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

                                   FORM 10-Q

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

                 For the Quarterly Period Ended June 30, 2004

                                      OR

          [ ] TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF
            THE SECURITIES EXCHANGE ACT OF 1934 [ NO FEE REQUIRED ]

                       For the Transition Period from_____to_____


                      Commission File Number: 001-31896


                            THE WILBER CORPORATION
          ----------------------------------------------------------
          (Exact Name of the Registrant as Specified in its Charter)

                 NEW YORK                                   15-6018501
      ----------------------------                    ----------------------
      (State or Other Jurisdiction                       (I.R.S. Employer
           of Incorporation or                        Identification Number)
              Organization)


                      245 Main Street, Oneonta, NY 13820
              ---------------------------------------------------
              (Address of Principal Executive Offices) (Zip Code)


                                 607 432-1700
              ---------------------------------------------------
              (Registrant's Telephone Number Including Area Code)


          Securities Registered Pursuant to Section 12(b) of the Act:
                    Common Stock, $0.01 par value per share
                    ---------------------------------------
                               (Title of Class)


          Securities Registered Pursuant to Section 12(g) of the Act:
                                     None

Indicate by check mark whether the Registrant (1)  has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports) or (2) has been subject to such
requirements for the past 90 days.
YES  [X]     NO [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES  [ ]     NO [X]

As of August 5, 2004, there were issued and outstanding 11,209,392 shares of
the Registrant's Common Stock.



<PAGE>



                            THE WILBER CORPORATION
                                   FORM 10-Q
                                     INDEX


                        PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FORWARD-LOOKING STATEMENTS
<S>         <C>
ITEM 1:     Financial Statements (Unaudited)
------

            Consolidated Statements of Condition
            Consolidated Statements of Income
            Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income
            Consolidated Statements of Cash Flows
            Notes to Unaudited Consolidated Financial Statements

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

            A. General
            B. Financial Condition and Performance Overview
            C. Comparison of Financial Condition at June 30, 2004 and December 31, 2003
            D.  Comparison of Results of Operation for the Three Months Ended June 30, 2004 and 2003
            E.   Comparison of Results of Operation for the Six Months Ended June 30, 2004 and 2003
            F.   Liquidity
            G.  Capital Resources and Dividends

ITEM 3:     Quantitative and Qualitative Disclosures about Market Risk
------
ITEM 4:     Controls and Procedures
------

                          PART II - OTHER INFORMATION

ITEM 1:     Legal Proceedings
------

ITEM 2:     Changes in Securities and Use of Proceeds
------

ITEM 3:     Defaults Upon Senior Securities
------

ITEM 4:     Submission of Matters to a Vote of Security Holders
------

ITEM 5:     Other Information
------

ITEM 6:     Exhibits and Reports on Form 8-K
------
            (a) Exhibits
            (b) Reports on Form 8-K

</TABLE>
Signature Page

Index to Exhibits

                                       i


<PAGE>


                          FORWARD-LOOKING STATEMENTS


When we use words or phrases like "will probably result," "we expect," "will
continue," "we anticipate,"  "estimate,"  "project," "should cause," or
similar expressions in this report or in any press releases,  public
announcements, filings with the Securities and Exchange Commission  (the
"SEC")  or other disclosures,  we are making  "forward-looking statements" as
described in the Private Securities Litigation Reform Act of  1995. In
addition,  certain information we provide,  such as analysis of the adequacy
of our allowance for loan losses or an analysis of the interest rate
sensitivity of our assets and liabilities, is always based on predictions of
the future.  From time to time, we may also publish other forward-looking
statements about anticipated financial performance, business prospects, and
similar matters.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. We want you to know that a variety of future
events and uncertainties could cause our actual results and experience to
differ materially from what we anticipate when we make our forward-looking
statements. 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 consumer preferences,
changes in interest rates,  deposit flows,  cost of funds, demand for loan
products, demand for financial services, competition, changes in the quality
or composition of the Company's loan and investment 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 fees.

Please do not rely unduly on any forward-looking statements, which are valid
only as of the date made.  Many factors, including those described above,
could affect our financial performance and could cause our actual results or
circumstances for future periods to differ materially from what we anticipate
or project.  We have no obligation to update any forward-looking statements to
reflect future events which occur after the statements are made,  and we
specifically disclaim such obligation.


                                       ii

<PAGE>

ITEM 1: Financial Statements (Unaudited)
------

The Wilber Corporation
Consolidated Statements of Condition (Unaudited)

<TABLE>
<CAPTION>
                                                                        June 30,        December 31,
dollars in thousands except share and per share data                      2004              2003
----------------------------------------------------                  ----------        -------------
<S>                                                                   <C>               <C>
Assets
Cash and Due from Banks                                               $  10,238           $  11,892
Time Deposits with Other Banks                                            7,498               7,998
Federal Funds Sold                                                          500                  --
                                                                      ---------           ---------
   Total Cash and Cash Equivalents                                       18,236              19,890
Securities
   Trading, at Fair Value                                                 1,373               1,025
   Available-for-Sale, at Fair Value                                    240,390             275,051
   Held-to-Maturity, Fair Value of $60,625 at June 30, 2004
     and $44,416 at December 31, 2003                                    61,901              44,140
Loans                                                                   374,393             360,906
   Allowance for Loan Losses                                             (6,113)             (5,757)
                                                                      ---------           ---------
   Loans, Net                                                           368,280             355,149
                                                                      ---------           ---------
Premises and Equipment, Net                                               5,986               5,721
Bank Owned Life Insurance                                                14,686              14,405
Goodwill                                                                  2,682               2,682
Intangible Assets, Net                                                      418                 461
Other Assets                                                             12,235              10,499
                                                                      ---------           ---------
   Total Assets                                                       $ 726,187           $ 729,023
                                                                      =========           =========
Liabilities and Stockholders' Equity
Deposits:
   Demand                                                             $  60,760           $  61,267
   Savings, NOW and Money Market Deposit Accounts                       241,965             251,180
   Certificates of Deposit (Over $100M)                                  88,934              82,847
   Certificates of Deposit (Under $100M)                                159,716             158,783
   Other Time Deposits                                                   26,751              26,556
                                                                      ---------           ---------
   Total Deposits                                                       578,126             580,633
                                                                      ---------           ---------
Short-Term Borrowings                                                     9,117              20,018
Long-Term Borrowings                                                     68,984              55,849
Other Liabilities                                                         6,416               8,219
                                                                      ---------           ---------
   Total Liabilities                                                    662,643             664,719
                                                                      ---------           ---------
Stockholders' Equity:
   Common Stock, $.01 Par Value, 13,961,664 Shares Issued at
     June 30, 2004, and December 31, 2003                                   140                 140
   Additional Paid in Capital                                             4,224               4,224
   Retained Earnings                                                     81,048              79,043
   Accumulated Other Comprehensive (Loss) Income                         (1,493)              1,272
   Treasury Stock at Cost, 2,752,272 Shares at June 30, 2004
      and December 31, 2003                                             (20,375)            (20,375)
                                                                      ---------           ---------
   Total Stockholders' Equity                                            63,544              64,304
                                                                      ---------           ---------
   Total Liabilities and Stockholders' Equity                         $ 726,187           $ 729,023
                                                                      =========           =========
</TABLE>


See accompanying notes to unaudited consolidated interim financial statements.

                                       1

<PAGE>

The Wilber Corporation
Consolidated Statements of Income (Unaudited)

<TABLE>
<CAPTION>

                                                                        Three Months Ended                 Six Months Ended
                                                                               June 30,                        June 30,
dollars in thousands except share and per share data                   2004             2003               2004            2003
----------------------------------------------------              ------------      -------------      ------------    ------------
<S>                                                               <C>               <C>                <C>             <C>
Interest and Dividend Income
Interest and Fees on Loans                                        $      6,022      $       6,217      $     11,961    $     12,531
Interest and Dividends on Securities:
     U.S. Government and Agency Obligations                              1,963              2,489             4,167           5,049
     State and Municipal Obligations                                       639                483             1,288             965
     Other                                                                 124                299               282             647
Interest on Federal Funds Sold and Time Deposits                           142                295               286             615
                                                                  ------------      -------------      ------------    ------------
     Total Interest and Dividend Income                                  8,890              9,783            17,984          19,807
                                                                  ------------      -------------      ------------    ------------
Interest Expense
Interest on Deposits:
     Savings, NOW and Money Market Deposit Accounts                        436                613               947           1,360
     Certificates of Deposit (Over $100M)                                  563                622             1,094           1,244
     Other Time                                                          1,297              1,514             2,599           3,021
Interest on Short-Term Borrowings                                           20                 20                54              60
Interest on Long-Term Borrowings                                           781                840             1,512           1,721
                                                                  ------------      -------------      ------------    ------------
     Total Interest Expense                                              3,097              3,609             6,206           7,406
                                                                  ------------      -------------      ------------    ------------
Net Interest Income                                                      5,793              6,174            11,778          12,401
Provisions for Loan Losses                                                 300                435               660             855
                                                                  ------------      -------------      ------------    ------------
Net Interest Income After Provision for Loan Losses                      5,493              5,739            11,118          11,546
                                                                  ------------      -------------      ------------    ------------
Other Income
Trust Fees                                                                 320                297               641             642
Service Charges on Deposit Accounts                                        380                367               721             727
Commissions Income                                                         126                131               286             257
Investment Security (Losses) Gains, Net                                    (27)               297               651             719
Increase in Cash Surrender Value of Bank Owned
 Life Insurance                                                            120                176               281             337
Other Service Fees                                                          70                 56               124             167
Other Income                                                                83                199               182             261
                                                                  ------------      -------------      ------------    ------------
     Total Other Income                                                  1,072              1,523             2,886           3,110
                                                                  ------------      -------------      ------------    ------------
Other Expense
Salaries and Employee Benefits                                           2,594              2,488             5,222           5,097
Net Occupancy Expense of Bank Premises                                     359                327               752             716
Furniture and Equipment Expense                                            182                199               356             400
Computer Service Fees                                                      124                 71               204             148
Advertising and Marketing                                                  127                109               212             213
Professional Fees                                                           72                 52               297             122
Other                                                                      655                834             1,383           1,394
                                                                  ------------      -------------      ------------    ------------
     Total Other Expense                                                 4,113              4,080             8,426           8,090
                                                                  ------------      -------------      ------------    ------------
Income Before Taxes                                                      2,452              3,182             5,578           6,566
Income Taxes                                                              (601)              (889)           (1,443)         (1,878)
                                                                  ------------      -------------      ------------    ------------
Net Income                                                        $      1,851      $      2,293       $      4,135    $      4,688
                                                                  ============      =============      ============    ============

Weighted Average Shares Outstanding (1)                             11,209,392        11,209,392         11,209,392      11,219,264
Basic Earnings Per Share (1)                                      $       0.17      $       0.21       $       0.37    $       0.42

</TABLE>



See accompanying notes to unaudited consolidated interim financial statements.
(1) All Share and per share information has been restated to give retroactive
effect to the 4-for-1 stock split in September 2003.


                                       2

<PAGE>


The Wilber Corporation
Consolidated Statements of Changes in Stockholders' Equity and Comprehensive
Income (Unaudited)


<TABLE>
<CAPTION>

                                                                                          Accumulated
                                                               Additional                   Other
dollars in thousands except share and per             Common    Paid in     Retained     Comprehensive     Treasury
 share data                                           Stock      Capital    Earnings      Income (Loss)     Stock      Total
                                                     -------    -------    ---------       ---------      ---------   --------
<S>                                                  <C>        <C>        <C>             <C>            <C>         <C>
Balance December 31, 2002                            $ 2,182    $ 2,182    $  74,439       $   4,242      $ (19,883)  $ 63,162
     Comprehensive Income:
      Net Income                                          --         --        4,688              --             --      4,688
      Change in Net Unrealized Gain (Loss)
            on Securities, Net of Taxes                   --         --           --            (570)            --       (570)
                                                                                                                      --------
     Total Comprehensive Income                                                                                          4,118
                                                                                                                      --------
     Cash Dividends ($.185 per share) (1)                 --         --       (2,036)             --             --     (2,036)
     Purchase of Treasury Stock (11,917 shares)           --         --           --              --           (492)      (492)
                                                     -------    -------    ---------       ---------      ---------   --------
Balance June 30, 2003                                $ 2,182    $ 2,182    $  77,091       $   3,672      $ (20,375)  $ 64,752
                                                     -------    -------    ---------       ---------      ---------   --------

Balance December 31, 2003                              $ 140    $ 4,224    $  79,043       $   1,272      $ (20,375)  $ 64,304
     Comprehensive Income:
      Net Income                                          --         --        4,135              --             --      4,135
      Change in Net Unrealized Gain (Loss)
       on Securities, Net of Taxes                        --         --           --         (2,765)             --     (2,765)
                                                                                                                      --------
     Total Comprehensive Income                                                                                          1,370
                                                                                                                     ---------
     Cash Dividends ($.19 per share)                      --         --       (2,130)             --             --     (2,130)
                                                     -------    -------    ---------       ---------      ---------   --------
Balance June 30, 2004                                $   140    $ 4,224    $  81,048       $ (1,493)      $ (20,375)  $ 63,544
                                                     -------    -------    ---------       ---------      ---------   --------
</TABLE>

See accompanying notes to unaudited consolidated interim financial statements
(1) All share and per share information has been restated to give retroactive
effect to the 4-for-1 stock split in September 2003.



                                       3

<PAGE>



The Wilber Corporation
Consolidated Statements of Cash Flows (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Six Months Ended
                                                                                        June 30
dollars in thousands                                                                2004         2003
                                                                                 ---------    ---------
<S>                                                                              <C>          <C>
Cash Flows from Operating Activities:
   Net Income                                                                    $   4,135    $   4,688
   Adjustments to Reconcile Net Income to Net Cash
   Used by Operating Activities:
     Provision for Loan Losses                                                         660          855
     Depreciation and Amortization                                                     407          434
     Net Amortization of Premiums and Accretion of Discounts on Investments          1,338          553
     Investment Security Gains                                                        (651)         719)
     Other Real Estate Losses                                                           21           33
     Increase in Cash Surrender Value of Bank Owned Life Insurance                    (281)        (335)
     Net (Increase) Decrease in Trading Securities                                    (296)         147
     Net Gains on Trading Securities                                                   (52)        (102)
     Decrease (Increase) in Other Assets                                                 8       (1,949)
     Decrease in Other Liabilities                                                  (1,803)        (801)
                                                                                 ---------   ----------
     Net Cash Provided by Operating Activities                                       3,486        2,804
                                                                                 ---------   ----------
Cash Flows from Investing Activities:
   Proceeds from Maturities of Held-to-Maturity Investment Securities               12,081       16,492
   Purchases of Held-to-Maturity Investment Securities                             (30,014)     (12,298)
   Proceeds from Maturities of Available-for-Sale Investment Securities             92,815       62,010
   Proceeds from Sales of Available-for-Sale Investment Securities                   7,922        8,781
   Purchases of Available-for-Sale Investment Securities                           (71,121)     (89,995)
   Net Increase in Loans                                                           (14,144)      (4,702)
   Proceeds from Sale of Loans                                                         294          --
   Purchase of Premises and Equipment, Net of Disposals                               (628)        (126)
   Proceeds from Sale of Other Real Estate                                              58           47
                                                                                 ---------   ----------
     Net Cash Used in Investing Activities                                          (2,737)     (19,791)
                                                                                 ---------   ----------
Cash Flows from Financing Activities:
   Net (Decrease) Increase in Demand Deposits, Savings, NOW,
     Money Market and Other Time Deposits                                           (9,527)      18,010
   Net Increase in Certificates of Deposit                                           7,020       15,800
   Net Decrease in Short-Term Borrowings                                           (10,901)      (1,460)
   Increase in Long-Term Borrowings                                                 15,000         --
   Repayment of Long-Term Borrowings                                                (1,865)     (10,734)
   Decrease in Dividends Payable                                                        --         (209)
   Purchase of Treasury Stock                                                           --         (492)
   Cash Dividends Declared                                                          (2,130)      (2,036)
                                                                                 ---------   ----------
     Net Cash (Used) Provided by Financing Activities                               (2,403)      18,879
                                                                                 ---------   ----------
      Net (Decrease) Increase in Cash and Cash Equivalents                          (1,654)       1,892
Cash and Cash Equivalents at Beginning of Year                                      19,890       47,064
                                                                                 ---------   ----------
   Cash and Cash Equivalents at End of Period                                    $  18,236   $   48,956
                                                                                 =========   ==========
</TABLE>

See accompanying notes to unaudited consolidated interim financial statements.



                                       4

<PAGE>


The Wilber Corporation
Consolidated Statements of Cash Flows (Unaudited), continued


<TABLE>
<CAPTION>

<S>                                                        <C>            <C>
Supplemental Disclosures of Cash Flow Information:
        Cash Paid during Period for:
          Interest                                         $  6,271       $  7,591
          Income Taxes                                     $  2,874       $  3,673
        Non Cash Investing Activities:
          Unrealized Loss on Securities                    $ (4,530)      $   (972)
          Transfer of Loans to Other Real Estate           $     59       $     58

</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.


                                       5

<PAGE>



The Wilber Corporation
Notes to Unaudited Consolidated Financial Statements

Note 1.  Basis of Presentation

The accompanying unaudited consolidated financial statements include the
accounts of The Wilber Corporation (the "Company"), its wholly owned
subsidiary Wilber National Bank  (the  "Bank")  and the Bank's wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. The accompanying unaudited consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP")  for interim
financial information and with the instructions to Form  10-Q and Article  10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements.

The preparation of financial statements in conformity with GAAP required
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period.  Actual results could differ from
those estimates. In the opinion of management,  the unaudited consolidated
financial statements include all necessary adjustments, consisting of normal
recurring accruals,  necessary for a fair presentation for the periods
presented. The results for the periods presented are not necessarily
indicative of results to be expected for the entire fiscal year or any other
interim period.

The data in the consolidated balance sheet for December 31, 2003 was derived
from the Company's  2003 Annual Report on Form 10-K.  The Annual Report of
Form 10-K includes the Company's audited consolidated statements of condition
as of December  31,  2003  and  2002, and the consolidated statements of
income, consolidated statements of cash flows, consolidated statements of
stockholders' equity and comprehensive income for each of the years in the
three-year period ended December 31, 2003.  That data, along with the interim
unaudited financial information presented in the consolidated statements of
condition as of June 30,  2004;  and the statements of income for the three
months and six months ended June 30,  2004  and June  30,  2003,  and the
statements of changes in stockholders' equity and comprehensive income for the
six months ended June 30, 2004  and  2003  should be read in conjunction with
the 2003  consolidated financial statements, including the notes thereto.

Amounts in prior period's consolidated financial statements are reclassified
when necessary to conform to the current period's presentation.

Note 2.  Earnings Per Share

Basic earnings per share (EPS) are calculated by dividing net income available
to common shareholders by the weighted average number of common shares
outstanding during 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. The Company does not have a complex capital
structure, and accordingly, has presented only basic EPS.

Note 3.  Guarantees

The Company does not issue any guarantees that would require liability-
recognition or disclosure,  other than its standby letters of credit.  Standby
and other letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including bond financing and similar transactions.  The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers.  Typically,  these instruments have
terms of 12 months or less and expire unused;  therefore,  the total amounts
do not necessarily represent future cash requirements.  The estimated fair
value of the Company's stand-by letters of credit was $50 thousand and $43
thousand at June 30, 2004 and December 31, 2003, respectively.



                                       6
<PAGE>


Note 4.  Employee Benefit Plans

The Company,  through its bank subsidiary,  has a non-contributory defined
benefit pension plan,  covering employees who have attained the age of 21 and
have completed one year of service. The Company's funding practice is to
contribute at least the minimum amount annually to meet minimum funding
requirements. 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.  Plan assets consist primarily of marketable fixed income securities
and common stocks. Plan benefits are based on years of service and the
employee's average compensation during the five highest consecutive years of
the last ten years of employment.

The Components of Net Periodic Benefit Cost (Benefit), based on a September
30 measurement date, are:

<TABLE>
<CAPTION>
                                                       Three Months Ended           Six Months Ended
                                                           June 30,                     June 30,
dollars in thousands                                   2004          2003           2004         2003
--------------------                                 -------        -------        -------     ------
              <S>                                    <C>            <C>            <C>         <C>
              Service Cost                           $  162         $  135         $  323      $  271
              Interest Cost                             210            196            420         393
              Expected Return on Plan Assets           (286)          (237)          (571)       (475)
              Net Amortization                           50             42            100          83
                                                     ------         ------        -------      ------
                                                     $  136         $  136         $  272      $  272
                                                     ======         ======        =======      ======
</TABLE>

Note 5.  Long-Term Borrowings

During the six month period ended June 30, 2004, the Company, through its bank
subsidiary,  secured  $15,000,000 of long-term borrowings from the Federal
Home Loan Bank of New York ("FHLBNY"). All of the long-term borrowings secured
by the Company during the period were collateralized by mortgage-backed
securities or other government agency securities.  The following is a summary
of the long- term borrowings and the related outstanding balances as of June
30, 2004:

<TABLE>
<CAPTION>
                                                                    June 30,
dollars in thousands                                                 2004
--------------------                                               --------
<S>                                                                <C>
Bearing Interest at 1.30%, due March 24, 2005                      $  3,000
Bearing Interest at 1.81%, due March 24, 2006                         3,000
Bearing Interest at 2.43%, due March 9, 2007                          3,500
Bearing Interest at 2.35%, due March 26, 2007                         2,000
Bearing Interest at 3.12%, due March 9, 2011                          3,425
                                                                   --------
                                                                   $ 14,925
</TABLE>

Note 6.  Other Comprehensive Income

The following is a summary of changes in other comprehensive income for the
periods presented.

<TABLE>
<CAPTION>
                                                                               Three Months Ended       Six Months Ended
                                                                                    June 30,                 June 30,
dollars in thousands                                                            2004         2003       2004       2003
--------------------                                                         ---------     ------      --------   -------
<S>                                                                          <C>           <C>         <C>        <C>
Unrealized Holding (Losses) Gains Arising During the Period Net of Tax
    (Pre-tax Amount of ($6,516), $536, ($3,879) and ($253))                  $ (3,979)     $  325      $ (2,367)  $  (131)

Reclassification Adjustment for Losses (Gains) Realized in Net Income
  During the Period, Net of Tax (Pre-tax Amount of $27, ($297),
    ($651) and ($719))                                                             16        (180)         (398)     (439)
                                                                             --------      ------      ---------  -------
Other Comprehensive (Loss) Income, Net of Tax of ($2,528), $93,
    ($1,765) and ($401)                                                      $ (3,963)     $  145      $ (2,765)  $  (570)
                                                                             ========      ======      =========  =======
</TABLE>


                                       7
<PAGE>

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

A. General

The primary objective of this quarterly report is to provide: (i) an overview
of the material changes in our financial condition, including liquidity and
capital resources, at June 30, 2004,  as compared to December 31, 2003; (ii) a
comparison of our results of operations for the three month period ended June
30, 2004, as compared to the three month period ended June 30, 2003; and (iii)
a comparison on our results of operations for the six month period ended June
30, 2004, as compared to the six month period ended June 30, 2004.

Our financial performance is heavily dependent upon net interest income,
which is the difference between the interest income earned on our loans and
investment securities less the interest paid on our deposits and borrowings.
Results of operations are also affected by the provision for loan losses,
investment securities gains  (losses),  service charges and penalty fees on
deposit accounts, fees collected for trust and investment services,  insurance
commission income, the increase in the cash surrender value on bank owned life
insurance,  other service fees and other income.  Our non-interest expenses
primarily consist of employee salaries and benefits,  occupancy and equipment
expense, advertising and marketing expense, computer service fees,
professional fees and other expenses.  Results of operations are also
influenced by general economic and competitive conditions (particularly
changes in interest rates), government policies,  changes in Federal or State
tax law, and the actions of our regulatory authorities.

Critical Accounting Policies. Our management considers the accounting policy
relating to the allowance for loan losses to be a critical accounting policy
given the uncertainty in evaluating the level of the allowance required to
cover credit losses inherent in the loan portfolio and the material effect
that such judgments can have on the results of operations. While management's
current evaluation of the allowance for loan losses indicates that the
allowance is adequate, under adversely different conditions or assumptions,
the allowance would need to be increased. For example,  if historical loan
loss experience significantly worsened or if current economic conditions
significantly deteriorated, additional provisions for loan losses would be
required to increase the allowance.  In addition, the assumptions and
estimates used in our internal reviews of non-performing loans and potential
problem loans has a significant impact on the overall analysis of the adequacy
of the allowance for loan losses.  While we have concluded that the current
evaluation of collateral values is reasonable under the circumstances,  if
collateral valuations were significantly lowered, our allowance for loan
losses would also require additional provisions for loan losses.


B. Financial Condition and Performance Overview

The financial condition of the Company did not change significantly during the
first six months of 2004.  Total assets and stockholders'  equity decreased
slightly and some of our asset quality measures improved.  Our net income,
however, decreased by 11.8% or  $553  thousand from $4.688 million for the six
month period ended June 30, 2003 to $4.135 million for the six month period
ended June 30, 2004.  The decrease in net income is primarily the result of a
sharp decline in investment securities yields.  Throughout the first six
months of  2004  residential mortgage interest rates remained low, which
provided incentive for many homeowners throughout the United States to
refinance their existing mortgage.  The high level of mortgage refinancing
activity resulted in an acceleration of principal payments on the
mortgage-backed securities held by us, particularly on several collateralized
mortgage obligations that we held at a  "premium,"  i.e.,  those securities in
which our amortized cost exceeded the par value of the security. The embedded
option or pre-payment risk associated with these investment securities and the
prevailing market conditions throughout the first six months of 2004 required
us to record amortization of premiums, net of accretion of discounts on
investments of $1.338 million.  This expense is recorded as a reduction in our
interest income. By comparison, during the six month period ended June  30,
2003, we recorded amortization of premium expense, net of accretion of
discounts on investments of $553 thousand, a $785 thousand or 142% increase in
the first half of 2004.

The following tables set forth in this quarterly financial report provide
readers with supplementary information,  which is not directly obtainable from
the unaudited financial statements provided in PART I, Item 1 of this
quarterly report. These tables are to be read in conjunction with our
management, discussion and analysis narrative regarding the financial
condition, results of operations, liquidity and capital resources contained
within this report.


                                       8

<PAGE>

Asset and Yield Summary Table:

The following tables set forth the total dollar amount and resultant yields of
interest income from average earning assets, as well as the interest expense
on average interest bearing liabilities for the periods stated.  No tax
equivalent adjustments were made.  Average balances are daily averages.

<TABLE>
<CAPTION>


                                                                   For the Three Months Ended June 30,
                                               ------------------------------------------------------------------------------
                                                                  2004                               2003
                                               ------------------------------------------  ----------------------------------
                                                    Average         Interest                Average      Interest
                                                  Outstanding       Earned                 Outstanding   Earned        Yield/
                                                    Balance          /Paid     Yield/Rate   Balance       /Paid         Rate
                                               -----------------   --------    ----------  -----------   --------      ------
                                                                               (Dollars in thousands)
<S>                                                <C>             <C>         <C>          <C>          <C>           <C>
Earning Assets:
      Federal funds sold                            $    6,478     $    16     0.99%       $    15,573    $     48      1.24%
      Interest bearing deposits                          7,498         126     6.76%            14,658         247      6.76%
      Securities (1)                                   311,769       2,726     3.52%           293,547       3,271      4.47%
      Loans, Net (2)                                   364,145       6,022     6.65%           356,949       6,217      6.99%
                                                    ----------     -------                  ----------    --------
         Total earning assets                          689,890       8,890     5.18%           680,727       9,783      5.76%

      Non-earning assets                                46,065                                  43,344
                                                    ----------                              ----------
         Total assets                               $  735,955                              $  724,071
                                                    ==========                              ==========
Liabilities:
      Savings accounts                              $   95,114     $   139     0.59%        $   87,959   $    196      0.89%
      Money market accounts                             26,931          53     0.79%            29,699         76      1.03%
      NOW accounts                                     125,144         244     0.78%           120,675        341      1.13%
      Time accounts                                    277,120       1,860     2.70%           284,516      2,136      3.01%
      Borrowings                                        80,469         801     4.00%            73,926        860      4.67%
                                                    ----------     -------                  ----------   --------
         Total interest bearing liabilities            604,778       3,097     2.06%           596,775      3,609      2.43%

      Non-interest bearing deposits                     60,106                                  54,959
      Other non-interest bearing liabilities             6,508                                   7,887
                                                    ----------                              ----------
      Total liabilities                                671,392                                 659,621
      Stockholders' equity                              64,563                                  64,450
                                                    ----------                              ----------
         Total liabilities and shareholder equity   $  735,955                              $  724,071
                                                    ==========                              ==========

       Net interest income                                         $ 5,793                               $ 6,174
                                                                   =======                               =======


      Net interest rate spread (3)                                             3.12%                                   3.33%
                                                                               ====                                    ====

       Net earning assets                             $ 85,112                              $  83,952
                                                      ========                              =========


      Net interest margin (4)                                                  3.38%                                   3.64%
                                                                               ====                                    ====

      Ratio of earning assets to interest bearing     114.07%                                  114.07%
      liabilities                                     =========                             ==========

</TABLE>

(1) Securities are shown at average amortized cost with net unrealized gains
or losses on securities available-for-sale included as a component of
non-earning assets.

(2) Average net loans equal average total loans less the average allowance for
loan losses.  However, for purposes of these computations, non-accrual loans
are included in average loan balances outstanding.

(3) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.

(4) The net interest margin, also known as the net yield on average
interest-earning assets, represents net interest income as a percentage of
average interest-earning assets.


                                 9

<PAGE>


<TABLE>
<CAPTION>
                                                                              For the Six Months Ended June 30,
                                                      ------------------------------------------------------------------------
                                                                          2004                               2003
                                                      ------------------------------------  ----------------------------------
                                                         Average                               Average
                                                       Outstanding   Interest     Yield /   Outstanding    Interest    Yield /
                                                         Balance    Earned /Paid   Rate        Balance    Earned/Paid   Rate
                                                      ------------- ----------- ----------  ------------ ------------- -------
                                                                                (Dollars in thousands)
<S>                                                      <C>          <C>         <C>       <C>           <C>          <C>
Earning Assets:
    Federal funds sold                                   $   6,865     $   34      1.00%    $    19,103   $     117     1.24%
    Interest bearing deposits                                7,509        252      6.75%         15,565         498     6.45%
    Securities (1)                                         308,507      5,737      3.74%        287,819       6,661     4.67%
    Loans, Net (2)                                         361,331     11,961      6.66%        356,060      12,531     7.10%
                                                         ---------    -------               -----------   ---------
                       Total earning assets                684,212     17,984      5.29%        678,547      19,807     5.89%




   Non-earning assets                                       46,257                               43,855
                                                        ----------                          -----------
                           Total assets                 $  730,469                          $   722,402
                                                        ==========                          ===========
Liabilities:
  Savings accounts                                      $   94,114   $    312       0.67%   $    86,878    $    444      1.03%
  Money market accounts                                     28,975        116       0.81%        30,430         162      1.07%
  NOW accounts                                             124,958        519       0.84%       119,356         754      1.27%
  Time accounts                                            273,127      3,693       2.72%       280,669       4,265      3.06%
  Borrowings                                                77,708      1,566       4.05%        77,902       1,781      4.61%
                                                        ----------   --------               -----------    --------
             Total interest bearing liabilities            598,882      6,206       2.08%       595,235       7,406      2.51%

  Non-interest bearing deposits                             58,863                               54,187
  Other non-interest bearing liabilities                     7,630                                8,906
                                                         ---------                          -----------
  Total liabilities                                        665,375                              658,328
  Stockholders' equity                                      65,094                               64,074
                                                         ---------                          -----------
           Total liabilities and shareholder equity      $ 730,469                          $   722,402
                                                         =========                          ===========
  Net interest income                                               $ 11,778                              $  12,401
                                                                    ========                              =========
  Net interest rate spread (3)                                                     3.21%                                3.38%
                                                                                   ====                                =========
  Net earning assets                                     $ 85,330                           $    83,312
                                                         ========                           ===========
  Net interest margin (4)                                                          3.46%                                3.69%
                                                                                   =====                              =========
  Ratio of earning assets to interest bearing
   liabilities                                             114.25%                              114.00%
                                                         ========                           ==========

</TABLE>

(1) Securities are shown at average amortized cost with net unrealized gains
or losses on securities available-for-sale included as a component of
non-earning assets.

(2) Average net loans equal average total loans less the average allowance for
loan losses.  However, for purposes of these computations, non-accrual loans
are included in average loan balances outstanding.

(3) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.

(4) The net interest margin, also known as the net yield on average
interest-earning assets, represents net interest income as a percentage of
average interest-earning assets.


                                     10

<PAGE>

Table of Non-performing Assets:

The following table sets forth information regarding non-performing loans and
assets as of the periods indicated.

<TABLE>
<CAPTION>
                                                       At June 30,          At December 31,
      Dollars in Thousands                                2004                  2003
                                                       -----------          ---------------
<S>                                                      <C>                 <C>
Loans in Non-Accrual Status:
  Agricultural                                           $     --            $   1,425
   Residential real estate (1)                                 63                  257
   Commercial real estate                                     931                1,199
   Commercial                                                 362                  275
   Consumer                                                     5                    8
                                                         --------            ---------
       Total non-accruing loans                             1,361                3,164
Loans Contractually Past Due 90 Days
or More and Still Accruing Interest                            73                  123
Troubled Debt Restructured Loans                              363                  371
                                                         --------            ---------
      Total non-performing loans                            1,797                3,658
Other real estate owned                                        --                   20
                                                         --------            ---------
Total non-performing assets                              $  1,797            $   3,678
                                                         ========            =========
Total non-performing assets as a
percentage of total assets                                   0.25%                0.50%
                                                         ========            =========
Total non-performing loans as a
percentage of total loans                                   0.48%                 1.01%
                                                         =======             =========

</TABLE>

(1) Includes home equity loans.



                                         11

<PAGE>

Analysis of the Allowance for Loan Losses Table:

The following table sets forth changes in the allowance for loan losses for
the periods indicated:

<TABLE>
<CAPTION>
                                                             Three months ended            Six months ended
                                                              June 30,                         June 30,
                                                    ------------------------------      -----------------
                                                       2004             2003              2004       2003
                                                    --------      ----------------      --------  -------
                                                                          (Dollars in thousands)
<S>                                                  <C>            <C>                 <C>       <C>
Balance at beginning of period                       $ 5,893        $ 5,603             $  5,757   $ 5,392

Charge offs:
Agricultural                                              --             36                   --       147
Residential real estate                                   --             60                  113        67
Commercial real estate                                    --             --                   43        --
Commercial                                                --             --                   48        --
Consumer                                                 117            203                  237       398
                                                     -------        -------             --------   -------
   Total charge offs                                     117            299                  441       612
                                                     -------        -------             --------   -------
Recoveries:
Agricultural                                              --             --                   --        --
Residential real estate                                    5              1                   19         1
Commercial real estate                                    --             --                   --        --
Commercial                                                 6             --                   26        68
Consumer                                                  26             46                   92        82
                                                     -------        -------             --------   -------
   Total recoveries                                       37             47                  137       151
                                                     --------       -------             --------   --------

Net charge-offs                                            80           252                  304       461
Provision for loan losses                                 300           435                  660       855
                                                     --------       -------             --------   --------

Balance at end of period                             $  6,113       $ 5,786             $  6,113   $ 5,786
                                                     ========       =======             ========  ========
Ratio of net charge-offs during the period
 to average  loans outstanding during the
 period (annualized)                                     0.09%         0.28%               0.17%     0.26%
                                                     ========       =======            =========  =======
Allowance for loan losses to total loans                 1.63%         1.60%               1.63%     1.60%
                                                     ========       =======            =========  =======
Allowance for loan losses to non-performing loans         340%          123%                340%      123%
                                                     ========       =======            ========   =======
</TABLE>



                                     12
<PAGE>


C. Comparison of Financial Condition at June 30, 2004 and December 31, 2003

Overview.  The financial condition of the Company did not change significantly
between December 31, 2003 and June 30, 2004.  Total assets decreased by less
than 1% from  $729.0 million at December 31, 2003 to $726.2 million at June
30, 2004.  A decrease in our investment securities portfolio, including
trading, available-for-sale, and held-to-maturity investment securities, was
offset by an increase in total loans outstanding.  Total loans outstanding
increased by $13.5  million or 3.7% between the periods, while total
investment securities, decreased by $16.6  million or  5.2%. During the period
we borrowed $15.0 million from the FHLBNY to purchase an equivalent amount of
available-for-sale investment securities in a wholesale leverage transaction.
The increase in the available-for-sale investment securities portfolio related
to this wholesale leverage transaction was offset by very large maturities on
both our available- for-sale and held-to-maturity investment securities
portfolio. Due to very high principal prepayments on our mortgage-backed
securities, we received principal payments on our investment securities
portfolios totaling  $104.9 million during the first half of  2004. The
remaining net increases and decreases in assets and liabilities provided in
the Consolidated Statements of Condition in PART I, Item 1 of this quarterly
financial report occurred in the normal course of our business and were not
due to any unusually large or non- routine transactions such as an asset or
branch purchase or sale.

Total stockholders' equity decreased by  $760 thousand or 1.2% during the six
month period ended June 30, 2004.  Due to an increase in interest rates
between the periods accumulated other comprehensive income decreased by $2.765
million between the periods from a gain of $1.272 million at December  31,
2003 to a loss of  $1.493 million at June 30, 2004.  Our retained earnings
increased by $2.005 million during the period.  During the period we earned
$4.135 million and paid dividends to our common stockholders totaling $2.130
million.

Asset Quality.  We use several measures to determine the overall credit
quality of our loan portfolio.  These include the level of delinquent loans
(those 30 or more days delinquent, excluding loans placed on non-accrual
status), the level of non-performing loans, the level of potential problem
loans and the dollar amount and type of loan charge-offs we experience.
Between December 31, 2003 and June  30,  2004  the credit quality of our asset
portfolios improved. The level of delinquent loans, non-performing loans,  and
the dollar amount of loan charge-offs all decreased. Potential problem loans
increased only slightly between the periods.

At June 30, 2004 loans that were 30 or more days delinquent  (excluding loans
placed on non-accrual status)  totaled  $1.407  million or  0.38%  of loans
outstanding.  By comparison at December 31, 2003 we had $2.752 million or
0.76% of loans outstanding in this same category, a net decrease of $1.345
million between the periods.  The reduction in delinquent loans is primarily
due to the removal of one large commercial real estate loan totaling $1.775
million which became 30 days delinquent on March  31,  2004  and was
subsequently brought to current status by the borrower.

Total non-performing assets, including non-accruing loans,  loans  90  days or
more past due and still accruing interest, troubled debt restructured loans
and other real estate owned were $1.797 million at June 30, 2004, as compared
to $3.678 million at December  31, 2003, a $1.881 million decrease.  The
reduction in total non-performing assets was primarily due to the transfer of
one agricultural loan totaling  $1.425 million from non-accrual status to
accrual status during the quarter ended June 30, 2004.

Potential problem loans, which are those that are currently performing, but
where we believe potential credit problems exist, were  $8.475 million or
2.26% of total loans at June 30, 2004, as compared to $7.846 million or  2.17%
of total loans at December 31, 2003.

The allowance for loan losses increased from $5.757 million or 1.60% of total
loans outstanding at December  31,  2003  to  $6.113  or  1.63% of total loans
outstanding at June 30, 2004.  Our management and Board of Directors deemed
the allowance for loan losses as adequate at June 30, 2004.

The credit quality of the investment securities portfolios, both
available-for- sale and held-to-maturity, remained strong during the quarter.
At June  30, 2004, 99.7%  of the securities held in the Company's bond
portfolio were rated "A" or better by Moody's or Standard and Poor's credit
rating services; 92.4% were rated AAA.  At December 31, 2003, 98.5% were rated
"A" or better and 89.8% were rated AAA by these same services.


                                       13

<PAGE>


D. Comparison of the Results of Operations for the Three Months Ended June 30,
2003 and 2004

Overview.  Net income decreased by  $442 thousand or 19.3%, from $2.293
million for the three month period ended June  30, 2003 to $1.851 million for
the three month period ended June 30, 2004.  The primary reasons net income
decreased in the second quarter of 2004, as compared to the second quarter of
2003 was due to a decline in net interest income and investment securities
gains  (losses). During the three month period ended June 30, 2004, net
interest income was $5.793 million.  This compares to $6.174  million for the
three month period ended June  30,  2003,  a $381 thousand or 6.2% decrease.
During the second quarter of 2004, we experienced very rapid prepayments on
our mortgage-backed securities investment portfolio due to low interest rates.
This made it necessary for us to record an increased level of amortization
expense of premium,  net of accretion of discounts on investments,  thereby
reducing interest income.  During the second quarter of 2004 we recorded  $795
thousand of amortization expense of premiums,  net of accretion of discounts
on investments.  By comparison during the second quarter of 2003, we recorded
only $360  thousand of this expense,  an increase of $435 thousand.  In
addition, during the second quarter net income decreased as a result of a
decrease in investment securities gains (losses).  During the second quarter
of 2004, $551 thousand of investment securities were sold / called netting a
$27  thousand loss.  By comparison, during the second quarter of 2003, we sold
$3.152 million of available-for-sale investment securities totaling a $297
thousand gain.

The decrease in net income caused earnings per share to decrease by $0.04,
from $0.21 for the three month period ended June 30, 2003 to $0.17 for the
three month period ended June 30, 2004.  Similarly,  the return on average
assets and return on average stockholders'  equity decreased from  1.27%  and
14.27%, respectively, in the three month period ended June  30,  2003  to
1.01%  and 11.53%, respectively, for the three month period ended June 30,
2004.

Net Interest Income. Net interest income is our most significant source of
revenue.  During the three month period ended June 30, 2004 and the three
month period ended June  30, 2003, net interest income comprised  84%  and
80%, respectively, of our total revenues. In the three month period ended June
30 2004,  our net interest income was $5.793  million. By comparison,  our net
interest income for the three month period ended June 30, 2003 was $6.174
million.  The decrease in net interest income between the periods,  totaling
$381  thousand or  6.2%,  was due to several factors, the most significant of
which was an increase in our amortization expense of premiums, net of
accretion of discounts on investments of $435 thousand.

Throughout the third and fourth quarters of  2003  and the first and second
quarters of 2004 maturing and adjustable-rate loans and investment securities
were renewed and replaced by new loans and investments at lower rates of
interest.  Lower reinvestment rates coupled with the rapid amortization of our
investment securities premiums resulted in a decrease in both interest income
and earning assets yields.  Interest income for the three month period ended
June 30, 2004 was  $8.890  million versus  $9.783  million for the three month
period ended June  30,  2003,  a $893 thousand or 9.1% decrease. Similarly,
during the three month period ended June  30,  2004  earning asset yields were
5.18%, as compared to 5.76% for the three month period ended June 30, 2003.

To minimize the negative impact to net interest income associated with reduced
earning asset yields, we lowered deposit rates and borrowing costs during the
second half of  2003 and first half of 2004.  This reduced the total cost of
interest bearing liabilities from  2.43%  to  2.06%.  We found it increasingly
difficult between the periods to further reduce deposit and borrowing costs
because many of our non-maturity interest bearing deposits were already near
an interest rate floor of 0%.  The net impact of our interest rate reductions
on deposits and borrowings reduced the cost of our interest bearing
liabilities by $512 thousand between the comparable periods.

Rate and Volume Analysis:  The purpose of a rate volume analysis is to
identify the dollar amount of change in net interest income due to changes in
interest rates versus changes in the volume of earning assets and interest
bearing liabilities.

Rate and Volume Table:

The following table presents changes in interest income and interest expense
attributable to changes in volume  (change in average balance multiplied by
prior year rate), changes in rate (change in rate multiplied by prior year
volume),   and the net change in net interest income. The net change
attributable to the combined impact of volume and rate has been allocated to
each in proportion to the absolute dollar amount of change.  The table has not
been adjusted for tax-exempt interest.

                                      14

<PAGE>


<TABLE>
<CAPTION>
                                                For the Three Months Ended              For The Six Months Ended
                                                        June 30,                                June 30,

                                       ---------------------------------------    ------------------------------------
                                                     2004 vs. 2003                            2004 vs. 2003
                                       ---------------------------------------    ------------------------------------
                                           Rate         Volume       Total            Rate      Volume        Total
                                       ---------       -------     -----------    ---------     ------     -----------
                                                                       (In thousands)
<S>                                    <C>             <C>         <C>            <C>           <C>        <C>
Earning assets:
   Federal Funds Sold                  $    (11)       $  (21)     $  (32)        $    (23)     $ (60)     $    (83)
   Interest Bearing Deposits                  1          (122)       (121)              23       (269)         (246)
  Securities                               (705)          160        (545)          (1,309)       385          (924)
  Loans                                    (314)          119        (195)            (745)       175          (570)
                                       -----------     ------     -------         ----------    -----      --------
      Total earning assets               (1,029)          136        (893)          (2,054)       231        (1,823)
                                       -----------     ------     -------         ----------    -----      --------

Interest bearing liabilities:
   Savings accounts                          67           (10)         57              156        (24)          132
   Money market accounts                     18             5          23               40          6            46
   NOW accounts                             106            (9)         97              259        (24)          235
   Time accounts                            224            52         276              470        102           572
   Borrowings                               119           (60)         59              211          4           215
                                       -----------     ------     -------         ----------    -----      --------
  Total interest bearing liabilities        534           (22)        512            1,136         64         1,200
                                       -----------     ------     -------         ----------    -----      --------

Change in net interest income          $   (495)       $  114     $  (381)        $   (918)     $ 295      $   (623)
                                       -----------     ------     -------         ----------    -----      --------
</TABLE>

Net interest income was $381 thousand less in the three month period ended
June 30, 2004 than in the three month period ended June 30, 2003.  Increases
in both the volume of earning assets and volume of interest bearing
liabilities resulted in a net increase in net interest income between the
periods of $114 thousand.  The net improvement in net interest income due to
changes in volume was offset by a $495 thousand decrease in net interest
income due to changes in interest rates.  Interest income on earning assets
decreased by $893 thousand primarily due to lower yields on earning assets
between the periods,  $435 thousand of which was caused by the rapid
prepayment and associated increase in amortization of premiums,  net of
accretion of discounts on investments; specifically on our mortgage-backed
investment securities.  This decrease in interest income was offset by a  $512
thousand decrease in interest bearing liability costs primarily due to lower
rates of interest paid on deposits and borrowed funds.

Provision for Loan Losses. We recorded a provision for loan losses of $300
thousand for the three month period ended June 30, 2004, as compared to  $435
thousand for the three month period ended June  30, 2003, a $135 thousand
decrease. The provision for loan losses decreased in the second quarter of
2004, as compared to the second quarter of  2003  due to an improvement in
several asset quality measures between periods, including net charge-offs,
non- performing loans and delinquent loans.  Specifically, during the three
month period ended June 30, 2004, we recorded net loan charge-offs of $80
thousand. This compares to  $252  thousand during the three month period ended
June 30, 2003,  a decrease of $172 thousand.  At June  30,  2004,  total
non-performing loans totaled $1.797 million, as compared to $4.688 million at
June 30, 2003, a $2.891 million improvement. At June  30, 2004 loans that were
30 to 89 days delinquent totaled $1.335 million or 0.35% of loans outstanding.
By comparison at June 30, 2003 we had $3.921 million or  1.08%  of loans
outstanding 30 to 89 days past due, a net decrease of $2.586 million between
the periods.  Potential problem loans are those that are currently performing,
but where we believe potential credit problems exist, were relatively the same
at each period end. At June 30, 2004, potential problem loans were $8.475
million or 2.26% of total loans outstanding,  as compared to  $8.194  million
or  2.27% of total loans outstanding at June 30, 2003.

Non-Interest Income.  Non-interest income decreased from $1.523  million in
the three month period ended June 30, 2004 to $1.072 million in the three
month period ended June 30, 2004,  a  $451  thousand or 29.6% decrease.  The
primary reason other income decreased between periods was a reduction in net
investment securities gains (losses).  During the second quarter of 2003, we
netted gains on the sale of available-for-sale investment securities and
called securities of $297 thousand, as compared to a $27 thousand loss in the
second quarter of 2004, a $324 thousand decrease between comparable periods.

                                       15

<PAGE>

Other income also decreased $116 thousand between the periods. Other income
was $199 thousand in the three month period ended June 30, 2003, as compared
to $83 thousand in the three month period ended June 30, 2004.  This decrease
was primarily due to the poor performance of the investments held in the
Company's trading securities portfolio.  During the second quarter of 2003 we
recorded $125 thousand of other income on the Company's trading securities,
as compared to  $9 thousand in the second quarter of 2004 a $116 thousand
decrease. Under our executive deferred compensation plan, certain executive
officers may defer a portion of their salary or bonus for distribution at
retirement. Participants can elect to contribute their deferred amounts either
to a "funded" investment account managed by the plan's Trustee or a "phantom
stock" investment.  "Funded" deferred compensation accounts are recorded as
trading securities. Gains and losses associated with "funded" deferred
compensation accounts are recorded through other income and other expense.
Under the phantom stock component of the plan, the deferred amounts are
indexed to the price and dividend performance of our Company's common stock.
We record increases and / or decreases to the deferred amounts invested in
phantom stock through salaries expense.

In addition,  income related to the Company's bank owned life insurance
decreased $56 thousand on a comparable period basis due to a reduction in the
net crediting rates on insurance policies owned by the Bank.  Between the
periods, the yields on the asset portfolios of the policy issuers  (insurance
carriers)  were reduced due to lower interest rates forcing a reduction in
crediting rates on our policies.

Non-Interest Expense. Non-interest expense increased from  $4.080 million for
the quarter ended June 30, 2003 to $4.113 million for the quarter ended June
30, 2004,  a $33 thousand or 0.8% increase.  Increases in salaries and
employee benefits expenses,  occupancy expense,  computer service fees,
advertising and marketing and professional fees were largely offset by a
reduction in other expenses.

Salaries and employee benefits expenses increased $106 thousand or  4.3%, from
$2.488  million in the second quarter  2003 to $2.594 million in the second
quarter of 2004 due to increased health insurance costs,  annual increases in
existing employees salaries and expansionary activities including the opening
of a full-service branch in Johnson City, New York (Broome County) and a loan
production office in Kingston,  New York  (Ulster County). The increase in
salaries and benefit expense was reduced by a $95 thousand swing in executive
deferred compensation expenses. During the second quarter of 2003, the price
of the Company's stock increased resulting in a  $24  thousand expense on the
phantom stock component of the executive deferred compensation plan. During
the second quarter of  2004,  the price of the Company's stock decreased
resulting in a $71 thousand benefit in salaries and benefits expense, netting
a $95 thousand expense savings in the comparative quarters.

Computer service fees increased $53 thousand, from $71 thousand in the three
month period ended June  30,  2003 to $124 thousand in the three month period
ended June  30,  2004. Increased system operation,  system recovery and
information security demands on our information technology systems, as well as
the implementation of new customer delivery systems resulted in an increase in
our computer service fees.

Other expenses decreased from $834 thousand in the three month period ended
June 30, 2003 to $655 thousand in the three month period ended June 30, 2004,
a $179 thousand or 21.5% decrease.  The primary reasons other expenses
decreased between the periods,  were because we recorded (i) a $116 thousand
decrease in expense related to the  "funded"   component of our executive
deferred compensation plan, (ii) a $45 thousand reduction in collection and
non-filing expense due to a decrease in delinquent loans,  and (iii) a $31
thousand reduction in telephone expenses related to reduced long distance
rates.  These improvements were partially offset by a $24 thousand increase in
printing, mailing and transfer agent expenses related to the Company's stock
listing on the American Stock Exchange.

Income Taxes. Income tax expense decreased from  $889 thousand during the
three month period ended June 30, 2003 to $601 thousand during the three month
period ended June 30, 2004.  The decrease in income tax expense was due to an
increase in tax-exempt income from state and municipal investment securities
and a general decrease in taxable income. Our effective tax rate decreased
significantly between periods, from 27.9% in the three month period ended June
30, 2003 to 24.5% in the three month period ended June 30, 2004.  The decrease
in the effective tax rate was due to a higher percentage of our pre-tax
earnings being generated from tax-exempt sources.

E. Comparison of the Results of Operations for the Six Months Ended June 30,
2003 and 2004

                                     16

<PAGE>

Overview.  Net income decreased by $553 thousand or  11.8%, from $4.688
million for the six month period ended June 30, 2003 to $4.135  million for
the six month period ended June  30, 2004.  The primary reasons net income
decreased over the comparable periods were due to a decline in net interest
income and an increase in non interest expenses. During the six month period
ended June 30, 2004,  net interest income was $11.778  million. This compares
to  $12.401 million for the six month period ended June 30, 2003, a $623
thousand or 5.0% decrease.  During the first half of 2004, we experienced very
rapid prepayments on our mortgage-backed securities investment portfolio as
homeowners refinanced debt to take advantage of lower interest rates.  This
made it necessary for us to increase our amortization of premiums,  net of
accretion of discounts on investments, thereby reducing interest income.
During the first half of 2004 we recorded  $1.338  million of amortization of
premium, net of accretion on discounts on investments related to investment
securities premiums. By comparison during the first half of 2003, we recorded
only $553 thousand of this same expense,  an increase of $785  thousand. In
addition,  employee benefits,  computer service fees and professional fees
were significantly greater in the six months ended June 30, 2004 than in the
six months ended June 30, 2003. As a result, non interest expenses increased
by $336 thousand or 4.2% between comparable periods.

The decrease in net income caused earnings per share to decrease by $0.05,
from $0.42 for the six month period ended June 30, 2003 to $0.37 for the six
month period ended June 30, 2004.  Similarly, the return on average assets and
return on average stockholders'  equity decreased from 1.31% and 14.75%,
respectively, in the six month period ended June 30, 2003 to 1.14% and 12.77%,
respectively, for the six month period ended June 30, 2004.

Net Interest Income.  Net interest income is our most significant source of
revenue.  During the six month periods ended June 30,  2004  and June 30,
2003, net interest income comprised 80% of our total revenues.  In the six
month period ended June 30 2004,  our net interest income was $11.778 million.
By comparison, our net interest income for the six month period ended June
30, 2003  was  $12.401  million. The decrease in net interest income between
the periods, totaling $623 thousand or 5.0%,  was due to several factors the
most significant of which was an increase in our amortization of premiums,
net of accretion of discounts on investments of $785 thousand.

Throughout the third and fourth quarters of 2003 and the first and second
quarters of 2004 maturing and adjustable-rate loans and investment securities
were renewed and replaced by new loans and investments at lower rates of
interest.  Lower reinvestment rates coupled with the rapid amortization of our
investment securities purchase price premiums resulted in a decrease in both
interest income and earning assets yields.  During the six month period ended
June 30, 2004 earning asset yields were 5.29%, as compared to 5.89% for the
six month period ended June 30, 2003.

To minimize the negative impact to net interest income associated with reduced
earning asset yields, we lowered our deposit rates and borrowing costs during
the second half of 2003 and first half of 2004.  This reduced the total
average cost of interest bearing liabilities from 2.51% to 2.08%.  We reduced
our total cost of interest bearing liabilities only  43 basis points because
it became increasingly difficult between the periods to reduce deposit and
borrowing costs further.  Many of our non-maturity interest bearing deposits
were near an interest rate floor of 0%  at the beginning of  2004,  due to
interest rate reductions made during 2003.  The net impact of our interest
rate reductions on deposits and borrowings reduced the cost of our interest
bearing liabilities by $1.200 million between the comparable periods.

Rate and Volume Analysis:  The purpose of a rate and volume analysis is to
identify the dollar amount of change in net interest income due to changes in
interest rates versus changes in the volume of earning assets and interest
bearing liabilities.

Net interest income was $623 thousand less in six month period ended June 30,
2004 than in the six month period ended June 30, 2003.  Increases in both the
volume of earning assets and volume of interest bearing liabilities resulted
in a net increase in net interest income between the periods of $295 thousand.
The net improvement in net interest income due to changes in volume was offset
by a $918 thousand decrease in net interest income due to changes in interest
rates.  Interest income on earning assets decreased by $1.823 million
primarily due to lower yields on earning assets between the periods,  $785
thousand of which was caused by the rapid prepayment and associated increase
in amortization of premiums, net of accretion of discounts on our
mortgage-backed investment securities.  This decrease in interest income was
offset by a $1.200 million decrease in interest bearing liability costs
primarily due to lower rates of interest paid on deposits and borrowed funds.


                                       17

<PAGE>


Provision for Loan Losses. We recorded a provision for loan losses of $660
thousand for the six month period ended June 30, 2004, as compared to  $855
thousand for the six month period ended June 30, 2003, a $195 thousand or
22.8% decrease.  The provision for loan losses decreased in the first six
months of 2004, as compared to the first six months of  2003  due to an
improvement in several asset quality measures between periods.  Specifically,
during the six month period ended June  30,  2004, we recorded net loan
charge-offs of $304 thousand.  This compares to $461 thousand during the six
month period ended June 30, 2003, a decrease of $157 thousand or 34.1%.  At
June  30,  2004, total non-performing loans totaled $1.797 million, as
compared to $4.688 million at June 30, 2003, a $2.891 million improvement.  At
June 30, 2004, loans that were 30 or more days delinquent  (excluding loans
placed on non-accrual status) totaled  $1.407  million or 0.38% of loans
outstanding.  By comparison at June 30, 2003 we had $4.256 million or  1.17%
of loans outstanding 30 or more days past due (excluding loans placed on
non-accrual status),  a net decrease of $2.849 million between the periods.
Potential problem loans are loans that are currently performing,  but where we
believe potential credit problems exist, were relatively the same at each
period end. At June  30,  2004,  potential problem loans were  $8.475  million
or 2.26% of total loans outstanding,  as compared to $8.194 million or 2.27%
of total loans outstanding at June  30, 2003.

Non-Interest Income.  Non-interest income decreased $224 thousand or 7.2% on a
comparable period basis, from $3.110 million in the six month period ended
June 30,  2003  to  $2.886 million in the six month period ended June 30,
2004.  The primary reasons other income decreased between periods was a
reduction in other income, a reduction in net realized gains on investment
securities, a reduction in bank owned life insurance income and a reduction in
other service fees. Between the periods other income declined $79 thousand;
investment securities gains on the sale of available-for-sale investment
securities declined  $68 thousand; income on bank owned life insurance
declined $56 thousand; and other service fees declined $43 thousand.

Other income was $261 thousand in the six month period ended June 30, 2003, as
compared to $182 thousand in the six month period ended June 30, 2004.  This
decrease was primarily due to the poor performance of the investments held in
the Company's trading securities portfolio and a decrease in title insurance
agency income.  During the first six months of 2003 we recorded $102 of other
income on the Company's trading securities, as compared to $52 thousand in the
first six months of  2004,  a  $50  thousand decrease. Under our executive
deferred compensation plan, certain executive officers may defer a portion of
their salary or bonus for distribution at retirement.  Participants can elect
to contribute their deferred amounts either to a "funded" investment account
managed by the plan's Trustee or a "phantom stock"  investment. "Funded"
deferred compensation accounts are recorded as trading securities.  Gains and
losses associated with "funded" deferred compensation accounts are recorded
through other income and other expense.

We own a small portion of a title insurance agency, New York Bankers Title
Agency East, LLC.  During the six month period ended June 30, 2003, we
recorded $40 thousand of income related to our investment in this title
agency, as compared to $11 thousand during the first six months of 2004, a
decrease of $29 thousand. Between the periods, we reduced our ownership of the
agency. In addition, the gross fees generated by the business activities of
the title agency are less in the first half of 2004, as compared to the first
half of 2003.

During the first six months of 2003, we netted realized gains on the sale or
call of investment securities of  $719  thousand. By comparison, during the
first six months of 2004, we netted $651 thousand of realized gains on the
sale or call of investment securities, a $68 thousand decrease.

In addition,  income related to the Company's bank owned life insurance
decreased $56 thousand between the six month periods due to a reduction in the
net crediting rates on insurance policies owned by the Bank due to lower
interest rates.

Other service fees decreased by $43 thousand between the six month periods.
Most of this decrease was due to a significant reduction in merchant credit
card processing fees. We closed our largest merchant credit card processing
account during the third quarter of 2003.

Non-Interest Expense. Non-interest expense increased to $8.426 million for the
six month period ended June 30, 2004, as compared to  $8.090 for the six month
period ended June  30,  2003. Increases in salaries and employee benefits
expenses, occupancy expense, computer service fees, and professional fees were
the primary reasons non-interest expense increased.



                                       18

<PAGE>


Salaries and employee benefits expenses increased  $125  thousand or 2.5%,
from $5.097 million in the six month period ended June 30, 2003 to $5.222
million in the six month period ended June 30, 2004 due to increased health
insurance costs,  annual increases in existing employees salaries and
expansionary activities.  During the first quarter of 2004, we opened a
full-service branch in Johnson City, New York  (Broome County)  and a loan
production office in Kingston,  New York  (Ulster County).  The increase in
salaries and benefit expense was partially offset by a  $79  thousand swing in
executive deferred compensation expenses. Under the phantom stock component of
our executive deferred compensation plan, the deferred amounts are indexed to
the price and dividend performance of our Company's common stock. Increases
and/or decreases to the deferred amounts invested in phantom stock are
recorded through salaries expense. During the first six months of 2003, the
price of the Company's stock increased resulting in a  $37  thousand expense
on the phantom stock component of the executive deferred compensation plan.
During the second quarter of 2004,  the price of the Company's stock decreased
resulting in a $42 thousand reduction in salaries and benefits expense,
netting a $79 thousand expense savings in the comparative periods.

Occupancy expenses increased from $716 thousand in the six month period ended
June 30, 2003 to $752 thousand in the six month period ended June 30, 2004, a
$36 thousand increase.  Additional rents related to our expansion activities,
as well as general increases in taxes, utilities, insurance and building
repairs account for the increase in occupancy expense.

Computer service fees increased $56  thousand,  from  $148  thousand in the
six month period ended June 30, 2003 to $204 thousand in the six month period
ended June  30,  2004. Increased system operation, system recovery and
information security demands on our information technology systems,  as well
as the implementation of new customer delivery systems resulted in an increase
in our computer service fees.

Professional fees increased  $175  thousand or 143%, from $122 thousand in the
six month period ended June 30, 2003  to  $297 thousand in the six month
period ended June 30, 2004.  The increase is primarily due to additional
listing, audit, and legal fees related to our registration with the SEC and
the listing of our common stock on the American Stock Exchange during the
first quarter of 2004.

Other expenses did not vary significantly between the six month period ended
June 30, 2004 and the six month period ended June 30, 2003.  Decreases in
Board of Director fees, collection and non-filing expense,  donations,
telephone, amortization expense,  executive deferred compensation, and
deferred reserves for unadvanced credit instruments, were offset by increases
in accounts receivable finance administration expenses,   office supplies,
software amortization,  minority interest expense and expenses related to
listing our stock on the American Stock Exchange.

Income Taxes. Income tax expense decreased from  $1.878 million during the six
month period ended June 30, 2003 to $1.443 million during the six month period
ended June 30, 2004.  The decrease in income tax expense was due to an
increase in tax-exempt income and a general decrease in taxable income.
Similarly, our effective tax rate decreased between periods, from 28.6%  in
the six month period ended June  30,  2003  to  25.9%  in the six month period
ended June 30, 2004. This was due to a higher percentage of our pre-tax
earnings being generated from tax-exempt sources.

F. Liquidity

Liquidity describes our ability to meet financial obligations in the normal
course of business.  Liquidity is primarily needed to meet the borrowing and
deposit withdrawal requirements of our customers and to fund our current and
planned expenditures. We are committed to maintaining a strong liquidity
position. Accordingly, we monitor our liquidity position on a daily basis
through our daily funds management process. This includes:

o  maintaining the appropriate levels of currency throughout our branch
   system to meet the daily cash needs of our customers,
o  balancing our mandated deposit or  "reserve"  requirements at the
   Federal Reserve Bank of New York,
o  maintaining adequate cash balances at our correspondent banks, and
o  assuring that adequate levels of federal funds sold, liquid assets,
   and borrowing resources are available to meet obligations including
   reasonably anticipated daily fluctuations.

In addition to the daily funds management process,  we also monitor certain
liquidity ratios and complete a liquidity assessment every 90 days to estimate
current and future sources and uses of liquidity.  The 90-day sources and uses
assessment is reviewed by our Asset and Liability Committee ("ALCO").  The
ALCO, based on this assessment and other data, determines our future funding
or investment needs and strategies.  The following list represents the sources
of funds available to meet our liquidity requirements. Our primary sources of
funds are denoted by an asterisk (*).


                                    19

<PAGE>


Source of Funding

o Currency*
o Federal Reserve and Correspondent Bank Balances*
o Federal Funds Sold*
o Loan and Investment Principal and Interest Payments*
o Investment Security Maturities and Calls*
o Demand Deposits & NOW Accounts*
o Savings & Money Market Deposits*
o Certificates of Deposit and Other Time Deposits*
o Repurchase Agreements*
o FHLBNY Advances / Lines of Credit*
o Sale of Available for Sale Investment Securities
o Brokered Deposits
o Correspondent Lines of Credit
o Fed. Reserve Discount Window Borrowings
o Sale of Loans
o Proceeds from Issuance of Equity Securities
o Branch Acquisition


The following table summarizes several of our key liquidity measures for the
periods stated:

Table of Liquidity Measures:

<TABLE>
<CAPTION>
             Liquidity Measure                        June 30,         December
                                                        2004           31, 2003
---------------------------------------------       ----------       ----------
<S>                                                 <C>              <C>
Dollars in Thousands

Cash and Cash Equivalents                            $ 18,236          $  19,890
Available for Sale Investment Securities at
Estimated Fair Value less Securities
pledged for State and Municipal Deposits             $ 70,709          $ 106,933
and Borrowings
Total Loan to Total Asset Ratio                         51.56%             49.50%
FHLBNY Remaining Borrowing Capacity                  $ 13,285          $  18,314
Correspondent Bank Lines of Credit                   $ 10,000          $  10,000

</TABLE>


Although there was a general decline in our liquidity between June 30, 2004
and December 31, 2003, we maintained sufficient levels of liquidity in both
periods to meet anticipated funding needs.    The substantial majority of the
unencumbered available-for-sale investment securities are highly liquid and
could be sold immediately or pledged for borrowing purposes to meet our
anticipated or unanticipated loan and other funding requirements.

In addition to the above liquidity measures, at June 30, 2004  and December
31, 2003  we had $14.7 million and $14.4 million, respectively, of cash
surrender value in our bank-owned life insurance portfolio. These policies
could be terminated and surrendered for cash upon our demand.

Our commitments to extend credit and standby letters of credit increased by
$6.6 million or 11.2%  between December 31, 2003 to June 30, 2004.  At June
30, 2004 commitments to extend credit and standby letters of credit were $65.7
million,  as compared to $59.1 million at December 31, 2003. Our experience
indicates that draws on the commitments to extend credit and standby letters
of credit do not fluctuate significantly and therefore are not expected to
materially impact our liquidity.

Deposit flows and loan and investment prepayment activity are affected by the
level of interest rates,   the interest rates and products offered by
competitors, and other factors.  Based on our deposit retention experience,
anticipated levels of regional economic activity, particularly moderate levels
of loan demand within our primary market area, and current pricing strategies,
we anticipate that we will have sufficient levels of liquidity to meet our
current funding commitments for several quarters prospectively.

                                       20

<PAGE>

G. Capital Resources and Dividends

The maintenance of appropriate capital levels is a management priority.
Overall capital adequacy is monitored on an ongoing basis by our management
and reviewed regularly by the Board of Directors.  Our principal capital
planning goal is to provide an adequate return to shareholders while retaining
a sufficient capital base to provide for future expansion and comply with all
regulatory standards.

At June 30, 2004 stockholders' equity was  $63.544  million,  $760 thousand or
1.2%  below December  31,  2003 stockholders' equity of $64.304 million. The
decrease in stockholders' equity was primarily due to a decrease in the market
value of our available-for-sale investment securities portfolio as interest
rates increased during the period. More specifically,  accumulated other
comprehensive income was $1.272 million at December 31, 2003, as compared to a
$1.493  million loss at June  30, 2004, a decrease of $2.765 million. This
decrease was offset by a $2.005 million increase in retained earnings between
the periods.

From time to time we have repurchased outstanding common stock from our
stockholders under limits prescribed by the Board of Directors.  The Board of
Directors at all times attempts to maintain regulatory capital ratios at or
above  "well-capitalized"  levels. Throughout the six month period ended June
30, 2004 management was not provided any authority to re-purchase the
Company's common shares into Treasury.  Hence, no shares of stock were
repurchased by the Company during the six month period ended June  30,  2004.
Any future stock repurchase activities will be approved by the Company's Board
of Directors and will be designed to comply with applicable SEC and American
Stock Exchange rules.

The Company and the Bank are both subject to regulatory capital guidelines.
Under these guidelines,  as established by federal bank regulators,  to be
adequately capitalized, the Company and the Bank must both maintain the
minimum ratio of "Tier 1" capital to risk-weighted assets at 4.0% and the
minimum ratio of total capital to risk-weighted assets of 8.0%.  Tier  1
capital is comprised of stockholders'  equity,  less intangible assets and
accumulated other comprehensive income. Total capital,  for this risk-based
capital standard, includes Tier  1  capital plus the Company's allowance for
loan losses. Similarly, for the Bank to be considered "well capitalized," it
must maintain a Tier 1 capital to risk-weighted assets ratio of  6.0%  and a
total capital to risk-weighted assets ratio of 10.0%.  The Company and the
Bank exceeded all capital adequacy and well capitalized guidelines at June 30,
2004 and December 31, 2003.  The Company's Tier 1 capital to risk-weighted
assets ratio and total capital to risk-weighted assets ratio at June 30, 2004
were 12.76% and 14.01%, respectively.

The principal source of funds for the payment of shareholder dividends by the
Company has been dividends declared and paid to the Company by its subsidiary
bank. There are various legal and regulatory limitations applicable to the
payment of dividends to the Company by its subsidiaries as well as the payment
of dividends by the Company to its shareholders.  As of June 30, 2004, under
this statutory limitation,  the maximum amount that could have been paid by
the Bank subsidiary to the Company,  without special regulatory approval,  was
approximately $8.7  million. The ability of the Company and the Bank to pay
dividends in the future is and will continue to be influenced by regulatory
policies, capital guidelines and applicable laws.


ITEM 3: Quantitative and Qualitative Disclosures about Market Risk
------

Our business activities generate market risk.  Market risk is the possibility
that changes in future market conditions, including interest rates and prices,
will reduce earnings and make the Company less valuable.  We are primarily
exposed to market risk through changes in interest rates.  This risk is called
Interest Rate Risk and is an inherent component of risk for all banks. The
risk occurs because we pay interest on deposits and borrowed funds at varying
rates and terms,  while receiving interest income on loans and investments
with different rates and terms. As a result, our earnings and the market value
of assets and liabilities are subject to potentially significant fluctuations
as interest rates rise and fall.  Our objective is to minimize the fluctuation
in net interest margin and net interest income caused by anticipated and
unanticipated changes in interest rates.

Ultimately, the Company's Board of Directors is responsible for monitoring and
managing market and interest rate risk.  The Board accomplishes this objective
by annually reviewing and approving an Asset and Liability Management Policy,
which establishes broad risk limits and delegates responsibility to carry out
asset and liability oversight and control to the Directors' Loan and
Investment Committee and management's ALCO.


                                       21

<PAGE>


We manage several different forms of interest rate risk.  The first is
mismatch risk, which involves the mismatch of maturities of fixed rate assets
and liabilities.  The second is basis risk.  Basis risk is the risk associated
with non-correlated changes in different interest rates.  For example, we
price many of our adjustable rate commercial loans (an asset) using the Prime
Rate as a basis,  while some of our deposit accounts (a liability) are tied to
Treasury security yields.  In a given timeframe, the Prime rate might decrease
2% while a particular Treasury security might only decrease 1%.  If this were
to occur, our yield on Prime based commercial loans would decrease by 2%,
while the cost of deposits might only decrease by 1%  negatively affecting net
interest income and net interest margin.  The third risk is option risk.
Option risk generally appears in the form of prepayment volatility on
residential mortgages, commercial and commercial real estate loans,  consumer
loans,  mortgage backed securities, and callable agency or municipal
investment securities.  The Bank's customers generally have alternative
financing sources  (or options)   to refinance their existing debt obligations
with other financial institutions. When interest rates decrease,  many of
these customers exercise this option and refinance at other institutions and
prepay their loans with us, which requires us to reinvest the prepaid funds in
lower yielding investments and loans.  The same type of refinancing activity
also accelerates principal payments on mortgage-backed securities held by the
Bank.  Municipal investment securities and agency securities are issued with
specified call dates and call prices and are typically exercised by the issuer
when interest rates on comparable maturity securities are lower than the
current coupon rate on the security.

Measuring and managing interest rate risk is a dynamic process that the Bank's
management must continually perform to meet the objective of maintaining
stable net interest income and net interest margin.  This means that prior to
setting the term or interest rate on loans or deposits, or before purchasing
investment securities or borrowing funds, management must understand the
impact that alternative interest rates will have on the Bank's interest rate
risk profile. This is accomplished through simulation modeling.  Simulation
modeling is the process of "shocking" the current Balance Sheet under a
variety of interest rate scenarios and then measuring the impact of interest
rate changes on both projected earnings and the market value of the Bank's
equity.  The estimates underlying the sensitivity analysis are based on
numerous assumptions including, but not limited to: the nature and timing of
interest rate changes, prepayments on loans and securities, deposit decay
rates, pricing decisions on loans and deposits, and reinvestment / replacement
rates on asset and liability cash flows.  While assumptions are developed
based on available information and current economic and local market
conditions, management cannot make any assurances as to the ultimate accuracy
of these assumptions including competitive influences and customer behavior.
Accordingly, actual results will differ from those predicted by simulation
modeling.

The following table shows the projected changes in net interest income from a
parallel shift in all market interest rates.  The shift in interest rates is
assumed to occur in monthly increments of 0.50% per month until the full shift
is complete. In other words, the model assumes it will take 6 months for a
3.00% shift to take place. This is also known as a "ramped" interest rate
shock.  The projected changes in net interest income are totals for the 12-
month period beginning July 1, 2004 and ending June 30, 2005 under ramped
shock scenarios.


                                       22

<PAGE>

Interest Rate Sensitivity Table:

<TABLE>
<CAPTION>

 Interest Rates                         Dollars in Thousands
---------------------    --------------------------------------------------------------------
                                                                               Projected
                                            Projected                          Change in Net
                                            Dollar            Projected        Interest Income
                          Projected         Change in         Percentage       As a Percent of
Interest                  Annualized        Net               Change in        Total
Rate Shock      Prime     Net Interest      Interest          Net Interest     Stockholders'
(1)             Rate      Income            Income            Income           Equity

---------       ------    ------------      ---------         ------------     --------------
<S>             <C>       <C>                <C>              <C>             <C>
   -2.00%        2.00%       $ 25,182         ($ 151)           -0.60%          -0.24%
   -1.00%        3.00%       $ 25,081         ($ 252)           -0.99%          -0.40%
No change        4.00%       $ 25,333            --               --              --
    1.00%        5.00%       $ 24,815         ($ 518)           -2.04%          -0.82%
    2.00%        6.00%       $ 25,094         ($ 239)           -0.94%          -0.38%
    3.00%        7.00%       $ 25,899          $ 566             2.23%           0.89%

</TABLE>

(1) Under a ramped interest rate shock, interest rates are modeled to change
at a rate of 0.50% per month.

Many assumptions are embedded within our interest rate risk model.  These
assumptions were approved by the Bank's Asset and Liability Committee and were
based upon both management's experience and projections provided by investment
securities companies. Assuming our prepayment and other assumptions are
accurate and assuming we take reasonable actions to preserve net interest
income, we project that net interest income would decrease by $239 thousand or
-0.38% of total stockholders' equity in a  +2.00%  ramped interest rate shock.
Similarly, we project that net interest income would decrease by $151 thousand
or -0.24% of total stockholders' equity in a -2.00% ramped interest rate
shock. This is within our Asset and Liability Policy guideline,  which limits
the maximum projected decrease in net interest income in a +2.00% or -2.00%
ramped interest rate shock to -5.00% of the Company's total equity capital.

Our strategy for managing interest rate risk is impacted by general market
conditions and customer demand.  But, generally, we try to limit the volume
and term of fixed-rate assets and fixed-rate liabilities, so that we can
adjust the mix and pricing of assets and liabilities to mitigate Net interest
income volatility.  We also purchase investments for the securities portfolio
and structure borrowings from the FHLBNY to counter-balance interest rate risk
taken in the loan portfolio.  We also offer adjustable rate loan and deposit
products that change as interest rates change.  Approximately 24%  of our
Total Assets were invested in adjustable rate loans and investments at June
30, 2004.


ITEM 4: Controls and Procedures
------

Our management,  including the Chief Executive Officer and Chief Financial
Officer, evaluated the design and operational effectiveness of the Company's
disclosure controls and procedures  (as defined in Rule  13(a)-15(e)  and
15(d)-15(e)  under the Securities Exchange Act of 1934, as amended) as of June
30, 2004.  Based upon that evaluation,  the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were effective in ensuring that information required to be
disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934 are recorded, processed,  summarized and
reported within the time periods specified in the SEC's rules and forms.


                          PART II - OTHER INFORMATION

ITEM 1: Legal Proceedings
-------

The Company is not the subject of any material pending legal proceedings,
other than ordinary routine litigation occurring in the normal course of its
business.

                                       23

<PAGE>

On an ongoing basis, the Bank also becomes subject to various legal claims
from time to time,  which arise in the normal course of business.  The various
pending legal claims against the Bank will not,  in the opinion of management
based upon consultation with counsel, result in any material liability to the
Company and will not materially affect our financial position, results of
operation or cash flow.


ITEM 2: Changes in Securities and Use of Proceeds
------

During the three month period ended June 30, 2004  the rights of holders of
our registered securities were not modified; nor were any other class of
security issued that could materially limit or qualify our registered
securities.


ITEM 3: Defaults Upon Senior Securities
------

The Company did not default on any senior securities during the three month
period ended June 30, 2004.


ITEM 4: Submission of Matters to a Vote of Security Holders
------

On April 24, 2004  the Company held its Annual Meeting of Shareholders to vote
on three matters:

      1. To fix the number of directors of the Company at six (6)
      2. To elect six (6)  members to the Company's Board of Directors, each
         to serve for a one year term, and
      3. To ratify the appointment of KPMG LLP, as our independent auditors
         for the fiscal year ending December 31, 2004

On the record date for the Annual Meeting of Shareholders,  March  12, 2004,
11,209,392  shares were issued and outstanding and eligible to be voted. At
total of 9,947,820 shares were voted at the meeting. The following table
summarizes the votes for each of the three matters:

<TABLE>
<CAPTION>
                                                                              Number of Votes Cast:
                                                         ----------------------------------------------------------------
                                                                      Withheld /                              Broker Non-
                 Description of Matter                      For       Against         Abstentions               Votes
----------------------------------------                ---------     ---------       -----------             -----------
<S>                                                     <C>            <C>               <C>                     <C>
1. To fix the number of directors of the                9,929,847       11,564            6,319                  --
Company at six (6)
2. To elect six (6) members to the Company's Board
of Directors, each to serve for a one year term
   Philip J. Devine                                     9,829,404       118,416             --                   --
   Robert W. Moyer                                      9,833,628       114,192             --                   --
   James F. VanDeusen                                   9,833,628       114,192             --                   --
   Alfred S. Whittet                                    9,833,628       114,192             --                   --
   David F. Wilber, III                                 9,832,628       115,192             --                   --
   Brian R. Wright                                      9,832,628       115,192             --                   --
3. To ratify the appointment of KPMG fiscal year        9,916,013         2,202           29,605                 --
LLP, as our independent auditors for the
fiscal year ending December 31, 2004

</TABLE>


ITEM 5: Other Information
------

None.


                                       24

<PAGE>


ITEM 6: Exhibits and Reports on Form 8-K
------
(a) Exhibits: see Exhibit Index to this Form 10-Q

(b) Reports on Form 8-K

   The following reports on Form 8-K were filed during the three month period
ended June 30, 2004:
   (i)   First quarter earnings and dividend press release dated April 23,
         2004
   (ii)  Retirement of Company's Vice President and Treasurer; Appointment of
         Company Secretary and Treasurer dated June 1, 2004



                                       25

<PAGE>

                                  SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of  1934,  the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


THE WILBER CORPORATION


By:                           Dated:08/05/2004
    ----------------------          ----------
Alfred S. Whittet
President and Chief Executive Officer



By:                           Dated:08/05/2004
    ----------------------          ----------
Joseph E. Sutaris
Treasurer and Chief Financial Officer


                                       26



<PAGE>

                                 EXHIBIT INDEX


No.       Document

31.1      Certification of Chief Executive Officer Pursuant to 302 of the
          Sarbanes-Oxley Act of 2002

31.2      Certification of Chief Financial Officer Pursuant to 302 of the
          Sarbanes-Oxley Act of 2002

32.1      Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350

32.2      Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350


                                       27