Exhibit 13


                              CNB Bancorp, Inc.

                                     2004
                                ANNUAL REPORT


<PAGE>


DIRECTORS
CNB Bancorp, Inc. and City National Bank and Trust Company


JOHN C. MILLER.................................PRESIDENT, JOHN C. MILLER, INC.
                                                             AUTOMOBILE DEALER

ROBERT L. MAIDER......................  .....PARTNER, MAIDER & SMITH ATTORNEYS

WILLIAM N. SMITH........................................CHAIRMAN OF THE BOARD,
  PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY AND THE SUBSIDIARY BANK

GEORGE A. MORGAN...................VICE PRESIDENT AND SECRETARY OF THE COMPANY
                                     AND EXECUTIVE VICE PRESIDENT, CASHIER AND
                                          TRUST OFFICER OF THE SUBSIDIARY BANK

BRIAN K. HANABURGH.........................OWNER, D/B/A MCDONALD'S RESTAURANTS
                                                          FAST FOOD RESTAURANT

CLARK D. SUBIK................................PRESIDENT, SUPERB LEATHERS, INC.
                                                          LEATHER MERCHANDISER

DEBORAH H. ROSE................(RETIRED) VICE PRESIDENT, HATHAWAY AGENCY, INC.
                                                             GENERAL INSURANCE

THEODORE E. HOYE, III............................PRESIDENT, FIRST CREDIT CORP.
                                FINANCING AND INSURING OF MANUFACTURED HOUSING

TIMOTHY E. DELANEY.......................PRESIDENT, DELANEY CONSTRUCTION CORP.
                                                    HEAVY/HIGHWAY CONSTRUCTION

RICHARD D. RUBY..................................PRESIDENT, RUBY & QUIRI, INC.
                                                     HOME FURNISHINGS RETAILER

JOHN J. DALY...................(RETIRED) CO-FOUNDER, ALPIN HAUS SKI SHOP, INC.
              RETAIL SALES OF RECREATIONAL VEHICLES, SKI ACCESSORIES AND POOLS


OFFICERS - CNB BANCORP, INC.

WILLIAM N. SMITH...........................CHAIRMAN OF THE BOARD AND PRESIDENT
GEORGE A. MORGAN..................................VICE PRESIDENT AND SECRETARY
MICHAEL J. FRANK.....................................................TREASURER
BRIAN R. SEELEY........................................................AUDITOR


HONORARY DIRECTORS

LYDON F. MAIDER              JAMES W. ST. THOMAS              ROSS H. HIGIER
CLARK EASTERLY, SR.          RICHARD E. HATHAWAY            RICHARD P. TATAR
FRANK E. PERRELLA


<PAGE>


FINANCIAL HIGHLIGHTS
(In thousands, except per share data)


                                      2004              2003             2002

NET INCOME                           $4,509            $3,653           $4,632

Earnings Per Share

   Basic                               2.04              1.65             2.05
   Diluted                             2.03              1.64             2.03

CASH DIVIDENDS                       $1,771            $1,685           $1,579
Per Common Share                       0.80              0.76             0.70

STOCKHOLDERS' EQUITY AT YEAR-END    $40,021           $38,040          $36,884
Per Common Share                      18.04             17.22            16.58

RETURN ON AVERAGE
  STOCKHOLDERS' EQUITY                 11.5%              9.7%            12.8%

RETURN ON AVERAGE ASSETS               1.10%             0.92%            1.22%

TOTAL ASSETS AT YEAR-END           $421,920          $395,556         $391,804



                                    - 1 -


<PAGE>


PRESIDENT'S MESSAGE


   I am pleased to report that 2004 was a return to earnings growth for our
Company.
   Net income at $4.5 million was an increase of 23.4% over the prior year's
result of $3.7 million. More importantly, diluted earnings per share were
$2.03, compared to $1.64 in 2003, an increase of 23.8%.
   Total assets increased $26.4 million or 6.7%, resulting in total assets at
year-end of $421.9 million.
   Total loans, net of unearned income, increased $17.3 million or 10.1%. An
increase in commercial lending and the purchase of loans associated with two
branch acquisitions, discussed below, were primarily responsible for the
increase.
   Total deposits increased $23.4 million or 7.6%, resulting in total
deposits at year-end of $331.6 million. This increase primarily relates to
the deposits received in the branch acquisitions.
   Stockholders' equity at year-end was $40.0 million as compared to $38.0
million at the prior year-end. This resulted in an equity to total assets
ratio of 9.5%, a ratio that is over twice the regulatory minimum guideline of
4.0%.
   In January, the Board of Directors increased the dividend for the
thirty-eighth consecutive year. The dividend per share for the year was
$0.80, an increase of 5.3%, as compared to $0.76 in 2003. Total dividends
paid to stockholders for the year amounted to $1.8 million.
   On July 30, 2004, the subsidiary Bank acquired two branches from HSBC BANK
USA. These branches are located in Amsterdam, New York and Speculator, New
York. At the date of acquisition, these branches had deposits totaling
approximately $41.7 million and loans, net of unearned discount, totaling
approximately $6.0 million.
   We are extremely pleased with these two purchases. The Amsterdam
acquisition has expanded our market area south into Montgomery County and the
Speculator acquisition has extended our market area north into Hamilton
County into an area where there are no other banks. Both areas offer
potential for growth in both loans and deposits.
   In November, John J. Daly, a native of Amsterdam, was appointed a member
of the Board of Directors. His business experience and involvement in
community affairs will compliment our existing board.
   During the year, Lloyd Politsch and Paul E. Smith, both former presidents
of the Bank, passed away. Lloyd's career with the Bank began in 1934. In 1965
he was elected to the Board of Directors and in 1966 he became president of
the Bank. Although he retired from active management of the Bank in 1977, he
continued as a member of the Board until reaching the retirement age for
directors in 1986. His service to the Company covered a period of 52 years.
Paul came to work at the Bank in 1937. He was elected to the Board of
Directors in 1968 and in 1977 became president of the Bank, a position he
held until December 31, 1983. His service on the Board continued until
retirement in 1995. Paul's commitment lasted for a period of 58 years.
   The loyalty, dedication and leadership of these two gentlemen to our
organization should long be remembered.
   On July 30, 2002, President Bush signed the Sarbanes-Oxley Act of 2002
into law. This Act makes broad and significant changes to the federal
securities statues, particularly in the areas of financial reporting and the
audit process. This Act applies to all public companies reporting to the
Securities and Exchange Commission (SEC), including CNB Bancorp, Inc.
   A result of the Act is that the SEC has adopted rules that require
companies to provide a management evaluation of the effectiveness of the
Company's internal control over financial reporting with the Company's
independent registered public accounting firm attesting to that evaluation.
These rules are effective as of year-end 2005 for CNB


                                    - 2 -


<PAGE>


Bancorp, Inc. For the independent registered public accounting firm to be
able to attest to management's evaluation, major in-depth documentation must
be developed. There are high implementation costs for all SEC reporting
companies for this project, and it is estimated that our outside costs for
compliance will exceed $100,000.00 in 2005.
   At the request of the United States Senate Committee on Small Business,
the Government Accountability Office is conducting a study on the impact of
the Act on small business. We are hopeful that some regulatory relief will
come from Congress on this matter in the not-to-distant future.
   If you have visited one of our branches recently, you may have noticed
that free coffee is available, there is a computer terminal to check your
e-mail, and a television to provide you with the latest business news. This
is all part of our new theme throughout the Bank, "Banking for your
Lifestyle".
   Banking for your Lifestyle suggests superior customer service and
providing a relaxing environment to do your banking. At many banks, customers
rarely visit the branches because everything is automated. Even though we
offer the latest technological services, at City National Bank we still want
to encourage our customers and potential customers to come into the bank.
   Studies have shown that people who regularly go into a bank branch are far
more likely to use more of the banks products and services.
   The new theme and new signage was developed by our advertising agency. You
will notice this new theme now permeates all our promotional and advertising
materials, including the color scheme for the cover of this year's Annual
Report.
   In closing, as always, we welcome your comments and suggestions, and
please remember to use our banking services and recommend us to your friends
and neighbors.

                                                        /s/ WILLIAM N. SMITH

                                                            WILLIAM N. SMITH
                Chairman of the Board, President and Chief Executive Officer
                                      of the Company and the subsidiary Bank


                                    - 3 -


<PAGE>


Year-End Total Assets
Five Years (2000-2004)

(Thousands)

2000    $339,306
2001    $359,955
2002    $391,804
2003    $395,556
2004    $421,920



Net Income
Five Years (2000-2004)

(Thousands)

2000    $3,705
2001    $4,032
2002    $4,632
2003    $3,653
2004    $4,509


                                    - 4 -


<PAGE>


Basic Earnings Per Share
Five Years (2000-2004)

(Dollars)

2000    $1.56
2001    $1.75
2002    $2.05
2003    $1.65
2004    $2.04



Dividends Per Common Share
Five Years (2000-2004)

(Dollars)

2000    $0.62
2001    $0.66
2002    $0.70
2003    $0.76
2004    $0.80


                                    - 5 -


<PAGE>


FINANCIAL REVIEW


The financial review is a presentation of management's discussion and
analysis of the consolidated financial condition and results of operations of
CNB Bancorp, Inc. and its operating subsidiaries. The financial review is
presented to provide a better understanding of the financial data contained
in this report and should be read in conjunction with the consolidated
financial statements and other schedules that follow.

Overview:

      CNB Bancorp, Inc. (the Company) was organized in 1988 and is a
registered financial holding company headquartered in Gloversville, New York.
Its wholly-owned subsidiary, City National Bank and Trust Company (subsidiary
Bank), was organized in 1887 and is also headquartered in Gloversville, New
York. On June 1, 1999, the Company completed the acquisition of Adirondack
Financial Services Bancorp, Inc. (Adirondack), at which time Adirondack was
merged with and into CNB Bancorp, Inc. Upon acquisition, Adirondack's
subsidiary bank, Gloversville Federal Savings and Loan Association, merged
with the Company's subsidiary bank City National Bank and Trust Company.
      Effective July 1, 2000, the Company completed the acquisition of
Hathaway Agency, Inc. (Agency), a general insurance agency. Pursuant to the
merger, Hathaway became a wholly-owned subsidiary of CNB Bancorp, Inc.
      On August 2, 2004, the subsidiary Bank completed the acquisition of two
HSBC BANK USA branch offices located in Speculator and Amsterdam, New York.
      The subsidiary Bank is a full service commercial bank that offers a
broad range of traditional banking services. The services include the
gathering of deposits from branch offices in areas served and using those
deposits to originate a variety of commercial, consumer and real estate
loans, and providing trust and investment services. The Company's main
revenue sources are interest earned on loans and investments from the
subsidiary Bank and insurance commissions from the Agency. The Company's
principal expenses are interest paid on deposits, interest paid on borrowings
and the provision for loan losses.
      The subsidiary Bank is a member of the Federal Deposit Insurance
Corporation and the Federal Reserve System and is subject to regulation and
supervision of the Federal Reserve Bank and the Office of the Comptroller of
the Currency (OCC).
      The subsidiary Insurance Agency specializes in commercial, industrial
and not-for-profit businesses, as well as insuring personal automobiles and
homes primarily in Fulton County. The insurance agency is under the
supervision of the New York State Insurance Department.

Forward-Looking Statements:

      This report may include certain forward-looking statements with respect
to the financial condition, results of operations and business of the Company
and its subsidiaries based on current management expectations. The Company's
ability to predict results or the effect of future plans and strategies is
inherently uncertain and actual results, performance, or achievements could
differ materially from those management expectations. Factors that could
cause future results to vary from current management expectations include,
but are not limited to, general economic conditions, legislative and
regulatory changes, monetary and fiscal policies of the federal government,
changes in tax policies, rates and regulations of federal, state, and local
tax authorities, changes in interest rates, deposit flows, the cost of funds,
demand for loan products, demand for financial services, competition, changes
in the quality or composition of the subsidiary Bank's loan and securities
portfolios, changes in accounting principles, policies or guidelines, and
other economic, competitive, governmental, and technological factors
affecting the Company's operations, markets, products, services and prices.

Critical Accounting Policies:

      The Company's consolidated financial statements are prepared with
accounting policies generally accepted in the United States of America. In
applying these policies management was required to make certain estimates and
assumptions that affected the amounts reported in these statements. These
estimates and assumptions are made by manage-


                                    - 6 -


<PAGE>


ment based upon information available at that time. There are uncertainties
inherent in making these estimates and assumptions which could materially
affect the results of operations and financial position. Some of these
policies are more critical than others. Management considers the accounting
policy relating to the allowance for loan losses to be a critical accounting
policy because of the uncertainty and subjectivity inherent in estimating the
levels of reserve needed to cover probable credit losses within the loan
portfolio and the material effect that these estimates can have on the
Company's results of operations. Based on management's evaluation of the
allowance at December 31, 2004, management considers the allowance to be
adequate. Another critical accounting policy relates to the Company's
retirement plans. Liabilities under these plans rely on estimates of future
salary increases, numbers of employees and employee retention, discount rates
and long term rates of investment return. Changes in financial markets or
the economy may result in changes in assumptions that may materially affect
the Company's consolidated financial statements.
      Additional accounting policies can be found in note 1 of the Company's
notes to consolidated financial statements.

Financial Condition:

      The table below presents a comparison of average and year-end selected
consolidated balance sheet categories over the past three years, and the
changes in balances for those years (in thousands).


<TABLE>

<CAPTION>

                                                                                        Increase/(Decrease)
Average Consolidated Balance Sheet        2004          2003           2002          2004/2003      2003/2002

<S>                                      <C>            <C>            <C>               <C>             <C>
Assets:
   Cash and due from banks               $10,780        $10,051        $9,543            $729            $508
   Federal funds sold                     10,319         13,577        12,628          (3,258)            949
   Int. bearing deposits with banks        5,638         14,409        10,468          (8,771)          3,941
   Total securities*                     186,607        167,952       140,600          18,655          27,352
   Loans, net                            175,667        173,645       188,819           2,022         (15,174)
   Other assets                           20,788         18,543        16,111           2,245           2,432

      Total Assets                      $409,799       $398,177      $378,169         $11,622         $20,008

Liabilities:
   Demand deposits                       $36,873        $29,175       $28,565          $7,698            $610
   Savings, NOW and money
      market accounts                    175,103        155,477       141,168          19,626          14,309
   Time deposits                         112,469        123,086       121,716         (10,617)          1,370
   Notes payable and repurchase
      agreements                          44,302         50,689        48,926          (6,387)          1,763
   Other liabilities                       1,730          1,937         1,690            (207)            247
Stockholders' equity                      39,322         37,813        36,104           1,509           1,709

      Total Liabilities and Equity      $409,799       $398,177      $378,169         $11,622         $20,008


</TABLE>


                                                               - 7 -


<PAGE>


FINANCIAL REVIEW (Continued)


<TABLE>

<CAPTION>

                                                                                        Increase/(Decrease)
Year-End Consolidated Balance Sheet       2004           2003          2002          2004/2003        2003/2002

<S>                                       <C>           <C>           <C>             <C>              <C>
Assets:
   Cash and due from banks                $9,580        $12,272       $11,252         ($2,692)         $1,020
   Federal funds sold                      2,400         13,200        10,900         (10,800)          2,300
   Int. bearing deposits with banks          369          5,918        12,508          (5,549)         (6,590)
   Total securities*                     199,747        175,951       156,949          23,796          19,002
   Loans, net                            186,204        168,812       183,181          17,392         (14,369)
   Other assets                           23,620         19,403        17,014           4,217           2,389

      Total Assets                      $421,920       $395,556      $391,804         $26,364          $3,752

Liabilities:
   Demand deposits                       $41,922        $30,386       $27,827         $11,536          $2,559
   Savings, NOW and money
      market accounts                    181,722        160,736       152,469          20,986           8,267
   Time deposits                         107,990        117,125       120,320          (9,135)         (3,195)
   Notes payable and repurchase
      agreements                          48,543         47,860        52,689             683          (4,829)
   Other liabilities                       1,722          1,409         1,615             313            (206)
Stockholders' equity                      40,021         38,040        36,884           1,981           1,156

      Total Liabilities and Equity      $421,920       $395,556      $391,804         $26,364          $3,752


*Includes available for sale securities at fair value, held to maturity
securities at amortized cost and Federal Reserve Bank and Federal Home Loan
Bank stock at cost.


</TABLE>


     Total assets at December 31, 2004 reached a new record high of $421.9
million as compared to $395.6 million at December 31, 2003, an increase of
$26.4 million or 6.7%. Asset growth for the year mainly consisted of a $17.4
million increase in net loans and a $23.8 million increase in total
securities. These increases were partially offset by decreases in federal
funds sold of $10.8 million and interest-bearing deposits with banks of $5.5
million. Asset growth was funded primarily by an increase in deposits of
$23.4 million, which was primarily due to the purchase of two branches in
August of 2004 from HSBC BANK USA (HSBC). Total deposits from this
acquisition were approximately $41.7 million. Average assets for 2004 totaled
$409.8 million, an increase of $11.6 million or 2.9% from the 2003 average of
$398.2 million.
      Loans, net of unearned discount and the allowance for loan losses,
represented 44.1% of total assets at December 31, 2004 and accounted for
59.7% of total interest and dividend income. Average net loans for 2004
increased $2.0 million or 1.2% over 2003. Average commercial and consumer
loans for the year increased by 2.5% and 1.2% respectively, while the average
for mortgage loans was relatively flat, decreasing by 0.4%. The yield on
total loans decreased from 7.11% in 2003 to 6.56% in 2004, which reflects the
lower interest rates that were in effect throughout the year.
      The total securities portfolio, which includes both "available for
sale" and "held to maturity" securities, and Federal Reserve Bank and Federal
Home Loan Bank stock at December 31, 2004 was $199.7 million as compared to
$176.0 million the previous year, an increase of $23.8 million. The increase
for 2004 was funded with growth in core deposit accounts primarily obtained
from the purchase of the two HSBC branches. The yield on the portfolio on a
fully taxable equivalent basis, decreased 9 basis points year-to-year from
4.73% for 2003 to 4.64% for year 2004. This decrease in yield was due to
lower reinvestment rates in effect throughout the year.
      Interest-bearing deposits with banks and federal funds sold are
short-term asset accounts that provide a source of liquidity for the
subsidiary Bank. These accounts decreased from $19.1 million to $2.8 million
year-to-year. On average, these accounts decreased by $12.0 million or 43.0%.
Lower average levels of short-term assets were maintained


                                    - 8 -


<PAGE>


during the year in an attempt to keep assets fully invested in a low interest
rate enviroment. This decrease, coupled with branch acquisitions and the
resulting deposit increase, funded securities and loan growth.
      Deposits continue to be the subsidiary Bank's primary source of
funding. Total deposits at December 31, 2004 reached $331.6 million, an
increase of $23.4 million or 7.6% over the previous year-end. Most of the
year-to-year gain can be attributed to the HSBC branch acquisition which
added approximately $41.7 million to total deposits. Core deposits, which
consist of demand, savings, NOW, and money market accounts, grew by $32.5
million or 17.0%. Time deposits were down for the year decreasing $9.1
million. Average deposits increased during the year to $324.4 million from
$307.7 million, an increase of $16.7 million or 5.4%.
      Notes payable and repurchase agreements at year-end 2004 were
relatively flat for the year, increasing by $0.7 million from $47.9 million
in 2003 to $48.5 million for 2004. Average notes payable and repurchase
agreements were down for the year from $50.7 million in 2003 to $44.3 million
in 2004.
      Cash and due from banks  decreased  from $12.3  million to $9.6  million
year-to-year,  while the average for the year was up $0.7 million or 7.3%.
      Other assets increased for the year by $4.2 million to $23.6 million at
December 31, 2004 from $19.4 million at December 31, 2003. Average other
assets also increased by $4.1 million year-to-year. Both year-end and average
increases were primarily due to the HSBC goodwill and core deposit premium
paid with the acquisition.
      Stockholders' equity at year-end 2004 was $40.0 million as compared to
$38.0 million at year-end 2003, an increase of $2.0 million or 5.2% for the
year. The increase was due mainly to a combination of net income after
dividends of $2.7 million, and a reduction in accumulated other comprehensive
income of $0.9 million plus net treasury stock transactions of $0.3 million.
The consolidated statements of changes in stockholders' equity included in
this annual report detail the changes in equity capital.

Results of Operations:

      The comparative consolidated statements of income summarize income and
expense for the last three years. For the year ended December 31, 2004, net
income was $4,509,000 as compared to $3,653,000 for 2003, an increase of
$856,000 or 23.4% from the previous year. Net income for 2003 was 21.1% below
2002 net income of $4,632,000. Basic earnings per share for year 2004 were
$2.04, up 23.6% from 2003 per share earnings of $1.65. Diluted earnings per
share of $2.03 were up 23.8% over 2003 diluted earnings per share of $1.64.
The increase in earnings is attributable to a higher net interest margin and
a decrease of $790,000 in the provision for loan losses for 2004. The return
on average assets for the three years ended December 31, 2004, 2003 and 2002
was 1.10%, 0.92% and 1.22%, respectively. The return on average equity for
the same periods was 11.5%, 9.7% and 12.8%.
      Net interest income, the most significant component of earnings, is the
amount by which the interest generated from earning assets exceeds the
expense associated with funding those assets. Changes in net interest income
from year-to-year result from changes in the level and mix of the average
balances (volume) of earning assets and interest-bearing liabilities and from
the yield earned and the cost paid (rate). In the following discussion,
interest income is presented on a fully taxable equivalent basis applying the
statutory Federal income tax rate of 34%. Net interest income for 2004
increased $1,076,000 or 7.7%. The increase in 2004 was attributable to a
higher net interest margin, increasing from 3.77% in 2003 to 3.95% for 2004.
Interest and fees on loans for 2004 decreased by $869,000 or 6.9% from the
previous year, due mainly to a decrease in the overall yield in the total
loan portfolio of 55 basis points from 7.11% in 2003 to 6.56% in 2004. The
decrease was due to lower interest rates in effect on new and refinanced
loans throughout the year. This rate decrease caused interest income to be
down $984,000 from 2003 but the volume increase offset $115,000 of this
decrease. Interest on securities increased for the year by $791,000, going
from $7.8 million in 2003 to $8.6 million for year 2004. Even though the
average volume of total securities increased by $18.7 million or 11.1% for
the year, it was somewhat offset by a 9 basis point decrease in yield from
4.73% in 2003 to 4.64% in 2004. The higher volume of securities produced
additional interest income of $821,000 and the lower rates throughout the
year reduced this by $30,000. The high volume of securities was a result of
the investment of the cash received from the purchase of the two HSBC
branches obtained in the third quarter of 2004. Interest on federal funds
sold decreased slightly for the

                                    - 9 -


<PAGE>


FINANCIAL REVIEW (Continued)


year by $16,000 or 10.8%. The decrease in 2004 was a result of lower average
volumes offset by slightly higher average rate of 1.28% compared to 1.09% in
2003.
      For comparison purposes, the table below shows interest and dividend
income converted to a fully taxable basis to recognize the income tax savings
between taxable and tax-exempt assets (in thousands).


                                                           % Change   % Change
                               2004       2003      2002   2004/2003  2003/2002

Total interest and
  dividend income            $19,551    $19,705   $22,046     (0.8)%    (10.6)%
Total interest expense         5,476      6,716     8,300    (18.5)     (19.1)

Net interest and
  dividend income             14,075     12,989    13,746      8.4       (5.5)
Tax equivalent adjustment        905        915       901      1.1        1.6

Net interest and
  dividend income
   taxable equivalent basis  $14,980    $13,904   $14,647      7.7%      (5.1)%


      Total interest expense decreased $1,240,000 or 18.5% in 2004 over that
of 2003 compared to a decrease of $1,584,000 or 19.1% for 2003 over 2002. The
decrease in 2004 was due to lower interest rates on all interest-bearing
liabilities throughout the year. The average rate on interest-bearing
liabilities for 2004 was 1.65%, a decrease of 39 basis points from 2003. The
rate reduction was partially offset by an increase in average volume of $9.0
million from 2003. Lower rates on all deposit products reduced interest
expense by $1,262,000. This reduction was partially offset by the increase in
deposits which produced additional interest expense of $159,000 in 2004.
Notes payable and repurchase agreements produced a decline of $200,000 due to
lower average volume throughout 2004. This was partially offset by higher
rates on floating rate advances with the Federal Home Loan Bank in the second
half of 2004 which increased interest expense by $63,000.
      Total other income for 2004 increased by $295,000 or 12.7% which was
the result of a net gain of $416,000 from the sale on calls of securities in
the investment portfolio. This was partially offset by a decline in insurance
commissions at the Agency. Total other expense in 2004 increased for the year
by $711,000 or 7.7% over the preceding year. The 2004 increase reflects
higher salaries and employee benefits, occupancy expenses and external data
processing expense. The increases can be attributed to normal inflationary
increases and additional expense associated with the two new branch offices
acquired from HSBC. The 2004 increase also reflects higher depreciation and
advertising costs associated with the opening of a new branch office in
Saratoga Springs, New York and a new advertising campaign.
      The provision for income taxes increased $604,000 or 53.5% from
$1,128,000 for 2003 to $1,732,000 for 2004. This was a result of higher
income before income taxes of $1,460,000 and a reduction in the tax exempt
municipal income from $1,495,000 in 2003 to $1,478,000 in 2004. The provision
for income taxes had declined $689,000 from 2002 to 2003 primarily due to the
decline in the income before income taxes of $1,668,000. With the tax exempt
municipal income remaining virtually unchanged, the effective tax rate for
2003 declined to 23.6%. The effective tax rate for 2004, 2003 and 2002 was
27.8%, 23.6% and 28.2%, respectively.
      Net interest rate spread, the difference between average earning assets
yield and the cost of average interest-bearing funds, increased 20 basis
points or 5.6% from 2003 to 2004. The net interest margin, net interest
income as a percentage of earning assets, increased 18 basis points or 4.8%.
The increases in net interest spread and net interest margin for 2004 were
attributed to the decline in interest rates affecting shorter-term
interest-bearing liabilities faster than longer-term interest-bearing assets
throughout the year.


                                    - 10 -


<PAGE>


Interest rate spread and net interest margin (dollars in thousands):
(Tax equivalent basis)

<TABLE>

<CAPTION>

                                         2004                  2003                 2002

                                    Yearly                Yearly               Yearly
                                    Average   Rate        Average  Rate        Average   Rate

<S>                                <C>        <C>        <C>       <C>        <C>        <C>
Earning assets                     $378,822   5.40%      $369,060  5.59%      $353,745   6.49%
Interest bearing liabilities        331,874   1.65        329,252  2.04        311,810   2.66

Net interest rate spread                      3.75%                3.55%                 3.83%

Net interest margin                           3.95%                3.77%                 4.14%

</TABLE>


Capital Resources:

      Stockholders' equity ended 2004 at $40,021,000, up $1,981,000 or 5.2%,
due to a combination of net retained earnings, less other comprehensive loss
and plus net treasury stock transactions. At December 31, 2004, the ratio of
stockholders' equity to total assets was 9.5%, as compared to 9.6% at
December 31, 2003.
      On January 31, 2000, the Board of Directors of the Company (Board)
approved a stock repurchase plan (the "Plan") authorizing the repurchase of
up to 5% or 120,000 shares of the Company's common stock over a two-year
period. The Board has since made two extensions to the plan, one on May 29,
2001 authorizing an additional 5% or approximately 115,000 shares and on
April 28, 2003 authorizing an additional 5% or approximately 111,000 shares.
Both extensions were over a new two-year period upon completion of the
original plan and first extension. As of December 31, 2004, the Company had
purchased 248,163 shares under the plan at an average price of $29.03 per
share. The repurchased shares are held in treasury stock and may be reissued
to support the Company's dividend reinvestment plan, to satisfy the exercise
of stock options, or other corporate purposes.
      Banks and bank holding companies are required to meet a ratio of
qualifying total capital to risk-weighted assets. Risk-based assets are the
value of assets carried on the books of the Company, as well as certain
off-balance sheet items, multiplied by an appropriate factor as stipulated in
the regulation. Tier 1 capital consists of common stock and qualifying
stockholders' equity reduced by intangible assets. Total capital consists of
Tier 1 capital plus a portion of allowance for loan losses. Currently, the
minimum risk-based ratios, as established by the Federal Reserve Board, for
Tier 1 and total capital are 4% and 8%, respectively. At December 31, 2004,
the Company had Tier 1 and total risk-based capital ratios of 15.2% and
16.3%, respectively. The Company also maintained a leverage ratio of 7.7% as
of December 31, 2004. The leverage ratio is defined as Tier 1 capital in
relation to fourth quarter average assets.

Liquidity:

      The primary objective of liquidity management is to ensure sufficient
cash flows to meet all of the Company's funding needs, such as loan demand
and customers' withdrawals from their deposit accounts. While the primary
source of liquidity consists of maturing securities, other sources of funds
are federal funds sold, repayment of loans, sale of securities available for
sale, growth of deposit accounts, and borrowed funds and securities sold
under agreements to repurchase. In addition to existing balance sheet cash
flows, the subsidiary Bank maintains lines of credit with a correspondent
bank and the Federal Home Loan Bank (FHLB) to supplement its short term
borrowing needs.
      The subsidiary Bank has pledged certain assets as collateral for
deposits from municipalities, FHLB borrowings and repurchase agreements. By
utilizing collateralized funding sources, the subsidiary Bank is able to
access a variety of cost effective sources of funds. Management monitors its
liquidity position on a regular basis and does not anticipate any negative
impact to its liquidity from pledging activities. While there are no known
trends or demands that are likely to affect the subsidiary Bank's liquidity
position in any material way during the coming year, the subsidiary Bank
continuously monitors its basic liquidity on an ongoing basis.
      As of December 31, 2004, the Company had various loan commitments and
standby letter of credit commitments totaling approximately $35.7 million.
Included in this amount is approximately $23.2 million in commercial lines of
credit, residential home equity lines of credit and overdraft lines of
credit. Under normal banking conditions these lines


                                    - 11 -


<PAGE>


FINANCIAL REVIEW (Continued)


are drawn on from time to time and then repaid so that the full amount of the
lines are never drawn down at any one time.
      FASB Interpretation No. 45 (FIN No. 45), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others; an Interpretation of FASB Statements No. 5, 57, and
107 and rescission of FASBInterpretation No. 34", requires certain
disclosures and liability-recognition for the fair-value at issuance of
guarantees that fall within its scope. Under FIN No. 45, the Company does not
issue any guarantees that would require liability-recognition or disclosure,
other than its standby letters of credit. The Company has issued conditional
commitments in the form of standby letters of credit to guarantee payment on
behalf of a customer and guarantee the performance of a customer to a third
party. Standby letters of credit generally arise in connection with lending
relationships. The credit risk involved in issuing these instruments is
essentially the same as that involved in extending loans to customers.
Contingent obligations under standby letters of credit totaled approximately
$326,000 and $191,000 at December 31, 2004 and 2003, respectively, and
represent the maximum potential future payments the Company could be required
to make. Typically, these instruments have terms of twelve months or less and
expire unused; therefore, the total amounts do not necessarily represent
future cash requirements. Each customer is evaluated individually for
creditworthiness under the same underwriting standards used for commitments
to extend credit and on-balance sheet instruments. Company policies governing
loan collateral apply to standby letters of credit at the time of credit
extension. Loan-to-value ratios are generally consistent with loan-to-value
requirements for other commercial loans secured by similar types of
collateral. The fair value of the Company's standby letters of credit at
December 31, 2004 and 2003 were insignificant.

Allowance for loan losses:

      Management considers the accounting policy relating to the allowance
for loan losses to be a critical accounting policy given the inherent
uncertainty in evaluating the levels of the reserve required to cover credit
losses in the portfolio and the material effect that assumption could have on
the results of operations. The Company establishes an allowance for loan
losses based on an analysis of risk factors in its loan portfolio. The
analysis includes concentrations of credit, past loan loss experience,
current economic conditions, amount and composition of the loan portfolio,
estimated fair market value of underlying collateral, delinquencies and other
factors.
      The allowance for loan losses as a percentage of loans, net of unearned
discount, was 1.24% at December 31, 2004 compared to 1.41% at December 31,
2003. The decrease is a result of a lower provision for loan losses primarily
due to a decrease in non-performing loans and lower net charge-offs. At
December 31, 2004 non-performing loans were $0.7 million as compared to $1.6
million in 2003.
      The Company's allowance for loan losses coverage of non-performing
loans increased as of December 31, 2004 to 324% from 147% at December 31,
2003. The provision for loan losses was $500,000, $1,290,000 and $1,165,000
for the years ended December 31, 2004, 2003 and 2002, respectively. Net loan
charge-offs for 2004, 2003 and 2002 were $587,000, $1,955,000 and $588,000,
respectively. The provision for loan losses is a result of management's
overall assessment of the loan portfolio and the adequacy of the allowance
for loan losses.
      The Company will continue to monitor its allowance for loan losses and
make future additions to the allowance through the provision for loan losses
as conditions dictate. Although the Company maintains its allowance at a
level it considers to be adequate to provide for inherent risk of loss in its
loan portfolio, there can be no assurance that future losses will not exceed
estimated amounts or that additional provisions for loan losses will not be
required in future periods. In addition, the Company's determination as to
the amount of the allowance for loan losses is subject to review by the OCC
as part of its examination process, which may result in the establishment of
an additional allowance based on the OCC's judgment of the information
available to it at the time of examination.

Market Risk:

      Market risk is the risk of loss from adverse changes in market prices
and interest rates. The subsidiary Bank's market risk arises primarily from
interest rate risk inherent in its lending and deposit acceptance activities.
Although the subsidiary Bank manages other risks, such as credit and
liquidity risk, in the normal course of its business man-


                                    - 12 -


<PAGE>


agement, it considers interest rate risk to be its most significant market
risk and could potentially have the largest effect on the Bank's financial
condition and results of operations. The Company does not currently have a
trading portfolio or use derivatives such as swaps or options to manage
market and interest rate risk.
      The subsidiary Bank's interest rate risk management is the
responsibility of the Asset/Liability Management Committee (ALCO), which
reports to the Board of Directors. The Committee, comprised of senior
management, has developed policies to measure, manage and monitor interest
rate risk. Interest rate risk arises from a variety of factors, including
differences in the timing between the contractual maturity or the repricing
of the subsidiary Bank's assets and liabilities. For example, the subsidiary
Bank's net interest income is affected by changes in the level of market
interest rates as the repricing characteristics of its loans and other assets
do not necessarily match those of its deposits and borrowings.
      In managing exposure, the subsidiary Bank uses interest rate
sensitivity models that measure both net gap exposure and earnings at risk.
ALCO monitors the volatility of its net interest income by managing the
relationship of interest rate sensitive assets to interest rate sensitive
liabilities. The Committee utilizes a simulation model to analyze net income
sensitivity to movements in interest rates. The simulation model projects net
interest income based on an immediate rise or fall in interest rates of 200
basis points for a twelve-month period. The model is based on the
contractural maturity and repricing characteristics of interest rate assets
and liabilities. The model incorporates assumptions regarding the impact of
changing interest rates on the prepayment rate of certain assets and
liabilities.
      The following table shows the approximate effect on the subsidiary
Bank's net interest income as of December 31, 2004 and 2003, assuming an
increase or decrease of 100 and 200 basis points in interest rates (dollars
in thousands).

                                    2004

Change in Interest Rates        Estimated Net             Change in Net
     (basis points)            Interest Income           Interest Income

           +200                   $13,114                     (7.4)%
           +100                    13,690                     (3.3)
              0                    14,158                      0.0
           -100                    13,755                     (2.8)
           -200                    13,371                     (5.6)


                                    2003

Change in Interest Rates        Estimated Net             Change in Net
     (basis points)            Interest Income           Interest Income
           +200                   $12,625                     (4.5)%
           +100                    13,049                     (1.3)
              0                    13,224                      0.0
           -100                    12,472                     (5.7)
           -200                    12,351                     (6.6)


      Both years show a decline in the net interest income in an up or down
scenario primarily based on the subsidiary Bank's current position in
callable securities. In a declining rate environment these securities are
quite often called and the funds reinvested in lower yielding securities and
in a rising rate environment these securities do not get called so the funds
do not reprice as quickly as rates rise. The Company is currently
repositioning the investment portfolio into shorter maturities which react
more favorably as rates rise or fall.
      Another tool used to measure interest rate sensitivity is the
cumulative gap analysis. The cumulative gap represents the net position of
assets and liabilities subject to repricing in specified time periods.
Deposit accounts without maturity dates are modeled based on historical
run-off characteristics of these products in periods of rising rates. Loans
and security maturities are based on contractural maturities. At December 31,
2004 the Company had a negative one-year cumulative gap position.
      The cumulative gap analysis is merely a snapshot at a particular date
and does not fully reflect that certain assets and liabilities have similar
repricing periods but may in fact reprice at different times within that
period and at differ-


                                    - 13 -


<PAGE>


FINANCIAL REVIEW (Continued)


ing rate levels. Management, therefore, uses the interest rate sensitivity
gap only as a general indicator of the potential effects of interest rate
changes on net interest income. Management believes that the gap analysis is
a useful tool only when used in conjunction with its simulation model and
other tools for analyzing and managing interest rate risk.
      As of December 31, 2004, the Company was in a liability sensitive
position for one year, which means that more liabilities are scheduled to
mature or reprice within the next year than assets. The Company is in an
asset sensitive position beyond one year.

      The following table shows the interest rate sensitivity gaps as of
December 31, 2004 highlighting the gap percentages within one year.


<TABLE>

<CAPTION>

                                                     Balance Maturing or Subject to Repricing (in Thousands)

                                                            After 3 Mo.    After One
                                               Within       But Within    But Within        After
AT DECEMBER 31, 2004                          3 Months        1 Year      Five Years     Five Years        Total

<S>                                             <C>            <C>          <C>             <C>          <C>
Interest Earning Assets:
   Securities*                                  $13,780        $29,454      $107,734        $47,653      $198,621
   Total Loans, net of unearned discount         42,238         33,681        88,915         23,701       188,535
   Other Earning Assets                           2,769             --            --             --         2,769

      Total Earning Assets                       58,787         63,135       196,649         71,354       389,925

Fair Value Above Cost of Securities
   Available-for-Sale                                                                                       1,126
Other Assets                                                                                               30,869

TOTAL ASSETS                                                                                             $421,920

Interest-Bearing Liabilities:
   Savings, NOW and MMDA                        $58,967        $12,538       $32,695        $77,522      $181,722
   Time Deposits                                 26,531         47,907        33,552             --       107,990
   Other Interest-Bearing Liabilities            27,214          4,060         2,269         15,000        48,543

      Total Interest-Bearing Liabilities        112,712         64,505        68,516         92,522       338,255

Demand Deposits                                                                                            41,922
Other Liabilities & Equity                                                                                 41,743

TOTAL LIABILITIES & EQUITY                                                                               $421,920

Interest Rate Sensitivity Gap                  ($53,925)       ($1,370)     $128,133       ($21,168)
Cumulative Interest Rate Sensitivity Gap       ($53,925)      ($55,295)      $72,838        $51,670
Cumulative Gap to Total Assets                                   (13.1%)


*Includes Available-for-Sale Securities and Investment Securities at
amortized cost and FHLB and FRB stock at cost.


</TABLE>


                                    - 14 -


<PAGE>


<TABLE>

FIVE-YEAR FINANCIAL SUMMARY
(In thousands, except per share data)

<CAPTION>

December 31,                                                  2004           2003           2002          2001           2000

<S>                                                          <C>           <C>            <C>            <C>           <C>
Consolidated statement of income data
Interest and dividend income:
    Loans                                                    $11,681       $12,550        $14,646        $15,785       $15,367
    Securities*                                                7,670         6,869          7,042          7,942         7,980
    Federal funds sold and other                                 200           286            358            326           413

        Total interest and dividend income                    19,551        19,705         22,046         24,053        23,760

Interest expense:
    Deposits                                                   3,800         4,903          6,402          9,397        10,529
    Borrowings                                                 1,676         1,813          1,898          2,011         1,562

        Total interest expense                                 5,476         6,716          8,300         11,408        12,091

Net interest income                                           14,075        12,989         13,746         12,645        11,669
Provision for loan losses                                        500         1,290          1,165            525           219
Net interest income after provision
    for loan losses                                           13,575        11,699         12,581         12,120        11,450
Other income                                                   2,609         2,314          2,287          2,124         1,762
Other expenses                                                 9,943         9,232          8,419          8,403         7,932

Income before income taxes                                     6,241         4,781          6,449          5,841         5,280
Provision for income taxes                                     1,732         1,128          1,817          1,809         1,575

Net income                                                    $4,509        $3,653         $4,632         $4,032        $3,705

Per share data:
    Basic earnings per share                                   $2.04         $1.65          $2.05          $1.75         $1.56
    Diluted earnings per share                                  2.03          1.64           2.03           1.72          1.54
    Cash dividends paid                                         0.80          0.76           0.70           0.66          0.62
    Cash dividend payout ratio                                  39.2%         46.1%          34.1%          37.7%         39.8%

Selected year-end consolidated statement of
  condition data:
        Total assets                                        $421,920      $395,556       $391,804       $359,955      $339,306
        Securities*                                          199,747       175,951        156,949        133,057       124,767
        Net loans                                            186,204       168,812        183,181        192,443       183,840
        Deposits                                             331,634       308,247        300,616        279,227       270,474
        Stockholders' equity*                                 40,021        38,040         36,884         34,649        33,993


*Securities figures include investment securities, securities available for
sale, FRB and FHLB stock. Securities available for sale were recorded at fair
value with any unrealized gain or loss at December 31 included in
stockholders' equity, on a net of tax basis.


</TABLE>


                                    - 15 -


<PAGE>


<TABLE>

CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share and per share data)

<CAPTION>
                                                                                       December 31,
                                                                           2004                          2003

<S>                                                                         <C>                          <C>
ASSETS

Cash and cash equivalents
    Non-interest bearing                                                    $9,580                       $12,272
    Interest bearing deposits with banks                                       369                         5,918
    Federal funds sold                                                       2,400                        13,200

        Total cash and cash equivalents                                     12,349                        31,390

Securities available for sale, at fair value                               189,176                       163,251

Investment securities, at cost (approximate fair value at
    December 31, 2004 - $7,804; at December 31, 2003 - $10,030)              7,587                         9,711

Investments required by law, stock in Federal Home Loan
    Bank of New York and Federal Reserve Bank of New
    York, at cost                                                            2,984                         2,989

Loans                                                                      197,313                       185,147
    Unearned income                                                         (8,778)                      (13,917)
    Allowance for loan losses                                               (2,331)                       (2,418)

        Net loans                                                          186,204                       168,812

Premises and equipment, net                                                  5,780                         5,765
Accrued interest receivable                                                  1,813                         1,809
Goodwill                                                                     5,809                         3,960
All other intangibles                                                          886                           366

Other assets                                                                 9,332                         7,503

        Total assets                                                      $421,920                      $395,556


LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
    Demand (non-interest bearing)                                          $41,922                       $30,386
    Regular savings, NOW and money market accounts                         181,722                       160,736
    Certificates and time deposits of $100,000 or more                      24,657                        28,215
    Other time deposits                                                     83,333                        88,910

        Total deposits                                                     331,634                       308,247

Securities sold under agreements to repurchase                              12,891                        12,124
Notes payable - Federal Home Loan Bank                                      35,652                        35,736
Other liabilities                                                            1,722                         1,409

        Total liabilities                                                  381,899                       357,516

Commitments and contingent liabilities (Note 15)


STOCKHOLDERS' EQUITY

Common stock, $2.50 par value, 5,000,000 shares authorized,
    2,401,695 shares issued                                                  6,004                         6,004
Surplus                                                                      4,418                         4,418
Undivided profits                                                           34,981                        32,353
Accumulated other comprehensive income                                          10                           975
Treasury stock, at cost; 183,067 shares at December 31, 2004 and
    192,601 shares at December 31, 2003                                     (5,392)                       (5,710)

        Total stockholders' equity                                          40,021                        38,040

        Total liabilities and stockholders' equity                        $421,920                      $395,556


</TABLE>


See accompanying notes to consolidated financial statements.


                                    - 16 -


<PAGE>


<TABLE>

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

<CAPTION>

                                                                               Years ended December 31,

                                                                        2004              2003             2002

<S>                                                                   <C>              <C>               <C>
INTEREST AND DIVIDEND INCOME

Interest and fees on loans                                            $11,681          $12,550           $14,646
Interest on federal funds sold                                            132              148               210
Interest on balances due from depository institutions                      68              138               148
Interest on securities available for sale                               7,132            6,253             6,364
Interest on investment securities                                         446              503               532
Dividends on FRB and FHLB stock                                            92              113               146

    Total interest and dividend income                                 19,551           19,705            22,046

INTEREST EXPENSE

Interest on deposits:
    Regular savings, NOW and money market accounts 1,272                1,417            2,102
    Certificates and time deposits of $100,000 or more591                 817              925
    Other time deposits                                                 1,937            2,669             3,375
Interest on securities sold under agreements to repurchase                589              594               606
Interest on other borrowings                                            1,087            1,219             1,292

    Total interest expense                                              5,476            6,716             8,300

NET INTEREST INCOME                                                    14,075           12,989            13,746
Provision for loan losses                                                 500            1,290             1,165

NET INTEREST INCOME AFTER PROVISION
    FOR LOAN LOSSES                                                    13,575           11,699            12,581

OTHER INCOME

Income from fiduciary activities                                          171              178               174
Service charges on deposit accounts                                       783              724               622
Net gain on sales or calls of securities                                  416               30                33
Insurance commissions                                                     703              761               842
Other income                                                              536              621               616

    Total other income                                                  2,609            2,314             2,287

OTHER EXPENSES

Salaries and employee benefits                                          5,241            4,800             4,311
Occupancy expense, net                                                    690              600               501
Furniture and equipment expense                                           494              471               455
External data processing expense                                        1,091              955               924
Other expense                                                           2,427            2,406             2,228

    Total other expenses                                                9,943            9,232             8,419

INCOME BEFORE INCOME TAXES                                              6,241            4,781             6,449
Provision for income taxes                                              1,732            1,128             1,817

NET INCOME                                                             $4,509           $3,653            $4,632

Earnings per share
    Basic                                                               $2.04            $1.65             $2.05
    Diluted                                                              2.03             1.64              2.03


</TABLE>


See accompanying notes to consolidated financial statements.


                                    - 17 -


<PAGE>


<TABLE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)

<CAPTION>
                                                                                   Accumulated
                                                                                      Other                      Total
                                              Common                   Undivided  Comprehensive  Treasury    Stockholders'
                                               Stock       Surplus      Profits   Income/(Loss)    Stock        Equity


<S>                                           <C>          <C>         <C>             <C>       <C>           <C>
Balance at December 31, 2001                  $6,004       $4,418      $27,608         $481      ($3,862)      $34,649
Comprehensive income:
    Net income                                    --           --        4,632           --           --         4,632
    Other comprehensive income                    --           --           --          818           --           818

        Total comprehensive income                                                                               5,450

Treasury stock purchased (85,886 shares)          --           --           --           --       (2,544)      (2,544)

Treasury stock sold (exercise of stock options
    and dividend reinvestment plan -
    33,948 shares), including tax benefit         --           --         (144)          --        1,052           908

Cash dividends ($0.70 per share)                  --           --       (1,579)          --           --       (1,579)

Balance at December 31, 2002                   6,004        4,418       30,517        1,299       (5,354)       36,884
Comprehensive income:
    Net income                                    --           --        3,653           --           --         3,653
    Other comprehensive loss                      --           --           --         (324)          --          (324)

        Total comprehensive income                                                                               3,329

Treasury stock purchased (37,656 shares)          --           --           --           --       (1,001)      (1,001)

Treasury stock sold (exercise of stock
    options and dividend reinvestment plan -
    21,546 shares), including tax benefit         --           --         (132)          --          645           513

Cash dividends ($0.76 per share)                  --           --       (1,685)          --           --       (1,685)

Balance at December 31, 2003                   6,004        4,418       32,353          975       (5,710)       38,040
Comprehensive income:
    Net income                                    --           --        4,509           --           --         4,509
    Other comprehensive loss                      --           --           --         (965)          --          (965)

        Total comprehensive income                                                                               3,544

Treasury stock purchased (9,815 shares)           --           --           --           --         (253)        (253)

Treasury stock sold (exercise of stock
    options and dividend reinvestment plan -
    19,349 shares), including tax benefit         --           --         (110)          --          571           461

Cash dividends ($0.80 per share)                  --           --       (1,771)          --           --       (1,771)

Balance at December 31, 2004                  $6,004       $4,418      $34,981          $10      ($5,392)      $40,021


</TABLE>


See accompanying notes to consolidated financial statements.


                                    - 18 -


<PAGE>


<TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<CAPTION>

                                                                                        Years ended December 31,

                                                                                2004              2003              2002

<S>                                                                            <C>               <C>              <C>
Cash flows from operating activities:
    Net income                                                                 $4,509            $3,653           $4,632
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Increase in interest receivable                                                (4)               (8)            (140)
    (Increase)/decrease in other assets                                          (812)             (184)             462
    Increase/(decrease) in other liabilities                                      108               (94)            (318)
    Deferred income tax (benefit)/expense                                         (49)              186             (308)
    Depreciation and other amortization expense                                   581               531              542
    Net increase in cash surrender value of bank-owned life insurance            (206)             (263)            (218)
    Amortization of premiums/discounts on securities, net                         861             1,440              388
    Net gain on securities transactions                                          (416)              (30)             (33)
    Provision for loan losses                                                     500             1,290            1,165
    Tax benefit from exercise of stock options                                     12                15               48

        Net cash provided by operating activities                               5,084             6,536            6,220

Cash flows from investing activities:
    Net cash and cash equivalents provided by branch acquisitions              33,058                --               --
    Purchase of investment securities                                          (2,190)           (2,852)          (2,124)
    Purchase of securities available for sale                                (116,844)         (115,460)        (104,966)
    Net redemption/(purchase) of FRB and FHLB stock                                 4               172             (308)
    Proceeds from maturities, paydowns and calls of investment securities       3,301             2,699            2,499
    Proceeds from maturities, paydowns and calls of
        securities available for sale                                          59,319            93,587           82,255
    Proceeds from sale of securities available for sale                        30,738               586            1,021
    Net (increase)/decrease in loans                                          (11,869)           13,009            7,945
    Purchase of bank-owned life insurance                                          --                --           (2,850)
    Purchases of premises and equipment, net                                     (435)           (2,161)            (958)

        Net cash used by investing activities                                  (4,918)          (10,420)         (17,486)

Cash flows from financing activities:
    Net (decrease)/increase in deposits                                       (18,315)            7,631           21,389
    Increase/(decrease) in securities sold under agreement to repurchase          767            (1,446)           1,941
    Increase in notes payable - Federal Home Loan Bank                          5,000             1,000            8,500
    Decrease in notes payable - Federal Home Loan Bank                         (5,084)           (4,383)          (2,370)
    Treasury stock purchased                                                     (253)           (1,001)          (2,544)
    Cash dividends paid on common stock                                        (1,771)           (1,685)          (1,579)
    Proceeds from the sale of treasury stock                                      449               498              860

        Net cash (used)/provided by financing activities                      (19,207)              614           26,197

Net (decrease)/increase in cash and cash equivalents                          (19,041)           (3,270)          14,931
Cash and cash equivalents beginning of year                                    31,390            34,660           19,729

Cash and cash equivalents end of year                                         $12,349           $31,390          $34,660

Supplemental disclosures of cash flow information:
    Cash paid during the year:
        Interest                                                               $5,497            $6,761           $8,406
        Income taxes                                                            1,594             1,089            2,120

Supplemental schedule of noncash activities:
    Fair value of assets acquired in branch acquisitions                       $6,796               $--              $--
    Fair value of liabilities assumed in branch acquisitions                   41,702                --               --
    Net reduction in loans resulting from the transfer to real estate owned        --                20               80
    Decrease in taxes payable due to exercise of non-qualified stock options       12                15               49


</TABLE>


                                    - 19 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting and reporting policies of CNB Bancorp, Inc. (Parent
Company), City National Bank and Trust Company (subsidiary Bank) and Hathaway
Agency, Inc. (subsidiary Insurance Agency) conform to accounting principles
generally accepted in the United States of America and general practices
within the banking and insurance fields. The following is a summary of the
significant policies used in the preparation of the consolidated financial
statements.

     BASIS OF PRESENTATION - The Parent Company is a financial holding
company whose principal activity is the ownership of all outstanding shares
of the subsidiary Bank's and Insurance Agency's stock. The subsidiary Bank is
a commercial bank providing community banking services to individuals, small
businesses and local municipal governments in the counties of Fulton,
Saratoga, Hamilton and Montgomery, New York. The subsidiary Insurance Agency
primarily serves Fulton County providing various insurance products to
businesses and individuals. Management makes operating decisions and assesses
performance based on an ongoing review of the subsidiary Bank's and Insurance
Agency's community operations. The consolidated financial statements include
the accounts of the Parent Company and its wholly-owned subsidiaries
(referred to together as the "Company") after elimination of all significant
intercompany transactions.

     SECURITIES - Management determines the appropriate classification of
securities at the time of purchase. If management has the positive intent and
ability to hold debt securities to maturity, they are classified as
investment securities and are stated at amortized cost. If securities are
purchased for the purpose of selling them in the near term, they are
classified as trading securities and are reported at fair value with
unrealized holding gains and losses reflected in current earnings. All other
marketable securities are classified as securities available for sale and are
reported at the fair value, with net unrealized gains or losses reported, net
of income taxes, as a separate component of stockholders' equity. A decline
in the fair value of any security below cost that is deemed other than
temporary is charged to earnings resulting in the establishment of a new cost
basis for the security.
     Nonmarketable equity securities, such as Federal Reserve Bank stock and
Federal Home Loan Bank stock, are carried at cost. These investments are
required for membership.
     Gains and losses on the disposition of securities are based on the
amortized cost of the specific security sold. Amortization of premiums and
accretion of discounts are recognized in interest income on a level-yield
basis to the earlier of call or maturity date. At December 31, 2004 and 2003,
the Company did not have any securities classified as trading securities.

     NET LOANS RECEIVABLE - Loans receivable are reported at the principal
amount outstanding, net of unearned income, net deferred loan fees and costs,
and the allowance for loan losses. Unearned income and net deferred loan fees
and costs are accreted to income using an effective interest method.
     When, in the opinion of management, the collection of interest and/or
principal is in doubt, a loan is categorized as non-accrual. Generally, loans
past due greater than 90 days are categorized as non-accrual. Thereafter, no
interest is taken into income until received in cash or until such time as
the borrower demonstrates the ability to make scheduled payments of interest
and principal.
     Management considers a loan to be impaired if, based on current
information, it is probable that the subsidiary Bank will be unable to
collect all scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. When a loan is considered to be
impaired, the amount of the impairment is measured based on the present value
of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market price or
the fair value of collateral if the loan is collateral dependent. Management
excludes large groups of smaller balance homogeneous loans such as
residential mortgages and consumer loans which are collectively evaluated.
Impairment losses, if any, are recorded through a charge to the provision for
loan losses.

     ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained
at a level estimated by management to provide adequately for probable losses
inherent in the loan portfolio. The allowance is increased by provisions for
loan losses charged to operating expense and decreased by loan charge-offs
net of recoveries. Adequacy of the allowance and determination of the amount
to be charged to operating expense are based on an evaluation of the loan
portfolio, its overall composition, size of the individual loans,
concentration by industry, past due and non-accrual loan statistics,
historical loss experience and general economic conditions in the Company's
market area.
     While management uses all of the above information to recognize losses
on loans, future additions to the allowance may be necessary based on changes
in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Company's
allowance for losses on loans. Such agencies may require the Company to
recognize additions to the allowance based on their judgments of information
available to them at the time of their examination which may not be presently
available.

                                    - 20 -


<PAGE>


     RETIREMENT PLANS - Another critical accounting policy relates to
the Company's retirement plans. Liabilities under these plans rely on
estimates of future salary increases, numbers of employees and employee
retention, discount rates and long term rates of investment return. Changes
in financial markets or the economy may result in changes in assumptions that
may materially affect the Company's consolidated financial statements.

     OTHER REAL ESTATE OWNED - Included in other assets is other real estate
owned which consists of properties acquired through foreclosure or by
acceptance of a deed in lieu of foreclosure. These assets are recorded at the
lower of the recorded investment in the loan or fair value of the property,
less any estimated costs of disposal. Loan losses arising from the
acquisition of such assets are charged to the allowance for loan losses and
subsequent valuation write-downs are charged to non-interest expense.
Operating costs associated with the properties are charged to expense as
incurred. Gains on the sale of other real estate owned are included in income
when title has passed and the sale has met the minimum down payment
requirements prescribed by generally accepted accounting principles.

     BANK PREMISES AND EQUIPMENT - These assets are reported at cost less
accumulated depreciation. Depreciation is charged to operating expense over
the useful lives of the assets using the straight line method. Maintenance
and repairs are charged to operating expense as incurred.

     GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill represents the excess of
the purchase price over the fair value of the net assets acquired for
business combinations accounted for using purchase accounting. FASB Statement
No. 142, "Goodwill and Other Intangible Assets", requires acquired intangible
assets (other than goodwill) to be amortized over their useful economic life,
while goodwill and any acquired intangible asset with an indefinite economic
life would not be amortized, but would be reviewed for impairment on an
annual basis. Statement No. 142 also requires additional disclosures
pertaining to goodwill and intangible assets. Accordingly, the Company
adopted the Statement on January 1, 2002. The Company performed the required
annual impairment tests of goodwill during the quarter ended March 31, 2004.
Based on management's evaluation, the Company determined that no impairment
losses were required to be recognized as of the testing date. The Company's
core deposit intangible and other intangibles are being amortized on a
straight line basis over their estimated useful economic life of eight to
fifteen years.

     INCOME TAXES - Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company's policy is that deferred tax assets are reduced by a valuation
reserve if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In
considering if it is more likely than not that some or all of the deferred
tax assets will not be realized, the Company considers temporary taxable
differences, historical taxes and estimates of future taxable income.

     EARNINGS PER COMMON SHARE - Basic earnings per share ("EPS") is computed
by dividing income available to common stockholders (net income less
dividends on perferred stock, if any) by the weighted average number of
common shares outstanding for the period. Entities with complex capital
structures must also present diluted EPS which reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common shares that then shared in the
earnings of the entity, such as the Company's stock options.

     STOCK-BASED COMPENSATION - The Company accounts for stock options in
accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees". Accordingly, compensation
expense is recognized only if the exercise price of the option is less than
the fair value of the underlying stock at the grant date. FASB Statement No.
123, "Accounting for Stock-Based Compensation", encourages entities to
recognize the fair value of all stock-based awards on the date of grant as
compensation expense over the vesting period. Alternatively, Statement No.
123 allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma disclosures of net income and earnings per share as if
the fair-value-based method defined in Statement No. 123 had been applied.
The Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosures required by Statement No. 123.
     On October 20, 1998, the Company's shareholders approved the CNB
Bancorp, Inc. Stock Option Plan (Stock Option Plan) which permits the
issuance of options to selected employees. The primary objective of the Stock
Option Plan is to provide employees with a proprietary interest in the
Company and as an incentive to encourage such persons to remain with the
Company. On April 16, 2002, the Company's shareholders approved the Long-Term
Incentive Compensation Plan which pro-


                                    - 21 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


vided the Company's Compensation Committee with the authority to grant stock
options to employees, non-employee directors and consultants of the Company
and its subsidiaries. Under the Stock Option Plan, 240,000 shares of
authorized but unissued common stock are reserved for issuance upon option
exercises. Under the Long-Term Incentive Compensation Plan, 225,000 shares of
authorized but unissued common stock are reserved for issuance upon option
exercises. The Company also has the alternative to fund both plans with
treasury stock. Options under the plans may be either non-qualified stock
options or incentive stock options. Each option entitles the holder to
purchase one share of common stock at an exercise price equal to the fair
market value on the date of the grant. Options expire no later than ten years
following the date of the grant.
     On June 24, 2002, 40,550 options were awarded at an exercise price of
$29.43 per share. These options have a ten-year term with twenty-five percent
vesting each year starting one year from the date of the grant. On June 30,
2003, 41,800 options were awarded at an exercise price of $25.75 per share.
These options have a ten-year term with twenty-five percent vesting each year
starting one year from the date of the grant. On October 26, 2004, 44,300
options were awarded at an exercise price of $26.325 per share. These options
have a ten-year term with twenty-five percent vesting each year starting one
year from the date of the grant.
     The fair value of each option grant, excluding the options granted in
connection with the acquisition of Adirondack, is estimated on the date of
the grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in fiscal 2004, 2003 and 2002:
dividend yield of 3.09%, 2.84% and 2.41%, respectively; expected volatility
of 15.2%, 15.7% and 15.8%, respectively; risk free interest rate of 3.30%,
2.27% and 4.19%, respectively; and an average life of five years for grants
awarded in all three years. Based on the aforementioned assumptions, the
Company has estimated that the fair value of the options granted on October
26, 2004, June 30, 2003 and June 24, 2002 was $3.14, $2.84 and $4.71,
respectively.
     The Company applies APB Opinion No. 25 in accounting for its stock
options and, accordingly, no compensation cost has been recognized for its
stock options in the consolidated financial statements. Had the Company
determined compensation cost based on the estimated fair value at the grant
date for its stock options under Statement No. 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below for the years ended December 31 (in thousands, except per
share data):

                                                   2004      2003       2002

Net income, as reported                           $4,509     $3,653    $4,632
Deduct: Total stock-based employee
    compensation expense determined under fair
    value based method for all awards,
    net of related tax effects                       103        132       161

Pro forma net income                              $4,406     $3,521    $4,471

Basic earnings per share:
     As reported                                   $2.04      $1.65     $2.05
     Pro forma                                      1.99       1.59      1.98
Diluted earnings per share:
     As reported                                   $2.03      $1.64     $2.03
     Pro forma                                      1.98       1.58      1.96


     DIVIDEND RESTRICTIONS - Certain restrictions exist regarding the ability
of the subsidiary Bank to transfer funds to the Company in the form of cash
dividends. The approval of the Comptroller of the Currency is required to pay
dividends in any calendar year in excess of the subsidiary Bank's earnings
retained in the current year plus retained net profits, as defined, for the
preceding two years.

     TRUST ASSETS - Assets held in fiduciary or agency capacities for
customers of the subsidiary Bank are not included in the accompanying
consolidated statements of condition as such assets are not assets of the
subsidiary Bank. Trust assets under management totaled $31.0 million as of
December 31, 2004.

     CASH AND CASH EQUIVALENTS - Cash and cash equivalents as shown in the
consolidated statements of condition and consolidated statements of cash
flows consists of cash, due from banks and federal funds sold.

     FINANCIAL INSTRUMENTS - The Company is a party to certain financial
instruments with off-balance sheet risk, such as commitments to extend
credit, unused lines of credit, standby letters of credit and commercial
letters of credit. The Company's policy is to record such instruments when
funded.

     USE OF ESTIMATES - The preparation of the consolidated financial
statements, in conformity with accounting principles generally accepted in
the United States of America, requires management to make estimates and
assumptions that affect the


                                    - 22 -


<PAGE>


reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

     RECENT ACCOUNTING PRONOUNCEMENTS - In December 2004, the Financial
Accounting Standards Board ("FASB") issued Statement No. 123 (revised)
Share-Based Payment ("FAS 123(R)"), the accounting standard requiring the
expensing of stock options for public companies. FAS 123(R) is now scheduled
to be mandatory for public companies at the beginning of the first fiscal
quarter ending after June 15, 2005. FAS 123(R) covers a broad range of
stock-based compensation arrangements including stock options, stock
appreciation rights, restricted stock and restricted stock units as well as
employee stock purchase plans. FAS 123(R) requires companies to expense
share-based payments based on fair value as of the date of the grant and
requires all companies to expense stock options and other awards. FAS 123(R)
is not expected to have a material effect on the Company's financial position
or results of operations.

     RECLASSIFICATIONS - Amounts in the prior years' financial statements are
reclassified, whenever necessary, to conform to the presentation in the
current years' financial statements.


Note 2: ACQUISITION

     On July 30, 2004, the subsidiary Bank acquired two branches from HSBC
BANK USA. These branches are located in Amsterdam, New York and Speculator,
New York. The acquisition was accounted for in accordance with FASB Statement
No. 141, "Business Combinations". The purchase agreement called for a premium
of $2.4 million which will be amortized for tax purposes using the
straight-line method over fifteen years. At the time of the acquisition, the
fair value of assets acquired was $39.3 million and the fair value of
liabilities assumed was $41.7 million. The core deposit intangible portion of
the purchase premium was $0.6 million which will be amortized over eight
years to expense using the straight-line method. The remaining $1.8 million
portion of the purchase premium was considered to be goodwill, which will be
evaluated annually to determine if any impairment loss is required to be
recognized.
     On July 1, 2000, the Company acquired Hathaway Agency, Inc. (Hathaway),
a local insurance agency. The acquisition was accounted for using purchase
accounting in accordance with APB Opinion No. 16. Under purchase accounting,
the purchase price is allocated to the respective assets acquired and
liabilities assumed based on their fair values. The acquisition of Hathaway
resulted in approximately $300,000 in excess of cost over net assets acquired
("goodwill"). Covenant not to compete payments are being expensed as paid
over the five-year period of the covenant.


Note 3: EARNINGS PER SHARE

     The following sets forth certain information regarding the calculation
of basic and diluted earnings per share (EPS) for the years ended December 31
(in thousands, except per share data):

                                                  2004        2003        2002

Net income                                       $4,509     $3,653      $4,632
Weighted average common shares outstanding        2,214      2,216       2,257
Dilutive effect of potential common shares
   related to stock based compensation plans          8         10          24

Weighted average common shares including
   potential dilution                             2,222      2,226       2,281

Basic earnings per share                          $2.04      $1.65       $2.05
Diluted earnings per share                        $2.03      $1.64       $2.03

     There were 70,650, 73,150 and 74,400 anti-dilutive stock options
outstanding at December 31, 2004, 2003 and 2002, respectively.


Note 4: RESERVE REQUIREMENTS

     The subsidiary Bank is required to maintain certain reserves of cash
and/or deposits with the Federal Reserve Bank. The amount of this reserve
requirement, included in cash and cash equivalents, was approximately
$6,102,000 and $4,738,000 at December 31, 2004 and 2003, respectively.


                                    - 23 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 5: SECURITIES

     The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of securities available for sale as of December 31 are
as follows (in thousands):


<TABLE>

<CAPTION>
                                                                                   2004

                                                                           Gross            Gross           Estimated
                                                       Amortized        Unrealized       Unrealized           Fair
                                                         Cost              Gains           Losses             Value

<S>                                                      <C>                 <C>                <C>          <C>
Debt securities available for sale:
  U.S. Treasury securities                               $2,050              $13                $7           $2,056
  Obligations of U.S. Government agencies               129,755              398               664          129,489
  Collateralized mortgage obligations:
     U.S. Government agencies                            20,856               27               261           20,622
  Other corporate securities                              6,301              146                10            6,437
  Obligations of state and political subdivisions        27,878            1,316                30           29,164

     Total debt securities available for sale           186,840            1,900               972          187,768

Equity securities available for sale:
  Corporate securities                                    1,210              198                --            1,408

     Total equity securities available for sale           1,210              198                --            1,408

         Total securities available for sale           $188,050           $2,098              $972         $189,176


</TABLE>


<TABLE>

<CAPTION>

                                                                                   2003

                                                                           Gross            Gross           Estimated
                                                       Amortized        Unrealized       Unrealized           Fair
                                                         Cost              Gains           Losses             Value

<S>                                                      <C>                 <C>                <C>          <C>
Debt securities available for sale:
  U.S. Treasury securities                               $2,143              $54               $--           $2,197
  Obligations of U.S. Government agencies               120,026            1,170               442          120,754
  Collateralized mortgage obligations:
     U.S. Government agencies                             6,173                5                 9            6,169
     Corporate securities                                   277               --                 5              272
  Other corporate securities                              7,172              303                60            7,415
  Obligations of state and political subdivisions        23,693            1,307                11           24,989

     Total debt securities available for sale           159,484            2,839               527          161,796

Equity securities available for sale:
  Corporate securities                                    1,210              245                --            1,455

     Total equity securities available for sale           1,210              245                --            1,455

         Total securities available for sale           $160,694           $3,084              $527         $163,251


</TABLE>


     The amortized cost and estimated fair value of debt securities available
for sale at December 31, 2004, by contractual maturity, are shown in the
accompanying table (in thousands). Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties. Collateralized
mortgage obligations are included in this schedule based on the contractual
maturity date.


                                                      Amortized    Estimated
                                                         Cost     Fair Value

 Due in one year or less                                $8,635      $8,626
 Due after one year through five years                  77,513      77,337
 Due after five years through ten years                 35,715      36,528
 Due after ten years                                    64,977      65,277

      Total debt securities available for sale        $186,840    $187,768


     Proceeds from sales of securities available for sale during 2004, 2003
and 2002 were $30,738,000, $586,000 and $1,021,000, respectively. Gross gains
in 2004, 2003 and 2002 were $504,000, $30,000 and $31,000, respectively.
Gross losses in 2004 were $88,000. There were no losses in 2003 or 2002.
     The fair value of all securities available for sale pledged to secure
public deposits and for other purposes as required or permitted by law at
December 31, 2004 and 2003 were $107,768,000 and $87,030,000, respectively.
Actual deposits secured by these


                                    - 24 -


<PAGE>


these securities at December 31, 2004 and 2003 were $12,891,000 and
$12,124,000, respectively.

     The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of investment securities as of December 31 are as
follows (in thousands):

                                                      2004

                                                Gross       Gross    Estimated
                                 Amortized   Unrealized  Unrealized    Fair
                                   Cost         Gains      Losses      Value

Obligations of states
   and political subdivisions      $6,587        $220           $3    $6,804
Corporate securities                1,000          --           --     1,000

    Total investment securities    $7,587        $220           $3    $7,804



                                                      2003

                                               Gross       Gross    Estimated
                                 Amortized   Unrealized  Unrealized    Fair
                                   Cost         Gains      Losses      Value

Obligations of states and
   political subdivisions          $7,711        $323           $4    $8,030
Corporate securities                2,000          --           --     2,000

    Total investment securities    $9,711        $323           $4   $10,030

     The amortized cost and estimated fair value of investment securities at
December 31, 2004, by contractual maturity, are shown in the accompanying
table (in thousands). Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations
with or without call or prepayment penalties.


                                               Amortized         Estimated
                                                 Cost           Fair Value

   Due in one year or less                       $1,927            $1,936
   Due after one year through five years          3,177             3,304
   Due after five years through ten years         1,019             1,080
   Due after ten years                            1,464             1,484

        Total investment securities              $7,587            $7,804


     There were no sales of investment securities during 2004, 2003 and 2002.
In 2002, municipal issues called at premiums produced gains of $2,000. There
were no municipal issues called at premiums in 2004 and 2003.
     The amortized cost of all investment securities pledged to secure public
deposits as required by law at December 31, 2004 and 2003 were $1,979,000 and
$2,698,000, respectively. Actual deposits secured by these securities at
December 31, 2004 and 2003 were $1,899,000 and $2,676,000, respectively.

     The estimated fair values and unrealized losses on securities as of
December 31, 2004 are as follows (in thousands):


<TABLE>

<CAPTION>
                                                 Less than 12 months       12 months or longer              Total

                                                          Unrealized                 Unrealized                Unrealized
                                               Fair Value   Losses       Fair Value    Losses      Fair Value    Losses

<S>                                               <C>             <C>           <C>         <C>        <C>            <C>
Securities available for sale:
   U.S. Treasury securities                       $1,031          $7           $--         $--         $1,031         $7
   Obligations of U.S. Government agencies        75,532         446        12,319         218         87,851        664
   Collateralized mortgage obligations:
     U.S. Government agencies                     18,645         261            --          --         18,645        261
   Other corporate securities                        940          10            --          --            940         10
   Obligations of states and political
     subdivisions                                  3,160          30            --          --          3,160         30

   Total temporarily impaired securities
     available for sale                          $99,308        $754       $12,319        $218       $111,627       $972

Investment securities:
   Obligations of states and political
     subdivisions                                   $195          $2           $34          $1           $229         $3

   Total temporarily impaired investment
     securities                                     $195          $2           $34          $1           $229         $3

</TABLE>


                                    - 25 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     Securities with unrealized losses at December 31, 2004 are primarily
related to current market rates. Unrealized losses of periods exceeding
twelve months are also related to longer maturities of mortgage-backed
securities with credit ratings of A or better.


Note 6: LOANS

     Loans are comprised of the following at December 31 (in thousands):


                                             2004             2003

Commercial and commercial real estate       $56,850           $49,466
Residential real estate                      77,700            71,114
Installment                                  62,763            64,567

     Total loans                           $197,313          $185,147


     Non-accrual loans at December 31, 2004, 2003 and 2002 were $561,000,
$1,374,000 and $1,620,000, respectively. The difference between the interest
collected on these loans and recognized as income, and the amounts which
would have been accrued is not significant. There were loans ninety days past
due and still accruing interest of $159,000, $273,000 and $67,000 as of
December 31, 2004, 2003 and 2002, respectively.
     As of December 31, 2004 and 2003, respectively, there were $561,000 and
$1,374,000 of commercial loans that were placed on non-accrual status and
were classified as impaired loans. As of December 31, 2004 and 2003, $112,000
and $371,000 of the allowance for loan losses was allocated to the impaired
loans, respectively. During 2004, 2003 and 2002, the average balance of
impaired loans was $655,000, $1,876,000 and $665,000, respectively. Interest
income of $31,000 and $58,000 was recognized on impaired loans during 2003
and 2002. No interest income was recognized on impaired loans during 2004.
     The subsidiary Bank's primary business area consists of the Counties of
Fulton, Saratoga, Hamilton and Montgomery and, therefore, there are certain
concentrations of loans and loan commitments within that geographic area.
Accordingly, a substantial portion of its debtors' ability to honor their
contracts is dependent upon the economy of this region. At December 31, 2004
and 2003, the only area of industry concentration that existed within the
subsidiary Bank were to the leather and leather-related industries. Loans
outstanding to this segment were $1.2 million as of December 31, 2004 and
$2.6 million as of December 31, 2003. These figures represent 0.6% and 1.4%
of gross loans outstanding at the end of each respective year. Outstanding
commitments to this segment were $1.4 million as of December 31, 2004 and
$0.6 million as of December 31, 2003. These figures represent 3.9% and 2.4%
of the total commitments outstanding at the end of each respective year.
     In the ordinary course of business, the subsidiary Bank has made loans
to certain directors and executive officers of the Company, its subsidiaries,
and other related parties. Such transactions are on substantially the same
terms, including interest rates and collateral on loans, as comparable
transactions made to others. Total loans to these persons and companies on
December 31, 2004 and 2003 amounted to $4,428,000 and $3,832,000,
respectively. During 2004, $3,224,000 of new loans were made and repayments
totaled $2,628,000.


Note 7: ALLOWANCE FOR LOAN LOSSES

     A summary of the changes in the allowance for loan losses is as follows
(in thousands):


                                        2004         2003          2002

Balance at beginning of year           $2,418       $3,083        $2,506
Provision charged to income               500        1,290         1,165
Loans charged off                        (903)      (2,122)         (723)
Recoveries of loans charged off           316          167           135

Balance at end of year                 $2,331       $2,418        $3,083


Note 8: PREMISES AND EQUIPMENT

Premises and equipment at December 31
   are as follows (in thousands):                 2004             2003

Land                                            $1,354            $1,354
Premises and leasehold improvements              5,114            5,026
Equipment, furniture and fixtures                3,028            3,537
                                                 9,496            9,917
Less: Accumulated depreciation                  (3,716)          (4,152)

     Total premises and equipment               $5,780           $5,765


     Depreciation expense amounted to $429,000, $392,000 and $382,000 for the
years 2004, 2003 and 2002, respectively.


                                    - 26 -


<PAGE>


Note 9: INTANGIBLE ASSETS AND GOODWILL
     Intangible assets at December 31 are as follows (in thousands):

<TABLE>

<CAPTION>

                                                      2004                          2003

                                         Gross Carrying   Accumulated  Gross Carrying   Accumulated
Amortized intangible assets:                 Amount      Amortization      Amount      Amortization

<S>                                           <C>            <C>             <C>            <C>
 Core deposit intangible                      $647           $39             $--            $--
 Covenant not to compete                       325           292             325            227
 Customer list                                 350           105             350             82

     Total amortized intangible assets      $1,322          $436            $675           $309


</TABLE>


The aggregate amortization expense for the years ended December 31, 2004 and
2003 was $127,000 and $88,000, respectively.

Estimated amortization expense:
     For year ended December 31, 2005                        $148
     For year ended December 31, 2006                         116
     For year ended December 31, 2007                         116
     For year ended December 31, 2008                         116
     For year ended December 31, 2009                         116


The changes in the carrying amount of goodwill for the year ended December
31, 2004 is as follows:

Balance as of December 31, 2003                            $3,960
Goodwill acquired during year                               1,849
Impairment losses                                              --
Balance as of December 31, 2004                            $5,809


     Goodwill acquired during 2004 relates to the acquisition of the branches
from HSBC BANK USA in August 2004. There were no impairment losses to write
down in 2003 or 2004.


Note 10: TIME DEPOSITS

     The approximate amount of contractual  maturities of time deposit accounts
for the years subsequent to December 31, 2004 are as follows (in thousands):

               Years ended December 31,

                         2005                          $73,559
                         2006                           15,666
                         2007                            7,720
                         2008                            6,840
                         2009                            4,205

                         Total                        $107,990


Note 11: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

     For the years ended December 31, 2004, 2003 and 2002, outstanding
balances of securities sold under agreements to repurchase were $12,891,000,
$12,124,000 and $13,570,000, respectively. The average rate being paid on
these repurchase agreements at December 31, 2004, 2003 and 2002 was 4.62%,
4.85% and 4.55%, respectively. For the years ended December 31, 2004, 2003
and 2002 the average balance of Securities Sold Under Agreements to
Repurchase was $12,121,000, $12,081,000 and $12,436,000, respectively. The
highest month end balances for these borrowings during 2004, 2003 and 2002
were $14,206,000, $13,277,000 and $13,570,000, respectively. The average rate
paid for these borrowings during 2004, 2003 and 2002 was 4.86%, 4.92% and
4.87%, respectively.
     The underlying securities associated with customer repurchase agreements
are under the control of the subsidiary Bank. All customer repurchase
agreements, totaling $2,691,000, at December 31, 2004 matured within three
days. The underlying securities associated with repurchase agreements with
the Federal Home Loan Bank (FHLB) are held in a collateral account for our
account until maturity of the agreements. All FHLB repurchase agreements have
stated maturities of ten years or less.


                                    - 27 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table summarizes the FHLB repurchase agreements outstanding at
December 31, 2004:

                               Balance at            Interest Rate as of
    Maturity Date           December 31, 2004         December 31, 2004

     03/14/2005                  $2,000                    6.290%
     12/22/2005                   2,000                    5.210
     12/18/2007                   2,200                    5.622
     12/21/2010                   2,000                    4.890
     12/22/2010                   2,000                    5.080

                                $10,200


Note 12: NOTES PAYABLE - FEDERAL HOME LOAN BANK

     Information on the borrowings is summarized as follows (dollars in
thousands):


                    Floating Rate and Fixed Rate Advances

                        Balance at       Interest Rate as of
   Maturity Date     December 31, 2004     December 31, 2004    Call Date

    01/27/2005            $1,000               6.150%               *
    01/31/2005             5,000               2.510                *
    11/22/2005             2,000               5.920           02/22/2005
    12/13/2010             2,000               5.090           03/13/2005
    01/11/2011             2,000               4.600           01/11/2005
    01/11/2011             2,000               4.910           01/11/2005
    02/28/2011             1,000               4.460           02/28/2005
    03/08/2011             2,000               4.820           03/08/2005
    05/02/2011             2,000               4.720           01/30/2005
    11/28/2011             1,000               4.020           02/28/2005
    03/19/2012             2,000               4.410           03/18/2005
    04/18/2005*            2,000               2.100                *
    05/02/2005*            2,000               2.230                *
    06/15/2005*            2,000               2.443                *
    07/12/2005*            2,000               2.010                *
    07/15/2005*            1,000               2.110                *
    08/30/2005*            1,000               2.420                *
    10/31/2005*            1,000               2.230                *
    03/06/2006*            1,000               2.398                *
    05/23/2007*            1,500               2.540                *

          Total          $35,500

     *These borrowings are non-callable but retain a monthly or quarterly
repricing frequency to the current 1-month or 3-month LIBOR rate plus or
minus 0 to 18 basis points. The interest on these borrowings is calculated on
an actual/360-day basis and is payable monthly or quarterly to the Federal
Home Loan Bank depending on the repricing frequency.


                    Monthly Amortizing Fixed Rate Advances

                              Balance at            Interest Rate as of
   Maturity Date           December 31, 2004         December 31, 2004

   10/28/2005                  $    61                    5.228%
   10/28/2008                       91                    5.436

            Total              $   152


     These borrowings call for monthly payments of principal and interest of
approximately $8,000 per month. Interest on these advances is calculated on a
30/360 day basis.

     At December 31, 2004 and 2003, the subsidiary Bank had available lines
of credit with correspondent banks and the Federal Home Loan Bank of
$132,404,000 and $124,451,000, respectively. Advances on these lines are
secured by the subsidiary Bank's real estate mortgages, investment
securities, available-for-sale securities and Federal Home Loan Bank stock.
At December 31, 2004 and 2003, advances outstanding on these lines with the
Federal Home Loan Bank were $35,652,000 and $35,736,000, respectively.


                                    - 28 -


<PAGE>


Note 13: EMPLOYEE BENEFIT PLANS

     Pension Plan - The subsidiary Bank is a member of the New York State
Bankers Retirement System (the "System") and offers a non-contributory
defined benefit retirement plan to substantially all full-time employees.
Benefit payments to retired employees are based upon their length of service
and percentages of average compensation during the final three to five years
of employment. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected to be earned in
the future.
     The following table sets forth the plan's funded status as of a
September 30 measurement date, and the amounts recognized in the accompanying
consolidated financial statements (dollars in thousands).


                                                     2004        2003
Change in projected benefit obligation:
     Projected benefit obligation at
       beginning of year                           $5,357      $5,079
     Service cost                                     240         231
     Interest cost                                    301         311
     Benefits paid                                   (222)       (218)
     Expenses paid                                    (35)        (30)
     Assumption changes and other                     314         (16)

    Projected benefit obligation at end of year     5,955       5,357

Change in plan assets:
     Fair value of plan assets at
       beginning of year                            4,147       3,622
     Actual return/(loss) on plan assets              449         636
     Employer contribution                            241         137
     Benefits paid                                   (222)       (218)
     Expenses paid                                    (35)        (30)
     Fair value of plan assets at end of year       4,580       4,147
     Funded status                                 (1,375)     (1,210)
     Unrecognized net actuarial loss                1,670       1,545
     Unrecognized prior service cost                  249         264
     Unrecognized transition asset                     --          (1)

     Net amount recognized                           $544        $598

Amounts recognized in the consolidated
  statements of condition consist of:
     Prepaid pension cost                            $544        $598
     Accrued benefit cost                          (1,358)     (1,222)
     Intangible asset                                 249         264
     Accumulated other comprehensive loss
         (pre-tax basis)                            1,109         958

     Net amount recognized                           $544        $598


The following assumptions were used to determine projected benefit obligations
   as of September 30:

                                                    2004        2003

     Discount rate                                   5.50%       5.75%
     Rate of compensation increase                   3.00        3.00


                                                     2004        2003     2002

Components of net periodic pension cost:
     Service cost                                    $240        $231     $200
     Interest cost                                    301         311      271
     Expected return on plan assets                  (328)       (302)    (344)
     Amortization of loss from earlier periods         65          95       31
     Amortization of unrecognized prior service cost   17          17        6
     Amortization of unrecognized transition asset     --          (1)      (1)

     Net periodic pension cost                       $295        $351     $163


The following assumptions were used to determine  net periodic benefit cost
for the years ended September 30:
                                                     2004        2003     2002

     Discount rate                                   5.75%       6.25%    6.75%
     Expected return on plan assets                  8.00        8.00     8.50
     Rate of compensation increase                   3.00        4.00     4.00


                                    - 29 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     The Company contributed $241,000 to its pension plan in June 2004 and
expects to contribute $236,000 in 2005. The Company paid $222,000 in benefit
payments in 2004 and expects to pay approximately $317,000 in 2005. The
following table shows the expected payments for the years indicated:

                 Years ended December 31,

                           2006                $413,000
                           2007                 443,000
                           2008                 431,000
                           2009                 419,000
                        2010-14               2,013,000

Plan Assets:
The asset allocation of the pension plan at September 30 was as follows:

                                 2004           2003

     Equity securities           64.7%          59.7%
     Debt securities             34.9           34.5
     Other                        0.4            5.8

     Total                      100.0%         100.0%


Investment Policies

     The New York State Bankers Retirement System (the "System") was
established in 1938 to provide for the payment of benefits to employees of
participating banks. The System is overseen by a Board of Trustees who meet
quarterly and set the investment policy guidelines. The System utilizes two
investment management firms (which will be referred to as Firm I and Firm
II), each investing approximately 50% of the total portfolio. The System's
investment objective is to exceed the investment benchmarks in each asset
category. Each firm operates under a separate written investment policy
approved by the Trustees and designed to achieve an allocation approximating
60% invested in Equity Securities and 40% invested in Debt Securities. Each
Firm shall report at least quarterly to the Investment Committee and
semi-annually to the Board.

     Equities: The target allocation percentage for equity securities is 60%
but may vary from 50%-70% at the investment manager's discretion. Firm I is
employed for its expertise as a Value Manager. It is allowed to invest a
certain amount of the equity portfolio under its management in international
securities and to hedge the international securities so as to protect against
currency devaluations. The equities managed by Firm II are in a commingled
Large Cap Equity Fund. The Fund is invested in a diversified portfolio of
common or capital stocks, or bonds, debentures, notes, or preferred stocks
convertible into common or capital stocks, or in other types of equity
investments whether foreign or domestic. Short-term obligations of the U.S.
Government or other short-term investments may be purchased and held pending
the selection and purchase of suitable investments which meet the guidelines
above. Investments may include units of participation in any Fund established
within this Fund which consists of assets of the nature described in the
preceding paragraph.

     Fixed Income: For both investment portfolios, the target allocation
percentage for debt securities is 40% but may vary from 30%-50% at the
investment manager's discretion. The Fixed Income Portfolio managed by Firm I
operates with guidelines relating to types of debt securities, quality
ratings, maturities, and maximum single and sector allocations. The portfolio
may trade foreign currencies in both spot and forward markets to effect
securities transactions and to hedge underlying asset positions. The purchase
and sale of bond indices and short-term securities is permitted, however
purchases may not be used to leverage the portfolio. Currency transactions
may only be used to hedge 0-100% of currency exposure of foreign securities.
The Fixed Income managed by Firm II is in a commingled Fixed Income Fund.
This style of fixed income management focuses on high quality securities
drawn from various market sectors, including U.S. treasuries and government
sponsored agencies, sovereigns, supranationals, residential Mortgage Backed
Securities (MBS), corporates, Commercial Mortgage Backed Securities (CMBS),
Asset Backed Securities (ABS), and municipals as set forth in its guidelines
and the System's investment policy.

Expected Long-Term Rate-of-Return

     The expected long-term rate-of-return on plan assets reflects long-term
earnings expectations on existing plan assets and those contributions
expected to be received during the current plan year. In estimating that
rate, appropriate consideration was given to historical returns earned by
plan assets in the fund and the rates of return expected to be available for
reinvestment. Average rates of return over the past 1, 3, 5 and 10 year
periods were determined and subsequently adjusted to reflect current capital
market assumptions and changes in investment allocations.


                                    - 30 -


<PAGE>


Supplemental Executive Retirement Plan

     The subsidiary Bank has a Supplemental Executive Retirement Plan for key
management personnel. The subsidiary Bank's expense for the years ended
December 31, 2004, 2003 and 2002 was approximately $162,000, $62,000 and
$60,000, respectively.

Supplemental Life Insurance Plan

     The subsidiary Bank has also established a Supplemental Life Insurance
Plan/Split Dollar for all officers, vice president and above, with at least
ten years of service to the Company. Under the terms of this plan, upon the
death of a participant, the beneficiary receives an amount equal to three
times the final year's salary of the participant. The subsidiary Bank has
invested approximately $5.1 million for this coverage and is receiving an
annual tax free return. The cash surrender value of the bank-owned life
insurance is included in other assets and was approximately $6.3 million and
$6.0 million as of December 31, 2004 and December 31, 2003, respectively.

Profit Sharing Plan

     The subsidiary Bank has a non-contributory profit sharing plan under
which contributions are made by the subsidiary Bank to a separate trust for
the benefit of the subsidiary Bank's participating employees. Annual
contributions to the plan are determined by the board of directors of the
subsidiary Bank. Contributions are accrued during the year and are
distributed on December 31 of each year. The subsidiary Bank's contribution
to the plan for 2004, 2003 and 2002 was $175,000, $156,000 and $152,000,
respectively.
     Other than certain life insurance benefits which are provided to a
closed group of retirees, the Company does not provide post-retirement
benefits to employees. The costs associated with the life insurance to the
closed group of retirees is not significant in 2004, 2003 or 2002.


Note 14: STOCK BASED COMPENSATION

     A summary of the status of the Company's stock option plans as of December
31, 2004, 2003 and 2002 and changes during the years then ended is presented
below:


<TABLE>

<CAPTION>

                                                2004                          2003                        2002

                                          Weighted Average             Weighted Average             Weighted Average
                                        Shares     Exercise Price   Shares      Exercise Price    Shares     Exercise Price

<S>                                    <C>            <C>           <C>             <C>          <C>             <C>
Options:
     Outstanding at beginning of year  277,870        $26.27        247,761         $26.11       231,258         $25.32
     Granted                            44,300        26.325         41,800          25.75        40,550          29.43
     Exercised                          (6,635)        19.43         (9,334)         19.51       (22,047)         23.35
     Cancelled                          (5,650)        27.42         (2,357)         26.97        (2,000)         32.50

     Outstanding at year-end           309,885         26.41        277,870          26.27       247,761          26.11

     Exercisable at year-end           217,860        $26.26        206,595         $25.93       185,657         $25.08

</TABLE>


The following table summarizes information about the Company's stock options
at December 31, 2004:

                                              Weighted Average
     Exercise                                    Remaining
       Price          Outstanding              Contract Life      Exercisable

      $26.325             44,300                 9.8 years               --
        25.75             39,100                 8.5 years            9,775
        29.43             36,800                 7.5 years           18,400
        32.50             33,850                 6.5 years           33,850
        26.25            102,640                 4.3 years          102,640
        23.67             38,188                 3.8 years           38,188
        15.22             15,007                 3.7 years           15,007

                         309,885                                    217,860


                                    - 31 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 15: INCOME TAXES

     The following is a summary of the components of income tax expense for
the years ended December 31 (in thousands):

                                             2004         2003         2002

Current tax expense:
     Federal                                $1,533         $866       $1,861
     State                                     248           76          264

     Total current tax expense               1,781          942        2,125

Deferred tax expense (benefit):
     Federal                                   (40)         150         (249)
     State                                      (9)          36          (59)

     Total deferred tax expense (benefit)      (49)         186         (308)

Provision for income taxes                  $1,732       $1,128       $1,817

     The provision for income taxes is less than the amount computed by
applying the U.S. Federal income tax rate of 34% to income before taxes as
follows (in thousands):


<TABLE>

<CAPTION>
                                                            2004                   2003                    2002

                                                                  % of                   % of                    % of
                                                                 Pretax                 Pretax                  Pretax
                                                     Amount      Income      Amount     Income      Amount      Income

<S>                                                  <C>         <C>         <C>          <C>      <C>          <C>
Tax expense at statutory rate                        $2,122      34.0%       $1,626       34.0%    $2,193       34.0%
Increase (decrease) resulting from:
     Tax-exempt interest income                        (519)     (8.3)         (525)     (11.0)      (533)      (8.2)
     State tax expense, net of federal deductions       156       2.5            72        1.5        135        2.1
     Interest expense incurred to carry
        tax-exempt bonds                                 30       0.5            37        0.8         47        0.7

     Other                                              (57)     (0.9)          (82)      (1.7)       (25)      (0.4)

Provision for income taxes                           $1,732      27.8%       $1,128       23.6%    $1,817       28.2%


</TABLE>


     Significant temporary differences that give rise to the deferred tax
assets and liabilities as of December 31, are as follows (in thousands):

                                                      2004          2003
Deferred tax assets:
     Allowance for loan losses                        $908         $942
     Director's deferred compensation                   10           10
     Accrued pension liability                         254          192
     Purchase accounting adjustments                    21           29
     Covenant not to compete                            91           74
     Loan (costs)/fees                                 (12)          10

        Total gross deferred tax assets              1,272        1,257

Deferred tax liabilities:
     Premises and equipment, primarily due to
         accelerated depreciation                      (45)         (52)
     Securities discount accretion                     (95)         (87)
     Prepaid pension cost                             (304)        (327)
     Purchase accounting adjustments                  (141)        (153)

        Total gross deferred tax liabilities          (585)        (619)

        Net deferred tax asset end of year             687          638
        Net deferred tax asset beginning of year       638          824

Deferred tax (benefit)/expense                        ($49)        $186


     In addition to the deferred tax assets and liabilities described above,
the Company also has a deferred tax liability of $438,000 at December 31,
2004 related to the unrealized gain on securities available for sale as of
December 31, 2004 and a deferred tax asset of $432,000 related to the
recognition of a minimum pension liability as of December 31, 2004. The
Company had a deferred tax liability of $996,000 at December 31, 2003 related
to the unrealized gain on securities available for sale as of December 31,
2003 and a deferred tax asset of $373,000 related to the recognition of a
minimum pension liability as of December 31, 2003.
     Deferred tax assets are recognized subject to management's judgement
that realization is more likely than not. In considering if it is more likely
than not that some or all of the deferred tax assets will not be realized,
the Company considers temporary taxable differences, historical taxes and
future taxable income. Based primarily on the sufficiency of historical
taxable income, management believes it is more likely than not that the
remaining net deferred tax asset at December 31, 2004 and 2003 will be
realized.


                                    - 32 -


<PAGE>


Note 16: COMPREHENSIVE INCOME

     Comprehensive income/(loss) represents the sum of net income and items
of "other comprehensive income" which are reported directly in stockholders'
equity, such as the net unrealized gain or loss on securities available for
sale and minimum pension liability adjustments. The Company has reported its
comprehensive income or loss for 2004, 2003 and 2002 in the consolidated
statements of changes in stockholders' equity.

     The Company's other comprehensive income consisted of the following
components for the years ended December 31 (in thousands):


<TABLE>

<CAPTION>
                                                                                 2004       2003         2002

<S>                                                                             <C>         <C>        <C>
Net unrealized holding (losses)/gains arising during the year, net of taxes
      of $396 in 2004, $321 in 2003 and ($1,034) in 2002                        ($619)      ($504)     $1,621
Reclassification adjustment for net realized gains included in
     income, net of taxes of $162 in 2004, $12 in 2003 and $12 in 2002           (254)        (18)        (19)
Minimum pension liability adjustment, net of taxes of $58 in 2004,
     ($127) in 2003 and $500 in 2002                                              (92)        198        (784)

Other comprehensive (loss)/income                                               ($965)      ($324)       $818


</TABLE>


Note 17: COMMITMENTS AND CONTINGENT LIABILITIES

     Various commitments and contingent liabilities arise in the normal
conduct of the subsidiary Bank's business that include certain financial
instruments with off-balance sheet risk to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
unused lines of credit, standby letters of credit and commercial letters of
credit. Those instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized on the consolidated statements of
financial condition. The contract amounts of those instruments reflect the
extent of involvement the subsidiary Bank has in particular classes of
financial instruments. The subsidiary Bank's exposure to credit loss in the
event of nonperformance by the other party to the commitments to extend
credit, unused lines of credit, standby letters of credit and commercial
letters of credit are represented by the contractual notional amount of those
instruments. The subsidiary Bank uses the same credit policies in making
commitments as it does for on-balance sheet instruments.
     Contract  amounts of financial  instruments  that represent  credit risk
as of December 31, 2004 and 2003 at fixed and variable rates are as follows
(in thousands):

                                                           2004

                                           Fixed       Variable        Total

Commitment and unused lines of credit:
     Home equity loans                       $--         $8,906       $8,906
     Commercial loans                      9,278         12,110       21,388
     Overdraft loans                       2,184             --        2,184
     Mortgage loans                        2,911             --        2,911

                                          14,373         21,016       35,389
Standby and commercial letters of credit      --            326          326

Total commitments                        $14,373        $21,342      $35,715


                                                        2003

                                           Fixed       Variable        Total

Commitment and unused lines of credit:
     Home equity loans                       $--         $4,528       $4,528
     Commercial loans                      3,311         12,595       15,906
     Overdraft loans                       1,354             --        1,354
     Mortgage loans                        2,596             --        2,596

                                           7,261         17,123       24,384
Standby letters of credit                     --            191          191

Total commitments                         $7,261        $17,314      $24,575


     Commitments to extend credit and unused lines of credit are agreements
to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being fully drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. The subsidiary Bank evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral, if any, required by the
subsidiary Bank upon the


                                    - 33 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

extension of credit is based on management's credit evaluation of the
customer. Mortgage and home equity loan commitments are secured by a lien on
real estate. Collateral on extensions of credit for commercial loans varies
but may include accounts receivable, inventory, property, plant and
equipment, and income producing property.
     FASB Interpretation No. 45 (FIN No. 45), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others; an Interpretation of FASB Statements No. 5, 57, and
107 and rescission of FASB Interpretation No. 34", requires certain
disclosures and liability-recognition for the fair value at issuance of
guarantees that fall within its scope. Under FIN No. 45, the Company does not
issue any guarantees that would require liability-recognition or disclosure,
other than its standby letters of credit. The Company has issued conditional
commitments in the form of standby letters of credit to guarantee payment on
behalf of a customer and guarantee the performance of a customer to a third
party. Standby and commercial letters of credit generally arise in connection
with lending relationships. The credit risk involved in issuing these
instruments is essentially the same as that involved in extending loans to
customers. Contingent obligations under standby and commercial letters of
credit totaled approximately $326,000 and $191,000 at December 31, 2004 and
2003, respectively, and represent the maximum potential future payments the
Company could be required to make. Typically, these instruments have terms of
twelve months or less and expire unused; therefore, the total amounts do not
necessarily represent future cash requirements. Each customer is evaluated
individually for creditworthiness under the same underwriting standards used
for commitments to extend credit and on-balance sheet instruments. Company
policies governing loan collateral apply to standby and commercial letters of
credit at the time of credit extension. Loan-to-value ratios are generally
consistent with loan-to-value requirements for other commercial loans secured
by similar types of collateral. The fair value of the Company's standby and
commercial letters of credit at December 31, 2004 and 2003 were
insignificant.
     The Company and its subsidiaries may, from time to time, be defendants
in legal proceedings relating to the conduct of their business. In the best
judgments of management, the consolidated financial position of the Company
and its subsidiaries would not be affected materially by the outcome of any
pending legal proceedings.


Note 18: REGULATORY CAPITAL REQUIREMENTS

     National banks are required to maintain minimum levels of regulatory
capital in accordance with regulations of the Office of the Comptroller of
the Currency ("OCC"). The Federal Reserve Board ("FRB") imposes similar
requirements for consolidated capital of bank holding companies. The OCC and
FRB regulations require a minimum leverage ratio of Tier 1 capital to total
adjusted average assets of 3.0% to 4.0% depending on the institution and
minimum ratios of Tier 1 and total capital to risk-weighted assets of 4.0%
and 8.0%, respectively.
     Under its prompt corrective action regulations, the OCC is required to
take certain supervisory actions (and may take additional discretionary
actions) with respect to an undercapitalized bank. Such actions could have a
direct material effect on a bank's financial statements. The regulations
establish a framework for the classification of banks into five categories:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Generally, a bank is
considered well capitalized if it has a leverage (Tier 1) capital ratio of at
least 5.0% (based on total adjusted average assets); a Tier 1 risk-based
capital ratio of at least 6.0%; and a total risk-based capital ratio of at
least 10.0%.
     The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgements by the regulators
about capital components, risk weightings and other factors.
     As of December 31, 2004 and 2003, the Company and the subsidiary Bank
met all capital adequacy requirements to which they are subject. Further, the
most recent OCC notification categorized the subsidiary Bank as a
well-capitalized bank under the prompt corrective action regulations. There
have been no conditions or events since that notification that management
believes have changed the subsidiary Bank's capital classification.
     The following is a summary  of the actual capital amounts and ratios
as of December 31, 2004 and 2003 for the  Company (consolidated) and the
subsidiary Bank (in thousands):

                                           2004                   2003

                                   Amount       Ratio        Amount     Ratio

Consolidated
     Leverage (Tier 1) capital     $32,707       7.7%       $32,589      8.3%
     Risk-based capital:
        Tier 1                      32,707      15.2         32,589     16.2
        Total                       35,127      16.3         35,117     17.5

Subsidiary Bank
     Leverage (Tier 1) capital     $31,104       7.3%       $30,464      7.8%
     Risk-based capital:
        Tier 1                      31,104      14.4         30,464     15.2
        Total                       33,468      15.5         32,914     16.4


                                    - 34 -


<PAGE>


Note 19: PARENT COMPANY ONLY FINANCIAL INFORMATION

     The following presents the financial condition of the Parent Company as
of December 31, 2004 and 2003 and the results of its operations and cash
flows for the years ended December 31, 2004, 2003 and 2002 (in thousands):


               CONDENSED STATEMENTS OF CONDITION (Parent only)


                                                        At December 31,

                                                       2004         2003
ASSETS
     Cash                                               $441        $513
     Securities available for sale, at fair value        235         285
     Investment in subsidiaries                       39,394      37,311

        Total assets                                 $40,070     $38,109

LIABILITIES AND STOCKHOLDERS'  EQUITY
     Deferred taxes payable - FASB No. 115               $49         $69

        Total liabilities                                 49          69

STOCKHOLDERS' EQUITY
     Common stock                                     $6,004      $6,004
     Surplus                                           4,418       4,418
     Undivided profits                                34,981      32,353
     Treasury stock, at cost                          (5,392)     (5,710)
     Accumulated other comprehensive income               10         975

        Total stockholders' equity                    40,021      38,040

        Total liabilities and stockholders' equity   $40,070     $38,109



                 CONDENSED STATEMENTS OF INCOME (Parent only)

                                                      Years ended December 31,

                                                       2004      2003     2002

Income
     Dividends from subsidiaries                     $1,450    $2,300   $3,312
     Dividends on securities available for sale           7         8        6
     Net gain on securities transactions                 88        --       --

        Total dividend income                         1,545     2,308    3,318

Expenses
     Other expense                                       29        19       38
        Total expenses                                   29        19       38

Income before income taxes and
   equity in undistributed net income
   of subsidiaries                                    1,516     2,289    3,280

Income tax (expense)/benefit                            (25)        5       13
Income before equity in undistributed net income
   of subsidiaries                                    1,491     2,294    3,293
Equity in undistributed net income of subsidiaries    3,018     1,359    1,339

Net income                                           $4,509    $3,653   $4,632



               CONDENSED STATEMENTS OF CASH FLOWS (Parent only)

                                                   Years ended December 31,

                                                  2004       2003       2002

Cash flows from operating activities:
     Net income                                 $4,509     $3,653     $4,632
     (Equity in)/distributions in
         excess of  undistributed
         net income                             (3,018)    (1,359)    (1,339)

Net cash provided by operating activities        1,491      2,294      3,293

Cash flows from financing activities:
     Proceeds from the sale of treasury stock      461        513        908
     Treasury stock purchased                     (253)    (1,001)    (2,544)
     Cash dividends paid on common stock        (1,771)    (1,685)    (1,579)

Net cash used by financing activities           (1,563)    (2,173)    (3,215)

Net increase in cash                               (72)       121         78

Cash beginning of period                           513        392        314

Cash end of period                                $441       $513       $392


                                    - 35 -


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 20: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the subsidiary Bank's entire holdings of a
particular financial instrument. Because no market exists for a significant
portion of the subsidiary Bank's financial instruments, fair value estimates
are based on judgments regarding future expected net cash flows, current
economic conditions, risk characteristics of various financial instruments,
and other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates.
     Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. Significant assets and liabilities that are
not considered financial assets or liabilities include the net deferred tax
asset and premises and equipment. In addition, the tax ramifications related
to the realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in the estimates
of fair value. In addition, there are significant intangible assets that the
fair value estimates do not recognize, such as the value of "core deposits",
the subsidiary Bank's branch network, trust relationships and other items
generally referred to as "goodwill".

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

Cash and Cash Equivalents
     For these short-term instruments, carrying value approximates fair value.

Securities Available for Sale & Investment Securities

     The fair value of securities available for sale and investment
securities, except certain state and municipal securities, is estimated on
bid prices published in financial newspapers or bid quotations received from
securities dealers. The fair value of certain state and municipal securities
is not readily available through market sources other than dealer quotations,
so fair value estimates are based on quoted market prices of similar
instruments, adjusted for differences between the quoted instruments and the
instruments being valued. The estimated fair value of stock in the Federal
Reserve Bank and Federal Home Loan Bank is assumed to be its cost given the
lack of a public market for these investments and the historical experience
that these securities are redeemed at cost.

Loans

     Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, consumer,
and real estate. Each loan category is further segmented into fixed and
adjustable rate interest terms and by performing and non-performing
categories.
     The fair value of performing loans is calculated by discounting
scheduled cash flows through the contractual estimated maturity using
estimated market discount rates that reflect the credit and interest rate
risk inherent in the loan. The estimate of maturity is based on the term of
the loans to maturity, adjusted for estimated prepayments.
     Fair value for non-performing loans is based on recent external
appraisals and discounting of cash flows. Estimated cash flows are discounted
using a rate commensurate with the risk associated with the estimated cash
flows. Assumptions regarding credit risk, cash flows, and discount rates are
judgmentally determined using available market information and specific
borrower information.

Accrued Interest Receivable

     For accrued interest receivable, a short-term instrument, carrying value
approximates fair value.

Deposit Liabilities

     The fair value of deposits with no stated maturity, such as non-interest
bearing demand deposits, savings, NOW accounts and money market accounts is
estimated to be the amount payable on demand. The fair value of certificates
and time deposits is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for deposits
of similar remaining maturities. These fair value estimates do not include
the benefit that results from the low-cost funding provided by the deposit
liabilities compared to the cost of borrowing funds in the market.

Securities Sold Under Agreements to Repurchase

     For those short-term instruments that mature in one to ninety days,
carrying value approximates fair value. For those instruments that mature in
more than ninety days, the fixed borrowing rate is compared to rates for
similar advances and a premium or discount is calculated.


                                    - 36 -


<PAGE>


Notes Payable - Federal Home Loan Bank

     For these instruments that mature in more than ninety days the current
borrowing rate is compared to rates for similar advances and a premium or
discount is calculated.

Accrued Interest Payable

     For accrued interest payable, a short-term instrument, carrying value
approximates fair value.

Commitments to Extend Credit, Standby and Commercial Letters of Credit, and
Financial Guarantees Written

     The fair value of commitments to extend credit and unused lines of
credit is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. For fixed rate loan
commitments, fair value also considers the difference between current levels
of interest rates and the committed rates. The fair value of financial
guarantees written and letters of credit is based on fees currently charged
for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties. Fees, such as these
are not a major part of the subsidiary Bank's business. Therefore, carrying
value approximates fair value and the amounts are not significant.

Financial Instruments

     The estimated fair values of the Company's financial instruments at
December 31 are as follows (in thousands):


<TABLE>

<CAPTION>
                                                                   2004                               2003

                                                          Carrying       Estimated           Carrying       Estimated
                                                           Amount       Fair Value            Amount       Fair Value

<S>                                                        <C>            <C>                 <C>            <C>
Financial Assets:
     Cash and cash equivalents                             $12,349        $12,349             $31,390        $31,390
     Securities available for sale*                        192,160        192,160             166,240        166,240
     Investment securities                                   7,587          7,804               9,711         10,030
     Loans (net of unearned income)                        188,535        189,439             171,230        173,260
        Less allowance for loan losses                       2,331             --               2,418             --

           Net loans                                       186,204        189,439             168,812        173,260
     Accrued interest receivable                             1,813          1,813               1,809          1,809

Financial Liabilities:
     Deposits
        Non-interest bearing demand                        $41,922        $41,922             $30,386        $30,386
        Savings, NOW and money market                      181,722        181,722             160,736        160,736
        Certificates of deposit and other time             107,990        108,224             117,125        118,292

           Total deposits                                  331,634        331,868             308,247        309,414
        Securities sold under agreements to repurchase      12,891         13,600              12,124         11,916
        Notes Payable - FHLB                                35,652         35,935              35,736         35,679
        Accrued interest payable                               259            259                 280            280


*Includes investments required for membership in FRB and FHLB.


</TABLE>


                                    - 37 -


<PAGE>


REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
CNB Bancorp, Inc.:

We have audited the accompanying consolidated statements of condition of CNB
Bancorp, Inc. and subsidiaries (the Company) as of December 31, 2004 and
2003, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2004. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CNB
Bancorp, Inc. and subsidiaries as of December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles.

                                                         /s/ KPMG LLP

Albany, New York
February 25, 2005


                                    - 38 -


<PAGE>


UNAUDITED INTERIM FINANCIAL INFORMATION
(In thousands, except per share data)

The following is a summary of unaudited quarterly financial information for
each quarter of 2004 and 2003.


<TABLE>

<CAPTION>

                                                              THREE MONTHS ENDED

                                      March 31, 2004     June 30, 2004   Sept. 30, 2004     Dec. 31, 2004

<S>                                        <C>               <C>              <C>               <C>
Total interest and dividend income         $4,841            $4,708           $4,951            $5,051
Total interest expense                      1,410             1,304            1,354             1,408

Net interest income                         3,431             3,404            3,597             3,643

Provision for loan losses                     150               150              125                75

Noninterest income                            978               620              541               470
Noninterest expense                         2,295             2,298            2,631             2,719

Income before income taxes                  1,964             1,576            1,382             1,319
Provision for income taxes                    587               437              357               351

Net income                                 $1,377            $1,139           $1,025              $968

Earnings per share:
    Basic                                   $0.62             $0.51            $0.46             $0.44
    Diluted                                  0.62              0.51             0.46              0.43


</TABLE>


<TABLE>

<CAPTION>

                                                              THREE MONTHS ENDED

                                      March 31, 2003     June 30, 2003   Sept. 30, 2003     Dec. 31, 2003

<S>                                        <C>               <C>              <C>               <C>
Total interest and dividend income         $5,170            $4,981           $4,749            $4,805
Total interest expense                      1,816             1,761            1,612             1,527

Net interest income                         3,354             3,220            3,137             3,278

Provision for loan losses                     385               135              135               635

Noninterest income                            712               525              615               462
Noninterest expense                         2,202             2,299            2,294             2,437

Income before income taxes                  1,479             1,311            1,323               668
Provision for income taxes                    396               329              325                78

Net income                                 $1,083              $982             $998              $590

Earnings per share:
    Basic                                   $0.49             $0.44            $0.45             $0.27
    Diluted                                  0.49              0.44             0.45              0.27


</TABLE>


                                    - 39 -


<PAGE>


DESCRIPTION OF BUSINESS

CNB Bancorp, Inc., a New York corporation, organized in 1988, is a registered
financial holding company headquartered in Gloversville, New York. Its
wholly-owned subsidiary, City National Bank and Trust Company, was organized
in 1887 and is also headquartered in Gloversville, New York, with five
branches located in the county of Fulton, one branch located in the county of
Saratoga, one branch located in the county of Hamilton, and one branch
located in the county of Montgomery. The subsidiary Bank is a full service
commercial bank that offers a broad range of demand and time deposits;
consumer, mortgage, and commercial loans; and trust and investment services.
The subsidiary Bank is a member of the Federal Deposit Insurance Corporation
and the Federal Reserve System and is subject to regulation and supervision
of the Federal Reserve Bank and the Office of the Comptroller of the
Currency. On July 1, 2000, CNB Bancorp, Inc. acquired another wholly-owned
subsidiary, Hathaway Agency, Inc., which was organized in 1915 and is also
headquartered in Gloversville, New York. The subsidiary Insurance Agency
specializes in commercial, industrial and not-for-profit businesses, as well
as insuring the personal automobiles and homes of the people of Fulton
County. The insurance agency is under the supervision of the New York
State Insurance Department.


MARKET AND DIVIDEND INFORMATION
CNB BANCORP, INC.

   The common capital stock - $2.50 par value is the only registered security
of the Company and is inactively traded. The range of prices of this security
known to management based on records of the Company and as supplied by Ryan,
Beck and Co. on a quarterly basis and the quarterly cash dividends paid for
the most recent two years are shown below:


                                                 2004

                               High        Low        Close     Dividend Paid

First Quarter                 $26.75     $22.60      $26.75         $ .20
Second Quarter                 26.75      24.00       25.00           .20
Third Quarter                  26.75      24.35       26.75           .20
Fourth Quarter                 27.75      26.25       26.65           .20

Number of shareholders on December 31     708


                                                 2003

                               High        Low        Close     Dividend Paid

First Quarter                 $26.50     $23.31      $23.95         $ .19
Second Quarter                 26.05      22.20       25.75           .19
Third Quarter                  29.00      25.50       27.25           .19
Fourth Quarter                 27.50      25.60       25.60           .19

Number of shareholders on December 31     697



A copy of Form 10K (Annual Report) for 2004, filed with the Securities and
Exchange Commission by the Company, is available to shareholders free of
charge by written request to:
                  George A. Morgan, Vice President and Secretary
                  CNB Bancorp, Inc., 10-24 N. Main Street,
                  P.O. Box 873, Gloversville, NY 12078


                                    - 40 -


<PAGE>


                      CITY NATIONAL BANK & TRUST COMPANY

                                ADMINISTRATION

WILLIAM N. SMITH...........................CHAIRMAN OF THE BOARD AND PRESIDENT
GEORGE A. MORGAN..........EXECUTIVE VICE-PRESIDENT, CASHIER, AND TRUST OFFICER

                        COMPLIANCE AND RISK MANAGEMENT

GEORGE E. DOHERTY........................................SENIOR VICE-PRESIDENT

                                   FINANCE

MICHAEL J. FRANK................................VICE-PRESIDENT AND COMPTROLLER

                               HUMAN RESOURCES

DEBORAH A. BRANDIS..............................................VICE-PRESIDENT
CAROLE A. GOTTUNG.............................................TRAINING OFFICER

                                   LENDING

MICHAEL J. PEPE..........................................SENIOR VICE-PRESIDENT
BILL ARGOTSINGER................................................VICE-PRESIDENT
BRIAN HANRAHAN..................................................VICE-PRESIDENT
HENRI LANGEVIN..................................................VICE-PRESIDENT
RICHARD A. LEE..................................................VICE-PRESIDENT
MICHAEL G. LISKY................................................VICE-PRESIDENT
GARY R. CANFIELD......................................ASSISTANT VICE-PRESIDENT
MARY E. IANNOTTI......................................ASSISTANT VICE-PRESIDENT
JESSICA VITCHERFOSKI..............................................LOAN OFFICER

                                  MARKETING

LAWRENCE D. PECK................................................VICE-PRESIDENT

                                  OPERATIONS

RONALD J. BRADT..........................................SENIOR VICE-PRESIDENT
DENISE L. CERASIA...............................................VICE-PRESIDENT
PAULA K. TUCKER................................................SYSTEMS OFFICER

                                  TECHNOLOGY

L. RANDY MARSICANO..............................................VICE-PRESIDENT

                                    TRUST

DEBORAH M. BUCK..................................................TRUST OFFICER

                             INVESTMENT SERVICES

RICHARD DIXON.......................................FINANCIAL SERVICES OFFICER

                                    AUDIT

BRIAN R. SEELEY........................................................AUDITOR

                                BRANCH OFFICES

ELIZABETH J. SIMONDS...................VICE-PRESIDENT AND BRANCH ADMINISTRATOR
DEBRA ELLSWORTH.................ASSISTANT VICE PRESIDENT, MANAGER, MAIN OFFICE
CHARLA BARKEVICH...........ASSISTANT VICE PRESIDENT, MANAGER, AMSTERDAM OFFICE
ROSEANN LAURIA..........ASSISTANT VICE PRESIDENT, MANAGER, FIFTH AVENUE OFFICE
TAMMY L. WARNER............ASSISTANT VICE PRESIDENT, MANAGER, JOHNSTOWN OFFICE
CONSTANCE A. ROBINSON.....ASSISTANT VICE PRESIDENT, MANAGER, NORTHVILLE OFFICE
TAMMY MALAGISI.................ASSISTANT VICE PRESIDENT, MANAGER, PERTH OFFICE
PETER E. BROWN..............ASSISTANT VICE PRESIDENT, MANAGER, SARATOGA OFFICE
DALE BROWN................ASSISTANT VICE PRESIDENT, MANAGER, SPECULATOR OFFICE
KAREN GARDINIER...............................BRANCH OFFICER, AMSTERDAM OFFICE
DENISE HLADIK..............................BRANCH OFFICER, FIFTH AVENUE OFFICE
NANCY RUPERT.............................BRANCH OFFICER, FREMONT STREET OFFICE
CYNTHIA DINGMAN...............................BRANCH OFFICER, JOHNSTOWN OFFICE
JOAN IRELAND.................................BRANCH OFFICER, NORTHVILLE OFFICE
SHEILA DORN.......................................BRANCH OFFICER, PERTH OFFICE
SERGE ROY......................................BRANCH OFFICER, SARATOGA OFFICE


<PAGE>


                              City National Bank
                              and Trust Company


                               BANKING OFFICES


                               AMSTERDAM OFFICE
                 1 North Market Street o Amsterdam, NY 12010

                                 MAIN OFFICE
               10-24 North Main Street o Gloversville, NY 12078

                        TRUST AND INVESTMENT SERVICES
                52 North Main Street o Gloversville, NY 12078

                        FREMONT STREET DRIVE-UP OFFICE
                            Gloversville, NY 12078

                             FIFTH AVENUE OFFICE
                  185 Fifth Avenue o Gloversville, NY 12078

                               JOHNSTOWN OFFICE
                142 North Comrie Avenue o Johnstown, NY 12095

                              NORTHVILLE OFFICE
                   312 Bridge Street o Northville, NY 12134

                                 PERTH OFFICE
                     4178 State Hwy 30 o Town of Perth o
                             Amsterdam, NY 12010

                           SARATOGA SPRINGS OFFICE
                  295 Broadway o Saratoga Springs, NY 12866

                                  SPECULATOR
                     Routes 8 & 30 o Speculator, NY 12164

                              OTHER ATMs LOCATED
                    Nathan Littauer Hospital, Gloversville
                            Holiday Inn, Johnstown