   by ESOP    by BRP     Total
<S>                                             <C>        <C>       <C>       <C>            <C>       <C>       <C>       <C>
Six Months Ended June 30, 1996            
                                          
Balance at December 31, 1995                $   157    151,969   258,631   (82,381)         3,528    (7,535)   (1,187)  323,182
                                          
Net income                                       --         --    15,546        --             --        --        --    15,546
                                          
Purchase of treasury stock (541,017 shares)      --         --        --   (15,097)            --        --        --   (15,097)

Exercise of stock options                        --         --       367       570             --        --        --       937
                                          
Tax benefits related to vested BRP stock and
  stock options exercised                        --        400        --        --             --        --        --       400
                                          
Adjustment of securities available for sale  
  to market, net of tax                          --         --        --        --         (5,691)       --        --    (5,691)
                                          
Cash dividends declared                          --         --    (3,251)       --             --        --        --    (3,251)

Stock dividends declared                         --     27,803   (64,051)   36,248             --        --        --        --

Amortization of award of ESOP stock              --         --        --        --             --       210        --       210
                                          
Amortization of award of BRP stock               --         --        --        --             --        --       467       467
                                          
Balance at June 30, 1996                    $   157    180,172   207,242   (60,660)        (2,163)   (7,325)     (720)  316,703



Six Months Ended June 30, 1997

Balance at December 31, 1996                $   157    180,670   214,283   (71,235)         1,781    (6,279)     (252)  319,125

Net income                                       --         --    18,758        --             --        --        --    18,758
                                          
Purchase of treasury stock (150,468 shares)      --         --        --    (4,909)            --        --        --    (4,909)
                                          
Exercise of stock options                        --         --      (478)    1,344             --        --        --       866

Tax benefits related to vested BRP stock and  
  stock options exercised                        --        526        --        --             --        --        --       526
                                          
Adjustment of securities available for sale 
  to market, net of tax                          --         --        --        --            506        --        --       506
                                          
Cash dividends declared                          --         --    (3,847)       --             --        --        --    (3,847)

Amortization of award of ESOP stock              --         --        --        --             --       243        --       243
                                          
Amortization of award of BRP stock               --         --        --        --             --        --       238       238
                                          
Balance at June 30, 1997                    $   157    181,196   228,716   (74,800)         2,287    (6,036)      (14)  331,506

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.
</TABLE>

<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<CAPTION>
                                                                                         Six Months Ended
                                                                                               June 30,
                                                                                         1997            1996
<S>                                                                                       <C>             <C>
                                                                                             (Unaudited)
Increase in cash and cash equivalents
Cash flows from operating activities:
Net income                                                                       $     18,758          15,546
Reconciliation of net income to net cash provided by operating activities:
    Depreciation and lease amortization                                                 1,566           1,290
    Goodwill amortization                                                               1,747           1,472
    Net amortization of premiums and accretion of discounts on securities                 499             685
    Amortization of award of ESOP and BRP stock                                           481             677
    Net gain on security transactions                                                    (255)             (5)
    Net gain on sale of real estate owned                                                (172)           (192)
    Origination of loans receivable for sale                                           (4,351)        (11,473)
    Proceeds from sale of loans receivable                                              8,863          16,831
    Provision for loan losses                                                           3,600           2,850
    Writedown of real estate owned                                                        170             364
    Net decrease (increase) in accrued interest receivable                             (1,874)            179
    Net decrease (increase) in other assets                                           (11,185)          5,751
    Net increase in accrued income taxes payable                                        5,576             388
    Net increase (decrease) in other liabilities and obligation under capital lease    (3,418)          9,299
Net cash provided by operating activities                                              20,005          43,662

Cash flows from investing activities:
Net cash used by acquisition activity                                                      --         (54,437)
Proceeds from the sale of securities available for sale                                    --          22,985
Proceeds from the maturity or call of securities available for sale                    94,491         112,181
Proceeds from the maturity or call of investment securities                            32,122          40,719
Proceeds from the partial recovery of Nationar investment                                 252              --   
Purchase of securities available for sale                                            (137,157)        (44,627)
Purchase of investment securities                                                     (15,374)        (25,179)
Purchase of loans receivable                                                          (91,134)        (58,608)
Net decrease (increase) in loans receivable                                            35,763         (10,530)
Redemption (purchase) of Federal Home Loan Bank stock                                  (4,495)          2,912
Proceeds from the sale of real estate owned                                             3,312           2,564
Capital expenditures                                                                   (3,041)           (817)
Net cash used by investing activities                                                 (85,261)        (12,837)
                                                                                    
Cash flows from financing activities:
Net decrease in deposits                                                              (26,615)        (12,481)
Net increase (decrease) in escrow accounts                                             (1,854)          1,290
Net increase (decrease) in short-term borrowed funds and repurchase agreements         70,581         (20,075)
Proceeds from long-term debt                                                               --          30,000
Repayment of long-term debt                                                           (10,000)             --
Proceeds from capital securities                                                       50,000              --
Purchase of treasury stock                                                             (4,909)        (15,097)
Dividends paid                                                                         (3,881)         (3,025)
Cash proceeds from the exercise of stock options                                          866             335
Net cash provided (used) by financing activities                                       74,188         (19,053)

Net increase in cash and cash equivalents                                               8,932          11,772
Cash and cash equivalents at beginning of period                                       68,883         105,002
Cash and cash equivalents at end of period                                       $     77,815         116,774

Supplemental disclosures of cash flow information
Cash paid during the period:
    Interest on deposits, escrows, short-term borrowed funds,  
        repurchase agreements and long-term debt                                 $     64,133          60,758
    Income taxes                                                                        6,407           8,569

Supplemental schedule of noncash investing and financing activities:
      Net reduction in loans resulting from transfers to real estate owned              2,600           3,226
      Net unrealized loss on securities available for sale                                734          (9,670)
      Tax benefits related to vested BRP stock and stock options                          526             400
      Acquisition activity:
         Fair value of noncash assets acquired                                             --         408,693
         Fair value of liabilities assumed                                                 --         354,256

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.

</TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1.  Presentation of Financial Information

The accompanying unaudited consolidated interim financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. The
accompanying unaudited consolidated interim financial statements
should be read in conjunction with the financial statements and
the related management's discussion and analysis of financial
condition and results of operations filed with the 1996 Form
10-K of ALBANK Financial Corporation and subsidiary. In the
opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for
the six months ended June 30, 1997, are not necessarily
indicative of results that may be expected for the entire year
ending December 31, 1997.

The unaudited consolidated interim financial statements include
the accounts of ALBANK Financial Corporation (the "Holding
Company") and its two wholly owned subsidiaries (collectively
with the Holding Company, the "Company"), ALBANK, FSB and
subsidiaries (the "Bank") and ALBANK Capital Trust I (the
"Trust"). The accounting and reporting policies of the Company
conform in all material respects to generally accepted
accounting principles and to general practice within the savings
bank industry. Certain prior period amounts have been
reclassified to conform to the current period classifications.   

NOTE 2.  Pending Acquisition

On January 24, 1997, the Bank entered into a purchase agreement
with KeyBank National Association (New York) relating to deposit
liabilities of approximately $530 million and 35 New York State
banking offices currently operated by KeyBank (the "KeyBank
Transaction"). The offices are located in northern New York, the
greater Hudson Valley, and the Binghamton area. The Company
intends to establish as a new subsidiary a New York chartered
commercial bank, ALBANK Commercial, which will act under the
agreement to pay a deposit premium of approximately 7% and will
have the option to purchase approximately $53 million in small
business, consumer and mortgage loans. The KeyBank Transaction,
the establishment of ALBANK Commercial and the related
registration of the Company as a bank holding company are
subject to approval by bank regulatory authorities. Following
receipt of those approvals, the two companies currently
anticipate closing the transaction in the Fall of 1997.

NOTE 3. Corporation-Obligated Mandatorily Redeemable Capital
 Securities of Subsidiary Trust

On June 6, 1997, the Company, through a subsidiary trust formed
for the sole purpose of issuing capital securities, issued
$50,000,000 in 9.27% Capital Securities due June 6, 2027.
Proceeds of this issue will be used for general corporate
purposes. In October 1996, the Federal Reserve Board approved
Tier I capital treatment for this type of capital security which
provides the Company with a method of funding Tier I capital
that is tax deductible. The proceeds to the Trust are lent to
the Holding Company as long-term junior subordinated debentures
that are subordinated to all Holding Company debt but senior to
all common stock. The securities may be called at a premium, in
whole or in part, on or after June 6, 2007, and provisions are
included which could provide for the temporary deferral of
interest payments for up to five years under certain conditions.

NOTE 4. Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities

In June 1996, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." This Statement provides
accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that
focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured
borrowings, and supersedes the accounting for financial assets
under SFAS No. 122. The Company adopted SFAS No. 125 on January
1, 1997. Certain aspects of SFAS No. 125 were amended by SFAS
No. 127, "Deferral of the Effective Date of Certain Provisions
of SFAS Statement No. 125." The adoption of SFAS No. 125 did not
have a material impact on the Company's unaudited consolidated
interim financial statements.

NOTE 5. Other Accounting Matters

In February 1997, the FASB issued SFAS No. 128, "Earnings Per
Share". SFAS No. 128 establishes standards for computing and
presenting earnings per share ("EPS") and applies to entities
with publicly held common stock or potential common stock. SFAS
No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. All
prior period EPS will be restated after the effective date of
this statement. Management does not believe the adoption of SFAS
No. 128 will have a material impact on its financial condition
or results of operations.

In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure" which establishes standards
for disclosure about a company's capital structure. In
accordance with SFAS No. 129, companies will be required to
provide in the financial statements a complete description of
all aspects of their capital structure, including call and put
features, redemption requirements and conversion options. The
disclosures required by SFAS No. 129 are for financial
statements for periods ending after December 15, 1997.
Management anticipates providing the required information in the
1997 annual financial statements.

In June 1997, the FASB issued SFAS No. 130, " Reporting
Comprehensive Income". SFAS No. 130 establishes standards for
reporting comprehensive income. SFAS No. 130 states that
comprehensive income includes the reported net income of a
company adjusted for items that are currently accounted for as
direct entries to equity, such as the mark to market adjustment
on securities available for sale, foreign currency items and
minimum pension liability adjustments. This statement is
effective for fiscal years beginning after December 15, 1997.
Management anticipates developing the required information for
inclusion in the 1998 annual consolidated financial statements.

In June 1997, the FASB issued SFAS No, 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131
establishes standards for reporting by public companies about
operating segments of their business. SFAS No. 131 also
establishes standards for related disclosures about products and
services, geographic areas and major customers. This statement
is effective for periods beginning after December 15, 1997.
Management anticipates developing the required information for
inclusion in the 1998 annual consolidated financial statements.

ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS 
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

ALBANK Financial Corporation (the "Holding Company", "Company",
"ALBANK") completed its initial public offering on April 1,
1992. To date, the principal operations of ALBANK Financial
Corporation have been those of ALBANK, FSB and subsidiaries (the
"Bank").

The Bank operates as a thrift institution with its principal
business being the solicitation of deposits from the general
public; these deposits, together with funds generated from
operations, are invested primarily in single-family, owner
occupied adjustable rate mortgage loans. The Bank is a member of
the Federal Home Loan Bank of New York ("FHLB") and is subject
to certain regulations of the Board of Governors of the Federal
Reserve System with respect to reserves required to be
maintained against deposits and certain other matters.
Approximately 66% of the Bank's deposit accounts as of June 30,
1997, were insured by the Savings Association Insurance Fund
("SAIF"), as administered by the FDIC, and approximately
34% were treated as insured by the Bank Insurance Fund
("BIF"), as administered by the FDIC, in each case, up to
the maximum amount permitted by law. The Bank is subject to
regulation by the Office of Thrift Supervision ("OTS"). The Bank
conducts its operations through a network of 73 branch offices
in upstate New York, western Massachusetts and Vermont. The
Bank's principal operating subsidiary is Alvest Financial
Services, Inc. This wholly owned company, operating through the
Bank's branch network, offers a full range of investment and
insurance products and services.

The Bank's results of operations are dependent primarily on net
interest income, which is the difference between the interest
income earned on its loan portfolio, investment securities and
securities available for sale portfolios and other earning
assets, and its cost of funds, consisting of the interest paid
on its deposits and borrowings. The Bank's operating results are
also impacted by provisions for loan losses, and to a lesser
extent, by gains and losses on the sale of its securities
available for sale portfolio, the operations of its brokerage
and insurance subsidiary and other noninterest income. The
Bank's operating expenses principally consist of employee
compensation and benefits, federal deposit insurance premiums,
occupancy expense and other general and administrative expenses.
The Bank's results of operations are also significantly affected
by general economic and competitive conditions, particularly
changes in market interest rates, government policies and
actions of the regulatory authorities.

Under a consent decree filed in the U.S. District Court for the
Northern District of New York on August 13, 1997, entered into
by the U.S. Department of Justice, the Company and the Bank
concerning allegations of fair lending violations relating to
certain of the Bank's arrangements with unaffiliated
"correspondent" mortgage bankers or brokers from whom the Bank
purchased loans originated in Connecticut and in Westchester
County, New York, the Bank agreed to make available $35 million of
home mortgage loans at 1.5% below market rates to homebuyers in the
Connecticut cities of Bridgeport, Hartford, New Britain, New Haven,
Norwalk, Stamford and Waterbury over the next five years. In
Westchester County below I-287, the Bank will make available $20 
million in similarly discounted loans over the next two years. The
Bank will also contribute $350,000 over the next five years
to support home buying counseling and educational programs provided
by local organizations in these areas, and will spend another 
$350,000, primarily in the form of services, for the Bank's
homebuyer education programs. 

In agreeing to the Consent Decree, the Bank denied any and all
allegations that it intentionally violated fair lending laws. In
particular, the Bank believes that the loan origination criteria
that it set for the mortgage bankers from whom it purchased
loans in Connecticut and Westchester County were based primarily
on credit quality considerations and, initially, the desire to
stay within markets similar to the Bank's upstate New York
lending area. The Bank agreed to accept the conditions of the
Consent Decree because it believed that the cost of fighting
allegations in the courts would have been significant, and that
protracted litigation would have hampered the Bank's strategic
growth plans.

Liquidity and Capital Resources

The Company's primary sources of funds are deposits and
principal and interest payments on its loan and securities
portfolios. While maturities and scheduled amortization of loans
and securities are, in general, a predictable source of funds,
deposit flows and loan prepayments are greatly influenced by
general interest rates, economic conditions and competition.

The Company's most liquid assets are cash and cash equivalents
and highly liquid short-term investments. The levels of these
assets are dependent on the Company's operating, financing and
investing activities during any given period. Cash and cash
equivalents at June 30, 1997, were $77.8 million, an increase of
$8.9 million (13%) from $68.9 million at December 31, 1996.

The Bank is required to maintain minimum levels of liquid assets
as defined by OTS Regulations. This requirement, which may vary
at the direction of the OTS depending on economic conditions and
deposit flows, is based upon a percentage of deposits and
short-term borrowings. The required ratio of liquid assets to
deposits and short-term borrowings is currently 5%. The Bank's
liquidity ratio at June 30, 1997, was 23.16%.

At the time of its conversion to stock form, the Bank was
required to establish a liquidation account in an amount equal
to its regulatory net worth as of December 31, 1991. The amount
of this liquidation account reduces to the extent that eligible
depositors' accounts are reduced. In the unlikely event of a
complete liquidation (and only in such event), each eligible
depositor would be entitled to receive a distribution from the
liquidation account before any liquidation distribution could be
made to the common stockholders of the Company.

At June 30, 1997, the Bank's capital exceeded each of the
capital requirements of the OTS. At June 30, 1997, the Bank's
tangible and core capital levels were both $256.3 million (7.23%
of total adjusted assets) and its risk-based capital level was
$282.1 million (12.80% of total risk-weighted assets). The
minimum regulatory capital ratio requirements are 1.5% for
tangible capital, 3.0% for core capital and 8.0% for risk-based
capital.

Financial Condition

On June 30, 1997, total assets equaled $3.602 billion, an
increase of $96.1 million (3%) from the $3.506 billion
outstanding at year-end 1996. The increase in total assets was
generally the combined result of the June 6, 1997, issuance of
$50.0 million of Capital Securities (See Note 3 to Unaudited
Consolidated Interim Financial Statements) and an increased
level of net borrowings. Securities available for sale of $660.8
million at June 30, 1997, increased $42.9 million (7%) from
year-end 1996 as purchases of $137.6 million exceeded proceeds
from maturities, payments and calls of $94.7 million. 
Investment securities declined $16.7 million (15%) and totaled
$92.9 million at June 30, 1997, as proceeds of $32.1 million
exceeded additions to the portfolio of $15.4 million. Loans
receivable of $2.613 billion at June 30, 1997, increased $46.5
million (2%) from year-end 1996 as mortgage and other loan
originations of $219.7 million and $37.0 million, respectively,
outpaced principal paydowns in each portfolio. Stock in the
Federal Home Loan Bank of $21.4 million increased $4.5 million
(27%) due to a purchase of stock during the first quarter of
1997 in order to maintain required regulatory levels. Other
assets of $38.3 million increased $10.9 million (40%) primarily
due to a $10.3 million receivable established for the maturity
of an investment on June 30, 1997. The $10.3 million and related
interest was received on the next business day. Total
liabilities increased $33.7 million (1%) and equaled $3.221
billion at June 30, 1997. Total deposits of $2.987 billion
declined $26.6 million (1%) as an increase of $4.4 million (1%)
in interest-bearing transaction accounts was more than offset by
declines in savings accounts, time accounts, and noninterest
checking accounts of $23.4 million (3%), $5.2 million and $2.4
million (2%), respectively. Borrowings increased $60.6 million
(84%) to total $133.0 million at June 30, 1997. Such increases
were used to fund additional investments in securities available
for sale along with increases in net loans outstanding. Accrued
income taxes payable increased $5.1 million (128%) to total $9.0
million at June 30, 1997, due mainly to the timing of the
required federal and state estimated income tax payments.

Stockholders' equity of $331.5 million increased $12.4 million
(4%) from $319.1 million at year-end 1996. Increases included
net income of $18.8 million, stock option exercises of $0.9
million and net unrealized appreciation in the securities
available for sale portfolio of $0.5 million since December 31,
1996. Other increases were the result of amortization and tax
benefits related to ESOP and BRP stock of $0.2 million and $0.7
million, respectively. Offsetting these increases were purchases
of treasury stock amounting to $4.9 million and cash dividends
declared during the first half of 1997 of $3.8 million.

Book value per common share increased to $25.85 per share at
June 30, 1997, from $24.72 per share at December 31, 1996. The
increase is a combined result of an increase in stockholders'
equity of $12.4 million (4%) to $331.5 million at June 30, 1997,
and a reduction in shares outstanding as additional stock was
purchased under the Company's ongoing repurchase program. At
June 30, 1997, the Holding Company held 2,872,644 shares of its
common stock as treasury stock compared with 2,786,737 at
year-end 1996. During the first half of 1997 the Holding Company
acquired 150,468 shares pursuant to its repurchase program at a
cost of $4.9 million and distributed 64,561 shares to fulfill
stock option exercises. At June 30, 1997, the ratio of equity to
assets was 9.20%, which compared with 9.10% at December 31, 1996.

Nonperforming assets decreased $0.8 million (2%) to total $33.0
million at June 30, 1997, compared with $33.8 million as of
December 31, 1996. Nonperforming loans declined $0.2 million
(1%) from year-end 1996 and totaled $29.7 million at June 30,
1997. The reduction in nonperforming loans reflects mainly a
decline of $3.2 million (30%) in accruing loans 90 days or more
delinquent, offset by an increase of $3.0 million (16%) in
nonaccrual loans. The ratio of nonperforming assets to total
assets at June 30, 1997, was 0.91% compared with 0.96% at
December 31, 1996. The ratio of nonperforming loans to loans
receivable was 1.13% at June 30, 1997, compared with 1.16% at
December 31, 1996.

Comparisons of Operating Results for the Three and Six Months
Ended June 30, 1997 and 1996

The analyses of net interest income that are shown in the
following tables are an integral part of the discussion of the
results of operations for three and six months ended June 30,
1997, compared with the corresponding period of the prior year.

Analysis of Changes in Net Interest Income

The tables below present the extent to which changes in interest
rates and changes in the volume of interest-earning assets and
interest-bearing liabilities have affected the Company's
interest income and interest expense during the periods
indicated. Information is provided in each category with respect
to (i) changes attributable to changes in volume (changes in
volume multiplied by prior rate), (ii) changes attributable to
changes in rate (changes in rate multiplied by prior volume),
and (iii) the net change. The changes attributable to the
combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due
to rate.


<TABLE>
<CAPTION>
                                            Three months ended June 30, 1997
                                                               compared with
                                            Three months ended June 30, 1996
                                                          Increase (Decrease)
                                                          Due to 
                                        Volume           Rate            Net
<S>                                        <C>            <C>            <C>
Interest Income                                (In thousands) (Unaudited)
Mortgage loans, net (1)              $   4,857           (286)         4,571
Other loans, net (1)                     2,238           (202)         2,036
Securities available for sale             (642)            84           (558)
Investment securities                     (655)           101           (554)
Federal funds sold                        (334)            26           (308)
Securities purchased under
  agreement to resell                     (732)            19           (713)
Stock in Federal Home Loan Bank             69            (14)            55
Total                                    4,801           (272)         4,529
                                                                                 
Interest Expense                                                                  
Deposits:                                                                         
  Savings accounts (2)                    (359)           (45)          (404)
  Transaction accounts (3)                 253            231            484
  Certificate accounts                   1,242             76          1,318
Short-term borrowed funds and
  repurchase agreements                  1,046              9          1,055
Long-term debt                            (136)             4           (132)
Total                                    2,046            275          2,321
                                                                                  
Change in net interest income        $   2,755           (547)         2,208



                                              Six months ended June 30, 1997
                                                               compared with
                                              Six months ended June 30, 1996
                                                          Increase (Decrease)
                                                          Due to
                                        Volume          Rate             Net
<S>                                        <C>           <C>             <C>
Interest Income                                (In thousands) (Unaudited)
Mortgage loans, net (1)            $   10,052         (1,146)          8,906
Other loans, net (1)                    4,285           (525)          3,760
Securities available for sale          (2,417)           (27)         (2,444)
Investment securities                  (1,260)           208          (1,052)
Federal funds sold                       (484)            18            (466)
Securities purchased under
  agreement to resell                  (1,357)           (94)         (1,451)
Stock in Federal Home Loan Bank           108             10             118
Total                                   8,927         (1,556)          7,371
                                                                                  
Interest Expense                                                                  
Deposits:
  Savings accounts (2)                   (627)          (152)           (779)
  Transaction accounts (3)                560            490           1,050
  Certificate accounts                  2,239           (976)          1,263
Short-term borrowed funds and
  repurchase agreements                 1,605             18           1,623
Long-term debt                           (144)             6            (138)
Total                                   3,633           (614)          3,019
                                                                                  
Change in net interest income       $   5,294           (942)          4,352

(1) Net of unearned discounts, premiums and related deferred loan fees/costs, where applicable.
(2) Includes passbook, statement and interest-bearing escrow accounts.
(3) Includes NOW, Super NOW, money market and interest-bearing demand deposit accounts.

</TABLE>
Average Balance Sheets, Interest Rates and Interest Differential

The average balance sheets that follow reflect the average yield
on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived by dividing
annualized income or expense by the average balance of assets or
liabilities, respectively, for the periods shown. The yields and
costs include fees which are considered adjustments to yields. 

<TABLE>
<CAPTION>
                                                              Three Months Ended June 30,
                                                                   1997                                1996
                                                                Average                             Average
                                             Average              Yield/       Average                Yield/
                                             Balance   Interest    Cost        Balance   Interest      Cost
<S>                                              <C>        <C>     <C>            <C>        <C>       <C>
                                                          (Dollars in thousands) (Unaudited)
Assets
Interest-earning assets:                         
    Mortgage loans, net (1)              $ 2,084,423    42,072     8.08 %  $ 1,843,887     37,501      8.14 %
    Other loans, net (1)                     498,843    11,427     9.18        401,327      9,391      9.38
    Securities available for sale            638,717    10,045     6.29        679,611     10,603      6.24
    Investment securities                    103,817     1,728     6.66        143,413      2,282      6.37
    Federal funds sold                           901        13     5.30         24,198        321      5.32
    Securities purchased under
      agreement to resell                        440         6     5.70         50,000        719      5.79
    Stock in Federal Home Loan Bank           21,408       327     6.11         16,913        272      6.47
Total interest-earning assets              3,348,549    65,618     7.84      3,159,349     61,089      7.74

Noninterest-earning assets                   181,337                            170,425               
Total assets                             $ 3,529,886                        $ 3,329,774

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
    Deposits:
        Savings accounts (2)              $  825,982    5,976     2.90 %    $   875,610      6,380     2.93 %
        Transaction accounts (3)             503,609    3,365     2.68          464,423      2,881     2.49
        Certificate accounts               1,585,214   21,458     5.43        1,493,433     20,140     5.42
    Short-term borrowed funds and
      repurchase agreements                   78,653    1,095     5.55            3,976         40     4.30
    Long-term debt                            20,061      274     5.47           30,000        406     5.44
Total interest-bearing liabilities         3,013,519   32,168     4.28        2,867,442     29,847     4.19
Noninterest-bearing demand deposits          101,287                             77,275
Noninterest-bearing liabilities               75,388                             64,724               
Total liabilities                          3,190,194                          3,009,441

Corporation-obligated mandatorily redeemable
  capital securities of subsidiary trust      13,736                                 --  
Stockholders' equity                         325,956                            320,513
Total liabilities and 
  stockholders' equity                   $ 3,529,886                      $ 3,329,954

Net interest income and
  net interest spread                                $ 33,450     3.56 %                  $ 31,242     3.55 %

Net interest-earning assets and
  net interest margin                    $   335,030              3.99 %  $   291,907                   3.94 %

Interest-earning assets to
  interest-bearing liabilities                  1.11 x                           1.10 x

Average balances are derived principally from average daily balances and include nonaccruing loans. Tax-exempt securities 
income has not been calculated on a tax equivalent basis. Interest on securities available for sale includes dividends
received on equity securities.

(1) Net of unearned discounts, premiums and related deferred loan fees/costs, where applicable.
(2) Includes passbook, statement and interest-bearing escrow accounts.
(3) Includes NOW, Super NOW, money market and interest-bearing demand deposit accounts.
</TABLE>


<TABLE>
<CAPTION>
                                                            Six Months Ended June 30,
                                                                    1997                             1996
                                                                 Average                          Average
                                             Average               Yield/       Average             Yield/
                                             Balance  Interest      Cost        Balance  Interest    Cost
<S>                                              <C>       <C>       <C>            <C>       <C>     <C> 
                                                                    (Dollars in thousands) (Unaudited)
Assets
Interest-earning assets:                         
    Mortgage loans, net (1)              $ 2,086,737    84,113     8.07 %   $ 1,837,727    75,207    8.19 %
    Other loans, net (1)                     489,668    22,283     9.16         395,800    18,523    9.38
    Securities available for sale            626,989    19,513     6.22         704,659    21,957    6.23
    Investment securities                    105,638     3,490     6.61         144,054     4,542    6.31
    Federal funds sold                           508        14     5.33          18,102       480    5.33
    Securities purchased under
      agreement to resell                        221         6     5.70          50,000     1,457    5.86
    Stock in Federal Home Loan Bank           20,017       629     6.28          16,593       511    6.20
Total interest-earning assets              3,329,778   130,048     7.82       3,166,935   122,677    7.75

Noninterest-earning assets                   181,692                            169,276               
Total assets                             $ 3,511,470                        $ 3,336,211

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
    Deposits:
        Savings accounts (2)             $   828,460    11,938    2.91 %    $   871,845    12,717    2.93 %
        Transaction accounts (3)             501,524     6,745    2.71          458,335     5,695    2.50
        Certificate accounts               1,578,992    42,344    5.41        1,496,103    41,081    5.52
    Short-term borrowed funds and
      repurchase agreements                   71,731     1,959    5.48           12,990       336    5.21
    Long-term debt                            21,221       576    5.47           26,539       714    5.41
Total interest-bearing liabilities         3,001,928    63,562    4.27        2,865,812    60,543    4.25
Noninterest-bearing demand deposits          101,360                             75,637
Noninterest-bearing liabilities               77,213                             73,226               
Total liabilities                          3,180,501                          3,014,675

Corporation-obligated mandatorily redeemable
  capital securities of subsidiary trust       6,906                                 --  
Stockholders' equity                         324,063                            321,536
Total liabilities and 
  stockholders' equity                   $ 3,511,470                        $ 3,336,211

Net interest income and
  net interest spread                                $  66,486    3.55 %                $  62,134    3.50 %

Net interest-earning assets and
  net interest margin                    $   327,850              3.97 %    $   301,123              3.91 %

Interest-earning assets to
  interest-bearing liabilities                  1.11 x                             1.11 x


Average balances are derived principally from average daily balances and include nonaccruing loans. Tax-exempt securities 
income has not been calculated on a tax equivalent basis. Interest on securities available for sale includes dividends
received on equity securities.

(1) Net of unearned discounts, premiums and related deferred loan fees/costs, where applicable.
(2) Includes passbook, statement and interest-bearing escrow accounts.
(3) Includes NOW, Super NOW, money market and interest-bearing demand deposit accounts.

</TABLE>
Net Income and Interest Analysis

Three Months Ended June 30, 1997 compared with 1996

Net income for the quarter ended June 30, 1997, was $9.4
million, an increase of $1.6 million (21%) from the comparable
quarter last year. Primary and fully diluted earnings per share
were $0.68 for the second quarter of 1997, up from $0.54 per
share a year ago, representing a 26% increase. The 1997 results
of operations include the impact of the September 1996
acquisition of approximately $108 million in loans and deposits
from the Green Mountain Bank of Rutland, Vermont ("Green
Mountain"), a wholly owned subsidiary of Arrow Financial
Corporation. Net interest income increased $2.2 million (7%) and
totaled $33.5 million for the second quarter of 1997.
Noninterest income increased $0.4 million (13%) and totaled $3.5
million, while noninterest expense increased $0.5 million (2%)
and totaled $20.2 million. Return on average equity and return
on average assets for the second quarter of 1997 were 11.62% and
1.07%, respectively. For the comparable 1996 period, return on
average equity was 9.83%, while return on average assets was
0.95%.

Core net income excludes income or expense amounts (net of
income taxes) included in net income of a nonrecurring nature
which detract from comparative analysis. For the second quarter
of 1997 core net income totaled $9.3 million. Excluded from 1997
core net income was a partial recovery of the 1995 Nationar
investment write-off which totaled $0.2 million after tax ($0.3
million before tax) and amounted to $0.01 per share. For the
second quarter of 1996 there were no such adjustments to net
income necessary to determine core net income. Cash net income
is defined as core net income plus amortization of goodwill and
costs associated with certain stock-related employee benefit
plans. Cash net income for the quarter ended June 30, 1997, was
$10.5 million or $0.75 per share on a fully diluted basis and
$0.76 per share on a primary basis. Cash net income for the
quarter ended June 30, 1996, was $9.1 million or $0.63 per share
on a both primary and fully diluted basis. Cash return on
average tangible equity was 14.81% compared with 12.95% for the
same period last year; cash return on average assets rose to
1.19% from 1.10% in 1996.

Interest income for the three months ended June 30, 1997,
totaled $65.6 million, an increase of $4.5 million (7%) from
1996's second quarter that was a combined result of a $189.2
million (6%) rise in average interest-earning assets to $3.349
billion and a 10 basis point (1%) increase in the average rate
earned to 7.84%. Interest income on mortgage loans increased
$4.6 million (12%) and totaled $42.1 million as a 6 basis point
(1%) decline in the average rate earned was more than offset by
a $240.5 million (13%) rise in the average balance. The average
balance increased primarily as a result of approximately $108
million in balances acquired from Green Mountain in September
1996. Similarly, interest income on other loans was $11.4
million, an increase of $2.0 million (22%), as the average rate
earned declined 20 basis points (2%) and the average balance
increased $97.5 million (24%). The average balance of the
Company's loans increased even though loan originations totaled
$148.5 million in the second quarter of 1997 compared with
$168.4 million in the second quarter of 1996, a decrease of
$19.9 million (12%). Offsetting the increased income on loans
discussed previously was a decline in interest income on
securities available for sale, which totaled $10.0 million, 
of $0.6 million (5%). This decline occurred as a decrease
in the average amount invested of $40.9 million (6%) was
partially offset by an increase in the average rate earned
of 5 basis points (1%). Interest income on investment securities
of $1.7 million was $0.6 million (24%) lower than the comparable
1996 period as a decline in the average balance invested of
$39.6 million (28%) more than offset an increase in the average
rate earned of 29 basis points (5%). Declines in interest income
on federal funds sold of $0.3 million (96%) and securities
purchased under agreement to resell of $0.7 million (99%) were
the result of similar percentage declines in the average amounts
invested.

Interest expense for the quarter ended June 30, 1997, amounted
to $32.2 million, $2.1 million (7%) more than the corresponding
quarter of last year as the combined result of a $156.0 million
(5%) increase in average interest-bearing liabilities to $3.014
billion and a 9 basis point (2%) increase in the average rate
paid to 4.28%. The increase in average interest-bearing deposits
of $81.3 million (3%) to $2.915 billion was attributable to the
assumption of approximately $108 million in deposits in
conjunction with the Green Mountain acquisition. Declines in
savings account average balances of $49.6 million (6%) and
average rate paid of 3 basis points (1%) resulted in a decrease
of $0.4 million (6%) in interest expense compared with the
second quarter of 1996. Transaction account average balances
grew $39.2 million (8%) and rates paid increased by 19 basis
points (8%) resulting in an increase in related interest expense
of $0.5 million (17%) to $3.4 million. Interest expense on
certificate accounts increased $1.3 million (7%) and totaled
$21.5 million as the combined result of a $91.8 million (6%)
increase in average balance and a 1 basis point increase in the
average rate paid. Interest expense on short-term borrowings
totaled $1.1 million as a result of a $74.7 million increase
to $78.7 million in average balance coupled with a 125 basis
point (29%) increase in the average rate paid. The percentage
increase in the average rate paid on short-term borrowings was
due to changes in the composition of various debt instruments
outstanding during the respective quarterly periods. Interest
expense on long-term debt was $0.3 million, a decrease of $0.1
million (33%) that resulted from a $9.9 million (33%) decline
in the average balance and a 3 basis point (1%) increase in
the average rate paid.

Net interest income for the three months ended June 30, 1997,
totaled $33.5 million, $2.2 million (7%) greater than the $31.2
million reported for the comparable quarter a year ago. The
increase in net interest income occurred as a result of a rise
of $189.2 million (6%) in interest-earning assets which exceeded
an increase of $156.0 million (5%) in interest-bearing
liabilities, coupled with increases in net interest spread and
margin. The net interest spread of 3.56% and the net interest
margin of 3.99% for the quarter ended June 30, 1997, were 1 and
5 basis points, respectively, higher than the results recorded
in the comparable quarter a year ago.

Six Months Ended June 30, 1997 compared with 1996

Net income of $18.8 million for first half of 1997, represented
an increase of $3.2 million (21%) from the comparable 1996
period. Primary and fully diluted earnings per share were $1.35
for the six months ended June 30, 1997, up 26% from $1.07 per
share reported in 1996. The 1997 results of operations include
the impact of the September 1996 acquisition of Green Mountain.
Net interest income increased $4.4 million (7%) and totaled
$66.5 million for the first half of 1997. Noninterest income of 
$6.8 million increased $0.7 million (11%) compared with 1996.
Noninterest expense increased $0.6 million (2%) and totaled
$40.0 million for the first half of 1997. Return on average
equity and return on average assets for the first six months of
1997 were 11.67% and 1.08%, respectively compared with 9.72% and
0.94% in 1996.

Core net income for the first half of 1997 excludes the $0.2
million after tax, partial recovery of the 1995 Nationar
write-off. For the first half of 1997, core net income was $18.6
million or $1.34 per share on a primary and fully diluted basis,
compared with $15.5 million or $1.07 per share for 1996. Cash
net income for the six months ended June 30, 1997, was $21.2
million compared with $18.1 million for 1996. Earnings per share
based on cash net income were $1.52 on a fully diluted basis and
$1.53 on a primary basis for the first half of 1997 compared
with $1.25 on both a primary and fully diluted basis for 1996.
Cash return on average tangible equity was 15.20% compared with
12.83% for the same period last year; cash return on average
assets rose to 1.22% from 1.09% in 1996.

Interest income for the first half of 1997 equaled $130.0
million, $7.4 million (6%) higher than the corresponding period
of 1996. The increase resulted as average interest-earning
assets rose $162.8 million (5%), primarily as a result of
approximately $108 million in loans received in the Green
Mountain acquisition, and totaled $3.330 billion for the six
months ended June 30, 1997, while the average rate earned
increased 7 basis points (1%) to 7.82%. Interest income on
mortgage loans increased $8.9 million (12%) and totaled $84.1
million as a $249.0 million (14%) increase in average amount
invested was partially reduced by a 12 basis point (1%) decline
in the average rate earned. An increase in the average balance
of other loans of $93.9 million (24%) offset with a 22 basis
point (2%) decline in the average rate earned resulted in an
increase in interest income of $3.8 million (20%). Average loan
balances outstanding continued to expand despite a $6.8 million
(3%) decrease in loan originations which totaled $256.7 million
in the first half of 1997 compared with $263.5 million generated
in the comparable period of 1996. Interest income on securities
available for sale declined $2.4 million (11%) as a result of
decreases in the average amount invested and average rate earned
of $77.7 million (11%) and 1 basis point, respectively. Interest
income on investment securities dropped $1.1 million (23%) as a
decline in the average amount invested of $38.4 million (27%)
was partially offset by an increase in the average rate paid of
30 basis points (5%). The average amount invested in federal
funds sold declined $17.6 million resulting in a corresponding
percentage decline in related interest income. The maturity of a
$50.0 million repurchase agreement which was outstanding
throughout the first half of 1996 resulted in a decline in
related interest income of $1.5 million.

Interest expense for the first half of 1997 was $63.6 million,
an increase of $3.2 million (5%) from 1996. The increase was the
combined result of increases in average balance and average rate
paid of $141.4 million (5%) and 2 basis points (1%),
respectively. Interest expense on savings accounts declined $0.8
million (6%) as a decline in the average  balance of $43.4
million (5%) combined with a 2 basis point (1%) drop in the
average rate paid. A $1.1 million (18%) increase in interest
expense on transaction accounts resulted from a $43.2 million
(9%) increase in average balance and a 21 basis point (8%)
increase in the average rate paid. The average balance of
certificate accounts increased $82.9 million (6%), while the
average rate paid declined 11 basis points (2%) resulting in a
$1.3 million (3%) increase in related interest expense. Interest
expense on short-term borrowed funds increased  $1.6 million
(483%) as an increase in average balance of $58.7 million (452%)
combined with a 27 basis point (5%) increase in the average rate
paid.

Net interest income for the first half of 1997 increased $4.4
million (7%) and equaled $66.5 million. The increase in net
interest income arose as a widening net interest spread and
margin of 5 basis points (1%) and 6 basis points (2%),
respectively, combined with an increase in net average
interest-earning assets of $26.7 million (9%). 

Provision for Loan Losses

The provision for loan losses amounted to $1.8 million and $3.6
million for the quarter and six months ended June 30, 1997,
respectively, compared with $1.4 million  and $2.9 million a
year ago. The increases are primarily a function of the
increased outstanding balance of loans receivable. The Bank
utilizes the provision for loan losses to maintain an allowance
for loan losses that it deems appropriate to provide for known
and inherent risks in its loan portfolio. In determining the
adequacy of its allowance for loan losses, management takes into
account the current status of the Bank's loan portfolio and
changes in appraised values of collateral as well as general
economic conditions. The Bank's allowance for loan losses
totaled $26.0 million (0.99% of loans receivable and 87.54% of
nonperforming loans) at June 30, 1997, compared with $24.1
million (0.94% of loans receivable and 80.88% of nonperforming
loans) at December 31, 1996. The increase in the allowance
during the first half of 1997 was the net result of a provision
for loan losses of $3.6 million reduced by net chargeoffs of
$1.7 million.

Noninterest Income

Noninterest income totaled $3.5 million and $6.8 million for the
three and six months ended June 30, 1997, respectively,
increases of $0.4 (13%) and $0.7 (11%) from the comparable
periods last year. Service charges on deposit accounts which
totaled $1.6 million for the quarter and $3.1 million for the
six months ended June 30, 1997, increased $0.2 million (18%) and
$0.4 million (16%) over the comparable 1996 periods,
respectively. The increases are the combined result of increased
fees charged by the Bank for certain deposit services such as
handling returned checks as well as the higher level of deposit
accounts related primarily to the expansion of the Bank's Marble
Division in Vermont to include branches acquired from Green
Mountain. Net security transactions of $0.3 million for the
quarter and six months ended June 30, 1997, resulted from an
April 1997 partial recovery of the Nationar investment that was
written off in 1995. Brokerage and insurance commissions
increased $0.1 million (13%) for the six month period and were
essentially flat for the three month period ended June 30, 1997,
as compared with the comparable 1996 period. 

Noninterest Expense

Noninterest expense increased $0.5 million (2%) to $20.2 million
for the three months ended June 30, 1997, compared with $19.7
million for the same period in 1996. For the first half of 1997
noninterest expense of $40.0 million compared with $39.4 million
in 1996, an increase of $0.6 million (2%). Compensation and
employee benefits totaled $9.9 million for the quarter and $19.9
million for the six months ended June 30, 1997, increases of
$0.4 million (4%) and $0.9 million (5%), respectively, from
1996. A net increase in salaries resulted from salaries
incurred to staff branches acquired from Green Mountain, other
increases in staff necessary to support expanded services, and
the effect of annual merit increases beginning in March. The net
increase in salaries expense was somewhat reduced by declines
in expenses incurred for temporary help for both the second
quarter and the first half of 1997 by $0.1 million (63%) and
$0.2 million (66%), respectively.  

Net occupancy expense for the second quarter of 1997 increased
$0.2 million (8%) to $2.4 million primarily as a combined result
of increased depreciation of branches acquired from Green
Mountain as well as rental expenses relating to the expanded
branch network. Similarly, for the first six months of 1997 net
occupancy expense increased $0.3 million (7%). Increased
furniture, fixtures and equipment expense of $0.4 million (31%) 
and $0.7 million (27%) for the three and six months ended June
30, 1997, is primarily the result of depreciation of equipment
used to assimilate branches acquired into the Bank's data
processing system.

FDIC deposit insurance premiums declined $0.8 million (69%) for
the three months ended June 30, 1997, and $1.6 million (69%) for
the six months ended June 30, 1997, compared with the previous
year. At June 30, 1997, approximately 34% of the Bank's
deposits, including all of the deposits acquired in the Green
Mountain acquisition, were insured by the BIF. The remainder of
the Bank's deposits were insured by the SAIF. In September 1996,
the Bank recognized as expense a $10.4 million assessment to
recapitalize the SAIF. As a result of the one-time special
assessment, the SAIF insurance rate was reduced to $0.065 per
$100 of deposit for 1997 from $0.230 per $100 for the same
period last year. BIF rates were $0.013 per $100 during the
first half of 1997 and were effectively zero for the first half
of 1996.

Professional, legal and other fees totaled $0.9 million for the
second quarter of 1997 and $1.7 million for the first half of
1997, increases of $0.2 million (26%) and $0.4 million (28%),
respectively. The increases were primarily related to legal fees.

Telephone, postage and printing expense declined slightly in the
second quarter and the first half of 1997, as compared to the
prior year and totaled $1.0 million and $2.2 million,
respectively. The Company was able to offset additional expenses
related to the operation of an expanded Marble Division with
managed cost reductions in this area.

The increases in goodwill amortization of $0.1 million (19%) for
the three months ended June 30, 1997 and $0.3 million (19%) for
the six months ended June 30, 1997, were related to the
amortization of goodwill resulting from the Green Mountain
acquisition.

Capital securities expense for 1997 totaled $0.3 million and is
related to the corporation-obligated mandatorily redeemable capital
securities of a subsidiary trust issued on June 6, 1997.

Other noninterest expense of $2.8 million for the three months
ended June 30, 1997, represented a decrease of $0.3 million (9%)
below prior year levels.  For the first half of 1997 other
noninterest expense declined $0.6 million (9%) and totaled $5.3
million. These declines occurred primarily as a result of
reductions of other real estate expense of $0.2 million (39%)
and $0.4 million (39%) for the three and six month periods,
respectively and a reduction of $0.1 million (44%) in insurance
premiums realized in the first half of 1997.

The ratios of noninterest expense, excluding capital securities
expense, to average assets were 2.26% and 2.28% on an annualized
basis for the three and six months ended June 30, 1997, compared
with 2.37% and 2.36% for the same periods last year. The ratios
of noninterest expense net of noninterest income, excluding net
securities transactions and capital securities expense, to average
assets were 1.89% and 1.91% on an annualized basis for the three
and six months ended June 30, 1997, respectively, compared with
2.00% for the comparable periods a year ago. The efficiency ratio
measures noninterest expense (excluding amortization of intangibles,
real estate owned related expense and capital securities expense)
as a percentage of net interest income plus noninterest income
(exclusive of net security transactions and real estate owned
related income). The efficiency ratios for the quarters ended
June 30, 1997 and 1996 were 51.11% and 53.94%, respectively.
While the efficiency ratios for the first half of 1997 and 1996
were 51.30% and 54.17%, respectively. Efficiency ratios for
thrift institutions in the $1-5 billion asset range, as reported
by SNL Securities, were 58.98% and 57.06% for the quarters ended
December 31, 1996 and March 31, 1997. The comparable ratios for
all thrifts in the above time periods were 60.63% and 58.96%,
respectively.

Income Tax Expense

Income tax expense for the three months ended June 30, 1997,
totaled $5.5 million, a $0.2 million (2%) increase over the same
period of the prior year. For the first half of 1997, income tax
expense was $10.9 million, an increase of $0.4 million (4%) from
the comparable 1996 period.  The increases were due to a rise in
income before income taxes largely mitigated by a decrease in
the effective tax rate. The Company's effective tax rates for
the second quarter and first half of 1997 were 36.9% and 36.7%,
respectively, compared with 40.6% and 40.2% in 1996. The lower
effective tax rate resulted from the combined effect of Federal
low income housing and historic preservation tax credits and
downward trends in effective state franchise tax rates.

Part II		OTHER INFORMATION

Item 1.	Legal Proceedings

		The Holding Company and the Bank are not engaged in any legal
					proceedings of a material nature at the present time.

Item 2.	Changes in Securities

		None.

Item 3.	Defaults upon Senior Securities

		None.

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

		The annual meeting of the shareholders of the Holding Company
was held on	May 21, 1997. Proxies were solicited with respect
to such meeting under	Regulation 14A of the Securities and
Exchange Act of 1934 pursuant to Proxy	materials dated April
12, 1997.

	(a) The election of three directors for a term of three years
each. There were no votes	in opposition to any of the
nominations.

				                                    				Number of    		Number of
							                                    	Affirmative  		Withheld
						                                    		Votes	       		Votes

			John E. Maloy, Sr.	                    		10,645,934	   	738,537
			Henry M. Elliot, Jr.	                 	 	10,630,823   		753,648
			Karen R. Hitchcock, Ph.D.	              	10,611,126	    773,345

		The term of office as a director of the following individuals
continued after the	May 21, 1997 meeting:

			Herbert G. Chorbajian
			William J. Barr
			Anthony P. Tartaglia, M.D.
			Susan J. Stabile, Esq.
			Francis L. McKone

	(b) The ratification of KPMG Peat Marwick LLP as independent
auditors of the	Company for the fiscal year ending December
31, 1997.

                                 					Number of  		Number of 		Number of
                                					 Affirmative		Negative 	 	Withheld
 			                                		Votes	     		Votes		    	Votes

                                 					11,207,050	 	109,481   		67,940

	(c) The stockholder proposal, opposed by the Board of
Directors, to recommend that	the Board of Directors
immediately take steps necessary to actively seek a sale or
merger of the Company on terms that will maximize share value
for stockholders. 

			                                 		Number of  		Number of 		Number of
			                                 		Affirmative		Negative	  	Withheld
			                                 		Votes	     		Votes	    		Votes

                                 					1,603,216  		7,220,444	 	438,926

Item 5.	Other Information

		None.

Item 6.	Exhibits and Reports on Form 8-K

	(a)	Exhibits

		The following exhibit is filed as part of this report:

		Regulation S-K Exhibit
		Reference Number

		11.1					Statement regarding Computation of
					    		Per Share Earnings

	(b)	Reports on Form 8-K

		None.

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.


							ALBANK Financial Corporation
								    (Registrant)


DATE:	  August 14, 1997			BY:	 /s/ Herbert G. Chorbajian
                        							Herbert G. Chorbajian 
						                        	Chairman of the Board,
					                        		President and Chief Executive Officer
					                        		(Duly Authorized Officer)


DATE:	  August 14, 1997			BY:  /s/  Richard J. Heller
	                      					  	Richard J. Heller 
					                        		Executive Vice President and  
                              	Chief Financial Officer
		                        					(Principal Financial Officer)



ALBANK FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q 
Exhibit Index
									

Regulation S-K Exhibit	                                       						Exhibit 
Reference Number       						                                      	Number     	



11		11.1	            Statement regarding Computation of
                				 Per Share Earnings		                	      	    11.1


<TABLE>
ALBANK  FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q
Statement regarding Computation of Per Share Earnings  
<CAPTION>


                                                                                
                                                                        Three  Months               Six Months
                                                                        Ended June 30,              Ended June 30,
   Exhibit 11.1                                                         1997         1996           1997         1996
<S>                                                                      <C>          <C>           <C>           <C>
    1.    Net income                                            $  9,440,684    7,834,414     18,757,967   15,545,878

    2.    Weighted average common shares outstanding              12,796,835   13,509,270     12,822,629   13,579,636

    3.    Weighted average common stock equivalents due 
            to the dilutive effect of stock options when utilizing 
            the treasury stock method. Per share market price  
            is based on the average per share market price for 
            the period.                                            1,067,106      905,404      1,044,736      883,077

    4.    Total weighted average common shares and 
            common stock equivalents outstanding for 
            primary earnings per share computation                13,863,941   14,414,674     13,867,365   14,462,713

    5.    Primary earnings per share                            $       0.68         0.54           1.35         1.07


    6.    Weighted average common shares outstanding              12,796,835   13,509,270     12,822,629   13,579,636

    7.    Weighted average common stock equivalents due 
            to the dilutive effect of stock options when utilizing 
            the treasury stock method. Per share market price 
            used is the greater of the average market price for 
            the period or the end-of-period market price per
            share.                                                 1,096,052      905,404      1,105,810      887,149

    8.    Total weighted average common shares and 
            common stock equivalents outstanding for
            fully diluted earnings per share computation          13,892,887   14,414,674     13,928,439   14,466,785

    9.    Fully diluted earnings per share                      $       0.68         0.54           1.35         1.07
</TABLE>